<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
R&B FALCON CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1381 76-0544217
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
WAYNE K. HILLIN
R&B FALCON CORPORATION
901 THREADNEEDLE 901 THREADNEEDLE
HOUSTON, TEXAS 77079 HOUSTON, TEXAS 77079
(281) 496-5000 (281) 496-5000
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of Registrant's principal number,
executive offices) including area code, of agent for service)
</TABLE>
---------------------
Copies to:
W. MARK YOUNG
GARDERE WYNNE SEWELL & RIGGS, L.L.P.
1000 LOUISIANA, SUITE 3400
HOUSTON, TEXAS 77002-5007
(713) 276-5864
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement and upon consummation of the exchange offer described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the offering. [ ]
------------------
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13 7/8% Senior Cumulative Redeemable
Preferred Stock(1)........................ $311,447,000 100% $311,447,000 $86,585
- ---------------------------------------------------------------------------------------------------------------------------
13 7/8% Senior Subordinated Debentures due
2009...................................... (3) (3) (3) (3)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement also relates to an indeterminate number of
shares of 13 7/8% Senior Cumulative Redeemable Preferred Stock that may be
issued as dividends payable in kind on shares of 13 7/8% Senior Cumulative
Redeemable Preferred Stock pursuant to the terms thereof.
(2) Estimated, based on the liquidation preference. Estimated solely for
purposes of computing the registration fee in accordance with Rule 457(f)(2)
under the Securities Act of 1933, as amended.
(3) This Registration Statement covers the Registrant's 13 7/8% Senior
Subordinated Debentures due 2009 to be issued and delivered to holders of
the 13 7/8% Senior Cumulative Redeemable Preferred Stock when and if the
Registrant exchanges these Debentures for the Preferred Stock and such
indeterminable number of Debentures paid in lieu of cash interest on the
Debentures. No further fee is payable pursuant to Rule 457(i) under the
Securities Act.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE 21, 1999
PROSPECTUS
R&B FALCON CORPORATION
OFFER TO EXCHANGE
ALL OUTSTANDING
311,447 SHARES
OF
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
FOR
311,447 SHARES
OF
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
-------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED
-------------------------
TERMS OF EXCHANGE OFFER
- - We are offering to exchange a total of 311,447 shares of 13 7/8% Senior
Cumulative Redeemable Preferred Stock for an equal number of our outstanding
restricted shares of 13 7/8% Senior Cumulative Redeemable Preferred Stock
- - The exchange offer is not subject to any condition other than that it not
violate applicable law or any applicable interpretation of the staff of the
Securities and Exchange Commission
- - Tenders of outstanding preferred stock may be withdrawn any time prior to the
expiration of the exchange offer
- - The exchange of preferred stock will not be a taxable exchange for the U.S.
federal income tax purposes
- - We will not receive any proceeds from the exchange offer
- - The terms of the preferred stock to be issued are substantially identical to
the outstanding preferred stock, except the new preferred stock does not
contain the transfer restrictions and registration rights that apply to the
outstanding preferred stock
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF MATTERS THAT
YOU SHOULD CONSIDER PRIOR TO DECIDING WHETHER TO EXCHANGE YOUR PREFERRED STOCK
IN THE EXCHANGE OFFER.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
-------------------------
The date of this Prospectus is , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
RISK FACTORS................................................ 12
FORWARD-LOOKING STATEMENTS.................................. 18
THE EXCHANGE OFFER.......................................... 18
USE OF PROCEEDS............................................. 27
CAPITALIZATION.............................................. 28
DESCRIPTION OF SECURITIES................................... 29
DESCRIPTION OF SIGNIFICANT INDEBTEDNESS..................... 57
UNITED STATES FEDERAL TAX CONSEQUENCES...................... 58
PLAN OF DISTRIBUTION........................................ 69
WHERE YOU CAN FIND MORE INFORMATION......................... 70
INCORPORATION BY REFERENCE.................................. 71
LEGAL MATTERS............................................... 71
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 71
</TABLE>
<PAGE> 4
SUMMARY
This summary highlights selected information from this prospectus to help
you understand the exchange offer and the preferred stock. You should carefully
read the entire prospectus to understand fully the terms of the exchange offer
and the preferred stock, as well as the tax and other considerations that are
important to you in making your investment decision. You should pay special
attention to the "Risk Factors" section beginning on page 12 of this prospectus.
THE COMPANY
We own and operate the world's largest fleet of marine drilling rigs. Our
fleet is one of the most diverse in the industry, capable of drilling in shallow
to ultra-deepwater depths. We currently operate in most of the world's major
offshore hydrocarbon producing regions. We believe that our fleet diversity and
worldwide operations allow us to mitigate revenue and cash flow impacts
associated with a major downturn in any single segment of the drilling industry
or geographic region.
Our overall strategy is to enhance our competitive positions in markets
that generate superior long-term returns. We focus on equipment types that serve
markets with long-term growth potential, can benefit from consolidation, or are
characterized by long-term contracts. As a result of this strategy, we have
become one of the largest drilling contractors in the deepwater, shallow water
and transition zone markets.
RECENT DEVELOPMENTS
On April 7, 1999, we announced that Steven Webster, our president and chief
executive officer, would resign from these officer positions at the end of May
1999. On May 19, 1999, Mr. Paul Loyd, our chairman of the board, was elected as
our chief executive officer, and Mr. Andrew Bakonyi was elected as president and
chief operating officer. Mr. Webster remains a director of our company.
On April 15, 1999, BP Amoco cancelled its drilling contract with us for our
drillship Peregrine VII in accordance with the terms of the contract because we
had not delivered this rig on time. We are currently marketing this rig.
On April 22, 1999, we issued in a private placement 300,000 units, each
consisting of one share of the preferred stock that is the subject of this
exchange offer and a warrant to purchase 35 shares of our common stock. We are
using the approximately $289 million net proceeds from this offering for general
corporate purposes, including funding our deepwater rig construction program.
On May 19, 1999, we announced that we had received notice from Petrobras of
cancellation of the drilling contract on our semisubmersible Falcon 100, based
upon alleged late delivery of the rig. We do not believe that Petrobras has the
right to cancel the contract. We have engaged Brazilian counsel to pursue our
rights under the contract and intend to take legal action to enforce our rights
under the contract. Petrobras has also advised us that the contract for which we
had been the low bidder with our Peregrine VII drillship had been awarded by
Petrobras to another drilling contractor, for the reason that Petrobras desired
to commence such contract prior to the expected delivery date of the Peregrine
VII.
1
<PAGE> 5
SUMMARY OF TERMS OF EXCHANGE OFFER
We are offering to exchange up to 300,000 shares of our outstanding 13 7/8%
Senior Cumulative Redeemable Preferred Stock that were initially issued on April
22, 1999 and up to 11,447 additional shares of this preferred stock that we
expect to issue as payment in kind of dividends on the preferred stock on August
1, 1999 for an equal number of shares of our 13 7/8% Senior Cumulative
Redeemable Preferred Stock. The form and terms of the shares of new preferred
stock are identical in all material respects to the form and terms of the shares
of outstanding preferred stock, except that the new preferred stock has been
registered under the Securities Act of 1933 and, therefore, is not entitled to
the benefits of the registration rights granted under the registration rights
agreement, executed as part of the offering of the outstanding preferred stock.
REGISTRATION RIGHTS
AGREEMENT.................. You are entitled to exchange your shares of
outstanding preferred stock for registered shares
of new preferred stock with substantially identical
terms. The exchange offer is intended to satisfy
these rights. After the exchange offer is complete,
you will no longer be entitled to any exchange or
registration rights with respect to your preferred
stock.
THE EXCHANGE OFFER......... We are offering to exchange one share of new
preferred stock for each share of outstanding
preferred stock. We will accept for exchange all
shares of outstanding preferred stock that are
validly tendered and not validly withdrawn. In
order to be accepted, a share of outstanding
preferred stock must be properly tendered and
accepted. After consummation of the exchange offer,
holders of shares of outstanding preferred stock
which are not exchanged will continue to be subject
to the existing restrictions upon the transfer of
outstanding preferred stock and we will have no
further obligation to such holders to provide for
the registration of the outstanding preferred stock
under the Securities Act.
SHELF REGISTRATION......... We may be required to file a shelf registration
statement with respect to our outstanding preferred
stock if:
- the Securities and Exchange Commission
issues an interpretation that we are not
permitted to effect the exchange offer; or
- a holder of outstanding preferred stock
(a) is not eligible to participate in the
exchange offer, or
(b) has participated in the exchange offer
but does not receive freely tradeable
new preferred stock,
RESALE OF NEW PREFERRED
STOCK...................... Based on interpretations by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties,
including "Exxon Holdings Corporation" (available
May 13, 1998) and "Morgan Stanley & Co.
Incorporated" (available June 5, 1991), we believe
that you may offer the new preferred stock for
resale, resell the new preferred stock and
otherwise transfer the new preferred stock without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that:
- you acquire the new preferred stock in the
exchange offer in the ordinary course of
business;
2
<PAGE> 6
- you have no arrangement or understanding
with any person to participate in the
distribution of the new preferred stock that
you obtain in the exchange offer;
- you are not a broker-dealer who purchased
such outstanding preferred stock directly
from us for resale pursuant to Rule 144A or
any other available exemption under the
Securities Act; and
- you are not an "affiliate" of our company.
We intend to rely on the existing no-action letters
and we do not intend to seek a no-action letter
from the Securities and Exchange Commission with
respect to the resale of the new preferred stock.
EXPIRATION DATE............ The exchange offer will expire at 5:00 p.m., New
York City time, , 1999, unless we extend the
expiration date.
ACCRUED DIVIDENDS ON THE
NEW PREFERRED STOCK AND THE
OUTSTANDING PREFERRED
STOCK.................... The new preferred stock will be issued after the
first dividend payment date, which is August 1,
1999. Dividends on the new preferred stock will
accrue from August 1, 1999. If we accept your
outstanding preferred stock you will not receive
any payment in respect of dividends on such
outstanding preferred stock accrued from August 1,
1999 to the date of the issuance of the new
preferred stock. Consequently, holders who exchange
their outstanding preferred stock for new preferred
stock will receive the same dividend payment on
November 1, 1999, which will be the first dividend
payment date after the closing of the exchange
offer with respect to the outstanding preferred
stock and the new preferred stock to be issued in
the exchange offer, that they would have received
had they not accepted the exchange offer.
TERMINATION OF THE EXCHANGE
OFFER.................... We may terminate the exchange offer at any time
prior to the expiration date if we determine that
our ability to proceed with the exchange offer
could be materially impaired due to any legal or
governmental action, new law, statute, rule or
regulation or any interpretation of the staff of
the Securities and Exchange Commission of any
existing law, statute, rule or regulation. We do
not expect any of the foregoing conditions to
occur, although there can be no assurance that such
conditions will not occur. Holders of outstanding
preferred stock will have certain rights against us
under the registration rights agreement executed as
part of the offering of the outstanding preferred
stock if we fail to consummate the exchange offer.
CONDITIONS TO EXCHANGE
OFFER...................... The exchange offer is subject to conditions, which
we may waive. See "The Exchange Offer -- Conditions
of the exchange offer." The exchange offer is not
conditioned upon any minimum number of shares of
outstanding preferred stock being tendered.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......... If you are the beneficial owner of outstanding
preferred stock and your name does not appear on a
security position listing of the Depository Trust
Company as the holder of that outstanding preferred
stock or if
3
<PAGE> 7
you are a beneficial owner of outstanding preferred
stock that is registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and you wish to tender shares of
outstanding preferred stock for registered shares
of preferred stock in the exchange offer, you
should contact the person in whose name your
outstanding preferred stock is registered promptly
and instruct that person to tender on your behalf.
If you wish to tender on your own behalf you must,
prior to completing and executing the letter of
transmittal and delivering your outstanding
preferred stock either make appropriate
arrangements to register ownership of the
outstanding preferred stock in your name or obtain
a properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time.
GUARANTEED DELIVERY
PROCEDURES................. If you wish to tender shares of your outstanding
preferred stock and time will not permit your
required documents to reach the exchange agent by
the expiration date, or the procedure for
book-entry transfer cannot be completed on time or
certificates for registered shares of outstanding
preferred stock cannot be delivered on time, you
may tender your outstanding preferred stock
pursuant to the procedures described in this
prospectus under the heading "The Exchange
Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures."
WITHDRAWAL RIGHTS.......... You may withdraw the tender of your outstanding
preferred stock at any time prior to 5:00 p.m., New
York City time, on , 1999, unless your
outstanding preferred stock was previously accepted
for exchange.
ACCEPTANCE OF OUTSTANDING
PREFERRED STOCK AND
DELIVERY OF NEW PREFERRED
STOCK.................... Subject to certain conditions as described more
fully under "The Exchange Offer -- Conditions of
the Exchange Offer," we will accept for exchange
any and all shares of outstanding preferred stock
which are properly tendered in the exchange offer
prior to 5:00 p.m., New York City time, on the
expiration date. The new preferred stock issued
pursuant to the exchange offer will be delivered
promptly to you following the expiration date.
FEDERAL INCOME TAX
CONSIDERATIONS........... The exchange of the outstanding preferred stock
will generally not be a taxable exchange for United
States federal income tax purposes. We believe you
will not recognize any taxable gain or loss or any
income as a result of the exchange.
USE OF PROCEEDS............ We will not receive any proceeds from the issuance
of new preferred stock pursuant to the exchange
offer. We will pay all expenses incident to the
exchange offer.
EXCHANGE AGENT............. American Stock Transfer & Trust Company is serving
as the exchange agent in connection with the
exchange offer. The exchange agent can be reached
at 40 Wall Street, New York, NY 10005, Attention:
Reorganization Department. For more information
with respect to the exchange offer, the telephone
number for the exchange agent is
4
<PAGE> 8
(718) 921-8200 and the facsimile number for the
exchange agent is (718) 234-5001.
CONSEQUENCES OF NOT
EXCHANGING OUTSTANDING
PREFERRED STOCK.......... If you do not exchange your outstanding preferred
stock for new preferred stock, you will no longer
be able to require us to register the outstanding
preferred stock under the Securities Act. In
addition, you will not be able to offer or sell the
outstanding preferred stock unless:
- they are registered under the Securities
Act; or
- you offer or sell them under an exemption
from the registration requirements of the
Securities Act.
See "The Exchange Offer" for more detailed information concerning the terms
of the exchange offer.
SUMMARY OF TERMS OF NEW PREFERRED STOCK
SECURITIES OFFERED......... 311,447 shares of our 13 7/8% Senior Cumulative
Redeemable Preferred Stock.
DIVIDENDS.................. Dividends on the preferred stock are payable in
cash or, on or before May 1, 2004, at our option,
in additional shares of preferred stock, on each
February 1, May 1, August 1 and November 1,
beginning August 1, 1999. Dividends on the
preferred stock will accrue at the rate of 13 7/8%
of the liquidation preference per annum and be
cumulative from the date on which the preferred
stock was originally issued. Covenants contained in
the indentures governing a substantial portion of
our indebtedness limit our ability to pay cash
dividends. We intend to pay dividends on the
preferred stock in additional shares of preferred
stock for most or all of the period ending May 1,
2004 unless industry conditions improve
significantly. For federal income tax purposes,
these distributions of additional shares of
preferred stock in lieu of cash will be taxed as
dividends to the extent of our earnings and profits
(as determined under applicable federal income tax
principles). Holders of the preferred stock will be
required to pay any applicable federal income taxes
with respect to such distributions of shares, but
will not receive cash from us with which to pay
such taxes.
LIQUIDATION PREFERENCE..... $1,000 per share, plus accrued and unpaid
dividends.
VOTING..................... Holders of the preferred stock will have no voting
rights except as provided by law and as provided in
the certificate of designation for the preferred
stock. In the event that dividends are not paid for
any three quarters, whether or not consecutive, or
upon certain other events (including the failure to
make a change of control offer, to comply with
other specified covenants or to pay the mandatory
redemption price when due), then the number of
directors that make up our Board of Directors will
be increased to permit the holders of the majority
of the then outstanding shares of preferred stock,
voting separately as a class with any other class
of securities having similar voting rights, to
elect two directors.
MANDATORY REDEMPTION....... We must redeem the preferred stock on May 1, 2009
(subject to the legal availability of funds) at a
redemption price equal to the
5
<PAGE> 9
liquidation preference, plus accrued and unpaid
dividends to the redemption date.
OPTIONAL REDEMPTION........ We may redeem any of the preferred stock beginning
May 1, 2004. The initial redemption price is
106.938% of the liquidation preference, declining
thereafter to 100.000% on or after May 1, 2007, in
each case plus accrued and unpaid dividends to the
redemption date.
In addition, on or prior to May 1, 2002, we may
redeem shares of the preferred stock having an
aggregate liquidation preference of up to $105
million at a price equal to 113.875% of its
liquidation preference, plus accrued and unpaid
dividends to the redemption date, with proceeds
from one or more public equity offerings. We may
make one of these redemptions only if it occurs
within 45 days after completion of the public
equity offering.
RANKING.................... The preferred stock will rank (i) senior to our
common stock and to all other capital stock of our
company unless the terms of the other capital stock
expressly provide that it ranks equally with the
preferred stock; and (ii) equally with any capital
stock of our company the terms of which expressly
provide that it will rank equally with the
preferred stock. As of the date of this offering
memorandum, all of our other outstanding capital
stock would rank junior to the preferred stock.
OPTIONAL EXCHANGE
FEATURE.................... The preferred stock will become exchangeable in
whole, but not in part, into exchange debentures at
our option if the conditions described in the
certificate of designation are satisfied.
Indentures governing a substantial portion of our
indebtedness will restrict our ability to
consummate such an exchange.
CERTAIN COVENANTS.......... The certificate of designation contains covenants
that restrict our ability and the ability of our
restricted subsidiaries to:
- issue capital stock;
- pay dividends or make distributions in
respect of capital stock;
- redeem capital stock; or
- effect a consolidation or merger.
However, these limitations are subject to a number
of important qualifications and exceptions.
REGISTRATION
REQUIREMENTS............... We are obligated to complete the exchange offer
pursuant to an effective registration statement or
cause resales of preferred stock to be registered
under the Securities Act. If the exchange offer
does not occur by October 19, 1999, or if other
related events do not occur within certain shorter
time periods, we will be required to pay liquidated
damages to the holders of the preferred stock.
CHANGE OF CONTROL.......... Upon a change of control, we will be required to
make an offer to purchase all outstanding preferred
stock. The purchase price will equal 101% of the
liquidation preference of the preferred stock, plus
accrued and unpaid dividends. We may not be
permitted under our debt agreements at the time of
any change of control, or may not have enough funds
available at the time of any change of control, to
make any required purchase of the preferred stock.
6
<PAGE> 10
THE EXCHANGE DEBENTURES
SECURITIES DESCRIPTION..... 13 7/8% Senior Subordinated Debentures due 2009 in
an aggregate principal amount equal to the
aggregate liquidation preference of, and accrued
and unpaid dividends on, the preferred stock
outstanding on the date fixed for the exchange of
the preferred stock.
MATURITY................... May 1, 2009.
INTEREST RATE AND PAYMENT
DATES.................. The exchange debentures will accrue interest at the
rate of 13 7/8% per annum, commencing on the date
they are exchanged for the preferred stock. The
interest payment dates will be February 1, May 1,
August 1 and November 1 of each year, beginning
with the first of such dates to occur after the
date they are exchanged for the preferred stock. On
or before May 1, 2004, we may pay interest on the
exchange debentures by issuing additional exchange
debentures.
OPTIONAL REDEMPTION........ We may redeem any of the exchange debentures
beginning May 1, 2004. The initial redemption price
is 106.938% of the principal amount of the exchange
debentures, declining thereafter to par on or after
May 1, 2007, in each case plus accrued and unpaid
interest to the redemption date.
In addition, on or prior to May 1, 2002, we may
redeem up to an aggregate principal amount of the
exchange debentures equal to $105 million, less the
aggregate liquidation preference of all shares of
preferred stock previously redeemed out of the
proceeds of one or more public equity offerings, at
a redemption price equal to 113.875% of the
principal amount of the exchange debentures, plus
accrued and unpaid interest, with the proceeds of
one or more public equity offerings. We may make
one of these redemptions only if it occurs within
45 days after completion of the public equity
offering.
RANKING.................... The exchange debentures will be our senior
subordinated indebtedness, ranking junior to all of
our existing and future senior indebtedness and
equally with or senior to all of our subordinated
indebtedness. At March 31, 1999, we and our
subsidiaries had $2.7 billion of consolidated
indebtedness outstanding, all of which would have
been effectively senior to the exchange debentures.
CERTAIN COVENANTS.......... The indenture under which the exchange debentures
would be issued will contain certain covenants that
restrict our ability and the ability of our
restricted subsidiaries to:
- pay dividends or make distributions in
respect of capital stock;
- redeem capital stock;
- make other restricted payments; or
- effect a consolidation or merger.
However, these limitations would be subject to a
number of important qualifications and exceptions.
REGISTRATION
REQUIREMENTS............... The exchange debentures may not be issued unless
such issuance is registered under the Securities
Act or is exempt from registration.
7
<PAGE> 11
CHANGE OF CONTROL.......... Upon a change of control, we will be required to
make an offer to purchase the exchange debentures.
The purchase price will equal 101% of the principal
amount of the exchange debentures, plus accrued and
unpaid interest. We may not be permitted under our
debt agreements at the time of any change of
control, or may not have enough funds available at
the time of any change of control, to make any
required purchase of the exchange debentures.
RISK FACTORS
See "Risk Factors" for a discussion of factors you should carefully
consider before deciding whether to exchange your notes in the exchange offer.
8
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below gives effect to the
merger of Falcon Drilling Company, Inc. and Reading & Bates Corporation, which
occurred on December 31, 1997, under the "pooling-of-interests" method of
accounting. This means that these companies are treated as if they have always
been combined for accounting and financial reporting purposes. The summary
consolidated financial data as of and for the three months ended March 31, 1998
and 1999 have been derived from our unaudited condensed consolidated financial
statements and include all adjustments (consisting of only normal recurring
adjustments) that management considers necessary for a fair presentation of the
interim periods. Results of interim periods are not necessarily indicative of
results for the full year. The summary financial data for the years ended
December 31, 1995, 1996, 1997 and 1998 were derived from our audited
consolidated financial statements, and for the year ended December 31, 1994 from
the separate audited consolidated financial statements of Reading & Bates and
Falcon. You should read this data together with our historical consolidated
financial statements, which are incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
1998 1999
------- ---------
(IN MILLIONS, EXCEPT
PER SHARE AND RATIO
AMOUNTS)
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $279.3 $ 243.8
Operating income............................................ 116.8 32.7
Income from continuing operations before income tax expenses
and minority interest..................................... 105.2 9.3
Net income(1)............................................... 69.8 1.6
Income from continuing operations per common share:
Basic..................................................... .42 .01
Diluted................................................... .42 .01
OTHER DATA:
Ratio of earnings to fixed charges and preferred
dividends(2).............................................. 5.3x --
Depreciation................................................ $ 21.4 $ 36.5
Capital expenditures and acquisitions....................... $237.4 $ 236.3
BALANCE SHEET DATA AS OF MARCH 31, 1999:
Working capital............................................. $ 639.1
Total assets................................................ 4,442.2
Total debt.................................................. 2,720.5
Stockholders' equity........................................ 1,253.0
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998(3)
----------- ------ -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $307.6 $390.3 $ 609.6 $ 933.0 $1,032.6
Operating income............................................ 22.4 64.9 178.8 160.4 215.8
Income (loss) from continuing operations before
extraordinary item........................................ (12.7) 23.5 106.7 29.8 91.0
Net income (loss)(1)........................................ (12.7) 26.9 106.7 (6.2) 102.8
Net income (loss) from continuing operations per common
share:
Basic..................................................... (.18) .16 .70 .18 .54
Diluted................................................... (.18) .15 .67 .18 .54
OTHER DATA:
Ratio of earnings to fixed charges and preferred
dividends(2).............................................. -- 1.6x 3.1x 2.6x 2.0x
Depreciation and amortization............................... $ 38.4 $ 46.9 $ 62.3 $ 84.7 $ 97.6
Capital expenditures and acquisitions....................... 124.7 186.9 383.2 600.2 1,166.5
BALANCE SHEET DATA (END OF PERIOD):
Working capital............................................. $ 9.2 $ 57.7 $ 195.3 $ (15.2) $ 175.3
Total assets................................................ 810.9 946.8 1,455.8 1,933.0 3,709.3
Total debt.................................................. 288.6 308.7 514.2 827.4 1,995.9
Stockholders' equity........................................ 356.3 472.6 716.7 728.0 1,250.2
</TABLE>
9
<PAGE> 13
- ---------------
(1) After extraordinary gain of $3.4 million in 1995, loss from discontinued
operations of $36.0 million in 1997, extraordinary loss of $24.2 million and
income from discontinued operations of $36.0 million in 1998, income from
discontinued operations of $8.3 million for the three months ended March 31,
1998, and extraordinary loss of $1.7 million for the three months ended
March 31, 1999.
(2) For the purpose of this calculation "earnings" represents income (loss) from
continuing operations before income tax expense, minority interest, and
extraordinary gain, plus fixed charges exclusive of interest capitalized.
"Fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt expense and an estimated portion of rentals
representing interest expense and preferred dividends. For the year ended
December 31, 1994 and the three months ended March 31, 1999, earnings were
insufficient to cover fixed charges by $11.8 million and $5.3 million,
respectively. Fixed charges for the year ended December 31, 1997 and 1998
and the three months ended March 31, 1998 and 1999 exclude interest cost of
$7.3 million, $22.5 million, $4.5 million and $3.7 million, respectively,
related to the debt of joint venture companies guaranteed by us or our
subsidiaries. Approximately $273.4 million of outstanding indebtedness at
December 31, 1998 was retired with a portion of our borrowings from RBF
Finance Co. and the proceeds from the sale of our $200 million senior notes.
Giving effect to this retirement and assuming an average effective interest
rate of approximately 11.76% on this debt and giving effect to the
amortization of debt issuance costs, the pro forma ratio of earnings to
fixed charges and preferred dividends for the year ended December 31, 1998
was 1.8x and, for the three months ended March 31, 1999, earnings were
insufficient to cover fixed charges by $12.3 million.
(3) Includes results of Cliffs Drilling Company, which we acquired on December
1, 1998, only for the month of December 1998 because we accounted for this
acquisition under the purchase method.
10
<PAGE> 14
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The summary unaudited pro forma combined financial data set forth below for
the year ended December 31, 1998 was derived from our historical financial
statements and from the historical financial statements of Cliffs Drilling
Company, which we acquired on December 1, 1998. The summary unaudited pro forma
combined financial data is presented as if the acquisition of Cliffs Drilling
and certain other acquisition and financing transactions were consummated at the
beginning of the period. The summary unaudited pro forma combined financial data
does not purport to represent what our company's and Cliffs Drilling's combined
results of operations actually would have been if the acquisition of Cliffs
Drilling had occurred as of the date indicated or will be for any future
periods. The summary unaudited pro forma combined financial data should be read
in conjunction with the unaudited pro forma condensed statement of operations
and our historical financial statements, which are incorporated by reference in
this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998(4)
-------------
(IN MILLIONS,
UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................................... $1,349.0
Operating income............................................ 305.1
Income from continuing operations........................... 138.9
OTHER DATA:
EBITDA(1)................................................... $ 544.6
Ratio of EBITDA to interest expense(2)...................... 6.7x
Ratio of earnings to fixed charges and preferred
dividends(3).............................................. 2.4x
Depreciation and amortization............................... $ 130.0
</TABLE>
- ---------------
(1) "EBITDA" means income from continuing operations before extraordinary loss,
interest expense, taxes, depreciation, amortization, cancellation of
conversion projects and merger expenses. EBITDA should not be considered as
an alternative to net income as an indicator of our operating performance,
or as an alternative to cash flow as a better measure of liquidity. EBITDA
measures presented may not be comparable to other similarly titled measures
of other companies. We believe EBITDA is a widely accepted financial
indicator of a company's ability to service debt.
(2) We believe that the ratio of EBITDA to interest expense provides an investor
with information as to its current ability to meet its interest costs.
(3) For the purpose of this calculation "earnings" represent income from
continuing operations before income tax expense, minority interest, and
extraordinary loss, plus fixed charges exclusive of interest capitalized.
"Fixed charges" consist of interest, whether expensed or capitalized,
amortization of debt expense, and an estimated portion of rentals
representing interest expense and preferred dividends. Fixed charges for the
year ended December 31, 1998 exclude interest cost of $22.5 million related
to the debt of joint venture companies guaranteed by us or our subsidiaries.
(4) The pro forma data does not reflect any of the proceeds from our senior note
offering completed in December 1998, or the application of the net proceeds
from that offering, as we used the net proceeds for general corporate
purposes, including funding our deepwater construction program.
Additionally, the pro forma data does not reflect the proceeds from our
senior note offering completed in March 1999 or the application of the loans
from RBF Finance Co. funded with the proceeds from the secured note
offerings of RBF Finance Co., since we used these proceeds to repay our
revolving credit facility and our short-term obligations and for general
corporate purposes, including funding our deepwater construction program,
and the impact of repaying the revolving credit facility and short-term
obligations did not have a material effect. Likewise, the pro forma data
does not reflect any proceeds from our offering in April 1999 of preferred
stock and warrants since we used these proceeds for general corporate
purposes, including funding our deepwater rig construction program.
11
<PAGE> 15
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations. The risk factors set forth
below are generally applicable to the outstanding preferred stock as well as the
exchange shares.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including the risks faced by us described below and elsewhere in this
prospectus.
DEPRESSED INDUSTRY CONDITIONS, COMBINED WITH OUR SUBSTANTIAL CAPITAL
REQUIREMENTS, HAVE ADVERSELY AFFECTED OUR LIQUIDITY.
We are currently constructing or significantly upgrading six wholly-owned
deepwater drilling rigs and have recently completed the construction of one
deepwater drilling rig. We estimate the gross capital expenditures on these
projects will be approximately $1.9 billion, of which approximately $0.8 billion
remains to be expended. Since May 1998, however, there has been a downturn in
demand for marine drilling rigs resulting in a decline in rig utilization and
dayrates. The decline has been particularly dramatic in the domestic barge and
jack-up rig markets where we are one of the largest contractors. Although our
operating revenues increased by $99.6 million from 1997 to 1998, on a quarterly
basis during 1998 we experienced a decline in operating revenues from $279.3
million for the first quarter of 1998 to $243.8 million for the first quarter of
1999. Similarly, although our EBITDA increased by $114.5 million from 1997 to
1998, we experienced a decline in EBITDA from $136.7 million in the first
quarter of 1998 to $71.5 million in the first quarter of 1999. As a result of
our declining operating results, our cash flow from operations and cash on hand,
including the net proceeds from our debt offering in March 1999, our borrowings
from RBF Finance Co. and our preferred stock and warrant offering in April 1999,
may not be sufficient to satisfy our short-term and long-term working capital
needs, planned investments, capital expenditures, debt, lease and other payment
obligations. Accordingly, it may be necessary for us to obtain additional
capital through debt and/or equity financings to meet our currently projected
obligations. We are currently evaluating two project financings to meet a
portion of our additional capital requirements. There can be no assurance,
however, that we can obtain these or any other additional financings or, if
obtained, that they will be on favorable terms or for the amount we need. As a
result of our debt offering in March 1999 and our borrowings from RBF Finance
Co., we have a limited ability under our indenture covenants to incur additional
recourse indebtedness and to secure that debt. In the event that we are unable
to obtain the requisite financing, we would have to sell assets or terminate or
suspend one or more construction projects. Termination or suspension of a
project may subject us to claims for penalties or damages under the construction
contracts or drilling contracts for rigs that are being constructed.
Accordingly, our inability to complete such financings would have a material
adverse effect on our financial condition and results of operations.
WE ARE DEPENDENT ON THE OIL AND GAS INDUSTRY AND MARKET PRICES. DECLINES IN OIL
AND GAS PRICES HAVE ADVERSELY AFFECTED OUR DAYRATES AND RIG UTILIZATION.
The amount of cash flow we generate depends on the level of activity in
offshore oil and gas exploration and development. Oil and gas prices
significantly affect the level of activity in oil and gas exploration and
development. These prices are volatile, and have only recently begun to show
signs of recovery from declines that started in 1997. These declines have
adversely affected our rig utilization and dayrates. Utilization of our domestic
jack-up fleet has declined from approximately 97% in the first quarter of 1998
to approximately 49% in the first quarter of 1999, and dayrates have declined
from an average of $35,000 during the first quarter of 1998 to an average of
$21,000 during the first quarter of 1999. Dayrates for our domestic barge
drilling rig fleet have not declined materially, but utilization of the fleet
declined from approximately 93% in the first quarter of 1998 to approximately
27% in the first quarter of 1999. Our international jack-up fleet has
experienced declines in utilization and dayrates since January 1998, but such
declines have not been as dramatic as those experienced in the domestic jack-up
fleet. If conditions in the
12
<PAGE> 16
oil and gas industry do not improve in the future, our financial condition and
results of operations may continue to be adversely affected.
WE HAVE A SIGNIFICANT AMOUNT OF DEBT.
We have a significant amount of debt. At March 31, 1999, our total
indebtedness was approximately $2.7 billion, which would have been 63% of our
total book value capitalization, as adjusted to give effect to our preferred
stock and warrant offering in April 1999. This substantial indebtedness will
have important consequences to you. For example, it will:
- make it more difficult for us to make our required debt payments;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future capital expenditures and working capital
and other general corporate requirements;
- potentially require us to sell assets or to terminate or suspend some of
our deepwater drilling construction projects;
- limit our flexibility in planning for, or reacting to, changes in our
business and our industry;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit our ability to borrow additional funds because of financial and
other restrictive covenants governing our debt.
OUR EXISTING DEBT DOCUMENTS CURRENTLY PREVENT US FROM PAYING CASH DIVIDENDS ON
THE PREFERRED STOCK, AND THE SUBSTANTIAL PAYMENTS REQUIRED TO SERVICE OUR
OUTSTANDING INDEBTEDNESS MAY MAKE IT DIFFICULT TO PAY CASH DIVIDENDS ON THE
PREFERRED STOCK IN THE FUTURE EVEN IF PERMITTED BY THE COVENANTS IN OUR DEBT
DOCUMENTS.
Dividends on the preferred stock must be paid in cash after May 1, 2004.
Under the indentures governing some of our outstanding indebtedness, we may pay
cash dividends and make other distributions on or in respect of our capital
stock, including the preferred stock, only if we meet specified financial tests.
Currently, these restrictions would prohibit us from paying cash dividends on
the preferred stock. We cannot assure you that our existing or future financing
arrangements will ever permit us to pay cash dividends on the preferred stock.
In the event that any of our financing agreements limit our ability to pay cash
dividends on the preferred stock when required, we will need to obtain waivers
of the limitations or refinance amounts outstanding under those agreements to
make such dividend payments. We cannot assure you that we would be able to
obtain waivers or refinance amounts outstanding under those agreements. In
addition, we have substantial outstanding indebtedness, which will require
substantial debt service payments in the future. See "Description of Significant
Indebtedness." These substantial debt service payment requirements may make it
difficult for us to pay cash dividends on the preferred stock in the future even
if permitted by the covenants in our debt documents. Any future refinancings of
this indebtedness will likely contain similar covenants. Our failure to pay cash
dividends on the preferred stock for three quarters after May 1, 2004 would
constitute a voting rights triggering event.
WE MAY NOT BE ABLE TO REDEEM THE PREFERRED STOCK OR REPAY THE EXCHANGE
DEBENTURES BECAUSE OF OUR SUBSTANTIAL DEBT REPAYMENT OBLIGATIONS.
As of March 31, 1999, we and our subsidiaries had approximately $2.5
billion of indebtedness with maturity dates on or prior to the mandatory
redemption date of the preferred stock. These substantial repayment obligations
may adversely affect our ability to redeem or refinance the preferred stock or,
if issued, the exchange debentures.
THE PREFERRED STOCK AND THE EXCHANGE DEBENTURES WILL RANK JUNIOR TO OUR AND OUR
SUBSIDIARIES' INDEBTEDNESS.
The preferred stock will rank junior to all of our present and future
indebtedness and other liabilities and equally with other classes of preferred
stock that provide that they rank on a parity with the preferred
13
<PAGE> 17
stock and senior to our common stock and any other class of preferred stock that
does not provide that it ranks on a parity with the preferred stock. In the
event of our bankruptcy, liquidation or reorganization, our assets will be
available to pay obligations on the preferred stock only after all of our
outstanding indebtedness and other liabilities have been paid in full, and there
may not be sufficient assets remaining to pay all amounts payable on the
preferred stock. The preferred stock also effectively ranks junior to all
liabilities, including indebtedness, of our subsidiaries. As of March 31, 1999,
we and our subsidiaries had consolidated indebtedness of approximately $2.7
billion.
If the preferred stock is exchanged for exchange debentures, the exchange
debentures will rank junior to all of our senior debt. The exchange debentures
will also effectively rank junior to all liabilities, including indebtedness, of
our subsidiaries. In the event of our bankruptcy, liquidation or reorganization,
we will be able to pay obligations on the exchange debentures only after all of
our outstanding senior debt has been paid in full, and there may not be
sufficient assets remaining to pay amounts payable on the exchange debentures.
We may in the future incur additional indebtedness and, subject to certain
limitations, issue additional preferred stock. Such additional indebtedness may
rank senior to, equally with or junior to the exchange debentures, while
additional indebtedness of the subsidiaries will effectively rank senior to the
exchange debentures. Any additional preferred stock may rank junior to or,
subject to a majority vote of the preferred stock, on parity with the preferred
stock.
WE HAVE COMMITTED SIGNIFICANT RESOURCES TO THE DEEPWATER DRILLING MARKET.
We have committed significant financial resources to the deepwater drilling
market through our deepwater rig construction projects. The cost of these
projects will exceed the cash flow from the contractual commitments that we have
for these projects. If the deepwater market continues to weaken, we may not be
able to obtain contracts for the use of the contracted rigs once the initial
contracts expire, and any renewals may be at lower dayrates and for shorter
terms than those in the initial contracts. For the periods during which we are
obligated to use the Deepwater Frontier, we will be obligated to pay the full
dayrate of $165,000 to the limited liability company that owns this rig, without
regard to whether we have a customer for this rig. These developments would
result in reduced cash flows and profitability, and adversely affect our
financial condition and results of operations.
OUR CUSTOMERS MAY SEEK TO CANCEL OR RENEGOTIATE CONTRACTS DURING DEPRESSED
MARKET CONDITIONS.
During depressed market conditions like those we are currently
experiencing, a customer may no longer need a rig, or may be able to obtain a
comparable rig at a lower dayrate. As a result, customers may pressure us to
renegotiate the terms of existing contracts. In addition, customers may seek to
avoid their obligations under existing drilling contracts. Since December 1998,
customers have cancelled a number of contracts within the drilling industry,
including the contract for our Jack Bates semisubmersible rig, primarily based
on alleged performance breaches by the drilling contractors. Our customers for
our drillship Peregrine VII and our semisubmersible Falcon 100 recently
cancelled their contracts with us because of our late delivery of these rigs. If
our customers cancel some of our significant contracts, it could have a material
adverse effect on our financial condition and results of operations.
OUR CUSTOMERS MAY CANCEL THEIR DEEPWATER CONTRACTS IF WE EXPERIENCE OPERATIONAL
PROBLEMS.
The deepwater market requires the use of floating rigs utilizing more
sophisticated technologies than those of the bottom-supported rigs that
previously constituted the majority of our fleet. We and other drilling
contractors have experienced problems with the new generation of subsea and
related systems designed for drilling in deeper waters. If this equipment fails
to function properly, the rig cannot engage in drilling operations. If we
encounter these or other operational problems on our deepwater rigs, we will
lose revenues, and our customers may have the right to terminate the drilling
contracts. The likelihood that a
14
<PAGE> 18
customer may seek to terminate a contract for operational problems is increased
during market downturns like the one we are currently experiencing. If our
customers cancel some of our significant contracts, it could have a material
adverse effect on our financial condition and results of operations.
OUR CONSTRUCTION AND UPGRADE PROJECTS ARE SUBJECT TO DELAYS AND COST OVERRUNS.
Our deepwater rig construction and upgrade projects are subject to delays
and cost overruns from (1) delays in equipment deliveries, (2) unforeseen
engineering problems, (3) work stoppages, (4) weather interference, (5)
unanticipated cost increases and (6) shortages of materials or skilled labor.
Our conversion projects are particularly susceptible to cost overruns and delays
due to the engineering and construction uncertainties inherent in conversion
projects. The customers for our drillship Peregrine VII and semisubmersible
Falcon 100 have cancelled their drilling contracts due to late delivery of these
rigs. We will be subject to late delivery penalties to our customer for our
drillship Peregrine IV, and our drilling contract for this rig gives the
customer cancellation rights if delivery is delayed significantly. We may also
be subject to late delivery penalties under the recently cancelled contract for
our semisubmersible Falcon 100. We have recently extended the delivery dates
for, and increased our estimated costs of, several of our deepwater rig
projects. Any additional cost overruns or delays will adversely affect our
financial condition and results of operations.
REDUCED DAYRATES RESULTING FROM COMPETITION ADVERSELY EFFECT OUR RESULTS OF
OPERATIONS BECAUSE WE CANNOT SIGNIFICANTLY REDUCE OUR OPERATING COSTS.
The marine drilling market is highly competitive and no one competitor is
dominant. During periods when the supply of rigs exceeds demand, as it currently
does, this competition results in significant downward pressure on the dayrates
at which we can contract our rigs. Because our rig operating costs cannot be
materially reduced, any reduction in dayrates adversely affects our results of
operations.
WE ARE SUBJECT TO OPERATIONAL RISKS.
Our operations are subject to the hazards inherent in the marine drilling
business. These include (1) blowouts, (2) craterings, (3) fires, (4) collisions,
(5) capsizings and (6) adverse weather. These hazards could result in
substantial damage to the environment, personal injury and loss of life,
suspension of drilling operations or damage to property and producing
formations. We may incur substantial liabilities or losses as a result of these
hazards. While we maintain insurance protection against some of these risks, and
seek to obtain indemnity agreements from our customers requiring the customers
to hold us harmless in the event of loss of production, reservoir damage or
liability for pollution that originates below the water surface, our insurance
or contractual indemnity protection may not be sufficient to protect us under
all circumstances or against all hazards.
WE CONDUCT TURNKEY DRILLING OPERATIONS.
We conduct most of our drilling services under daywork drilling contracts
where the customer pays for the period of time required to drill or workover a
well. We expect to provide an increasing portion of our services under turnkey
drilling contracts. Under turnkey drilling contracts, we contract to drill a
well to a contract depth under specified conditions for a fixed price. Our risks
under a turnkey drilling contract are substantially greater than on a well
drilled on a daywork basis because we assume most of the risks associated with
drilling operations generally assumed by the operator in a daywork contract,
including (1) risk of blowout, (2) loss of hole, (3) stuck drill stem, (4) lost
production or damage to the reservoir, (5) machinery breakdowns, (6) abnormal
drilling conditions and (7) risks associated with subcontractors' services,
supplies and personnel.
WE CONDUCT FOREIGN OPERATIONS.
We currently operate our rigs worldwide. Operations outside the United
States involve additional risks, including (1) war and civil disturbances, (2)
general strikes, (3) regional economic downturns and
15
<PAGE> 19
(4) foreign governmental activities that may limit or disrupt markets, restrict
payments or the movement of funds, impose exchange controls or cause currency
devaluations, or result in the loss of contract rights or expropriation of
property.
OFFSHORE DRILLING OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATION.
A number of federal, state, local and foreign laws and regulations govern
our operations. These include laws and regulations that restrict the discharge
of materials into the environment or otherwise relate to the protection of the
environment, the safety of our personnel and vessels and other matters.
Environmental laws and regulations could impose significant liability on us for
damages, clean-up costs and penalties if we spill oil or other pollutants in the
course of our operations. Some of these laws impose liability without regard to
negligence or fault. Environmental and other laws and regulations may increase
our costs of doing business, discourage our customers from exploring for oil and
gas and reduce demand for our services.
THERE MAY BE ADVERSE FEDERAL INCOME TAX CONSEQUENCES FOR HOLDERS OF PREFERRED
STOCK AND EXCHANGE DEBENTURES.
Because we may pay dividends on the preferred stock by distributing
additional shares of preferred stock, compliance with U.S. federal withholding
tax rules would be difficult with respect to investors who are not U.S. persons.
If we pay a dividend on the preferred stock by issuing additional shares of
preferred stock (or otherwise are deemed to pay a distribution for United States
federal income tax purposes) to any person with respect to which we determine,
after request of such information from a holder as we deem appropriate, that we
are obligated to withhold United States federal tax, then prior to any
distribution to that holder we shall be entitled to liquidate on behalf of the
holder the additional shares of preferred stock to the extent necessary in order
to fully fund our withholding obligation. We will promptly distribute to such
person the balance of the additional shares of preferred stock not used to fund
such withholding obligation.
Distributions of cash or, to the extent of their fair market value,
distributions of additional shares of preferred stock will generally be treated
as dividends, taxable as ordinary income to the extent of our current and
accumulated earnings and profits, as determined under U.S. federal income tax
principles. A holder would recognize this ordinary income in the case of a
distribution of additional shares of preferred stock even though the holder has
not received any cash with respect to the distribution. We do not expect to have
current earnings and profits in 1999 as determined under U.S. federal income tax
principles, and we are unable to predict if we will have current or accumulated
earnings and profits in the future. To the extent a distribution with respect to
the preferred stock exceeds our current earnings and profits, the distribution
will be treated as a nontaxable return of capital and will be applied against
and reduce the adjusted tax basis (but not below zero) in the hands of each
holder of the shares of preferred stock on which the distribution is made, thus
increasing the amount of any gain (or reducing the amount of any loss) which
would otherwise be realized by the holder upon the sale or other disposition of
such shares of preferred stock. In the case of distributions of additional
preferred stock, however, this basis reduction largely should be offset by a
corresponding amount of tax basis for a holder in the additional preferred
stock. A holder would recognize gain to the extent that any distributions were
to exceed our current or accumulated earnings and profits and the adjusted tax
basis of the holder in the preferred stock.
As the redemption price of the preferred stock is expected to exceed its
issue price by more than a de minimis amount, the difference ("redemption
premium") generally will be taxable as a constructive distribution of additional
preferred stock to a holder over a specified period under an economic accrual
method similar to that described below for accruing original issue discount
("OID") on the exchange debentures. However, to the extent we lack current or
accumulated earnings and profits for a taxable year to which a constructive
distribution relates, a holder should not recognize taxable income or gain as a
result of the constructive distribution. Moreover, there should be no net effect
on the holder's adjusted tax basis of the preferred stock as a result of the
constructive distribution if we have no current or accumulated earnings and
profits. To the extent we have current or accumulated earnings and profits for a
16
<PAGE> 20
taxable year to which a constructive distribution relates, the distribution will
be taxable currently to the holder as a dividend even though the holder does not
receive any actual distribution and will produce a corresponding increase in the
adjusted tax basis of the preferred stock as to which the distribution is deemed
to have been made.
Additional shares of preferred stock distributed on the preferred stock
will also have redemption premium if the redemption price of such preferred
stock exceeds the fair market value of the additional shares of preferred stock
when distributed by more than a de minimis amount. Such redemption premium may
differ from that attributable to the shares of preferred stock issued in this
offering. Therefore, any such additional shares of the preferred stock
distributed may not be fungible with the shares of the preferred stock issued in
this offering.
Upon a redemption of preferred stock in exchange for exchange debentures,
the holder generally will have a capital gain or loss equal to the difference
between the issue price of the exchange debentures received and the holder's
adjusted tax basis in the preferred stock redeemed, except to the extent all or
a portion of the exchange debentures received is treated as a dividend payment.
Because we have the option through May 1, 2004 to pay interest on the exchange
debentures by issuing additional exchange debentures, any exchange debentures
issued prior to that date will be treated as issued with OID for U.S. federal
income tax purposes, unless a de minimis exception is satisfied. Further, the
Exchange Debentures would be issued with OID (regardless of when issued) if
either (1) the exchange debentures (or preferred stock) are traded on an
established securities market at the exchange date at a price below the stated
principal amount of the exchange debentures or (2) absent any trading on an
established securities market, the yield on the exchange debentures was less
than an applicable federal rate existing as of the exchange date. If the
exchange debenture has OID in excess of the de minimis amount, holders would
have to accrue all such OID into ordinary income over the entire term of the
exchange debentures in advance of the receipt of the cash attributable thereto.
The exchange debentures may also be subject to the rules for "applicable high
yield discount obligations," in which case our deduction for OID on the exchange
debentures will be substantially deferred, and a portion of such deduction may
be disallowed entirely.
YOUR SHARES OF PREFERRED STOCK WILL CONTINUE TO BE SUBJECT TO TRANSFER
RESTRICTIONS IF YOU DO NOT EXCHANGE THEM IN THE EXCHANGE OFFER.
If you do not exchange your outstanding shares of preferred stock for
registered preferred stock in the exchange offer, you will continue to be
subject to the restrictions on transfer of your shares of preferred stock
described in the legend on your shares. The restrictions on transfer of your
outstanding preferred stock arise because we issued the shares under exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the currently outstanding preferred stock if it is registered
under the Securities Act and applicable state securities laws, or is offered and
sold under an exemption from these registration requirements. We do not intend
to register the currently outstanding preferred stock under the Securities Act.
In addition, if you exchange your preferred stock in the exchange offer for the
purpose of participating in a distribution of the new preferred stock, you may
be deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. To the extent the
amount of the currently outstanding preferred stock decreases because holders
tender their shares in the exchange offer, the trading market, if any, for the
currently outstanding preferred stock after the closing of the exchange offer
would be adversely affected.
THERE IS NO ESTABLISHED MARKET FOR THE NEW PREFERRED STOCK.
Although the new preferred stock may be resold or otherwise transferred by
holders who are not affiliates of our company without compliance with the
registration requirements under the Securities Act, they will be new securities
for which there is currently no established trading market. We do not intend to
apply for listing of the new preferred stock on a national securities exchange
or for quotation of the new
17
<PAGE> 21
preferred stock on an automated dealer quotation system. The liquidity of any
market for the new preferred stock will depend upon the number of holders of the
new preferred stock, the interest of securities dealers in making a market in
the new preferred stock and other factors. Accordingly, there can be no
assurance as to the development or liquidity of any market for the new preferred
stock. If an active trading market for the new preferred stock does not develop,
the market price and liquidity of the new preferred stock may be adversely
affected. If shares of the new preferred stock are traded, they may trade at a
discount from their face value, depending upon prevailing interest rates, the
market for similar securities, our performance and other factors. The new
preferred stock will be eligible for trading in The PORTAL Market.
Even though we are registering our offer of the new preferred stock in the
exchange offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of our company may publicly offer for sale or resell the new
preferred stock only in compliance with provisions of Rule 144 under the
Securities Act.
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements relate to analyses and other information which are based
on forecasts of future results and estimates of amounts not yet determinable.
These statements also relate to our future prospects, developments and business
strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will," and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Summary" and "Risk Factors," and other sections of this
prospectus and in the documents incorporated by reference in this prospectus.
These forward-looking statements involve risks and uncertainties that may
cause our actual future activities and results of operations to be materially
different from those suggested or described in this prospectus. These risks
include: our dependence on the oil and gas industry; the effects of recent
declines in oil and gas prices; our commitment to the deepwater drilling market;
the cancellation of contracts by our customers; our ability to secure adequate
financing, including financing to fund our deepwater drilling program; the risks
involved in our construction and upgrade projects; competition; operational
risks; risks involved in turnkey operations and foreign operations; the age of
our rigs; government regulation and environmental matters; our ability to
integrate and realize anticipated synergies relating to the merger with Cliffs
Drilling Company; our ability to achieve and execute internal business plans;
and the impact of any economic downturns and inflation.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, our actual results may vary materially
from those expected, estimated or projected.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We initially issued an aggregate of 300,000 shares of outstanding preferred
stock on April 22, 1999 to the initial purchaser in reliance on Section 4(2) of
the Securities Act. The initial purchaser subsequently offered and sold the
outstanding preferred stock only to "qualified institutional buyers" as defined
in and in compliance with Rule 144A. The first dividend payment date for the
preferred stock will be August 1, 1999. We do not expect to have completed the
exchange offer by that date, and we expect to issue additional shares of
preferred stock as payment of that dividend. Therefore, we are also offering to
exchange registered shares of preferred stock for the shares issued as payment
of the first dividend in the exchange offer.
18
<PAGE> 22
In connection with the sale of the outstanding preferred stock, we entered
into a registration rights agreement, which requires us
- to cause the outstanding preferred stock to be registered under the
Securities Act, or to file with the Securities and Exchange Commission
("SEC") a registration statement under the Securities Act with respect to
an issue of new preferred stock identical in all material respects to the
outstanding preferred,
- use our best efforts to cause such registration statement to become
effective under the Securities Act, and
- upon the effectiveness of that registration statement, to offer to the
holders of the outstanding preferred stock the opportunity to exchange
shares of their outstanding preferred stock for a like number of shares
of new preferred stock, which will be issued without a restrictive legend
and which may be reoffered and resold by the holder without restrictions
or limitations under the Securities Act.
We have filed a copy of the registration rights agreement as an exhibit to
the registration statement of which this prospectus is a part. We are making the
exchange offer to satisfy our obligations under the registration rights
agreement. The term "holder" with respect to the exchange offer means any person
in whose name shares of outstanding preferred stock are registered on our books
or any other person who has obtained a properly completed stock power from the
registered holder, or any person whose shares of outstanding preferred stock are
held of record by The Depository Trust Company ("DTC") who desires to deliver
such outstanding preferred stock by book-entry transfer at DTC.
We have not requested, and do not intend to request, an interpretation by
the staff of the SEC with respect to whether the new preferred stock issued in
the exchange offer in exchange for the outstanding preferred stock may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the SEC set forth in
no-action letters issued to third parties, we believe the new preferred stock
issued in exchange for outstanding preferred stock may be offered for resale,
resold and otherwise transferred by any holder without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that:
- you are not a broker-dealer,
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act,
- you acquire the new preferred stock in the ordinary course of your
business, and
- you have no arrangement or understanding with any person to participate
in the distribution of the new preferred stock.
Any holder who tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a distribution of the new
preferred stock or who is our affiliate may not rely upon the interpretations by
the staff of the SEC and, in the absence of an exemption, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Any holder to comply with such
requirements may incur liabilities under the Securities Act for which the holder
is not indemnified by us. Each broker-dealer (other than an affiliate of ours)
that receives new preferred stock for its own account in the exchange offer must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of new preferred stock. The letter
of transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. We have agreed that, for a period of 180 days
after the exchange date, we will make the prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
19
<PAGE> 23
We are not making the exchange offer to, nor will we accept surrenders for
exchange from, holders of outstanding preferred stock in any jurisdiction in
which this exchange offer or its acceptance would not comply with the securities
or blue sky laws.
By tendering in the exchange offer, you will represent to us that, among
other things:
- you are acquiring the new preferred stock in the exchange offer in the
ordinary course of your business, whether or not you are a holder,
- you do not have an arrangement or understanding with any person to
participate in the distribution of the new preferred stock,
- you are not a broker-dealer, or you are a broker-dealer but will not
receive new preferred stock for your own account in exchange for
outstanding preferred stock, or you are a broker-dealer and will receive
new preferred stock for your own account in exchange for outstanding
preferred stock, where you acquired the outstanding preferred stock as a
result of market-making activities or other trading activities, and you
acknowledge that you will deliver a prospectus in connection with any
resale of the new preferred stock,
- neither you nor any other person is engaged in or intends to participate
in the distribution of the new preferred stock, and
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act or, if you are our "affiliate," you will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
Following the completion of the exchange offer, no shares of preferred
stock will be entitled to the contingent increase in dividend rate applicable to
the shares of outstanding preferred stock. Nor will holders of preferred stock
have any further registration rights, and the outstanding preferred stock will
continue to be subject to certain restrictions on transfer. See
" -- Consequences of Failure to Exchange." Accordingly, the liquidity of the
market for the outstanding preferred stock could be adversely affected. See
"Risk Factors -- There may be adverse consequences of a failure to exchange."
Participation in the exchange offer is voluntary and you should carefully
consider whether to accept. We urge you to consult your financial and tax
advisors in making your own decisions on whether to participate in the exchange
offer.
TERMS OF THE EXCHANGE OFFER
General. Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, we will accept for exchange any and
all shares of outstanding preferred stock validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on the expiration date. We will issue
one share of new preferred stock in exchange for each share of outstanding
preferred stock accepted in the exchange offer. You may tender some or all of
your outstanding preferred stock in the exchange offer.
The form and terms of the new preferred stock will be identical in all
material respects to the form and terms of the outstanding preferred stock
except that the new preferred stock will be registered under the Securities Act
and, therefore, certificates representing shares of new preferred stock will not
bear legends restricting their transfer. The new preferred stock will be treated
as a single class with any outstanding preferred stock that remain outstanding.
We are not conditioning the exchange offer upon any minimum number of shares of
outstanding preferred stock being tendered for exchange.
You do not have any appraisal or dissenters' rights under the Delaware
General Corporation Law or the certificate of designation in connection with the
exchange offer. We are sending this prospectus, together with the letter of
transmittal, to all registered holders of outstanding preferred stock. We have
not fixed any record date for determining record holders of outstanding
preferred stock entitled to participate
20
<PAGE> 24
in the exchange offer. We intend to conduct the exchange offer in accordance
with the provisions of the registration rights agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the SEC.
Shares of outstanding preferred stock which are not tendered for exchange in the
exchange offer will remain outstanding and dividends will continue to accrue,
but such shares of outstanding preferred stock will not be entitled to any
rights or benefits under the registration rights agreement.
We will be deemed to have accepted validly tendered shares of outstanding
preferred stock when, as and if we have given oral or written notice to the
exchange agent. The exchange agent will act as agent for the tendering holders
for the purposes of receiving the new preferred stock from us. If we do not
accept any tendered shares of outstanding preferred stock for exchange because
of an invalid tender or the occurrence of certain other events identified in
this prospectus, we will return the certificates for the unaccepted shares of
outstanding preferred stock, without expense, to the tendering holder as
promptly as practicable after the expiration date.
You will not be required to pay brokerage commissions or fees or, subject
to the instructions in the letter of transmittal, transfer taxes if you tender
outstanding preferred stock in the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the exchange offer. See " -- Fees and expenses."
Expiration Date; Extensions; Amendments. The exchange offer expires at 5:00
p.m., New York City time, on , 1999, unless we, in our sole discretion,
extend the exchange offer, in which case the expiration date will be the latest
date and time to which the exchange offer is extended. Although we do not intend
to extend the exchange offer at this time, we reserve the right to extend the
exchange offer at any time by giving oral or written notice to the exchange
agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service. During any extension of the exchange offer, all shares of outstanding
preferred stock previously tendered pursuant to the exchange offer and not
withdrawn will remain subject to the exchange offer. The date of the exchange of
the new preferred stock for outstanding preferred stock will be as soon as
practicable following the expiration date.
We reserve the right, in our sole discretion,
- to delay accepting any outstanding preferred stock, to extend the
exchange offer or to terminate the exchange offer if any of the
conditions set forth below under "-- Conditions of the Exchange Offer"
have not been satisfied, by giving oral or written notice of such delay,
extension or termination to the exchange agent, or
- to amend the terms of the exchange offer in any manner.
We will, as promptly as practicable, notify you orally or in writing if
there is any delay in acceptance, extension, termination or amendment. If we
amend the exchange offer in any manner determined by us to constitute a material
change, we will promptly disclose the amendment by means of a prospectus
supplement that we will distribute to you. We will also extend the exchange
offer for a period of time, depending upon the significance of the amendment and
the manner of disclosure to the registered holders, if the exchange offer would
otherwise expire during that period.
In all cases we will issue shares of new preferred stock for shares of
outstanding preferred stock accepted for exchange in the exchange offer only
after the exchange agent timely receives a properly completed and duly executed
letter of transmittal and all other required documents. We reserve the right to
waive any conditions of the exchange offer or defects or irregularities in the
tender of outstanding preferred stock. If any tendered shares of outstanding
preferred stock are not accepted for any reason set forth in the terms and
conditions of the exchange offer or if shares of outstanding preferred stock are
submitted for a greater number of shares than the holder desires to exchange,
such unaccepted or non-exchanged outstanding preferred stock or substitute
outstanding preferred stock evidencing the unaccepted portion, as appropriate,
will be returned without expense to the tendering holder, unless otherwise
provided
21
<PAGE> 25
in the letter of transmittal, as promptly as practicable after the expiration or
termination of the exchange offer.
Dividends on the New Preferred Stock. You will not receive accrued
dividends on outstanding preferred stock that are accepted for exchange at the
time of exchange. However, we will pay accrued but unpaid dividends on exchanged
shares of outstanding preferred stock, rounded to the nearest whole share, in
shares of new preferred stock on the first dividend payment date following
consummation of the exchange offer.
Procedures for Tendering Outstanding Preferred Stock. Your tender of shares
of outstanding preferred stock through one of the procedures set forth below
will constitute an agreement between you and us in accordance with the terms and
subject to the conditions set forth in this prospectus and in the letter of
transmittal. In order to tender shares of outstanding preferred stock, you must
- properly complete and sign a letter of transmittal or a facsimile thereof
and deliver the same, together with any corresponding certificate or
certificates representing the shares of outstanding preferred stock being
tendered and any required signature guarantees, to the exchange agent at
its address set forth in the letter of transmittal on or prior to the
expiration date,
- comply with the procedure for book-entry transfer described below, or
- comply with the guaranteed delivery procedures described below.
You do not need to have your signature guaranteed if the tendered shares of
outstanding preferred stock are registered in the name of the signer of the
letter of transmittal and the new preferred stock to be issued in exchange are
to be issued and any untendered shares of outstanding preferred stock are to be
reissued in the name of the registered holder, including any participant in DTC
(also referred to as a book-entry facility) whose name appears on a security
listing as the owner of outstanding preferred stock. In any other case you must
be endorse the tendered shares of outstanding preferred stock or accompany them
with written instruments of transfer in form satisfactory to us and duly
executed by the registered holder. In addition, the signature on the endorsement
or instrument of transfer must be guaranteed by an eligible guarantor
institution which is a member of one of the following recognized signature
guarantee programs:
- The Securities Transfer Agents Medallion Program (STAMP),
- The New York Stock Exchange Medallion Signature Program (MSF), or
- The Stock Exchange Medallion Program (SEMP).
If the new preferred stock or outstanding preferred stock not exchanged are
to be delivered to an address other than that of the registered holder appearing
on the register for the outstanding preferred stock, the signature in the letter
of transmittal must be guaranteed by an eligible institution.
YOU MUST ELECT, AND ACCEPT THE RISK OF, THE METHOD OF DELIVERY OF SHARES OF
THE OUTSTANDING PREFERRED STOCK, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, WE
RECOMMEND THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED,
BE USED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. DO NOT SEND ANY LETTER OF
TRANSMITTAL OR CERTIFICATES REPRESENTING SHARES OF OUTSTANDING PREFERRED STOCK
TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
We understand that the exchange agent has confirmed with DTC that any
financial institution that is a participant in DTC's system may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender shares of outstanding
preferred stock. We further understand that the exchange agent will request,
within two business days after the date the exchange offer commences, that DTC
establish an account with respect to the outstanding preferred stock for the
purpose of facilitating the exchange offer, and any participant may make
book-entry delivery of shares of outstanding preferred stock by causing DTC to
22
<PAGE> 26
transfer such shares of outstanding preferred stock into the exchange agent's
account in accordance with DTC's ATOP procedures for transfer. However, the
exchange of the shares of outstanding preferred stock so tendered will only be
made after timely confirmation (a "Book-Entry Confirmation") of such book-entry
transfer and timely receipt by the exchange agent of an agent's message, and any
other documents required by the letter of transmittal.
The term "agent's message" means a message, transmitted by DTC and received
by the exchange agent and forming part of Book-Entry Confirmation, which states
that:
- DTC has received an express acknowledgment from a participant tendering
shares of outstanding preferred stock which are the subject of such
Book-Entry Confirmation,
- the participant has received and agrees to be bound by the terms of the
letter of transmittal, and
- we may enforce such agreement against such participant.
A tender will be deemed to have been received as of the date when
- the tendering holder's properly completed and duly signed letter of
transmittal accompanied by the outstanding preferred stock or a
confirmation of book-entry transfer of such outstanding preferred stock
into the exchange agent's account at DTC, is received by the exchange
agent, or
- a notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect from an eligible institution is received
by the exchange agent.
Issuances of new preferred stock in exchange for outstanding preferred
stock tendered pursuant to a notice of guaranteed delivery or letter, telegram
or facsimile transmission to similar effect by an eligible institution will be
made only against submission of a duly signed letter of transmittal and any
other required documents and deposit of the tendered outstanding preferred
stock.
We will determine all questions as to the validity, form, eligibility
including time of receipt, and acceptance for exchange of any tender of shares
of the outstanding preferred stock in our reasonable judgment. Our determination
will be final and binding. We reserve the absolute right to reject any or all
tenders not in proper form or the acceptance for exchange of which may, in the
opinion of our counsel, be unlawful. We also reserve the absolute right to waive
any of the conditions of the exchange offer or any defect or irregularity in the
tender of any outstanding preferred stock. Neither we, the exchange agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Any shares of outstanding preferred stock received by the exchange
agent that are not validly tendered and as to which the defects or
irregularities have not been cured or waived, or if a number of shares of
outstanding preferred stock are submitted greater than the number of shares of
outstanding preferred stock being tendered by such tendering holder, such
unaccepted or non-exchanged shares of outstanding preferred stock will be
returned by the exchange agent to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
In addition, we reserve the right in our sole discretion
- to purchase or make offers for any shares of outstanding preferred stock
that remain outstanding subsequent to the expiration date, and
- to the extent permitted by applicable law, to purchase outstanding
preferred stock in the open market, in privately negotiated transactions
or otherwise.
The terms of any such purchases or offers will differ from the terms of the
exchange offer.
Guaranteed Delivery Procedures. If you desire to accept the exchange offer
and time will not permit a letter of transmittal or outstanding preferred stock
to reach the exchange agent before the expiration date or the procedure for
book-entry transfer cannot be completed on a timely basis, you may effect a
tender if
23
<PAGE> 27
the exchange agent has received at its office, on or prior to the expiration
date, a letter, telegram or facsimile transmission from an eligible institution
- setting forth the name and address of the tendering holder,
- setting forth the name(s) in which the shares of outstanding preferred
stock are registered and the certificate number(s) of the shares of
outstanding preferred stock to be tendered,
- stating that the tender is being made thereby, and
- guaranteeing that, within three New York Stock Exchange trading days
after the date of execution of such letter, telegram or facsimile
transmission by the eligible institution, such outstanding preferred
stock, in proper form for transfer or a confirmation of book-entry
transfer of such outstanding preferred stock into the exchange agent's
account at DTC, will be delivered by such eligible institution together
with a properly completed and duly executed letter of transmittal and any
other required documents.
Unless outstanding preferred stock being tendered by the above-described
method are deposited with the exchange agent within the time period set forth
above, accompanied or preceded by a properly competed letter of transmittal and
any other required documents, we may, at our option, reject the tender. Copies
of a notice of guaranteed delivery which may be used by eligible institutions
for the purposes described in this paragraph are available from the exchange
agent.
Terms and Conditions of the Letter of Transmittal. The letter of
transmittal contains, among other things, the following terms and conditions,
which are part of the exchange offer.
The party tendering shares of outstanding preferred stock for exchange (the
"transferor") exchanges, assigns and transfers the outstanding preferred stock
to us and irrevocably constitutes and appoints the exchange agent as the
transferor's agent and attorney-in-fact to cause the outstanding preferred stock
to be assigned, transferred and exchanged. The transferor represents and
warrants that it has full power and authority to tender, exchange, assign and
transfer the outstanding preferred stock and to acquire the new preferred stock
issuable upon the exchange of such tendered outstanding preferred stock, and
that, when the same are accepted for exchange, we will acquire good and
unencumbered title to the tendered outstanding preferred stock, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The transferor also warrants that it will, upon request, execute
and deliver any additional documents deemed by us to be necessary or desirable
to complete the exchange, assignment and transfer of tendered shares of
outstanding preferred stock or to transfer ownership of such outstanding
preferred stock on the account books maintained by DTC. All authority conferred
by the transferor will survive the death, bankruptcy or incapacity of the
transferor and every obligation of the transferor shall be binding upon the
heirs, personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy and other legal representatives of such transferor.
By executing a letter of transmittal, each holder will make to us the
representations set forth above under the heading "-- Purpose and Effect of the
Exchange Offer."
Withdrawal of Tenders of Outstanding Preferred Stock. Except as otherwise
provided herein, tenders of shares of outstanding preferred stock may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of shares of outstanding preferred stock in the
exchange offer, a written or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth herein prior to 5:00
p.m., New York City time, on the expiration date. Any such notice of withdrawal
must
- specify the name of the person having deposited the outstanding preferred
stock to be withdrawn (the "depositor"),
24
<PAGE> 28
- identify the outstanding preferred stock to be withdrawn, including the
certificate number or numbers and number of shares of such outstanding
preferred stock,
- contain a statement that the holder is withdrawing its election to have
such outstanding preferred stock exchanged,
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such shares of outstanding preferred
stock were tendered, including any required signature guarantees, or be
accompanied by documents of transfer sufficient to have the transfer
agent with respect to the outstanding preferred stock register the
transfer of such shares of outstanding preferred stock in the name of the
person withdrawing the tender, and
- specify the name in which any such shares of outstanding preferred stock
are to be registered, if different from that of the depositor.
If shares of outstanding preferred stock have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility. All
questions as to the validity, form and eligibility, including time of receipt,
of such notices will be determined by us, and our determination shall be final
and binding on all parties. Any outstanding preferred stock so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer and
no new preferred stock will be issued with respect thereto unless the shares of
outstanding preferred stock so withdrawn are validly retendered. Any shares of
outstanding preferred stock which have been tendered but which are not accepted
for exchange will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal, rejection of tender or termination of
the exchange offer. Properly withdrawn outstanding preferred stock may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering Outstanding Preferred Stock" at any time prior to
the expiration date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue shares of new preferred stock in
exchange for, any shares of outstanding preferred stock. We may terminate or
amend the exchange offer, if at any time before the acceptance of shares of
outstanding preferred stock for exchange or the exchange of the shares of new
preferred stock for shares of outstanding preferred stock, the exchange offer is
determined by us, in our sole and absolute discretion, to violate applicable law
or any applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
We have appointed American Stock Transfer & Trust Company as exchange agent
for the exchange offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery should be directed to the exchange
agent addressed as follows:
<TABLE>
<S> <C>
By hand or overnight courier: By Mail:
American Stock Transfer & Trust Company American Stock Transfer & Trust Company
40 Wall Street 40 Wall Street
New York, NY 10005 New York, NY 10005
Attn: Reorganization Department Attn: Reorganization Department
(registered or certified mail recommended)
By Facsimile: Confirm by Telephone:
(718) 234-5001 (718) 921-8200
(For eligible institutions only)
</TABLE>
25
<PAGE> 29
FEES AND EXPENSES
We will bear all fees and the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telecopy, telephone or in person by our officers and regular employees and
those of affiliates. No additional compensation will be paid to any such
officers and employees who engage in soliciting tenders. We will also pay the
cash expenses to be incurred in connection with the exchange offer. These
expenses include fees and expenses of the exchange agent and transfer agent and
registrar, accounting and legal fees and printing costs, among others.
We have not retained any dealer-manager or other soliciting agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the exchange offer. However, we will
pay the exchange agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
We may also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this prospectus, the letter of transmittal and related documents to the
beneficial owners of the outstanding preferred stock and in handling or
forwarding tenders for exchange.
We will pay all transfer taxes, if any, applicable to the exchange of the
outstanding preferred stock for new preferred stock in the exchange offer. If,
however, new preferred stock, or outstanding preferred stock for principal
amounts not tendered or accepted for exchange, are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the
outstanding preferred stock tendered or if a transfer tax is imposed for any
reason other than the exchange of the outstanding preferred stock pursuant to
the exchange offer, then the amount of any such transfer taxes, whether imposed
on the registered holder or any other persons, will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the letter of transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The shares of outstanding preferred stock that are not exchanged for new
preferred stock in the exchange offer will remain restricted securities within
the meaning of Rule 144 of the Securities Act. Accordingly, such outstanding
preferred stock may be resold only
- to us or any of our subsidiaries,
- to a qualified institutional buyer in compliance with Rule 144A,
- to an institutional accredited investor that, prior to such transfer,
furnishes to the transfer agent a signed letter containing certain
representations and agreements relating to the restrictions on transfer
of the outstanding preferred stock and an opinion of counsel acceptable
to us that such transfer is in compliance with the Securities Act,
- pursuant to the exemption from registration provided by Rule 144 under
the Securities Act, if available,
- in accordance with another exemption from the registration requirements
of the Securities Act (and based on a legal opinion acceptable to us), or
- pursuant to an effective registration statement under the Securities Act.
The liquidity of the outstanding preferred stock could be adversely
affected by the exchange offer. Following the consummation of the exchange
offer, holders of the preferred stock will have no further registration rights
under the registration rights agreement and will not be entitled to the
contingent increase in the dividend rate applicable to the outstanding preferred
stock.
26
<PAGE> 30
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new
preferred stock. In consideration for issuing the new preferred stock as
contemplated in this prospectus, we will receive in exchange a like number of
outstanding preferred stock. The form and terms of the new preferred stock are
identical in all material respects to the form and terms of the outstanding
preferred stock, except that:
- the offering of the new preferred stock has been registered under the
Securities Act;
- the new preferred stock will not be subject to transfer restrictions; and
- the holders of the new preferred stock will not be entitled to
registration or other rights under the registration rights agreement,
including the payment of liquidated damages upon our failure to complete
the exchange offer.
The outstanding preferred stock surrendered in exchange for new preferred
stock will be retired and canceled and cannot be reissued. Accordingly, issuance
of the new preferred stock will not result in a change in the number of shares
of outstanding preferred stock.
27
<PAGE> 31
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization as
of March 31, 1999 and our unaudited consolidated capitalization as adjusted to
reflect our offering of preferred stock and warrants in April 1999, and the
application of the net proceeds from that offering. You should read this table
along with our consolidated financial statements and the related notes that are
incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999
-------------------------
AS
ACTUAL ADJUSTED
----------- -----------
(IN MILLIONS, UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 545.1 $ 834.1
======== ========
Current portion of long-term debt........................... 6.2 6.2
Long-term debt, excluding current portion:
Loans from RBF Finance Co. due 2006(1).................... 400.0 400.0
Loans from RBF Finance Co. due 2009(2).................... 400.0 400.0
12 1/4% Senior Notes due 2006............................. 200.0 200.0
6 1/2% Senior Notes due 2003.............................. 249.2 249.2
6 3/4% Senior Notes due 2005.............................. 348.2 348.2
6.95% Senior Notes due 2008............................... 249.2 249.2
7 3/8% Senior Notes due 2018.............................. 248.0 248.0
9 1/8% Senior Notes due 2003.............................. 100.0 100.0
9 1/2% Senior Notes due 2008.............................. 300.0 300.0
10 1/4% Senior Notes due 2003............................. 202.4 202.4
Other debt................................................ 17.3 17.3
-------- --------
Total long-term debt, including current portion... 2,720.5 2,720.5
-------- --------
Minority interest........................................... 44.6 44.6
-------- --------
Mandatorily redeemable preferred stock(3)................... -- 242.8
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share.................... 1.9 1.9
Capital in excess of par.................................. 1,061.1 1,061.1
Warrants(4)............................................... -- 46.2
Retained earnings......................................... 200.7 200.7
Other..................................................... (10.7) (10.7)
-------- --------
Total stockholders' equity.................................. 1,253.0 1,299.2
-------- --------
Total capitalization, including short-term obligations and
current portion of long-term debt......................... $4,018.1 $4,307.1
======== ========
</TABLE>
- ---------------
(1) Comprised of ten tranches with interest rates of 11.02%.
(2) Comprised of ten tranches with interest rates of 11.395%.
(3) We have discounted the $300 million liquidation preference of the preferred
stock by the preliminary estimated fair value of the warrants and a portion
of the estimated offering costs.
(4) We have based the fair value of the warrants on our preliminary estimate,
and we will finalize the fair value based on a third party appraisal.
28
<PAGE> 32
DESCRIPTION OF SECURITIES
DESCRIPTION OF PREFERRED STOCK
The following is a summary of the significant terms of the preferred stock.
The terms of the preferred stock are set forth in the certificate of
designation. The outstanding shares of preferred stock were offered for sale in
a private transaction that was not subject to the registration requirements of
the Securities Act. The following summary of the preferred stock, the
certificate of designation and the registration rights agreement is not intended
to be complete and is subject to, and qualified in its entirety by reference to,
our certificate of incorporation, the certificate of designation and the
registration rights agreement, including the definitions of certain terms used
below. Copies of the certificate of designation and registration rights
agreement are filed as exhibits to the registration statement of which this
prospectus forms a part. As used in this description of preferred stock,
references to the preferred stock shall be deemed to include the outstanding
preferred stock and the new preferred stock.
General
We are authorized to issue 50,000,000 shares of preferred stock, $0.01 par
value per share. Our certificate of incorporation authorizes our Board of
Directors to issue classes of preferred stock from time to time in one or more
series, with such designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions as
may be determined by our Board of Directors, subject to certain limitations. See
"-- Ranking." Our Board of Directors adopted resolutions approving the
certificate of designation. The certificate of designation creates a maximum of
600,000 shares of outstanding preferred stock, of which 300,000 shares of
outstanding preferred stock are authorized, issued and outstanding pursuant to
the private offering and an additional 300,000 shares of outstanding preferred
stock are designated and reserved for issuance to pay dividends on the
outstanding preferred stock if we elect to pay dividends on the outstanding
preferred stock in additional shares of outstanding preferred stock. The
certificate of designation also creates a class consisting of a like number of
shares of new preferred stock to be issued pursuant to the exchange offer having
terms identical in all material respects to the outstanding preferred stock. See
"-- Preferred Stock Exchange Offer; Registration Rights; Liquidated Damages."
All these shares of preferred stock have a liquidation preference of $1,000
per share. We are required to redeem (subject to the legal availability of funds
therefor) all outstanding shares of preferred stock on May 1, 2009 at a price in
cash equal to the liquidation preference, plus, without duplication, accrued and
unpaid dividends and liquidated damages, if any, to the date of redemption.
Subject to our satisfaction of specified conditions, including there being no
"default" or "event of default" arising under the indentures for our existing
senior notes, the preferred stock is exchangeable (in whole but not in part) for
the exchange debentures at our option on any dividend payment date. The
outstanding preferred stock is fully paid and non-assessable and the holders
thereof have do not have any subscription or preemptive rights. Upon issuance,
the new preferred stock will be fully paid and non-assessable and the holders
thereof will not have any subscription or preemptive rights.
The preferred stock ranks junior in right of payment to all of our
indebtedness and other obligations. As of March 31, 1999, on a pro forma basis
after giving effect to the private offering, the preferred stock would have been
junior in right of payment to $2.7 billion of indebtedness of our company and
our subsidiaries. In addition, our operations are conducted primarily through
our subsidiaries and, therefore, we are dependent upon the cash flow of our
subsidiaries to meet our obligations, including our ability to pay cash
dividends on and to redeem the preferred stock. Any right of ours to receive
assets of any of our subsidiaries will be effectively subordinated to all
indebtedness and other liabilities and commitments (including trade payables and
lease obligations) of such entities.
The transfer agent and registrar for the preferred stock is American Stock
Transfer & Trust Company, unless and until we select a successor.
29
<PAGE> 33
Ranking
With respect to dividends and rights on the liquidation, winding-up and
dissolution, the preferred stock ranks:
- senior to each class of our capital stock outstanding or established
after the date of the certificate of designation by our Board of
Directors, the terms of which do not expressly provide that it ranks
senior to, or on a parity with, the preferred stock as to dividends and
rights on the liquidation, winding-up and dissolution of our company
(collectively referred to, together with our common stock, as "junior
securities") and
- on a parity with each other class of our preferred stock established
after the date of this offering memorandum by our Board of Directors the
terms of which expressly provide that such class or series will rank on a
parity with the preferred stock as to dividends and rights on the
liquidation, winding-up and dissolution of our company (collectively
referred to as the "parity securities").
The certificate of designation provides that we may not, without the
approval of the holders of at least a majority of the then outstanding shares of
preferred stock voting or consenting as a separate class, authorize, create (by
way of reclassification or otherwise) or issue any parity securities or any
security convertible or exchangeable into or evidencing a right to purchase,
shares of any class or series of parity securities, except that we may issue:
- shares of new preferred stock pursuant to the certificate of designation
and as provided in the registration rights agreement; and
- shares of outstanding preferred stock or new preferred stock to pay
dividends thereon in accordance with the terms of the certificate of
designation.
The certificate of designation provides that we may not authorize, create
or issue (by way of reclassification or otherwise) any future issuances of
preferred stock that rank senior to the preferred stock.
Dividends
The holders of shares of the preferred stock are entitled to receive,
whether or not dividends are declared by the Board of Directors out of our
funds, cumulative preferential dividends from the issue date of the preferred
stock accumulating at 13 7/8% of the liquidation preference per annum from the
date of issuance, payable quarterly on February 1, May 1, August 1 and November
1, or, if any such date is not a business day, on the next succeeding business
day (each a "dividend payment date"), to the holders of record as of the
immediately preceding January 15, April 15, July 15 and October 15 (each, a
"record date"). Dividends may be paid in cash or, at our option until May 1,
2004, by the issuance of additional shares of preferred stock (including
fractional shares) having an aggregate liquidation preference equal to the
amount of such dividends. In the event that on or prior to May 1, 2004 dividends
are declared and paid through the issuance of additional shares of preferred
stock, such dividends shall be deemed paid in full and will not accumulate.
After May 1, 2004, dividends must be paid in cash. The first dividend payment of
preferred stock will be payable on August 1, 1999. Dividends payable on the
preferred stock are computed on the basis of a 360-day year consisting of twelve
30-day months and are deemed to accrue on a daily basis.
The dividend rate on the preferred stock is subject to increase, and
liquidated damages will be payable on the dividend payment dates set forth
above, in specified circumstances, if, among other matters, the preferred stock
is not registered with the SEC within specified time periods. All references
herein to "dividends" shall be deemed to include any such "liquidated damages."
See "-- Preferred Stock Exchange Offer; Registration Rights; Liquidated
Damages."
Dividends on the preferred stock accrue whether or not we have earnings or
profits, whether or not there are funds legally available for the payment of
such dividends and whether or not dividends are declared. Dividends will
accumulate to the extent they are not paid on the dividend payment date for the
30
<PAGE> 34
period to which they relate. In the event that dividends on the preferred stock
are in arrears and unpaid for three or more quarterly dividend periods (whether
or not consecutive), holders of preferred stock will be entitled to certain
voting rights. See "-- Voting Rights; Amendments." The certificate of
designation provides that we will take all actions required or permitted under
the Delaware General Corporation Law (the "DGCL") to permit the payment of
dividends on the preferred stock, including, without limitation, through the
revaluation of our assets in accordance with the DGCL, to make or keep funds
legally available for the payment of dividends.
If we pay a dividend on the preferred stock by issuing additional shares of
preferred stock (or otherwise are deemed to pay a distribution for United States
federal income tax purposes) to any person with respect to which we determine,
after request of such information from such holder as we deem appropriate, that
we are obligated to withhold United States federal tax, then prior to any such
distribution we shall be entitled to liquidate on behalf of such person the
additional shares of preferred stock to the extent necessary in order to fully
fund our withholding obligation. We will promptly distribute to such person the
balance of the additional shares of preferred stock not used to fund such
withholding obligation.
Dividends on account of arrears for any past dividend period and dividends
in connection with any optional redemption may be declared and paid at any time,
without reference to any regular dividend payment date, to holders of record of
preferred stock on such date, not more than 45 days prior to the payment
thereof, as may be fixed by our Board of Directors.
No dividends whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of preferred
stock with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividend, upon all outstanding shares of
preferred stock. No full dividends may be declared or paid or funds set apart
for the payment of dividends on any parity securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash, a
sum in cash sufficient for such payment set apart for such payment on the
preferred stock. If full dividends are not so paid, the preferred stock will
share dividends pro rata with the parity securities. So long as any preferred
stock is outstanding and unless and until full cumulative dividends have been
paid (or are deemed paid) in full on the preferred stock:
- no dividend (other than a dividend payable solely in shares of additional
junior securities) shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any shares of junior securities;
- no other distribution shall be declared or made upon, or any sum set
apart for the payment of any distribution upon, any shares of junior
securities, other than a distribution consisting solely of junior
securities;
- no shares of parity securities or junior securities shall be purchased,
redeemed or otherwise acquired or retired for value (excluding an
exchange for shares of other junior securities) by us or any of our
subsidiaries;
- no warrants, rights, calls or options requiring or permitting us or any
of our Subsidiaries to purchase any parity securities or junior
securities shall be directly or indirectly issued by us or any of our
subsidiaries; and
- no monies shall be paid into or set apart or made available for a sinking
or other like fund for the purchase, redemption or other acquisition or
retirement for value of any shares of parity securities or junior
securities by us or any of our subsidiaries.
Holders of the preferred stock are not entitled to any dividends, whether
payable in cash, property or stock, in excess of the full cumulative dividends
described in this prospectus.
31
<PAGE> 35
The indentures relating to some of our existing indebtedness contain, and
future credit agreements or other agreements relating to indebtedness to which
we become a party may contain, restrictions on our ability to pay dividends on
the preferred stock (other than solely in additional shares of preferred stock).
Voting Rights; Amendments
Holders of record of shares of the preferred stock have no voting rights,
except as required by law and as provided in the certificate of designation. The
certificate of designation provides that upon:
(a) the accumulation of accrued and unpaid dividends on the
outstanding preferred stock in an amount equal to three or more quarterly
dividend periods (whether or not consecutive) in the aggregate;
(b) our failure to make any required change of control offer, or
(c) our failure to comply with any of the other covenants or
agreements set forth in the certificate of designation and the continuance
of such failure for 30 consecutive days or more after receipt of notice of
such failure from the holders of at least 25% of the preferred stock then
outstanding (each of the events described in clauses (a), (b) and (c) being
referred to herein as a "voting rights triggering event"),
then the holders of a majority of the outstanding shares of preferred stock,
with the holders of shares of any parity securities, issued after the date of
original issuance of the outstanding preferred stock, upon which like voting
rights have been conferred and are exercisable, voting as a single class, will
be entitled to elect two directors to our Board of Directors for successive
one-year terms until all dividends in arrears on the preferred stock have been
paid or declared and set apart for payment, we have made and, to the extent any
shares of preferred stock are tendered, consummated such change of control
offer, or such failure to comply with covenants or other agreements has been
cured. Upon our paying or declaring and setting apart of funds for payment of
all such dividends in arrears, making and consummating such change of control
offer or curing such failure to comply with covenants or other agreements, the
term of office of each director elected will immediately terminate and the
number of directors constituting the entire Board of Directors will be reduced
by the number of directors elected by the holders of the preferred stock and any
parity securities.
In addition to the provisions described above in "-- Ranking," the
certificate of designation also provides that we will not, without the approval
of the holders of at least a majority of the preferred stock then outstanding,
amend, alter or repeal any of the provisions of our certificate of incorporation
(including the certificate of designation) or our bylaws so as to affect
adversely the powers, preferences or rights of the holders of the preferred
stock or reduce the time for any notice to which the holders of the preferred
stock may be entitled. Subject to the provisions described above under
"-- Ranking," the certificate of designation provides that an amendment of our
certificate of incorporation to authorize or create, or to increase the amount
of junior securities or parity securities shall not be deemed to affect
adversely the powers, preferences or rights of the holders of the preferred
stock.
Notwithstanding the foregoing, modifications and amendments to the
certificate of designation described below under "-- Change of Control" may be
made by us with the consent of the holders of a majority of the preferred stock
then outstanding; provided that following the mailing of any change of control
offer and until the expiration date for holders to accept that change of control
offer, no such modification or amendment may, without the consent of the holder
of each outstanding share of preferred stock affected thereby, modify any change
of control offer for the preferred stock required under the covenant entitled
"-- Change of Control" in a manner materially adverse to the holders of
outstanding preferred stock. In addition, holders of a majority of the
outstanding preferred stock may waive any past default of the provisions of the
certificate of designation described below under "-- Change of Control" except a
default arising from failure to purchase any preferred stock tendered pursuant
to an change of control offer.
32
<PAGE> 36
Under Delaware state law, holders of preferred stock, under certain
circumstances, are entitled to vote as a class upon a proposed amendment to our
certificate of incorporation, whether or not entitled to vote thereon by the
certificate of incorporation, if the amendment would alter or change the powers,
preferences, or special rights of the shares of such class so as to affect them
adversely.
Exchange
The preferred stock will not be exchangeable for exchange debentures unless
on a dividend payment date we could, among other things, (1) redeem the
preferred stock, (2) incur the indebtedness evidenced by the exchange debentures
and (3) pay in cash the dividend payable on such Dividend Payment Date, without
violating the covenants in the indentures governing our existing indebtedness.
If the preferred stock is exchangeable, we may, at our option, on such
dividend payment date, exchange in whole, but not in part, the then outstanding
shares of preferred stock for exchange debentures with a principal amount equal
to the liquidation preference of the preferred stock; provided that
- on the date of such exchange there are no accumulated and unpaid
dividends and liquidated damages, if any, on the preferred stock (other
than the dividend payable on such date) or other contractual impediments
to such exchange;
- there shall be legally available funds sufficient therefor;
- immediately after giving effect to such exchange, no default or event of
default (each as defined in the indentures relating to our existing
indebtedness and under the exchange debenture indenture) would exist
under such indentures with respect to such senior notes, secured notes or
Exchange Debentures or would be caused thereby;
- the Exchange Debenture Indenture (as defined below) has been qualified
under the Trust Indenture Act of 1939, if such qualification is required
at the time of exchange; and
- we shall have delivered a written opinion to the trustee (under the
exchange debenture indenture) to the effect that all conditions to be
satisfied prior to such exchange have been satisfied.
At any time, we may make an irrevocable election to waive our right to
exchange the preferred stock for exchange debentures.
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding preferred stock will be entitled to receive, subject to the second
succeeding sentence of this paragraph, $1.00 principal amount of exchange
debentures for each $1.00 of the aggregate liquidation preference of preferred
stock held by them, plus, without duplication, the accrued and unpaid dividends
due on the exchange date. The exchange debentures will be issued in registered
form, without coupons. The exchange debentures will be issued in principal
amounts of $1,000 and integral multiples thereof to the extent possible, and
will also be issuable in principal amounts less than $1,000 so that each holder
of preferred stock will receive interests representing the entire amount of
exchange debentures to which such holder's shares of preferred stock entitle
such holder; provided that we may pay cash in lieu of issuing an exchange
debenture having a principal amount less than $1,000. Notice of the intention to
exchange will be sent by or on behalf of us not more than 60 days nor less than
30 days prior to the exchange date by first class mail, postage prepaid, to each
holder of record of preferred stock at its registered address. If notice of
exchange has been given (unless we default in issuing exchange debentures in
redemption by means of the exchange for the preferred stock or fail to pay or
set aside accrued and unpaid dividends and liquidated damages, if any, on the
preferred stock) and certain conditions with respect to the issuance of exchange
debentures are met, on the exchange date the holders of the preferred stock will
cease to be stockholders with respect to such shares and will have no interest
in or claims against us by virtue thereof (except the right to receive exchange
debentures in exchange therefor and accrued and unpaid dividends thereon to the
exchange date) and will have no voting or other rights with respect to such
shares, dividends will cease to accrue on the preferred stock, and the shares of
preferred stock will no longer be outstanding. No shares of preferred stock may
be exchanged for exchange debentures unless we have paid or set aside for the
benefit of the
33
<PAGE> 37
holders of the preferred stock all accrued and unpaid dividends and liquidated
damages, if any, on the preferred stock to the exchange date. Our ability to
exchange preferred stock for exchange debentures is restricted under the terms
of the indentures relating to our existing indebtedness. Our ability to exchange
preferred stock for exchange debentures is also subject to certain conditions
contained in the indenture relating to the exchange debentures and to
limitations imposed under the DGCL and by applicable laws protecting the rights
of creditors.
Redemption
Mandatory Redemption
On May 1, 2009, we will be required to redeem (subject to the legal
availability of funds therefor) all outstanding shares of preferred stock at a
price in cash equal to the liquidation preference thereof, plus accrued and
unpaid dividends (including an amount in cash equal to a pro rated dividend for
any partial dividend period) and liquidated damages, if any, to the date of
redemption. We will not be required to make sinking funds payments with respect
to the preferred stock. The certificate of designation provides that we will
take all actions required or permitted under Delaware law to permit such
redemption.
Optional Redemption
The preferred stock may be redeemed, in whole or in part, at our option on
or after May 1, 2004, at the redemption prices specified below (expressed as
percentages of the liquidation preference thereof), in each case, together with
accrued and unpaid dividends (including an amount in cash equal to a pro rated
dividend for any partial dividend period) and liquidated damages, if any, to the
date of redemption, upon not less than 30 nor more than 60 days' prior written
notice, if redeemed during the 12-month period commencing on May 1 of each of
the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004..................................................... 106.938%
2005..................................................... 104.625%
2006..................................................... 102.313%
2007 and thereafter...................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to May 1, 2002, we
may, at our option, redeem in whole or in part, shares of the preferred stock
having an aggregate liquidation preference of up to $105 million at a price in
cash equal to 113.875% of the liquidation preference thereof, plus accrued and
unpaid dividends and liquidated damages thereon, if any, to the redemption date,
with the net cash proceeds from one or more public equity offerings; provided
that any such redemption shall occur within 45 days of the date of the closing
of such public equity offerings.
Liquidation Rights
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
our company or reduction or decrease in its capital stock resulting in a
distribution of assets to the holders of any class or series of our capital
stock, each holder of shares of the preferred stock will be entitled to payment
out of our assets available for distribution of an amount equal to the
liquidation preference per share of preferred stock held by such holder, plus
accrued and unpaid dividends and liquidated damages, if any, to the date fixed
for liquidation, dissolution, winding-up or reduction or decrease in capital
stock, before any distribution is made on any junior securities, including,
without limitation, our common stock. After payment in full of the liquidation
preference and all accrued and unpaid dividends and liquidated damages, if any,
to which holders of preferred stock are entitled, such holders will not be
entitled to any further participation in any distribution of our assets. If,
upon any voluntary or involuntary liquidation, dissolution or winding-up of our
company, the amounts payable with respect to the preferred stock and all other
parity securities are not paid in full, the holders of the preferred stock and
the parity securities will share equally and ratably in any distribution of our
assets in proportion to the full liquidation preference and accumulated and
unpaid
34
<PAGE> 38
dividends and liquidated damages to which each is entitled. Neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of our property
or assets nor the consolidation or merger of our company with or into one or
more corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of our company or reduction or decrease in capital
stock, unless such sale, conveyance, exchange or transfer shall be in connection
with a liquidation, dissolution or winding-up of the business of our company or
reduction or decrease in capital stock.
The certificate of designation does not contain any provision requiring
funds to be set aside to ensure the payment of the liquidation preference of the
preferred stock, although such liquidation preference will be substantially in
excess of the par value of the shares of the preferred stock. There can be no
assurance that, upon any such voluntary or involuntary liquidation, dissolution
or winding-up of our company, there will be funds available in an amount
sufficient to pay such liquidation preference in full, in part or at all.
Change of Control
Upon the occurrence of any of the following events (each a "change of
control"), we will be required to make an offer (the "change of control offer")
to each holder of shares of preferred stock to repurchase all or any part (but
not, in the case of any holder requiring us to purchase less than all of the
shares of preferred stock held by such holder, any fractional shares) of such
holder's preferred stock at an offer price in cash equal to 101% of the
aggregate liquidation preference thereof plus, without duplication, all accrued
and unpaid dividends per share to the date of purchase (including an amount in
cash equal to a pro rated dividend for the period from the dividend payment date
immediately prior to the date of purchase to the date of purchase) and
liquidated damages, if any, to the date of purchase (the "change of control
purchase price"):
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of this
clause (i) such person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of our
voting stock;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted our Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by our shareholders was approved by a vote of
66 2/3% of our directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office; and
(iii) the merger or consolidation of our company with or into another
person or the merger of another person with or into our company, or the
sale of all or substantially all our assets or of the assets of our company
and its restricted subsidiaries (as defined below) taken as a whole to
another person, and, in the case of any such merger or consolidation, our
securities that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of our voting stock are
changed into or exchanged for cash, securities or property, unless pursuant
to such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at least a
majority of the aggregate voting power of the voting stock of the surviving
corporation.
Notwithstanding the foregoing, a change of control shall not be deemed to
have occurred if (a) the ratings assigned to our 12 1/4% Senior Notes due 2006
by Moody's and S&P prior to the announcement are not downgraded or placed on a
negative credit watch by either such rating agency as a result thereof and (b)
no default has occurred and is continuing under the indenture relating to those
senior notes.
35
<PAGE> 39
Within 30 days following any Change of Control, we shall mail a notice to
each holder of the preferred stock stating, among other things:
- that a change of control has occurred and that such holder has the right
to require us to purchase such holder's preferred stock for the change of
control purchase price;
- the circumstances and relevant facts regarding such change of control
(including information with respect to pro forma historical income, cash
flow and capitalization after giving effect to such change of control);
- the repurchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed); and
- the instructions determined by us, consistent with the covenant described
hereunder, that a holder of the preferred stock must follow in order to
have its preferred stock purchased.
We shall comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of preferred stock pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder, we
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached our obligations under the covenant described
hereunder by virtue thereof.
The certificate of designation provides that if any credit facility that
provides for an event of default or requires a payment upon a change of control
is in effect or if we or our subsidiaries have any outstanding indebtedness that
requires a payment upon a change of control, or any amounts are owing thereunder
or in respect thereof, at the time of the occurrence of a change of control,
prior to the mailing of the notice to holders described in the second preceding
paragraph, but in any event within 30 days following any change of control, we
shall be required to (i)(A) repay or cause the borrowers thereunder to repay in
full all obligations under or in respect of such credit facility or such other
indebtedness of each lender who has then irrevocably accepted such offer or (B)
obtain and cause such other borrowers to obtain the requisite consents under
such credit facility or such other indebtedness from the holders of such other
indebtedness to permit the repurchase of the preferred stock as described above
without violating any applicable covenants and other contractual restrictions
contained in the instruments governing such credit facility and other
indebtedness , and (ii) if we and any other borrowers do not obtain such
requisite consents pursuant to clause (i)(B) above, take such other or
additional actions as may be required to consummate the change of control offer
in compliance with all applicable covenants or other contractual restrictions in
the instruments governing such credit facility or other indebtedness. We may
not, and shall not be required to, purchase preferred stock in the event of a
change of control unless and until we have complied with the covenant described
in the preceding sentence; provided, that our failure to comply with the
covenant described in the preceding sentence constitutes a voting rights
triggering event described in clause (b) under "-- Voting Rights; Amendments"
above. There can be no assurance that we will have adequate resources to
refinance or fund the repurchase of the preferred stock in the event of a change
of control. Our failure, following a change of control, to make a change of
control offer or to pay when due the change of control purchase price for shares
of preferred stock tendered in conformity with any such change of control offer
will give the holders of the preferred stock the rights described under
"-- Voting Rights; Amendments." As a result of the foregoing, a holder of the
preferred stock may not be able to compel us to purchase the preferred stock
unless we or such borrower is able at the time to refinance all of the
obligations under or in respect of such credit facility or such other
indebtedness or obtain requisite consents thereunder.
The certificate of designation further provides that
- if we have issued any outstanding preferred stock (other than the
preferred stock), and we are required to make a change of control offer
or to make a distribution with respect to such preferred stock (other
than the preferred stock) in the event of a change of control, we shall
not consummate
36
<PAGE> 40
any such offer or distribution with respect to such preferred stock
(other than the preferred stock and any parity securities having
comparable rights on a change of control) until such time as we shall
have paid the change of control purchase price in full to the holders of
preferred stock that have validly accepted our change of control offer
and shall otherwise have consummated the change of control offer made to
holders of the preferred stock and
- we will not issue preferred stock with change of control provisions
requiring the payment of such preferred stock prior to or contemporaneous
with the payment of the preferred stock in the event of a change of
control without the approval of holders of at least a majority of the
preferred stock then outstanding.
Except as described above with respect to a change of control, the
certificate of designation does not contain provisions that permit the holders
of the preferred stock to require that we repurchase or redeem the preferred
stock in the event of takeover, recapitalization or similar transaction.
We are not required to make a change of control offer to the holders of
preferred stock upon a change of control if a third party makes the change of
control offer described above in the manner, at the times and otherwise in
compliance with the requirements set forth in the certificate of designation and
purchases all shares of preferred stock validly tendered and not withdrawn under
such change of control offer.
The definition of change of control includes a phrase relating to the sale,
conveyance, lease or transfer of all or substantially all of our assets or the
assets of our company and our restricted subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, if we and/or our restricted subsidiaries were to engage in a
transaction in which we or they disposed of less than all of the assets of our
company or our company and our restricted subsidiaries taken as a whole, as
applicable, a question of interpretation could arise as to whether such
disposition was of "substantially all" of its or their assets, as the case may
be, and whether we were required to make a change of control offer.
Mergers, Consolidation or Sale of Assets.
We shall not consolidate with or merge into any person, continue in another
jurisdiction, or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of our assets to any person, unless:
- the person formed by or surviving such consolidation or merger (if other
than our company), or to which such sale, lease, conveyance, transfer or
other disposition shall be made (collectively, the "successor"), is a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia,
- the preferred stock shall be converted into or exchanged for and shall
become shares of such successor, having in respect of such Successor, the
same powers, preferences and relative participating, optional or other
special rights and the qualifications, limitations or restrictions
thereon, that the preferred stock had immediately before such
transactions, and
- immediately after giving effect to such transaction, no voting rights
triggering event shall have occurred and be continuing.
Transfer Agent and Registrar
American Stock Transfer & Trust Company is the transfer agent and registrar
for the preferred stock.
Reports to Holders
The certificate of designation provides that whether or not required by the
rules and regulations of the SEC, so long as any shares of preferred stock are
outstanding, we shall furnish to the holders of the preferred stock within 15
days after we are or would have been required to file them with the SEC, (i) all
37
<PAGE> 41
annual and quarterly financial information that would be required to be
contained in a filing with the SEC on Forms 10-K and 10-Q (without exhibits) if
we were required to file such forms, including a section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by our certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K (without exhibits) if we were required to file
such reports. In addition, whether or not required by the rules and regulations
of the SEC, we will file a copy of all such information and reports with the SEC
for public availability (unless the SEC will not accept such a filing). In
addition, we shall furnish to the holders of the preferred stock and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act and the exhibits omitted from the information furnished pursuant
to the preceding sentence, for so long as the preferred stock is not freely
transferable under the Securities Act.
Preferred Stock Exchange Offer; Registration Rights; Liquidated Damages
We and the initial purchaser entered into the registration rights agreement
upon the closing of the private offering of the preferred stock. Pursuant to the
registration rights agreement, we agreed to file with the SEC the registration
statement of which this prospectus forms a part.
If any holder of transfer restricted securities notifies us prior to the
20th day following consummation of the exchange offer that (A) it is prohibited
by law or SEC policy from participating in the exchange offer or (B) that it may
not resell the new preferred stock or the new exchange debentures, as the case
may be, acquired by it in the exchange offer to the public without delivering a
prospectus and the prospectus contained in the exchange offer registration
statement is not appropriate or available for such resales or (C) that it is a
broker-dealer and owns preferred stock or exchange debentures acquired directly
from us or an affiliate of our company, we will file with the SEC a shelf
registration statement to cover resales of the preferred stock or the exchange
debentures by the holders thereof who satisfy certain conditions relating to the
provision of information in connection with the shelf registration statement. We
will use its best efforts to cause the shelf registration statement to be
declared effective as promptly as possible by the SEC.
For purposes of the foregoing, "transfer restricted securities" means
preferred stock or exchange debentures, as the case may be, until (i) the date
on which such security has been exchanged by a person other than a broker-dealer
for new preferred stock or new exchange debentures, as the case may be, in the
exchange offer, (ii) following the exchange by a broker-dealer in the exchange
offer of a share of preferred stock or an exchange debenture, as the case may
be, for new preferred stock or new exchange debentures, as the case may be, the
date on which such new security is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the exchange offer registration statement, (iii) the date on which
such security has been effectively registered under the Securities Act and
disposed of in accordance with the shelf registration statement or (iv) the date
on which such security is distributed to the public pursuant to Rule 144 under
the Securities Act.
The registration rights agreement provides that (i) we use our best efforts
to issue on or prior to 30 days after the date on which the exchange offer
registration statement is declared effective by the SEC, new preferred stock or
new exchange debentures, as applicable, in exchange for all preferred stock or
exchange debentures tendered prior thereto in the exchange offer and (ii) if
obligated to file the shelf registration statement, we will use our best efforts
to file the shelf registration statement with the SEC on or prior to 30 days
after such filing obligation arises and to cause the shelf registration to be
declared effective by the SEC on or prior to 120 days after such obligation
arises.
If (a) we fail to file the shelf registration statement on or before the
date specified for such filing, (b) the shelf registration statement is not
declared effective by the SEC on or prior to the date specified for such
effectiveness (the "effectiveness target date"), or (c) we fail to consummate
the exchange offer within 30 days of the effectiveness target date with respect
to the exchange offer registration statement or (d) the shelf registration
statement or the the registration statement of which this prospectus forms a
part
38
<PAGE> 42
is declared effective but thereafter ceases to be effective or usable in
connection with resales of transfer restricted securities during the periods
specified in the registration rights agreement (each such event referred to in
clauses (a) through (d) above a "registration default"), then we will pay
liquidated damages to each holder of preferred stock or exchange debentures, as
the case may be, with respect to the first 90-day period immediately following
the occurrence of the first registration default in an amount equal to $.05 per
week per $1,000 in liquidation preference of the preferred stock or principal
amount of exchange debentures held by such holder, as applicable. The amount of
the liquidated damages will increase by an additional $.05 per week per $1,000
in liquidation preference of the preferred stock or principal amount of exchange
debentures, as applicable, with respect to each subsequent 90-day period until
all registration defaults have been cured, up to a maximum amount of liquidated
damages of $.50 per week per $1,000 in liquidation preference of the preferred
stock or principal amount of exchange debentures. All accrued liquidated damages
will be paid by us on each dividend payment date or interest payment date, as
applicable, to the global certificate holder by wire transfer of immediately
available funds or by federal funds check and to holders of certificated
securities by wire transfer to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified.
Following the cure of all registration defaults, the accrual of liquidated
damages will cease.
Holders of preferred stock or exchange debentures, as applicable, are
required to make certain representations to us (as described in the registration
rights agreement) in order to participate in the exchange offer and are required
to deliver information to be used in connection with the shelf registration
statement and to provide comments on the shelf registration statement within the
time periods set forth in the registration rights agreement in order to have
their securities included in the shelf registration statement and benefit from
the provisions regarding liquidated damages set forth above.
DESCRIPTION OF EXCHANGE DEBENTURES
General
The exchange debentures will, if and when issued, be issued pursuant to an
indenture to be dated as of the date of first issuance (the "Exchange Date") of
the exchange debentures (the "Indenture" or "Exchange Debenture Indenture")
among us and U.S. Trust Company, N.A., as trustee (the "Trustee"). The terms of
the exchange debentures include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as in
effect on the date of the Indenture. The exchange debentures are subject to all
such terms, and holders of exchange debentures are referred to the Indenture and
the Trust Indenture Act for a statement thereof. The following summary of the
material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. Copies of the proposed form of
Indenture and registration rights agreement are included as exhibits to the
registration statement of which this prospectus forms a part. The definitions of
certain terms used in the following summary are set forth below under
"-- Certain Definitions."
Principal, Maturity and Interest
The exchange debentures will be our general unsecured obligations and will
mature on May 1, 2009 and will be limited in aggregate principal amount to the
liquidation preference of the preferred stock, plus, without duplication,
accumulated and unpaid dividends, on the date on which it is exchanged for
exchange debentures (plus any additional exchange debentures issued in lieu of
cash interest as described herein). The exchange debentures will be issued in
fully registered form only, in denominations of $1,000 and integral multiples
thereof (other than as described in "-- Description of Preferred Stock" or with
respect to additional exchange debentures issued in lieu of cash interest as
described herein). The exchange debentures will bear interest at the rate of
13 7/8% per annum and will be payable quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year to Holders of record on the immediately
preceding January 15, April 15, July 15 and October 15. On or before May 1,
2004, interest payable on the exchange debentures may be paid in the form of
additional exchange debentures valued at the principal amount thereof. Interest
on the exchange debentures will accrue from the most recent date to
39
<PAGE> 43
which interest has been paid or, if no interest has been paid, from the Exchange
Date. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal, premium and Liquidated Damages, if any, and
interest on the exchange debentures will be payable at our office or agency
maintained for such purpose or, at our option, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the holders of the
exchange debentures at their respective addresses set forth in the register of
holders of exchange debentures. Until otherwise designated by us, our office or
agency will be the office of the Trustee maintained for such purpose. The
exchange debentures will be issued in denominations of $1,000 and integral
multiples thereof.
The exchange debentures will be subordinated in right of payment to all of
our Senior Debt and will rank pari passu with or senior to our future
Indebtedness that expressly provides that it ranks pari passu with or junior to
the exchange debentures, as the case may be.
We conducts our operations primarily through subsidiaries and, therefore,
we are dependent upon the cash flow of our subsidiaries to meet our obligations,
including our obligations under the exchange debentures. The exchange debentures
will be effectively subordinated to all indebtedness and other liabilities
(including trade payables, tort claims and tax claims) of our present and future
subsidiaries, including any future Unrestricted Subsidiaries. Any right of ours
to receive assets of any of our subsidiaries upon such subsidiary's liquidation
or reorganization (and the consequent right of the holders of the exchange
debentures to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's third-party creditors, except for any
Indebtedness validly owed to us. In addition, as obligations of a company that
primarily conducts its operations through its subsidiaries, the exchange
debentures will be effectively subordinated to all obligations of our
subsidiaries. As of March 31, 1999, the exchange debentures, if issued, would
have been subordinated to approximately $2.7 billion of Indebtedness.
Subordination
The payment of principal of, premium and Liquidated Damages, if any, and
interest on the exchange debentures will be subordinated in right of payment, as
set forth in the Indenture, to the prior payments in full of all Senior Debt,
whether outstanding on the date of the Indenture or thereafter created, incurred
or assumed and all renewals, extensions, refundings or refinancings thereof.
The Indenture will provide that, upon any payment or distribution of our
assets of any kind or character, whether in cash, property or securities, to
creditors in any Insolvency or Liquidation Proceeding with respect to our
company all amounts due or to become due under or with respect to all Senior
Debt will first be paid in full in cash before any payment is made on account of
the exchange debentures, except that the holders of exchange debentures may
receive Reorganization Securities. Upon any such Insolvency or Liquidation
Proceeding, any payment or distribution of our assets of any kind or character,
whether in cash, property or securities (other than Reorganization Securities),
to which the holders of the exchange debentures or the Trustee would be entitled
will be paid by us or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, or by the
holders of the exchange debentures or by the Trustee if received by them,
directly to the holders of Senior Debt (pro rata to such holders on the basis of
the amounts of Senior Debt held by such holders) or their Representatives, as
their interests may appear, for application to the payment of the Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of Senior Debt.
The Indenture will provide that (a) in the event of and during the
continuation of any default in the payment of principal of, interest or premium,
if any, on any Designated Senior Debt, or any obligations owing from time to
time under or in respect of Designated Senior Debt, or in the event that any
event of default (other than a payment default) with respect to any Designated
Senior Debt will have occurred and be continuing and will have resulted in such
Designated Senior Debt becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, or (b) if any
event of default other than as described in clause (a) above with respect to any
Designated Senior Debt will have occurred and be continuing permitting the
holders of such Designated Senior Debt (or their
40
<PAGE> 44
Representatives) to declare such Designated Senior Debt due and payable prior to
the date on which it would otherwise have become due and payable, then no
payment will be made by or on behalf of us on account of the exchange debentures
(other than payments in the form of Reorganization Securities) (x) in cash in
the case of any payment or nonpayment default specified in (a), unless and until
such default will have been cured or waived in writing in accordance with the
instruments governing such Designated Senior Debt or such acceleration will have
been rescinded or annulled, or (y) in cash in the case of any nonpayment event
of default specified in (b), during the period (a "Payment Blockage Period")
commencing on the date we or the Trustee receive written notice of such event of
default (which notice will be binding on the Trustee and the holders of exchange
debentures as to the occurrence of such a payment default or nonpayment event of
default) from the Representative (or holders of Designated Senior Debt or their
Representative or Representatives) and ending on the earliest of (A) 179 days
after such date, (B) the date, if any, on which such Designated Senior Debt to
which such default relates is paid in full in cash or such default is cured or
waived in writing in accordance with the instructions governing such Designated
Senior Debt by the holders of such Designated Senior Debt or their
Representatives and (C) the date on which the Trustee received written notice
from the Representative (or holders of Designated Senior Debt or their
Representative or Representatives), as the case may be, terminating the Payment
Blockage Period. During any consecutive 360-day period, the aggregate of all
Payment Blockage Periods shall not exceed 179 days and there shall be a period
of at least 181 consecutive days in each consecutive 360-day period when no
Payment Blockage Period is in effect. No event of default which existed or was
continuing with respect to the Designated Senior Debt for which notice
commencing a Payment Blockage Period was given on the date such Payment Blockage
Period commenced shall be or be made the basis for the commencement of any
subsequent Payment Blockage Period unless such event of default is cured or
waived for a period of not less than 90 consecutive days.
If we fail to make any payment on the exchange debentures when due or
within any applicable grace period, whether or not on account of payment
blockage provisions, such failure would constitute an Event of Default under the
Indenture and would enable the holders of the exchange debentures to accelerate
the maturity thereof. See "-- Defaults."
As a result of the subordination provisions described above, in the event
our liquidation, dissolution, bankruptcy, reorganization, insolvency,
receivership or similar proceeding or in an assignment for the benefit of the
creditors or a marshalling of our assets and liabilities, holders of exchange
debentures may recover less ratably than our creditors who are holders of Senior
Debt.
A holder of exchange debentures by his acceptance of exchange debentures
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purpose.
Optional Redemption
The exchange debentures will not be redeemable at our option prior to May
1, 2004. Thereafter, the exchange debentures will be subject to redemption at
any time at our option, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004...................................................... 106.938%
2005...................................................... 104.625%
2006...................................................... 102.313%
2007 and thereafter....................................... 100.000%
</TABLE>
41
<PAGE> 45
Notwithstanding the foregoing, at any time on or prior to May 1, 2002, we
may, at our option, redeem, in whole or in part, up to an aggregate principal
amount of the exchange debentures equal to $105 million, less the aggregate
Liquidation Preference of all shares of preferred stock previously redeemed out
of the proceeds of one or more Public Equity Offerings, at a redemption price of
113.875% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date with the net cash
proceeds of one or more Public Equity Offerings; provided that any such
redemption shall occur within 45 days of the date of the closing of such Public
Equity Offerings.
Selection and Notice
If less than all of the exchange debentures are to be redeemed at any time,
selection of exchange debentures for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the exchange debentures are listed or, if the Exchange
Debentures are not so listed, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided that no exchange
debentures of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of exchange debentures to be redeemed at its
registered address. Notices of redemption may not be conditional. If any
exchange debenture is to be redeemed in part only, the notice of redemption that
relates to such exchange debenture shall state the portion of the principal
amount thereof to be redeemed. A new exchange debenture in principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original exchange debenture. Exchange
debentures called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest and Liquidated Damages, if any, cease to
accrue on exchange debentures or portions of them called for redemption unless
we default in paying the redemption price.
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund payments
with respect to the exchange debentures.
Covenants
Change of Control
Upon the occurrence of a Change of Control, each holder of exchange
debentures will have the right to require us to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's exchange
debentures pursuant to the offer described below (the "Exchange Debenture Change
of Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Exchange Debenture Change of
Control Payment"). Within 30 days following any Change of Control, we shall mail
a notice to each holder of exchange debentures stating, among other things: (a)
that a Change of Control has occurred and that such holder has the right to
require us to purchase such holder's exchange debentures for the Exchange
Debenture Change of Control Payment; (b) the circumstances and relevant facts
regarding such Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization after giving effect to
such Change of Control); (c) the repurchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed); and (d) the
instructions determined by us, consistent with the covenant described hereunder,
that a holder of the exchange debentures must follow in order to have its
exchange debentures purchased.
We shall comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of exchange debentures pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder, we
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
42
<PAGE> 46
On the exchange debenture repurchase date, we will, to the extent lawful,
(1) accept for payment all exchange debentures or portions thereof properly
tendered pursuant to the Exchange Debenture Change of Control Offer, (2) deposit
with the paying agent for the exchange debentures an amount equal to the
Exchange Debenture Change of Control Payment in respect of all exchange
debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the exchange debentures so accepted together with an
Officers' Certificate stating the aggregate principal amount of exchange
debentures or portions thereof being purchased by us. The paying agent will
promptly mail to each holder of exchange debentures so tendered the Exchange
Debenture Change of Control Payment for such exchange debentures, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each holder a new exchange debenture equal in principal amount to any
unpurchased portion of the exchange debentures surrendered, if any; provided
that each such new exchange debenture will be in a principal amount of $1,000 or
an integral multiple thereof. We will publicly announce the results of the
Exchange Debenture Change of Control Offer on or as soon as practicable after
the Exchange Debenture Change of Control Payment Date.
Due to change of control repayment provisions in the indentures relating to
some of our existing indebtedness and in certain indebtedness of our
Subsidiaries, it is unlikely that we would be able to repurchase all of the
exchange debentures upon the occurrence of a Change of Control. We must first
comply with the change of control, restricted payment and other covenants
referred to in the preceding sentence before we shall be required to purchase
exchange debentures in the event of a Change of Control; provided that our
failure to comply with the Change of Control covenant of the Indenture
constitutes an Event of Default. There can be no assurance that we will have
adequate resources to refinance or fund the repurchase of the exchange
debentures in the event of a Change of Control. Our failure, following a Change
of Control, to make an Exchange Debenture Change of Control Offer or to pay when
due the Exchange Debenture Change of Control Payment tendered in conformity with
any such Exchange Debenture Change of Control Offer will give the Trustee and
the holders of the exchange debentures the rights described under "-- Defaults."
As a result of the foregoing, a holder of the exchange debentures may not be
able to compel us to purchase the exchange debentures unless we are able at the
time to refinance all of our existing obligations restricting our ability to
make a Change of Control Offer or obtain requisite consents thereunder. Our
ability to redeem all of the exchange debentures upon a Change of Control may
also be limited by restrictions on the ability of our subsidiaries to pay
dividends to us. Finally, the exchange debentures will be effectively
subordinated to obligations of our subsidiaries, including with respect to
Exchange Debenture Change of Control Payments. See "-- General."
The Change of Control provision of the Indenture could have the effect of
deterring certain acquisition proposals which would constitute an Exchange
Debenture Change of Control even if such acquisition might be beneficial to
certain holders of exchange debentures, as well as restricting our ability to
obtain additional financing in the future.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to an Exchange Debenture Change of Control, the Indenture
does not contain provisions that permit the Holders of the exchange debentures
to require that we repurchase or redeem the exchange debentures in the event of
a takeover, recapitalization or similar transaction.
We will not be required to make an Exchange Debenture Change of Control
Offer upon a Change of Control if a third party makes the Exchange Debenture
Change of Control Offer in the manner at the times and otherwise in compliance
with the requirements set forth in the Indenture applicable to an Exchange
Debenture Change of Control Offer made by us and purchases all exchanges
debentures validly tendered and not withdrawn under such Exchange Debenture
Change of Control Offer.
One of the events that constitutes an Exchange Debenture Change of Control
under the Indenture is a sale, conveyance, lease or transfer of all or
substantially all of our assets or of the assets of our company and our
Restricted Subsidiaries taken as a whole. The Indenture will be governed by New
York law, and there is no established quantitative definition under New York law
of "substantially all" of the assets of a
43
<PAGE> 47
corporation. Accordingly, if we and/or our Restricted Subsidiaries were to
engage in a transaction in which it or they disposed of less than all of our
assets or the assets of our company and our Restricted Subsidiaries taken as a
whole, a question of interpretation could arise as to whether such disposition
was of "substantially all" of its or their assets, as the case may be, and
whether we were required to make an Exchange Debenture Change of Control Offer.
Limitation on Restricted Payments. (a) We will not, and will not permit any
Restricted Subsidiary, directly or indirectly, to:
(1) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving us) or to the direct or indirect holders
of its Capital Stock, except:
(A) dividends or distributions payable solely in its
Non-Convertible Capital Stock or in options, warrants or other rights to
purchase its Non-Convertible Capital Stock;
(B) dividends or distributions payable to us or a Restricted
Subsidiary; and
(C) pro rata dividends or distributions on the Capital Stock of a
Restricted Subsidiary held by minority stockholders (including, without
limitation, minority stockholders of Arcade Drilling AS, a Norwegian
corporation).
(2) purchase, redeem or otherwise acquire or retire for value any of
our Capital Stock or of any direct or indirect parent of our company, or
any Restricted Subsidiary (except Capital Stock held by us or a Restricted
Subsidiary and except for preferred stock); or
(3) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Obligation (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition) (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition or retirement being
herein referred to as a "Restricted Payment"),
if at the time we or such Restricted Subsidiary makes such Restricted Payment:
(i) a Default shall have occurred and be continuing (or would result
therefrom); or
(ii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since April 22, 1999 would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from April 1, 1999 to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of
such Restricted Payment (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit);
(B) 100% of the aggregate net proceeds (including the fair market
value of non-cash proceeds, which shall be determined in good faith by
our Board of Directors) received by us from the issue or sale of our
Capital Stock (other than Redeemable Stock or Exchangeable Stock) on or
after April 22, 1999 (other than an issuance or sale to a Restricted
Subsidiary or an employee stock ownership plan or similar trust);
(C) the amount by which our Indebtedness is reduced on our balance
sheet upon the conversion or exchange (other than by a Restricted
Subsidiary) subsequent to the Incurrence of any Indebtedness of our
company convertible or exchangeable for our Capital Stock (other than
Redeemable Stock or Exchangeable Stock), less the amount of any cash, or
other property, distributed by us upon such conversion or exchange;
44
<PAGE> 48
(D) to the extent not otherwise included in Consolidated Net
Income, the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets, in each case to us or any Restricted Subsidiary
after April 22, 1999 from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary
(valued in each case as provided in the definition of Investment), not
to exceed in the case of any Restricted Subsidiary the total amount of
Investments in such Restricted Subsidiary made by us and our Restricted
Subsidiaries in such Unrestricted Subsidiary after the Issue Date; and
(E) $20.0 million.
(b) The provisions of Section (a) shall not prohibit:
(1) Any purchase or redemption of our Capital Stock or Subordinated
Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, our Capital Stock (other than Redeemable
Stock or Exchangeable Stock and other Capital Stock issued or sold to a
Restricted Subsidiary or an employee stock ownership plan); provided,
however, that (i) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (ii) the Net Cash
Proceeds from such sale shall be excluded from clauses (ii)(B) and (ii)(C)
of Section (a);
(2) Any purchase or redemption of our Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Subordinated Obligations; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments;
(3) Dividends paid within 60 days after the date of declaration if at
such date of declaration such dividend would have complied with this
provision; provided, however, that at the time of payment of such dividend,
no other Default shall have occurred and be continuing (or would result
therefrom); provided further, however, that such dividend shall be included
in the calculation of the amount of Restricted Payments (unless already
included in determining the amount of Restricted Payments previously made
upon the declaration of such dividend); and
(4) If we issue preferred stock which is Non-Convertible Capital Stock
and receive at least $100.0 million of net proceeds therefrom, Dividends on
such preferred stock in an aggregate amount not to exceed $30.0 million,
provided that such Dividends constitute Restricted Payments for purposes of
calculating the amount of Restricted Payments made pursuant to clause (ii)
of Section (a) above.
(c) In the event that at any time (1) the ratings assigned to our 12 1/4%
Senior Notes due 2006 by both of the Rating Agencies are Investment Grade
Ratings and (2) no Default has occurred and is continuing under the indenture
for those senior notes, we and our Restricted Subsidiaries will no longer be
subject to the provisions of the Indenture described above under "-- Limitation
on Restricted Payments" (the "Suspended Covenant"). In the event that we are not
subject to the Suspended Covenant for any period of time as a result of the
preceding sentence and, subsequently, one or both Rating Agencies withdraws its
respective rating or downgrades its respective rating assigned to those senior
notes below the required Investment Grade Rating, then we and our Restricted
Subsidiaries will again be subject to the Suspended Covenant and compliance with
the Suspended Covenant with respect to Restricted Payments made after the time
of such withdrawal or downgrade will be calculated in accordance with the terms
of the "-- Limitation on Restricted Payments" covenant as if such covenant had
been in effect during the entire period of time from the date of the Indenture.
Limitations on Mergers and Consolidations. We shall not consolidate with or
merge into any Person, continue in another jurisdiction, or sell, lease, convey,
transfer or otherwise dispose of all or substantially all of its assets to any
Person, unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than us), or to which such sale, lease, conveyance, transfer or other
disposition shall be made (the "Successor"), is a
45
<PAGE> 49
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and the Successor assumes by
supplemental indenture in a form satisfactory to the Trustee all of our
applicable Obligations under the Indenture; and
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
Defaults
An Event of Default is defined in the Indenture as:
(i) a default in the payment of interest (including Liquidated
Damages, if any), on the exchange debentures when due, continued for 30
days;
(ii) (a) default in the payment of principal of, or premium, if any,
on any exchange debenture when due at its Stated Maturity, upon redemption,
required repurchase, declaration of acceleration or otherwise or
(b) the failure to redeem or purchase exchange debentures when
required pursuant to the Exchange Debenture Indenture;
(iii) the failure by us to comply with our obligations under
"-- Covenants -- Change of Control";
(iv) the failure by us to comply with our other agreements contained
in the exchange debentures or the Indenture, and such failure or event of
default continues for 60 days after notice (except in the case of a default
with respect to the "-- Covenants -- Limitations on Mergers and
Consolidations" covenant, which shall constitute an Event of Default with
such notice requirement but without such passage of time requirement)
(whether or not prohibited by the provisions of the Indenture described
under "-- Subordination");
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness us or any of our Restricted Subsidiaries (or the payment of
which is guaranteed by us or any of our Restricted Subsidiaries) whether
such Indebtedness or guarantee now exists, or is created after the date of
the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of
such default unless being contested in good faith by appropriate
proceedings (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $20.0
million or more;
(vi) failure by us or any of our Restricted Subsidiaries to pay final
judgments aggregating in excess of $20.0 million, which judgments are not
paid, discharged or stayed for a period of 30 days; or
(vii) certain events of bankruptcy or insolvency with respect to us or
any of our Significant Subsidiaries or group of Restricted Subsidiaries
that, taken together (as of the latest audited consolidated financial
statements for us and our Subsidiaries), would constitute a Significant
Subsidiary.
However, a default under clause (v) will not constitute an Event of Default
until the Trustee provides a written notice to us, or the holders of 25% in
aggregate principal amount of the outstanding exchange debentures provide a
written notice to us and the Trustee, of the default and we do not cure such
default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing with respect to the
Indenture (other than certain events of bankruptcy, insolvency or
reorganization), the Trustee or the holders of not less than 25% in
46
<PAGE> 50
principal amount of the exchange debentures outstanding may declare the
principal of and premium, if any, and accrued but unpaid interest (including
Liquidated Damages, if any) on all the exchange debentures to be due and
payable. Upon such a declaration, such principal, premium, if any, and interest
(including Liquidated Damages, if any) will be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency
or reorganization occurs and is continuing, the principal of and premium, if
any, and interest (including Liquidated Damages, if any) on the exchange
debentures will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders of the
exchange debentures.
The amount due and payable on the acceleration of any exchange debenture
will be equal to 100% of the principal amount of such exchange debenture, plus
accrued and unpaid interest (including Liquidated Damages, if any) to the date
of payment.
Under certain circumstances, the holders of a majority in principal amount
of the outstanding exchange debentures may rescind any such acceleration with
respect to the exchange debentures and its consequences.
No holder of an exchange debenture may pursue any remedy under the
Indenture unless
(1) the Trustee shall have received written notice of a continuing
Event of Default,
(2) the Trustee shall have received a request from holders of at least
25% in principal amount of exchange debentures to pursue such remedy,
(3) the Trustee shall have been offered indemnity reasonably
satisfactory to it and
(4) the Trustee shall have failed to act for a period of 60 days after
receipt of such notice and offer of indemnity;
however, such provision does not affect the right of a holder of an exchange
debenture to sue for enforcement of any overdue payment thereon.
Subject to certain restrictions, the holders of a majority in aggregate
principal amount of the outstanding exchange debentures are given the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other holder of an exchange debenture or that would involve
the Trustee in personal liability. Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any of the
holders of the exchange debentures unless such holders have offered to the
Trustee reasonable indemnity or security against any loss, liability or expense.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the exchange
debentures notice of the Default within 90 days after it occurs. Except in the
case of a Default in the payment of principal of or interest on any exchange
debenture, the Trustee may withhold notice if and so long as a committee of its
trust officers determines that withholding notice is not opposed to the interest
of the holders of the exchange debentures. In addition, we are required to
deliver to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. We also are required to deliver to the
Trustee, within five Business Days after the occurrence thereof, written notice
of a Default or an Event of Default, its status and what action we are taking or
proposes to take in respect thereof.
47
<PAGE> 51
Amendments and Waivers
Subject to certain exceptions, we and the Trustee may amend the Indenture
with the consent of the holders of a majority in aggregate principal amount of
the exchange debentures then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the exchange debentures)
and any past Default or Event of Default or compliance with any provisions may
also be waived with the consent of the holders of a majority in aggregate
principal amount of the exchange debentures then outstanding. However, without
the consent of each holder of an outstanding exchange debenture affected
thereby, no amendment may, among other things,
- change the Stated Maturity of the principal of, or any installment of
interest on, any exchange debenture, or reduce the principal amount
thereof (or premium, if any) due upon maturity thereof, or the interest
thereon that would be due and payable thereon, or change the place of
payment where, or the coin or currency in which, any exchange debenture
or any premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof,
- reduce the percentage in principal amount at Stated Maturity of the
outstanding exchange debentures, the consent of whose holders is
necessary for any such supplemental indenture or required for any waiver
of compliance with certain provisions of the Indenture, or certain
Defaults thereunder,
- modify our Obligations to make offers to purchase exchange debentures
upon a Change of Control, or
- modify any of the provisions of this paragraph (except to increase any
percentage set forth herein).
Without the consent of any holder of the exchange debentures, we and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of our
obligations under the Indenture, to provide for uncertificated exchange
debentures in addition to or in place of certificated exchange debentures
(provided that the uncertificated exchange debentures are issued in registered
form for purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated exchange debentures are described in Section 163(f)(2)(B) of the
Code), to add guarantees with respect to the exchange debentures, to provide
security for the exchange debentures, to add to our covenants for the benefit of
the holders of the exchange debentures or to surrender any right or power
conferred upon us, to make any change that does not adversely affect the rights
of any holder of the exchange debentures or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act.
The consent of the holders of the exchange debentures is not necessary
under the Indenture to approve the particular form of any proposed amendment. It
is sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required to
mail to holders of the exchange debentures a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the
exchange debentures, or any defect therein, will not impair or affect the
validity of the amendment.
Defeasance
We at any time may terminate all of our obligations under the exchange
debentures and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the exchange debentures, to replace
mutilated, destroyed, lost or stolen exchange debentures and to maintain a
registrar and paying agent in respect of the exchange debentures and except for
its optional redemption rights. We at any time may terminate our repurchase
obligations under the covenants described under "-- Covenants" (other than the
covenant described under "-- Limitations on Mergers and Consolidations"), the
operation of the cross acceleration
48
<PAGE> 52
provision, the bankruptcy provisions with respect to Significant Subsidiaries
and the judgment default provision described under "-- Defaults" above
("covenant defeasance").
We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the exchange debentures may not be accelerated because of an
Event of Default with respect thereto. If we exercise our covenant defeasance
option, payment of the exchange debentures may not be accelerated because of an
Event of Default specified in clause (iii) (other than the covenant described
under "-- Limitations on Mergers and Consolidations") or (v) under "-- Defaults"
above. If we exercise our legal defeasance option, we will be released from all
of our obligations with respect to the exchange debentures.
In order to exercise either defeasance option, we must irrevocably deposit
in trust (the "defeasance trust") with the Trustee money or U.S. Government
Obligations for the payment of principal, premium, if any, and interest
(including Liquidated Damages, if any) on the exchange debentures to redemption
or maturity, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an opinion of counsel to the effect that
holders of the exchange debentures will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and will
be subject to federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such opinion of counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
Concerning the Trustee
U.S. Trust Company, N.A. will be the Trustee under the Indenture and has
been appointed by us as Registrar and Paying Agent with regard to the exchange
debentures.
The holders of a majority in aggregate principal amount of the outstanding
exchange debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that if an Event of
Default occurs (and is not cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent Person in the conduct of
its own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of exchange debentures, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense and then only to the extent required by the terms of
the Indenture.
Governing Law
The Indenture provides that the Indenture and the exchange debentures will
be governed by, and construed in accordance with, the laws of the State of New
York without giving effect to applicable principles of conflicts of law, except
to the extent that the application of the law of another jurisdiction would be
required thereby.
Consent to Jurisdiction and Service
The Indenture will provide that we will appoint CT Corporation System as
our agent for actions brought under federal or state securities laws brought in
any federal or state court located in the Borough of Manhattan in The City of
New York and will submit to such jurisdiction.
49
<PAGE> 53
Certain Definitions
The following is a summary of certain defined terms to be used in the
Indenture. Reference is made to the Indenture for the full definition of all
these terms and for the definitions of other capitalized terms used in this
description of the exchange debentures and not defined below.
"Board of Directors" means the Board of Directors of a Person or any
committee thereof duly authorized to act on behalf of such Board.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however
designated) the equity (which includes, but is not limited to, common stock,
preferred stock and partnership and joint venture interests) of such Person
(excluding any debt securities that are convertible into, or exchangeable for,
such equity).
"Capitalized Lease Obligations" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with generally accepted accounting principles and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Net Income" means, for any period, the net income of our
company and our consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(a) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (1) our equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to us or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (c) below) and (2) our
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(b) any net income of any Person acquired by us or a Restricted
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(c) any net income of any Restricted Subsidiary to the extent such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to us, except that (1) the
net income of Cliffs Drilling Company shall be included notwithstanding the
foregoing, (2) the net income of a Restricted Subsidiary shall be included
to the extent such net income could be paid to us or a Restricted
Subsidiary by loans, advances, intercompany transfers, principal repayments
or otherwise, (3) our equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to us or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Restricted Subsidiary, to the
limitation contained in this clause) and (4) our equity in a net loss of
any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(d) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of our company or our
consolidated subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale or
other disposition of any Capital Stock of any Person;
(e) extraordinary, unusual or nonrecurring charges;
(f) charges relating to the extinguishment of debt obligations of R&B
Falcon Holdings Inc.; and
50
<PAGE> 54
(g) the cumulative effect of a change in accounting principles.
"Default" means any act, event or condition which is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Debt" as to us, means any Senior Debt which has at the
time of initial issuance an aggregate principal amount outstanding or available
under a committed facility in excess of $20 million and which has been so
designated as Designated Senior Debt by our Board of Directors at the time of
initial issuance or the Exchange Date in a resolution delivered to the Trustee.
"Exchangeable Stock" means any Capital Stock that is exchangeable or
convertible, at the option of the holder thereof, into another security (other
than our Capital Stock which is neither Exchangeable Stock nor Redeemable
Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Hedging Obligations" of any Person means the net obligation (not the
notional amount) of such Person pursuant to any interest rate swap agreement,
foreign currency exchange agreement, interest rate collar agreement, option or
futures contract or other similar agreement or arrangement relating to interest
rates or foreign exchange rates.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" of any Person at any date means, without duplication:
(1) all indebtedness of such Person for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof),
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (or reimbursement obligations with respect
thereto), other than standby letters of credit and performance bonds issued
by such Person in the ordinary course of business, to the extent not drawn
or, to the extent drawn, if such drawing is reimbursed not later than the
third business day following demand for reimbursement,
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business,
(5) all Capitalized Lease Obligations of such Person,
(6) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, to the
extent of the fair market value of all the assets of such Person subject to
such Lien,
(7) all Indebtedness of others guaranteed by such Person to the extent
of such guarantee,
(8) Redeemable Stock, and
(9) all Hedging Obligations of such Person.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to us or to our creditors, as
such, or our other assets, or (ii) any liquidation, dissolution, reorganization
or winding up of
51
<PAGE> 55
our company, whether voluntary or involuntary, and involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshalling of our assets and liabilities.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. The amount of an Investment shall be
the original cost of such Investment, plus the cost of all additions thereto and
minus the amount of any such portion of such Investment repaid to such Person as
a repayment of principal or a return of capital, as the case may be.
"Investment Grade Rating" means BBB- or above, in the case of S&P (or its
equivalent under any successor rating categories of S&P), Baa3 or above, in the
case of Moody's (or its equivalent under any successor rating categories of
Moody's), and the equivalent in respect of the ratings categories of any Rating
Agencies substituted for S&P or Moody's.
"Moody's" is defined to mean Moody's Investor Service, Inc. and its
successors.
"Non-Convertible Capital Stock" means, with respect to any Person, any
non-convertible Capital Stock of such Person and any Capital Stock of such
Person convertible solely into non-convertible common stock of such Person;
provided, however, that Non-Convertible Capital Stock shall not include any
Redeemable Stock or Exchangeable Stock.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"preferred stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Public Equity Offering" means any underwritten public offering of shares
of our common stock (however designated and whether voting or non-voting) of and
any and all rights, warrants or options to acquire such common stock pursuant to
an effective registration statement (other than a registration statement on Form
S-4 or S-8) filed with the SEC in accordance with the Securities Act.
"Rating Agencies" means (a) S&P and Moody's or (b) if S&P or Moody's or
both of them are not making ratings of our 12 1/4% Senior Notes due 2006
publicly available, a nationally recognized U.S. rating agency or agencies, as
the cases may be, selected by us, which will be substituted for S&P or Moody's
or both, as the case may be.
"Redeemable Stock" means, with respect to the exchange debentures, any
Capital Stock that, by its terms (or by the terms of any security into which it
is convertible, or for which it is exchangeable, in each case at the option of
the holder thereof), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the exchange debentures mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Redeemable Stock
solely because the holders thereof have the right to require us to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Redeemable Stock if the terms of such Capital Stock provide
that we may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenants
described above under the caption "-- Covenants -- Change of Control," and
"-- Covenants -- Limitation on Restricted Payments."
52
<PAGE> 56
"Reorganization Securities" means securities distributed to the holders of
the exchange debentures in an Insolvency or Liquidation Proceeding pursuant to a
plan of reorganization consented to by each class of the Senior Debt, but only
if all of the terms and conditions of such securities (including, without
limitation, term, tenor, interest, amortization, subordination, standstills,
covenants and defaults) are at least as favorable (and provide the same relative
benefits) to the holders of Senior Debt and to the holders of any security
distributed in such Insolvency or Liquidation Proceeding on account of any such
Senior Debt as the terms and conditions of the exchange debentures and the
Indenture are and provide to the holders of the Senior Debt.
"Representative" means the trustee, agent or representative for any Senior
Debt.
"Restricted Subsidiary" means any Subsidiaries other than an Unrestricted
Subsidiary.
"S&P" means Standard & Poors Ratings Group, a division of McGraw-Hill
Companies, Inc. and its successors.
"Senior Debt" means the principal of and premium, if any, and interest
(including post-petition interest) on, and any and all other fees, expense
reimbursement obligations and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all of our
Indebtedness owed to lenders under any credit facility, (b) all of our
obligations with respect to any interest rate agreement or any currency
agreement, (c) all of our obligations to reimburse any bank or other person in
respect of amounts paid under letters of credit, banker's acceptances or other
similar instruments, (d) all of our other Indebtedness which does not provide
that it is to rank in right of payment pari passu with or subordinate to the
Exchange Debentures, and (e) all deferrals, renewals, extensions and refundings
of, and amendments, modifications and supplements to, any of the Senior Debt
described above. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (i) our Indebtedness to any of our Subsidiaries,
(ii) Indebtedness represented by the Exchange Debentures, (iii) any Indebtedness
which by the express terms of the agreement or instrument creating, evidencing
or governing the same is junior or subordinate in right of payment to any item
of Senior Debt (including, without limitation, Indebtedness represented by
Redeemable Stock), (iv) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business, or (v)
any Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to such
Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be our
"Significant Subsidiary" within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any of our Indebtedness (whether
outstanding on the Exchange Date or thereafter Incurred), which is subordinate
or junior in right of payment to the exchange debentures, whether pursuant to a
written agreement to that effect or by operation of law.
"Subsidiary" means, with respect to any Person:
(1) any corporation of which more than 50% of the total voting power
of all classes of the Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors is
owned by such Person directly or through one or more other Subsidiaries of
such Person, and
(2) any entity other than a corporation of which at least a majority
of the Capital Stock or other equity interest (however designated) entitled
(without regard to the occurrence of any contingency) or vote in the
election of the governing body, partners, managers or others that will
control the
53
<PAGE> 57
management of such entity is owned by such Person directly or through one
or more other Subsidiaries of such Person.
"Unrestricted Subsidiary" means:
(a) any Subsidiary of ours that at the time of determination will be
designated an Unrestricted Subsidiary by our Board of Directors as provided
below and
(b) any Subsidiary of an Unrestricted Subsidiary.
Our Board of Directors may designate any Subsidiary of ours as an
Unrestricted Subsidiary so long as after giving effect thereto, such designation
was permitted by the "Limitation on Restricted Payments" covenant. Any such
designation by our Board of Directors shall be evidenced to the Trustee by
filing a resolution of the Board of Directors with the Trustee giving effect to
such designation. Our Board of Directors may designate any Unrestricted
Subsidiary as a Restricted Subsidiary if, immediately after giving effect to
such designation, no Default or Event of Default shall occur and be continuing.
Notwithstanding any covenant herein, any Subsidiary that is an "Unrestricted
Subsidiary" on the Exchange Date pursuant to the indentures governing our
outstanding indebtedness shall be an Unrestricted Subsidiary hereunder.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at our option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
DESCRIPTION OF CERTAIN PROVISIONS APPLICABLE TO ALL OF THE SECURITIES
Book-Entry, Delivery and Form
For purposes of the following description of the book-entry, delivery and
form provisions of the preferred stock and the exchange debentures underlying
the preferred stock, references to "Global Certificates" shall mean registered,
global certificates representing the preferred stock on and prior to the
Exchange Date and the exchange debentures after the Exchange Date, as the
context indicates, and references to "Global Securities" shall mean the
preferred stock and the exchange debentures underlying the preferred stock, as
the context indicates, as represented by the Global Certificates.
The new preferred stock will be issued initially only as registered
securities in the form of one or more registered Global Certificates without
coupons. Upon issuance, the Global Certificates will be deposited with The
Depository Trust Company ("DTC"), in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to the accounts of DTC's
Direct and Indirect Participants (as defined).
The Global Securities may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Securities may be
exchanged for Securities in certificated form in certain limited circumstances.
See "-- Transfer of Interests in Global Securities for Certificated Securities."
The preferred stock may be presented for registration of transfer and
exchange at the offices of the Transfer Agent and the exchange debentures after
the Exchange Date may be presented for registration of transfer and exchange at
the offices of the Trustee.
Depositary Procedures
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the "Direct
Participants") and to facilitate the clearance and
54
<PAGE> 58
settlement of transactions in those securities between Direct Participants
through electronic book-entry changes in accounts of Participants. The Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations, including Euroclear and
Cedel. Access to DTC's system is also available to other entities that clear
through or maintain a direct or indirect, custodial relationship with a Direct
Participant (collectively, the "Indirect Participants" and together with the
Direct Participants, the "Participants"). DTC may hold securities beneficially
owned by other persons only through the Direct Participants or Indirect
Participants and such other persons' ownership interest and transfer of
ownership interest will be recorded only on the records of the Direct
Participant and/or Indirect Participant, and not on the records maintained by
DTC.
DTC has also advised us that, pursuant to DTC's procedures, (i) upon
deposit of the Global Securities, DTC will credit the accounts of the Direct
Participants with portions of the issued amount of the Global Securities
issuable upon exchange of the outstanding preferred stock to such Direct
Participants, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global Securities and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global Securities. Direct Participants and Indirect Participants must maintain
their own records of the ownership interests of, and the transfer of ownership
interests by and between, Indirect Participants and other owners of beneficial
interests in the Global Securities.
Investors in the Global Securities may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Security to
such persons. Because DTC can act only on behalf of Direct Participants, which
in turn act on behalf of Indirect Participants and others, the ability of a
person having a beneficial interest in a Global Security to pledge such interest
to persons or entities that are not Direct Participants in DTC, or to otherwise
take actions in respect of such interests, may be affected by the lack of
physical certificates evidencing such interests. For certain other restrictions
on the transferability of the Securities see "-- Transfers of Interests in
Global Securities for Certificated Securities."
Except as described in "-- Transfers of Interests in Global Securities for
Certificated Securities," owners of beneficial interests in the Global
Securities will not have Securities registered in their names, will not receive
physical delivery of Securities in certificated form and will not be considered
the registered owners or holders thereof under the certificate of designation or
the Indenture for any purpose.
Under the terms of the certificate of designation for the preferred stock
and the Indenture for the exchange debentures, we and the transfer agent or the
Trustee, as applicable, will treat the persons in whose names the Securities are
registered (including Securities represented by Global Securities) as the owners
thereof for the purpose of receiving payments and for any and all other purposes
whatsoever. Payments in respect of the liquidation preference, principal,
interest, Liquidated Damages, if any, and dividends on Global Certificates
registered in the name of DTC or its nominee will be payable by the transfer
agent or the Trustee, as applicable, to DTC or its nominee as the registered
holder. Neither we, the transfer agent or the Trustee nor an agent of any of
them has or will have any responsibility or liability for (i) any aspect of
DTC's records or any Direct Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Securities or for maintaining, supervising or reviewing any of DTC's
records or any Direct Participant's or Indirect Participant's records relating
to the beneficial ownership interests in any Global Security or (ii) any other
matter relating to the actions and practices of DTC or any of its Direct
Participants or Indirect Participants.
DTC has advised us that its current payment practice (for payments of
principal, interest and the like) with respect to securities such as the
Securities is to credit the accounts of the relevant Direct Participants with
such payment on the payment date in amounts proportionate to such Direct
Participant's
55
<PAGE> 59
respective ownership interests in the Global Securities as shown on DTC's
records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Securities will be governed by standing instructions
and customary practices between them and will not be the responsibility of DTC,
the transfer agent, the Trustee or us. None of the Transfer Agent, the Trustee
or us will be liable for any delay by DTC or its Direct Participants or Indirect
Participants in identifying the beneficial owners of the Securities, and the
Transfer Agent, the Trustee and our company may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Securities for all purposes.
Interests in the Global Securities are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and, therefore, transfers between Direct
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in immediately available funds. Transfers between Indirect
Participants who hold an interest through a Direct Participant will be effected
in accordance with the procedures of such Direct Participant but generally will
settle in immediately available funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of Securities only at the direction of one or more Direct Participants to
whose account interests in the Global Securities are credited and only in
respect of such portion of the aggregate principal amount of the Securities as
to which such Direct Participant or Direct Participants has or have given
direction. However, DTC reserves the right to exchange Global Certificates
(without the direction of one or more of its Direct Participants) for legended
Securities in certificated form, and to distribute such certificated forms of
Securities to its Direct Participants. See "-- Transfers of Interests in Global
Securities for Certificated Securities."
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Securities among Direct Participants, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of us, the transfer agent or
the Trustee will have any responsibility for the performance by DTC or its
respective Direct and Indirect Participants of their respective obligations
under the rules and procedures governing any of their operations.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
Transfers of Interests in Global Securities for Certificated Securities
An entire Global Security may be exchanged for definitive Securities in
registered, certificated form ("Certificated Securities") if (i) DTC (x)
notifies us that it is unwilling or unable to continue as depositary for the
Global Securities and we thereupon fail to appoint a successor depositary within
90 days or (y) has ceased to be a clearing agency registered under the Exchange
Act, or (ii) we, at our option, notify the transfer agent or the Trustee in
writing that we elect to cause the issuance of Certificated Securities. In any
such case, we will notify the transfer agent or the Trustee in writing that,
upon surrender by the Direct and Indirect Participants of their interest in such
Global Security, Certificated Securities will be issued to each person that such
Direct Participants and DTC identify as being the beneficial owner of the
related Securities.
Beneficial interests in Global Securities held by any Direct or Indirect
Participant may be exchanged for Certificated Securities (for itself or on
behalf of an Indirect Participant), but only upon at least 20 days' prior
written notice given to the transfer agent or the Trustee, as applicable, by or
on behalf of DTC in accordance with customary DTC procedures. Certificated
Securities delivered in exchange for any beneficial interest in any Global
Security will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct or Indirect
Participants (in accordance with DTC's customary procedures).
None of us, the Transfer Agent or the Trustee will be liable for any delay
by the holder of the Global Securities or DTC in identifying the beneficial
owners of Securities, and we, the Transfer Agent and the
56
<PAGE> 60
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the holder of the Global Security or DTC for all purposes.
Same Day Settlement and Payment
Each of the certificate of designation for the preferred stock and the
Indenture for the exchange debentures requires that payments in respect of the
Securities represented by the Global Securities (including distributions,
dividends, interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the holder of such
Global Security. With respect to Certificated Securities, we will make all
payments of distributions, dividends, interest and Liquidated Damages, if any,
by wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no such account is specified, by mailing a check to each
such holder's registered address. We expect that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
DESCRIPTION OF SIGNIFICANT INDEBTEDNESS
BANK FACILITIES
Cliffs Drilling currently maintains a $35 million revolving credit facility
that matures May 31, 2000. At March 31, 1999, Cliffs Drilling had $0.4 million
in letters of credit outstanding, leaving $34.6 million available under this
credit facility.
R&B FALCON NOTES
In April 1998, we issued four series of the senior notes with an aggregate
principal amount of $1.1 billion. As a result, we received net proceeds of
$1,082 million after deducting estimated offering related expenses. These senior
notes bear interest at varying rates from 6.5% to 7.375%. Interest on these
senior notes is payable semiannually on April 15 and October 15; and they mature
at varying times from 2003 to 2018. These senior notes are unsecured
obligations, ranking equally in right of payment with all of our other existing
and future senior unsecured indebtedness. We used the proceeds from the offering
of these senior notes to repay indebtedness of $874.4 million. We used the
remainder of the net proceeds for planned capital expenditures, working capital
and other general corporate purposes.
In December 1998, we issued $100 million principal amount of our 9 1/8%
Senior Notes due 2003 and $300 million principal amount of our 9 1/2% Senior
Notes due 2008. Interest on these senior notes is payable semiannually on June
15 and December 15. These senior notes are unsecured obligations, ranking
equally in right of payment with all of our other existing and future senior
unsecured indebtedness. We received net proceeds from the issuance of these
senior notes of approximately $392 million, after deducting estimated offering
related expenses. We used the proceeds from the offering of these notes to
reduce borrowings under our then existing revolving credit facility.
On March 26, 1999, we issued the $200 million of 12 1/4% Senior Notes due
2006. Also on that date, RBF Finance Co., a limited purpose finance company
affiliated with us, issued $400 million of its 11% Senior Secured Notes due 2006
and $400 million of its 11 3/8% Senior Secured Notes due 2009. We borrowed the
proceeds from these notes from RBF Finance Co. in ten separate loans, each of
which is secured by one of our drilling rigs or the construction contract to
build a drilling rig. We also guaranteed the notes that RBF Finance Co. issued.
We are using the proceeds from the loans from RBF Finance Co. to finance the
costs of acquiring, constructing, repairing and improving the drilling rigs that
are security for the loans. To the extent we have already paid these costs, we
are using the proceeds for general corporate purposes, including the repayment
of debt. We are using the net proceeds from our offering of the $200 million
Senior Notes for general corporate purposes, including the repayment of debt.
57
<PAGE> 61
CLIFFS DRILLING NOTES
Cliffs Drilling has outstanding an aggregate principal amount of $200.0
million of its 10 1/4% Senior Notes due 2003 and debt premium, net of
amortization, of $2.8 million as of March 31, 1999. Interest on the Cliffs
Drilling notes is payable semi-annually during each May and November. The Cliffs
Drilling notes are unconditionally guaranteed on a senior unsecured basis by
some of Cliffs Drilling's subsidiaries, which guarantees rank equally in right
of payment with all senior indebtedness of these subsidiary guarantors and
senior to all subordinated indebtedness of these subsidiary guarantors. The
Cliffs Drilling notes are redeemable on or after May 15, 2000 at a declining
premium.
The indenture under which the Cliffs Drilling notes are issued imposes
significant operating and financial restrictions on Cliffs Drilling. These
restrictions affect, and in many respects limit or prohibit, the ability of
Cliffs Drilling to incur additional indebtedness, make capital expenditures,
create liens, sell assets, make dividends or other payments and take other
actions.
UNITED STATES FEDERAL TAX CONSEQUENCES
The following summary describes the anticipated material U.S. federal
income tax consequences of the exchange of new preferred stock for outstanding
preferred stock pursuant to the exchange offer and the ownership and disposition
of the new preferred stock by U.S. Holders (as defined below). This discussion
does not purport to be a complete analysis of all potential tax considerations
to holders of the new preferred stock. Except where noted, it deals only with
new preferred stock and exchange debentures held as capital assets within the
meaning of Section 1221 of the Code and purchasers who purchased their
outstanding preferred stock from the initial purchaser. We intend to treat the
exchange debentures as indebtedness for federal income tax purposes, and the
balance of this discussion is based on the assumption that such treatment will
be respected. This summary does not address all aspects of the U.S. federal
income tax consequences that may be relevant to a particular holder that is
subject to special tax rules, such as persons that own in excess of 10 percent
of our stock, dealers of securities or currencies, financial institutions,
tax-exempt organizations, life insurance companies, persons subject to the
alternative minimum tax, persons holding new preferred stock or exchange
debentures as a part of a hedging or conversion transaction or a straddle, U.S.
Holders whose "functional currency" is not the U.S. dollar and non-United States
persons, including foreign corporations and nonresident aliens, some of which
may be subject to special rules. Furthermore, the summary is limited solely to
U.S. federal income tax matters and is based upon the Code and Treasury
Regulations, including the OID Regulations, administrative ruling and judicial
decisions thereunder all as of the date hereof, and all of which are subject to
change (possibly on a retroactive basis) or different interpretation. In
particular, potential investors should be aware that certain relevant provisions
of the Code have not been subject to definitive interpretation by the IRS or the
courts. We have not sought, nor do we intend to seek, a ruling from the IRS as
to any of the matters covered by this discussion, and there can be no assurance
that the IRS will not successfully challenge the conclusions reached in this
discussion. This discussion does not address the effect of any foreign, state,
local or other tax laws or estate or gift tax considerations.
Because we may pay dividends on the new preferred stock by distributing
additional shares of preferred stock, compliance with U.S. federal withholding
tax rules would be difficult with respect to investors who are not U.S. Holders.
BECAUSE THE U.S. FEDERAL INCOME TAX CONSEQUENCES DISCUSSED BELOW DEPEND
UPON EACH HOLDER'S PARTICULAR TAX STATUS, AND DEPEND FURTHER UPON U.S. FEDERAL
INCOME TAX LAWS, REGULATIONS, RULINGS AND DECISIONS WHICH ARE SUBJECT TO CHANGE
(WHICH CHANGES MAY BE RETROACTIVE IN EFFECT), HOLDERS OF OUTSTANDING PREFERRED
STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW PREFERRED
STOCK OR EXCHANGE DEBENTURES.
58
<PAGE> 62
CERTAIN DEFINITIONS
"AFR" means the applicable federal rate, as of the relevant time,
determined under Section 1274(d) of the Code and published monthly by the IRS.
"Code" means the U.S. Internal Revenue Code of 1986, as amended and in
effect as of the date hereof.
"IRS" means the U.S. Internal Revenue Service.
"OID" means original issue discount as defined and used in Part V of
Subchapter P of Chapter 1 of the Code (Sections 1271 through 1288) and the
Treasury Regulations thereunder.
"OID Debentures" means any Exchange Debentures issued with original issue
discount.
"OID Regulations" means any final, temporary and proposed Treasury
Regulations published or promulgated under the Code that address debt
obligations issued with OID.
"U.S. Holder" means a beneficial owner of the preferred stock or exchange
debentures that is a citizen or resident of the United States, or any state
thereof, a corporation, limited liability company, partnership (unless Treasury
Regulations provide otherwise) or other entity created or organized in or under
the laws of the U.S. or any political subdivision thereof, an estate the income
of which is subject to U.S. federal income taxation regardless of its source or
a trust if both (i) a court within the U.S. is able to exercise primary
supervision over the administration of such trust and (ii) one or more U.S.
persons have the authority to control all substantial decisions of such trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996, and treated as a
United States person prior to such date, that elect to continue to be treated as
United States persons are also U.S. Holders.
ISSUANCE OF NEW PREFERRED STOCK
The issuance of the new preferred stock to holders of the outstanding
preferred stock pursuant to the terms set forth in this prospectus generally
should not be a taxable exchange for U.S. federal income tax purposes. We
believe that holders of outstanding preferred stock should not recognize any
taxable gain or loss or any income as a result of the exchange. For purposes of
determining gain or loss upon the subsequent sale or exchange of the new
preferred stock, a holder's basis in the new preferred stock should be the same
as such holder's basis in the outstanding preferred stock exchanged therefor.
Holders should be considered to have held the new preferred stock from the time
of their original acquisition of the outstanding preferred stock exchanged
therefor.
A holder who does not tender his outstanding preferred stock will not
recognize any gain or loss for U.S. federal income tax purposes from the
exchange offer.
PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED STOCK
Distributions on the Preferred Stock. Distributions of cash or, to the
extent of their fair market value on the distribution date, of additional shares
of preferred stock on the preferred stock will generally be treated as dividends
to U.S. Holders, taxable as ordinary income to the extent of our current and
accumulated earnings and profits as determined under U.S. federal income tax
principles. Accordingly, the fair market value of additional shares of preferred
stock that are received as a dividend is taxable currently as ordinary income to
a U.S. Holder, even though no cash is received with respect to such
distribution. We expect to have current earnings and profits for 1999. The
actual amount of our earnings and profits at any future time will of course
depend upon our actions and financial performance and there can be no assurance
that we will have current or accumulated earnings and profits in future years,
especially in light of our substantial obligation to fund interest on our debt.
If we have no current or accumulated earnings and profits for a taxable year in
which we made a distribution on the preferred stock, the distribution would be
treated as a non-taxable return of capital and reduce the adjusted tax basis of
the preferred stock in the hands of each U.S. Holder (but not below zero), thus
increasing the amount of any gain (or
59
<PAGE> 63
reducing the amount of any loss) which would otherwise be recognized by the U.S.
Holder upon the sale or other taxable disposition of the preferred stock. The
amount of any such distribution which exceeds the U.S. Holder's adjusted tax
basis of the preferred stock would be treated as long-term or short-term capital
gain depending on the holder's holding period for the preferred stock. The
initial tax basis of additional preferred stock distributed to a U.S. Holder
will equal the fair market value of such additional preferred stock at the time
of distribution. Accordingly, in the case of distributions of additional
preferred stock on the preferred stock, any basis reduction or gain recognition
will be offset by a corresponding increase in the tax basis of the additional
preferred stock.
Redemption Premium. We have both a mandatory and an optional right to
redeem the preferred stock. If, as we expect, the redemption price of the
preferred stock exceeds its issue price by more than a de minimis amount, such
excess (the "redemption premium") may be taxable to the holder as constructive
distributions of additional preferred stock on the preferred stock over the
period that the preferred stock cannot be called for redemption. We intend to
take the position that the issue price of the preferred stock is approximately
$840 per share. The amount of each constructive distribution would be based on
an economic accrual method, similar to that applicable to OID. See "OID
Debentures" under "Reporting of Interest and OID on the Exchange Debentures."
For this purpose, the redemption premium of a share of preferred stock will
generally be treated as zero if it is de minimis (i.e., less than one-quarter of
one percent of the redemption price multiplied by the number of completed years
from the date of issuance of the stock until the stock is to be redeemed). To
the extent a constructive distribution is treated as dividend (i.e., paid from
our current or accumulated earnings and profits), it will generally be taxable
currently as ordinary income (and will increase the U.S. Holder's adjusted tax
basis in the preferred stock), even though the U.S. Holder receives no cash
distribution. See "-- Distributions on the Preferred Stock" above. A holder
should not recognize taxable income or gain from a constructive distribution
(and the holder's basis in its preferred stock should not be adjusted) to the
extent it is not paid from our current or accumulated earnings and profits.
For purposes of determining the amount of the redemption premium,
redemption of the preferred stock will be deemed to occur at the mandatory
redemption price unless, based on all of the facts and circumstances when the
preferred stock is issued, the optional redemption is more likely than not to
occur. Under a regulatory "safe harbor" rule, our optional redemption right will
not be treated as more likely than not to occur if (i) we and the U.S. Holder
are not related, (ii) there are no plans, arrangements, or agreements that
effectively require or are intended to compel us to exercise the optional
redemption right (disregarding, a separate mandatory redemption) and (iii)
exercise of the right to redeem will not reduce the yield of the preferred
stock. Even if the optional redemption were determined more likely than not to
occur, the amount of the redemption premium is not based on the optional
redemption price if such redemption premium is solely in the nature of a penalty
for premature redemption. Based on these Treasury Regulations, we intend to take
the position that the existence of our optional redemption right does not result
in a constructive distribution to the U.S. Holders, and that our mandatory
redemption obligation will control the timing and the amount of the income that
a U.S. Holder of preferred stock will be required to include in gross income as
redemption premium. Because of the factual nature of this determination,
however, there can be no assurance that such treatment will be sustained.
Under the Treasury regulations a redemption premium will arise due to a
redemption feature relating to a change of control only if, (i) under the same
criteria discussed in the preceding paragraph, a change in control redemption is
more likely than not to occur and the redemption premium associated with such
redemption is other than solely in the nature of a penalty for premature
redemption, or (ii) triggering our obligation to redeem under the change of
control redemption feature is within the legal or practical control of the
holders of the preferred stock (or parties related thereto) and based on all the
facts and circumstances on the issue date such possibility of redemption is more
than remote. We believe that, under the foregoing criteria, the change of
control redemption feature does not give rise to a redemption premium, and
accordingly we will not report redemption premium associated with the change of
control redemption feature as a constructive distribution. However, because of
the factual nature of this determination, there can be no assurance that such
treatment will be sustained.
60
<PAGE> 64
The preferred stock provides for mandatory redemption at a redemption price
equal to the liquidation value of the preferred stock, plus accrued and unpaid
dividends. If at the time of issuance of the preferred stock, there were no
intention for dividends to be paid currently, the IRS could treat the payment of
such dividends on redemption as disguised additional redemption premium subject
to the constant yield rules discussed above. However, we intend to pay all
dividends currently on the preferred stock, either in cash or, on or before May
1, 2004, in additional shares of preferred stock. Thus, while the appropriate
treatment of unpaid cumulative dividends has not yet been addressed in Treasury
Regulations and no assurance can be given as to the outcome of such guidance, we
intend to take the position that the terms of the mandatory redemption should
not include any accrued and unpaid dividends in the stated redemption price nor
should any such accrued and unpaid dividends be treated as a constructive
distribution to the U.S. Holders prior to actually being paid.
In the event that the fair market value of any additional shares of
preferred stock that are distributed on the preferred stock issued in the
exchange offer (determined when the additional shares are issued) is less than
its redemption price, the additional preferred stock will have a redemption
premium that may be taxable as a constructive distribution to a U.S. Holder
(treated as a dividend to the extent of our current and accumulated earnings and
profits), under the constant yield method over the term commencing with the
issuance of such additional preferred stock and ending when this stock is
mandatorily redeemable. Such redemption premium on the additional shares of
preferred stock may differ from that attributable to the preferred stock issued
in the exchange offer (or from additional shares distributed on a different
date), resulting in the additional shares of preferred stock not being fungible
with the shares issued in the exchange offer (or with additional shares issued
on a different date).
Dividends-Received Deduction. Subject to certain exceptions and
restrictions, corporate U.S. Holders generally will be entitled to a
dividends-received deduction equal to 70 percent of the amount of any
distribution on the preferred stock (whether payable in cash or additional
preferred stock) that is treated as a dividend. The dividends-received deduction
nonetheless may be restricted or may result in other U.S. federal tax
consequences to the corporate U.S. Holder. For example, the dividends-received
deduction is reduced or eliminated for a corporate U.S. Holder that has
indebtedness "directly attributable" to its investment in the preferred stock or
fails to meet special holding period requirements. Also, if a distribution
equals or exceeds five percent of a corporate U.S. Holder's adjusted tax basis
in the preferred stock, the distribution may constitute an "extraordinary
dividend," requiring the corporate U.S. Holder to reduce its adjusted tax basis
in the preferred stock by the amount excluded from income as a result of the
dividends-received deduction. Moreover, 70 percent of the amount excluded from
income as a result of the dividends-received deduction will be included in the
computation of "adjusted current earnings," potentially affecting a corporate
U.S. Holder's liability for alternative minimum tax.
Extraordinary Dividends. Section 1059 of the Code requires a corporate
holder to reduce (but not below zero) its basis in the preferred stock by the
"nontaxed portion" of any "extraordinary dividend" if the holder has not held
such stock (subject to a risk of loss) for more than two years before the date
we declare, announce, or agree to, the amount or payment of such dividend,
whichever is earliest. A holder will recognize gain to the extent that the
nontaxed portion of such dividends exceeds the holder's basis in such stock.
Generally, the nontaxed portion of an extraordinary dividend is the amount
excluded from income by application of the dividends received deduction. An
extraordinary dividend on preferred stock, such as the preferred stock, is a
dividend that (i) equals or exceeds 5 percent of the holder's adjusted tax basis
in the stock, treating all dividends having ex-dividend dates within an 85-day
period as one dividend, or (ii) exceeds 20 percent of the holder's adjusted tax
basis in the stock, treating all dividends having ex-dividend dates within the
same 365-day period as one dividend. A stockholder may elect to determine
whether a dividend on the preferred stock is extraordinary by reference to the
fair market value of the stock on the day before the ex-dividend date (rather
than by reference to the stockholder's adjusted tax basis) for purposes of the 5
percent or 20 percent tests described above if the holder is able to establish
the fair market value of the preferred stock as of such date to the satisfaction
of the IRS. An extraordinary dividend may also include any amount treated as a
dividend in the case of a redemption that is either non-pro rata as to all
stockholders or in partial liquidation of our company, regardless of the
61
<PAGE> 65
relative size of the dividend and regardless of the corporate holder's holding
period for the preferred stock. The extraordinary dividend rules do not apply
with respect to certain "qualified preferred dividends." A qualified preferred
dividend is any fixed dividend payable with respect to preferred stock which (i)
provides for fixed preferred dividends payable no less often than annually, and
(ii) is not in arrears as to dividends when acquired, provided the actual rate
of return, as determined under Section 1059(e)(3) of the Code, does not exceed
15 percent. When a qualified preferred dividend exceeds the 5 percent (or 20
percent) threshold for extraordinary dividend status described above, (a) the
extraordinary dividend rules will not apply if the holder holds the stock for
more than five years, and (b) if the holder disposed of the stock before it has
been held for more than five years, the aggregate reduction in basis cannot
exceed the excess of the qualified preferred dividends paid on such stock during
the period held by the taxpayer over the qualified preferred dividends which
would have been paid during such period on the basis of the stated rate of
return, as determined under Section 1059(e)(3) of the Code. The length of time
that a taxpayer is deemed to have held stock is subject to various special rules
under the Code.
Based upon the anticipated issue price of the preferred stock, regular
quarterly distributions should not constitute extraordinary dividends. Under
certain circumstances, however, the redemption of the preferred stock for cash
or in exchange for exchange debentures may be treated as a distribution taxable
as a dividend. See "-- Sale, Redemption, Exchange for Exchange Debentures, or
Other Disposition of the Preferred Stock." To the extent any such redemption
constitutes a dividend, it is likely to constitute an "extraordinary dividend"
to a corporate holder. CORPORATE HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 OF THE CODE TO THEIR
OWNERSHIP AND DISPOSITION OF THE PREFERRED STOCK.
Sale, Redemption, Exchange for Exchange Debentures, or Other Disposition of
the Preferred Stock
A U.S. Holder will generally recognize capital gain or loss upon the sale
or other taxable disposition of preferred stock equal to the difference between
the amount of cash or the fair market value of non-cash consideration received
and the holder's adjusted tax basis in the preferred stock. A holder who
purchases a Unit in this offering will have an adjusted tax basis in the
preferred stock initially equal to the portion of the purchase price of the Unit
that is allocated to the preferred stock, or the fair market value of any
additional preferred stock that is received as a distribution, plus any amount
included in gross income as a constructive distribution or redemption premium
with respect to the preferred stock, and less the amount of any distribution
treated as a nontaxable return of capital that reduced the adjusted tax basis of
the preferred stock. See "-- Redemption Premium" and "-- Distributions on the
Preferred Stock." A redemption of the preferred stock for cash or an exchange of
the preferred stock for the exchange debentures will be treated, depending on
the facts and circumstances, either as a distribution of our stock or a taxable
exchange of the preferred stock. Any cash paid or exchange debentures issued
that are attributable to accrued dividends, however, will be treated in the same
manner as a distribution on the preferred stock. See "-- Distributions on the
Preferred Stock." A redemption or exchange of the preferred stock will be
treated as a taxable exchange of the preferred stock if it results in either a
complete termination or a "meaningful reduction" of the U.S. Holder's total
stock interest in our company, taking into account various constructive stock
ownership rules. If the redemption or exchange of the preferred stock does not
result in a complete termination or meaningful reduction (as defined for tax
purposes) of the U.S. Holder's stock interest in our company, the transaction
will be treated as a distribution on the preferred stock. See "-- Distributions
on the Preferred Stock." The amount of the distribution will equal the amount of
cash or the "issue price" of the exchange debentures received by the U.S. Holder
in exchange for the preferred stock (with no offset for any basis that the
holder has in its preferred stock). To the extent the distribution is treated as
a dividend, it will be taxable as ordinary income and may have a
dividends-received deduction, extraordinary dividend and/or alternative minimum
tax consequences to a corporate U.S. Holder. See "-- Distributions on the
Preferred Stock."
If the redemption of the preferred stock (or exchange of preferred stock
for exchange debentures) results in a complete termination or meaningful
reduction (as defined for tax purposes) of the U.S. Holder's stock interest in
our company, the U.S. Holder will generally recognize capital gain or loss
62
<PAGE> 66
equal to the difference between the "amount realized" by the U.S. Holder and its
adjusted tax basis in the preferred stock exchanged therefor. The amount
realized by a U.S. Holder, which excludes any amount attributable to cumulative
unpaid dividends, equals (i) the amount of cash or the fair market value of non-
cash consideration (other than exchange debentures) received in redemption of
the preferred stock, and (ii) the "issue price" of the exchange debentures
issued in exchange for the preferred stock. Determination of the "issue price"
of the exchange debentures will depend on (i) whether the preferred stock or the
exchange debentures are traded on an established securities market within the
meaning of the OID Regulations during the 60 day period ending 30 days after the
exchange date, or (ii) if they are not so traded, whether the yield on the
exchange debentures, as of the exchange date, is at least equal to the AFR. See
"-- Original Issue Discount" under "-- Ownership and Disposition of the Exchange
Debentures." It cannot be determined at the present time whether the preferred
stock or the exchange debentures will, at the relevant time, be traded on an
established securities market within the meaning of the OID Regulations or
whether the yield on the exchange debentures will equal or exceed the AFR.
Any capital gain or loss from the sale, redemption, exchange for exchange
debentures or other disposition of the preferred stock will be long-term or
short-term depending on the U.S. Holder's holding period for the preferred stock
at the time of the sale or other disposition of the preferred stock. In the case
of a noncorporate U.S. Holder (including an individual), any capital gain will
be taxable at a preferential rate if the U.S. Holder's holding period for the
preferred stock exceeds one year. The deductibility of capital losses is subject
to limitation. Prospective investors should consult their own tax advisors
regarding the taxation of capital gains and capital losses recognized upon a
sale or other disposition of the preferred stock.
Depending upon the circumstances, the treatment of a redemption of the
preferred stock as a dividend, in particular upon its exchange for exchange
debentures, may produce undesirable federal income tax consequences, including
the requirement to pay substantial federal income tax prior to the receipt of
cash. Prospective purchasers are therefore urged to consult their own tax
advisors regarding the tax consequences of exchanging preferred stock for
exchange debentures, including the possibility of avoiding dividend treatment by
a contemporaneous sale of all or a portion of the holder's interest in the
preferred stock or other equity interest in our company that the holder might
actually or constructively own.
PROSPECTIVE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF A REDEMPTION OF PREFERRED STOCK OR EXCHANGE OF PREFERRED STOCK
FOR EXCHANGE DEBENTURES.
OWNERSHIP AND DISPOSITION OF THE EXCHANGE DEBENTURES
Depending upon a U.S. Holder's particular circumstances, the tax
consequences of holding exchange debentures may be less advantageous than the
tax consequences of holding preferred stock because, for example, payments of
interest on the exchange debentures will be currently includible in a holder's
income and will not be eligible for the dividends-received deduction that may be
available to corporate U.S. Holders (subject to our having current or
accumulated earnings and profits) and because, as discussed below, the exchange
debentures may be issued with OID. Moreover, unlike distributions received on
the preferred stock, interest and any existing OID on the exchange debentures is
includible in the holder's gross income, even if we have no earnings and
profits. The tax consequences of holding the exchange debentures will depend in
part on whether the exchange debentures are issued with OID. Exchange debentures
issued before May 1, 2004 generally will be treated as having been issued with
OID. Exchange debentures issued on or after May 1, 2004 will not be issued with
OID unless, as discussed below, their stated redemption price at maturity
exceeds their issue price by more than a de minimis amount.
Original Issue Discount
General. The amount of OID, if any, on a debt instrument equals the excess
of its "stated redemption price at maturity" over its "issue price." If such
excess is de minimis (i.e., less than one-quarter of one percent of the stated
redemption price at maturity of the debt instrument multiplied by the
63
<PAGE> 67
number of complete years to maturity of the debt instrument), the amount of OID
is treated as zero. The "stated redemption price at maturity" of a debt
instrument is the sum of its principal amount plus all other payments required
thereunder, other than payments of "qualified stated interest" (defined
generally as stated interest that is unconditionally payable in cash or in
property (other than the debt instruments of the issuer), at least annually at a
single fixed rate that appropriately takes into account the length of intervals
between payments). Unless the amount of exchange debentures that we are
permitted to pay as interest is de minimis in amount, exchange debentures that
are issued when we have the option to pay interest in additional exchange
debentures should be treated as having been issued without any qualified stated
interest, resulting in a stated redemption price at maturity of the exchange
debentures that includes all interest payable thereunder (including interest
payable in additional exchange debentures). On the other hand, if the exchange
debentures are issued after May 1, 2004, then stated interest would qualify as
qualified stated interest and none of such stated interest would be included in
the stated redemption price at maturity of the exchange debentures.
Determination of the "issue price" of the exchange debentures issued in
exchange for the preferred stock will depend on whether, as of the exchange date
(i) the preferred stock or the exchange debentures are traded on an established
securities market within the meaning of the OID Regulations, or (ii) if they are
not so traded, the yield on the exchange debentures equals or exceeds the AFR.
If either the exchange debentures or shares of the preferred stock are traded on
an established securities market during the 60 day period ending 30 days after
the exchange date, the issue price of the exchange debentures will equal the
fair market value of the exchange debentures (or if the exchange debentures are
not traded, the preferred stock) on the exchange date. Subject to certain
limitations described in the Treasury Regulations, the exchange debentures and
preferred stock generally will be deemed traded on an established securities
market if, for example, such securities appear on a system of general
circulation that provides a reasonable basis to determine fair market value
based on either recent price quotations or recent sales transactions. If neither
the preferred stock nor the exchange debentures are traded on an established
securities market, the issue price of the exchange debentures will be the stated
principal amount of the exchange debentures if the yield on the exchange
debentures is equal to or greater than the AFR in effect at the time the
exchange debentures are issued. If the yield on the exchange debentures is less
than the AFR, their issue price will be equal to the present value as of the
issue date of all payments to be made on the exchange debentures, discounted at
the AFR. It cannot be determined at the present time whether the preferred stock
or the exchange debentures will be, at the relevant time, traded on an
established securities market within the meaning of the OID Regulations or
whether the yield on the exchange debentures will equal or exceed the AFR.
Payment of Interest by Issuance of Additional Exchange Debentures.
The OID Regulations provide that in the case of a debt instrument that
provides the issuer with an unconditional option to pay interest by issuing
additional debt instruments, the issuer is assumed to exercise this option for
OID purposes only if exercise of the option would decrease the yield on the debt
instrument. Nevertheless, if the issuer has the option to issue more than a de
minimis amount of additional debt instruments as interest on a debt instrument,
none of the stated interest under the debt instrument will constitute qualified
stated interest, even if exercise of the option to pay interest with additional
debt instruments would minimize the issuer's yield on the debt instrument. If
the issue price of the exchange debentures issued in exchange for preferred
stock ("Initial Debentures") is equal to their principal amount, the yield to
maturity of the Initial Debentures, assuming the option to pay interest with
additional exchange debentures ("Secondary Debentures") is exercised, will be no
less than the yield to maturity would be if the option were not exercised.
Accordingly, for purposes of calculating OID, it will be presumed that we will
not exercise the option because exercise of the option will not minimize the
yield. If the option were in fact subsequently exercised and Secondary
Debentures were issued by us as interest on an Initial Debenture in lieu of
cash, such Secondary Debentures would be aggregated with the corresponding
Initial Debenture upon which they were issued, and OID would be recalculated for
the remainder of the term of the Initial Debentures based upon a stated
redemption price at maturity which includes the amount of all payments due under
the Secondary Debentures. As a result of such exercise,
64
<PAGE> 68
U.S. Holders of Initial Debentures would include OID in income in advance of the
receipts of cash, regardless of such U.S. Holders' regular methods of
accounting.
If the issue price of the Initial Debentures is less than their principal
amount, the yield to maturity of the Initial Debentures, assuming the option to
pay interest with Secondary Debentures is exercised, will be less than the yield
to maturity if the option is not exercised. Accordingly, for purposes of
calculating OID, it would be presumed that we will exercise the option because
to do so will minimize the yield. If we subsequently makes a cash payment
instead of exercising its option to issue a Secondary Debenture, the cash
payment made will be treated as a prepayment of the Initial Debentures,
partially retiring such Initial Debentures on a pro rata basis on the date of
such payment. Such retirement would be a taxable exchange to the holder of the
Initial Debenture.
If an Initial Debenture is issued prior to May 1, 2004 and we are presumed
under the rules above to issue at least one Secondary Debenture as interest on
the Initial Debenture, then the following rules apply for purposes of
calculating OID. The Initial Debenture and any Secondary Debentures that we are
presumed to issue as interest would be treated as a single debt instrument
having the same issue date and maturity date as the Initial Debenture. The
stated redemption price at maturity of the Initial Debenture will equal the sum
of the stated principal of, and the stated interest that will accrue on, the
Initial Debenture, including the interest that will accrue on the Secondary
Debentures. Unless a de minimis OID exception is met, receipt of cash interest
payments will not be subject to tax during the term of the exchange debenture,
and upon the issuance of each Secondary Debenture the holder's tax basis (and
adjusted issue price) in the Initial Debenture will be allocated between the
Secondary Debenture and the Initial Debenture in proportion to their respective
stated principal amounts. On an interest payment date, the adjusted issue price
of the Initial Debenture on which at least one Secondary Debenture is presumed
to be paid will equal the initial issue price of the Initial Debenture (as
determined above), increased by the accrued OID attributable to the Initial
Debenture for all prior accrual periods, less all payments of stated principal
and interest paid in cash on the Initial Debenture and less a portion of the
Initial Debenture's adjusted issue price allocated to the issuance of a
Secondary Debenture as discussed in the previous sentence. A holder will not
recognize income or gain upon receipt of a Secondary Debenture. Similar
treatment would apply if additional Secondary Debentures are issued on
subsequent interest payment dates. If we are presumed to issue Secondary
Debentures on an Initial Debenture for a given interest payment date and we
instead pay interest in cash, then in lieu of the cash interest payment, we are
deemed to issue the applicable Secondary Debentures on such interest payment
date (with a tax basis to the holder as determined above), followed immediately
by a constructive redemption by us of the deemed Secondary Debentures with the
cash interest payment. This would result in the holder recognizing capital gain
on the deemed redemption equal to the excess of the cash interest payment over
the tax basis of the deemed Secondary Debentures that are constructively
redeemed. Payment of cash interest, rather than Secondary Debentures, in this
situation also would reduce the amount of OID otherwise includible in the
holder's income during the remaining term of the Initial Debenture and would
reduce the holder's adjusted issue price and basis in the Initial Debenture on
which the cash interest is paid as if the deemed Secondary Debentures were
actually issued.
If the Initial Debentures are issued on or after May 1, 2004, we will not
have the option to pay interest with Secondary Debentures. In such event, any
Initial Debenture will be issued with OID only to the extent its principal
amount exceeds its issue price (as determined above) by more than a de minimis
amount because (i) all interest payments on any Exchange Debenture issued will
be qualified stated interest, and (ii) the stated redemption price at maturity
of any Exchange Debenture will be equal to its principal amount.
Reporting of Interest and OID on the Exchange Debentures
Non-OID Exchange Debentures. U.S. Holders of exchange debentures that are
not issued with OID will generally report the stated interest under the exchange
debentures as ordinary income under their regular method of tax accounting.
65
<PAGE> 69
OID Debentures. U.S. Holders of OID Debentures must include OID in gross
income for U.S. federal income tax purposes on an annual basis under a constant
yield accrual method, regardless of their method of accounting. As a result,
U.S. Holders will include OID in income in advance of the receipt of cash
attributable to that income. However, U.S. Holders of OID Debentures generally
will not be required to include separately in income cash payments received on
the OID Debentures, even if denominated as interest, to the extent such payments
do not constitute qualified stated interest (as defined above). Stated interest
on an OID Debenture that constitutes qualified stated interest (as defined
above) is not taxed as OID and is included in a U.S. Holder's gross income as
ordinary income under the Holder's regular method of tax accounting. We will
report to U.S. Holders of OID Debentures on a timely basis, the reportable
amount of OID and interest income based on its understanding of applicable law.
The amount of OID includible in income by the initial U.S. Holder of an OID
Debenture is the sum of the "daily portions" of OID with respect to the OID
Debenture for each day during the taxable year or portion of the taxable year in
which such U.S. Holder held such OID Debenture ("accrued OID"), even though the
cash to which such income is attributable may not be received until a later
date. The daily portions of OID required to be included in a holder's gross
income in a taxable year will be determined under a constant yield method by
allocating to each day during the taxable year in which the holder holds the
exchange debenture a pro rata portion of the OID thereon which is attributable
to the accrual period in which such day is included. The amount of the OID
attributable to each accrual period will be the product of the "adjusted issue
price" of the exchange debenture at the beginning of such accrual period
multiplied by the "yield to maturity" of the exchange debenture (properly
adjusted for the length of the accrual period). For purposes of calculating OID,
we will use quarterly accrual periods that end on February 1, May 1, August 1
and November 1, with the possible exception of the initial accrual period for
the exchange debentures. The daily portion is determined by allocating to each
day in any "accrual period" a pro rata portion of the OID allocable to the
accrual period. The amount of OID allocable to any accrual period is an amount
equal to the excess, if any, of (a) the product of the OID Debenture's adjusted
issue price at the beginning of such accrual period and its yield to maturity
(the discount rate which, when used in computing the present value of all
principal and interest payments to be made under the OID Debenture, produces an
amount equal to the OID Debenture's issue price) over (b) the amount of any
qualified stated interest allocable to the accrual period. The calculation of
OID for an initial short accrual period may be determined using any reasonable
method. The "adjusted issue price" of an OID Debenture at the beginning of any
accrual period is equal to its issue price increased by the accrued OID for each
prior accrual period (determined without regard to the amortization of any
acquisition premium or bond premium, as described below) and reduced by any
payment made on such OID Debenture (other than qualified stated interest and
issuance of Secondary Debentures) on or before the first day of the accrual
period and less the amount of adjusted issue price allocated to any Secondary
Debentures.
Exchange debentures may be redeemed prior to their stated maturity at our
option. For purposes of computing the yield of OID Debentures, we will be deemed
to exercise or not exercise our option to redeem the OID Debentures in a manner
that minimizes the yield on the OID Debentures. It is not anticipated that our
ability to redeem prior to stated maturity will affect the yield to maturity of
such instrument. In the event of a change of control, we will be required to
offer to repurchase all of the exchange debentures. The right of holders to
require repurchase upon a change of control, will not affect the yield or
maturity date of the exchange debentures unless, based on all the facts and
circumstances as of the issue date, it is more likely than not that such an
event giving rise to the repurchase will occur. We do not intend to treat the
change of control provisions of the exchange debentures as affecting the
computation of the yield to maturity of any exchange debentures.
Election to Report Interest as OID. U.S. Holders may elect to treat all
interest on any exchange debenture as OID and calculate the amount to be
included in gross income under the constant yield accrual method. For the
purposes of this election, interest includes stated interest, acquisition
discount, OID, de minimis OID, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium or acquisition
premium. The election must be made for the taxable year in which the U.S. Holder
acquired the exchange debenture, and may not be revoked without the consent of
66
<PAGE> 70
the IRS. U.S. Holders should consult with their own tax advisors about the
election to report interest on the exchange debentures and OID using the
constant yield method.
Market Discount on Resale of Exchange Debentures
Purchasers of preferred stock should be aware that the disposition of
exchange debentures may be affected by the market discount provisions of the
Code. If a U.S. Holder acquires an exchange debenture (other than an OID
Debenture) for an amount less than its stated redemption price at maturity or,
in the case of an OID Debenture, for an amount that is less than its adjusted
issue price, the amount of the difference will be treated as "market discount"
for U.S. federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a U.S. Holder will
be required to treat any principal payment on an exchange debenture, or any
realized gain on the sale, exchange, retirement or other disposition of an
exchange debenture, as ordinary income to the extent of the market discount that
has not previously been included in income and that is treated as having accrued
on such exchange debenture at the time of such payment or disposition. For
purposes of determining the amount taxed as ordinary income in the case of a
U.S. Holder disposing of an exchange debenture acquired at a market discount in
a transaction other than a sale, exchange or involuntary conversion, such holder
will be treated as realizing an amount equal to the fair market value of the
exchange debenture disposed of. In addition, the U.S. Holder may be required to
defer, until the maturity of the exchange debenture or its earlier disposition
in a taxable transaction, the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
exchange debenture.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the exchange debenture,
unless the U.S. Holder elects to accrue on a constant yield method. A U.S.
Holder of an exchange debenture may elect to include market discounts in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding recognition of ordinary income on
principal payments, sales and other dispositions of an exchange debenture and
deferral of interest deductions will not apply. A U.S. Holder's tax basis in an
exchange debenture is increased to the extent that the market discount is
included in gross income of the holder under this election. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS.
Acquisition Premium
A U.S. Holder that purchases an exchange debenture for an amount that is
greater than its adjusted issue priced but equal to or less than the sum of all
amounts payable on the exchange debenture after the purchase date, other than
qualified stated interest, will be considered to have purchased such exchange
debenture at an "acquisition premium." Under the acquisition premium rules, the
amount of OID, if any, which such U.S. Holder must include in its gross income
with respect to such exchange debenture for any taxable year will be reduced by
the portion of such acquisition premium properly allocable to such year.
Amortizable Bond Premium
If immediately after the time the preferred stock is exchanged for exchange
debentures or immediately after the time a subsequent U.S. Holder acquires
exchange debentures, the U.S. Holder's tax basis in any such exchange debenture
exceeds the sum of all amounts payable on the exchange debenture after the
exchange date or purchase date, other than qualified stated interest, such
excess may constitute "amortizable bond premium" and such U.S. Holder will not
be required to include any OID in income.
A U.S. Holder generally may elect to amortize bond premium over the
remaining term of the exchange debenture on a constant yield method (subject to
special rules concerning early call provisions). The amount amortized in any
year will be treated as a reduction of the U.S. Holder's interest income from
the exchange debenture. Bond premium on an exchange debenture held by a U.S.
Holder that does not make such an election will decrease the gain or increase
the loss otherwise recognized on disposition of the
67
<PAGE> 71
exchange debenture. The election to amortize bond premium on a constant yield
method once made applies to all debt obligations held or subsequently acquired
by the electing U.S. Holder on or after the first day of the first taxable year
to which the election applies and may not be revoked without the consent of the
IRS.
Redemption, Sale or Disposition of Exchange Debentures
Except to the extent attributable to accrued qualified stated interest or
market discount not previously included in income, which portion of the
consideration would be taxed as ordinary income, upon the redemption, sale,
exchange or retirement of an exchange debenture, a U.S. Holder will recognize
gain or loss equal to the difference between the amount realized upon the
redemption, sale, exchange or retirement and the adjusted tax basis of the
exchange debenture. The adjusted tax basis of an exchange debenture of a U.S.
Holder who receives (i) exchange debentures in exchange for preferred stock
will, in general, be initially equal to the issue price of such exchange
debentures, less any portion of the adjusted issue price allocated to any
Secondary Debentures and (ii) a Secondary Debenture as payment of interest, will
initially be equal to the allocable portion of the adjusted issue price of the
exchange debenture on which the Secondary Debentures was issued; increased in
both cases by accrued OID and market discount previously included in income by
the U.S. Holder and reduced by any amortized premium and any cash payments on
the exchange debentures other than qualified stated interest.
Such gain or loss will be long-term capital gain or loss if at the time of
redemption, sale, exchange or retirement the exchange debenture has been held
for more than one year. The deduction of capital losses is subject to certain
limitations. Prospective investors should consult their own tax advisors
regarding the taxation consequences of capital gains and losses recognized upon
a disposition of the exchange debentures.
Applicable High Yield Discount Obligations
If the yield-to-maturity on OID Debentures equals or exceeds the sum of (i)
the AFR in effect for the month in which the OID Debentures are issued, and (ii)
five percent, and the OID on such OID Debentures is "significant," the OID
Debentures will be considered "applicable high yield discount obligations"
("AHYDOs") under Section 163(i) of the Code. OID is significant if the aggregate
amount includible in gross income for periods before the close of any accrual
period ending more than five years after the issue date exceeds the sum of the
aggregate amounts of interest to be paid before the close of such accrual period
plus the product of the issue price and the yield to maturity. If the OID
Debentures are AHYDOs, we will not be allowed to take a deduction for OID
accrued on the OID Debentures for U.S. federal income tax purposes until such
time as we actually pay such OID in cash or in other property (other than our
stock or debt or the stock or debt of certain related parties).
Moreover, if the yield-to-maturity on the OID Debenture exceeds the sum of
(i) the AFR, and (ii) six percent (such excess shall be referred to hereinafter
as the "Disqualified Yield"), the deduction for OID accrued on the OID
Debentures will be permanently disallowed (regardless of whether we actually pay
such OID in cash or in other property) for U.S. federal income tax purposes to
the extent such OID is attributable to the Disqualified Yield on the OID
Debentures ("Dividend-Equivalent Interest"). Application of the AHYDO rules to
the exchange debentures might reduce our after-tax cash flow. Regardless of the
application of the AHYDO rules to an exchange debenture, a U.S. Holder of an
exchange debenture will be required to include OID in gross income as discussed
above under "Reporting of Interest and OID on the Exchange Debenture -- OID
Debentures." For purposes of the dividends-received deduction, such
Dividend-Equivalent Interest will be treated as a dividend to the extent it is
deemed to have been paid out of our current or accumulated earnings and profits.
Because the amount of OID, if any, attributable to the exchange debentures
will be determined at the time such exchange debentures are issued, and the AFR
at such time is not predictable, it is impossible to determine at the present
time whether an OID Debenture will be treated as an AHYDO.
68
<PAGE> 72
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the proceeds
of sales of preferred stock and exchange debentures made to U.S. Holders other
than certain exempt recipients (such as corporations). A 31 percent backup
withholding tax will apply to such payments if the U.S. Holder fails to provide
a taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income. If we pay a
dividend on the preferred stock by issuing additional shares of preferred stock
(or otherwise is deemed to pay a distribution for United States federal income
tax purposes) to any person with respect to which we determine, after request of
such information from such holder as we deem appropriate, that we are obligated
to withhold United States federal tax, then prior to any such distribution we
shall be entitled to liquidate the additional shares of preferred stock to the
extent necessary in order to fully fund our withholding obligation. We will
promptly distribute to such person the balance of the additional shares of
preferred stock not used to fund such withholding obligation.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against the U.S. Holder's U.S. federal income tax liability
provided the required information is timely furnished to the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF THE PREFERRED STOCK AND
EXCHANGE DEBENTURES IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISOR, AS TO THE SPECIFIC TAX
CONSEQUENCES THAT WOULD RESULT FROM THEIR PURCHASE, OWNERSHIP AND DISPOSITION OF
THE PREFERRED STOCK AND EXCHANGE DEBENTURES INCLUDING THE APPLICATION AND EFFECT
OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the outstanding shares. We do not intend to apply for the listing of
the preferred stock on a national securities exchange or for their quotation
through The Nasdaq Stock Market. The preferred stock is eligible for trading in
The PORTAL Market. We have been advised by Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of the preferred stock in the
private offering, that they currently intend to make a market in the preferred
stock; however, they are not obligated to do so and any market making may be
discontinued at any time. In addition, such market making activity may be
limited during the exchange offer. Therefore, there can be no assurance that an
active market for the outstanding shares or the new preferred stock will
develop. If a trading market does not develop or is not maintained, holders of
preferred stock may experience difficulty in reselling preferred stock. If a
trading market develops for the preferred stock, future trading prices of such
securities will depend on many factors, including, among other things,
prevailing interest rates, our results of operations and the market for similar
securities. Depending on such factors, such securities may trade at a discount
from their offering price.
Broker-dealers who did not acquire outstanding shares as a result of market
making activities or trading activities may not participate in the exchange
offer.
With respect to resale of shares of new preferred stock, based on an
interpretation by the staff of the SEC set forth in no-action letters issued to
third parties, we believe that a holder (other than a person that is our
affiliate within the meaning of Rule 405 under the Securities Act or a "broker"
or "dealer" registered under the Exchange Act) who exchanges outstanding shares
for new preferred stock in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the new
preferred stock, will be allowed to resell the new preferred stock to the public
without further registration under the Securities Act and without delivering to
the purchasers of the new preferred stock a prospectus that satisfies the
requirements of Section 10 thereof. However, if any holder acquires new
preferred stock in the exchange offer for the purpose of distributing or
participating in a distribution of the new preferred stock,
69
<PAGE> 73
such holder cannot rely on the position of the staff of the SEC enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988) or similar no-action
letters or any similar interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available.
As contemplated by the no-action letters mentioned above and the
registration rights agreement, each holder accepting the exchange offer is
required to represent to us in the letter of transmittal that:
- the new preferred stock are to be acquired by the holder in the ordinary
course of business
- the holder is not engaging and does not intend to engage in the
distribution of the new preferred stock, and
- the holder acknowledges that, if such holder participates in the exchange
offer for the purpose of distributing the new preferred stock, such
holder must comply with the registration and prospectus delivery
requirements of the Securities Act and cannot rely on the above no-action
letters.
Any broker or dealer registered under the Exchange Act who holds
outstanding shares that were acquired for its own account as a result of
market-making activities or other trading activities (other than outstanding
shares acquired directly from us or our affiliate) may exchange such outstanding
shares for new preferred stock pursuant to the exchange offer; however, such
broker-dealer may be deemed an underwriter within the meaning of the Securities
Act and, therefore, must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of the new preferred stock
received by it in the exchange offer, which prospectus delivery requirement may
be satisfied by the delivery by such broker-dealer of this prospectus. We have
agreed to cause the exchange offer registration statement, of which this
prospectus is a part, to remain continuously effective for a period of 180 days,
if required, from the exchange date, and to make this prospectus, as amended or
supplemented, available to any such broker-dealer for use connection with
resales. Any broker-dealer participating in the exchange offer will be required
to acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of new preferred stock received by
it in the exchange offer. The delivery by a broker-dealer of a prospectus in
connection with resales of new preferred stock shall not be deemed to be an
admission by such broker-dealer that it is an underwriter within the meaning of
the Securities Act. We will not receive any proceeds from any sale of new
preferred stock by a broker-dealer.
New preferred stock received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new preferred stock or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such new preferred stock.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information filed by us at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our filings with the SEC are also
available to the public from commercial document retrieval services and at the
SEC's web site at "http://www.sec.gov."
This prospectus constitutes a part of a registration statement we have
filed with the SEC under the Securities Act of 1933. As permitted by the rules
and regulations of the SEC, this prospectus does not contain all of the
information contained in the registration statement and the exhibits and
schedules to the registration statement. Accordingly, in this prospectus, we
make reference to the registration statement and to its exhibits and schedules.
For further information about us and about the securities we are offering in
70
<PAGE> 74
this prospectus, you should consult the registration statement and its exhibits
and schedules. You should be aware that statements contained in this prospectus
concerning the provisions of any documents filed as an exhibit to the
registration statement or otherwise filed with the SEC are not necessarily
complete, and in each instance reference is made to the copy of the document so
filed as an exhibit to the registration statement. These statements are
qualified in their entirety by these references.
INCORPORATION BY REFERENCE
All documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act after the date hereof are incorporated by reference into
and to be a part of this prospectus from the date of filing of those documents.
We are incorporating by reference the following documents we have filed
with the SEC:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
- Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1999;
- Current Report on Form 8-K/A filed January 20, 1999, amending Current
Report on Form 8-K filed December 15, 1998; and
- Current Reports on Form 8-K filed March 16, 1999, April 19, 1999, April
21, 1999, May 20, 1999 and May 21, 1999.
You may request a copy of any of these filings, at no cost, by writing or
telephoning us at the following address or phone number:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
(281) 496-5000
Attention: Investor Relations
LEGAL MATTERS
Certain legal matters with respect to the preferred stock offered hereby
will be passed upon for us by Gardere Wynne Sewell & Riggs, L.L.P., Houston,
Texas.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of R&B Falcon Corporation as of December
31, 1998 and 1997, and the related statements of operations, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1998, incorporated by reference in this prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
With respect to the unaudited interim financial information for the
quarters ended March 31, 1999 and 1998, Arthur Andersen LLP has applied limited
procedures in accordance with professional standards for a review of that
information. However, their separate report thereon states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on that information should
be restricted in light of the limited nature of the review procedures applied.
In addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the registration statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of that Act.
71
<PAGE> 75
The consolidated financial statements of Cliffs Drilling Company as of
December 31, 1997 and for each of the three years in the period ended December
31, 1997, incorporated by reference in this prospectus, have been audited by
Ernst & Young LLP, independent accountants, as stated in their report, which is
incorporated by reference herein.
72
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Certificate of Incorporation and Bylaws of R&B
Falcon Corporation require the indemnification of directors and officers to the
fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law authorizes and empowers
R&B Falcon Corporation to indemnify the directors, officers, employees and
agents of R&B Falcon Corporation against liabilities incurred in connection
with, and related expenses resulting from, any claim, action or suit brought
against any such person as a result of his relationship with R&B Falcon
Corporation, provided that such person acted in good faith and in a manner such
person reasonably believed to be in, and not opposed to, the best interests of
R&B Falcon Corporation in connection with the acts or events on which such
claim, action or suit is based. The finding of either civil or criminal
liability on the part of such persons in connection with such acts or events is
not necessarily determinative of the question of whether such persons have met
the required standard of conduct and are, accordingly, entitled to be
indemnified. The foregoing statements are subject to the detailed provisions of
Section 145 of the General Corporation law of the State of Delaware.
Article 6.1 of the Bylaws of R&B Falcon Corporation provides that R&B
Falcon Corporation shall indemnify to the fullest extent authorized or permitted
by law, any person made, or threatened to be made, a party to or otherwise
involved in any action or proceeding by reason of the fact that he or she is or
was a director or officer of R&B Falcon Corporation, at the request of R&B
Falcon Corporation or by reason of the fact that such director or officer at the
request of R&B Falcon Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
any capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 -- Form of Indenture between R&B Falcon Corporation, as
Issuer, and U.S. Trust Company, N.A., as Trustee, with
respect to 13 7/8% Senior Subordinated Debentures due
2009.
4.2 -- Registration Rights Agreement dated as of April 22, 1999
among R&B Falcon Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.3 -- Certificate of Designation of R&B Falcon Corporation
filed with the Secretary of State of the State of
Delaware on April 22, 1999.
5.1 -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P., counsel
for R&B Falcon Corporation.
10.1 -- Purchase Agreement dated April 15, 1999 among R&B Falcon
Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation.
12.1 -- Statement regarding computation of ratio of earnings to
fixed charges and preferred dividends.
15.1 -- Letter regarding unaudited interim financial information.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney (set forth on the signature pages
contained in Part II of this Registration Statement).
25.1 -- Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
</TABLE>
II-1
<PAGE> 77
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) of 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on June 21, 1999.
R&B FALCON CORPORATION
By: /s/ PAUL B. LOYD
----------------------------------
Paul B. Loyd
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul B. Loyd, Tim W. Nagle and Wayne K. Hillin,
and each of them, each of whom may act without joinder of the other, his or her
true and lawful attorneys and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all pre- and post-effective amendments to
this Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of any or all of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PAUL B. LOYD Chairman of the Board, Chief June 21, 1999
- ----------------------------------------------------- Executive Officer and Director
Paul B. Loyd (Principal Executive Officer)
/s/ TIM W. NAGLE Executive Vice President and June 21, 1999
- ----------------------------------------------------- Chief Financial Officer
Tim W. Nagle (Principal Accounting and
Financial Officer)
Director June , 1999
- -----------------------------------------------------
Purnendu Chatterjee
/s/ STEVEN A. WEBSTER Director June 21, 1999
- -----------------------------------------------------
Steven A. Webster
Director June , 1999
- -----------------------------------------------------
Arnold L. Chavkin
/s/ CHARLES A. DONABEDIAN Director June 21, 1999
- -----------------------------------------------------
Charles A. Donabedian
</TABLE>
II-3
<PAGE> 79
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DOUGLAS A.P. HAMILTON Director June 21, 1999
- -----------------------------------------------------
Douglas A.P. Hamilton
Director June , 1999
- -----------------------------------------------------
Macko A.E. Laqueur
Director June , 1999
- -----------------------------------------------------
Michael E. Porter
/s/ ROBERT L. SANDMEYER Director June 21, 1999
- -----------------------------------------------------
Robert L. Sandmeyer
/s/ DOUGLAS E. SWANSON Director June 21, 1999
- -----------------------------------------------------
Douglas E. Swanson
/s/ WILLIAM R. ZIEGLER Director June 21, 1999
- -----------------------------------------------------
William R. Ziegler
</TABLE>
II-4
<PAGE> 80
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 -- Form of Indenture between R&B Falcon Corporation, as
Issuer, and U.S. Trust Company, N.A., as Trustee, with
respect to 13 7/8% Senior Subordinated Debentures due
2009.
4.2 -- Registration Rights Agreement dated as of April 22, 1999
among R&B Falcon Corporation and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.3 -- Certificate of Designation of R&B Falcon Corporation
filed with the Secretary of State of the State of
Delaware on April 22, 1999.
5.1 -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P., counsel
for R&B Falcon Corporation.
10.1 -- Purchase Agreement dated April 15, 1999 among R&B Falcon
Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation.
12.1 -- Statement regarding computation of ratio of earnings to
fixed charges and preferred dividends.
15.1 -- Letter regarding unaudited interim financial information.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney (set forth on the signature pages
contained in Part II of this Registration Statement).
25.1 -- Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
</TABLE>
<PAGE> 1
EXHIBIT 4.1
R&B FALCON CORPORATION
as Issuer
$
--------------
13 7/8% Senior Subordinated Debentures due 2009
---------------
INDENTURE
Dated as of ,
---------- -----
---------------
U.S. TRUST COMPANY, N.A.
as Trustee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE................................................................1
SECTION 1.1 Definitions.....................................................................................1
SECTION 1.2 Other Definitions..............................................................................13
SECTION 1.3 Incorporation By Reference of Trust Indenture Act..............................................14
SECTION 1.4 Rules of Construction..........................................................................14
ARTICLE 2 THE DEBENTURES...........................................................................................15
SECTION 2.1 Form and Dating................................................................................15
SECTION 2.2 Execution and Authentication...................................................................17
SECTION 2.3 Registrar and Paying Agent.....................................................................18
SECTION 2.4 Paying Agent to Hold Money in Trust............................................................18
SECTION 2.5 Holder Lists...................................................................................19
SECTION 2.6 Transfer and Exchange..........................................................................19
SECTION 2.7 Replacement of Debentures......................................................................29
SECTION 2.8 Outstanding Debentures.........................................................................29
SECTION 2.9 Treasury Debentures............................................................................30
SECTION 2.10 Temporary Debentures...........................................................................30
SECTION 2.11 Cancellation...................................................................................30
SECTION 2.12 Payment of Interest; Interest Rights Preserved.................................................30
SECTION 2.13 Computation of Interest........................................................................32
SECTION 2.14 CUSIP Number...................................................................................32
ARTICLE 3 REDEMPTION AND PREPAYMENT................................................................................32
SECTION 3.1 Notices to Trustee.............................................................................32
SECTION 3.2 Selection of Debentures to be Redeemed.........................................................32
SECTION 3.3 Notice of Redemption...........................................................................33
SECTION 3.4 Effect of Notice of Redemption.................................................................33
SECTION 3.5 Deposit of Redemption Price....................................................................34
SECTION 3.6 Debentures Redeemed in Part....................................................................34
SECTION 3.7 Optional Redemption............................................................................34
ARTICLE 4 COVENANTS................................................................................................35
SECTION 4.1 Payment of Debentures..........................................................................35
SECTION 4.2 Maintenance of Office or Agency................................................................36
SECTION 4.3 Corporate Existence............................................................................36
SECTION 4.4 Compliance With Laws...........................................................................37
SECTION 4.5 Taxes and Other Claims.........................................................................37
SECTION 4.6 Stay, Extension and Usury Laws.................................................................37
SECTION 4.7 Change of Control..............................................................................37
SECTION 4.8 Limitation on Restricted Payments..............................................................41
SECTION 4.9 Reports to Holders.............................................................................43
SECTION 4.10 Compliance Certificate; Notice of Default or Event of Default..................................43
SECTION 4.11 Prohibition on Company Becoming an Investment Company..........................................44
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 5 CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER.....................................................44
SECTION 5.1 Limitation on Mergers and Consolidations.......................................................44
SECTION 5.2 Successor Corporation Substituted..............................................................45
ARTICLE 6 DEFAULTS AND REMEDIES....................................................................................46
SECTION 6.1 Events of Default..............................................................................46
SECTION 6.2 Acceleration...................................................................................48
SECTION 6.3 Other Remedies.................................................................................49
SECTION 6.4 Waiver of Past Defaults........................................................................49
SECTION 6.5 Control By Majority............................................................................49
SECTION 6.6 Limitation on Suits............................................................................50
SECTION 6.7 Rights of Holders of Debentures to Receive Payment.............................................50
SECTION 6.8 Collection Suit by Trustee.....................................................................50
SECTION 6.9 Trustee May File Proofs of Claim...............................................................51
SECTION 6.10 Priorities.....................................................................................52
SECTION 6.11 Undertaking For Costs..........................................................................52
SECTION 6.12 Restoration of Rights and Remedies.............................................................52
SECTION 6.13 Rights and Remedies Cumulative.................................................................52
SECTION 6.14 Delay or Omission Not Waiver...................................................................53
ARTICLE 7 TRUSTEE..................................................................................................53
SECTION 7.1 Duties of Trustee..............................................................................53
SECTION 7.2 Rights of Trustee..............................................................................54
SECTION 7.3 Individual Rights of Trustee...................................................................56
SECTION 7.4 Trustee's Disclaimer...........................................................................56
SECTION 7.5 Notice of Defaults.............................................................................56
SECTION 7.6 Reports by Trustee to Holders of the Debentures................................................56
SECTION 7.7 Compensation and Indemnity.....................................................................57
SECTION 7.8 Replacement of Trustee.........................................................................57
SECTION 7.9 Successor Trustee by Merger, Etc...............................................................59
SECTION 7.10 Eligibility; Disqualification..................................................................59
SECTION 7.11 Preferential Collection of Claims Against the Company..........................................60
ARTICLE 8 SATISFACTION AND DISCHARGE...............................................................................60
SECTION 8.1 Satisfaction and Discharge.....................................................................60
SECTION 8.2 Application of Trust Money.....................................................................61
SECTION 8.3 Repayment of the Company.......................................................................61
SECTION 8.4 Reinstatement..................................................................................61
ARTICLE 9 DEFEASANCE AND COVENANT DEFEASANCE.......................................................................62
SECTION 9.1 Option to Effect Defeasance or Covenant Defeasance.............................................62
SECTION 9.2 Defeasance and Discharge.......................................................................62
SECTION 9.3 Covenant Defeasance............................................................................63
SECTION 9.4 Conditions to Defeasance or Covenant Defeasance................................................63
SECTION 9.5 Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous
Provisions.....................................................................................65
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 9.6 Repayment to the Company.......................................................................65
SECTION 9.7 Reinstatement..................................................................................66
ARTICLE 10 AMENDMENT, SUPPLEMENT AND WAIVER........................................................................66
SECTION 10.1 Without Consent of Holders of Debentures.......................................................66
SECTION 10.2 With Consent of Holders of Debentures..........................................................67
SECTION 10.3 Effect of Supplemental Indentures..............................................................68
SECTION 10.4 Compliance with Trust Indenture Act............................................................69
SECTION 10.5 Revocation and Effect of Consents..............................................................69
SECTION 10.6 Notation on or Exchange of Debentures..........................................................69
SECTION 10.7 Trustee to Sign Supplemental Indentures........................................................69
SECTION 10.8 Payment for Consent............................................................................70
ARTICLE 11 MISCELLANEOUS...........................................................................................71
SECTION 11.1 Trust Indenture Act Controls...................................................................71
SECTION 11.2 Notices........................................................................................71
SECTION 11.3 Communication By Holders of Debentures With Other Holders of Debentures........................72
SECTION 11.4 Certificate and Opinion as to Conditions Precedent.............................................72
SECTION 11.5 Statements Required in a Certificate or Opinion................................................73
SECTION 11.6 Acts of Holders................................................................................73
SECTION 11.7 Rules by Trustee and Agents....................................................................75
SECTION 11.8 No Personal Liability of Directors, Officers, Employees and Stockholders.......................75
SECTION 11.9 Governing Law..................................................................................75
SECTION 11.10 Agent for Service; Submission to Jurisdiction; Waiver of Immunities............................75
SECTION 11.11 No Adverse Interpretation of Other Agreements..................................................76
SECTION 11.12 Successors.....................................................................................76
SECTION 11.13 Severability...................................................................................76
SECTION 11.14 Counterpart Originals..........................................................................76
SECTION 11.15 Table of Contents, Headings, Etc...............................................................76
ARTICLE 12 SUBORDINATION...........................................................................................77
SECTION 12.1 Debentures Subordinated to Senior Debt.........................................................77
SECTION 12.2 No Payment on Debentures in Certain Circumstances..............................................77
SECTION 12.3 Payment Over of Proceeds Upon Dissolution, Etc.................................................78
SECTION 12.4 Payments May Be Paid Prior to Dissolution......................................................78
SECTION 12.5 Subrogation....................................................................................78
SECTION 12.6 Obligations of the Company Unconditional.......................................................79
SECTION 12.7 Notice to Trustee..............................................................................79
SECTION 12.8 Reliance on Judicial Order or Certificate of Liquidating Agent.................................79
SECTION 12.9 Trustee's Relation to Senior Indebtedness......................................................80
SECTION 12.10 Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of
Senior Debt....................................................................................80
SECTION 12.11 Holders Authorize Trustee To Effectuate Subordination of Debentures............................81
SECTION 12.12 This Article 12 Not to Prevent Events of Default...............................................81
SECTION 12.13 Trustee's Compensation Not Prejudiced..........................................................81
</TABLE>
iii
<PAGE> 5
EXHIBITS
EXHIBIT A ........... Form of Debenture
EXHIBIT B-1 ........... Form of Certificate for Exchange or Registration of
Transfer from U.S. Global Debenture to Regulation S
Global Debenture
EXHIBIT B-2 ........... Form of Certificate for Exchange or Registration
of Transfer from Regulation S Global Debenture to
U.S. Global Debenture
EXHIBIT B-3 ........... Form of Certificate for Exchange or Registration of
Transfer of Certificated Debentures
EXHIBIT B-4 ........... Form of Certificate for Exchange or Registration of
Transfer from U.S. Global Debenture or Regulation S
Permanent Global Debenture to Certificated
Debenture
EXHIBIT C ........... Form of Certificate From Acquiring Institutional
Accredited Investor
iv
<PAGE> 6
INDENTURE, dated as of ____________, 1999, among R&B Falcon
Corporation, a Delaware corporation (the "Company"), and U.S. Trust Company,
N.A., as trustee (the "Trustee").
RECITALS
The Company has duly authorized the creation and issuance of
its 13 7/8% Senior Subordinated Debentures due 2009 (the "Initial Debentures")
of substantially the tenor and amount hereinafter set forth; and to provide
therefor and for, if and when issued as further evidence of the Company's
indebtedness and in substitution for the Initial Debentures pursuant to this
Indenture and the Registration Rights Agreement (as defined herein), the
Company's 13 7/8% Senior Subordinated Debentures due 2009 (the "Exchange
Debentures," and together with the Initial Debentures, the "Debentures"), the
Company has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Debentures, when executed by
the Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid instrument of the Company, in accordance with its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the exchange by the Company of Debentures for
outstanding shares of its 13 7/8% Senior Cumulative Redeemable Preferred Stock
pursuant to the terms of the Certificate of Designation therefor with the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of Voting Stock, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
<PAGE> 7
"Applicable Procedures" means, with respect to any transfer or exchange
of beneficial interest in a Global Debenture, the rules and procedures of the
Depositary and the Trustee that apply to such transfer and exchange.
"Board of Directors" means the Board of Directors of a Person or any
committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by a
Secretary or Assistant Secretary of a Person to have been duly adopted by the
Board of Directors thereof and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however
designated) the equity (which includes, but is not limited to, common stock,
preferred stock and partnership and joint venture interests) of such Person
(excluding any debt securities that are convertible into, or exchangeable for,
such equity).
"Capitalized Lease Obligation" of any Person means any obligation of
such Person to pay rent or other amounts under a lease of property, real or
personal, that is required to be capitalized for financial reporting purposes in
accordance with GAAP and the amount of such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Cedel" means Cedel Bank, societe anonyme (or any successor securities
clearing agency).
"Certificated Debentures" means Debentures that are substantially in
the form of the Debenture attached hereto as Exhibit A that do not include the
information or text called for by footnotes 1, 3 and 4 thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means Capital Stock other than Preferred Stock.
"Company" means the Person named as such in the preamble of this
Indenture unless and until a successor replaces it pursuant to the applicable
provisions hereof and thereafter means such successor.
"Company Order" means a written order or request signed in the name of
an Officer and delivered to the Trustee.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(a) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (1) the Company's equity in the net income of any such
Person for such period shall
2
<PAGE> 8
be included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (c) below) and (2) the Company's equity in a net
loss of any such Person for such period shall be included in determining such
Consolidated Net Income;
(b) any net income of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(c) any net income of any Restricted Subsidiary to the extent such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (1) the net
income of Cliffs Drilling Company shall be included notwithstanding the
foregoing, (2) the net income of a Restricted Subsidiary shall be included to
the extent such net income could be paid to the Company or a Restricted
Subsidiary by loans, advances, intercompany transfers, principal repayments or
otherwise, (3) the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Restricted
Subsidiary during such period to the Company or another Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend or other
distribution to another Restricted Subsidiary, to the limitation contained in
this clause) and (4) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income;
(d) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its
consolidated subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person;
(e) extraordinary, unusual or nonrecurring charges;
(f) charges relating to the extinguishment of debt obligations of
R&B Falcon Holdings Inc.; and
(g) the cumulative effect of a change in accounting principles.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Debenture Custodian" means the Trustee, as custodian for the
Depositary with respect to the Debentures in global form, or any successor
entity thereto.
3
<PAGE> 9
"Debentures" has the meaning set forth in the Recitals of this
Indenture and more particularly means any of the Debentures authenticated and
delivered under this Indenture.
"Default" means any event, act or condition the occurrence of which is,
or after notice or the passage of time or both would be, an Event of Default.
"Depositary" means, with respect to the Debentures issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depositary with respect to the Debentures, until a successor shall have
been appointed and become such Depositary pursuant to the applicable provision
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.
"Designated Senior Debt" as to the Company, means any Senior Debt which
has at the time of initial issuance an aggregate principal amount outstanding or
available under a committed facility in excess of $20 million and which has been
so designated as Designated Senior Debt by the Board of Directors of the Company
at the time of initial issuance or the Exchange Date in a resolution delivered
to the Trustee.
"Euroclear" means the Euroclear System (or any successor securities
clearing agency).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means the date on which the Initial Debentures are
issued in exchange for shares of Preferred Stock.
"Exchange Global Debenture" means one or more Global Debentures that do
not and are not required to bear the Private Placement Legend.
"Exchange Debentures" has the meaning set forth in the Recitals to this
Indenture and more particularly means any of the Debentures authenticated and
delivered under this Indenture pursuant to the Exchange Offer.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registrations Rights Agreement to exchange Exchange Debentures
for Initial Debentures.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Exchangeable Stock" means any Capital Stock that is exchangeable or
convertible, at the option of the holder thereof, into another security (other
than Capital Stock of the Company which is neither Exchangeable Stock nor
Redeemable Stock).
"GAAP" means generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.
4
<PAGE> 10
"Global Debenture" means, individually and collectively, the Regulation
S Global Debenture, the U.S. Global Debentures and the Exchange Global
Debentures.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "guarantee"
used as a verb has a corresponding meaning. The term "guarantor" shall mean any
Person guaranteeing any obligation.
"Hedging Obligations" of any Person means the net obligation (not the
notional amount) of such Person pursuant to any interest rate swap agreement,
foreign currency exchange agreement, interest rate collar agreement, option or
futures contract or other similar agreement or arrangement relating to interest
rates or foreign exchange rates.
"Holder" or "Debentureholder" means the Person in whose name a
Debenture is registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for, provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" of any Person at any date means, without duplication:
(1) all indebtedness of such Person for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof),
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(3) all obligations of such Person in respect of letters of credit
or other similar instruments (or reimbursement obligations with respect
thereto), other than standby letters of credit and performance bonds issued by
such Person in the ordinary course of business, to the extent not drawn or, to
the extent drawn, if such drawing is reimbursed not later than the third
Business Day following demand for reimbursement,
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business,
5
<PAGE> 11
(5) all Capitalized Lease Obligations of such Person,
(6) all Indebtedness of others secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person, to the
extent of the fair market value of all the assets of such Person subject to such
Lien,
(7) all Indebtedness of others guaranteed by such Person to the
extent of such guarantee,
(8) Redeemable Stock, and
(9) all Hedging Obligations of such Person.
"Indenture" means this Indenture, as amended or supplemented from time
to time by one or more indentures supplemental hereto entered into pursuant to
the applicable provisions hereof, including for all purposes of this Indenture
and any supplemental indenture the provisions of the Trust Indenture Act that
are deemed to be a part of and govern this Indenture and any supplemental
indenture.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Debentures" has the meaning set forth in the Recitals to this
Indenture and more particularly means any of the Debentures authenticated and
delivered under this Indenture other than Exchange Debentures.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to the Company or to the creditors
of the Company, as such, or other assets of the Company, or (ii) any
liquidation, dissolution, reorganization or winding up of the Company, whether
voluntary or involuntary, and involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company. The merger or consolidation of the Company or its
liquidation or dissolution following a transfer of substantially all of its
assets upon the terms and conditions permitted in Section 5.1 shall not be an
Insolvency or Liquidation Proceeding.
"Institutional Accredited Investor" means an entity which is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other
6
<PAGE> 12
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. The amount of an Investment
shall be the original cost of such Investment, plus the cost of all additions
thereto and minus the amount of any such portion of such Investment repaid to
such Person as a repayment of principal or a return of capital, as the case may
be.
"Investment Grade Rating" means BBB- or above, in the case of S&P (or
its equivalent under any successor rating categories of S&P), Baa3 or above, in
the case of Moody's (or its equivalent under any successor rating categories of
Moody's), and the equivalent in respect of the ratings categories of any Rating
Agencies substituted for S&P or Moody's.
"Legal Holiday" means a Saturday, a Sunday or a day on which federal
offices or banking institutions in The City of New York , in the city of the
Corporate Trust Office of the Trustee, or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment may be made on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing). For the purposes of this Indenture, the Company or any of its
Subsidiaries shall be deemed to own subject to a Lien any asset which the
Company or such Subsidiary has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capitalized Lease
Obligation or other title retention agreement relating to such asset.
"Liquidated Damages" means all "liquidated damages" owing pursuant to
the Registration Rights Agreement.
"Maturity" means the date on which the principal of a Debenture becomes
due and payable as provided therein or in this Indenture, whether at the Stated
Maturity or the Change of Control Payment Date or by declaration of
acceleration, call for redemption or otherwise.
"Moody's" is defined to mean Moody's Investor Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock, the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"1999 Senior Note Indenture" means the Indenture, dated as of March 26,
1999, between the Company and U.S. Trust Company of Texas, National Association,
as trustee thereunder, relating to the 1999 Senior Notes, as amended and
supplemented from time to time.
7
<PAGE> 13
"1999 Senior Notes" means the 12 1/4% Senior Notes due 2006 of the
Company issued pursuant to the 1999 Senior Note Indenture.
"Non-Convertible Capital Stock" means, with respect to any Person, any
non-convertible Capital Stock of such Person and any Capital Stock of such
Person convertible solely into non-convertible common stock of such Person;
provided, however, that Non-Convertible Capital Stock shall not include any
Redeemable Stock or Exchangeable Stock.
"Obligations" means, with respect to any Indebtedness, any obligation
thereunder, including, without limitation, principal, premium and interest
(including post petition interest thereon and, with respect to the Debentures,
Liquidated Damages), penalties, fees, costs, expenses, indemnifications,
reimbursements, damages and other liabilities.
"Officer" means, with respect to any Person, the Chairman of the Board,
a Vice Chairman of the Board, the Chief Executive Officer, the President, the
Chief Financial Officer, the Chief Accounting Officer, the Treasurer, any
Assistant Treasurer, the Controller, the Secretary, an Assistant Secretary or
any Vice President of such Person.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President, the Chief Executive
Officer or a Vice President, and by the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company, or a Subsidiary and delivered to the
Trustee, which shall comply with this Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
11.4 and 11.5 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company,
whether outstanding on the date on which the Debentures are originally issued or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness the instrument creating or evidencing the same or pursuant to which
the same is outstanding expressly provides that such Indebtedness shall be
subordinated in right of payment to Debentures.
"Participant" means, with respect to DTC, a Person who has an account
with DTC.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"preferred stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
8
<PAGE> 14
"Preferred Stock" means the 13 7/8% Senior Cumulative Redeemable
Preferred Stock of the Company, which, upon satisfaction of certain conditions,
may be exchanged by the Company in its sole discretion, in whole but not in
part, into Debentures.
"Public Equity Offering" means any underwritten public offering of
shares of common stock (however designated and whether voting or non-voting) of
the Company and any and all rights, warrants or options to acquire such common
stock pursuant to an effective registration statement (other than a registration
statement on Form S-4 or S-8) filed with the Commission in accordance with the
Securities Act.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Rating Agencies" means (a) S&P and Moody's or (b) if S&P or Moody's or
both of them are not making ratings of the Debentures publicly available, a
nationally recognized U.S. rating agency or agencies, as the cases may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
"Record Date" means, for the interest payment on any Interest Payment
Date, the date specified in Section 2.12 hereof.
"Redeemable Stock" means, with respect to the Debentures, any Capital
Stock that, by its terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case at the option of the
holder thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Debentures mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Redeemable Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital Stock
upon the occurrence of a change of control or an asset sale shall not constitute
Redeemable Stock if the terms of such Capital Stock provide that the Company may
not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Sections 4.7 and 4.8 hereof.
"Redemption Date" means, when used with respect to any Debenture or
part thereof to be redeemed hereunder, the date fixed for redemption of such
Debentures pursuant to the terms of the Debentures and this Indenture.
"Redemption Price" means, when used with respect to any Debenture or
part thereof to be redeemed hereunder, the price fixed for redemption of such
Debenture pursuant to the terms of the Debentures and this Indenture, plus
accrued and unpaid interest, if any, and Liquidated Damages, if any, thereon, to
the Redemption Date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April ____, 1999, by and between the Company and the
Initial Purchaser, as such agreement may be amended, modified or supplemented
from time to time.
9
<PAGE> 15
"Regulation S" means Regulation S under the Securities Act (including
any successor regulation thereto), as it may be amended from time to time.
"Regulation S Global Debenture" means a Global Debenture that contains
the paragraph referred to in footnote 1, the phrase referred to in footnote 3
and the additional schedule referred to in footnote 4 to the form of the
Debenture attached hereto as Exhibit A, and that is deposited with the Debenture
Custodian and registered in the name of the Depositary or its nominee,
representing the Initial Debentures issued in exchange for Preferred Stock sold
in reliance on Regulation S.
"Reorganization Securities" means securities distributed to the holders
of the Debentures in an Insolvency or Liquidation Proceeding pursuant to a plan
of reorganization consented to by each class of the Senior Debt, but only if all
of the terms and conditions of such securities (including, without limitation,
term, tenor, interest, amortization, subordination, standstills, covenants and
defaults) are at least as favorable (and provide the same relative benefits) to
the holders of Senior Debt and to the holders of any security distributed in
such Insolvency or Liquidation Proceeding on account of any such Senior Debt as
the terms and conditions of the Debentures and the Indenture are and provide to
the holders of the Senior Debt.
"Representative" means the trustee, agent or representative of any
Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means any
officer of the Trustee with direct responsibility of the administration of this
Indenture and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"S&P" is defined to mean Standard & Poors Ratings Group, a division of
McGraw-Hill Companies, Inc. and its successors.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Senior Debt" means the principal of and premium, if any, and interest
(including post-petition interest) on, and any and all other fees, expense
reimbursement obligations and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all Indebtedness of
the Company owed to lenders under any credit facility, (b) all obligations of
the Company with respect to any interest rate agreement or any currency
agreement, (c) all obligations of the Company to reimburse any bank or other
Person in respect of amounts paid under letters of credit, banker's acceptances
or other similar instruments, (d) all other Indebtedness of the
10
<PAGE> 16
Company which does not provide that it is to rank in right of payment pari passu
with or subordinate to the Debentures, and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any of the Senior Debt described above. Notwithstanding anything to the contrary
in the foregoing, Senior Debt will not include (i) Indebtedness of the Company
to any of its Subsidiaries, (ii) Indebtedness represented by the Debentures,
(iii) any Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Senior Debt (including, without limitation, Indebtedness
represented by Redeemable Stock), (iv) any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business, or (v) any Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to such Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC. For purposes of Section 6.1(g) and
Section 6.1(h) hereof only, the term "Significant Subsidiary" shall also include
any group of Restricted Subsidiaries that, taken as a whole as of the latest
audited consolidated financial statements for the Company and its Subsidiaries,
would constitute a Significant Subsidiary.
"Special Record Date" means a date fixed by the Trustee pursuant to
Section 2.12 hereof for the payment of Defaulted Interest.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Exchange Date or thereafter Incurred), which is
subordinate or junior in right of payment to the Debentures, whether pursuant to
a written agreement to that effect or by operation of law.
"Subsidiary" means, with respect to any Person:
(1) any corporation of which more than 50% of the total voting
power of all classes of the Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors is owned by
such Person directly or through one or more other Subsidiaries of such Person,
and
(2) any entity other than a corporation of which at least a
majority of the Capital Stock or other equity interest (however designated)
entitled (without regard to the occurrence of any contingency) to vote in the
election of the governing body, partners, managers or others that will control
the management of such entity is owned by such Person directly or through one or
more other Subsidiaries of such Person.
11
<PAGE> 17
"Transfer Restricted Debentures" means Debentures that bear or are
required to bear the Private Placement Legend.
"Trust Indenture Act" or "TIA" means the U.S. Trust Indenture Act of
1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this
Indenture is qualified under the Trust Indenture Act except as required by
Section 9.3 hereof, provided that if the Trust Indenture Act of 1939 is amended
after such date, "Trust Indenture Act" or "TIA" means, if so required by such
amendment, the Trust Indenture Act of 1939, as so amended.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means:
(a) any Subsidiary of the Company that at the time of
determination will be designated an Unrestricted Subsidiary by the
Board of Directors of the Company as provided below and
(b) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary of
the Company as an Unrestricted Subsidiary so long as after giving effect to such
designation, such designation was permitted by Section 4.8 of this Indenture.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing a resolution of the Board of Directors with
the Trustee giving effect to such designation. The Board of Directors of the
Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Notwithstanding any covenant
herein, any Subsidiary that is an "Unrestricted Subsidiary" on the Exchange Date
pursuant to the 1999 Senior Note Indenture or the indentures governing the
Company's 9 1/8% Senior Notes due 2003, the Company's 9 1/2% Senior Notes due
2008, RBF Finance Co.'s 11% Senior Secured Notes due 2006 or RBF Finance Co.'s
11 3/8% Senior Secured Notes due 2009 shall be an Unrestricted Subsidiary
hereunder.
"U.S. Global Debenture" means a permanent Global Debenture that contains
the paragraphs referred to in footnote 1, in the phrase referred to in footnote
4 and the additional schedule referred to in footnote 5 to the form of the
Debenture attached hereto as Exhibit A, and that is deposited with the Debenture
Custodian and registered in the name of the Depositary or its nominee,
representing Debentures sold in reliance on Rule 144A or in reliance on another
exemption from the registration requirements of the Securities Act.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the Company's option.
12
<PAGE> 18
"U.S. Person" means (i) any individual resident in the United States,
(ii) any partnership or corporation organized or incorporated under the laws of
the United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respects to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is an
non-U.S. Person who has sole or shared investment discretion with respect to its
assets and no beneficiary of the trust (and no settler, if the trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person), (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned, by "accredited investors" within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); provided, however, that the term "U.S. Person" shall not
include (A) a branch or agency of a U.S. Person that is located and operating
outside the United States for valid business purposes as a locally regulated
branch or agency engaged in the banking or insurance business, (B) any employee
benefit plan established and administered in accordance with the law, customary
practices and documentation of a foreign country and (C) the international
organizations set forth in Section 902(k)(2)(vi) of Regulation S and any other
similar international organizations, and their agencies, affiliates and pension
plans.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
SECTION 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section or Article
---- ------------------
<S> <C>
"Act" 11.6
"Additional Debentures" 2.12
"Change of Control" 4.7(a)
"Change of Control Offer" 4.7(a)
"Change of Control Purchase Price" 4.7(a)
"Change of Control Offer Period" 4.7(b)
"Change of Control Payment Date" 4.7(b)
"Covenant Defeasance" 9.3
"DTC" 2.3
"Defaulted Interest" 2.12
"Defeasance" 9.2
"Event of Default" 6.1
"Interest Payment Date" 2.12
</TABLE>
13
<PAGE> 19
<TABLE>
<S> <C>
"Paying Agent" 2.3
"Payment Default" 6.1(e)
"Private Placement Legend" 2.6(e)(i)
"Process Agent" 11.10
"Registrar" 2.3
"Restricted Payment" 4.11(a)(iv)
"Securities Register" 2.3
"Successor" 5.1(a)(1)
"Suspended Covenant" 4
</TABLE>
SECTION 1.3 Incorporation By Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture.
The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Debentures;
"indenture security holder" means a Holder of a Debenture;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Debentures means the Company or any other
obligor on the Debentures.
All other terms used in this Indenture that are defined by the
Trust Indenture Act, defined by the Trust Indenture Act reference to another
statute or defined by SEC rule under the Trust Indenture Act have the meanings
so assigned to them therein.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) the words "herein," "hereof" and "hereunder," and other
words of similar import, refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(2) a term has the meaning assigned to it;
(3) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(4) "or" is not exclusive;
(5) words in the singular include the plural, and in the
plural include the singular;
14
<PAGE> 20
(6) provisions apply to successive events and transactions;
(7) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time;
(8) the principal amount of any non-interest bearing or other
discount security at any date shall be the principal amount thereof that would
be shown on a balance sheet of the issuer dated such date prepared in accordance
with GAAP;
(9) when used with respect to the Debentures, the term
"principal amount" shall mean the principal amount thereof at Maturity;
(10) unless otherwise expressly provided herein, the principal
amount of any preferred stock shall be the greater of (i) the maximum
liquidation value of such preferred stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such preferred stock;
and
(11) all references to amounts of money or $ mean U.S.
Dollars.
ARTICLE 2
THE DEBENTURES
SECTION 2.1 Form and Dating.
(a) General. The Debentures, together with the Trustee's
certificate of authentication, shall be substantially in the form set forth in
Exhibit A hereto. The Debentures may have notations, legends or endorsements
required by law, stock exchange rule or usage. Each Debenture shall be dated the
date of its authentication. The Debentures shall be in denominations of $1,000
and integral multiples thereof; provided, that Debentures may be issued in
denominations of less than $1,000 (but not less than $1.00) upon the exchange of
the Preferred Stock for the Debentures such that each holder of Preferred Stock
shall receive Debentures in a principal amount equal to the full liquidation
preference of the Preferred Stock on the date of exchange; provided, further,
that Additional Notes may be issued in denominations of less than $1,000 (but
not less than $1.00). The Initial Debentures and the Exchange Debentures will be
the same except that the Private Placement Legend and paragraph 18 will be
omitted from the Exchange Debentures.
The terms and provisions contained in the Debentures shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
(b) Initial Debentures. Initial Debentures shall be issued in
the form of one or more permanent Global Debentures in definitive fully
registered form without interest coupons. Debentures exchanged for Preferred
Stock held by QIBs in reliance on Rule 144A shall be issued initially in the
form of the U.S. Global Debentures, which shall be deposited on behalf of the
15
<PAGE> 21
purchasers of the Debentures represented thereby with the Debenture Custodian,
and registered in the name of the Depositary or a nominee of the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Debentures may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided. Debentures
exchanged for Preferred Stock held by Persons in reliance on Regulation S shall
be issued in the form of the Regulation S Global Debenture, which shall be
deposited on behalf of the purchasers of the Debentures represented thereby with
the Debenture Custodian, and registered in the name of the Depositary or the
nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Company and authenticated by
the Trustee as hereinafter provided.
Each Global Debenture shall represent such of the outstanding
Debentures as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Debentures from time to time
endorsed on Schedule A thereto and that the aggregate amount of outstanding
Debentures represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions and transfers of interests. Any
endorsement of Schedule A of a Global Debenture to reflect the amount of any
increase or decrease in the amount of outstanding Debentures represented thereby
shall be made by the Trustee or the Debenture Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear
Clearance System" and "Terms and Conditions Governing Use of Euroclear" and the
"Management Regulations" and "Instructions to Participants" of Cedel shall be
applicable to interests in the Regulation S Global Debenture that are held by
Participants through Euroclear or Cedel. The Trustee shall have no obligation to
notify Holders of any such procedures or to monitor or enforce compliance with
the same.
Except as set forth in Section 2.6 hereof, the Global
Debentures may be transferred, in whole and not in part, only to another nominee
of the Depositary or to a successor of the Depositary or its nominee.
(c) Book-Entry Provisions. This Section 2.1(c) shall apply
only to Global Debentures deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(c), authenticate and deliver the Global Debentures that
(i) shall be registered in the name of the Depositary or the nominee of the
Depositary and (ii) shall be delivered by the Trustee to the Depositary or
pursuant to the Depositary's instructions or held by the Debenture Custodian.
Participants shall have no rights either under this Indenture
with respect to any Global Debenture held on their behalf by the Depositary or
by the Debenture Custodian as custodian for the Depositary or under such Global
Debenture, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global
Debenture for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving
16
<PAGE> 22
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the exercise of
the rights of an owner of a beneficial interest in any Global Debenture.
(d) Certificated Debentures. Debentures issued in certificated
form shall be substantially in the form of Exhibit A attached hereto (but
without including the text referred to in footnotes 1, 3 and 4 thereto) and
shall be printed, typewritten, lithographed or engraved or produced by any
combination of these methods or may be produced by any other method permitted by
the rules of any securities exchange on which the Debentures may be listed, as
evidenced by the execution of such Debentures.
(e) Applicable to Forms of Debentures. The Debentures may also
have such additional provisions, omissions, variations or substitutions as are
not inconsistent with the provisions of this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with this Indenture,
any applicable law or with any rules made pursuant thereto or with the rules of
any securities exchange or governmental agency or as may be determined
consistently herewith by the Officers of the Company executing such Debentures,
as conclusively evidenced by their execution of such Debentures. All Debentures
will be otherwise substantially identical except as provided herein.
Subject to the provisions of this Article 2, a Holder of a
Global Debenture may grant proxies and otherwise authorize any Person to take
any action that a Holder is entitled to take under this Indenture or the
Debentures.
SECTION 2.2 Execution and Authentication.
Two Officers shall sign the Debentures for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Debenture no longer
holds that office at the time a Debenture is authenticated, the Debenture shall
nevertheless be valid.
A Debenture shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Debenture has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Debentures shall be
substantially as set forth in Exhibit A hereto.
The Trustee shall authenticate (i) Initial Debentures for
original issue in an aggregate principal amount not to exceed $__________, (ii)
Exchange Debentures for issue only in the Exchange Offer pursuant to the
Exchange Offer Registration Statement for a like principal amount of Debentures
exchanged in such Exchange Offer, and (iii) Additional Debentures in accordance
with the terms of the Debentures, in each case upon the receipt of a Company
Order directing the Trustee to authenticate such Debentures and certifying that
all conditions precedent to the issuance of the relevant Debentures contained
herein have been complied with. The aggregate
17
<PAGE> 23
principal amount of Debentures outstanding at any time may not exceed the
amounts described in the preceding sentence, except as provided in Section 2.7
hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Debentures. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Debentures whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where
Debentures may be presented for registration of transfer or for exchange
("Registrar"), (ii) an office or agency where Debentures may be presented for
payment ("Paying Agent"), and (iii) and an office or agency where notices or
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. The Registrar shall keep a register of the Debentures and of
their transfer and exchange (the "Securities Register"). The Company may appoint
one or more co-registrars and one or more additional paying agents except as
otherwise provided in this Indenture. The term "Registrar" includes any
co-registrar and the term "Paying Agent" includes any additional paying agent.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company shall notify the Trustee in writing of the name and address
of any Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Debentures.
The Company initially appoints the Trustee (at the Corporate
Trust Office of the Trustee) to act as the Registrar and Paying Agent and to act
as Debenture Custodian with respect to the Global Debentures.
SECTION 2.4 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, on, interest on, and Liquidated
Damages, if any, on, the Debentures, and shall notify the Trustee of any default
by the Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or a Subsidiary) shall have no further liability for the money.
If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Debentures.
18
<PAGE> 24
SECTION 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each Interest Payment Date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Debentures, and the Company shall otherwise comply with TIA Section
312(a).
SECTION 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Global Debentures. The transfer
and exchange of beneficial interests in Global Debentures shall be effected
through the Depositary, in accordance with this Indenture and the Applicable
Procedures, which shall include restrictions on transfer comparable to those set
forth herein to the extent required by the Securities Act. Beneficial interests
in a Global Debenture may be transferred to Persons who take delivery thereof in
the form of a beneficial interest in the same Global Debenture in accordance
with the transfer restrictions set forth in the legend in subsection (e) of this
Section 2.6. Transfers of beneficial interests in the Global Debentures to
Persons required to take delivery thereof in the form of an interest in another
Global Debenture shall be permitted as follows:
(i) U.S. Global Debenture to Regulation S Global Debenture.
If an owner of a beneficial interest in a U.S. Global
Debenture deposited with the Depositary (or the
Debenture Custodian) wishes to transfer its beneficial
interest in such U.S. Global Debenture to a Person who
is required or permitted to take delivery thereof in the
form of an interest in a Regulation S Global Debenture,
such owner shall, subject to the Applicable Procedures,
exchange or cause the exchange of such interest for an
equivalent beneficial interest in a Regulation S Global
Debenture as provided in this Section 2.6(a)(i). Upon
receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from a
Participant directing the Trustee to credit or cause to
be credited a beneficial interest in the Regulation S
Global Debenture in an amount equal to the beneficial
interest in the U.S. Global Debenture to be exchanged,
(2) a written order given in accordance with the
Applicable Procedures containing information regarding
the Participant account of the Depositary and the
Euroclear or Cedel account to be credited with such
increase, and (3) a certificate in the form of Exhibit
B-1 hereto given by the owner of such beneficial
interest stating that the transfer of such interest has
been made in compliance with the transfer restrictions
applicable to the Global Debentures and pursuant to and
in accordance with Rule 903 or Rule 904 of Regulation S,
then the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the
aggregate principal amount at Maturity of the applicable
U.S. Global Debenture and to increase or cause to be
increased the aggregate principal amount at Maturity of
the applicable Regulation S Global Debenture by the
principal
19
<PAGE> 25
amount at Maturity of the beneficial interest in the
U.S. Global Debenture to be exchanged or transferred, to
credit or cause to be credited to the account of the
Person specified in such instructions, a beneficial
interest in the Regulation S Global Debenture equal to
the reduction in the aggregate principal amount at
Maturity of the U.S. Global Debenture, and to debit, or
cause to be debited, from the account of the Person
making such exchange or transfer the beneficial interest
in the U.S. Global Debenture that is being exchanged or
transferred.
(ii) Regulation S Global Debenture to U.S. Global Debenture.
If an owner of a beneficial interest in a Regulation S
Global Debenture deposited with the Depositary or with
the Debenture Custodian wishes to transfer its
beneficial interest in such Regulation S Global
Debenture to a Person who is required or permitted to
take delivery thereof in the form of an interest in a
U.S. Global Debenture, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of
such interest for an equivalent beneficial interest in a
U.S. Global Debenture as provided in this Section
2.6(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel, if applicable, and
the Depositary, directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest in
the U.S. Global Debenture equal to the beneficial
interest in the Regulation S Global Debenture to be
exchanged, such instructions to contain information
regarding the Participant account with the Depositary to
be credited with such increase, (2) a written order
given in accordance with the Applicable Procedures
containing information regarding the Participant account
of the Depositary and (3) a certificate in the form of
Exhibit B-2 attached hereto given by the owner of such
beneficial interest stating (A) if the transfer is
pursuant to Rule 144A, that the Person transferring such
interest in a Regulation S Global Debenture reasonably
believes that the Person acquiring such interest in a
U.S. Global Debenture is a QIB and is obtaining such
beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or
securities laws of any state of the United States, (B)
that the transfer complies with the requirements of Rule
144 under the Securities Act, (C) if the transfer is to
an Institutional Accredited Investor that such transfer
is in compliance with the Securities Act and that a
certificate in the form of Exhibit C attached hereto is
attached thereto, together with, if the Company should
so request or if the transfer is in respect of an
aggregate principal amount of Debentures less than
$250,000, an Opinion of Counsel in form reasonably
acceptable to the Company that such transfer is in
compliance with the Securities Act or (D) if the
transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that
the transfer of such interest has been made in
compliance with the transfer restrictions applicable to
the Global Debentures and pursuant to and in accordance
with the requirements of the exemption claimed, such
statement to be supported by an Opinion of Counsel from
the transferee or
20
<PAGE> 26
the transferor in form reasonably acceptable to the
Company and to the Registrar and, in each case, in
accordance with any applicable securities laws of any
state of the United States or any other applicable
jurisdiction, then the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced
the aggregate principal amount at Maturity of such
Regulation S Global Debenture and to increase or cause
to be increased the aggregate principal amount at
Maturity of the applicable U.S. Global Debenture by the
principal amount at Maturity of the beneficial interest
in the Regulation S Global Debenture to be exchanged or
transferred, and the Trustee, as Registrar, shall
instruct the Depositary, concurrently with such
redemption, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the applicable U.S. Global
Debenture equal to the reduction in the aggregate
principal amount at Maturity of such Regulation S Global
Debenture and to debit or cause to be debited from the
account of the Person making such transfer the
beneficial interest in the Regulation S Global Debenture
that is being exchanged or transferred.
(iii) U.S. Global Debentures to Institutional Accredited
Investor. If, at any time, an owner of a beneficial
interest in a U.S. Global Debenture deposited with the
Depositary (or the Debenture Custodian) wishes to
transfer its beneficial interest in such U.S. Global
Debenture to a Person who is an Institutional Accredited
Investor, such owner shall, subject to the Applicable
Procedures and the other provisions of this Section 2.6,
exchange or cause the exchange of such interest for an
equivalent beneficial interest in a U.S. Global
Debenture as provided in this Section 2.6(a)(iii). Upon
receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from a
Participant directing the Trustee to credit or cause to
be credited a beneficial interest in the U.S. Global
Debenture in an amount equal to the beneficial interest
in the U.S. Global Debenture to be exchanged, (2) a
written order given in accordance with the Applicable
Procedures containing information regarding the
Participant account of the Depositary to be credited
with such increase, and (3) a certificate in the form of
Exhibit C hereto given by the proposed transferee, and,
if the Company should so request, an Opinion of Counsel
provided by the transferor or the transferee (a copy of
which the Transferor attaches to such certificate), in
form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in
compliance with the Securities Act, then the Trustee, as
Registrar, shall instruct the Depositary to credit or
cause to be credited to the account of the Person
specified in such instructions, a beneficial interest in
the U.S. Global Debenture equal to the aggregate
principal amount being transferred, and to debit, or
cause to be debited, from the account of the Person
making such exchange or transfer the beneficial interest
in the U.S. Global Debenture that is being exchanged or
transferred.
21
<PAGE> 27
(b) Transfer and Exchange of Certificated Debentures. When
Certificated Debentures are presented by a Holder to the Registrar with a
request to register the transfer of the Certificated Debentures or to exchange
such Certificated Debentures for an equal principal amount of Certificated
Debentures of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested only if the Certificated Debentures
are presented or surrendered for registration of transfer or exchange, are
endorsed and contain a signature guarantee or are accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney and contains a signature guarantee, duly
authorized in writing and the Registrar received the following documentation
(all of which may be submitted by facsimile):
in the case of Certificated Debentures that are Transfer
Restricted Debentures, such request shall be accompanied
by the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Debenture is being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, or such Transfer Restricted Debenture is
being transferred to the Company, a certification to
that effect from such Holder (in substantially the
form of Exhibit B-3 hereto); or
(B) if such Transfer Restricted Debenture is being
transferred to a QIB in accordance with Rule 144A
under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 under
the Securities Act or in an offshore transaction
pursuant to and in compliance with Rule 904 under the
Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto); or
(C) if such Transfer Restricted Debenture is being
transferred in reliance on any other exemption from
the registration requirements of the Securities Act,
a certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto) and an
Opinion of Counsel from such Holder or the transferee
in form reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in
compliance with the Securities Act.
(c) Transfer of a Beneficial Interests in Global Debentures
for Certificated Debentures.
(i) The Global Debentures that are Transfer Restricted
Debentures or the Exchange Global Debentures, as the case
may be, shall be exchanged by the Company for one or more
Certificated Debentures representing Initial Debentures or
Exchange Debentures, as the case may be, if (x) the
Depositary (i) has notified the Company that it is
unwilling or unable to continue as, or ceases to be, a
"Clearing Agency" registered under Section 17A of the
Exchange Act and (ii) a successor to the Depositary
registered as a "Clearing Agency" under
22
<PAGE> 28
Section 17A of the Exchange Act is not able to be
appointed by the Company within 90 calendar days or (y)
the Depositary is at any time unwilling or unable to
continue as Depositary and a successor to the Depositary
is not able to be appointed by the Company within 90
calendar days or (iii) the Company, at its option,
delivers a notice in the form of an Officers' Certificate
that it elects to cause the issuance of Certificated
Debentures. If an Event of Default occurs and is
continuing, the Company shall, at the request of the
Holder thereof, exchange all or part of a Global Debenture
that is a Transfer Restricted Debenture or an Exchange
Global Debenture, as the case may be, for one or more
Certificated Debentures representing Initial Debentures or
Exchange Debentures, as the case may be; provided that the
principal amount of each of such Certificated Debentures,
and such Global Debenture, after such exchange, shall be
$1,000 or an integral multiple thereof. Whenever a Global
Debenture is exchanged as a whole for one or more
Certificated Debentures, it shall be surrendered by the
Holder thereof to the Trustee for cancellation. Whenever a
Global Debenture is exchanged in part for one or more
Certificated Debentures, it shall be surrendered by the
Holder thereof to the Trustee and the Trustee shall make
the appropriate notations to Schedule A thereof pursuant
to Section 2.1 hereof. All Certificated Debentures or
Exchange Debentures, as the case may be, issued in
exchange for a Global Debenture or any portion thereof
shall be registered in such names, and delivered, as the
Depositary shall instruct the Trustee. Any Certificated
Debentures issued pursuant to this Section 2.6(c)(i) shall
include the Private Placement Legend, except as otherwise
provided for by Section 2.6 hereof. Interests in a Global
Debenture may not be exchanged for Certificated Debentures
other than as provided in this Section 2.6. If a
beneficial interest in a Transfer Restricted Debenture is
being transferred, the following additional documents and
information must be submitted (including by facsimile):
(A) if such beneficial interest is being transferred to
the Person designated by the Depositary as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of Exhibit B-4
hereto);
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or
in an offshore transaction pursuant to and in
compliance with Rule 904 under the Securities Act or
pursuant to an effective registration statement under
the Securities Act, a certification to that effect
from the transferor (in substantially the form of
Exhibit B-4 hereto);
23
<PAGE> 29
(C) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit B-4 hereto) and an Opinion of Counsel
from the transferee or the transferor in form
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act, in which case the
Trustee or the Debenture Custodian, at the direction
of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the
Depositary and the Debenture Custodian, cause the
aggregate principal amount of U.S. Global Debentures
or Regulation S Global Debentures as applicable, to be
reduced accordingly and, following such reduction, the
Company shall execute and, the Trustee shall
authenticate and deliver to the transferee a
Certificated Debenture in the appropriate principal
amount.
(ii) Certificated Debentures issued in exchange for a
beneficial interest in a U.S. Global Debenture or
Regulation S Global Debenture, as applicable, pursuant to
this Section 2.6(c) shall be registered in such names and
in such authorized denominations as the Depositary,
pursuant to instructions from its Participants or
Indirect Participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Certificated
Debentures to the Persons in whose names such Debentures
are so registered. Following any such issuance of
Certificated Debentures, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced
the aggregate principal amount at maturity of the
applicable Global Debenture to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global
Debentures. Notwithstanding any other provision of this Indenture (other than
the provisions set forth in subsection (e) of this Section 2.6), a Global
Debenture may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Any Holder of a
beneficial interest in a Global Debenture shall, by acceptance of such Global
Debenture, agree that transfers of beneficial interests in such Global Debenture
may be effected only through a book entry system maintained by the Holder of
such Global Debenture (or its agent), and that ownership of a beneficial
interest in the Debentures represented hereby shall be required to be reflected
in book entry form. Interests of beneficial owners in a Global Debenture may be
transferred in accordance with the rules and procedures of the Depositary (or
its successors).
(e) Legends.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Debenture certificate evidencing
Global Debentures and Certificated Debentures (and all
Debentures issued in exchange therefor or substitution
24
<PAGE> 30
thereof) shall bear a legend (the "Private Placement
Legend") in substantially the following form:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
(A "QIB"), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7)
UNDER REGULATION D UNDER THE SECURITIES ACT (AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D)
TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
25
<PAGE> 31
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE
902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN
VIOLATION OF THE FOREGOING.
(ii) Upon any sale or transfer of a Transfer Restricted
Debenture (including any Transfer Restricted Debenture
represented by a Global Debenture) pursuant to Rule 144
under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Debenture that
is a Certificated Debenture, the Registrar shall
permit the Holder thereof to exchange such Transfer
Restricted Debenture for a Certificated Debenture
that does not bear the legend set forth in (i) above
and rescind any restriction on the transfer of such
Transfer Restricted Debenture upon receipt of a
certification from the transferring Holder
substantially in the form of Exhibit B-4 hereto; and
(B) in the case of any Transfer Restricted Debenture
represented by a Global Debenture, such Transfer
Restricted Debenture shall not be required to bear
the legend set forth in (i) above, but shall continue
to be subject to the provisions of Section 2.6(a) and
(b) hereof; provided, however, that with respect to
any request for an exchange of a Transfer Restricted
Debenture that is represented by a Global Debenture
for a Certificated Debenture that does not bear the
legend set forth in (i) above, which request is made
in reliance upon Rule 144, the Holder thereof shall
certify in writing to the Registrar that such request
is being made pursuant to Rule 144 (such
certification to be substantially in the form of
Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Debenture (including any Transfer Restricted Debenture
represented by a Global Debenture) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to Rule
144A or Rule 144 under the Securities Act) in which the
Holder or the transferee provides an Opinion of Counsel
to the Company and the Registrar in form and substance
reasonably acceptable to the Company and the Registrar
(which Opinion of Counsel shall also state that the
transfer restrictions contained in the legend are no
longer applicable):
(A) in the case of any Transfer Restricted Debenture that
is a Certificated Debenture, the Registrar shall
permit the Holder thereof to exchange such Transfer
Restricted Debenture for a
26
<PAGE> 32
Certificated Debenture that does not bear the legend
set forth in (i) above and rescind any restriction on
the transfer of such Transfer Restricted Debenture;
and
(B) in the case of any Transfer Restricted Debenture
represented by a Global Debenture, such Transfer
Restricted Debenture shall not be required to bear
the legend set forth in (i) above, but shall continue
to be subject to the provisions of Section 2.6(a) and
(b) hereof.
(iv) By its acceptance of any Initial Debenture represented by
a certificate bearing the Private Placement Legend, each
Holder of, and beneficial owner of an interest in, such
Initial Debenture acknowledges the restrictions on
transfer of such Initial Debenture set forth in the
Private Placement Legend and under the heading "Notice to
Investors" in the Offering Memorandum and agrees that it
will transfer such Initial Debenture only in accordance
with the Private Placement Legend and the restrictions
set forth under the heading "Notice to Investors" in the
Offering Memorandum.
(v) Notwithstanding the foregoing, upon the occurrence of the
Exchange Offer in accordance with the Registration Rights
Agreement, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.2
hereof, the Trustee shall authenticate (i) one or more
unrestricted Global Debentures in aggregate principal
amount equal to the principal amount of the restricted
beneficial interests validly tendered and not properly
withdrawn by Persons that certify in the letter of
transmittal delivered in the Exchange Offer that they are
not (x) broker-dealers, (y) Persons participating in the
distribution of the Exchange Debentures or (z) Persons
who are affiliates (as defined in Rule 144 under the
Securities Act) of the Company and accepted for exchange
in the Exchange Offer and (ii) Certificated Debentures
that do not bear the Private Placement Legend in an
aggregate principal amount equal to the principal amount
of the Certificated Debentures that are Transfer
Restricted Debentures accepted for exchange in the
Exchange Offer. Concurrently with the issuance of such
Debentures, the Trustee shall cause the aggregate
principal amount of the applicable Global Debentures to
be reduced accordingly and the Company shall execute and
the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Certificated Debentures so
accepted Certificated Debentures in the appropriate
principal amount.
(f) Cancellation and/or Adjustment of Global Debentures. At
such time as all beneficial interests in Global Debentures have been exchanged
for Certificated Debentures, redeemed, repurchased or cancelled, all Global
Debentures shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Debenture is exchanged for Certificated
Debentures, redeemed, repurchased or cancelled, the principal amount of
Debentures represented
27
<PAGE> 33
by such Global Debenture shall be reduced accordingly and an endorsement shall
be made on such Global Debenture, by the Trustee or the Debenture Custodian, at
the direction of the Trustee, to reflect such reduction.
(g) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate
Global Debentures and Certificated Debentures at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any
stamp or transfer tax or similar governmental charge
payable in connection therewith (other than any such
stamp or transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections
2.10, 3.6, 4.8, 4.15 and 10.6 hereto).
(iii) All Global Debentures and Certificated Debentures
issued upon any registration of transfer or exchange of
Global Debentures or Certificated Debentures shall be
the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this
Indenture, as the Global Debentures or Certificated
Debentures surrendered upon such registration of
transfer or exchange.
(iv) The Registrar shall not be required: (A) to issue, to
register the transfer of or to exchange Debentures
during a period beginning at the opening of fifteen (15)
Business Days before the day of any selection of
Debentures for redemption under Section 3.2 hereof and
ending at the close of business on the day of selection,
(B) to register the transfer of or to exchange any
Debenture so selected for redemption in whole or in
part, except the unredeemed portion of any Debenture
being redeemed in part, or (C) to register the transfer
of or to exchange a Debenture between a Record Date and
the next succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a
transfer of any Debenture, the Trustee, any Agent and
the Company may deem and treat the Person in whose name
any Debenture is registered as the absolute owner of
such Debenture for the purpose of receiving payment of
principal of and interest on such Debentures and for all
other purposes, and neither the Trustee, any Agent nor
the Company shall be affected by notice to the contrary.
(vi) The Trustee shall authenticate Global Debentures and
Certificated Debentures in accordance with the
provisions of Section 2.2 hereof.
Notwithstanding anything herein to the contrary, as to any certifications or
certificates delivered to the Trustee or Registrar pursuant to this Section 2.6,
the Trustee's or the Registrar's duties
28
<PAGE> 34
shall be limited to confirming that any such certifications and certificates
delivered to it are in the form of Exhibits B-1 through B-4 and C attached
hereto. The Trustee or Registrar shall not be responsible for confirming the
truth or accuracy of representations made in any such certifications or
certificates.
SECTION 2.7 Replacement of Debentures.
If any mutilated Debenture is surrendered to the Trustee or
the Company, and the Trustee and the Company receive evidence to their
satisfaction of the destruction, loss or theft of any Debenture, the Company
shall issue, and the Trustee, upon the receipt of a Company Order, shall
authenticate, a replacement Debenture if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Debenture is replaced. The Company may
charge for its expenses in replacing a Debenture.
Every replacement Debenture is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Debentures duly issued hereunder. The
provisions of this Section 2.7 are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement of
mutilated, destroyed, lost or stolen Debentures.
SECTION 2.8 Outstanding Debentures.
The Debentures outstanding at any time are all the Debentures
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Debenture
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section 2.9
hereof, a Debenture does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Debenture.
If a Debenture is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Debenture is held by a bona fide purchaser.
If the principal amount of any Debenture is considered paid
under Section 4.1 hereof, it ceases to be outstanding and interest (including
Liquidated Damages, if any) on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a Redemption Date or Maturity, money
sufficient to pay Debentures payable on that date, then on and after that date
such Debentures shall be deemed to be no longer outstanding and shall cease to
accrue interest (including Liquidated Damages, if any).
29
<PAGE> 35
SECTION 2.9 Treasury Debentures.
In determining whether the Holders of the required principal
amount of Debentures have concurred in any direction, waiver or consent,
Debentures owned by the Company or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Debentures that a Responsible Officer
knows are so owned shall be so disregarded.
SECTION 2.10 Temporary Debentures.
Until definitive Debentures are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Debentures upon
a Company Order. Temporary Debentures shall be substantially in the form of
definitive Debentures but may have variations that the Company considers
appropriate for temporary Debentures and as shall be reasonably acceptable to
the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Debentures in exchange for temporary
Debentures.
Holders of temporary Debentures shall be entitled to all of
the benefits of this Indenture.
SECTION 2.11 Cancellation.
The Company at any time may deliver Debentures to the Trustee
for cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Debentures surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Debentures surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall upon the written request of the Company, return such cancelled Debentures
to the Company. The Company may not issue new Debentures to replace Debentures
that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12 Payment of Interest; Interest Rights Preserved.
Interest (including Liquidated Damages, if any) on any
Debenture which is payable, and is punctually paid or duly provided for, on any
February 1, May 1, August 1 or November 1 (an "Interest Payment Date"),
commencing on August 1, 1999, shall be paid to the Person in whose name such
Debenture is registered at the close of business on the Record Date for such
interest payment, which shall be the January 15, April 15, July 15 or October 15
(whether or not a Business Day) immediately preceding such Interest Payment
Date. Notwithstanding anything herein to the contrary, on each Interest Payment
Date through and including May 1, 2004, the entire amount of the interest
payment on the Debentures may be paid, at the option of the Company, in
additional Debentures ("Additional Debentures") (valued at 100% of the principal
amount thereof). The Company may, at its option, pay cash in lieu of issuing any
Additional Debenture to the extent the principal amount of such Additional
Debenture is not an integral multiple of $1,000. The Company shall notify the
Trustee of the Company's election to pay interest in Additional Debentures not
less than 5 days prior to the Record Date for an Interest Payment Date. On each
such Interest Payment Date, the Trustee shall authenticate Additional Debentures
for original issuance to each holder of
30
<PAGE> 36
Debentures on the preceding Record Date, as shown on the register of the
Debentures, in the amount required to pay such interest. For purposes of
determining the principal amount of Additional Debentures to be issued in
payment of interest, the Company shall be entitled to aggregate as to each
Holder the principal amount of all Debentures (including Additional Debentures)
held of record by such Holder.
Any interest on any Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Record Date, and, except as hereinafter
provided, such Defaulted Interest and any interest payable on such Defaulted
Interest may be paid by the Company, at its election, as provided in clause (a)
or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest, and any interest payable on such Defaulted Interest, to the Persons in
whose names the Debentures are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on the Debentures and the date
of the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest (including Liquidated Damages, if any) or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as provided
in this clause (a). Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 calendar
days and not less than 10 calendar days prior to the date of the proposed
payment and not less than 10 calendar days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be sent, first class mail, postage
prepaid, to each Holder at such Holder's address as it appears in the Securities
Register, not less than 10 calendar days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the Persons in whose names the Debentures are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest
(including Liquidated Damages, if any), and any interest payable on such
Defaulted Interest, on the Debentures in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each Debenture
delivered under this Indenture upon registration of transfer of, or in exchange
for, or in lieu of, or in substitution for, any other Debenture, shall carry the
rights to interest (and Liquidated Damages, if any) accrued and unpaid, and to
accrue, which were carried by such other Debenture.
31
<PAGE> 37
SECTION 2.13 Computation of Interest.
Interest on the Debentures shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
SECTION 2.14 CUSIP Number.
The Company in issuing the Debentures may use a "CUSIP"
number, and if it does so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Debentures and that
reliance may be placed only on the other identification numbers printed on the
Debentures. The Company shall promptly notify the Trustee of any change in the
CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.1 Notices to Trustee.
If the Company elects to redeem Debentures pursuant to the
optional redemption provisions of Section 3.7 hereof and of the Debentures, it
shall furnish to the Trustee, at least 45 days (unless a shorter period is
acceptable to the Trustee) but not more than 60 days before a Redemption Date,
an Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the Redemption Date, (iii) the
principal amount of Debentures to be redeemed and (iv) the Redemption Price.
SECTION 3.2 Selection of Debentures to be Redeemed.
In the case of any partial redemption provided for in Section
3.7 hereof, selection of the Debentures for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Debentures are listed or, if the Debentures are
not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; provided that no Debentures of $1,000 or less
shall be redeemed in part. If any Debenture is to be redeemed in part only, the
notice of redemption relating to such Debenture shall state the portion of the
principal amount thereof to be redeemed. A new Debenture in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Debenture.
The Trustee shall promptly notify the Company in writing of
the Debentures selected for redemption and, in the case of any Debenture
selected for partial redemption, the portion of the principal amount thereof to
be redeemed. For all purposes of this Indenture unless the context otherwise
requires, provisions of this Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption.
32
<PAGE> 38
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Debentures are to be redeemed at its
registered address as it appears in the Securities Register.
The notice shall identify the Debentures to be redeemed
including CUSIP number and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the method of calculating such
Redemption Price pursuant to this Indenture;
(c) if any Debenture is being redeemed in part, the portion of
the principal amount of such Debenture to be redeemed and that, after the
Redemption Date upon surrender of such Debenture, a new Debenture or Debentures
in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Debenture;
(d) the name and address of the Paying Agent;
(e) that Debentures called for redemption (other than a Global
Debenture) must be surrendered to the Paying Agent to collect the Redemption
Price;
(f) that, unless the Company defaults in making such
Redemption Payment, interest (and Liquidated Damages, if any) on Debentures (or
portions thereof) called for redemption shall cease to accrue on and after the
Redemption Date;
(g) the paragraph of the Debentures and/or Section of this
Indenture pursuant to which the Debentures called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Debentures.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
Redemption Date (unless a shorter time is acceptable to the Trustee), an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.3 hereof, Debentures called for redemption become irrevocably due and payable
on the Redemption Date at the Redemption Price including interest and Liquidated
Damages, if any, accrued and unpaid on the Redemption Date. Upon surrender to
the Paying Agent, such Debentures shall be paid at the Redemption Price stated
in such notice. Failure to give notice or any defect in the notice to any
33
<PAGE> 39
Holder shall not affect the validity of the notice to any other Holder. A notice
of redemption may not be conditional.
SECTION 3.5 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit
with the Trustee or with the Paying Agent immediately available funds sufficient
to pay the Redemption Price of and accrued and unpaid interest, if any, on (and
Liquidated Damages, if any, on) all Debentures to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the Redemption Price of, and accrued interest
(including Liquidated Damages, if any) on, all Debentures to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the Redemption Date, interest (and Liquidated Damages,
if any) shall cease to accrue on the Debentures or the portions of Debentures
called for redemption. If a Debenture is redeemed on or after a Record Date but
on or prior to the related Interest Payment Date, then any accrued and unpaid
interest (and Liquidated Damages, if any) shall be paid to the Person in whose
name such Debenture was registered at the close of business on such Record Date.
If any Debenture called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest (and Liquidated Damages, if any) shall be paid on the unpaid
principal, from the Redemption Date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Debentures and in Section 4.1 hereof.
SECTION 3.6 Debentures Redeemed in Part.
Upon surrender of a Debenture that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Debenture equal
in principal amount to the unredeemed portion of the Debenture surrendered. The
records of the Registrar and the Depositary shall reflect any partial redemption
of any Global Debenture.
SECTION 3.7 Optional Redemption.
(a) Except as set forth in subsection (b) of this Section 3.7,
the Debentures will not be redeemable at the Company's option prior to May 1,
2004. On or after such date, the Debentures will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' prior notice, at the Redemption Prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable Redemption
Date, if redeemed during the twelve-month period beginning on May 1 of the years
indicated below:
34
<PAGE> 40
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004....................................106.938%
2005....................................104.625%
2006....................................102.313%
2007 and thereafter.....................100.000%
</TABLE>
(b) Notwithstanding the provisions of subsection (a) to this
Section 3.7, at any time on or prior to May 1, 2002, the Company may, at its
option, redeem, in whole or in part, up to an aggregate principal amount of the
Debentures equal to $105,000,000, less the aggregate liquidation preference of
all shares of Preferred Stock previously redeemed out of the proceeds of one or
more Public Equity Offerings, at a Redemption Price of 113.875% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the Redemption Date with the net cash proceeds of one or more Public
Equity Offerings; provided that any such redemption shall occur within 45 days
of the date of the closing of such Public Equity Offerings.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 hereof.
ARTICLE 4
COVENANTS
In the event that at any time (a) the ratings assigned to the
1999 Senior Notes by both of the Rating Agencies are Investment Grade Ratings
and (b) no Default has occurred and is continuing under the 1999 Senior Note
Indenture, the Company and its Restricted Subsidiaries will no longer be subject
to the provisions of this Indenture found in Section 4.8 (the "Suspended
Covenant"). In the event that the Company is not subject to the Suspended
Covenant for any period of time as a result of the preceding sentence and,
subsequently, one or both Rating Agencies withdraws its respective rating or
downgrades its respective rating assigned to the 1999 Senior Notes below the
required Investment Grade Rating, then the Company and its Restricted
Subsidiaries will again be subject to the Suspended Covenant and compliance with
the Suspended Covenant with respect to Restricted Payments made after the time
of such withdrawal or downgrade will be calculated in accordance with the terms
of Section 4.8 as if such covenant had been in effect during the entire period
of time from the date of this Indenture.
SECTION 4.1 Payment of Debentures.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest (and Liquidated Damages, if any) on, the
Debentures on the dates and in the manner provided in the Debentures and in this
Indenture. Principal, premium, if any, and interest (and Liquidated Damages, if
any) shall be considered paid on the date due if the Trustee or the Paying
Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00
a.m., New York Time, on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest (and Liquidated Damages, if any) then
due, or if interest is to be paid in Additional Debentures, if the Trustee or
Paying Agent holds on that date duly authenticated Additional Debentures in an
aggregate principal amount equal
35
<PAGE> 41
to the applicable installment of interest. The Company shall pay all Liquidated
Damages, if any, in the same manner on the dates and in the amounts set forth in
the Registration Rights Agreement. The Company will promptly notify the Trustee
of a Registration Default (as defined in the Registration Rights Agreement)
under the Registration Rights Agreement and any cure thereof. All payments under
this Indenture shall be paid to the Trustee or the Paying Agent in New York, New
York, unless the Company is otherwise instructed by the Trustee or Paying Agent.
The Company shall pay interest (including post-petition
interest in any proceeding under any applicable Federal, state or foreign
bankruptcy law) on Defaulted Interest and Liquidated Damages, if any, (without
regard to any applicable grace period) at the same rate to the extent lawful.
SECTION 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Debentures may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Debentures may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.3 hereof.
SECTION 4.3 Corporate Existence.
Subject to the provisions of Article 5 hereof, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect (i) its corporate existence, and the corporate, partnership or
other existence of each of the Restricted Subsidiaries, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of each of the Company or any such Restricted Subsidiary and (ii) the
rights (charter and statutory), licenses and franchises of each of the Company
and the Restricted Subsidiaries; provided, however, that the Company shall not
be required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of the Restricted Subsidiaries, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the
36
<PAGE> 42
conduct of the business of the Company and the Restricted Subsidiaries taken as
a whole and that the loss thereof is not adverse in any material respect to the
Holders of the Debentures.
SECTION 4.4 Compliance With Laws.
The Company shall comply, and shall cause each of the
Restricted Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as would not in the aggregate have a material adverse
effect on the financial condition or results of operations of the Company and
the Restricted Subsidiaries taken as a whole.
SECTION 4.5 Taxes and Other Claims.
The Company shall pay, and shall cause each of the Restricted
Subsidiaries to pay, prior to delinquency, (a) all material taxes, assessments,
and governmental charges levied or imposed upon the Company or any of the
Restricted Subsidiaries or upon the income, profits or property or assets of the
Company or any of the Restricted Subsidiaries and (b) all lawful claims for
labor, materials and supplies, which, if unpaid, might by law become a Lien upon
the property or assets of the Company or any of the Restricted Subsidiaries,
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Debentures and for which adequate reserves in accordance
with GAAP or other appropriate provisions have been made.
SECTION 4.6 Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.7 Change of Control.
(a) Upon the occurrence of any of the following events (each a
"Change of Control"), the Company shall make an offer to repurchase all
outstanding Debentures in whole or in part (the "Change of Control Offer") at a
purchase price (the "Change of Control Purchase Price") in cash equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if any, and Liquidated Damages, if any, to the date of purchase
(subject to the right of Holders of record on the relevant Record Date to
receive interest (including Liquidated Damages, if any) due on the relevant
Interest Payment Date).
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this
37
<PAGE> 43
clause (i) such person shall be deemed to have
"beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is
exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of the Company;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the
Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the
directors of the Company then still in office who were
either directors at the beginning of such period or
whose election or nomination for election was previously
so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; and
(iii) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or
into the Company, or the sale of all or substantially
all the assets of the Company or the Company and its
Restricted Subsidiaries taken as a whole to another
Person and, in the case of any such merger or
consolidation, the securities of the Company that are
outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of
the Voting Stock of the Company are changed into or
exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed
into or exchanged for, in addition to any other
consideration, securities of the surviving corporation
that represent immediately after such transaction, at
least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred if (a) the ratings assigned to the 1999 Senior Notes by the
Rating Agencies prior to the announcement are not downgraded or placed on a
negative credit watch by either such Rating Agency as a result thereof and (b)
no Default has occurred and is continuing under the 1999 Senior Note Indenture.
(b) The Change of Control Offer will remain open for a period
of at least 30 days following its commencement but no longer than 60 days,
except to the extent that a longer period is required by applicable law (the
"Change of Control Offer Period"). On the first Business Day after the
termination of the Change of Control Offer Period (the "Change of Control
Payment Date"), the Issuer will purchase all Debentures validly tendered and not
properly withdrawn pursuant to the Change of Control Offer. Payment for any
Debentures so purchased will be made in the same manner as interest payments are
made on the Debentures. If the Change of Control Payment Date is on or after a
Record Date and on or before the related Interest Payment Date, any accrued and
unpaid interest and Liquidated Damages (to the extent involving interest that is
due and payable on such Interest Payment Date), if any, shall be paid to the
Person in whose name a Debenture is registered at the close of business on such
Record Date, and no additional
38
<PAGE> 44
interest (or Liquidated Damages, if any) (to the extent involving interest that
is due and payable on such Interest Payment Date) shall be payable to Holders
who validly tender Debentures pursuant to the Change of Control Offer.
(c) Within 30 days following any Change of Control, the
Company or the Trustee (at the expense of the Issuer) shall mail by first class
mail, a notice to each Holder, with a copy of such notice to the Trustee. The
notice, which shall govern the terms of the Change of Control Offer, shall
state, among other things:
(i) that a Change of Control has occurred and a Change of
Control Offer is being made as provided for herein that
each Holder has the right to require the Issuer to
purchase such Holder's Debentures at the Change of
Control Purchase Price, and that, although Holders are
not required to tender their Debentures, all Debentures
that are validly tendered shall be accepted for
payment;
(ii) the circumstances and relevant facts regarding such
Change of Control (including information with respect
to pro forma historical income, cash flow and
capitalization after giving effect to such Change of
Control);
(iii) the Change of Control Purchase Price and the Change of
Control Payment Date, which will be no earlier than 30
days and no later than 60 days after the date such
notice is mailed;
(iv) that any Debenture accepted for payment pursuant to the
Change of Control Offer (and duly paid for on the
Change of Control Payment Date) shall cease to accrue
interest and Liquidated Damages, if applicable, after
the Change of Control Payment Date;
(v) that any Debentures (or portions thereof) not validly
tendered shall continue to accrue interest and
Liquidated Damages, if applicable;
(vi) that any Holder electing to have a Debenture purchased
pursuant to any Change of Control Offer shall be
required to surrender the Debenture, with the form
entitled "Option of Holder to Elect Purchase" on the
reverse of the Debenture completed, or transfer by
book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the
address specified in the notice at least one (1)
Business Day before the Change of Control Purchase
Date;
(vii) that Holders shall be entitled to withdraw their
election if the Issuer, the depositary or the Paying
Agent, as the case may be, receives, not later than the
expiration of the Change of Control Offer Period, a
telegram, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of
the Debenture the Holder delivered for purchase and a
statement that such Holder is withdrawing his election
to have such Debenture purchased; and
39
<PAGE> 45
(viii) the instructions and any other information necessary to
enable Holders to tender their Debentures (or portions thereof) and have such
Debentures (or portions thereof) purchased pursuant to the Change of Control
Offer.
(d) On or before the Change of Control Payment Date, the
Company will, to the extent lawful, (1) accept for payment all Debentures or
portions thereof validly tendered and not properly withdrawn pursuant to the
Change of Control Offer, (2) deposit by 11:00 a.m., New York City time, on such
date with the Paying Agent an amount equal to the Change of Control Purchase
Price in respect of all Debentures or portions thereof so validly tendered and
not properly withdrawn and (3) deliver or cause to be delivered to the Trustee
the Debentures so accepted together with an Officers' Certificate stating the
aggregate principal amount of Debentures or portions thereof being purchased by
the Company. The Paying Agent shall promptly (but in any case not later than
five days after the Change of Control Payment Date) mail to each Holder of
Debentures so validly tendered and not properly withdrawn the Change of Control
Purchase Price for such Debentures.
(e) Upon surrender and cancellation of a Certificated
Debenture that is purchased in part pursuant to the Change of Control Offer, the
Company shall promptly issue and the Trustee shall authenticate and mail (or
cause to be transferred by book entry) to the surrendering Holder of such
Certificated Debenture, a new Certificated Debenture equal in principal amount
to the unpurchased portion of such surrendered Certificated Debenture; provided
that each such new Certificated Debenture shall be in a principal amount of
$1,000 or an integral multiple thereof.
(f) Upon surrender of a Global Debenture that is purchased in
part pursuant to a Change of Control Offer, the Paying Agent shall forward such
Global Debenture to the Trustee who shall make a notation on Schedule A thereof
to reduce the principal amount of such Global Debenture to an amount equal to
the unpurchased portion of such Global Debenture, as provided in Section 2.6
hereof. The Company shall publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date. For
purposes of this Section 4.7, the Trustee shall act as the Paying Agent.
(g) The Company shall comply with the requirements of Rules
13e-4 and 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Debentures as a result of a Change of
Control. To the extent that the provisions of any securities laws or regulations
conflict with this Section 4.7, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations hereunder by virtue thereof.
(h) The Company will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Company and purchases all Debentures validly tendered and not
withdrawn under such Change of Control Offer.
40
<PAGE> 46
SECTION 4.8 Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution on or
in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving the
Company) or to the direct or indirect holders of its
Capital Stock, except:
(1) dividends or distributions payable solely in its
Non-Convertible Capital Stock or in options, warrants or other rights to
purchase its Non-Convertible Capital Stock;
(2) dividends or distributions payable to the Company or a
Restricted Subsidiary; and
(3) pro rata dividends or distributions on the Capital Stock
of a Restricted Subsidiary held by minority stockholders (including, without
limitation, minority stockholders of Arcade Drilling AS, a Norwegian
corporation);
(ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or of any direct
or indirect parent of the Company, or any Restricted
Subsidiary (except Capital Stock held by the Company or
a Restricted Subsidiary and except for Preferred Stock);
or
(iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Obligation (other than the
purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within
one year of the date of acquisition) (any such dividend,
distribution, purchase, redemption, repurchase,
defeasance, other acquisition or retirement being herein
referred to as a "Restricted Payment"),
if at the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom); or
(2) the aggregate amount of such Restricted Payment and all
other Restricted Payments since April 22, 1999 would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from April 1, 1999 to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit);
41
<PAGE> 47
(B) 100% of the aggregate net proceeds (including the fair market value
of non-cash proceeds, which shall be determined in good faith by the Board of
Directors of the Company) received by the Company from the issue or sale of its
Capital Stock (other than Redeemable Stock or Exchangeable Stock) on or after
April 22, 1999 (other than an issuance or sale to a Restricted Subsidiary or an
employee stock ownership plan or similar trust);
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary) subsequent to the Incurrence of any Indebtedness of the
Company convertible or exchangeable for Capital Stock (other than Redeemable
Stock or Exchangeable Stock) of the Company (less the amount of any cash, or
other property, distributed by the Company upon such conversion or exchange);
(D) to the extent not otherwise included in Consolidated Net Income,
the net reduction in Investments in Unrestricted Subsidiaries resulting from
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary after April 22, 1999 from
any Unrestricted Subsidiary or from the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary (valued in each case as provided in the
definition of Investment), not to exceed in the case of any Restricted
Subsidiary the total amount of Investments in such Restricted Subsidiary made by
the Company and its Restricted Subsidiaries in such Unrestricted Subsidiary
after the Exchange Date; and
(E) $20,000,000.
(b) The provisions of Section (a) shall not prohibit:
(i) Any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Capital
Stock of the Company (other than Redeemable Stock or
Exchangeable Stock and other Capital Stock issued or sold to
a Restricted Subsidiary or an employee stock ownership plan);
provided, however, that (i) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted
Payments and (ii) the Net Cash Proceeds from such sale shall
be excluded from clauses (2)(B) and (2)(C) of Section (a);
(ii) Any purchase or redemption of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of
the Company; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount
of Restricted Payments;
(iii) Dividends paid within 60 days after the date of declaration
if at such date of declaration such dividend would have
complied with this provision; provided, however, that at the
time of payment of such dividend, no other Default shall have
occurred and be continuing (or would result therefrom);
provided further, however, that such dividend shall be
included in the
42
<PAGE> 48
calculation of the amount of Restricted Payments (unless
already included in determining the amount of Restricted
Payments previously made upon the declaration of such
dividend); and
(iv) If the Company issues preferred stock which is
Non-Convertible Capital Stock and receives at least
$100,000,000 of net proceeds therefrom, Dividends on such
Preferred Stock in an aggregate amount not to exceed
$30,000,000, provided that such Dividends constitute
Restricted Payments for purposes of calculating the amount of
Restricted Payments made pursuant to clause (a)(2) of this
Section 4.8.
(c) The provisions of this Section 4.8 may be suspended under
certain circumstances as described in the introductory paragraph of this Article
4.
SECTION 4.9 Reports to Holders.
Whether or not required by the rules and regulations of the Commission,
so long as any Debentures are outstanding, the Company shall furnish to the
Holders of the Debentures within 15 days after it is or would have been required
to file them with the Commission, (i) all annual and quarterly financial
information that would be required to be contained in a filing with the
Commission on Forms 10-K and 10Q (without exhibits) if the Company were required
to file such forms, including a section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K (without exhibits) if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing). In addition, the Company shall
furnish to the Holders of the Debentures and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act and the exhibits
omitted from the information furnished pursuant to the preceding sentence, for
so long as the Debentures are not freely transferable under the Securities Act.
SECTION 4.10 Compliance Certificate; Notice of Default or Event of Default.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate (which shall be signed by
Officers satisfying the requirements of Section 314 of the Trust Indenture Act)
stating that a review of the activities of the Company and the Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action
43
<PAGE> 49
the Company is taking or proposes to take with respect thereto) and that to the
best of his or her knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal of, interest, if any, or
Liquidated Damages, if any, on the Debentures is prohibited or if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.
(b) The year-end financial statements delivered pursuant to Section
4.9 hereof shall be accompanied by a written statement of the independent public
accountants of the Company, (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements, nothing has come to their attention that would lead them
to believe that the Company has violated any provisions of Article 4 or Article
5 hereof (except that, such written statement need not address the Company's
compliance with the provisions of Sections 4.2, 4.4, 4.5, 4.6, 4.9, 4.10 or 4.11
hereof) or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Debentures are
outstanding, deliver to the Trustee, forthwith upon, but in any event within
five Business Days after the occurrence thereof, an Officers' Certificate
specifying such Default or Event of Default, its status and what action the
Company is taking or proposes to take in respect thereof.
(d) For purposes of this Section 4.13, compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
SECTION 4.11 Prohibition on Company Becoming an Investment Company.
The Company shall not become an "Investment Company" as defined in
the Investment Company Act of 1940, as amended.
ARTICLE 5
CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
SECTION 5.1 Limitation on Mergers and Consolidations.
(a) The Company shall not consolidate with or merge into any Person,
continue in another jurisdiction, or sell, lease, convey, transfer or otherwise
dispose of all or substantially all of its assets to any Person, unless:
(1) the Person formed by or surviving such consolidation or merger
(if other than the Company), or to which such sale, lease, conveyance, transfer
or other disposition shall be made (the "Successor"), is a corporation organized
and existing under the laws of the United States or any State thereof or the
District of Columbia, and the Successor assumes by supplemental indenture in a
form satisfactory to the Trustee all of the applicable Obligations of the
Company under this Indenture; and
44
<PAGE> 50
(2) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing.
(b) In connection with any consolidation, merger, continuance, transfer
of assets or other transactions contemplated by this Section 5.1, the Company
shall deliver, or cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger, continuance, sale,
assignment, conveyance or transfer and the supplemental indenture in respect
thereto comply with the provisions of this Indenture and that all conditions
precedent in this Indenture relating to such transactions have been complied
with.
(c) Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, this Section 5.1, the
Successor shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture and the Debentures with the same
effect as if such Successor had been named as the Company in this Indenture; and
when a Successor duly assumes all of the Obligations and covenants of the
Company pursuant to this Indenture and the Debentures, except in the case of a
lease, the predecessor Person shall be relieved of all such Obligations.
SECTION 5.2 Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into
any other corporation, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1 hereof, the successor corporation formed by such
consolidation into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to "the Company" shall refer instead to
the Successor and not to the Company), and may exercise every right and power of
the Company under this Indenture with the same effect as if such Successor had
been named as the Company herein; provided, however, that the predecessor of the
Company shall not be relieved from the obligation to pay the principal, premium,
if any, and interest and Liquidated Damages, if any, on the Debentures except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.1 hereof.
If the Successor shall have succeeded to and been substituted
for the Company, such Successor may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or all
of the Debentures issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
Successor, instead of the Company, and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Debentures which previously shall have been signed and
delivered by the Officers of the Company to the Trustee for authentication, and
any Debentures which such Successor thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Debentures so issued and
so endorsed shall in all respects have the same legal rank and benefit under
this Indenture as the Debentures theretofore or thereafter issued and endorsed
in accordance with the
45
<PAGE> 51
terms of this Indenture as though all such Debentures had been issued and
endorsed at the date of the execution hereof.
In case of any such consolidation, merger, continuance, sale,
transfer, conveyance or other disposal, such changes in phraseology and form
(but not in substance) may be made in Debentures thereafter to be issued as may
be appropriate.
For all purposes of this Indenture and the Debentures,
Subsidiaries of any Successor will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to this Indenture.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default.
Each of the following is an "Event of Default" hereunder:
(a) default in the payment of interest (including Liquidated
Damages, if any) on the Debentures when due, continued for 30 days;
(b) (i) default in the payment of principal of any Debenture
when due at its Stated Maturity, upon redemption, required repurchase,
declaration of acceleration or otherwise; or
(ii) the failure to redeem or purchase Debentures when
required pursuant to this Indenture;
(c) the failure by the Company to comply with its obligations
under Section 4.7;
(d) the failure by the Company to comply with its other
agreements contained in the Debentures or this Indenture, and such failure or
event of default continues for 60 days after notice (except in the case of a
default with respect to Section 5.1, which shall constitute an Event of Default
with such notice requirement but without such passage of time requirement)
(whether or not prohibited by the provisions of Article 12);
(e) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (i) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default unless being contested in good faith by appropriate proceedings (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which
46
<PAGE> 52
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $20,000,000 or more; provided, however, that a default
under this clause (e) will not constitute an Event of Default until the Trustee
provides a written notice to the Company, or the Holders of 25% in aggregate
principal amount of the outstanding Debentures provide a written notice to the
Company and the Trustee, of the default and the Company does not cure such
default within the time specified after receipt of such notice;
(f) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $20,000,000, which
judgments are not paid, discharged or stayed for a period of 30 days;
(g) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under U.S. bankruptcy laws, as
now or hereafter constituted, or any other applicable Federal, state, or foreign
bankruptcy, insolvency, or other similar law or (ii) a decree or order adjudging
the Company or any Significant Subsidiary a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant Subsidiary under
U.S. bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal, state or foreign bankruptcy, insolvency, or similar law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of the property or assets of the Company or any Significant
Subsidiary, or ordering the winding up or liquidation of the affairs of the
Company or any Significant Subsidiary, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(h) the commencement by the Company or any Significant
Subsidiary of a voluntary case or proceeding under U.S. bankruptcy laws, as now
or hereafter constituted, or any other applicable Federal, state or foreign
bankruptcy, insolvency or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent; or (ii) the consent by the Company or
any Significant Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Significant Subsidiary in an involuntary case or
proceeding under U.S. bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal, state, or foreign bankruptcy, insolvency or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against the Company or any Significant Subsidiary; or (iii) the
filing by the Company or any Significant Subsidiary of a petition or answer or
consent seeking reorganization or relief under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or foreign
bankruptcy, insolvency or other similar law; or (iv) the consent by the Company
or any Significant Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or of any substantial part of the property or assets of
the Company or any Significant Subsidiary, or the making by the Company or any
Significant Subsidiary of an assignment for the benefit of creditors; or (v) the
admission by the Company or any Significant Subsidiary in writing of its
inability to pay its debts generally as they become due; or (vi) the taking of
corporate action by the Company or any Significant Subsidiary in furtherance of
any such action.
47
<PAGE> 53
SECTION 6.2 Acceleration.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.1) occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% of the
outstanding aggregate principal amount at Stated Maturity of the Debentures, may
declare the principal amount at Stated Maturity of, premium, if any, and any
accrued and unpaid interest (and Liquidated Damages, if any) on all such
Debentures then outstanding to be immediately due and payable by a notice in
writing to the Company (and to the Trustee if given by Holders of such
Debentures), and upon any such declaration all amounts payable in respect of the
Debentures will become and be immediately due and payable. If any Event of
Default specified in clause (g) or (h) of Section 6.1 occurs, the principal
amount at Stated Maturity of, premium, if any, and any accrued and unpaid
interest (including Liquidated Damages, if any) on, the Debentures then
outstanding shall become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder of such Debentures. In the
event of a declaration of acceleration because an Event of Default set forth in
clause (e) of Section 6.1 has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (e) of Section 6.1
shall be remedied or cured or waived by the holders of the relevant Indebtedness
within 30 days after such event of default; provided that no judgment or decree
for the payment of the money due on the Debentures has been obtained by the
Trustee as provided in this Indenture.
After any such acceleration, but before a judgment or decree
based on acceleration, Holders of a majority in principal amount at Stated
Maturity of the outstanding Debentures by notice to the Company and the Trustee
may rescind an acceleration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all money paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursement and
advances of the Trustee, its agents and counsel, and any
other amounts due to the Trustee under Section 7.7;
(ii) all overdue installments of interest and Liquidated
Damages, if any, on, and any other amounts due in
respect of, all Debentures;
(iii) the principal of (and premium, if any, on) any
Debentures that have become due otherwise than by such
acceleration and interest thereon at the rate or rates
prescribed therefor in the Debentures and this
Indenture; and
(iv) to the extent that payment of such interest is lawful,
interest upon Defaulted Interest at the rate or rates
prescribed therefor in the Debentures and this
Indenture;
48
<PAGE> 54
(b) all Events of Default, other than the nonpayment of
principal of Debentures which have become due solely by such acceleration, have
been cured or waived as provided in Section 6.4;
(c) the annulment of such acceleration would not conflict with
any judgment or decree of a court of competent jurisdiction; and
(d) the Company has delivered an Officers' Certificate to the
Trustee to the effect of clauses (b) and (c) of this sentence.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal of, premium,
if any, on, any interest on, Liquidated Damages, if any, on, and any other
amounts owing and unpaid on, the Debentures or to enforce the performance of any
provision of the Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Debentures or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder of a Debenture in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults.
Subject to Section 6.7 hereof, Holders of not less than a
majority in aggregate principal amount of the then outstanding Debentures by
notice to the Trustee may on behalf of the Holders of all of the Debentures
waive an existing Default or Event of Default and its consequences hereunder,
except (i) an existing Default or Event of Default in the payment of the
principal of, premium, if any, on, or interest and Liquidated Damages, if any,
on, the Debentures (including in connection with an offer to purchase) or (ii)
an existing Default or Event of Default in respect of a provision that under
Section 10.2 cannot be amended without the consent of each Holder affected
thereby. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.5 Control By Majority.
The Holders of a majority in aggregate principal amount of the
Debentures then outstanding may direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or, subject to Section
7.1 hereof, that the Trustee determines may be unduly prejudicial to the rights
of other Holders of Debentures or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed by the
Trustee that is not inconsistent with such
49
<PAGE> 55
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.6 Limitation on Suits.
No Holder of any Debenture shall have the right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Debentures, or for the appointment of a receiver or a trustee, or for any other
remedy, unless:
(a) the Holder of a Debenture has given to the Trustee written
notice of a continuing Event of Default;
(b) a Holder or Holders of at least 25% in principal amount of
the then outstanding Debentures make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Debenture or Holders of Debentures offer
and, if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the Debentures then outstanding do not give the Trustee a
direction inconsistent with the request.
A Holder of a Debenture may not use this Indenture to prejudice the rights of
another Holder of a Debenture or to obtain a preference or priority over another
Holder of a Debenture.
SECTION 6.7 Rights of Holders of Debentures to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of, premium, if any, on,
interest and Liquidated Damages, if any, on, the Debentures held by such Holder,
on or after the respective due dates expressed in the Debenture or this
Indenture (including in connection with an offer to purchase), or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium, if any, on, interest and Liquidated Damages, if
any, remaining unpaid on, the Debentures and interest on overdue principal and,
to the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due to the Trustee under Section 7.7.
50
<PAGE> 56
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered, without regard to
whether the Trustee or any Holder shall have made any demand or performed any
other act pursuant to the provisions of this Article and without regard to
whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration or otherwise, by intervention in any proceedings
relative to the Company or any obligor upon the Debentures, or to the creditors
or property or assets of the Company or any other obligor or otherwise, to take
any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be entitled and empowered in such instances:
(a) to file and prove a claim or claims for the whole amount
of principal (and premium, if any), interest, Liquidated Damages, if any, and
any other amounts owing and unpaid in respect of the Debentures, and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including all amounts owing to the Trustee and each
predecessor Trustee pursuant to Section 7.7 hereof) and of the Holders allowed
in any judicial proceedings relative to the Company or other obligor upon the
Debentures, or to the creditors or property of the Company or any such other
obligor,
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of the Debentures in any election of a trustee or
a standby trustee in arrangement, reorganization, liquidation or other
bankruptcy or insolvency proceedings or Person performing similar functions in
comparable proceedings, and
(c) to collect and receive any moneys or other property or
assets payable or deliverable on any such claims, and to distribute all amounts
received with respect to the claims of the Holders and of the Trustee on their
behalf; and any trustee, receiver, or liquidator, custodian or other similar
official is hereby authorized by each of the Holders to make payments to the
Trustee, and, in the event that the Trustee shall consent to the making of
payments directly to the Holders, to pay to the Trustee such amounts as shall be
sufficient to cover all amounts owing to the Trustee and each predecessor
Trustee pursuant to Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Debentures or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party), the Trustee shall be held to represent all
the Holders of the Debentures, and it shall not be necessary to make any Holders
of the Debentures parties to any such proceedings.
51
<PAGE> 57
SECTION 6.10 Priorities.
If the Trustee collects any money or property pursuant to this
Article, it shall pay out the money or property in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Debentures for amounts due and unpaid on
the Debentures for principal, premium, if any, interest, and Liquidated Damages,
if any, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Debentures for principal (premium, if any),
interest, and Liquidated Damages, if any, respectively; and
Third: to the Company or to such other party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Debentures pursuant to this Section 6.10. At least 15 days
before such record date, the Company shall mail to each Holder and the Trustee a
notice that states the record date, the payment date and amount to be paid. The
Trustee may mail such notice in the name and at the expense of the Company.
SECTION 6.11 Undertaking For Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Debenture pursuant to Section 6.7 hereof, or a suit by Holders of
more than 10% in aggregate principal amount of the then outstanding Debentures.
SECTION 6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder of Debentures has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding has been
instituted.
SECTION 6.13 Rights and Remedies Cumulative.
Except as otherwise provided in Section 2.7 hereof, no right
or remedy conferred herein, upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other
52
<PAGE> 58
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.14 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Debenture to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article 6 or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
ARTICLE 7
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the
Trustee need perform only those duties that are
specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
53
<PAGE> 59
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the Trust
Indenture Act.
SECTION 7.2 Rights of Trustee.
(a) Subject to the provisions of Section 7.1(a) hereof, the
Trustee may rely upon any document believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the oral or written advice of such counsel or any
Opinion of Counsel with respect to legal matters relating to this Indenture and
the Debentures shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any attorney or
agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by
54
<PAGE> 60
this Indenture; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(f) Except with respect to Section 4.1 hereof, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.1(a) (except that the Trustee shall not be
deemed to have knowledge of a default in the payment of Liquidated Damages) or
6.1(b), or (ii) any Default or Event of Default of which a Responsible Officer
of the Trustee shall have received written notification; provided that the
Trustee shall comply with the "automatic stay" provisions contained in U.S.
bankruptcy laws, if applicable. As used herein, the term "actual knowledge"
means the actual fact or statement of knowing, without any duty to make any
investigation with regard thereto.
(g) Prior to the occurrence of an Event of Default hereunder
and after the curing and waiving of all Events of Default, the Trustee shall not
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, Debenture, other evidence
of indebtedness or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in aggregate principal amount of the
Debentures then outstanding; provided that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable expenses of
every such examination shall be paid by the Company or, if advanced by the
Trustee, shall be repaid by the Company upon demand. The Trustee shall not be
bound to ascertain or inquire as to the performance or observance of any
covenants, conditions, or agreements on the part of the Company, except as
otherwise set forth herein, but the Trustee may, in its discretion, make such
further inquiry or investigation into such facts or matters as it may see fit
and if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company personally or by agent or attorney.
(h) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties hereunder.
(i) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty.
55
<PAGE> 61
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Debentures and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as defined in the Trust Indenture Act) it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue as Trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Debentures, it shall not be accountable for the Company's use of the proceeds
from the Debentures or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Debentures or any other document in connection with the
exchange of the Preferred Stock for the Debentures or pursuant to this Indenture
other than its certificate of authentication.
SECTION 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Debentures a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Debenture (including payments pursuant to
the mandatory repurchase provisions of such Debentures, if any), the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders of the Debentures.
SECTION 7.6 Reports by Trustee to Holders of the Debentures.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Debentures remain
outstanding, the Trustee shall mail to the Holders of the Debentures a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA Section 313(b). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Debentures shall be mailed to the Company and filed with the SEC and
each stock exchange on which the Debentures are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee whenever the
Debentures become listed on any stock exchange and of any delisting thereof.
56
<PAGE> 62
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee promptly from time to
time such compensation for its acceptance of this Indenture and services
hereunder as agreed to by the parties from time to time. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and expenses incurred or made by it,
including the costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses (including reasonable attorneys' fees) incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Indenture, including the costs and expenses of enforcing
this Indenture against the Company (including this Section 7.7) and defending
itself against any claim (whether asserted by the Company or any Holder or any
other Person) or liability in connection with the exercise or performance of any
of its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence or bad faith. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.7 shall
survive the resignation or removal of the Trustee and the satisfaction and
discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Debentures on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Debentures. Such Lien shall be a Lien permitted under
this Indenture and shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Sections 6.1(g) or 6.1(h) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any applicable bankruptcy laws.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
57
<PAGE> 63
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Debentures of a majority in principal amount of the then outstanding
Debentures may remove the Trustee by so notifying the Trustee and the Company in
writing. If at any time:
(a) the Trustee shall fail to comply with Section 310(b) of
the Trust Indenture Act after written request thereof by the Company or by any
Holder who has been a bona fide Holder of a Debenture for at least six months,
unless the Trustee's duty to resign is stayed in accordance with the provisions
of TIA Section 310(b); or
(b) the Trustee shall cease to be eligible under Section 7.10
hereof and shall fail to resign after written request therefor by the Company or
by any Holder; or
(c) the Trustee shall become incapable of acting or a decree
or order for relief by a court having jurisdiction in the premises shall have
been entered in respect of the Trustee in an involuntary case under the U.S.
bankruptcy laws, as now or hereinafter constituted, or a decree or order by a
court having jurisdiction in the premises shall have been entered for the
appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trustee or of its property and
assets or affairs, or any public officer shall take charge or control of the
Trustee or of its property and assets or affairs for the purpose of
rehabilitation, conservation, winding-up or liquidation; or
(d) the Trustee shall commence a voluntary case under the U.S.
bankruptcy laws, as now or hereafter constituted, or shall consent to the
appointment of or taking possession by a receiver, custodian, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Trustee or of
its property and assets or affairs, or shall make an assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts generally
as they become due, or shall take corporate action in furtherance of any such
action; or
(e) the Trustee becomes incapable of acting,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to the Debentures, or (ii) subject to Section 6.11 hereof,
any Holder who has been a bona fide Holder of a Debenture for at least six
months may, on behalf of such Holder and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee for the Debentures.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Debentures may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee notifies the Company of its resignation or is
removed, the retiring Trustee, the Company, or the Holders of Debentures of at
least 10% in principal amount of the then outstanding Debentures may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
58
<PAGE> 64
If the Trustee, after written request by any Holder of a
Debenture who has been a Holder of a Debenture for at least six months, fails to
comply with Section 7.10, such Holder of a Debenture may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Debentures. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
that all sums owing to the Trustee hereunder have been paid and subject to the
Lien provided for in Section 7.7 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.8, the Company's obligations under Section
7.7 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the Successor without any further act shall be the successor
Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Debentures shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee may authenticate such
Debentures either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that together, in the case of the initial
Trustee, with its ultimate parent entity, has a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
59
<PAGE> 65
SECTION 7.11 Preferential Collection of Claims Against the Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
SATISFACTION AND DISCHARGES
SECTION 8.1 Satisfaction and Discharge.
This Indenture shall upon the request of the Company cease to
be of further effect (except as to surviving rights of registration of transfer,
substitution or exchange of Debentures herein expressly provided for, the
Company's obligations under Sections 7.7 and 8.4 hereof, the Company's rights of
optional redemption under Article 3 hereof, and the Company's, the Trustee's and
the Paying Agent's obligations under Section 8.3 hereof) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when:
(a) either
(i) all outstanding Debentures have been delivered to the
Trustee for cancellation, or
(ii) all such Debentures not theretofore delivered to the
Trustee for cancellation have become due and payable,
will become due and payable within one year or are to be
called for redemption within one year under irrevocable
arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name and at
the expense of the Company, and the Company has
irrevocably deposited or caused to be deposited with the
Trustee funds or U.S. Government Obligations in an amount
sufficient to pay and discharge the entire debt on the
Debentures not theretofore delivered to the Trustee for
cancellation, for principal of (premium, if any, on) and
interest (including Liquidated Damages, if any) to the
date of deposit or Maturity or date of redemption;
(b) the Company has paid or caused to be paid all sums then
due and payable by the Company under this Indenture; and
(c) the Company has delivered an Officers' Certificate and an
Opinion of Counsel relating to compliance with the conditions set forth in this
Indenture.
Notwithstanding the satisfaction and discharge of this
Indenture, the Company's obligations in Sections 2.3, 2.4, 2.6, 2.7, 2.11, 2.13,
7.7, 7.8, 8.2, 8.3 and 8.4, and the Trustee's and Paying Agent's obligations in
Section 8.3 shall survive until the Debentures are no longer outstanding.
Thereafter, only the Company's obligations in Sections 7.7, 8.3 and 8.4 and the
Trustee's and Paying Agent's obligations in Section 8.3 shall survive.
60
<PAGE> 66
In order to have money available on a payment date to pay
principal (and premium, if any, on) or interest (and Liquidated Damages, if any)
on the Debentures, the U.S. Government Obligations shall be payable as to
principal (and premium, if any) or interest (and Liquidated Damages, if any) at
least one Business Day before such payment date in such amounts as will provide
the necessary money. U.S. Government Obligations shall not be callable at the
issuer's option.
SECTION 8.2 Application of Trust Money.
All money deposited with the Trustee pursuant to Section 8.1
shall be held in trust and, at the written direction of the Company, be invested
prior to maturity in non-callable U.S. Government Obligations, and applied by
the Trustee in accordance with the provisions of the Debentures and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest (and Liquidated Damages, if any) for the payment
of which money has been deposited with the Trustee; but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.3 Repayment of the Company.
The Trustee and the Paying Agent shall promptly pay to the
Company upon written request any excess money or securities held by them at any
time.
The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such payment
shall have become due; provided that the Company shall have either caused notice
of such payment to be mailed to each Holder of the Debentures entitled thereto
no less than 30 days prior to such repayment or within such period shall have
published such notice in a financial newspaper of widespread circulation
published in The City of New York, including, without limitation, The Wall
Street Journal (national edition). After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
SECTION 8.4 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 8.1 by reason of any
legal proceeding or by reason of any order or judgment of any court of
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Debentures
shall be revived and reinstated as though no deposit has occurred pursuant to
Section 8.1 until such time as the Trustee or Paying Agent is permitted to apply
all such money or U.S. Government Obligations in accordance with Section 8.2;
provided, however, that if the Company has made any payment of interest
(including Liquidated Damages) on or principal of any Debentures because of the
reinstatement of their Obligations, the Company shall be subrogated
61
<PAGE> 67
to the rights of the Holders of such Debentures to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 9.1 Option to Effect Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a Board Resolution, at any time, elect to have either Section 9.2
or 9.3 hereof be applied to all outstanding Debentures upon compliance with the
conditions set forth below in this Article 9.
SECTION 9.2 Defeasance and Discharge.
Upon the Company's exercise under Section 9.1 hereof of the
option applicable to this Section 9.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 9.4 hereof, be deemed to
have been discharged from its Obligations with respect to all outstanding
Debentures and this Indenture on the date the conditions set forth below are
satisfied (hereinafter, "Defeasance"). For this purpose, Defeasance means that
the Company shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Debentures and the Company shall be deemed to
have satisfied all of its obligations under such Debentures and this Indenture
(and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), subject to the following which shall
survive until otherwise terminated or discharged hereunder:
(a) the rights of Holders of such Debentures to receive,
solely from the trust fund described in Section 9.4 hereof and as more fully set
forth in Section 9.4, payments in respect of the principal and of and any
premium and interest (including Liquidated Damages, if any) on such Debentures
when payments are due, (but not the Change of Control Purchase Price).
(b) the Company's obligations with respect to such Debentures
under Sections 2.6, 2.7, 2.11, and 4.2 hereof,
(c) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture,
(d) Article 3 hereof, and
(e) this Article 9.
Subject to compliance with this Article 9, the Company may exercise its option
under this Section 9.2 notwithstanding the prior exercise of its option under
Section 9.3 hereof.
62
<PAGE> 68
SECTION 9.3 Covenant Defeasance.
Upon the Company's exercise under Section 9.1 hereof of the
option applicable to this Section 9.3, (i) the Company shall, subject to the
satisfaction of the conditions set forth in Section 9.4 hereof, be released from
its obligations under the covenants contained in Sections 4.5, 4.7, 4.8, 4.9,
4.10, and 5.1(b), the Events of Default contained in Sections 6.1(e) and 6.1(f)
and Sections 6.1(g) and 6.1(h) with respect to Significant Subsidiaries only,
and any covenant added to this Indenture subsequent to the Issue Date pursuant
to Section 10.1 hereof with respect to the outstanding Debentures and (ii) the
occurrence of any event specified in Section 6.1(c) or 6.1(d) hereof, with
respect to any of Sections 4.5, 4.7, 4.8, 4.9, 4.10 hereof, and any covenant
added to this Indenture subsequent to the Issue Date pursuant to Section 10.1
hereof, shall be deemed not to be or result in an Event of Default, in each case
with respect to such Debentures as provided in this Section 9.3 on and after the
date on which the conditions set forth in Section 9.4 hereof are satisfied, and
the Debentures shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Debentures shall not be deemed outstanding for accounting
purposes). For this purpose, "Covenant Defeasance" means that, with respect to
the outstanding Debentures, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such covenant (to the extent so specified in the case of Section 6.1(c) or
6.1(d) hereof), whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1 hereof, but, except as specified above, the remainder of this
Indenture, and the Debentures shall be unaffected thereby.
SECTION 9.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 9.2 or 9.3 hereof to the outstanding Debentures:
In order to exercise either Defeasance or Covenant Defeasance:
(a) the Company shall irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to the benefits of the Holders of such Debentures, (i) money in an
amount, or (ii) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide, not later than one Business Day before the due date of any payment,
money in an amount, or (iii) a combination thereof, in each case sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge the principal of (premium, if any, on) and any installment of
interest on and Liquidated Damages, if any, on the Debentures at the Maturity
thereof or Redemption Date therefor in accordance with the terms of this
Indenture and the Debentures;
63
<PAGE> 69
(b) in the case of an election under Section 9.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this Indenture, there
has been a change in the applicable U.S. federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Debentures will not recognize income, gain
or loss for U.S. federal income tax purposes as a result of such Defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Defeasance had
not occurred;
(c) in the case of an election under Section 9.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel confirming
that the Holders of the outstanding Debentures will not recognize income, gain
or loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Debentures pursuant to this Article 9
concurrently with such incurrence) or insofar as Sections 6.1(g) or 6.1(h)
hereof is concerned, shall have occurred at any time on or prior to the 91st day
after the date of such deposit and be continuing on such 91st day (it being
understood that this condition shall not be deemed satisfied until after such
91st day);
(e) such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming for the purpose of this clause (f) that all Debentures are in
default within the meaning of such Act);
(g) such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder;
(h) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that on the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(i) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders
64
<PAGE> 70
over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company; and
(j) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Defeasance or the Covenant
Defeasance have been complied with.
SECTION 9.5 Deposited Money and U.S. Government Obligations To Be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 9.6 hereof, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 9.5, the
"Trustee") pursuant to Section 9.4 hereof in respect of the outstanding
Debentures shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Debentures and this Indenture, to the payment, either
directly or through any such Paying Agent as the Trustee may determine, to the
Holders of such Debentures of all sums due and to become due thereon in respect
of principal, premium, if any, and interest (including Liquidated Damages, if
any), but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to Section 9.4 hereof or the principal
and interest received in respect thereof.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or U.S. Government Obligations held by it as
provided in Section 9.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 9.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Defeasance or Covenant
Defeasance.
SECTION 9.6 Repayment to the Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, Liquidated Damages, if any, or interest on any Debenture and remaining
unclaimed for two years after such principal, and premium, if any Liquidated
Damages, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Debenture shall thereafter, as a creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in The New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
65
<PAGE> 71
SECTION 9.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section 9.2 or
9.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's Obligations under this Indenture and the
Debentures shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.2 or 9.3 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 9.2 or 9.3
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, interest, Liquidated Damages, if any,
on any Debenture following the reinstatement of its Obligations, the Company
shall be subrogated to the rights of the Holders of such Debentures to receive
such payment from the money held by the Trustee or Paying Agent.
ARTICLE 10
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 10.1 Without Consent of Holders of Debentures.
Notwithstanding Section 9.2 of this Indenture, the Company and
the Trustee may amend or supplement this Indenture or the Debentures without the
consent of any Holder of a Debenture:
(a) to evidence the succession of another Person to the
Company and the assumption by such successor of the covenants and Obligations of
the Company under this Indenture and contained in the Debentures contained in
this Indenture,
(b) to add to the covenants of the Company, for the benefit of
Holders, or to surrender any right or power conferred upon the Company by this
Indenture,
(c) to provide for uncertificated Debentures in addition to or
in place of Certificated Debentures (provided that the uncertificated Exchange
Debentures are issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated Exchange Debentures are
described in Section 163(f)(2)(B) of the Code),
(d) to evidence and provide for the acceptance of appointment
under this Indenture by the successor Trustee,
(e) to secure the Debentures,
(f) to cure any ambiguity, to correct or supplement any
provision in this Indenture which may be inconsistent with any other provision
herein or to make any change that does not adversely affect the interests of
Holders,
(g) to add guarantees with respect to the Debentures, or
66
<PAGE> 72
(h) to comply with the requirements of the SEC to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
Upon the request of the Company accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
10.7 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 10.2 With Consent of Holders of Debentures.
Except as provided below in this Section 10.2, the Company and
the Trustee may amend or supplement this Indenture and the Debentures may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount at Stated Maturity of the Debentures then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Debentures), and, subject to Sections 6.4 and 6.7 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or, interest on, or
Liquidated Damages, if any, on, the Debentures, except a payment default
resulting from an acceleration that has been rescinded) or compliance with any
provision of this Indenture or the Debentures may be waived with the consent of
the Holders of a majority in aggregate principal amount at Stated Maturity of
the then outstanding Debentures (including consents obtained in connection with
a tender offer or exchange offer for the Debentures).
Upon the request of the Company accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Debentures as aforesaid, and upon
receipt by the Trustee of the documents described in Section 10.7 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Debentures under this Section 10.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes effective,
the Company shall mail to the Holders of Debentures affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental Indenture
or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in
aggregate principal amount of the Debentures then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Debentures.
67
<PAGE> 73
However, without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Debentures held by a non-consenting Holder):
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Debenture, or reduce the principal amount
thereof (or premium, if any), or the interest thereon that would be due and
payable upon Maturity thereof, or change the place of payment where, or the coin
or currency in which, any Debenture or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof;
(b) reduce the percentage in principal amount at Stated
Maturity of the outstanding Debentures, the consent of whose Holders is
necessary for any such supplemental indenture or required for any waiver of
compliance with certain provisions of this Indenture, or certain Defaults
hereunder;
(c) modify the Obligations of the Company to make offers to
purchase Debentures upon a Change of Control; or
(d) make any change in Sections 6.4 or 6.7 or modify any of
the provisions of this Section 10.2 (except to increase any percentage set forth
therein or herein).
Upon the request of the Company accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Debentures as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.2 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Debentures under this Section 10.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
SECTION 10.3 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article 10, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Debentures theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby. After a supplemental indenture becomes
effective, the Company shall mail to Holders a notice briefly describing such
amendment. The failure to give such notice to all Holders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
68
<PAGE> 74
SECTION 10.4 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the
Debentures shall be set forth in an amended or supplemental Indenture that
complies with the Trust Indenture Act as then in effect.
SECTION 10.5 Revocation and Effect of Consents.
(a) Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder of a Debenture is a continuing consent by
the Holder of a Debenture and every subsequent Holder of a Debenture or portion
of a Debenture that evidences the same debt as the consenting Holder's
Debenture, even if notation of the consent is not made on any Debenture.
However, any such Holder of a Debenture or subsequent Holder of a Debenture may
revoke the consent as to its Debenture if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
(b) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding subsection, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 10.6 Notation on or Exchange of Debentures.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Debenture thereafter authenticated. The
Company in exchange for all Debentures may issue and the Trustee shall
authenticate new Debentures that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new
Debenture shall not affect the validity and effect of such amendment, supplement
or waiver.
SECTION 10.7 Trustee to Sign Supplemental Indentures.
The Trustee shall sign any supplemental Indenture authorized
pursuant to this Article 10 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign a supplemental Indenture until the Board of Directors of such
Person approves it. In executing any supplemental indenture, the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and to receive
and (subject to Section 7.1) shall be fully protected in relying upon, in
addition to the documents required by Section 11.4, an Officers' Certificate and
an Opinion of Counsel stating that:
69
<PAGE> 75
(a) such supplemental indenture is authorized or permitted by
this Indenture and that all conditions precedent to the execution, delivery and
performance of such supplemental indenture have been satisfied;
(b) the Company has all necessary corporate power and
authority to execute and deliver the supplemental indenture and that the
execution, delivery and performance of such supplemental indenture has been duly
authorized by all necessary corporate action of the Company;
(c) the execution, delivery and performance of the
supplemental indenture do not conflict with, or result in the breach of or
constitute a default under any of the terms, conditions or provisions of (i)
this Indenture, (ii) the charter documents and by-laws of the Company, or (iii)
any material agreement or instrument to which the Company is subject and of
which such counsel is aware;
(d) to the knowledge of legal counsel writing such Opinion of
Counsel, the execution, delivery and performance of the supplemental indenture
do not conflict with, or result in the breach of any of the terms, conditions or
provisions of (i) any law or regulation applicable to the Company, or (ii) any
material order, writ, injunction or decree of any court or governmental
instrumentality applicable to the Company;
(e) such supplemental indenture has been duly and validly
executed and delivered by the Company, and this Indenture together with such
supplemental indenture constitutes a legal, valid and binding obligations of the
Company enforceable against the Company, in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles (whether considered in a proceeding at law or in equity); and
(f) this Indenture together with such amendment or supplement
complies with the Trust Indenture Act.
SECTION 10.8 Payment for Consent.
Neither the Company nor any Affiliate of the Company shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Debentures unless such consideration is offered to be paid to all Holders
that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
70
<PAGE> 76
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by, or with another provision included in this
Indenture by operation of Sections 310 to 318, inclusive, of the Trust Indenture
Act, such imposed duties or incorporated provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that can be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or excluded, as the case may
be.
SECTION 11.2 Notices.
Any notice or communication by the Company or the Trustee to
the other is duly given if in writing and delivered in person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Chief Financial Officer
Telephone No.: 281-496-5000
Telecopier No.: 281-597-7556
If to the Trustee:
U.S. Trust Company, N.A.
114 West 47th Street
25th Floor
New York, New York 10036
Attention: Corporate Trust Division
Telephone No.: 212-852-1676
Telecopier No.: 212-852-1626
The Company or the Trustee, by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
71
<PAGE> 77
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
Securities Register kept by the Registrar and shall be given if so sent within
the time prescribed. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the Trust
Indenture Act. Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it; a notice or communication, however, shall not be effective unless,
in the case of the Company or the Trustee, actually received.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give notice by mail to
Holders, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 11.3 Communication By Holders of Debentures With Other Holders of
Debentures.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the
Debentures. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 11.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company, upon request, shall
furnish to the Trustee, to the extent required by this Indenture or the Trust
Indenture Act:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
72
<PAGE> 78
or more such Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such Officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, and may
state that it is so based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Officer or Officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate of opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 11.5 Statements Required in a Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Persons making such certificate or
opinion have read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Persons, they
have made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Persons, such condition or covenant has been satisfied.
SECTION 11.6 Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by a specified percentage of Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor executed by such specified
percentage of Holders in person or by agents duly appointed; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are received by the Trustee and, where it is
hereby expressly required, by the Company. Such instrument or instruments (and
the action embodied therein and
73
<PAGE> 79
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
executing such instrument or instruments. Proof of execution of any such
instrument or of appointment of any such agent shall be sufficient for any
purpose of this Indenture and (subject to Sections 7.1 and 7.2) conclusive in
favor of the Trustee and the Company, if made in the manner provided in this
Section. Any electronic or other transmission pursuant to the Depository's
Applicable Procedures will be considered an instrument executed by the Holders
of the Debentures for the purpose of this Section 11.6.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient, including the execution
of such instrument or writing without more.
(c) The ownership, principal amount and serial numbers of
Debentures held by any Person, and the date of holding the same, shall be proved
by the Securities Register.
(d) If the Company shall solicit from the Holders of
Debentures any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Such record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not earlier than the date 30 days prior to the
first day such solicitation is completed. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Debentures have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Debentures shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Except to the extent otherwise expressly provided in this
Indenture, any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debenture.
74
<PAGE> 80
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action with regard to any particular Debenture may
do so with regard to all or any part of the principal amount of such Debenture
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
SECTION 11.7 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions; provided that no such rule shall
conflict with the terms of this Indenture or the Trust Indenture Act.
SECTION 11.8 No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Debentures, this Indenture, or for any claim based on, in
respect of, or by reason of, such Obligations or their creation. Each Holder by
accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Debentures.
SECTION 11.9 Governing Law.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE DEBENTURES, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 11.10 Agent for Service; Submission to Jurisdiction; Waiver of
Immunities.
By the execution and delivery of this Indenture or any
amendment or supplement hereto, the Company (i) acknowledges that it has, by
separate written instrument, designated and appointed CT Corporation System (the
"Process Agent") currently located at 1633 Broadway, New York, New York 10019,
as its authorized agent upon which process may be served in any suit, action or
proceeding with respect to, arising out of, or relating to, this Indenture or
the Debentures or brought under U.S. federal or state securities laws, may be
instituted in any U.S. federal or state court located in The City of New York,
New York, and acknowledges that the Process Agent has accepted such designation,
(ii) irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding and irrevocably waives, to the fullest extent that it may
effectively and lawfully do so, any obligation to the laying of venue of any
such suit, action or proceeding and the defense of an inconvenient forum to the
maintenance of any such suit action or proceeding in such court, and (iii)
agrees that service of process upon the Process Agent shall be deemed in every
respect effective service of process upon the Company in any such suit, action
or proceeding. The Company further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments as may be
necessary to continue such designation and appointment of the Process Agent in
full force and effect so long as this Indenture shall be in full force and
effect; provided that the Company may and shall (to the extent the Process Agent
ceases
75
<PAGE> 81
to be able to be served on the basis contemplated herein), by written notice to
the Trustee, designate such additional or alternative agents for service of
process under this Section 11.10 that (i) maintains an office located in the
Borough of Manhattan, The City of New York in the State of New York, (ii) are
either (a) counsel for the Company or (b) a corporate service company which acts
as agent for service of process for other persons in the ordinary course of its
business and (iii) agrees to act as agent for service of process in accordance
with this Section 11.10. Such notice shall identify the name of such agent for
process and the address of such agent for process in the Borough of Manhattan,
The City of New York, State of New York. Upon the request of any Holder of a
Debenture, the Trustee shall deliver such information to such Holder.
Notwithstanding the foregoing, there shall, at all times, be at least one agent
for service of process for the Company appointed and acting in accordance with
this Section 11.10.
To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its Obligations
under this Indenture and the Debentures, to the extent permitted by law.
SECTION 11.11 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or the Company's Subsidiaries
or of any other Person. Any such indenture, loan or debt agreement may not be
used to interpret this Indenture.
SECTION 11.12 Successors.
All agreements of the Company in this Indenture and the
Debentures shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 11.13 Severability.
In case any provision in this Indenture or in the Debentures
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.
SECTION 11.14 Counterpart Originals.
The parties may sign any number of copies of this Indenture in
separate counterparts, each of which when signed shall be deemed to be an
original, but all of them together represent the same agreement.
SECTION 11.15 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
76
<PAGE> 82
ARTICLE 12
SUBORDINATION
SECTION 12.1 Debentures Subordinated to Senior Debt.
The Company covenants and agrees and each Holder of the
Debentures, by its acceptance thereof, likewise covenants and agrees, that all
Debentures shall be issued subject to the provisions of this Article 12; and
each Person holding any Debenture, whether upon original issuance or upon
transfer, assignment or exchange thereof, accepts and agrees that the payment of
all obligations on the Debentures by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior payment in full (or such payment shall be duly provided for to the
satisfaction of the holders of the Senior Debt) of all Obligations on the Senior
Debt, that the subordination is for the benefit of, and shall be enforceable
directly by, the holders of Senior Debt, and that each holder of Senior Debt,
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture.
SECTION 12.2 No Payment on Debentures in Certain Circumstances.
(a) In the event of and during the continuation of any default
in the payment of principal of, interest or premium, if any, on any Designated
Senior Debt, or any Obligations owing from time to time under or in respect of
Designated Senior Debt, or in the event that any event of default (other than a
payment default) with respect to any Designated Senior Debt will have occurred
and be continuing and will have resulted in such Designated Senior Debt becoming
or being declared due and payable prior to the date on which it would otherwise
have become due and payable, or (b) if any event of default other than as
described in clause (a) above with respect to any Designated Senior Debt will
have occurred and be continuing permitting the holders of such Designated Senior
Debt (or their Representatives) to declare such Designated Senior Debt due and
payable prior to the date on which it would otherwise have become due and
payable, then no payment will be made by or on behalf of the Company on account
of the Debentures (other than payments in the form of Reorganization Securities)
(x) in cash in the case of any payment or nonpayment default specified in (a),
unless and until such default will have been cured or waived in accordance with
the instruments governing such Designated Senior Debt or such acceleration will
have been rescinded or annulled, or (y) in cash in the case of any nonpayment
event of default specified in (b), during the period (a "Payment Blockage
Period") commencing on the date the Company or the Trustee receive written
notice of such event of default (which notice will be binding on the Trustee and
the holders of Debentures as to the occurrence of such a payment default or
nonpayment event of default) from the Representative (or holders of Designated
Senior Debt or their Representative or Representatives) and ending on the
earliest of (A) 179 days after such date, (B) the date, if any, on which such
Designated Senior Debt to which such default relates is paid in full in cash or
such default is cured or waived in writing in accordance with the instructions
governing such Designated Senior Debt by the holders of such Designated Senior
Debt or their Representatives and (C) the date on which the Trustee received
written notice from the Representative (or holders of Designated Senior Debt or
their Representative or Representatives), as the case may be, terminating the
Payment Blockage Period. During any consecutive 360-day period, the aggregate of
all Payment Blockage Periods shall not exceed 179 days and there shall be a
period of at least 181 consecutive days in each
77
<PAGE> 83
consecutive 360-day period when no Payment Blockage Period is in effect. No
event of default which existed or was continuing with respect to the Designated
Senior Debt for which notice commencing a Payment Blockage Period was given on
the date such Payment Blockage Period commenced shall be or be made the basis
for the commencement of any subsequent Payment Blockage Period unless such event
of default is cured or waived for a period of not less than 90 consecutive days.
SECTION 12.3 Payment Over of Proceeds Upon Dissolution, Etc.
Upon any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors in
any Insolvency or Liquidation Proceeding with respect to the Company all amounts
due or to become due under or with respect to all Senior Debt will first be paid
in full in cash before any payment is made on account of the Debentures, except
that the holders of Debentures may receive Reorganization Securities. Upon any
such Insolvency or Liquidation Proceeding, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or securities
(other than Reorganization Securities), to which the holders of the Debentures
or the Trustee would be entitled will be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the holders of Debentures or by the Trustee if
received by them, directly to the holders of Senior Debt (pro rata to such
holders on the basis of the amounts of Senior Debt held by such holders) or
their Representatives, as their interests may appear, for application to the
payment of the Senior Debt remaining unpaid until all such Senior Debt has been
paid in full in cash, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior Debt.
SECTION 12.4 Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article 12 or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 12.2 and 12.3, from making payments at any time for the purpose of
making payments of principal of and interest on the Debentures, or from
depositing with the Trustee any monies for such payments, or (ii) in the absence
of actual knowledge by the Trustee that a given payment would be prohibited by
Section 12.2 or 12.3, the application by the Trustee of any monies deposited
with it for the purpose of making such payments of principal of, and interest
on, the Debentures to the Holders entitled thereto unless at least one Business
Day prior to the date upon which such payment would otherwise become due and
payable, the Trustee shall have received the written notice provided for in
Section 12.2 or in Section 12.7. The Company shall give prompt written notice to
the Trustee of any dissolution, winding-up, liquidation or reorganization of the
Company.
SECTION 12.5 Subrogation.
Subject to the payment in full in cash of all Senior Debt, the
Holders shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the Company
applicable to the Senior Debt until the Debentures shall be paid in full; and,
for the purposes of such subrogation, no such payments or distributions to the
holders of the Senior Debt by or on behalf of the Company or by or on behalf of
the Holders by virtue of this Article 12 which otherwise would have been made to
the Holders shall,
78
<PAGE> 84
as between the Company and the Holders, be deemed to be a payment by the Company
to or on account of the Senior Debt, it being understood that the provisions of
this Article 12 are and are intended solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of the Senior
Debt, on the other hand.
SECTION 12.6 Obligations of the Company Unconditional.
Nothing contained in this Article 12 or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as among the
Company and its creditors other than the holders of Senior Debt and the Holders,
the obligation of the Company, which is absolute and unconditional, to pay to
the Holders the principal of, premium, if any, on and any interest on the
Debentures as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Company other than the holders of any Senior Debt,
nor shall anything herein or therein prevent the Holder or the Trustee on its
behalf from exercising all remedies otherwise permitted by applicable law upon
Default under this Indenture, subject to the rights, if any, under this Article
12 of the holders of Senior Debt in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
SECTION 12.7 Notice to Trustee.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee in respect of the Debentures pursuant
to the provisions of this Article 12. Regardless of anything to the contrary
contained in this Article 12 or elsewhere in this Indenture, the Trustee shall
not be charged with knowledge of the existence of any default or event of
default with respect to any Senior Debt or of any other facts which would
prohibit the making of any payment to or by the Trustee unless and until the
Trustee shall have received notice in writing from the Company, or from a holder
of Senior Debt or a Representative therefor, and, prior to the receipt of any
such written notice, the Trustee shall be entitled to assume (in the absence of
actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article 12, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article 12, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 12.8 Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company, the
Trustee, subject to the provisions of Article 7 hereof, and the Holders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
79
<PAGE> 85
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, delivered to the Trustee or the Holders, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 12.
SECTION 12.9 Trustee's Relation to Senior Indebtedness.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article 12 with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 12, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt, the distribution may be made and the notice
may be given to their Representative, if any.
SECTION 12.10 Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders and without impairing or releasing
the subordination provided in this Article 12 or the obligations hereunder of
the Holders to the holders of the Senior Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement
in any manner Senior Debt, or any instrument evidencing the same or any
agreement under which Senior Debt is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged otherwise securing Senior
Debt; (iii) release any Person liable in any manner for the payment or
collection of Senior Debt; and (iv) exercise or refrain from exercising any
rights against the Company or any other Person.
80
<PAGE> 86
SECTION 12.11 Holders Authorize Trustee To Effectuate Subordination of
Debentures.
Each Holder by its acceptance of the Debentures authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders, the subordination provided in this Article 12, and appoints the
Trustee its attorney-in-fact for such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency, receivership, or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the filing of a claim for
the unpaid balance of its Debentures and accrued interest in the form required
in those proceedings.
If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Senior Debt or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Debentures. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Debt or their Representative to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 12.12 This Article 12 Not to Prevent Events of Default.
The failure to make a payment on account of principal of,
premium, if any, on or interest on the Debentures by reason of any provision of
this Article 12 will not be construed as preventing the occurrence of an Event
of Default.
SECTION 12.13 Trustee's Compensation Not Prejudiced.
Nothing in this Article 12 will apply to amounts due to the
Trustee pursuant to other Sections in this Indenture.
81
<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
R&B FALCON CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
U.S. TRUST COMPANY, N.A., as Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
82
<PAGE> 88
(Face of Debenture) Exhibit A
[THIS GLOBAL DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE
REFERRED TO ON THE REVERSE THEREOF.
UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
R&B FALCON CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEBENTURE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL DEBENTURE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL DEBENTURE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.6 OF
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS GLOBAL DEBENTURE IS EXCHANGEABLE FOR A DEBENTURE IN DEFINITIVE, FULLY
REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC NOTIFIES THE COMPANY THAT
IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY FOR THIS GLOBAL DEBENTURE OR
IF AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY" REGISTERED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A SUCCESSOR DEPOSITORY IS NOT
APPOINTED BY THE COMPANY WITHIN 90 DAYS OF SUCH NOTICE, (B) THE COMPANY EXECUTES
AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS GLOBAL DEBENTURE SHALL BE SO
TRANSFERABLE, REGISTRABLE, AND EXCHANGEABLE, AND SUCH TRANSFER SHALL BE SO
REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED
AND IS CONTINUING WITH RESPECT TO THE DEBENTURES.](1)
[THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER:
- ------------------------
(1) These paragraphs should be included if the Debentures are issued in global
form.
1
<PAGE> 89
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
REGULATION D UNDER THE SECURITIES ACT (AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D)
TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (E) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING.](2)
- --------------------------
(2) These paragraphs (the Private Placement Legend) should be omitted upon the
exchange of Initial Debentures for Exchange Debentures in the Exchange
Offer or upon the registration of Initial Debentures pursuant to the
Registration Rights Agreement.
2
<PAGE> 90
13 7/8 % Senior Subordinated Debentures due 2009
R&B FALCON CORPORATION
No.
CUSIP No.
$
----------------------
R&B FALCON CORPORATION promises to pay to _______________________ or registered
assigns, the principal sum of ___________________ United States Dollars, [or
such greater or lesser amount as may from time to time be endorsed on Schedule A
hereto](3) on May 1, 2009.
Interest Payment Dates: February 1, May 1, August 1 and November 1
Record Dates: January 15, April 15, July 15 and October 15
Reference is hereby made to the further provisions of this Debenture set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authorization hereon has been duly executed by the
Trustee referred to on the reverse hereof by manual signature, this Debenture
shall not be entitled to any benefit of this Indenture or be valid or obligatory
for any purpose.
- ------------------------
(3) This is included on Global Debentures only.
3
<PAGE> 91
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
as of the date written below.
R&B FALCON CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Dated:
--------------------------------
Name:
---------------------------------
Title:
--------------------------------
Certificate of Authentication:
This is one of the Debentures
referred to in the within-mentioned
Indenture:
U.S. TRUST COMPANY, N.A., as Trustee
By:
-----------------------------------
Authorized Signatory
4
<PAGE> 92
(Reverse of Debenture)
13 7/8% Senior Subordinated Debenture due 2009
Capitalized terms used herein shall have the meanings assigned
to them in this Indenture referred to below unless otherwise indicated.
1. Interest. R&B Falcon Corporation, a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being called the "Company"), promises to pay interest
on the principal amount of this Debenture at 13 7/8% per annum until Maturity
and shall pay Liquidated Damages, if any, payable pursuant to Section 5 of the
Registration Rights Agreement referred to below. The Company will pay interest,
if any, and Liquidated Damages, if any, quarterly in arrears on February 1, May
1, August 1 and November 1 of each year (each, an "Interest Payment Date"), or
if any such day is not a Business Day, on the next succeeding Business Day.
Interest on the Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Exchange Date;
provided that if there is no existing Default in the payment of interest, and if
this Debenture is authenticated between a Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date. The Company shall pay interest
(including post-petition interest in any proceeding under any applicable
Federal, State or foreign bankruptcy law) on overdue installments of interest
("Defaulted Interest"), and Liquidated Damages, if any, (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Notwithstanding anything herein to the contrary, on each
Interest Payment Date through and including May 1, 2004, the entire amount of
the interest payment on the Debentures may be paid, at the option of the
Company, in additional Debentures ("Additional Debentures") (valued at 100% of
the principal amount thereof). The Company may, at its option, pay cash in lieu
of issuing any Additional Debentures to the extent the principal amount of such
Additional Debentures is not an integral multiple of $1,000. The Company shall
notify the Trustee of the Company's election to pay interest in Additional
Debentures not less than 5 days prior to the Record Date for an Interest Payment
Date. On each such Interest Payment Date, the Trustee shall authenticate
Additional Debentures for original issuance to each holder of Notes on the
preceding Record Date, as shown on the register of the Debentures, in the amount
required to pay such interest. For purposes of determining the principal amount
of Additional Debentures to be issued in payment of interest, the Company shall
be entitled to aggregate as to each Holder the principal amount of all
Debentures (including Additional Debentures) held of record by such Holder.
2. Method of Payment. The Company will pay interest on the
Debentures (except Defaulted Interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Debentures at the close of business on
January 15, April 15, July 15 and October 15 immediately preceding the Interest
Payment Date (each, a "Record Date"), even if such Debentures are canceled after
such Record Date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to Defaulted Interest. The
Debentures will be payable as to principal, premium, interest and Liquidated
Damages at the office or agency of the Company maintained for such purpose
within the City and State of New
5
<PAGE> 93
York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium, if any, and Liquidated Damages, if any, on, all Global
Debentures and all other Debentures the Holders of which shall have provided
wire transfer instructions to the Company and the Paying Agent prior to the
applicable Record Date for such payment. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, the Trustee under
the Indenture will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. In certain situations,
the Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Debentures under an
Indenture dated as of [____________] ("Indenture") between the Company and U.S.
Trust Company, N.A., as trustee (the "Trustee," which term includes any
successor trustee under the Indenture). The terms of the Debentures include
those stated in the Indenture and those made part of the Indenture by reference
to the U.S. Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Debentures are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms. The Debentures are unsecured obligations of
the Company limited in aggregate principal amount as provided in Section 2.2 of
the Indenture. This Debenture is one of the Debentures referred to in the
Indenture.
5. Optional Redemption. (a) The Debentures will not be
redeemable at the Company's option prior to May 1, 2004. Thereafter, the
Debentures will be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.........................................106.938%
2005.........................................104.625%
2006.........................................102.313%
2007 and thereafter..........................100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or prior to
May 1, 2002, the Company may, at its option, redeem, in whole or in part, up to
an aggregate principal amount of the Debentures equal to $105,000,000, less the
aggregate liquidation preference of all shares of Preferred Stock previously
redeemed out of the proceeds of one or more Public Equity Offerings, at a
redemption price of 113.875% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date
with the net cash proceeds of one or more Public Equity Offerings; provided that
any such redemption shall occur within 45 days of the date of the closing of
such Public Equity Offerings.
6
<PAGE> 94
(c) Notices of redemption will be mailed by first class mail
at least 30 days but not more than 60 days before the Redemption Date to each
Holder whose Debentures are to be redeemed at its registered address. Debentures
in denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000, unless all of the Debentures held by a Holder are to be
redeemed. Unless the Company defaults in making such redemption payment, on and
after the Redemption Date interest (including Liquidated Damages, if any) ceases
to accrue on Debentures or portions thereof called for redemption.
6. Mandatory Redemption. Except as contemplated by clause 7
below, the Company shall not be required to make any mandatory redemption,
purchase or sinking fund payments with respect to the Debentures prior to the
maturity date.
7. Repurchase at Option of Holder. Upon the occurrence of a
Change of Control, each Holder will have the right to require the Company to
repurchase such Holder's Debentures in whole or in part (the "Change of Control
Offer") at a purchase price (the "Change of Control Purchase Price") in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, and Liquidated Damages, if any, to the Change of
Control Payment Date on the terms described in the Indenture.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred if (a) the ratings assigned to the 1999 Senior Notes
by the Rating Agencies prior to the announcement are not downgraded or placed on
a negative credit watch by either such Rating Agency as a result thereof and (b)
no Default has occurred and is continuing under the 1999 Senior Note Indenture.
Within 30 days following any Change of Control, the Company
shall send, or cause to be sent, by first class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder of Debentures. The Holder
of this Debenture may elect to have this Debenture or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Require Purchase" appearing below and tendering this Debenture
pursuant to the Change of Control Offer. Unless the Company defaults in the
payment of the Change of Control Payment with respect thereto, all Debentures or
portions thereof accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest (and Liquidated Damages, if any) from and after
the Change of Control Purchase Date.
8. Denominations; Transfer and Exchange. The Debentures are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000; provided, however, that Additional Debentures and
Debentures issued in exchange for the Preferred Stock may be issued in
denominations of less than $1,000. The transfer of Debentures may be registered
and Debentures may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents (including in certain cases, opinions of
counsel) and the Company may require a Holder to pay any taxes and fees required
by law or permitted by the Indenture. The Company need not exchange or register
the transfer of any Debenture or portion of a Debenture selected for redemption,
except for the unredeemed portion of any Debenture being redeemed in part. Also,
it need not exchange or register the transfer of any Debentures for a period of
15 days before a
7
<PAGE> 95
selection of Debentures to be redeemed or during the period between a Record
Date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Debenture
may be treated as its owner for all purposes.
10. Amendment, Supplement and Waiver. With the consent of the
holders of not less than a majority in aggregate principal amount at Stated
Maturity of the outstanding Debentures (including consents obtained in
connection with a tender offer or exchange offer for the Debentures), the
Company and the Trustee may enter into one or more indentures supplemental to
the Indenture for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of modifying in
any manner the rights of the holders; provided that no such supplemental
indenture may, among other things, without the consent of the Holder of each
outstanding Debenture affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Debenture, or reduce the
principal amount thereof (or premium, if any), or the interest thereon that
would be due and payable thereon, or change the place of payment where, or the
coin or currency in which, any Debenture or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof, (b) reduce the percentage in
principal amount at Stated Maturity of the outstanding Debentures, the consent
of whose Holders is necessary for any such supplemental indenture or required
for any waiver of compliance with certain provisions of the Indenture, or
certain Defaults thereunder, (c) modify the Obligations of the Company to make
offers to purchase Debentures upon a Change of Control or (d) make any changes
in Sections 6.4 or 6.7 of the Indenture or modify any of the provisions of this
clause (except to increase any percentage set forth therein or herein).
11. Defaults and Remedies. Events of Default include in
summary form: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, any Debentures; (ii) default in payment when
due of the principal of or premium, if any, on the Debentures; (iii) failure by
the Company to comply with Section 4.7 of the Indenture; (iv) failure by the
Company for 60 days after notice to comply with any of its other agreements in
the Indenture or the Debentures (except in the case of a default with respect to
Section 5.1 of the Indenture, which shall constitute an Event of Default with
such notice requirement but without such passage of time requirement) (whether
or not prohibited by the provisions of Article 12 of the Indenture); (v)
Indebtedness of the Company or any Subsidiary is not paid when due within the
applicable grace period, if any, or is accelerated by the holders thereof and,
in either case, the aggregate principal amount of such unpaid or accelerated
Indebtedness exceeds $20,000,000 or more; (vi) failure by the Company or any of
its Restricted Subsidiaries to pay final judgments aggregating in excess of
$20,000,000, which judgments are not paid, discharged or stayed for a period of
30 days; and (viii) certain events of bankruptcy or insolvency with respect to
the Company or any Significant Subsidiary or group of Restricted Subsidiaries
that, taken as a whole (as of the latest audited consolidated financial
statement for the Company and its Subsidiaries), would constitute a Significant
Subsidiary.
Holders of the Debentures may not enforce the Indenture or the
Debentures except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount
8
<PAGE> 96
of the then outstanding Debentures may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Debentures notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal, premium, if any, interest or
Liquidated Damages, if any) if it determines that withholding notice is in their
interest. Subject to certain limitations, the Holders of a majority in aggregate
principal amount of the Debentures then outstanding by notice to the Trustee may
on behalf of the Holders of all of the Debentures then outstanding waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, premium, if any, on, interest on, and, if any, on, the
Debentures. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
12. Defeasance Prior to Maturity or Redemption. The Company,
at its election, shall (a) be deemed to have paid and discharged its debt on the
Debentures and the Indenture shall cease to be of further effect as to all
outstanding Debentures (except as to (i) rights of registration of transfer,
substitution and exchange of Debentures, (ii) the Company's right of optional
redemption, (iii) rights of Holders to receive payments of principal of,
premium, if any, and interest including Liquidated Damages on the Debentures
(but not the Change of Control Purchase Price) and any rights of the Holders
with respect to such amounts, (iv) the rights, obligations and immunities of the
Trustee under the Indenture, and (v) certain other specified provisions in the
Indenture) or (b) cease to be under any obligation to comply with certain
restrictive covenants that are described in the Indenture, after the irrevocable
deposit by the Company with the Trustee, in trust for the benefit of the
Holders, at any time prior to the Stated Maturity of the Debentures, of (i)
money in an amount, (ii) U.S. Government Obligations which through the payment
of interest and principal will provide, not later than one Business Day before
the due date of payment in respect of such Debentures, money in an amount, or
(C) a combination thereof sufficient to pay and discharge the principal of,
premium, if any on, and interest (including Liquidated Damages, if any) on, such
Debentures then outstanding on the dates on which any such payments are due in
accordance with the terms of the Indenture and of such Debentures.
13. Trustee Dealings with the Company. Subject to certain
limitations imposed by the Trust Indenture Act, the Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Debentures, the Indenture
for any claim based on, in respect of, or by reason of, such Obligations or
their creation. Each Holder by accepting a Debenture waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Debentures.
15. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS DEBENTURE, WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.
9
<PAGE> 97
16. Authentication. This Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Transfer Restricted
Debentures. In addition to the rights provided to Holders of Debentures under
the Indenture, Holders of Transferred Restricted Debentures (as defined in the
Registration Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement dated as of April ___, 1999, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Debentures and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Debentures or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
10
<PAGE> 98
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Chief Financial Officer
Telephone No.: 281-496-5000
Telecopier No.: 281-597-7556
11
<PAGE> 99
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to
- -------------------------------------------------------------------------------
(Insert assignee's Social Security or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Debenture on the books of the Company or the agent appointed by
the Company to maintain such books. The agent appointed hereby may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date:
----------------------------
Your signature:
----------------------------------
(Sign exactly as your name appears on the face of this Debenture)
Signature Guarantee:
<PAGE> 100
Option of Holder to Elect Purchase
If you want to elect to have this Debenture purchased by the Company pursuant to
Section 4.7 of the Indenture, check the box below:
[ ] Section 4.7
If you want to elect to have only part of this Debenture purchased by the
Company pursuant to Section 4.7 of the Indenture, state the amount you elect to
have purchased (must be an integral multiple of $1,000):
$
------------------
Your Signature:
-------------------------------------------------------
(Sign exactly as your name appears on the Debenture)
Signature Guarantee: Social Security or Tax Identification No.:
-------
<PAGE> 101
SCHEDULE A
CHANGES IN PRINCIPAL AMOUNT OF DEBENTURE(4)
The following changes in the principal amount of this Global Debenture have been
recorded:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease in Amount of increase in of this Global Debenture Signature of
Principal Amount of Principal Amount of following such decrease authorized officer
Date of Transaction this Global Debenture this Global Debenture (or increase) of Trustee
- ------------------- --------------------- --------------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------------
(4) This should only be included if the Debenture is issued in global form.
<PAGE> 102
Exhibit B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL DEBENTURE TO REGULATION S GLOBAL DEBENTURE
(Pursuant to Section 2.6(a)(i) of the Indenture)
U.S. Trust Company, N.A.
114 West 47th Street
25th Floor
New York, New York 10036
Telephone No.: 212-852-1676
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
Re: 13 7/8% Senior Subordinated Debentures due 2009 of R&B Falcon Corporation
Reference is hereby made to the Indenture, dated as of
_____________(the "Indenture"), between R&B Falcon Corporation (the "Company"),
and U.S. Trust Company, N.A., as trustee (the "Trustee"). Capitalized terms used
but not defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$___________ principal amount of
Debentures which are evidenced by one or more U.S. Global Debentures and held
with the Depositary in the name of _____________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the
Debentures to a Person who will take delivery thereof in the form of an equal
principal amount of Debentures evidenced by one or more Regulation S Global
Debentures, which amount, immediately after such transfer, is to be held with
the Depositary through Euroclear or Cedel or both.
In connection with such request and in respect of such
Debentures, the Transferor hereby certifies that such transfer has been effected
in compliance with the transfer restrictions applicable to the Global Debentures
and pursuant to and in accordance with Rule 903 or Rule 904 under the United
States Securities Act of 1933, as amended (the "Securities Act"), and
accordingly the Transferor hereby further certifies that:
(1) The offer of the Debentures was not made to a person in
the United States and, if the 40-day restricted period has not yet expired and
the Transferor is a dealer (as defined in Section 2(12) of the Securities Act),
or a person receiving a selling concession, fee or other remuneration in respect
of the Debentures being sold (collectively, "Dealers"), (i) neither the
Transferor or any person acting on its behalf knows that the transferee is a
U.S. person and (ii) if the Transferor or any person acting on its behalf knows
that the transferee is a Dealer, the Transferor or person acting on its behalf
has sent a confirmation or other notice to the transferee stating that the
Debentures may be offered or sold in accordance with the provisions of
Regulation S, pursuant to registration under the Securities Act or pursuant to
an available exemption from the registration requirements of the Securities Act;
(2) either:
1
<PAGE> 103
(a) at the time the buy order was originated, the transferee
was outside the United States or the Transferor and any person acting on its
behalf reasonably believed and believes that the transferee was outside the
United States; or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the Transferor
nor any person acting on its behalf knows that the transaction was prearranged
with a buyer in the United States;
(1) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of Regulation S;
(2) the transaction is not part of a plan or scheme to evade
the registration provisions of the Securities Act; and
(3) upon completion of the transaction, the beneficial
interest being transferred as described above is to be held with the Depositary
through Euroclear or Cedel or both.
Upon giving effect to this request to exchange a beneficial interest in a U.S.
Global Debenture for a beneficial interest in a Regulation S Global Debenture,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Debentures pursuant to the Indenture
and the Securities Act.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), the Initial Purchaser of such Debentures
being transferred. We acknowledge that you, the Company, the Initial Purchaser
and others will rely upon our confirmations, acknowledgments and agreements set
forth herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
---------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Dated:
---------------------------
cc: R&B Falcon Corporation
Initial Purchaser
2
<PAGE> 104
Exhibit B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL DEBENTURE TO U.S. GLOBAL DEBENTURE
(Pursuant to Section 2.6(a)(ii) of the Indenture)
U.S. Trust Company, N.A.
114 West 47th Street
25th Floor
New York, New York 10036
Telephone No.: 212-852-1676
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
Re: 13 7/8% Senior Subordinated Debentures due 2009 of R&B Falcon Corporation
Reference is hereby made to the Indenture dated as of ______________ (the
"Indenture"), between R&B Falcon Corporation (the "Company"), and U.S. Trust
Company, N.A., as trustee (the "Trustee"). Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to $____________ principal amount of Debentures which are
evidenced by one or more Regulation S Global Debentures and held with the
Depositary through Euroclear or Cedel in the name of _________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Debentures to a Person who will take delivery thereof in the
form of an equal principal amount of Debentures evidenced by one or more U.S.
Global Debentures, to be held with the Depositary.
In connection with such request and in respect of such Debentures, the
Transferor hereby certifies that:
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the
"Securities Act") and, accordingly, the Transferor hereby further certifies
that the Debentures are being transferred to a Person that the Transferor
reasonably believes is purchasing the Debentures for its own account, or
for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A;
or
[ ] such transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act;
1
<PAGE> 105
[ ] the surrendered Debentures are being transferred to Institutional
Accredited Investor pursuant to an exemption under the Securities Act other
than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies
that the Transfer complies with the transfer restrictions applicable to
beneficial interests in Global Debentures and Certificated Debentures
bearing the Private Placement Legend and the requirements of the exemption
claimed, which certification is supported by a certificate attached hereto
executed by the Transferee in the form of Exhibit C to the Indenture, and,
if the Company should so request, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), in form reasonably acceptable to the Company and to
the Registrar, to the effect that such transfer is in compliance with the
Securities Act to the effect that such Transfer is in compliance with the
Securities Act;
or
[ ] such transfer is being effected in an offshore transaction pursuant to
and in accordance with Rule 904 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that the
Debentures are being transferred in compliance with the transfer
restrictions applicable to the Global Debentures and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the effect
that such transfer is in compliance with the Securities Act;
and such Debentures are being transferred in compliance with any applicable blue
sky or securities laws of any state of the United States or any other applicable
jurisdiction.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Debentures for a beneficial interest in U.S. Global
Debentures, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to U.S. Global Debentures pursuant to the
Indenture and the Securities Act.
2
<PAGE> 106
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser"), the Initial Purchaser of such
Debentures being transferred. We acknowledge that you, the Company, the Initial
Purchaser and others will rely upon our confirmations, acknowledgments and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our representations or warranties herein ceases to be accurate and
complete. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Dated:
-----------------------
cc: R&B Falcon Corporation
Initial Purchaser
3
<PAGE> 107
Exhibit B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED DEBENTURES
(Pursuant to Section 2.6(b) of the Indenture)
U.S. Trust Company, N.A.
114 West 47th Street
25th Floor
New York, New York 10036
Telephone No.: 212-852-1676
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
Re: 13 7/8% Senior Subordinated Debentures due 2009 of R&B Falcon Corporation
Reference is hereby made to the Indenture dated as of _________________(the
"Indenture"), between R&B Falcon Corporation (the "Company"), and U.S. Trust
Company, N.A. as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This relates to $_________ principal amount of Debentures which are evidenced by
one or more Certificated Debentures in the name of ______________ (the
"Transferor"). The Transferor has requested an exchange or transfer of such
Certificated Debenture(s) in the form of an equal principal amount of Debentures
evidenced by one or more Certificated Debentures, to be delivered to the
Transferor or, in the case of a transfer of such Debentures, to such Person as
the Transferor instructs the Trustee.
In connection with such request and in respect of the Debentures surrendered to
the Trustee herewith for exchange (the "Surrendered Debentures"), the Holder of
such Surrendered Debentures hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Debentures are being acquired for the Transferor's own
account, without transfer;
or
[ ] the Surrendered Debentures are being transferred to the Company;
or
[ ] the Surrendered Debentures are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Surrendered Debentures are being transferred to
a Person that the Transferor reasonably believes is purchasing the
Surrendered
1
<PAGE> 108
Debentures for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the meaning
of Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A;
or
[ ] the Surrendered Debentures are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] the Surrendered Debentures are being transferred in an offshore transaction
pursuant to and in accordance with Rule 904 under the Securities Act;
or
[ ] the Surrendered Debentures are being transferred to Institutional
Accredited Investor pursuant to an exemption under the Securities Act other
than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies
that the Transfer complies with the transfer restrictions applicable to
beneficial interests in Global Debentures and Certificated Debentures
bearing the Private Placement Legend and the requirements of the exemption
claimed, which certification is supported by a certificate attached hereto
executed by the Transferee in the form of Exhibit C to the Indenture, and,
if the Company should so request, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), in form reasonably acceptable to the Company and to
the Registrar, to the effect that such transfer is in compliance with the
Securities Act to the effect that such Transfer is in compliance with the
Securities Act;
or
[ ] the Surrendered Debentures are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that the
Debentures are being transferred in compliance with the transfer
restrictions applicable to the Global Debentures and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the effect
that such transfer is in compliance with the Securities Act;
and the Surrendered Debentures are being transferred in compliance with any
applicable blue sky or securities laws of any state of the United States or any
other applicable jurisdiction.
2
<PAGE> 109
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), the Initial Purchaser of such Debentures
being transferred. We acknowledge that you, the Company, the Initial Purchaser
and others will rely upon our confirmations, acknowledgments and agreements set
forth herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[INSERT NAME OF TRANSFEROR]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Dated:
-------------------------
cc: R&B Falcon Corporation
Initial Purchaser
3
<PAGE> 110
Exhibit B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL DEBENTURE OR REGULATION S
PERMANENT GLOBAL DEBENTURE
TO CERTIFICATED DEBENTURE
(Pursuant to Section 2.6(c) of the Indenture)
U.S. Trust Company, N.A.
114 West 47th Street
25th Floor
New York, New York 10036
Telephone No.: 212-852-1676
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
Re: 13 7/8% Senior Subordinated Debentures due 2009 of R&B Falcon Corporation
Reference is hereby made to the Indenture dated as of ________________(the
"Indenture"), between R&B Falcon Corporation (the "Company"), and U.S. Trust
Company, N.A., as trustee (the "Trustee"). Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to $_____________ principal amount of Debentures which are
evidenced by a beneficial interest in one or more U.S. Global Debentures or
Regulation S Global Debentures in the name of __________________ (the
"Transferor"). The Transferor has requested an exchange or transfer of such
beneficial interest in the form of an equal principal amount of Debentures
evidenced by one or more Certificated Debentures, to be delivered to the
Transferor or, in the case of a transfer of such Debentures, to such Person as
the Transferor instructs the Trustee.
In connection with such request and in respect of the Debentures surrendered to
the Trustee herewith for exchange (the "Surrendered Debentures"), the Holder of
such surrendered Debentures hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Debentures are being transferred to the beneficial owner of
such Debentures;
or
[ ] the Surrendered Debentures are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Surrendered Debentures are being transferred to
a Person that the Transferor reasonably believes is
1
<PAGE> 111
purchasing the Surrendered Debentures for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A;
or
[ ] the Surrendered Debentures are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] such transfer is being effected in an offshore transaction pursuant to and
in accordance with Rule 904 under the Securities Act;
or
[ ] the Surrendered Debentures are being transferred to Institutional
Accredited Investor pursuant to an exemption under the Securities Act other
than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies
that the Transfer complies with the transfer restrictions applicable to
beneficial interests in Global Debentures and Certificated Debentures
bearing the Private Placement Legend and the requirements of the exemption
claimed, which certification is supported by a certificate attached hereto
executed by the Transferee in the form of Exhibit C to the Indenture, and,
if the Company should so request, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), in form reasonably acceptable to the Company and to
the Registrar, to the effect that such transfer is in compliance with the
Securities Act to the effect that such Transfer is in compliance with the
Securities Act;
or
[ ] the Surrendered Debentures are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] the Surrendered Debentures are being transferred pursuant to an exemption
from the registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that the
Debentures are being transferred in compliance with the transfer
restrictions applicable to the Global Debentures and in accordance with the
requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel, provided by the transferor or the transferee (a copy
of which the Transferor has attached to this certification) in form
reasonably acceptable to the Company and to the Registrar, to the effect
that such transfer is in compliance with the Securities Act;
2
<PAGE> 112
and the Surrendered Debentures are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), the Initial Purchaser of such Debentures
being transferred. We acknowledge that you, the Company, the Initial Purchaser
and others will rely upon our confirmations, acknowledgments and agreements set
forth herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Dated:
-------------------------------------
cc: R&B Falcon Corporation
Initial Purchaser
3
<PAGE> 113
Exhibit C
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
U.S. Trust Company, N.A.
114 West 47th Street
25th Floor
New York, New York 10036
Telephone No.: 212-852-1676
Telecopier No.: 212-852-1626
Attention: Corporate Trust Division
Re: 13 7/8% Senior Subordinated Debentures due 2009 of R&B Falcon Corporation
Reference is hereby made to the Indenture, dated as of __________________ (the
"Indenture"), between R&B Falcon Corporation, as issuer, and U.S. Trust Company,
N.A., as trustee. Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
In connection with our proposed purchase of $________________ aggregate
principal amount of:
(a) [ ] Beneficial interests, or
(b) [ ] Certificated Debentures,
we confirm that:
(i) we are an entity which is an "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act"), or an entity in which all of the equity
owners are accredited investors within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act (an "Institutional Accredited
Investor");
(ii) any purchase of Debentures by us will be for our own account or for the
account of one or more other Institutional Accredited Investors;
(iii) in the event that we purchase any Debentures, we will acquire
Debentures having a minimum purchase price of at least $250,000 for our
own account and for each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business matters
that we are capable of evaluating the merits and risks of purchasing
Debentures;
(v) we are not acquiring Debentures with a view to any distribution thereof
in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property
and the
1
<PAGE> 114
property of any accounts for which we are acting as fiduciary shall
remain at all times within our control; and
(vi) we have received a copy of the Offering Memorandum and acknowledge that
we have had access to such financial and other information, and have
been afforded the opportunity to ask such questions of representatives
of the Company and receive answers thereto, as we deem necessary in
connection with our decision to purchase Debentures.
We understand that the Debentures are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Debentures have not been registered under the Securities Act, and we agree,
on our own behalf and on behalf of each account for which we acquire any
Debentures, that (A) such Debentures may be offered, resold, pledged or
otherwise transferred only (i) to a person whom we reasonably believe to be a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, in a transaction
meeting the requirements of Rule 144 under the Securities Act, outside the
United States in a transaction meeting the requirements of Rule 904 under the
Securities Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Company so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement under the Securities Act, and, in each case, in
accordance with any applicable securities laws of any State of the United States
or any other applicable jurisdiction and (B) that we will, and each subsequent
Holder is required to, notify any subsequent purchaser from it of the resale
restrictions set forth in (A) above. We understand that the registrar and
transfer agent will not be required to accept for registration of transfer any
Debentures, except upon presentation of evidence satisfactory to the Company
that the foregoing restrictions on transfer have been complied with. We further
understand that the Debentures purchased by us will bear a legend reflecting the
substance of this paragraph.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), the Initial Purchaser of such Debentures
being transferred. We acknowledge that you, the Company, the Initial Purchaser
and others will rely upon our confirmations, acknowledgments and agreements set
forth herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
2
<PAGE> 115
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
[Insert Name of Purchaser]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
cc: R&B Falcon Corporation
Initial Purchaser
3
<PAGE> 116
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C> <C>
310(a)(1) ...................................................................... 7.10
(a)(2) ...................................................................... 7.10
(a)(3) ...................................................................... N.A.
(a)(4) ...................................................................... N.A.
(b) ...................................................................... 7.3; 7.8; 7.10
(c) ...................................................................... N.A.
311(a) ...................................................................... 7.11
(b) ...................................................................... 7.11
(c) ...................................................................... N.A.
312(a) ...................................................................... 2.5
(b) ...................................................................... 11.3
(c) ...................................................................... 11.3
313(a) ...................................................................... 7.6
(b)(1) ...................................................................... N.A.
(b)(2) ...................................................................... 7.6
(c) ...................................................................... 7.6; 11.2
(d) ...................................................................... 7.6
314(a) ...................................................................... 4.13; 4.21; 11.2
(b) ...................................................................... N.A.
(c)(1) ...................................................................... 11.4, 11.5
(c)(2) ...................................................................... 7.2; 11.4; 11.5
(c)(3) ...................................................................... N.A.
(d) ...................................................................... N.A.
(e) ...................................................................... 10.5
(f) ...................................................................... N.A.
315(a) ...................................................................... 7.1(a)
(b) ...................................................................... 4.21; 7.5; 11.4
(c) ...................................................................... 7.1
(d) ...................................................................... 7.1
(e) ...................................................................... 6.11
316(a)(last sentence)................................................................... 2.9
(a)(1)(A) ...................................................................... 6.5
(a)(1)(B) ...................................................................... 6.4
(a)(2) ...................................................................... N.A.
(b) ...................................................................... 6.7
317(a)(1) ...................................................................... 6.3; 6.8
(a)(2) ...................................................................... 6.9
(b) ...................................................................... 2.4
318(a) ...................................................................... 11.1
</TABLE>
- -----------------------------------
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
<PAGE> 1
EXHIBIT 4.2
PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT
as of April 22, 1999
by and between
R&B FALCON CORPORATION
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
This PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT")
is made and entered into as of April 22, 1999, by and between R&B Falcon
Corporation, a Delaware corporation (the "COMPANY"), and Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ" or the INITIAL PURCHASER"), who has
agreed to purchase 13-7/8% Senior Cumulative Redeemable Preferred Stock (the
"RESTRICTED PREFERRED STOCK") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement dated April
15, 1999 (the "PURCHASE AGREEMENT"), by and between the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Restricted
Preferred Stock, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser set forth in Section 3 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Offering Memorandum of the
Company with respect to the Restricted Preferred Stock dated April 15, 1999 (the
"OFFERING MEMORANDUM").
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
AFFILIATE: As defined in Rule 144 under the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: As defined in the Certificate of Designation.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to (i) the New Preferred Stock and the underlying Exchange Debentures
or (ii) the New Exchange Debentures, as the case may be, to be issued in the
Exchange Offer, (b) the maintenance of such Exchange Offer Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the period required pursuant to Section 3(b) hereof and
(c) the delivery by the Company to the Registrar of New Preferred Stock in the
same aggregate principal amount as the aggregate amount in liquidation
preference of the Restricted Preferred Stock or the same aggregate amount as the
aggregate principal amount of the Exchange Debentures tendered by Holders
thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
1
<PAGE> 3
EFFECTIVENESS DEADLINE: As defined in Section 3(a) or 4(a) hereof, as
applicable.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
EXCHANGE DEBENTURES: The Company's 13-7/8% Subordinated Debentures due
2009 to be issued in exchange for the Preferred Stock.
EXCHANGE OFFER: The exchange and issuance by the Company of New
Preferred Stock, if issued, or New Exchange Debentures, as the case may be,
(which shall be registered pursuant to the Exchange Offer Registration
Statement) equal to the outstanding liquidation preference of Restricted
Preferred Stock or principal amount of Exchange Debentures, as the case may be,
that are tendered by such Holders in connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Restricted Preferred Stock or Exchange Debentures, as the
case may be, to certain "qualified institutional buyers," as such term is
defined in Rule 144A under the Act.
FILING DEADLINE: As defined in Sections 3(a) or 4(a) hereof, as
applicable.
HOLDERS: As defined in Section 2 hereof.
INDENTURE: The form of Indenture to be entered into between the Company
and U.S. Trust Company, N.A. relating to the Exchange Debentures.
NEW EXCHANGE DEBENTURES: The Company's 13-7/8% Subordinated Debentures
due 2009 to be issued pursuant to the Indenture: (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
NEW PREFERRED STOCK: The Company's 13-7/8% Senior Cumulative Redeemable
Preferred Stock to be issued pursuant to the Certificate of Designation: (i) in
the Exchange Offer or (ii) as contemplated by Section 4 hereof.
PREFERRED STOCK: The Restricted Preferred Stock and the New Preferred
Stock, collectively.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of (i) New Preferred Stock, together with the
underlying Exchange Debentures or (ii) New Exchange Debentures, as the case may
be, pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) that is filed pursuant to
2
<PAGE> 4
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER AGENT: American Stock Transfer & Trust Company.
TRANSFER RESTRICTED SECURITIES: Each share of Restricted Preferred
Stock and the underlying Exchange Debenture or each Exchange Debenture, as the
case may be, until the earliest to occur of (a) the date on which such
Restricted Preferred Stock and the underlying Exchange Debenture or Exchange
Debentures is exchanged in the Exchange Offer for New Preferred Stock and the
underlying Exchange Debenture or New Exchange Debentures, as the case may be,
which is entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Restricted Preferred Stock or Exchange Debentures has been disposed
of in accordance with a Shelf Registration Statement (and the purchasers thereof
have been issued New Preferred Stock or New Exchange Debentures, as the case may
be), or (c) the date on which such Restricted Preferred Stock or Exchange
Debenture is distributed to the public pursuant to Rule 144 under the Act (and
purchasers thereof have been issued New Preferred Stock or New Exchange
Debenture, as the case may be) and each New Preferred Stock or New Exchange
Debentures, as the case may be, until the date on which such New Preferred Stock
or New Exchange Debentures, as the case may be, is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
TRUSTEE: U.S. Trust Company, N.A.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person is a beneficial owner of Transfer
Restricted Securities in the security register of the Transfer Agent or Trustee,
as the case may be.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause the Exchange Offer Registration
Statement to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 60 days after the Closing Date (such
60th day being the "FILING DEADLINE"), (ii) use its best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 150 days after the Closing Date (such
150th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration
3
<PAGE> 5
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
New Preferred Stock and the underlying Exchange Debentures or the New Exchange
Debentures, as the case may be, to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the New Preferred Stock and the
underlying Exchange Debentures or the New Exchange Debentures, as the case may
be, to be offered in exchange for the Restricted Preferred Stock and the
underlying Exchange Debentures or the Exchange Debentures, as the case may be,
that are Transfer Restricted Securities and (ii) resales of New Preferred Stock
or New Exchange Debentures, as the case may be, by Broker-Dealers that tendered
into the Exchange Offer Restricted Preferred Stock and the underlying Exchange
Debentures or Exchange Debentures, as the case may be, that such Broker-Dealer
acquired for its own account as a result of market making activities or other
trading activities (other than Restricted Preferred Stock and the underlying
Exchange Debentures or Exchange Debentures, as the case may be, acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.
Notwithstanding any other provision of this Agreement, the Exchange
Offer Registration Statement shall register the offer of no less than 600,000
shares of New Preferred Stock and the underlying Exchange Debentures or
$600,000,000 in principal amount of New Exchange Debentures, as the case may be.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 30 days (or
longer if required by applicable law). The Company shall cause the Exchange
Offer to comply with all applicable federal and state securities laws. No
securities other than the New Preferred Stock and the underlying Exchange
Debentures or the New Exchange Debentures, as the case may be, shall be included
in the Exchange Offer Registration Statement. The Company shall use its best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 days thereafter (such 30th day being
the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Restricted Preferred Stock or
Exchange Debentures, as the case may be, acquired directly from the Company or
any Affiliate of the Company), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also
contain all other information with respect to such sales by such Broker-Dealers
that the Commission may require in order to permit such sales pursuant thereto,
but such "Plan of Distribution" shall not name any such Broker-Dealer or
disclose the amount of Transfer Restricted Securities held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy, rules or regulations after the date of this Agreement. See the
Shearman & Sterling no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any New Preferred
Stock or the New Exchange Debentures, as the case may be, received by such
Broker-Dealer in the Exchange Offer, the Company shall permit the use of the
Prospectus contained in the Exchange Offer Registration Statement by such
Broker-Dealer to satisfy such prospectus delivery
4
<PAGE> 6
requirement. To the extent necessary to ensure that the Prospectus contained in
the Exchange Offer Registration Statement is available for sales of New
Preferred Stock or the New Exchange Debentures, as the case may be, by
Broker-Dealers, the Company agrees to use its best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Section 6(a) and (c)
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of 180 days from the Consummation Deadline, or such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto. The Company shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company has complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the New
Preferred Stock or the New Exchange Debentures acquired by it in the Exchange
Offer to the public without delivering a prospectus and the Prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) such Holder is a Broker-Dealer and holds
Restricted Preferred Stock or Exchange Debentures, as the case may be, acquired
directly from the Company or any of its Affiliates, then the Company shall:
(x) cause to be filed, on or prior to 30 days after the earlier of
(i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above and
(ii) the date on which the Company receives the notice specified in clause
(a)(ii) above, (such earlier date, the "FILING DEADLINE"), a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")),
relating to all Transfer Restricted Securities, and
(y) shall use its best efforts to cause such Shelf Registration
Statement to become effective on or prior to 90 days after the Filing Deadline
for the Shelf Registration Statement (such 90th day the "EFFECTIVENESS
DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement
is available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use its best efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as
5
<PAGE> 7
extended pursuant to Section 6(c)(i)) following the Closing Date, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Shelf Registration Statement have been sold pursuant thereto.
Notwithstanding any other provision of this Agreement, the Shelf
Registration Statement shall register the offer of no less than 600,000 shares
of Restricted Preferred Stock and the underlying Exchange Debentures or
$600,000,000 in aggregate principal amount of New Exchange Debentures, as the
case may be.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. SPECIAL INTEREST
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective (each such event referred to in clauses (i) through
(iv), a "REGISTRATION DEFAULT"), then the Company hereby agrees to pay to each
Holder of Transfer Restricted Securities affected thereby additional interest
("SPECIAL INTEREST") in an amount equal to $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues for the first 90-day
period immediately following the occurrence of such Registration Default. The
amount of the Special Interest shall increase by an additional $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of special interest of $.50 per week per $1,000 in
principal amount of Transfer Restricted Securities; provided that the Company
shall in no event be required to pay special interest for more than one
Registration Default at any given time. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (i)
above, (2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (ii)
above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above,
or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
Special Interest payable with respect to the Transfer Restricted Securities as a
result of such clause (i), (ii), (iii) or (iv), as applicable, shall immediately
cease.
6
<PAGE> 8
All accrued Special Interest shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Offering
Memorandum, on each Dividend Payment Date or Interest Payment Date, as the case
may be, as more fully set forth in the Certificate of Designation or the
Indenture, as the case may be. Notwithstanding the fact that any securities for
which Special Interest are due cease to be Transfer Restricted Securities, all
obligations of the Company to pay Special Interest with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of New Preferred Stock by Broker-Dealers that tendered in the
Exchange Offer Restricted Preferred Stock or Exchange Debentures, as the case
may be, that such Broker-Dealer acquired for its own account as a result of its
market making activities or other trading activities (other than Restricted
Preferred Stock or Exchange Debentures, as the case may be, acquired directly
from the Company or any of its Affiliates) being sold in accordance with the
intended method or methods of distribution thereof, and (z) comply with all of
the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-act ion
letter or other favorable decision from the Commission allowing the
Company to Consummate an Exchange Offer for such Transfer Restricted
Securities. The Company hereby agrees to pursue the issuance of such a
decision to the Commission staff level. In connection with the foregoing,
the Company hereby agrees to take all such other reasonable actions as
may be requested by the Commission or otherwise required in connection
with the issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel
has concluded that such an Exchange Offer should be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker-Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer,
a written representation to the Company (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the New Preferred Stock or the New Exchange Debentures to
be issued in the Exchange Offer and (C) it is acquiring the New Preferred
Stock or the New Exchange Debentures, as the case may be, in its ordinary
course of business. As a condition to its participation in the Exchange
Offer, each Holder using the Exchange Offer to participate in a
distribution of the New Preferred Stock or the New Exchange Debentures,
as the case may be, shall acknowledge and agree that, if the resales are
of New Preferred Stock or of New Exchange Debentures obtained by such
Holder in exchange for Restricted Preferred Stock or Exchange Debentures,
as the case may be, acquired directly from the Company or an Affiliate
thereof, it (1) could not, under Commission policy as in effect on the
date of this Agreement, rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon
Capital Holdings Corporation (available May 13, 1988), as interpreted in
the Commission's letter to Shearman &
7
<PAGE> 9
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) If required by the Commission, prior to effectiveness of the
Exchange Offer Registration Statement, the Company shall provide a
supplemental letter to the Commission (A) stating that the Company is
registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that the Company has not
entered into any arrangement or understanding with any Person to
distribute the New Preferred Stock or the New Exchange Debentures, as the
case may be, to be received in the Exchange Offer and that, to the best
of the Company's information and belief, each Holder participating in the
Exchange Offer is acquiring the New Preferred Stock or the New Exchange
Debentures, as the case may be, in its ordinary course of business and
has no arrangement or understanding with any Person to participate in the
distribution of the New Preferred Stock or of New Exchange Debentures, as
the case may be, received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth in
any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall (i) comply with all the provisions of
Section 6(c) below and use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof and (ii) issue, upon the request of any Holder or
purchaser of Restricted Preferred Stock or Exchange Debentures, as the case may
be, covered by any Shelf Registration Statement contemplated by this Agreement,
New Preferred Stock or New Exchange Debentures, as the case may be, having an
aggregate liquidation preference equal to the aggregate liquidation preference
of Restricted Preferred Stock or Exchange Debentures sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register New Preferred Stock or Exchange Debentures, as the case
may be, on the Shelf Registration Statement for this purpose and issue the New
Preferred Stock or the New Exchange Debentures, as the case may be, to the
purchaser(s) of securities subject to the Shelf Registration Statement in the
names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company agrees to:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain an untrue
statement of material fact or omit to state any material fact necessary
to make the statements therein not misleading or (B) not to be effective
and usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement curing such
8
<PAGE> 10
defect, and, if Commission review is required, use its best efforts to
cause such amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) advise the Initial Purchaser promptly and, if requested by
the Initial Purchaser, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or
changes in the Registration Statement in order to make the statements
therein not misleading, or that requires the making of any additions to
or changes in the Prospectus in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchaser (and the Holders, if
requested) in connection with such exchange or sale, if any, before
filing with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of
the Initial Purchaser in connection with such sale, if any, for a period
of at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to
any such Registration Statement or Prospectus (including all such
documents incorporated by
9
<PAGE> 11
reference) to which the Initial Purchaser shall reasonably object within
five Business Days after the receipt thereof. The Initial Purchaser shall
be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
not misleading or fails to comply with the applicable requirements of the
Act;
(vi) in case of a Shelf Registration Statement only, make
available, at reasonable times, for inspection by the Initial Purchaser
and any attorney or accountant retained by the Initial Purchaser, all
financial and other records, pertinent corporate documents of the Company
and cause the Company's officers, directors and employees to supply all
information reasonably requested by the Initial Purchaser, attorney or
accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness; provided, however, that such persons shall
first agree in writing with the Company that any information that is
reasonably and in good faith designated by the Company in writing as
confidential by such persons unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information
is required by law (including any disclosure requirements pursuant to
Federal securities laws in conjunction with the filing of such Shelf
Registration Statement or use of any Prospectus), (iii) such information
becomes generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such person or
(iv) such information becomes available to such person from a source
other than the Company and its subsidiaries and such source is not bound
by confidentiality agreement; provided, further, that the foregoing
investigation shall be coordinated on behalf of such Holders by one
representative designated by and on behalf of such Holders and any such
confidential information shall be available from such representative to
such Holders so long as any Holder agrees to be bound by such
confidentiality agreement;
(vii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(viii) upon the request of each Holder, furnish to such Holder in
connection with such exchange or sale, without charge, at least one copy
of the Registration Statement, as first filed with the Commission, and of
each amendment thereto, including, upon request, all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each selling Holder in connection
with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(x) upon the request of any Holder, in connection with an
underwritten secondary offering, enter into such agreements (including
underwriting agreements) and make such reasonable representations and
warranties and take all such other reasonable actions in connection
therewith in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to the Shelf
10
<PAGE> 12
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder in connection with any sale or resale
pursuant to the Shelf Registration Statement. In such connection, the
Company shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each Holder or upon the effectiveness of the Shelf
Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
Sections 6(ff), 9(a) and 9(b) of the Purchase Agreement and such
other similar matters as such Holders may reasonably request;
(2) an opinion dated the date of effectiveness of the
Shelf Registration Statement, of counsel for the Company
covering matters similar to those set forth in Section 9(d) of
the Purchase Agreement and such other matter as such Holder may
reasonably request, and in any event including a statement to
the effect that such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the independent public accountants for the
Company and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to the extent such counsel deems appropriate upon
the statements of officers and other representatives of the
Company and without independent check or verification), no facts
came to such counsel's attention that caused such counsel to
believe that the Shelf Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in the Shelf Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter as of the date of
effectiveness of the Shelf Registration Statement from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Sections 9(g) and 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in the any agreement entered into by the Company
pursuant to this clause (x);
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
11
<PAGE> 13
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may reasonably request and do any and
all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would subject
it to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and
such names as the selling Holders may request at least two Business Days
prior to such sale of Transfer Restricted Securities;
(xiii) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xi) above;
(xiv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Transfer
Agent under the Certificate of Designation or the Trustee under the
Indenture, as the case may be, with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xvi) in the case of Exchange Debentures, cause the Indenture to
be qualified under the TIA not later than the effective date of the first
Registration Statement required by this Agreement and, in connection
therewith, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its
best efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner; and
(xvii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by
12
<PAGE> 14
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the New Preferred
Stock or the New Exchange Debentures, as the case may be, to be issued in the
Exchange Offer and printing of Prospectuses whether for exchanges, sales, market
making or otherwise), messenger and delivery services and telephone; (iv) all
fees and disbursements of counsel for the Company and all reasonable fees and
disbursements of counsel for the Holders of Transfer Restricted Securities; (v)
all application and filing fees, if any, in connection with listing the New
Preferred Stock or the New Exchange Debentures, as the case may be, on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), and its external expenses (including
without limitation, legal expenses, the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company).
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Restricted Preferred Stock or Exchange Debentures, as the case may be,
in the Exchange Offer and/or selling or reselling Restricted Preferred Stock,
New Preferred Stock, Exchange Debentures or New Exchange Debentures, as the case
may be, pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or the Shelf Registration Statement, as applicable, for
the reasonable fees and disbursements of not more than one counsel, who shall be
Akin, Gump, Strauss, Hauer & Feld, L.L.P., unless another firm shall be chosen
by the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any reasonable legal or other expenses incurred
in connection with investigating or
13
<PAGE> 15
defending any matter, including any action that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (or any amendment
or supplement thereto) provided by the Company to any Holder or any prospective
purchaser of New Preferred Stock or New Exchange Debentures, as the case may be,
or registered Restricted Preferred Stock or Exchange Debentures, as the case may
be, or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company, and its respective
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
to the same extent as the foregoing indemnity from the Company set forth in
section (a) above, but only with reference to information relating to such
Holder furnished in writing to the Company by such Holder expressly for use in
any Registration Statement. In no event shall any Holder, its directors,
officers or any Person who controls such Holder be liable or responsible for any
amount in excess of the amount by which the total amount received by such Holder
with respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages that such
Holder, its directors, officers or any Person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason
14
<PAGE> 16
of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the
15
<PAGE> 17
respective principal amount of Transfer Restricted Securities held by each
Holder hereunder and not joint.
(e) The Company agrees that the indemnity and contribution provisions
of this Section 8 shall apply to any Broker-Dealers who is deemed to be an
Affiliate of the Company to the same extent, on the same conditions, as it
applies to Holders.
SECTION 9. RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and subject to Section 4.6 of the Indenture in the case
of Exchange Debentures, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144,
and subject to Section 2.6 of the Indenture in the case of Exchange Debentures.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchaser or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and
16
<PAGE> 18
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Fax No.: (281) 496-0285
Attention: Leighton E. Moss, Esq.
With a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
1000 Louisiana, Suite 3400
Houston, Texas 77002-5007
Fax No.: (713) 276-5555
Attn: Frank Putman
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent at
the address specified in the Certificate of Designation or the Trustee at the
address specified in the Indenture, as the case may be.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement, the Certificate of
Designation or the Indenture, as the case may be. If any transferee of any
Holder shall acquire Transfer Restricted Securities in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Transfer Restricted Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
17
<PAGE> 19
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[The remainder of this page is intentionally left blank.]
18
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
R&B FALCON CORPORATION
By: /s/ ROBERT FULTON
--------------------------------------
Name: Robert Fulton
Title: EVP
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ TREVOR TURBIDY
--------------------------------------
Name: Trevor Turbidy
Title: Vice President
19
<PAGE> 21
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: R&B Falcon Corporation
Date: _________, 1999
For your information only (NO ACTION REQUIRED):
Today, ______, 1999, we filed [AN A/B EXCHANGE REGISTRATION
STATEMENT/A SHELF REGISTRATION STATEMENT] with the Securities and
Exchange Commission. We currently expect this registration
statement to be declared effective within __ business days of the
date hereof.
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
13-7/8% SENIOR CUMULATIVE REDEEMABLE
PREFERRED STOCK
OF
R&B FALCON CORPORATION
--------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------------------
R&B Falcon Corporation (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, certifies
that pursuant to the authority contained in Article Fourth of its Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation") and
in accordance with the provisions of Section 151 of the General Corporation Law
of the State of Delaware (the "DGCL"), a Special Committee of the Board of
Directors (the "Special Committee"), by unanimous written consent dated April
22, 1999, duly approved and adopted the following resolution (this "Certificate
of Designations") which resolution remains in full force and effect on the date
hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Amended and Restated Certificate of Incorporation the Special
Committee, acting under authority granted by the Board of Directors pursuant to
a resolution adopted by the Board of Directors on April 19, 1999 in accordance
with Section 141 of the DGCL, does hereby designate, create, authorize and
provide for the issue of 13-7/8% Senior Cumulative Redeemable Preferred Stock
(the "Preferred Stock"), par value $0.01 per share, with a liquidation
preference of $1,000 per share, consisting of 1,200,000 shares of Preferred
Stock. Of the 1,200,000 shares, (i) 300,000 will be issued on April 22, 1999 and
up to 300,000 shares are reserved for future issuance if the Company elects to
pay dividends on the Preferred Stock in additional shares of Preferred Stock in
accordance with the terms of this Certificate of Designations (collectively, the
"Initial Preferred Stock") and (ii) 600,000 are reserved for issuance in
connection with the consummation of an exchange offer pursuant to which the
Company may exchange the Initial Preferred Stock for shares of new 13-7/8%
Senior Cumulative Redeemable Preferred Stock and for issuance if the Company
elects to pay dividends on the Preferred Stock after such exchange offer in
additional shares of Preferred Stock in accordance with the terms of this
Certificate of Designations (collectively, the "New Preferred Stock"). No shares
of the New Preferred Stock may be issued except upon the surrender and
cancellation of such number of shares of the Initial Preferred Stock having an
aggregate Liquidation Preference equal to the aggregate Liquidation Preference
of the shares of the New Preferred Stock so issued or to pay dividends on the
New Preferred Stock in additional shares of New Preferred Stock in accordance
with the terms of this Certificate of Designations. All references in this
Certificate of Designations to Preferred Stock shall include Initial Preferred
Stock and New Preferred Stock. The Preferred Stock shall have the following
powers, preferences and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions thereof as follows:
1
<PAGE> 2
1. CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however
designated) the equity (which includes, but is not limited to, common stock,
preferred stock and partnership and joint venture interests) of such Person
(excluding any debt securities that are convertible into, or exchangeable for,
such equity).
"Certificated Securities" has the meaning set forth in Section 15(d)
below.
"Change of Control" has the meaning set forth in Section 8 below.
"Change of Control Offer" has the meaning set forth in Section 8 below.
"Change of Control Payment Date " has the meaning set forth in Section
8 below.
"Change of Control Purchase Price" has the meaning set forth in Section
8 below.
"Closing Date" means the date on which shares of Preferred Stock are
first issued.
"Commission" means the Securities and Exchange Commission.
"Depositary" has the meaning set forth in Section 15(a) below.
"Dividend Payment Date" has the meaning set forth in Section 3 below.
"Dividend Period" means (a) the initial dividend period commencing on
the Issue Date and ending on the first Dividend Payment Date to occur thereafter
and (b) thereafter, each quarterly dividend period.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Exchange Date" has the meaning set forth in Section 5 below.
"Exchange Debentures" means the Company's 13-7/8% Subordinated Exchange
Debentures due 2009 issuable in exchange for the Company's Preferred Stock
pursuant to Section 5.
"Exchange Debenture Indenture" has the meaning set forth in Section 5
below.
"Exchange Debenture Trustee" means the trustee under the Exchange
Debenture Indenture.
"Global Certificates" has the meaning set forth in Section 15(a) below.
"Global Certificate Holder" has the meaning set forth in Section 15(a)
below.
"Holder" means the record holder of one or more shares of Preferred
Stock, as shown on the books and records of the Transfer Agent.
2
<PAGE> 3
"Indebtedness" has the meaning ascribed to such term in the Exchange
Debenture Indenture.
"Initial Preferred Stock" means shares of Preferred Stock that are not
shares of New Preferred Stock.
"Issue Date" means with respect to a share of Preferred Stock the date
of its original issuance.
"Junior Securities" has the meaning set forth in Section 2 below.
"Legal Holiday" means a Saturday, a Sunday or a day on which federal
offices or banking institutions in The City of New York or at a place of payment
are authorized by law, regulation or executive order to remain closed.
"Liquidated Damages" means the additional amounts, if any, payable to
holders of the Preferred Stock under certain conditions pursuant to the terms of
the Registration Rights Agreement.
"Liquidation Preference" means $1,000 per share of Preferred Stock.
"Mandatory Redemption Date" means May 1, 2009.
"Moody's" means Moody's Investor Service, Inc. and its successors.
"New Preferred Stock" means that Company's 13-7/8% Senior Cumulative
Redeemable Preferred Stock that may be issued in exchange for the Initial
Preferred Stock constituting Preferred Stock as contemplated by the Registration
Rights Agreement and having terms identical in all material respects to the
Initial Preferred Stock constituting Preferred Stock.
"1999 Secured Note Indenture" means the indenture relating to the 1999
Secured Notes.
"1999 Secured Notes" means the 11% Senior Secured Notes due 2006 and
the 11-3/8% Senior Secured Notes due 2009 of RBF Finance Co. that are
unconditionally guaranteed by the Company.
"1999 Senior Note Indenture" means the indenture relating to the 1999
Senior Notes.
"1999 Senior Notes" means the Company's 12-1/4% Senior Notes due 2006.
"1998 Senior Note Indenture" means the indenture relating to the 1998
Senior Notes.
"1998 Senior Notes" means the Company's 9-1/8% Senior Notes due 2003
and 9-1/2% Senior Notes due 2008.
"Parity Securities" has the meaning set forth in Section 2 below.
"Paying Agent" has the meaning set forth in Section 11(c) below.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof or any other entity.
"Public Equity Offering" means any underwritten public offering shares
of common stock (however designated and whether voting or non-voting) of the
Company and any and all rights, warrants or options to acquire such common stock
pursuant to an effective registration statement (other than a registration
statement on Form S-4 or S-8) filed with the Commission in accordance with the
Securities Act.
3
<PAGE> 4
"RBF Finance Co. Loans" means the loans made pursuant to those ten
separate loan agreements each dated March 26, 1999 between the Company and RBF
Finance Co., each of which is secured by one of the Company's drilling rigs or
the construction contract to build a drilling rig.
"Redemption Notice" has the meaning set forth in Section 6 below.
"Registration Rights Agreement" means the Preferred Stock Registration
Rights Agreement executed and delivered by the Company and dated April 22, 1999.
"Restricted Subsidiary" means a Restricted Subsidiary under the 1999
Senior Note Indenture.
"S&P" means Standard & Poors Ratings Group, a division of McGraw-Hill
Companies, Inc. and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person:
(1) any corporation of which more than 50% of the total voting
power of all classes of the Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors
is owned by such Person directly or through one or more other
Subsidiaries of such Person, and
(2) any entity other than a corporation of which at least a
majority of the Capital Stock or other equity interest (however
designated) entitled (without regard to the occurrence of any
contingency) to vote in the election of the governing body, partners,
managers or others that will control the management of such entity is
owned by such Person or through one or more other Subsidiaries of such
Person.
"Transfer Agent" means the entity designated from time to time by the
Company to act as the registrar and transfer agent for the Preferred Stock.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Voting Rights Triggering Event" has the meaning set forth in Section 4
below.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
2. RANKING
The Preferred Stock shall, with respect to dividends and rights on the
liquidation, winding-up and dissolution of the Company, rank (i) senior to each
class of capital stock of the Company outstanding or established after the date
hereof by the Board of Directors of the Company, the terms of which do not
expressly provide that it ranks senior to, or on a parity with, the Preferred
Stock as to dividends and rights on the liquidation, winding-up and dissolution
of the Company (collectively referred to, together with the common stock of the
Company, as "Junior Securities") and (ii) on a parity with each other class of
preferred stock established after the Closing Date by the Board of Directors of
the Company, the terms of which expressly provide that such class or series will
rank on a parity with the Preferred Stock as to dividends and rights on the
liquidation, winding-up and dissolution of the Company (collectively referred to
as the "Parity Securities"). While any Preferred Stock is outstanding, the
Company may not, without the approval of the Holders of at least a majority of
the Preferred Stock then outstanding, voting or consenting as a separate class,
authorize, create (by way of reclassification or otherwise) or issue any Parity
Securities or any security convertible or exchangeable into or evidencing a
right to purchase, shares of any class or series of Parity Securities, except
that the Company may issue (a) shares of New Preferred Stock pursuant to this
Certificate of Designations and as provided in the Registration Rights
Agreement, and (b) shares of Initial Preferred Stock or New Preferred Stock to
pay dividends thereon in accordance with this Certificate of
4
<PAGE> 5
Designations. While any Preferred Stock is outstanding, the Company may not
authorize, create or issue (by way of reclassification or otherwise) any future
issuances of preferred stock that rank senior to the Preferred Stock.
3. DIVIDENDS
The Holders of shares of the Preferred Stock are entitled to receive,
whether or not dividends are declared by the Board of Directors out of funds of
the Company, cumulative preferential dividends from the Issue Date accumulating
at a rate equal to 13-7/8% of the Liquidation Preference per annum from the
Issue Date, payable quarterly per share on February 1, May 1, August 1, and
November 1, or, if any such date is not a Business Day, on the next succeeding
Business Day (each, a "Dividend Payment Date"), to the Holders as of the
immediately preceding January 15, April 15, July 15 and October 15 (each, a
"Record Date"). All accrued and unpaid dividends will compound on a quarterly
basis at a rate per annum equal to 13-7/8%. Dividends may be paid in cash or, at
the Company's option until May 1, 2004, by the issuance of additional shares of
Preferred Stock (including fractional shares) having an aggregate Liquidation
Preference equal to the amount of such dividends. In the event that on or prior
to May 1, 2004 dividends are declared and paid through the issuance of
additional shares of Preferred Stock, as provided in the previous sentence, such
dividends shall be deemed paid in full and will not accumulate. After May 1,
2004, dividends must be paid in cash. The first dividend payment of Preferred
Stock will be payable on August 1, 1999. Dividends payable on the Preferred
Stock will be computed on the basis of a 360-day year consisting of twelve
30-day months and will be deemed to accrue on a daily basis.
The dividend rate on the Preferred Stock is subject to increase, and
Liquidated Damages will be payable on the Dividend Payment Dates set forth
above, in certain circumstances as specified in the Registration Rights
Agreement, if, among other matters, the Preferred Stock is not registered with
the Commission within the time periods prescribed in the Registration Rights
Agreement. All references herein to "dividends" shall be deemed to include any
such "Liquidated Damages."
Dividends on the Preferred Stock will accrue whether or not the Company
has earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
Dividends will accumulate to the extent they are not paid on the Dividend
Payment Date for the period to which they relate. In the event that dividends on
the Preferred Stock are in arrears and unpaid for three or more quarterly
dividend periods (whether or not consecutive), holders of Preferred Stock will
be entitled to certain voting rights pursuant to Section 4 hereof. The Company
shall take all actions required or permitted under the DGCL to permit the
payment of dividends on the Preferred Stock, including, without limitation,
through the revaluation of its assets in accordance with the DGCL, and to make
or keep funds legally available for the payment of dividends.
If the Company pays a dividend on the Preferred Stock by issuing
additional shares of Preferred Stock (or otherwise is deemed to pay a
distribution for United States federal income tax purposes) to any Person with
respect to which the Company determines, after request of such information from
such Person as the Company deems appropriate, that it is obligated to withhold
United States federal tax, then prior to any such distribution the Company shall
be entitled to liquidate on behalf of such Person the additional shares of
Preferred Stock to the extent necessary in order to fully fund the Company's
withholding obligation. The Company will promptly distribute to such Person the
balance of the additional shares of Preferred Stock not used to fund such
withholding obligation.
Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to Holders of
Preferred Stock on such date, not more than 45 days prior to the payment
thereof, as may be fixed by the Board of Directors of the Company.
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of Preferred
Stock with respect to any Dividend Period unless all dividends for all preceding
Dividend Periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividend, upon all outstanding shares of
Preferred Stock. No full dividends may be declared or paid or funds set apart
for the payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash, a
sum in cash sufficient for such payment set apart for such payment on the
Preferred Stock. If full dividends are not so paid, the Preferred Stock will
share dividends pro rata with the Parity Securities. So long
5
<PAGE> 6
as any Preferred Stock is outstanding and unless and until full cumulative
dividends have been paid (or are deemed paid) in full on the Preferred Stock:
(i) no dividend (other than a dividend payable solely in shares of additional
Junior Securities) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Junior Securities; (ii) no other
distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any shares of Junior Securities, other than a
distribution consisting solely of Junior Securities; (iii) no shares of Parity
Securities or Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for shares of other Junior
Securities) by the Company or any of its Subsidiaries; (iv) no warrants, rights,
calls or options requiring the Company or any of its Subsidiaries to purchase
any Parity Securities or Junior Securities shall be directly or indirectly
issued by the Company or any of its Subsidiaries; and (v) no monies shall be
paid into or set apart or made available for a sinking or other like fund for
the purchase, redemption or other acquisition or retirement for value of any
shares of Parity Securities or Junior Securities by the Company or any of its
Subsidiaries. Holders of the Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the full
cumulative dividends as herein described.
4. VOTING RIGHTS; AMENDMENTS
Holders of shares of the Preferred Stock shall have no voting rights,
except as required by law and as provided herein. Upon (a) the accumulation of
accrued and unpaid dividends on the outstanding Preferred Stock for three or
more quarterly Dividend Periods (whether or not consecutive); (b) the failure of
the Company to make any required Change of Control Offer or (c) the failure of
the Company to comply with any of the other covenants or agreements set forth in
this Certificate of Designations and the continuance of such failure for 30
consecutive days or more after receipt of notice of such failure from the
holders of at least 25% of the Preferred Stock then outstanding (each of the
events described in clauses (a), (b) and (c) being referred to herein as a
"Voting Rights Triggering Event"), then the Holders of a majority of the
outstanding shares of Preferred Stock, with the holders of shares of any Parity
Securities, issued after the Closing Date, upon which like voting rights have
been conferred and are exercisable, voting as a single class, will be entitled
to elect two directors to the Company's Board of Directors for successive
one-year terms until all dividends in arrears on the Preferred Stock have been
paid or declared and set apart for payment, the Company has made and, to the
extent any shares of Preferred Stock are tendered, consummated, such Change of
Control Offer, or such failure to comply with covenants or other agreements has
been cured. Upon the Company's paying or declaring and setting apart of funds
for payment of all such dividends in arrears, making and consummating such
Change of Control Offer or curing such failure to comply with covenants or other
agreements, the term of office of each director elected will immediately
terminate and the number of directors constituting the entire Board of Directors
will be reduced by the number of directors elected by the holders of the
Preferred Stock and any Parity Securities.
In addition to the provisions described above in Section 2, the Company
shall not, without the approval of the Holders of at least a majority of the
Preferred Stock then outstanding, amend, alter or repeal any of the provisions
of the Company's Certificate of Incorporation (including this Certificate of
Designations) or the bylaws of the Company so as to affect adversely the powers,
preferences or rights of the holders of the Preferred Stock or reduce the time
for any notice to which the Holders of the Preferred Stock may be entitled.
Subject to Section 2 hereof, an amendment of the Company's Certificate of
Incorporation to authorize or create, or to increase the amount of Junior
Securities or Parity Securities shall not be deemed to affect adversely the
powers, preferences or rights of the holders of the Preferred Stock.
Notwithstanding the foregoing, modifications and amendments to the
Certificate of Designations described in Section 8 below may be made by the
Company with the consent of the Holders of a majority of the Preferred Stock
then outstanding; provided that following the mailing of any Change of Control
Offer and until the expiration date for Holders to accept that Change of Control
Offer no such modification or amendment may, without the consent of the Holder
of each outstanding share of Preferred Stock affected thereby, modify any Change
of Control Offer for the Preferred Stock required by Section 8 in a manner
materially adverse to the holders of outstanding Preferred Stock. Holders of a
majority of the outstanding Preferred Stock may waive any past default of the
provisions of Section 8 except a default arising from failure to purchase any
Preferred Stock tendered pursuant to a Change of Control Offer.
6
<PAGE> 7
5. EXCHANGE
The Preferred Stock will not be exchangeable for Exchange Debentures
unless on a Dividend Payment Date the Company could, among other things, (1)
redeem the Preferred Stock, (2) incur the indebtedness evidenced by the Exchange
Debentures and (3) pay in cash the dividend payable on such Dividend Payment
Date, without violating the covenants in the 1998 Senior Note Indenture, the
1999 Senior Note Indenture and the 1999 Secured Note Indenture. If the Preferred
Stock is exchangeable pursuant to the preceding sentence, the Company may, at
its option, on such Dividend Payment Date, exchange in whole, but not in part,
the then outstanding shares of Preferred Stock for Exchange Debentures with a
principal amount equal to the Liquidation Preference of the Preferred Stock
plus, without duplication, the accrued and unpaid dividends due on the Exchange
Date; provided that: (i) on the date of such exchange there are no accumulated
and unpaid dividends and Liquidated Damages, if any, on the Preferred Stock
(other than the dividend payable on such date) or other contractual impediments
to such exchange; (ii) there shall be legally available funds sufficient
therefor; (iii) immediately after giving effect to such exchange, no Default or
Event of Default (each as defined in the 1999 Secured Note Indenture, 1999
Senior Note Indenture, the 1998 Senior Note Indenture and the Exchange Debenture
Indenture) would exist under such indentures or would be caused thereby; (iv)
the Exchange Debenture Indenture has been qualified under the Trust Indenture
Act, if such qualification is required at the time of exchange; and (v) the
Company shall have delivered a written opinion to the Exchange Debenture Trustee
to the effect that all conditions to be satisfied prior to such exchange have
been satisfied. At any time, the Company may make an irrevocable election to
waive its right to exchange the Preferred Stock for Exchange Debentures.
Upon any exchange pursuant to the preceding paragraph, Holders of
outstanding Preferred Stock will be entitled to receive, subject to the second
succeeding sentence of this paragraph, $1.00 principal amount of Exchange
Debentures for each $1.00 of the aggregate Liquidation Preference of Preferred
Stock held by them, plus, without duplication, the accrued and unpaid dividends
due on the Exchange Date. The Exchange Debentures will be issued in registered
form, without coupons. The Exchange Debentures will be issued in principal
amounts of $1,000 and integral multiples thereof to the extent possible, and
will also be issuable in principal amounts less than $1,000 so that each Holder
of Preferred Stock will receive certificates representing the entire amount of
Exchange Debentures to which such Holder's shares of Preferred Stock entitle
such Holder; provided that the Company may pay cash in lieu of issuing an
Exchange Debenture having a principal amount less than $1,000. Notice of the
intention to exchange will be sent by or on behalf of the Company not more than
60 days nor less than 30 days prior to the date of exchange (the "Exchange
Date"), by first class mail, postage prepaid, to each Holder of Preferred Stock
at its registered address. In addition to any information required by law or by
the applicable rules of any exchange upon which Preferred Stock may be listed or
admitted to trading, such notice will state: (i) the Exchange Date; (ii) the
place or places where certificates for such shares are to be surrendered for
exchange, including any procedures applicable to exchanges to be accomplished
through book-entry transfers; and (iii) that dividends on the shares of
Preferred Stock to be exchanged will cease to accrue on the Exchange Date. If
notice of exchange has been properly given (unless the Company defaults in
issuing Exchange Debentures in redemption by means of the exchange for the
Preferred Stock or fails to pay or set aside accrued and unpaid dividends and
Liquidated Damages, if any, on the Preferred Stock), and if on or before the
Exchange Date the Exchange Debentures have been duly executed and authenticated
and deposited with the Transfer Agent, then on and after the close of business
on the Exchange Date, the holders of the Preferred Stock will cease to be
stockholders with respect to such shares and will have no interest in or claims
against the Company by virtue thereof (except the right to receive Exchange
Debentures in exchange therefor and accrued and unpaid dividends thereon to the
Exchange Date) and will have no voting or other rights with respect to such
shares, dividends will cease to accrue on the Preferred Stock, and the shares of
Preferred Stock will no longer be outstanding. No shares of Preferred Stock may
be exchanged for Exchange Debentures unless the Company has paid or set aside
for the benefit of the holders of the Preferred Stock all accrued and unpaid
dividends on the Preferred Stock, and Liquidated Damages, if any, to the
Exchange Date.
Prior to the exchange of all outstanding shares of Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the form of the
Indenture for the Exchange Debentures from the form thereof certified by the
Secretary of the Company and delivered to the Transfer Agent on the Closing Date
(the "Exchange Debenture Indenture") (except as expressly provided therein in
respect of amendments without the consent of holders of Exchange Debentures)
without the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Preferred Stock, voting or consenting, as the case may be,
together as one class.
7
<PAGE> 8
6. REDEMPTION
Mandatory Redemption
On the Mandatory Redemption Date, the Company shall redeem (subject to
the legal availability of funds therefor) all outstanding shares of Preferred
Stock at a price in cash equal to the Liquidation Preference thereof, plus
accrued and unpaid dividends (including an amount in cash equal to a pro rated
dividend for any partial Dividend Period) and Liquidated Damages, if any, to the
date of redemption. The Company will not be required to make sinking fund
payments with respect to the Preferred Stock. The Company shall take all actions
required or permitted under Delaware law to permit such redemption.
Optional Redemption
The Preferred Stock may be redeemed, in whole or in part, at the option
of the Company on or after May 1, 2004, at the redemption prices specified below
(expressed as percentages of the Liquidation Preference thereof), in each case,
together with accrued and unpaid dividends (including an amount in cash equal to
a pro rated dividend for any partial Dividend Period) and Liquidated Damages, if
any, to the date of redemption, upon not less than 30 nor more than 60 days'
prior written notice, if redeemed during the 12-month period commencing on May 1
of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004................................................. 106.938%
2005................................................. 104.625%
2006................................................. 102.313%
2007 and thereafter.................................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to May 1, 2002
the Company may, at its option, redeem in whole or in part, shares of Preferred
Stock having an aggregate Liquidation Preference of up to $105 million at a
price in cash equal to 113.875% of the Liquidation Preference thereof, plus
accrued and unpaid dividends and Liquidated Damages, if any, to the redemption
date, with the net cash proceeds from one or more Public Equity Offerings;
provided that any such redemption shall occur within 45 days of the date of the
closing of such Public Equity Offerings.
Procedures for Redemption
At least thirty (30) days and not more than sixty (60) days prior to
the date fixed for any redemption of the Preferred Stock, written notice (the
"Redemption Notice") shall be given by first class mail, postage prepaid, to
each Holder on the record date fixed for such redemption of the Preferred Stock
at such Holder's address as it appears on the register maintained by the
Transfer Agent, provided, that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption of any
shares of Preferred Stock to be redeemed except as to the Holder or Holders to
whom the Company has failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Redemption Notice shall state:
(i) whether the redemption is pursuant to a mandatory redemption
or optional redemption as specified in this Section 6;
(ii) the redemption price;
(iii) whether all or less than all the outstanding shares of the
Preferred Stock are to be redeemed and the total number of
shares of the Preferred Stock being redeemed;
(iv) the redemption date;
(v) that the Holder is to surrender to the Company, in the manner,
at the place or places and at the price designated, its
certificate or certificates representing the shares of
Preferred Stock to be redeemed; and
8
<PAGE> 9
(vi) that dividends on the shares of the Preferred Stock to be
redeemed shall cease to accumulate on such redemption date
unless the Company defaults in the payment of the redemption
price.
Each Holder of Preferred Stock shall surrender the certificate or
certificates representing such shares of Preferred Stock to the Company, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Company), in the manner and at the place designated in the Redemption Notice,
and on the redemption date the full redemption price for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
On and after the redemption date, unless the Company defaults in the
payment in full of the applicable redemption price, dividends on the Preferred
Stock called for redemption shall cease to accumulate on the redemption date,
and all rights of the Holders of redeemed shares shall terminate with respect
thereto on the redemption date, other than the right to receive the redemption
price; provided, that if the Redemption Notice shall have been given as provided
above and the funds necessary for redemption (including an amount in cash in
respect of all dividends that will accumulate to the redemption date) shall have
been irrevocably deposited in trust for the equal and ratable benefit for the
Holders of the shares to be redeemed, then, at the close of business on the day
on which such funds are segregated and set aside, the Holders of the shares to
be redeemed shall cease to be stockholders of the Company and shall be entitled
only to receive the redemption price.
7. LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock, each Holder of shares of the Preferred Stock shall
be entitled to payment out of the assets of the Company available for
distribution of an amount equal to the Liquidation Preference per share of
Preferred Stock held by such Holder, plus accrued and unpaid dividends and
Liquidated Damages, if any, to the date fixed for liquidation, dissolution,
winding-up or reduction or decrease in capital stock, before any distribution is
made on any Junior Securities, including, without limitation, common stock of
the Company. After payment in full of the Liquidation Preference and all accrued
and unpaid dividends and Liquidated Damages, if any, to which Holders of
Preferred Stock are entitled, such Holders shall not be entitled to any further
participation in any distribution of assets of the Company. If, upon any
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
the amounts payable with respect to the Preferred Stock and all other Parity
Securities are not paid in full, the holders of record of the Preferred Stock
and the Parity Securities shall share equally and ratably in any distribution of
assets of the Company in proportion to the full liquidation preference and
accumulated and unpaid dividends and Liquidated Damages to which each is
entitled. Neither the voluntary sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company nor the consolidation
or merger of the Company with or into one or more corporations will be deemed to
be a voluntary or involuntary liquidation, dissolution or winding-up of the
Company or reduction or decrease in capital stock, unless such sale, conveyance,
exchange or transfer shall be in connection with a liquidation, dissolution or
winding-up of the business of the Company or reduction or decrease in capital
stock.
8. CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), the Company shall make an offer (the "Change of Control Offer") to
each Holder of Preferred Stock to repurchase all or any part (but not, in the
case of any holder requiring the Company to purchase less than all of the shares
of Preferred Stock held by such Holder, any fractional shares) of such Holder's
Preferred Stock at an offer price in cash equal to 101% of the aggregate
Liquidation Preference thereof plus, without duplication, all accrued and unpaid
dividends per share to the date of purchase (including an amount in cash equal
to a pro rated dividend for the period from the Dividend Payment Date
immediately prior to the date of purchase (the "Change of Control Payment Date")
to the Change of Control Payment Date) and Liquidated Damages, if any, to the
Change of Control Payment Date (the "Change of Control Purchase Price"):
9
<PAGE> 10
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes
of this clause (i) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total voting
power of the Voting Stock of the Company;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board
of Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of 66-2/3% of the directors of the
Company then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
of the Board of Directors then in office; and
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company or the
Company and its Restricted Subsidiaries taken as a whole to another
Person, and, in the case of any such merger or consolidation, the
securities of the Company that are outstanding immediately prior to
such transaction and which represent 100% of the aggregate voting power
of the Voting Stock of the Company are changed into or exchanged for
cash, securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving
corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred if (a) the ratings assigned to the 1999 Senior Notes by Moody's
and S&P prior to the announcement are not downgraded or placed on a negative
credit watch by either such rating agency as a result thereof and (b) no Default
has occurred and is continuing under the 1999 Senior Note Indenture.
Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder of the Preferred Stock stating, among other things: (a)
that a Change of Control has occurred and that such holder has the right to
require the Company to purchase such Holder's Preferred Stock for the Change of
Control Purchase Price; (b) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro forma historical
income, cash flow and capitalization after giving effect to such Change of
Control); (c) the Change of Control Payment Date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed); and (d) the
instructions determined by the Company, consistent with this Section 8, that a
Holder must follow in order to have its Preferred Stock purchased.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Preferred Stock pursuant to
this Section 8. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 8 by virtue thereof.
If any credit facility that provides for an event of default or
requires a payment upon a Change of Control is in effect or if the 1998 Senior
Notes, 1999 Senior Notes or 1999 Secured Notes or the RBF Finance Co. Loans are
outstanding or if any other Indebtedness of the Company or its Subsidiaries that
requires a payment upon a Change of Control is outstanding, or any amounts are
owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, then prior to the mailing of the notice to Holders described
in the second preceding paragraph, but in any event within 30 days following any
Change of Control, the Company shall (i) (A) repay or cause the borrowers
thereunder to repay in full all obligations under or in respect of such credit
facility, such senior notes, such secured notes and such loans and such other
Indebtedness of each lender who has then irrevocably accepted such offer or (B)
obtain and cause such other borrowers to obtain the requisite consent under such
credit facility and such other Indebtedness from the holders of such other
Indebtedness and from the holders of the 1998 Senior Notes, 1999 Senior Notes,
1999 Secured Notes and the RBF Finance Co. Loans, respectively, to permit the
repurchase of the Preferred Stock as described above without violating any
applicable covenants and other contractual restrictions
10
<PAGE> 11
contained in the instruments governing such credit facility and other
Indebtedness and the 1998 Senior Note Indenture, 1999 Senior Note Indenture and
the 1999 Secured Note Indenture, and (ii) if the Company and any other borrowers
do not obtain such requisite consents pursuant to clause (i)(B) above, take such
other or additional actions as may be required to consummate the Change of
Control Offer without violating any applicable covenants or other contractual
restrictions contained in the instruments governing such credit facility and
other Indebtedness and the 1998 Senior Note Indenture, 1999 Senior Note
Indenture and 1999 Secured Note Indenture. The Company may not, and shall not be
required to, purchase Preferred Stock in the event of a Change of Control unless
and until it has complied with the covenant described in the preceding sentence;
provided, that the Company's failure to comply with the covenant described in
the preceding sentence constitutes a Voting Rights Triggering Event described in
clause (b) of the second sentence of Section 4 hereof. The failure of the
Company, following a Change of Control, to make a Change of Control Offer or to
pay when due the Change of Control Purchase Price for shares of Preferred Stock
tendered in conformity with any such Change of Control Offer will give the
holders of the Preferred Stock the rights described under Section 4 hereof.
If the Company has any outstanding preferred stock (other than the
Preferred Stock) with respect to which the Company is required to make an offer
to redeem or purchase or to make a distribution with respect to such preferred
stock in the event of a change of control, the Company shall not consummate any
such offer or distribution with respect to such preferred stock (other than the
Preferred Stock and any Parity Securities having comparable rights on a Change
of Control) until such time as the Company shall have paid the Change of Control
Purchase Price in full to the Holders of Preferred Stock that have validly
accepted the Company's Change of Control Offer and shall otherwise have
consummated the Change of Control Offer made to such Holders. The Company shall
not issue preferred stock with change of control provisions requiring the
redemption or purchase of such preferred stock prior to or contemporaneous with
the redemption or purchase of the Preferred Stock in the event of a Change of
Control without the approval of holders of at least a majority of the Preferred
Stock then outstanding.
The Company shall not be required to make a Change of Control Offer to
the Holders of Preferred Stock upon a Change of Control if a third party makes
the Change of Control Offer described above in the manner, at the times and
otherwise in compliance with the requirements set forth and purchases all shares
of Preferred Stock validly tendered and not withdrawn under such Change of
Control Offer. Further, the Company's obligation to purchase any Preferred Stock
tendered to the Company pursuant to a Change of Control Offer may be discharged
by a third party's purchase of such Preferred Stock and payment therefor in
accordance with the terms of the Change of Control Offer.
9. MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company shall not consolidate with or merge into any Person,
continue in another jurisdiction, or sell, lease, convey, transfer or otherwise
dispose of all or substantially all of its assets to any Person, unless:
(1) the Person formed by or surviving such consolidation or merger
(if other than the Company), or to which such sale, lease, conveyance, transfer
or other disposition shall be made (collectively, the "Successor"), is a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia;
(2) the Preferred Stock shall be converted into or exchanged for
and shall become shares of such Successor, having in respect of such Successor,
the same powers, preferences and relative participating, optional or other
special rights and the qualifications, limitations or restrictions thereon, that
the Preferred Stock had immediately before such transactions; and
(3) immediately after giving effect to such transaction, no Voting
Rights Triggering Event shall have occurred and be continuing.
10. REPORTS
Whether or not required by the rules and regulations of the Commission,
so long as any shares of Preferred Stock are outstanding, the Company shall
furnish to the Holders of the Preferred Stock within 15 days after it would
11
<PAGE> 12
have been required to file them with the Commission, (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K (without exhibits) if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants; and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K (without exhibits) if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, the Company shall file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing). In addition, the Company shall
furnish to the Holders of the Preferred Stock and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act and the exhibits
omitted from the information furnished pursuant to the preceding sentence, for
so long as the Preferred Stock is not freely transferable under the Securities
Act.
11. PAYMENT
a. All amounts payable in cash with respect to the
Preferred Stock shall be payable in United States dollars at the office
or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of
dividends (if any) may be made by check mailed to the Holders of the
Preferred Stock at their respective addresses set forth in the register
of Holders of Preferred Stock maintained by the Transfer Agent;
provided that all cash payments with respect to the Global Certificates
shall be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
b. Any payment on the Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be
made on the next succeeding Business Day with the same force and effect
as if made on such due date.
c. The Company has initially appointed the Transfer
Agent to act as the "Paying Agent." The Company may at any time
terminate the appointment of any Paying Agent and appoint additional or
other Paying Agents; provided that until the Preferred Stock has been
delivered to the Company for cancellation, or moneys sufficient to pay
the Liquidation Preference of the Preferred Stock plus, without
duplication, accumulated and unpaid dividends (including an amount in
cash equal to a pro rated dividend for any partial Dividend Period) and
Liquidated Damages, if any, on the Preferred Stock shall have been made
available for payment and either paid or returned to the Company as
provided in this Certificate of Designations, the Company shall
maintain an office or agency in the Borough of Manhattan, The City of
New York for surrender of Preferred Stock for payment and exchange.
d. Dividends payable on the Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date
shall be paid to the Holders of record as of the immediately preceding
Record Date.
e. All moneys and shares of Preferred Stock deposited
with any Paying Agent or then held by the Company in trust for the
payment of the Liquidation Preference and accumulated and unpaid
dividends and Liquidation Damages, if any, on any shares of Preferred
Stock which remain unclaimed at the end of two years after such payment
has become due and payable shall be repaid to the Company, and the
Holder of such shares of Preferred Stock shall thereafter look only to
Company for payment thereof.
12. EXCLUSION OF OTHER RIGHTS
Except as may otherwise be required by law, the shares of Preferred
Stock shall not have any powers, preferences and relative, participating,
optional or other special rights, other than those specifically set forth in
this Certificate of Designations (as this Certificate of Designations may be
amended from time to time) and in the Certificate of Incorporation. The shares
of Preferred Stock shall have no preemptive or subscription rights.
12
<PAGE> 13
13. HEADINGS OF SUBDIVISIONS
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
14. SEVERABILITY OF PROVISIONS
If any of the powers, preferences and relative, participating, optional
and other special rights of the Preferred Stock and the qualifications,
limitations and restrictions thereof set forth in this Certificate of
Designations (as it may be amended from time to time) are invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, all
other powers, preferences and relative, participating, optional and other
special rights of the Preferred Stock and the qualifications, limitations and
restrictions thereof set forth in this Certificate of Designations (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable powers, preferences and relative, participating, optional and
other special rights of the Preferred Stock and the qualifications, limitations
and restrictions thereof shall, nevertheless, remain in full force and effect,
and no powers, preferences and relative, participating, optional or other
special rights of the Preferred Stock and the qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any other
such powers, preferences and relative, participating, optional or other special
rights of Preferred Stock and qualifications, limitations and restrictions
thereof unless so expressed herein.
15. FORM OF PREFERRED STOCK
(a) The Preferred Stock shall initially be issued in the form of
one or more Global Certificates ("Global Certificates"). The Global Certificates
shall be deposited on the date of original issuance of the Initial Preferred
Stock with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to as the "Global Certificate Holder").
(b) So long as the Global Certificate Holder is the registered
owner of any Preferred Stock, the Global Certificate Holder shall be considered
the sole Holder under this Certificate of Designations of the shares of
Preferred Stock evidenced by the Global Certificate. Beneficial owners of shares
of Preferred Stock evidenced by the Global Certificate shall not be considered
the owners or holders thereof under this Certificate of Designations for any
purpose.
(c) Payments in respect of the Liquidation Preference of and
accumulated and unpaid dividends and Liquidated Damages, if any, on any
Preferred Stock registered in the name of the Global Certificate Holder on the
applicable record date shall be payable by the Company to or at the direction of
the Global Certificate Holder in its capacity as the registered holder under
this Certificate of Designations. The Company may treat the persons in whose
names Preferred Stock, including, without limitation, the Global Certificate,
are registered as the owners thereof for the purpose of receiving such payments.
(d) Any person having a beneficial interest in a Global
Certificate may, upon request to the Company, exchange such beneficial interest
for Preferred Stock in the form of registered definitive certificates (the
"Certificated Securities"). Upon any such issuance, the Company shall register
such Certificated Securities in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). If (i) the
Depositary has notified the Company that it is unwilling or unable to continue
as depositary for the Global Certificate and the Company thereupon fails to
appoint a successor to the Depositary within 90 days, or (ii) has ceased to be a
clearing agency registered under the Exchange Act, or (iii) the Company, at its
option, elects to cause the issuance of Preferred Stock in the form of
Certificated Securities, then, upon surrender by the Global Certificate Holder
of its Global Certificate, Preferred Stock in such form of Certificated Security
will be issued to each person that the Global Certificate Holder and the
Depositary identify as being the beneficial owner of the related Preferred
Stock. In each such case, the Company shall notify the Transfer Agent in writing
that, upon surrender by a person having a beneficial interest in the Global
Certificate of their interest in such Global Certificate. Certificated
Securities will be issued to each person that the Global Certificate Holder and
the Depositary identify as being the beneficial owner of the related Preferred
Stock.
13
<PAGE> 14
(e) (i) Each Global Certificate shall bear a legend in
substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST
COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE
APPOINTED BY THE COMPANY AND THE TRANSFER AGENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY
BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(f) All shares of Preferred Stock will bear a legend to the
following effect, unless the Company determines otherwise in compliance with
applicable law:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH IN THE NEXT SENTENCE. BY ITS acquisition HEREOF OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (a) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB"), OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2)
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"));
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY OF
ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRANSFER
AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY
(THE FORM OF WHICH CAN BE OBTAINED FROM THE TRANSFER AGENT)
AND AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (E)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, AND IN
EACH CASE, IN ACCORDANCE WITH
14
<PAGE> 15
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED
A NOTICE SUBSTANTIALLY to the EFFECT OF THIS LEGEND.
15
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed by Steven A. Webster, President of the Company, and attested by
Leighton E. Moss, its Assistant Secretary, this 22nd day of April, 1999.
R&B FALCON CORPORATION
By: /S/ STEVEN A. WEBSTER
---------------------------------
Name: Steven A. Webster
Title: President
ATTEST:
By: /S/ LEIGHTON E. MOSS
----------------------------
Name: Leighton E. Moss
Title: Assistant Secretary
16
<PAGE> 1
[GARDERE, WYNNE, SEWELL & RIGGS, L.L.P. LETTERHEAD]
EXHIBIT 5.1
June 21, 1999
Board of Directors
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Gentlemen:
We have acted as counsel to R&B Falcon Corporation, a Delaware
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-4 (the "Registration Statement") being filed with the
Securities and Exchange Commission on this date relating to the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of the
offer by the Company (the "Exchange Offer") of certain shares of its 13 7/8%
Senior Cumulative Redeemable Preferred Stock to be exchanged (the "Exchange
Preferred Stock") for up to 311,447 shares of its outstanding 13 7/8% Senior
Cumulative Redeemable Preferred Stock (the "Outstanding Preferred Stock," and,
together with the Exchange Preferred Stock, the "Preferred Stock"). Each share
of the Exchange Preferred Stock is to have terms substantially identical in all
material respects to each share of Outstanding Preferred Stock, except that such
Exchange Preferred Stock will not contain terms with respect to transfer
restrictions. The Exchange Preferred Stock is exchangeable, at the Company's
option, into 13 7/8% Senior Subordinated Debentures due 2009 (the "Exchange
Debentures"), which Exchange Debentures will be issued in accordance with the
provisions of the Indenture to be entered into prior to such exchange between
the Company and U.S. Trust Company, N.A., as Trustee (the "Indenture").
As the basis for the opinions expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Certificate of
Designation creating the Exchange Preferred Stock and such statutes,
regulations, corporate records and documents, certificates of corporate and
public officials and other instruments as we have deemed necessary or advisable
for the purposes of this opinion. In such examination, we have assumed (i) that
the signatures on all documents that we have examined are genuine, (ii) the
authenticity of all documents submitted to us as originals, and (iii) the
conformity with the original documents of all documents submitted to us as
copies.
In connection with this opinion, we have assumed that (i) the
Registration Statement, and any amendments thereto (including post-effective
amendments), will have become effective and (ii) the shares of Exchange
Preferred Stock will be issued and exchanged in compliance with applicable
federal and state securities laws and in the manner stated in the Registration
Statement.
<PAGE> 2
Board of Directors
R&B Falcon Corporation
June 21, 1999
Page Two
Based upon the foregoing, subject to the qualifications hereinafter set
forth, and having regard for such legal considerations as we have deemed
relevant, we are of the opinion that:
1. The shares of Exchange Preferred Stock proposed to be issued
pursuant to the Exchange Offer have been duly authorized for issuance and,
subject to the Registration Statement becoming effective under the Securities
Act and such shares being issued and exchanged in compliance with any applicable
state securities laws, when issued, delivered and exchanged in accordance with
the Exchange Offer, will be legally issued and fully paid and non-assessable.
2. The Exchange Debentures have been duly authorized for issuance, and
upon issuance thereof in exchange for shares of Preferred Stock, in accordance
with the terms of the Amended and Restated Certificate of Incorporation of the
Company, as amended, and the Indenture, and assuming due execution and delivery
of the Indenture by the parties thereto and due authentication of the Exchange
Debentures by the Trustee, will constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
that the enforcement of the Exchange Debentures may be limited by (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except that a waiver of rights under any usury laws may be
unenforceable; and furthermore, we express no opinion as to the enforceability
of any provisions of the Exchange Debentures that would require the performance
thereof in the presence of fraud or illegality on the part of the holders of the
Exchange Debentures or the Trustee.
The opinions expressed herein are limited exclusively to the federal
laws of the United States of America, the laws of the State of Texas and the
General Corporation Law of the State of Delaware, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction.
This opinion is rendered solely for the benefit of the Company and is
not to be used, circulated, copied, quoted or referred to without our prior
written consent. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the statements made with respect to us
under the caption "Legal Matters" in the Prospectus included as part of the
Registration Statement.
Very truly yours,
/s/ WILLIAM MARK YOUNG
William Mark Young, Partner
<PAGE> 1
EXHIBIT 10.1
PURCHASE AGREEMENT
------------------------
R&B FALCON CORPORATION
$300,000,000
300,000 UNITS CONSISTING OF
300,000 SHARES OF
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
AND
WARRANTS TO PURCHASE 10,500,000 SHARES OF COMMON STOCK
APRIL 15, 1999
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
$300,000,000
300,000 UNITS CONSISTING OF
300,000 SHARES OF 13-7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
AND WARRANTS TO PURCHASE 10,500,000 SHARES OF COMMON STOCK
R&B FALCON CORPORATION
PURCHASE AGREEMENT
April 15, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
AS INITIAL PURCHASER
277 PARK AVENUE
NEW YORK, NEW YORK 10172
Dear Sirs:
R&B Falcon Corporation, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER"), 300,000 shares, or an aggregate of
$300,000,000 in liquidation preference, of its 13-7/8% Senior Cumulative
Redeemable Preferred Stock, liquidation preference $1,000 per share and par
value $0.01 per share (the "RESTRICTED PREFERRED STOCK"), and warrants (the
"WARRANTS") to purchase 10,500,000 shares of the Company's common stock, par
value $0.01 per share (the "WARRANT SHARES"), to be offered in 300,000 units,
each consisting of one share of Restricted Preferred Stock, and one warrant,
each entitling the holder thereof to purchase 35 shares of the Company's common
stock (the "UNITS"), subject to the terms and conditions set forth herein. The
Restricted Preferred Stock is to be issued pursuant to the provisions of a
Certificate of Designation forming part of the Company's Certificate of
Incorporation (the "CERTIFICATE OF DESIGNATION") to be filed with the Secretary
of State of the State of Delaware on or before the Closing Date (as defined
below). The Warrants are to be issued pursuant to the provisions of a Warrant
Agreement (the "WARRANT AGREEMENT") to be dated as of the Closing Date. The
Units are to be issued pursuant to a Unit Agreement (the "UNIT AGREEMENT") to
be dated as of the Closing Date. The Restricted Preferred Stock and the New
Preferred Stock (as defined below), issuable in exchange therefor, are
collectively referred to herein as the "PREFERRED STOCK." The Preferred Stock
may be exchanged, at the option of the Company, for subordinated debentures of
the Company with the terms set forth in the Offering Memorandum (the "EXCHANGE
DEBENTURES"). The Units, the Preferred Stock, the Exchange Debentures and the
Warrants are collectively referred to herein as the "SECURITIES." Capitalized
terms used but not defined herein shall have the meanings given to such terms
in the Offering Memorandum.
1. OFFERING MEMORANDUM. The Securities will be offered and sold
to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"ACT"). The Company has prepared an offering memorandum, dated April 15, 1999
(the "OFFERING MEMORANDUM"), relating to the Securities.
<PAGE> 3
Upon original issuance thereof, and until such time as the same
is no longer required pursuant to the Certificate of Designation, the
Restricted Preferred Stock or the Exchange Debentures (and all securities
issued in exchange therefor, in substitution thereof or upon conversion
thereof) shall bear the following legend:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"),
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT (AN "IAI"));
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (D) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE [TRANSFER AGENT] [TRUSTEE]
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE
OBTAINED FROM THE [TRANSFER AGENT] [TRUSTEE]) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, AND IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND."
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Warrant Agreement, the Warrants and the Warrant
Shares (and all securities issued in exchange therefor, in substitution thereof
or upon conversion thereof) shall bear the following legend:
3
<PAGE> 4
"THESE WARRANTS (OR THEIR PREDECESSORS) AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREIN HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A), (1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT
(AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THESE WARRANTS OR WARRANT SHARES EXCEPT (A) TO THE ISSUER OR ANY OF
ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (D) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE WARRANT
AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THESE SECURITIES (THE FORM OF
WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, the aggregate principal amount of Units at a
purchase price equal to 96.50% of the aggregate offering price thereof (the
"PURCHASE PRICE").
4
<PAGE> 5
3. TERMS OF OFFERING. The Initial Purchaser has advised, and
represents and warrants to, the Company that the Initial Purchaser will make
offers and sales (the "EXEMPT RESALES") of the Securities purchased hereunder
on the terms set forth in the Offering Memorandum, as amended or supplemented,
solely to persons whom the Initial Purchaser reasonably believes to be
"qualified institutional buyers" (as defined in Rule 144A promulgated under the
Act) ("QIBs") (QIBs being referred to herein as the "ELIGIBLE PURCHASERS"). The
Initial Purchaser will offer the Securities to Eligible Purchasers initially at
a price set forth on the cover page of the Offering Memorandum.
Holders (including subsequent transferees) of the Restricted
Preferred Stock and Warrants will have the registration rights set forth in
either the Preferred Stock registration rights agreement (the "PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT") or the Warrant registration rights agreement
(the "WARRANT REGISTRATION RIGHTS AGREEMENT"), each to be dated the Closing
Date, in substantially the forms of Exhibit A and Exhibit B hereto, for so long
as such Restricted Preferred Stock, Exchange Debentures and/or Warrants
constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Preferred Stock
Registration Rights Agreement or the Warrant Registration Rights Agreement, as
applicable). Pursuant to the Preferred Stock Registration Rights Agreement, the
Company will agree to file (i) with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein (A) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to a new series of the Company's Preferred Stock of like amounts having
identical terms (the "NEW PREFERRED STOCK") to be offered in exchange for the
Restricted Preferred Stock, or if the Preferred Stock has been exchanged for
Exchange Debentures, subordinated debentures having identical terms (the "NEW
EXCHANGE DEBENTURES") (such offer to exchange being referred to as the
"EXCHANGE OFFER") and/or (B) a shelf registration statement pursuant to Rule
415 under the Act (the "PREFERRED STOCK SHELF REGISTRATION STATEMENT" and,
together with the Exchange Offer Registration Statement, the "REGISTRATION
STATEMENTS") relating to the resale by certain holders of the Restricted
Preferred Stock or Exchange Debentures, as applicable, and (ii) to use its
reasonable best efforts to cause such Registration Statements to be declared
and remain effective and usable for the periods specified in the Preferred
Stock Registration Rights Agreement and to consummate the Exchange Offer.
Pursuant to the Warrant Registration Rights Agreement, the Company will agree
to file (i) with the Commission under the circumstances set forth therein a
shelf registration statement pursuant to Rule 415 under the Act (the "WARRANT
SHELF REGISTRATION STATEMENT") relating to the resale by certain holders of the
Warrants or the Warrant Shares and (ii) to use its reasonable best efforts to
cause such Warrant Shelf Registration Statement to be declared and remain
effective and usable for the periods specified in the Warrant Registration
Rights Agreement. This Agreement, the Certificate of Designation forming part
of the Company's Certificate of Incorporation, the Indenture relating to the
Exchange Debentures, the Warrant Agreement, the Units, the Unit Agreement, the
Restricted Preferred Stock, Exchange Debentures, the Warrants, the Preferred
Stock Registration Rights Agreement and the Warrant Registration Rights
Agreement are referred to herein as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Securities shall be made at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., in Houston, Texas, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City
time, on April 22, 1999 or at such other time or date as shall be agreed upon
by the Initial Purchaser and the Company in writing. The time and date of such
delivery and the payment for the Securities are herein called the "CLOSING
DATE."
5
<PAGE> 6
(b) The Securities shall each be represented by definitive
global certificates and shall be issued in such authorized denominations and in
such names as the Initial Purchaser shall request no later than two business
days prior to the Closing Date. The Company shall deliver the Securities, with
any transfer taxes thereon duly paid by the Company against payment by the
Initial Purchaser of the Purchase Price thereof by wire transfer in same day
funds to the order of the Initial Purchaser through the facilities of The
Depository Trust Company ("DTC"). The certificates representing the Units, the
Restricted Preferred Stock and the Warrants shall be made available for
inspection not later than 9:30 a.m., New York City time, on the business day
prior to the Closing Date at the office of DTC or its designated custodian (the
"DESIGNATED OFFICE").
5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with
the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if
requested by the Initial Purchaser, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Securities for offering or
sale in any jurisdiction designated by the Initial Purchaser pursuant to
Section 5(e) hereof, or the initiation of any proceeding by any state
securities commission or any other federal or state regulatory authority for
such purpose and (ii) of the happening of any event during the period referred
to in Section 5(c) below that makes any statement of a material fact made in
the Offering Memorandum untrue or that requires any additions to or changes in
the Offering Memorandum in order to make the statements therein not misleading.
The Company shall use its best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption of any Securities
under any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority shall
issue an order suspending the qualification or exemption of any Securities
under any state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company as many copies of the
Offering Memorandum, and any amendments or supplements thereto, as the Initial
Purchaser may reasonably request for the time period specified in Section 5(c).
Subject to the Initial Purchaser's compliance with their representations and
warranties and agreements set forth in Section 7 hereof, the Company consents
to the use of the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchaser in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser for so long as any Securities
are outstanding, (i) not to make any amendment or supplement to the Offering
Memorandum of which the Initial Purchaser shall not previously have been
advised or to which the Initial Purchaser shall reasonably object after being
so advised and (ii) to prepare promptly upon the Initial Purchaser's reasonable
request based on the opinion of its counsel, any amendment or supplement to the
Offering Memorandum which may be necessary or advisable in connection with such
Exempt Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c)
above, any event shall occur or condition shall exist as a result of which, in
the opinion of counsel to the Initial Purchaser, it becomes necessary to amend
or supplement the Offering Memorandum in order to make the statements therein,
in the light of the circumstances when such Offering Memorandum is delivered to
an Eligible
6
<PAGE> 7
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment
or supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchaser and such other
persons as the Initial Purchaser may designate such number of copies thereof as
the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Securities pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Securities for offer and sale to the Initial Purchaser and
pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may reasonably request and to continue
such registration or qualification in effect so long as required for Exempt
Resales and to file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation in any jurisdiction in which it
is not now so qualified or to take any action that would subject it to general
consent to service of process or taxation other than as to matters and
transactions relating to the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Preferred Stock, Exchange Debentures or
Warrants are outstanding, (i) to mail and make generally available as soon as
practicable after the end of each fiscal year to the record holders of the
Securities such financial reports of the Company and its subsidiaries as are
required to be made available pursuant to the Certificate of Designation (or,
if the Preferred Stock has been exchanged for Exchange Debentures, the
Indenture), the Warrant Agreement and the federal securities laws of the United
States and (ii) to mail or make generally available as soon as practicable
after the end of each quarterly period (except for the last quarterly period of
each fiscal year) to such record holders to the extent so required, such
quarterly financial reports of the Company and its subsidiaries as may be
specified therein or required by such laws.
(g) So long as the Preferred Stock, Exchange Debentures or
Warrants are outstanding, to furnish upon request to the Initial Purchaser as
soon as available copies of all reports or other communications furnished by
the Company to its security holders or furnished to or filed with the
Commission or any national securities exchange on which any class of securities
of the Company is listed and such other publicly available information
concerning the Company as the Initial Purchaser may reasonably request.
(h) So long as any of the Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder of Securities in connection with any sale thereof and
any prospective purchaser of such Securities from such holder, the information
("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to
be paid all expenses incident to the performance of the obligations of the
Company under this Agreement, including: (i) the fees, disbursements and
expenses of counsel to the Company and accountants of the Company in connection
with the sale and delivery of the Securities to the Initial Purchaser and
pursuant to Exempt Resales, and all other fees and expenses in connection with
the preparation, printing, filing and distribution of the Offering
7
<PAGE> 8
Memorandum and all amendments and supplements to the foregoing (including
financial statements), including the mailing and delivering of copies thereof
to the Initial Purchaser and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Initial Purchaser and pursuant to Exempt
Resales, including any transfer or other taxes payable thereon, (iii) all costs
of printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale
or delivery of the Securities, (iv) all expenses in connection with the
registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Initial Purchaser in connection with such registration or qualification and
memoranda relating thereto), (v) the cost of printing certificates representing
the Securities, (vi) all expenses and listing fees in connection with the
application for quotation of the Securities in The PORTAL Market ("PORTAL") of
The Nasdaq Stock Market, Inc. ("Nasdaq"), (vii) the fees and expenses of the
Trustee and the Trustee's counsel in connection with the Indenture relating to
the underlying Exchange Debentures, (viii) the costs and charges of any
transfer agent, registrar and/or depositary (including DTC), (ix) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Preferred Stock Registration Rights Agreement or the Warrant Registration
Rights Agreement, and (x) and all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section.
(j) To use its best efforts, with the cooperation of the
Initial Purchaser, to effect the inclusion of the Securities on PORTAL and to
maintain the listing of the Securities on PORTAL for so long as any Securities
are outstanding. (k) To use its best efforts to maintain the listing of the
Company's common stock on the New York Stock Exchange for a period of three
years after the date of this Agreement.
(l) To obtain, with the cooperation of the Initial Purchaser,
the approval of DTC for "book-entry" transfer of the Securities, and to comply
with all of its agreements set forth in the representation letters of the
Company to DTC relating to the approval of the Securities for "book-entry"
transfer.
(m) Except as described or incorporated by reference in the
Offering Memorandum, during the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any securities of the Company or any
warrants, rights or options to purchase or otherwise acquire securities of the
Company substantially similar to the Securities (other than (i) the Exchange
Debentures, (ii) commercial paper issued in the ordinary course of business
(iii) outstanding employee stock options or options issuable under existing
employee benefit plans and (iv) acquisitions of stock or assets for
consideration of not more than an aggregate of 1,000,000 shares of common stock
of the Company), without the prior written consent of the Initial Purchaser.
(n) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Securities to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Securities under the Act.
(o) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Securities.
8
<PAGE> 9
(p) To comply with all of its agreements set forth in the
Warrant Agreement, the Unit Agreement, the Preferred Stock Registration Rights
Agreement, the Warrant Registration Rights Agreement and, to the extent the
Company exchanges the Preferred Stock for the Exchange Debentures, the
Indenture.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Securities.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
As of the date hereof, the Company represents and warrants to, and agrees with,
the Initial Purchaser that:
(a) The Offering Memorandum does not, and any supplement or
amendment to it will not, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
contained in this paragraph (a) shall not apply to statements in or omissions
from the Offering Memorandum (or any supplement or amendment thereto) based
upon information relating to the Initial Purchaser furnished to the Company in
writing by the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements of the Act, has
been issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation or limited liability company
in good standing under the laws of its jurisdiction of incorporation or
formation and has the corporate or limited liability company power and
authority to carry on its business as described in the Offering Memorandum and
to own, lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation or entity authorized to do business in
each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"), as the case may
be. Each of the subsidiaries of the Company listed on Schedule B hereto (the
"SUBSIDIARIES"), which Subsidiaries in the aggregate directly own substantially
all of the assets held by the Company and all of its subsidiaries on a
consolidated basis and which constitute all of the Company's "significant
subsidiaries" (as such term is defined in Regulation S-X under the Act), has
been duly incorporated, is validly existing as a corporation or limited
liability company in good standing under the laws of its jurisdiction of
incorporation or formation and has the corporate or limited liability company
power and authority to carry on its business and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation or entity authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not have
a Material Adverse Effect.
(c) All outstanding shares of capital stock of the Company
and its subsidiaries have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar rights and
after giving effect to the offering contemplated hereby the Preferred Stock,
when issued and delivered to the Initial Purchaser against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Preferred Stock will not be subject to
any preemptive or similar rights.
9
<PAGE> 10
(d) There are no authorized or outstanding subscriptions,
options, warrants, preemptive rights, rights of first refusal or other rights
to purchase, or equity or debt securities convertible or exchangeable into or
exchangeable or exercisable for, any capital stock of the Company or any of its
subsidiaries other than (1) those described or incorporated by reference in the
Offering Memorandum (2) outstanding employee stock options or options issuable
under existing employee benefit plans, (3) contingent or executory purchase
price payments or adjustments in connection with stock or asset acquisitions,
and (4) the right of Nisho Iwai to acquire an equity interest in the subsidiary
that owns the Iolair.
(e) There are no agreements, understandings or arrangements
among the Company or any other person regarding the ownership or disposition of
capital stock of the Company or any of its subsidiaries for election of
directors except (1) as described in the Certificate of Designation and the
Offering Memorandum or incorporated by reference in the Offering Memorandum,
(2) employee stock options or options issuable under existing employee benefit
plans, (3) contingent or executory purchase price payments or adjustments in
connection with stock or asset acquisitions, and (4) the right of Nisho Iwai to
acquire an equity interest in the subsidiary that owns the Iolair.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The form of the Indenture has been duly authorized by the
Company and, on the Exchange Date, the Indenture will have been validly
executed and delivered by the Company. When the Indenture has been duly
executed and delivered by the Company, the Indenture will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer or similar laws affecting
creditors' rights generally (the "ENFORCEABILITY EXCEPTIONS") and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Indenture will conform as to form in all material respects to the requirements
of the Trust Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE
ACT"), and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(h) On the Closing Date, the Certificate of Designation
relating to the Restricted Preferred Stock, the New Preferred Stock and any
additional shares of Preferred Stock issued as dividends in accordance with the
terms of the Certificate of Designation (the "DIVIDEND SHARES") will have been
duly authorized by the Company. On the Closing Date, the Certificate of
Designation will have been duly filed with the Secretary of State of the State
of Delaware, and the Amended and Restated Certificate of Incorporation of the
Company, including the Certificate of Designation forming part thereof, will
set forth the rights, preferences and priorities of the Preferred Stock and the
Dividend Shares.
(i) The Unit Agreement has been duly authorized by the
Company and, when executed and delivered by the Company, will constitute a
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to (x) the Enforceability
Exceptions and (y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(j) The Warrant Agreement has been duly authorized by the
Company and, when executed and delivered by the Company, will constitute a
valid and legally binding agreement of
10
<PAGE> 11
the Company, enforceable against the Company in accordance with its terms
subject to (x) the Enforceability Exceptions and (y) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability.
(k) The Units have been duly authorized and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-assessable and
free of any preemptive or similar rights. On the Closing Date, the Units will
conform as to legal matters to the description thereof contained in the
Offering Memorandum.
(l) The Restricted Preferred Stock has been duly authorized
and, when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable and free of any preemptive or similar rights. On the Closing
Date, the Restricted Preferred Stock will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(m) The Dividend Shares have been duly authorized and, if and
when issued and delivered by the Company in accordance with the terms of the
Certificate of Designation, will be validly issued, fully paid and
non-assessable and free of any preemptive or similar rights. The Company will
have reserved for issuance, and duly authorized the issuance of, the maximum
number of Dividend Shares issuable pursuant to the terms of the Certificate of
Designation.
(n) On the Closing Date, the New Preferred Stock will have
been duly authorized by the Company and upon its issuance in accordance with
the terms of the Preferred Stock Registration Rights Agreement, the New
Preferred Stock will be validly issued fully paid and non-assessable and free
of any preemptive or similar rights.
(o) The Warrants have been duly authorized by the Company
and, when issued and delivered by the Company against payment therefor in
accordance with the terms of the Warrant Agreement, will be validly issued,
fully paid and non-assessable and free of any preemptive or similar rights.
(p) The Warrant Shares will have been duly authorized by the
Company. Upon the exercise of the Warrants and payment of the exercise price
pursuant to the terms thereof (including payment by cashless exercise), the
Warrant Shares will be validly issued and will be fully paid, non-assessable
and free of any preemptive or similar rights.
(q) Prior to any exchange of the Preferred Stock for Exchange
Debentures, the Exchange Debentures will have been duly authorized by the
Company. If and when the Exchange Debentures are issued, executed and
authenticated in accordance with the terms of the Indenture and the Certificate
of Designation, the Exchange Debentures will be entitled to the benefits of the
Indenture and will be the valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as to
(i) the Enforceability Exceptions and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(r) Each of the Preferred Stock Registration Rights Agreement
and the Warrant Registration Rights Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company. When the Preferred Stock Registration Rights Agreement and the
Warrant Registration Rights Agreement have been duly executed and delivered,
each of the Preferred Stock Registration Rights Agreement and the Warrant
Registration Rights Agreement
11
<PAGE> 12
will be valid and binding agreements of the Company, enforceable against the
Company in accordance with their terms except as to (i) the Enforceability
Exceptions and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Preferred Stock Registration Rights Agreement and the
Warrant Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(s) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries to which the Company or its
subsidiaries is a party or by which the Company or its subsidiaries, or their
respective property, is bound.
(t) The execution, delivery and performance of this Agreement
and the other Operative Documents by the Company, compliance by the Company
with all provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or its subsidiaries or any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which the
Company or its subsidiaries is a party or by which the Company or its
subsidiaries, or their respective property is bound, (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over the
Company or its subsidiaries or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a lien under,
any agreement or instrument to which the Company or its subsidiaries is a party
or by which the their respective property is bound (other than liens granted
under or contemplated by the Operative Documents), or (v) result in the
termination, suspension or revocation of any Authorization (as defined below)
of the Company or result in any other impairment of the rights of the holder of
any such Authorization.
(u) There are no legal or governmental proceedings pending
or, to the knowledge of the Company or any of its subsidiaries, threatened, to
which the Company or its subsidiaries are a party or to which any of their
respective property is subject, which, if determined adversely against the
Company or its subsidiaries, would, singly or in the aggregate, have a Material
Adverse Effect.
(v) Except as disclosed in the Offering Memorandum, neither
the Company nor any of its subsidiaries has violated any foreign, federal,
state or local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any provisions
of the Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(w) Except as disclosed in the Offering Memorandum, neither
the Company nor any of its subsidiaries are obligated for costs or liabilities
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
12
<PAGE> 13
(x) Each of the Company and the Company's subsidiaries has
such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "AUTHORIZATION") of, and has made all filings with
and notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are necessary to own, lease,
license and operate its respective properties and to conduct its business,
except where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a Material Adverse
Effect. Each such Authorization is valid and in full force and effect and each
of the Company and the Company's subsidiaries is in compliance with all the
terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto; and
no event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; except where such burden or failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event or
the presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(y) The accountants, Arthur Andersen LLP and Ernst & Young
LLP, that have, as of the Closing, certified the financial statements and
supporting schedules of the Company or, one or more of the Company's
subsidiaries, are independent public accountants with respect to the Company
and its subsidiaries, as required by the Act and the Exchange Act. The summary
and selected historical consolidated financial data of the Company and the
historical financial statements, together with related schedules and notes, in
the Offering Memorandum or incorporated by reference complied as to form in all
material respects with the requirements applicable to (i) registration
statements under the Act or (ii) with respect to financial information
incorporated therein by reference, reports required to be filed under the
Exchange Act.
(z) The historical financial statements, together with
related schedules and notes incorporated by reference in the Offering
Memorandum (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated in the
Offering Memorandum at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set forth
in the Offering Memorandum (and any amendment or supplement thereto) are, in
all material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(aa) The pro forma financial statements incorporated by
reference in the Offering Memorandum have been prepared on a basis consistent
with the historical financial statements of the Company and its subsidiaries,
as adjusted to reflect the previously discontinued oil and gas exploration and
production operations as continuing operations for accounting purposes only,
and give effect to assumptions used in the preparation thereof on a reasonable
basis and in good faith and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in a registration statement under the Act. The
other pro forma financial and statistical information and data included in the
Offering Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with the pro forma financial statements.
13
<PAGE> 14
(bb) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(cc) Except as disclosed in the Offering Memorandum and
required under the terms of the 1998 Senior Notes, the 1999 Secured Notes and
the 1999 Senior Notes, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to require
the Company to file a registration statement under the Act with respect to any
securities of the Company (other than demand registration rights for not more
than an aggregate amount of 1,000,000 shares of the Company's common stock
granted in connection with acquisitions by the Company of stock or assets) or
to require the Company to include such securities with the Securities
registered pursuant to any Registration Statement.
(dd) Neither the Company or its subsidiaries nor any agent
thereof acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the
Securities to violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors
of the Federal Reserve System.
(ee) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act (i) has imposed (or has informed the Company that it is considering
imposing) any condition (financial or otherwise) on the Company's retaining any
rating assigned to the Company or any securities of the Company or (ii) has
indicated to the Company that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned or (b)
any change in the outlook for any rating of the Company or any securities of
the Company, except in the case of (i) and (ii) as publicly announced by such
nationally recognized statistical rating organization.
(ff) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), (i) there has not occurred any material adverse
change or, to the Company's or its subsidiaries' knowledge, any development
involving a prospective material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there has not been any adverse
change or, to the Company's or its subsidiaries' knowledge, any development
involving a prospective adverse change in the capital stock or in the long-term
debt of the Company or its subsidiaries and (iii) neither the Company nor its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(gg) The Offering Memorandum, as of its date, contains or
incorporates by reference all the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Act.
(hh) When the Securities are issued and delivered pursuant to
this Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(ii) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Company or any of
its respective representatives (other than the Initial Purchaser, as to whom
the Company makes no representation) in connection with the offer and
14
<PAGE> 15
sale of the Securities contemplated hereby, including, but not limited to,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as any of the Securities
have been issued and sold by the Company within the six-month period
immediately prior to the date hereof.
(jj) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(kk) None of the Company nor any of its affiliates or any
person acting on its or their behalf (other than the Initial Purchaser, as to
whom the Company makes no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S under the Act
("REGULATION S") with respect to the Securities.
(ll) No registration under the Act of the Securities is
required for the sale of the Securities to the Initial Purchaser as
contemplated hereby or for the Exempt Resales assuming the accuracy of the
Initial Purchaser's representations and warranties and agreements set forth in
Section 7 hereof.
(mm) Each certificate signed by any officer of the Company or
its subsidiaries and delivered to the Initial Purchaser or counsel for the
Initial Purchaser shall be deemed to be a representation and warranty by the
Company to the Initial Purchaser as to the matters covered thereby.
(nn) The Company and its subsidiaries have good and
marketable title to all real property and to all personal property owned by
them which is material to the business of the Company in each case free and
clear of all liens, except such as are described in the Offering Memorandum or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries. Except as otherwise described in the Offering
Memorandum or incorporated therein by reference, the Company and its
subsidiaries do not own any real property or buildings with such exceptions,
and any real property and buildings held under lease by the Company or its
subsidiaries are held by them under valid, subsisting and enforceable leases
that do not have such exceptions, unless in any case such exceptions are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or its subsidiaries.
The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
Initial Purchaser represents and warrants to, and agrees with, the Company:
(a) Such Initial Purchaser is a QIB with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Securities.
(b) Such Initial Purchaser (A) is not acquiring the
Securities with a view to any distribution thereof or with any present
intention of offering or selling any of the Securities in a transaction that
would violate the Act or the securities laws of any state of the United States
or any other
15
<PAGE> 16
applicable jurisdiction and (B) will be reoffering and reselling the Securities
only to QIBs in reliance on the exemption from the registration requirements of
the Act provided by Rule 144A.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by the Initial Purchaser or any of its
representatives in connection with the offer and sale of the Securities
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, the Initial Purchaser will solicit offers to buy the Securities
only from, and will offer to sell the Securities only to, Eligible Purchasers.
The Initial Purchaser further agrees that it will offer to sell the Securities
only to, and will solicit offers to buy the Securities only from Eligible
Purchasers that the Initial Purchaser reasonably believes are QIBs and that
agree that (x) the Securities purchased by them may be resold, pledged or
otherwise transferred within the time period referred to under Rule 144(k)
(taking into account the provisions of Rule 144(d) under the Act, if
applicable) under the Act, as in effect on the date of the transfer of such
Securities, only (I) to the Company or any of its subsidiaries, (II) to a
person whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the requirements
of Rule 144A under the Act, (III) in a transaction meeting the requirements of
Rule 144 under the Act, (IV) to an Accredited Institution that, prior to such
transfer, furnishes the trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of such
Securities and an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Act, (V) in accordance with another
exemption from the registration requirements of the Act (and based upon an
opinion of counsel acceptable to the Company) or (VI) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (y) they will deliver to each person to whom such Securities
or an interest therein is transferred a notice substantially to the effect of
the foregoing.
(e) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will not engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Securities.
The Initial Purchaser acknowledges that the Company and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and the
Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Initial Purchaser, its directors, its officers and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses reasonably incurred in connection with investigating or
defending any matter, including any action, that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Memorandum (or any amendment or supplement thereto), any Rule 144A
Information provided by the Company to any holder or prospective
16
<PAGE> 17
purchaser of Securities pursuant to Section 5(h) or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company and its respective directors and officers and each person,
if any, who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) the Company, to the same extent as the foregoing indemnity
from the Company to the Initial Purchaser, but only with reference to
information relating to the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser expressly for use in the Offering Memorandum.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchaser). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Initial Purchaser, in
the case of the parties indemnified pursuant to Section 8(a), and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and
expenses of counsel (in any case where such fees and expenses are at the
expense of the indemnifying party) and, prior to the date of such settlement,
the indemnifying party shall have failed to comply with such reimbursement
request. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party
17
<PAGE> 18
from all liability on claims that are or could have been the subject matter of
such action and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of the indemnified
party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchaser on the other hand from the
offering of the Securities or (ii) if the allocation provided by clause 8(d)(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company, on the one hand, and the Initial
Purchaser, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand and the Initial Purchaser, on the
other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (after underwriting discounts and
commissions, but before deducting expenses) received by the Company, and the
total discounts and commissions received by the Initial Purchaser bear to the
total price to investors of the Securities, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault of the
Company, on the one hand, and the Initial Purchaser, on the other hand, shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, on the
one hand, or the Initial Purchaser, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, on the one hand, and the Initial Purchaser, on
the other hand, agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action, that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchaser shall not be required to contribute any amount in excess of the
amount by which the total discounts and commissions received by the Initial
Purchaser exceeds the amount of any damages which the Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Securities under this
Agreement are subject to the satisfaction of each of the following conditions:
18
<PAGE> 19
(a) All the representations and warranties of the Company and
its subsidiaries contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), (i) there shall not have occurred any adverse
change or any development involving a prospective change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and its subsidiaries, taken as a whole, (ii) there shall not have
been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company and (iii) the Company shall not have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market
the Securities on the terms and in the manner contemplated in the Offering
Memorandum.
(c) The Initial Purchaser shall have received on the Closing
Date a certificate dated the Closing Date, signed by the Chief Executive
Officer and the Principal Financial Officer of the Company, confirming the
matters set forth in Sections 6(ff), 9(a) and 9(b) and stating that the Company
has complied with all the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied on or prior to the
Closing Date.
(d) The Initial Purchaser shall have received on the Closing
Date an opinion (satisfactory to you and counsel for the Initial Purchaser),
dated the Closing Date, of Gardere Wynne Sewell & Riggs, L.L.P., counsel for
the Company, to the effect that:
(i) the Company has been duly incorporated or
formed, is validly existing as a corporation in good standing
under the laws of Delaware and has the corporate power and
authority to carry on its business as described in the
Offering Memorandum and to own, lease and operate its
properties;
(ii) the Units to be issued and sold by the Company
hereunder have been duly authorized, and when issued and
delivered to the Initial Purchaser against payment therefor
as provided in this Agreement, will have been validly issued
and will be fully paid and non-assessable, and the issuance
of such Restricted Preferred Stock is free of any preemptive
or similar rights;
(iii) the Preferred Stock to be issued and sold by
the Company hereunder has been duly authorized, and when
issued and delivered to the Initial Purchaser against payment
therefor as provided in this Agreement, will have been
validly issued and will be fully paid and non-assessable, and
the issuance of such Preferred Stock is free of any
preemptive or similar rights;
(iv) the Dividend Shares, to be issued as dividends
on the Preferred Stock, have been duly authorized, and when
issued and delivered to the holders of the Preferred Stock as
provided in the Certificate of Designation after the due and
proper declaration of such dividends by the Board of
Directors, will have been validly issued and will be fully
paid and non-assessable, and the issuance of such Dividend
Shares would be free of any preemptive or similar rights;
19
<PAGE> 20
(v) the Warrants to be issued and sold by the
Company hereunder have been duly authorized, and when issued
and delivered to the Initial Purchaser against payment
therefor as provided in this Agreement, will have been
validly issued and will be fully paid and non-assessable, and
the issuance of such Warrants is free of any preemptive or
similar rights;
(vi) the Warrant Shares to be issued upon exercise
of the Warrants have been duly authorized, and when issued
and delivered to holders against payment therefor as provided
in the Warrant Agreement, will have been validly issued and
will be fully paid and non-assessable, and the issuance of
such Warrant Shares will be free of any preemptive or similar
rights;
(vii) the Certificate of Designation has been duly
authorized, executed and filed with the Secretary of State of
the State of Delaware and the Amended and Restated
Certificate of Incorporation of the Company, including the
Certificate of Designation forming part thereof, sets forth
the rights, preferences and priorities of the Preferred Stock
and the Dividend Shares;
(viii) the Warrant Agreement has been duly
authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms except as to
(x) the Enforceability Exceptions and (y) the availability of
equitable remedies may be limited by equitable principles of
general applicability;
(ix) the Unit Agreement has been duly authorized,
executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the
Company in accordance with its terms except as to (x) the
Enforceability Exceptions and (y) the availability of
equitable remedies may be limited by equitable principles of
general applicability;
(x) the form of Indenture has been duly authorized,
and when the Indenture has been executed and delivered by the
Company after due and proper authorization by the Board of
Directors of the exchange of the Preferred Stock for the
Exchange Debentures in accordance with the terms of the
Certificate of Designation, will be a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms except as to (x) the Enforceability
Exceptions and (y) rights of acceleration and the
availability of equitable remedies may be limited by
equitable principles of general applicability;
(xi) the form of Exchange Debenture has been duly
authorized and, when the Exchange Debentures have been
executed and authenticated in accordance with the provisions
of the Certificate of Designation and the Indenture after due
and proper authorization by the Board of Directors of the
exchange of the Preferred Stock for the Exchange Debentures
and delivered to holders of the Preferred Stock in accordance
with the terms of the Certificate of Designation and the
Indenture, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as to (x)
the Enforceability Exceptions and
20
<PAGE> 21
(y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general
applicability;
(xii) this Agreement has been duly authorized,
executed and delivered by the Company;
(xiii) each of the Preferred Stock Registration
Rights Agreement and the Warrant Registration Rights
Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreements of the
Company, enforceable against the Company in accordance with
their terms, except as to (x) the Enforceability Exceptions,
(y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general
applicability and (z) the enforceability of the
indemnification provisions thereof may be limited by federal
and state securities laws;
(xiv) the New Preferred Stock and related Dividend
Shares have been duly authorized;
(xv) the statements under the captions "Risk
Factors," "Description of Securities," "Description of
Certain Indebtedness," "Description of Capital Stock,"
"Certain Federal Income Tax Consequences to the U.S.
Holders," "Plan of Distribution" and "Notice to Investors" in
the Offering Memorandum, insofar as such statements
constitute a summary of legal matters, fairly present in all
material respects such legal matters;
(xvi) the execution, delivery and performance of
this Agreement, the Warrant Agreement, the Unit Agreement,
the Preferred Stock Registration Rights Agreement and the
Warrant Registration Rights Agreement, and, upon due and
proper authorization by the Board of Directors of the
exchange of the Preferred Stock for the Exchange Debentures
in accordance with the terms of the Certificate of
Designation, the Indenture and the Exchange Debentures and
compliance with the terms and provisions thereof by the
Company, and the issuance and sale of the Securities and
compliance with the Certificate of Designation will not (i)
violate its charter or bylaws, (ii) require any consent,
approval, authorization or other order of, or qualification
with, any court or governmental body or agency of the United
States or the States of Texas or New York (except such as may
be required under the securities or Blue Sky laws of the
various states), (iii) conflict with or constitute a breach
of any of the terms or provisions of, or a default under the
indentures executed, or senior notes issued, by the Company
in connection with the 1998 Senior Note and the 1999 Senior
Note offerings and by the Company and RBF Finance Co. in
connection with the 1999 Secured Note offering or, to such
counsel's actual knowledge, any other indenture, loan
agreement, mortgage, lease or other agreement or instrument
to which the Company or the Significant Subsidiaries is a
party or by which the Company or the Significant Subsidiaries
or their respective property is bound, which conflict, breach
or default is likely to have, either individually or in the
aggregate, a Material Adverse Effect, or (iv) violate or
conflict with any applicable law or any rule or regulation,
or to such counsel's actual knowledge, any judgment, order or
decree, in each case of any court or any governmental
21
<PAGE> 22
body or agency of the United States or the States of Texas or
New York having jurisdiction over the Company or the
Significant Subsidiaries or their respective property;
(xvii) the Company is not and, after giving effect
to the offering and sale of the Securities and the
application of the net proceeds thereof as described in the
Offering Memorandum, will not be, an "investment company" as
such term is defined in the Investment Issuer Act of 1940, as
amended;
(xviii) the Indenture complies as to form in all
material respects with the requirements of the TIA, and the
rules and regulations of the Commission applicable to an
indenture which is qualified thereunder; it is not necessary
in connection with the offer, sale and delivery of the
Securities to the Initial Purchaser in the manner
contemplated by this Agreement or in connection with the
Exempt Resales to qualify the Indenture under the TIA;
(xix) no registration under the Act of the
Securities is required for the sale of the Securities to the
Initial Purchaser as contemplated by this Agreement or for
the Exempt Resales assuming that (i) the Initial Purchaser is
a QIB, (ii) the accuracy of, and compliance with, the Initial
Purchaser's representations and agreements contained in
Section 7 of this Agreement and (iii) the accuracy of the
representations of the Company set forth in Sections 5(h) and
6(bb), (dd) and (hh) of this Agreement; and
(xx) such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the Company's accountants, the Initial
Purchaser's representatives and counsel for the Initial
Purchaser, at which conferences the contents of the Offering
Memorandum and related matters were discussed and, although
such counsel is not passing upon and does not assume any
responsibility for and shall not be deemed to have
independently verified the accuracy, completeness or fairness
of the statements contained in the Offering Memorandum no
facts have come to the attention of such counsel that lead
such counsel to believe that the Offering Memorandum
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements contained therein not
misleading or that the Offering Memorandum on the date
thereof or on the date hereof (other than the financial
statements and notes thereto and the other financial
information, including the information referred to under the
caption "Experts" as to which such counsel does not comment)
contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
The opinion of Gardere Wynne Sewell & Riggs, L.L.P. described in
Section 9(d) above shall be rendered to you at the request of the Company and
shall so state therein. In giving such opinion with respect to the matters
covered by Section 9(d)(xx), Gardere Wynne Sewell & Riggs, L.L.P. may state
that their opinion and belief are based upon their participation in the
preparation of the Offering Memorandum and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
22
<PAGE> 23
(e) The Initial Purchaser shall have received on the Closing
Date an opinion (satisfactory to you and counsel for the Initial Purchaser),
dated the Closing Date, of Leighton E. Moss, Senior Vice President and
Co-Counsel for the Company, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of Delaware and has the corporate power and authority to
carry on its business as described in the Offering Memorandum
and to own, lease and operate its properties;
(ii) the Company is duly qualified and is in good
standing as a foreign corporation authorized to do business
in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such
qualification, or application has been made and is pending,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(iii) R&B Falcon Holdings, Inc. ("HOLDINGS") has
been duly incorporated, is validly existing as a corporation
and in good standing under the laws of its jurisdiction of
incorporation, has the corporate authority to carry on its
business and to own, lease and operate its properties; is
duly qualified and is in good standing as a foreign
corporation or entity authorized to do business in each state
of the United States in which the nature of its business or
its ownership or leasing of property requires such
qualification, or application has been made and is pending,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(iv) R&B Falcon Drilling (International & Deepwater)
("DEEPWATER") Inc. has been duly incorporated, is validly
existing as a corporation and in good standing under the laws
of its jurisdiction of incorporation, has the corporate and
authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good
standing as a foreign corporation or entity authorized to do
business in each state of the United States in which the
nature of its business or its ownership or leasing of
property requires such qualification, or application has been
made and is pending, except where the failure to be so
qualified would not have a Material Adverse Effect;
(v) Cliffs Drilling Company ("CLIFFS") has been duly
incorporated, is validly existing as a corporation and in
good standing under the laws of its jurisdiction of
incorporation, has the corporate and authority to carry on
its business and to own, lease and operate its properties; is
duly qualified and is in good standing as a foreign
corporation or entity authorized to do business in each state
of the United States in which the nature of its business or
its ownership or leasing of property requires such
qualification, or application has been made and is pending,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(vi) R&B Falcon Drilling USA, Inc. ("DRILLING USA")
has been duly incorporated, is validly existing as a
corporation and in good standing under the
23
<PAGE> 24
laws of its jurisdiction of incorporation, has the corporate
and authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good
standing as a foreign corporation or entity authorized to do
business in each state of the United States in which the
nature of its business or its ownership or leasing of
property requires such qualification, or application has been
made and is pending, except where the failure to be so
qualified would not have a Material Adverse Effect;
(vii) R&B Falcon Drilling Co. ("DRILLING CO.") has
been duly incorporated, is validly existing as a corporation
and in good standing under the laws of its jurisdiction of
incorporation, has the corporate and authority to carry on
its business and to own, lease and operate its properties; is
duly qualified and is in good standing as a foreign
corporation or entity authorized to do business in each state
of the United States in which the nature of its business or
its ownership or leasing of property requires such
qualification, or application has been made and is pending,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(viii) R&B Falcon Exploration Co. ("EXPLORATION")
has been duly incorporated, is validly existing as a
corporation and in good standing under the laws of its
jurisdiction of incorporation, has the corporate and
authority to carry on its business and to own, lease and
operate its properties; is duly qualified and is in good
standing as a foreign corporation or entity authorized to do
business in each state of the United States in which the
nature of its business or its ownership or leasing of
property requires such qualification, or application has been
made and is pending, except where the failure to be so
qualified would not have a Material Adverse Effect;
(ix) Double Eagle Marine, Inc. ("DEM") has been duly
incorporated, is validly existing as a corporation and in
good standing under the laws of its jurisdiction of
incorporation, has the corporate and authority to carry on
its business and to own, lease and operate its properties; is
duly qualified and is in good standing as a foreign
corporation or entity authorized to do business in each state
of the United States in which the nature of its business or
its ownership or leasing of property requires such
qualification, or application has been made and is pending,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(x) all the outstanding shares of capital stock of
the Company, Deepwater, Holdings, Cliffs, Drilling USA,
Drilling Co., Exploration and DEM have been duly authorized
and validly issued and are fully paid, non-assessable and, to
such counsel's knowledge, are not subject to any preemptive
or similar rights;
(xi) to such counsel's actual knowledge, there are
no authorized or outstanding subscriptions, options,
warrants, preemptive rights, rights of first refusal or other
rights to purchase, or equity or debt securities convertible
or exchangeable into or exchangeable or exercisable for, any
capital stock of the Company or any of its subsidiaries other
than those described in the Offering Memorandum and this
Agreement.
24
<PAGE> 25
(x) the Company has the corporate power and
authority to perform its obligations under the Operative
Documents;
(xi) this Agreement has been duly authorized,
executed and delivered by the Company;
(xii) each of the Preferred Stock Registration
Rights Agreement and the Warrant Registration Rights
Agreement has been duly authorized, executed and delivered by
the Company;
(xiii) to such counsel's knowledge, (a) none of the
Company or Holdings, Deepwater, Cliffs, Drilling USA,
Drilling Co., Exploration or DEM (the "SIGNIFICANT
SUBSIDIARIES") is in violation of its respective charter or
bylaws and, (b) neither the Company nor the Significant
Subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and the
Significant Subsidiaries, taken as a whole, to which the
Company or the Significant Subsidiaries is a party or by
which the Company or the Significant Subsidiaries or their
respective property is bound, which default could reasonably
be expected to result in a Material Adverse Effect;
(xiv) the execution, delivery and performance of
this Agreement, the Warrant Agreement, the Unit Agreement,
the Preferred Stock Registration Rights Agreement and the
Warrant Registration Rights Agreement, and, upon due and
proper authorization by the Board of Directors of the
exchange of the Preferred Stock for the Exchange Debentures
in accordance with the terms of the Certificate of
Designation, the Indenture and the Exchange Debentures and
compliance with the terms and provisions thereof by the
Company and the issuance and sale of the Securities and
compliance with the Certificate of Designation will not (i)
violate its charter or bylaws, (ii) require any consent,
approval, authorization or other order of, or qualification
with, any court or governmental body or agency of the United
States or the States of Texas or New York (except such as may
be required under the securities or Blue Sky laws of the
various states), (iii) conflict with or constitute a breach
of any of the terms or provisions of, or a default under the
indenture executed, or senior notes issued, by the Company in
connection with debt offerings by the Company in connection
with the 1998 Senior Note and the 1999 Senior Note offerings
and by the Company and RBF Finance Co. in connection with the
1999 Secured Note offering or, to such counsel's actual
knowledge, any indenture, loan agreement, mortgage, lease or
other agreement or instrument to which the Company or the
Significant Subsidiaries is a party or by which the Company
or the Significant Subsidiaries or their respective property
is bound, which conflict, breach or default is likely to
have, either individually or in the aggregate, a Material
Adverse Effect, or (iv) violate or conflict with any
applicable law or any rule or regulation, or to such
counsel's actual knowledge, any judgment, order or decree, in
each case of any court or any governmental body or agency
having
25
<PAGE> 26
jurisdiction over the Company or the Significant Subsidiaries
or their respective property.
(xv) such counsel has no knowledge of any legal or
governmental proceedings pending or threatened to which the
Company or the Significant Subsidiaries is or could be a
party or to which any of their respective property is or
could be subject, which could reasonably be expected to
result, singly or in the aggregate, in a Material Adverse
Effect.
(xvi) to such counsel's knowledge, each of the
Company and the Significant Subsidiaries has such
Authorizations of, and has made all filings with and notices
to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other
tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its
business, except where the failure to have any such
Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect.
To such counsel's knowledge, (a) each such Authorization is
valid and in full force and effect and each the Company and
the Significant Subsidiaries is in compliance with all the
terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and (b) no event has
occurred (including the receipt of any notice from any
authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after
notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such
Authorization; and (c) such Authorizations contain no
restrictions that are burdensome to the Company or the
Significant Subsidiaries; except where such failure to be
valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a
Material Adverse Effect;
(xvii) to such counsel's knowledge, neither the
Company nor its subsidiaries has violated any Environmental
Law or any provisions of ERISA, any provisions of the Foreign
Corrupt Practices Act of the rules and regulations
promulgated thereunder, except for such violations which,
singly or in the aggregate, would not have a Material Adverse
Effect;
(xviii) after such counsel's review of the sections
of the Offering Memorandum under the headings "Offering
Memorandum Summary," "Risk Factors," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Description of
Securities--Description of Preferred Stock," "Description of
Certain Indebtedness" and Part I of the Company's Form 10-K
for the year ended December 31, 1998 (the "DESIGNATED
SECTIONS"), to such counsel's knowledge, except as disclosed
in the Designated Sections, there are no contracts,
agreements or understandings (other than the Registration
Rights Agreement) between the Company and any person granting
such person the right to require such Company to include such
securities with the Securities registered pursuant to any
Registration Statement; and
26
<PAGE> 27
(xix) such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the Company's accountants, the Initial
Purchaser's representatives and counsel for the Initial
Purchaser, at which conferences the contents of the Offering
Memorandum and related matters were discussed and, although
such counsel is not passing upon and do not assume any
responsibility for and shall not be deemed to have
independently verified the accuracy, completeness or fairness
of the statements contained in the Offering Memorandum, no
facts have come to the attention of such counsel that lead
such counsel to believe (a) that the Designated Sections
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements contained therein not
misleading or (b) that the Offering Memorandum on the date
thereof or on the date hereof contained any untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Initial Purchaser shall have received on the Closing
Date an opinion, dated the Closing Date, of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.
(g) The Initial Purchaser shall have received, at the Closing
Date, a letter dated the Closing Date, as the case may be, in the form attached
hereto as Annex I, from Ernst & Young LLP, independent public accountants.
(h) The Initial Purchaser shall have received, at the Closing
Date, a letter dated the Closing Date, in the form attached hereto as Annex II,
from Arthur Andersen LLP, independent public accountants.
(i) The Securities shall have been approved by Nasdaq for
trading and duly listed on PORTAL.
(j) The Initial Purchaser shall have received a certified
copy of the Indenture which shall have been delivered by the Company to the
Transfer Agent.
(k) The Company shall have executed the Preferred Stock
Registration Rights Agreement and the Initial Purchaser shall have received an
original copy thereof, duly executed by the Company.
(l) The Company shall have executed the Warrant Registration
Rights Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company and the Unit Agent.
(m) The Company shall have executed the Unit Agreement and
the Initial Purchaser shall have received an original copy thereof, duly
executed by the Company and the Warrant Agent.
(n) The Company shall have executed the Warrant Agreement and
the Initial
27
<PAGE> 28
Purchaser shall have received an original copy thereof, duly executed by the
Company.
(o) The Company shall have executed and filed the Certificate
of Designation with the Secretary of State of the State of Delaware and the
Initial Purchaser shall have received a certified copy thereof.
(p) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company at or prior to the
Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This
Agreement shall become effective upon the execution and delivery of this
Agreement by the parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchaser by written notice to the Company if any
of the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchaser's judgment, is material and adverse and, in the
Initial Purchaser's judgment, makes it impracticable to market the Securities
on the terms and in the manner contemplated in the Offering Memorandum, (ii)
the suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago
Board of Trade or the Nasdaq National Market or limitation on prices for
securities or other instruments on any such exchange or the Nasdaq National
Market, (iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the
Company, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state
or local government or agency in respect of its monetary or fiscal affairs
which in your opinion has a material adverse effect on the financial markets in
the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to R&B Falcon
Corporation, 901 Threadneedle, Houston, TX 77079 (telephone number:
281-496-5000) and (ii) if to the Initial Purchaser, Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and its
subsidiaries and the Initial Purchaser set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Securities, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchaser, the officers or directors of the Initial Purchaser, any
person controlling the Initial Purchaser, the Company, the officers or
directors of the Company, or any person controlling the Company, (ii)
acceptance of the Securities and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Securities are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchaser for all out-of-pocket expenses (including the fees and
28
<PAGE> 29
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(i) hereof. The Company also agrees to
reimburse the Initial Purchaser and their officers, directors and each person,
if any, who controls the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the fees and expenses of counsel) incurred by
them in connection with enforcing their rights under this Agreement (including
without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors and officers of the Company and its
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Securities from the Initial Purchaser merely because of
such purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York, without regard to the conflict of law rules
thereof.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
29
<PAGE> 30
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Initial Purchaser.
Very truly yours,
R&B FALCON CORPORATION
By: /s/ ROBERT F. FULTON
-------------------------------------
Name: Robert F. Fulton
Title: EVP
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ TREVOR TURBIDY
-------------------------------------
Name: Trevor Turbidy
Title: Vice President
30
<PAGE> 31
SCHEDULE B
SIGNIFICANT SUBSIDIARIES
R&B Falcon Holdings Inc.
R&B Falcon Drilling (International & Deepwater) Inc.
Cliffs Drilling Company
R&B Falcon Drilling USA, Inc.
R&B Falcon Drilling Co.
R&B Falcon Exploration Co.
Double Eagle Marine, Inc.
Arcade Drilling AS
<PAGE> 32
EXHIBIT A
FORM OF PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
<PAGE> 33
EXHIBIT B
FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 12.1
R&B FALCON CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
($ IN MILLIONS, EXCEPT RATIO AMOUNTS)
<TABLE>
<CAPTION>
For The Three
Months Ended March 31,
-----------------------
1999 1998
---------- -----------
<S> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain....................... $ 9.3 $ 105.2
Add
Portion of rents representative of the interest factor ...................... 3.0 3.3
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... 28.4 13.4
------ -------
Income as adjusted ........................................ $ 40.7 $ 121.9
------ -------
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... $ 28.4 13.4
Interest capitalized ........................................................ 14.6 6.3
Portion of rents representative of the interest factor ...................... 3.0 3.3
Preferred dividends, as adjusted for income taxes ........................... -- --
------ -------
Fixed charges ............................................. $ 46.0(a) $ 23.0(a)
------ -------
Ratio of earnings to fixed charges and preferred dividends ......................... -(b) 5.3
------ -------
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain ....................... $ 161.2 $ 123.9 $ 140.4
Add
Portion of rents representative of the interest factor ...................... 14.3 12.1 6.8
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... 63.9(a) 41.6(a) 40.8
======== ======== ========
Income as adjusted ........................................ $ 239.4 $ 177.6 $ 188.0
======== ======== ========
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... $ 63.9 $ 41.6 $ 40.8
Interest capitalized ........................................................ 39.1 13.7 7.6
Portion of rents representative of the interest factor ...................... 14.3 12.1 6.8
Preferred dividends, as adjusted for income taxes ........................... -- -- 4.4
-------- -------- --------
Fixed charges ............................................. $ 117.3 $ 67.4(a) $ 59.6
======== ======== ========
Ratio of earnings to fixed charges and preferred dividends ......................... 2.0 2.6 3.1
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain ....................... $ 32.6 $ (2.8)
Add
Portion of rents representative of the interest factor ...................... 3.2 5.9
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... 34.6 26.4
======== ========
Income as adjusted ........................................ $ 70.4 $ 29.5
======== ========
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ....................................... $ 34.6 $ 26.4
Interest capitalized ........................................................ 0.4 0.6
Portion of rents representative of the interest factor ...................... 3.2 5.9
Preferred dividends, as adjusted for income taxes ........................... 6.4 8.4
-------- --------
Fixed charges ............................................. $ 44.6 $ 41.3
======== ========
Ratio of earnings to fixed charges and preferred dividends ......................... 1.6 -(b)
======== ========
</TABLE>
(a) Fixed charges for the three months ended March 31, 1999 and 1998 and for the
years ended December 31, 1998 and 1997 exclude interest cost of $3.7
million, $4.5 million, $22.5 million and $7.3 million, respectively, related
to the debt of joint venture companies guaranteed by R&B Falcon Corporation.
(b) For the three months ended March 31, 1999 and the year ended December 31,
1994, earnings did not cover fixed charges by $5.3 million and $11.8
million, respectively.
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
($ IN MILLIONS)
The following computation reflects on a pro-forma basis, earnings available for
fixed charges and resultant ratio. The computation gives effect to the sale of
the senior notes and the preferred stock.
<TABLE>
<CAPTION>
For The Three Year Ended
Months Ended December 31,
March 31, 1999 1998
---------------- ------------
<S> <C> <C>
Income as adjusted ........................................................................... $ 40.7 $ 239.4
====== ========
Fixed charges ................................................................................ $ 46.0 $ 117.3
Pro forma adjustments
Interest on portion of senior notes that will be used to retire existing debt .............. 12.0 36.3
Amortization of deferred financing charges on portion of senior notes that will be used
to retire existing debt .................................................................. .9 3.6
Preferred dividends, as adjusted for income taxes (b)....................................... -- --
Interest requirements reduction attributable to substitution of proceeds from the sale of the
senior notes offered hereby for the debt that is to be retired ........................... (5.9) (22.4)
------ --------
Pro-forma fixed charges ...................................................................... $ 53.0 $ 134.8
------ --------
Pro-forma ratio of earnings to fixed charges and preferred dividends ......................... -(a) 1.8
====== ========
</TABLE>
(a) For the three months ended March 31, 1999 pro forma earnings did not cover
fixed charges by $12.3 million.
(b) No preferred dividends are included in the proforma calculation as the
Company used these proceeds for general corporate purposes, including
funding its deepwater Construction program.
<PAGE> 1
EXHIBIT 15.1
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
R&B Falcon Corporation:
We are aware that R&B Falcon Corporation has incorporated by reference in this
registration statement on Form S-4, its Form 10-Q for the quarter ended March
31, 1999, which includes our report dated April 28, 1999 covering the unaudited
interim financial information contained therein. Pursuant to Regulation C of the
Securities act of 1933, that report is not considered a part of the registration
statement prepared or certified by our Firm or a report prepared or certified by
our Firm within the meaning of sections 7 and 11 of the Act.
ARTHUR ANDERSEN LLP
Houston, Texas
June 18, 1999
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated March
26, 1999 included in R&B Falcon Corporation's Form 10-K for the year ended
December 31, 1998 and to all references to our Firm in this registration
statement.
ARTHUR ANDERSEN LLP
- -----------------------------------
Houston, Texas
June 18, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement (Form
S-4) and related Prospectus of R&B Falcon Corporation for the registration of
311,447 shares of Senior Cumulative Redeemable Preferred Stock and Senior
Subordinated Debentures of our report dated February 13, 1998, with respect to
the consolidated financial statements of Cliffs Drilling Company included in its
Annual Report (Form 10-K) for the year ended December 31, 1997 and incorporated
by reference in the R&B Falcon Corporation Current Report on Form 8-K/A
Amendment No. 1 dated January 20, 1999, both filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Houston, Texas
June 18, 1999
<PAGE> 1
EXHIBIT 25.1
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
------------------
R&B FALCON CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 76-0544217
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
901 Threadneedle
Houston, TX 77079
(Address of principal executive offices) (Zip Code)
------------------
13-7/8% Senior Cumulative Redeemable
Preferred Stock due 2009
(Title of the indenture securities)
==============================================
<PAGE> 2
- 2 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
R&B Falcon Corporation currently is not in default under any of its
outstanding securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
13, 14 and 15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
- 3 -
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as amended
by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of June 15, 1999, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 15th day
of June, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Christine C. Collins
----------------------------
Christine C. Collins
Assistant Vice President
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b)of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
---------------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1999
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 139,755
Short-Term Investments 85,326
Securities, Available for Sale 528,160
Loans 2,081,103
Less: Allowance for Credit Losses 17,114
----------
Net Loans 2,063,989
Premises and Equipment 57,765
Other Assets 125,780
----------
TOTAL ASSETS $3,000,775
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 623,046
Interest Bearing 1,875,364
----------
Total Deposits 2,498,410
Short-Term Credit Facilities 184,281
Accounts Payable and Accrued Liabilities 126,652
----------
TOTAL LIABILITIES $2,809,343
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 121,759
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 1,637
----------
TOTAL STOCKHOLDER'S EQUITY 191,432
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,000,775
==========
</TABLE>
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
May 18, 1999
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
R&B FALCON CORPORATION
OFFER TO EXCHANGE
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
FOR ALL OUTSTANDING
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
PURSUANT TO THE PROSPECTUS DATED , 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer Is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail By Hand or Overnight Delivery
American Stock Transfer & Trust Company American Stock Transfer & Trust Company
40 Wall Street 40 Wall Street
New York, New York 10005 New York, New York 10005
Attention: Reorganization Department Attention: Reorganization Department
By Facsimile Transmission Confirm by Telephone:
(718) 234-5001 (718) 921-8200
(For eligible institutions only)
For Inquiries:
(718) 921-8200
------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
For purposes of this Letter of Transmittal, the outstanding shares of
13 7/8% Senior Cumulative Redeemable Preferred Stock shall be defined as the
"Outstanding Preferred Stock." All other capitalized terms used but not defined
herein shall have the same meanings given them in the Prospectus (as defined
below).
This Letter of Transmittal is to be completed by holders (which term,
for purposes of this Letter of Transmittal, shall include any participant in The
Depository Trust Company ("DTC")) either if (a) certificates are to be forwarded
herewith or (b) tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth under "The Exchange Offer--Terms of the Exchange
Offer" in the
<PAGE> 2
Prospectus and an Agent's Message (as defined below) is not delivered.
Certificates, or book-entry confirmation of a book-entry transfer of such shares
of Outstanding Preferred Stock into the Exchange Agent's account at DTC, as well
as this Letter of Transmittal (or a facsimile thereof or delivery of an Agent's
Message in lieu thereof), properly completed and duly executed, with any
required signature guarantees, and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent at its address set forth
herein on or prior to the Expiration Date. Tenders by book-entry transfer may
also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of shares of Outstanding Preferred Stock into the Exchange
Agent's account at DTC. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming part of a book-entry
confirmation, that states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by this Letter of Transmittal and that R&B
Falcon Corporation may enforce this Letter of Transmittal against such
participant.
Holders of shares of Outstanding Preferred Stock whose certificates
(the "Certificates") for such shares of Outstanding Preferred Stock are not
immediately available or who cannot deliver their Certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date or
who cannot complete the procedures for book-entry transfer on or prior to the
Expiration Date must tender their Outstanding Preferred Stock according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Terms of the
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
2
<PAGE> 3
THE UNDERSIGNED HAS COMPLETED THE APPROPRIATE BOXES BELOW AND SIGNED
THIS LETTER OF TRANSMITTAL TO INDICATE THE ACTION THE UNDERSIGNED DESIRES TO
TAKE WITH RESPECT TO THE EXCHANGE OFFER.
--------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DESCRIPTION OF THE OUTSTANDING PREFERRED STOCK (CUSIP NO. 749 12 E200)
- ------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE
HOLDER(S) OF SHARES OF THE OUTSTANDING NUMBER(S) NUMBER OF
PREFERRED STOCK, EXACTLY AS NAME(S) (ATTACH SIGNED SHARES NUMBER OF
APPEAR(S) ON CERTIFICATE(S) (PLEASE FILL IN, IF LIST IF REPRESENTED BY SHARES TENDERED
BLANK) NECESSARY)(1) CERTIFICATE(S) FOR EXCHANGE (2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $
---------------------------------------------------
$ $
---------------------------------------------------
$ $
---------------------------------------------------
$ $
- ------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES OF $ $
OUTSTANDING PREFERRED STOCK TENDERED:
- ------------------------------------------------------------------------------------------------------
(1) NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS. SUCH HOLDERS SHOULD CHECK THE APPROPRIATE BOX
BELOW AND PROVIDE THE REQUESTED INFORMATION.
(2) NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL SHARES OF OUTSTANDING PREFERRED STOCK
HELD. ALL SHARES OF OUTSTANDING PREFERRED STOCK HELD SHALL BE DEEMED TENDERED UNLESS A LESSER
NUMBER IS SPECIFIED IN THIS COLUMN.
- ------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS
(DEFINED IN INSTRUCTION 1) ONLY)
[ ] CHECK HERE IF TENDERED OUTSTANDING SHARES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------
DTC Account Number
-------------------------------------------
Transaction Code Number
--------------------------------------
By crediting the shares of Outstanding Preferred Stock to the Exchange
Agent's account at DTC in accordance with DTC's Automated Tender Offer Program
("ATOP") and by complying with applicable ATOP procedures with respect to the
Exchange Offer, including transmitting an Agent's Message to the Exchange Agent
in which the holder of the Outstanding Preferred Stock acknowledges and agrees
to be bound by the terms of this Letter of Transmittal, the participant in ATOP
confirms on behalf of itself and the beneficial owners of such Outstanding
Preferred Stock all provisions of this Letter of Transmittal applicable to it
and such beneficial owners as fully as if it had completed the information
required herein and executed and transmitted this Letter of Transmittal to the
Exchange Agent.
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED SHARES OF OUTSTANDING PREFERRED STOCK ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder
------------------------------------
Window Ticket Number (if any)
--------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------
Name of Institution Which Guaranteed Delivery
----------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
--------------------------------
DTC Account Number
-------------------------------------------
Transaction Code Number
--------------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED SHARES
OF OUTSTANDING PREFERRED STOCK ARE TO BE RETURNED BY CREDITING THE DTC
ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED SHARES OF
OUTSTANDING PREFERRED STOCK FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING
BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name
---------------------------------------------------------
Address
------------------------------------------------------
Area Code and Telephone Number
-------------------------------
Contact Person
-----------------------------------------------
4
<PAGE> 5
Ladies and Gentlemen:
The undersigned hereby tenders to R&B Falcon Corporation, a Delaware
corporation (the "Company"), the above-described number of shares of its 13 7/8%
Senior Cumulative Redeemable Preferred Stock in exchange for a like number of
shares of its 13 7/8% Senior Cumulative Redeemable Preferred Stock (the "New
Preferred Stock"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), upon the terms and subject to the conditions
set forth in the Prospectus dated , 1999 (as the same may be amended or
supplemented from time to time, the "Prospectus"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitutes the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of the shares
of Outstanding Preferred Stock tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to such shares of
Outstanding Preferred Stock as are being tendered herewith. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent as its agent and
attorney-in-fact (with full knowledge that the Exchange Agent is also acting as
agent of the Company in connection with the Exchange Offer) with respect to the
tendered shares of Outstanding Preferred Stock, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the Prospectus
to (i) deliver Certificates for shares of Outstanding Preferred Stock to the
Company together with all accompanying evidences of transfer and authenticity
to, or upon the order of, the Company, upon receipt by the Exchange Agent, as
the undersigned's agent, of the New Preferred Stock to be issued in exchange for
such Outstanding Preferred Stock, (ii) present Certificates for such shares of
Outstanding Preferred Stock for registration of transfer, and transfer the
shares of Outstanding Preferred Stock on the books of the Company, and (iii)
receive for the account of the Company all benefits and otherwise exercise all
rights of beneficial ownership of such Outstanding Preferred Stock, all in
accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
SHARES OF OUTSTANDING PREFERRED STOCK TENDERED HEREBY AND THAT, WHEN THE SAME
ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND
UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES
AND ENCUMBRANCES, AND THAT THE SHARES OF OUTSTANDING PREFERRED STOCK TENDERED
HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY
OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE,
ASSIGNMENT AND TRANSFER OF THE SHARES OF OUTSTANDING PREFERRED STOCK TENDERED
HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE
TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) (which term,
for the purposes of this Letter of Transmittal, shall include any participant in
DTC) of the shares of Outstanding Preferred Stock tendered hereby should be
printed above, if they are not already set forth above, as they appear on the
Certificates representing such shares of Outstanding Preferred Stock. The
Certificate number(s) of the shares of Outstanding Preferred Stock that the
undersigned wishes to tender should be indicated in the appropriate boxes above.
If any tendered shares of Outstanding Preferred Stock are not exchanged
pursuant to the Exchange Offer for any reason, or if Certificates are submitted
for more shares of Outstanding Preferred Stock than are tendered or accepted for
exchange, Certificates for such nonexchanged or nontendered shares of
Outstanding Preferred Stock will be returned (or, in the case of shares of
Outstanding Preferred Stock tendered by book-entry transfer, such shares of
Outstanding Preferred Stock will be credited to an account maintained at DTC),
without expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of shares of Outstanding
Preferred Stock pursuant to any one of the procedures described under "The
Exchange Offer--Terms of the Exchange Offer" in the
5
<PAGE> 6
Prospectus and in the instructions herein will, upon the Company's acceptance
for exchange of such tendered shares of Outstanding Preferred Stock, constitute
a binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the shares of Outstanding
Preferred Stock tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name of the undersigned or, in the case of a book-entry transfer
of Outstanding Preferred Stock, that such New Preferred Stock be credited to the
account indicated above maintained at DTC. If applicable, substitute
Certificates representing Outstanding Preferred Stock not exchanged or not
accepted for exchange will be issued to the undersigned or, in the case of a
book-entry transfer of Outstanding Preferred Stock, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions" below, please deliver shares of New
Preferred Stock to the undersigned at the address shown below the undersigned's
signature.
BY TENDERING SHARES OF OUTSTANDING PREFERRED STOCK AND EXECUTING THIS
LETTER OF TRANSMITTAL, OR EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU
THEREOF, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED
IS NOT AN "AFFILIATE" OF THE COMPANY WITHIN THE MEANING OF RULE 405 UNDER THE
SECURITIES ACT, (II) ANY SHARES OF NEW PREFERRED STOCK TO BE RECEIVED BY THE
UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE
UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE
IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SHARES OF NEW
PREFERRED STOCK TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE
UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES
NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES
ACT) OF SUCH SHARES OF NEW PREFERRED STOCK. BY TENDERING SHARES OF OUTSTANDING
PREFERRED STOCK PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF
TRANSMITTAL, OR EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, A
HOLDER OF OUTSTANDING PREFERRED STOCK WHICH IS A BROKER-DEALER REPRESENTS AND
AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE
DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO
THIRD PARTIES, THAT (A) SUCH SHARES OF OUTSTANDING PREFERRED STOCK HELD BY THE
BROKER-DEALER ARE HELD ONLY AS A NOMINEE OR (B) SUCH SHARES OF OUTSTANDING
PREFERRED STOCK WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE
PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
PREFERRED STOCK (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER IN
CONNECTION WITH RESALES OF SHARES OF NEW PREFERRED STOCK RECEIVED IN EXCHANGE
FOR SHARES OF OUTSTANDING PREFERRED STOCK, WHERE SUCH SHARES OF OUTSTANDING
PREFERRED STOCK WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, FOR A PERIOD
ENDING 180 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN
LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH
SHARES OF NEW PREFERRED STOCK HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING
BROKER-DEALER. IN THAT REGARD, EACH PARTICIPATING BROKER-DEALER, BY TENDERING
SUCH SHARES OF OUTSTANDING PREFERRED STOCK AND EXECUTING THIS LETTER OF
TRANSMITTAL, OR EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, AGREES
THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR
THE DISCOVERY OF ANY FACT THAT MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY
REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR THAT CAUSES THE
6
<PAGE> 7
PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, OR OF THE OCCURRENCE
OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW PREFERRED STOCK
PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE
PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF
THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER, OR
THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW PREFERRED STOCK MAY BE
RESUMED, AS THE CASE MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE USE
OF THE PROSPECTUS, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE DURING
WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN
CONNECTION WITH THE RESALE OF NEW PREFERRED STOCK BY THE NUMBER OF DAYS DURING
THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND
INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES
OF THE AMENDED OR SUPPLEMENTED PROSPECTUS NECESSARY TO PERMIT RESALES OF SHARES
OF THE NEW PREFERRED STOCK OR TO AND INCLUDING THE DATE ON WHICH THE COMPANY HAS
GIVEN NOTICE THAT THE USE OF THE PROSPECTUS MAY BE RESUMED, AS THE CASE MAY BE.
AS A RESULT, A PARTICIPATING BROKER-DEALER WHO INTENDS TO USE THE
PROSPECTUS IN CONNECTION WITH RESALES OF SHARES OF NEW PREFERRED STOCK RECEIVED
IN EXCHANGE FOR OUTSTANDING PREFERRED STOCK PURSUANT TO THE EXCHANGE OFFER MUST
NOTIFY THE COMPANY, OR CAUSE THE COMPANY TO BE NOTIFIED, ON OR PRIOR TO THE
EXPIRATION DATE, THAT IT IS A PARTICIPATING BROKER-DEALER. SUCH NOTICE MAY BE
GIVEN IN THE SPACE PROVIDED ABOVE OR MAY BE DELIVERED TO THE EXCHANGE AGENT AT
THE ADDRESS SET FORTH IN THE PROSPECTUS UNDER "THE EXCHANGE OFFER--EXCHANGE
AGENT."
The undersigned agrees that acceptance of any tendered Outstanding
Preferred Stock and transfer of tendered Outstanding Preferred Stock in exchange
therefor shall constitute performance in full by the Company of its obligations
under the Registration Rights Agreement.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the shares of Outstanding Preferred Stock
tendered hereby. All authority herein conferred or agreed to be conferred in
this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Except as stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOXES ENTITLED "DESCRIPTION OF
OUTSTANDING PREFERRED STOCK" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL
BE DEEMED TO HAVE TENDERED THE SHARES OF OUTSTANDING PREFERRED STOCK AS SET
FORTH IN EACH SUCH BOX.
7
<PAGE> 8
- --------------------------------------------------------------------------------
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) (which term, for purposes of
this Letter of Transmittal, shall include any participant in DTC) exactly as
name(s) appear(s) on Certificate(s) for the shares of Outstanding Preferred
Stock hereby tendered or on the register of holders maintained by the Company,
or by any person authorized to become the registered holder by endorsements and
documents transmitted herewith (including such opinions of counsel,
certifications and other information as may be required by the Company for the
Outstanding Preferred Stock to comply with the restrictions on transfer
applicable to the Outstanding Preferred Stock). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Date: , 1999
-----------------------------------------
Name(s):
------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Tax Identification or Social Security Number(s):
--------------------------------
SIGNATURE(S) GUARANTEE
(IF REQUIRED--SEE INSTRUCTIONS 2 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date: , 1999
-----------------------------------------
Name of Eligible Institution Guaranteeing Signatures:
---------------------------
Capacity (full title):
----------------------------------------------------------
(PLEASE PRINT)
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
- --------------------------------------------------------------------------------
8
<PAGE> 9
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if shares of the New Preferred Stock or any shares
of Outstanding Preferred Stock that are not tendered are to be issued in the
name of the someone other than the registered holder of the shares of
Outstanding Preferred Stock whose name appears above.
Issue
[ ] New Preferred Stock and/or
[ ] Outstanding Preferred Stock not
tendered
No. of Shares
---------------------------------------------------
Name
---------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Phone Number)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number(s))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if shares of the New Preferred Stock or any shares
of Outstanding Preferred Stock that are not tendered are to be sent to someone
other than registered holder of the shares of Outstanding Preferred Stock whose
name appears above, or to such registered holder at an address other than that
shown above.
Mail
[ ] New Preferred Stock and/or
[ ] Outstanding Preferred Stock not
tendered
No. of Shares
---------------------------------------------------
Name
---------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Phone Number)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number(s))
- --------------------------------------------------------------------------------
9
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer--Terms of the Exchange Offer" in the Prospectus and an Agent's
Message is not delivered. Certificates, or book-entry confirmation of a
book-entry transfer of such shares of Outstanding Preferred Stock into the
Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in lieu thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date.
Holders who wish to tender their shares of Outstanding Preferred Stock
and (i) whose shares of Outstanding Preferred Stock are not immediately
available or (ii) who cannot deliver their shares of Outstanding Preferred
Stock, this Letter of Transmittal and all other required documents to the
Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete
the procedures for delivery by book-entry transfer on or prior to the Expiration
Date, may tender their shares of Outstanding Preferred Stock by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth under "The Exchange Offer--Terms of the
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. Pursuant to
such procedures: (a) such tender must be made by or through an Eligible
Institution (as defined below); (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Company, must be received by the Exchange Agent on or prior to the Expiration
Date; and (c) the Certificates (or a book-entry confirmation (as defined in the
Prospectus)) representing all tendered shares of Outstanding Preferred Stock, in
proper form for transfer, together with a Letter of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof), properly completed and duly
executed, with any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution of
such Notice of Guaranteed Delivery, all as provided in "The Exchange
Offer--Terms of the Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
shares of Outstanding Preferred Stock to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein and in
the Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association recognized program.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR
PRIOR TO THE EXPIRATION DATE. NO DOCUMENTS SHOULD BE SENT TO THE COMPANY.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by executing a Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof), waives any right to
receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
holder (which term, for purposes of this Letter of Transmittal, shall
include any participant in DTC whose name appears on a security
position listing as the owner of the Outstanding Preferred Stock) of
shares of Outstanding Preferred Stock tendered herewith, unless such
holder has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions"
above, or
(ii) such shares of Outstanding Preferred Stock are tendered
for the account of a firm that is an Eligible Institution.
10
<PAGE> 11
In all other cases, an Eligible Institution must guarantee the
signature on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the boxes captioned
"Description of Outstanding Preferred Stock" is inadequate, the Certificate
numbers and/or the number of shares of Outstanding Preferred Stock and any other
required information should be listed on a separate signed schedule that is
attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the shares
of Outstanding Preferred Stock evidenced by any Certificate submitted are to be
tendered, fill in the number of shares of Outstanding Preferred Stock that are
to be tendered in the box entitled "Number of Shares of Outstanding Preferred
Stock Tendered (If Less than All)." In such case, a new Certificate for the
remainder of the shares of Outstanding Preferred Stock that were evidenced by
the old Certificate will be sent to the holder of the Outstanding Preferred
Stock promptly after the Expiration Date, unless the appropriate boxes on this
Letter of Transmittal are completed. All shares of Outstanding Preferred Stock
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of shares of Outstanding
Preferred Stock may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective on or prior to that time, a written or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth above or in the Prospectus on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Outstanding Preferred Stock to be withdrawn,
the number of shares of Outstanding Preferred Stock to be withdrawn, and (if
Certificates for Outstanding Preferred Stock have been tendered) the name of the
registered holder of the Outstanding Preferred Stock as set forth on the
Certificate for the Outstanding Preferred Stock, if different from that of the
person who tendered such Outstanding Preferred Stock. If Certificates for Shares
of Outstanding Preferred Stock have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of such Certificates for
the Outstanding Preferred Stock, the tendering holder must submit the serial
numbers shown on the particular Certificates for the shares of Outstanding
Preferred Stock to be withdrawn and the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution, except in the case of Outstanding
Preferred Stock tendered for the account of an Eligible Institution. If shares
of Outstanding Preferred Stock have been tendered pursuant to the procedures for
book-entry transfer set forth under "The Exchange Offer--Terms of the Exchange
Offer," the notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawal of Outstanding Preferred Stock, in
which case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written or facsimile transmission on or prior to the Expiration Date.
Withdrawals of tenders of Outstanding Preferred Stock may not be rescinded.
Shares of Outstanding Preferred Stock properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Terms of the
Exchange Offer."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, which determination shall be final and binding on all parties.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any shares of Outstanding Preferred Stock
that have been tendered but are withdrawn on or prior to the Expiration Date
will be returned to the holder thereof without cost to such holder promptly
after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
shares of Outstanding Preferred Stock tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the Certificate(s)
or on a security position listing without alteration, enlargement or any change
whatsoever.
If any of the shares of Outstanding Preferred Stock tendered hereby are
owned of record by two or more joint owners, all such owners must sign this
Letter of Transmittal.
If any tendered shares of Outstanding Preferred Stock are registered in
different names on several Certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal (or facsimiles thereof or
Agent's Messages in lieu thereof) as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company, in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered owner of
the shares of Outstanding Preferred Stock listed and transmitted hereby, no
endorsement of Certificates or separate bond powers are required unless shares
of New
11
<PAGE> 12
Preferred Stock are to be issued in the name of a person other than the
registered holder. Signatures on such Certificates or bond powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the Outstanding Preferred Stock listed, the Certificates
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name of the registered owner appears on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Outstanding Preferred Stock.
Signatures on such Certificates or bond powers must be guaranteed by an Eligible
Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If shares of New
Preferred Stock are to be issued in the name of a person other than the signer
of this Letter of Transmittal, or if shares of New Preferred Stock are to be
sent to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Certificates for shares of Outstanding
Preferred Stock not exchanged will be returned by mail or, if tendered by
book-entry transfer, by crediting the account indicated above maintained at DTC
unless the appropriate boxes on this Letter of Transmittal are completed. See
Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of shares of Outstanding
Preferred Stock, which determination shall be final and binding on all parties.
The Company reserves the absolute right to reject any and all tenders determined
by it not to be in proper form or the acceptance of which, or exchange for, may,
in the view of counsel to the Company, be unlawful. The Company also reserves
the absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer set forth in the Prospectus under "The Exchange
Offer--Conditions of the Exchange Offer," or any conditions or irregularities in
any tender of shares of Outstanding Preferred Stock of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders. The Company's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of shares of Outstanding Preferred
Stock will be deemed to have been validly made until all irregularities with
respect to such tender have been cured or waived. The Company, any affiliates or
assigns of the Company, the Exchange Agent, or any other person shall not be
under a duty to give notification of any irregularities in tenders or incur any
liability for failure to give such notification.
8. LOST, DESTROYED OR STOLEN CERTIFICATES. The holder should promptly
notify the Exchange Agent if any Certificates representing shares of Outstanding
Preferred Stock have been lost, destroyed or stolen. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificates have been followed.
9. SECURITY TRANSFER TAXES. Holders who tender their shares of
Outstanding Preferred Stock for exchange will not be obligated to pay any
transfer taxes in connection therewith. If, however, shares of New Preferred
Stock are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the Outstanding Preferred Stock tendered, or
if a transfer tax is imposed for any reason other than the exchange of
Outstanding Preferred Stock in connection with the Exchange Offer, then the
amount of any such transfer tax (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. The amount of such
transfer taxes will be billed directly to such tendering holder if satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal.
10. INCORPORATION OF LETTER OF TRANSMITTAL. This Letter of Transmittal
shall be deemed to be incorporated in and acknowledged and accepted by any
tender through the DTC's ATOP procedures by any participant in DTC on behalf of
itself and the beneficial owners of any shares of Outstanding Preferred Stock so
tendered.
11. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions enumerated in the Prospectus.
12. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of shares of Outstanding
Preferred Stock, by executing this Letter of Transmittal, shall waive any right
to receive notice of the acceptance of shares of Outstanding Preferred Stock for
exchange.
Questions and requests for assistance may be directed to the Exchange
Agent at its address and telephone number set forth on the front of this Letter
of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and this Letter of Transmittal may be obtained from the Exchange Agent
or from the holder's broker, dealer, commercial bank, trust company or other
nominee.
12
<PAGE> 13
None of the Company, the Exchange Agent or any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of shares of Outstanding Preferred Stock nor shall any of them incur any
liability for failure to give any such notice.
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF OR AN AGENT'S MESSAGE
IN LIEU HEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered shares of
Outstanding Preferred Stock are accepted for exchange is required by law to
provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on the Substitute Form W-9 included herein or otherwise establish
a basis for exemption from backup withholding. If such holder is an individual,
the TIN is his or her social security number. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service may subject the
holder or transferee to a $50 penalty. In addition, delivery of such holder's
shares of New Preferred Stock may be subject to backup withholding. Failure to
comply truthfully with the backup withholding requirements also may result in
the imposition of severe criminal and/or civil fines and penalties.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Exchange Agent. A foreign person, including entities, may qualify as
an exempt recipient by submitting to the Exchange Agent a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to that holder's foreign status. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any payments made to the holder or other transferee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to
Outstanding Preferred Stock exchanged in the Exchange Offer, the holder is
required to provide the Exchange Agent with either: (i) the holder's correct TIN
by completing the form included herein, certifying that the TIN provided on
Substitute Form W-9 is correct (or that such holder is awaiting a TIN) and that
(a) the holder has not been notified by the Internal Revenue Service that the
holder is subject to backup withholding as a result of failure to report all
interest or dividends or (b) the Internal Revenue Service has notified the
holder that the holder is no longer subject to backup withholding; or (ii) an
adequate basis for exemption.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60-day period,
amounts withheld will be remitted to the Internal Revenue Service as backup
withholding. In addition, 31% of all payments made thereafter will be withheld
and remitted to the Internal Revenue Service until a correct TIN is provided.
NUMBER TO GIVE THE EXCHANGE AGENT
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the shares of Outstanding Preferred Stock or of the last transferee appearing on
the transfers attached to, or endorsed on, certificates representing shares of
the Outstanding Preferred Stock. If the shares of Outstanding Preferred Stock
are held in more than one name or are held not in the name of the actual owner,
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which number to
report.
13
<PAGE> 14
PAYOR'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part I -- PLEASE PROVIDE YOUR TIN IN
THE BOX AT RIGHT AND CERTIFY BY -----------------------------------------
FORM W-9 SIGNING AND DATING BELOW Social Security Number
OR
-----------------------------------------
DEPARTMENT OF THE TREASURY Employer Identification Number
INTERNAL REVENUE SERVICE --------------------------------------------------------------------------------------
PAYER'S REQUEST FOR Part II -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
TAXPAYER IDENTIFICATION
NUMBER ("TIN") (1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to
be issued to me); and
(2) I am not subject to backup withholding because: (a) I
am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup
withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
- -------------------------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you are subject to backup withholding, you received another notification from the
IRS that you are no longer subject to backup withholding, do not cross out such item (2).
- -------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE
---------------------------------------------------- -----------------------------
Part III --
NAME (please print) Awaiting TIN [ ]
----------------------------------------------------------------------------
ADDRESS (please print)
-------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON FORM
W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART III OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 20
percent of all reportable payments made to me thereafter will be withheld until
I provide a number. In addition, I understand that if, after seven business days
after this certification is received, the Company is required to make a payment
to me which, in its judgment, will close my account, or cause the cessation of
my relationship, with the Company, then such payment may be subject to backup
withholding.
- ----------------------------- ---------------------------------------
Date Signature
- --------------------------------------------------------------------------------
14
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
of
R&B FALCON CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for shares of the Company's (as defined below) 137/8% Senior
Cumulative Redeemable Preferred Stock (the "Outstanding Preferred Stock) are not
immediately available, (ii) shares of Outstanding Preferred Stock, the Letter of
Transmittal and all other required documents cannot be delivered to American
Stock Transfer & Trust Company (the "Exchange Agent") on or prior to the
Expiration Date (as defined in the Prospectus defined below), or (iii) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand, overnight
courier or mail, or transmitted by facsimile transmission, to the Exchange
Agent. See "The Exchange Offer--Terms of the Exchange Offer" and "----Guaranteed
Delivery Procedures" in the Prospectus. In addition, in order to utilize the
guaranteed delivery procedure to tender shares of Outstanding Preferred Stock
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to the shares of Outstanding Preferred Stock (or facsimile
thereof) must also be received by the Exchange Agent on or prior to the
Expiration Date. Capitalized terms used but not defined herein have the meanings
assigned to them in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer Is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail By Hand or Overnight Delivery
American Stock Transfer & Trust Company American Stock Transfer & Trust Company
40 Wall Street 40 Wall Street
New York, New York 10005 New York, New York 10005
Attention: Reorganization Department Attention: Reorganization Department
By Facsimile Transmission Confirm by Telephone:
(718) 234-5001 (718) 921-8200
(For eligible institutions only)
For Inquiries:
(718) 921-8200
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A
FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to R&B Falcon Corporation, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1999 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate number of shares of Outstanding Preferred
Stock set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer--Terms of the Exchange
Offer" and "----Guaranteed Delivery Procedures."
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OUTSTANDING PREFERRED STOCK (CUSIP NO. 749 12 E200)
- --------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
CERTIFICATE NUMBER(S) REPRESENTED BY TENDERED FOR EXCHANGE
(IF AVAILABLE) CERTIFICATE(S) *
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES OF
OUTSTANDING PREFERRED STOCK
TENDERED:
- --------------------------------------------------------------------------------
* NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL SHARES OF
OUTSTANDING PREFERRED STOCK HELD. ALL SHARES OF OUTSTANDING PREFERRED
STOCK HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS SPECIFIED
IN THIS COLUMN.
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH, INCAPACITY, OR DISSOLUTION OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE
UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
<TABLE>
<S> <C>
- ------------------------------------------------ ----------------------------------
If shares of Outstanding Preferred Stock will be PLEASE SIGN HERE
tendered by book-entry transfer, please provide
the following information:
----------------------------------
Signature(s)
Name of Tendering Institution ----------------------------------
Name(s) (Please Print)
- ----------------------------------------------- ----------------------------------
----------------------------------
Address (Include Zip Code)
The Depository Trust Company
Account No. ----------------------------------
(Area Code and Phone Number)
- -----------------------------------------------
----------------------------------
Date
- ------------------------------------------------ ----------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Preferred Stock exactly as its (their) name(s) appear
on certificates for shares of Outstanding Preferred Stock, or by person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es):
Name(s)
------------------------------------------------------------------------
Capacity
-----------------------------------------------------------------------
Address(es)
--------------------------------------------------------------------
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the shares of Outstanding
Preferred Stock tendered hereby in proper form for transfer, or confirmation of
the book-entry transfer of such shares of Outstanding Preferred Stock into the
Exchange Agent's account at the Depository Trust Company, pursuant to the
procedure for book-entry transfer set forth in the Prospectus, and any other
required documents, all by 5:00 p.m., New York City time, on the third New York
Stock Exchange trading day following the Expiration Date (as defined in the
Prospectus).
- ------------------------------------- -------------------------------------
Name of Firm Authorized Signature
- ------------------------------------- -------------------------------------
Name (please print)
- ------------------------------------- -------------------------------------
Address Title
- ------------------------------------- -------------------------------------
Area Code and Telephone No. Date
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OF OUTSTANDING PREFERRED
STOCK WITH THIS FORM. CERTIFICATES FOR SHARES OF OUTSTANDING
PREFERRED STOCK SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
4
