<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 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 Classification Code Number) Identification No.)
Organization)
</TABLE>
901 THREADNEEDLE
HOUSTON, TEXAS 77079
(281) 496-5000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
LEIGHTON E. MOSS
R&B FALCON CORPORATION
901 THREADNEEDLE
HOUSTON, TEXAS 77079
(281) 496-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
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>
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- ------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/8% Senior Notes due 2003...... $100,000,000 100% $100,000,000 $ 27,800
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9 1/2% Senior Notes due 2008...... $300,000,000 100% $300,000,000 $ 83,400
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Total Exchange Notes.............. $400,000,000 100% $400,000,000 $111,200
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
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 APRIL 28, 1999
PROSPECTUS
R&B FALCON CORPORATION
EXCHANGE OFFER
FOR
$100,000,000 9 1/8% SENIOR NOTES DUE 2003
AND
$300,000,000 9 1/2% SENIOR NOTES DUE 2008
---------------------
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 a total of $100 million of our 9 1/8% Series B Senior
Notes Due 2003 for an equal amount of our outstanding 9 1/8% Series A
Senior Notes Due 2003 and a total of $300 million of our 9 1/8% Series B
Senior Notes Due 2008 for an equal amount of our outstanding 9 1/2%
Series A Senior Notes Due 2008
- The exchange offer expires 5:00 p.m., New York City time,
, 1999, unless extended
- 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
- We will exchange all outstanding notes that are validly tendered and not
validly withdrawn
- Tenders of outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer
- The exchange of notes 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 notes to be issued are substantially identical to the
outstanding notes, except they do not contain the transfer restrictions
and registration rights relating to the outstanding notes
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF MATTERS THAT
YOU SHOULD CONSIDER PRIOR TO DECIDING WHETHER TO EXCHANGE YOUR NOTES 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 date of this Prospectus is , 1999
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.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
RISK FACTORS................................................ 11
FORWARD-LOOKING STATEMENTS.................................. 15
THE EXCHANGE OFFER.......................................... 17
USE OF PROCEEDS............................................. 24
CAPITALIZATION.............................................. 25
DESCRIPTION OF THE NOTES.................................... 27
UNITED STATES FEDERAL TAX CONSEQUENCES FOR NON-UNITED STATES
HOLDERS................................................... 51
PLAN OF DISTRIBUTION........................................ 53
WHERE YOU CAN FIND MORE INFORMATION......................... 53
INCORPORATION BY REFERENCE.................................. 53
LEGAL MATTERS............................................... 54
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 54
</TABLE>
---------------------
i
<PAGE> 4
SUMMARY
This summary highlights selected information from this prospectus to help
you understand the exchange offer and the exchange notes. You should carefully
read the entire prospectus to understand fully the terms of the exchange offer
and the exchange notes, 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 11 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 March 26, 1999, we issued $200 million of our 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.
For accounting purposes, we will consolidate RBF Finance Co.
On April 7, 1999, Steven Webster, our president and chief executive
officer, announced that he will resign from these officer positions effective
May 31, 1999. Mr. Webster will remain a director of our company. Mr. Paul Loyd,
our chairman of the board, will become our chief executive officer.
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. As part
of this marketing effort, we met with Petrobras in early April 1999 to discuss
possible drilling contracts for our drilling rigs Peregrine VII and the
Deepwater Frontier for the periods we are obligated to use this rig. During
these discussions, Petrobras indicated that it may seek to cancel the contract
for the Falcon 100 based on its interpretation of the cancellation provisions of
this contract. We do not believe that Petrobras has the right to cancel the
contract for the Falcon 100.
On April 22, 1999, we issued 300,000 units, each consisting of one share of
preferred stock and a warrant to purchase 35 shares of our common stock, in a
private placement. The preferred stock provides for a liquidation preference of
$1,000 per share and cumulative dividends, payable quarterly, at a rate of
13 7/8% per year. We may pay these dividends in additional shares of preferred
stock for up to five years. We will have the right to exchange the preferred
stock for subordinated debentures when we could do so without violating the
covenants in our existing debt documents. We must redeem the preferred stock at
a
1
<PAGE> 5
price equal to its liquidation preference on May 1, 2009. Each warrant entitles
the holder to purchase 35 shares of our common stock, for an aggregate of
10,500,000 shares, at a purchase price of $9.50 per share. The warrants are
exercisable at any time after they separate from the preferred stock, which will
occur no later than October 22, 1999. The warrants expire on May 1, 2009. We are
using the approximately $289 million net proceeds from this offering for general
corporate purposes, including funding our deepwater rig construction program.
2
<PAGE> 6
SUMMARY OF TERMS OF EXCHANGE OFFER
In December 1998, we completed the private offering of $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. In connection with that offering, we
agreed, among other things, to deliver to you this prospectus and to use our
best efforts to complete the exchange offer by June 20, 1999.
THE EXCHANGE OFFER......... We are offering to exchange:
- up to $100 million principal amount of our 9 1/8%
Series B Senior Notes due 2003 which have been
registered under the Securities Act for an equal
amount of our outstanding 9 1/8% Series A Senior
Notes due 2003, and
- up to $300 million principal amount of our 9 1/2%
Series B Senior Notes due 2008 which have been
registered under the Securities Act for an equal
amount of our outstanding 9 1/2% Series A Senior
Notes due 2008.
The form and terms of the exchange notes are
identical in all material respects to the form and
terms of the outstanding notes except that the
exchange notes have been registered under the
Securities Act. In order to be exchanged, an
outstanding note must be properly tendered and
accepted. You may tender outstanding notes only in
integral multiples of $1,000.
As of this date, $400 million principal amount of
the notes are outstanding. The exchange offer is
not conditioned on any minimum aggregate principal
amount of outstanding notes being tendered for
exchange.
RESALE OF THE EXCHANGE
NOTES...................... Based on an interpretation by the staff of the SEC
set forth in no-action letters issued to third
parties, we believe that the notes issued in the
exchange offer may be offered for resale, resold
and otherwise transferred by you without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that:
- you are acquiring the notes issued in the
exchange offer in the ordinary course of
business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the notes issued to you in
the exchange offer;
- you are not a broker-dealer who purchased such
outstanding notes 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.
Each broker-dealer that acquires notes in the
exchange offer for its own account in exchange for
notes that it acquired as a result of market-making
or other trading activities must acknowledge that
it will deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resale of the notes issued in the exchange
offer. The letter of transmittal states that by
making this acknowledgment and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the
3
<PAGE> 7
Securities Act. A broker-dealer may use this
prospectus for an offer to resell, resale or other
retransfer of the notes issued to it in the
exchange offer. We have agreed that, for a period
of 180 days after the date of this prospectus, we
will make this prospectus and any amendment or
supplement to this prospectus available to any such
broker-dealer for use in connection with any such
resales. We believe that no registered holder of
the outstanding notes is an affiliate (as this term
is defined in Rule 405 of the Securities Act) of
our company.
EXPIRATION DATE............ The exchange offer will expire at 5:00 p.m., New
York City time, , 1999, unless we
extend the expiration date.
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
OUTSTANDING NOTES........ If we consummate the exchange offer by June 1,
1999, the exchange notes will bear interest from
December 22, 1998. If we consummate the exchange
offer after June 1, 1999, the exchange notes will
bear interest from June 15, 1999. Holders of
outstanding notes that are accepted for exchange
will not have the right to receive any payment of
interest on those notes accrued from December 22,
1998 (if we consummate the exchange offer by June
1, 1999) or June 15, 1999 (if we consummate the
exchange offer after June 1, 1999) to the date of
the issuance of the exchange notes. Consequently,
holders who exchange their outstanding notes for
exchange notes will receive the same interest
payment on June 15, 1999 (the first interest
payment date) or December 15, 1999 (the second
interest payment date) that they would have
received had they not accepted the exchange offer.
TERMINATION OF THE EXCHANGE
OFFER.................... We may terminate the exchange offer 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 SEC 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. We
must pay increased interest on the notes if we fail
to consummate the exchange offer.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES........ If you are a holder of a note and you wish to
tender your note for exchange in the exchange
offer, you must send to Chase Bank of Texas,
National Association, as exchange agent, on or
before the expiration date:
either
- a properly completed and duly executed letter of
transmittal, which accompanies this prospectus,
or a facsimile of the letter of transmittal,
including all other documents required by the
letter of transmittal, to the exchange agent at
the address set forth on the cover page of the
letter of transmittal; or
- an agent's message transmitted by means of The
Depository Trust Company's Automated Tender Offer
Program system and received by the exchange agent
and forming a part of a confirmation of book
4
<PAGE> 8
entry transfer in which you acknowledge and agree to be bound by the terms of
the letter of transmittal;
and, the exchange agent must receive on or before
the expiration date either
- a timely confirmation of book-entry transfer of
your outstanding notes into the exchange agent's
account at The Depository Trust Company; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
By executing the letter of transmittal, each holder
will represent to us that, among other things:
- the person receiving the exchange notes is
obtaining the exchange notes in the ordinary
course of business of the person receiving such
exchange notes, whether or not such person is the
holder,
- neither the holder nor any other person acting
for the holder has an arrangement or
understanding with any person to participate in
the distribution of the exchange notes, and
- neither the holder nor any such other person is
an "affiliate," as defined in Rule 405 under the
Securities Act, of our company.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS.......... If you are the beneficial owner of notes and your
name does not appear on a security position listing
of The Depository Trust Company as the holder of
your notes, or if you are a beneficial owner of
registered notes that are registered in the name of
a broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender your notes in
the exchange offer, you should contact the person
in whose name your notes are 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 notes,
either make appropriate arrangements to register
ownership of the outstanding notes 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 your notes and time will not
permit your required documents to reach the
exchange agent by the expiration date of the
exchange offer, or you cannot complete the
procedure for book-entry transfer or deliver
certificates for registered notes on time, you may
tender your notes pursuant to the procedures
described in this prospectus under the heading "The
Exchange Offer -- Guaranteed Delivery Procedure."
WITHDRAWAL RIGHTS.......... You may withdraw the tender of your notes at any
time prior to 5:00 p.m. on the expiration date.
FEDERAL TAX CONSEQUENCES... The exchange of the notes will generally not be a
taxable event for United States federal income tax
purposes.
5
<PAGE> 9
USE OF PROCEEDS............ We will not receive any proceeds from the issuance
of notes pursuant to the exchange offer. We will
pay all expenses incident to the exchange offer.
EXCHANGE AGENT............. Chase Bank of Texas, National Association, the
trustee under the indenture governing the notes, is
serving as the exchange agent in connection with
the exchange offer. The exchange agent can be
reached at:
Chase Bank of Texas, National Association
c/o The Chase Manhattan Bank
55 Water Street, North Building, Room 234
Windows 20 and 21
New York, New York 10041
The telephone number for the exchange agent is
(212) 638-0454, and the facsimile number for the
exchange agent is (212) 638-7380 or (212) 638-7381
(eligible institutions only).
CONSEQUENCES OF NOT
EXCHANGING OUTSTANDING
NOTES.................... If you do not exchange your outstanding notes for
exchange notes, you will no longer be able to
require us to register the outstanding notes under
the Securities Act. In addition, you will not be
able to offer or sell the outstanding notes 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.
6
<PAGE> 10
SUMMARY OF TERMS OF EXCHANGE NOTES
SECURITIES OFFERED......... $100,000,000 aggregate principal amount of 9 1/8%
Senior Notes due 2003; and
$300,000,000 aggregate principal amount of 9 1/2%
Senior Notes due 2008.
MATURITY DATES............. December 15, 2003 for the 9 1/8% Senior Notes due
2003; and
December 15, 2008 for the 9 1/2% Senior Notes due
2008
INTEREST PAYMENT DATES..... June 15 and December 15 of each year, beginning
June 15, 1999.
ADDITIONAL INTEREST........ We will pay additional interest of 0.25% per year
for the period from February 20, 1999 to April 28,
1999 because we did not file the registration
statement for the exchange offer by the date
required by the registration rights agreement. If
we consummate the exchange offer by June 1, 1999,
we will pay this additional interest on June 15,
1999 to the holders of the exchange notes as of
June 1, 1999. If we do not consummate the exchange
offer by June 1, 1999, we will pay this additional
interest on June 15, 1999 to the holders of the
outstanding notes as of June 1, 1999. In addition,
if we do not consummate the exchange offer by June
20, 1999, the registration rights agreement will
require us to pay additional interest of 0.25% per
year for the period from June 20 to the date the
exchange offer is consummated.
OPTIONAL REDEMPTION........ We may redeem each series of notes at any time, at
a price equal to 100% of the principal amount plus
accrued and unpaid interest (if any) to the date of
redemption plus the applicable make-whole premium
(if any). The make-whole premium is the excess of
(i) the sum of the present values of the remaining
scheduled interest payments on the notes being
redeemed plus the principal amount that would have
been payable at the final maturity of such notes
over (ii) the principal amount of the notes being
redeemed.
GUARANTEES................. Any subsidiary that guarantees any of our long-term
indebtedness (including indebtedness under our bank
facility) will be required to guarantee the notes.
RANKINGS................... The notes will be our senior unsecured obligations.
They will rank equally in right of payment with any
of our existing and future senior unsecured
indebtedness and senior in right of payment to any
of our existing and future indebtedness that is, by
its terms, expressly subordinated to the notes. The
notes will be effectively subordinated to
indebtedness and other liabilities of our
subsidiaries and to our own secured indebtedness.
As of March 31, 1999, our subsidiaries had
approximately $225.8 million of indebtedness, in
addition to other substantial liabilities
(primarily trade payables and accrued expenses). In
addition, our $800 million of borrowings from RBF
Finance Co. is secured.
COVENANTS.................. We issued the outstanding notes and will issue the
exchange notes under an indenture with Chase Bank
of Texas, National Association. The indenture
restricts our ability and the ability of our
subsidiaries to:
- borrow money;
- pay dividends on stock or purchase stock;
7
<PAGE> 11
- make investments;
- use assets as security in other transactions;
- engage in sale/leaseback transactions; and
- sell substantially all of our assets or merge or
consolidate with other companies.
These limitations are subject to important
qualifications and exceptions.
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
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>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998(5)
----------- ------ -------- -------- --------
(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
Net income (loss) per common share:
Basic..................................................... (.18) .19 .70 (.04) .61
Diluted................................................... (.18) .18 .67 (.04) .61
Weighted average common shares outstanding:
Basic..................................................... 98.8 115.7 147.4 164.1 167.5
Diluted................................................... 99.5 121.8 157.7 166.2 168.8
OTHER DATA:
EBITDA(2)................................................... $ 59.4 $111.3 $ 236.8 $ 307.2 $ 421.7
Ratio of EBITDA to interest expense(3)...................... 2.2x 3.2x 5.8x 7.4x 6.6x
Ratio of earnings to fixed charges(4)....................... -- 1.8x 3.4x 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.................................................. 288.6 296.7 514.2 827.4 1,995.9
Stockholders' equity........................................ 356.3 472.6 716.7 728.0 1,250.2
</TABLE>
- ---------------
(1) After extraordinary gain of $3.4 million in 1995, loss from discontinued
operations of $36.0 million in 1997 and extraordinary loss of $24.2 million
and income from discontinued operations of $36.0 million in 1998.
(2) "EBITDA" means income (loss) from continuing operations before extraordinary
gain (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.
(3) We believe that the ratio of EBITDA to interest expense provides an investor
with information as to our current ability to meet our interest costs.
(4) 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. As a result of the loss incurred in 1994,
earnings were insufficient to cover fixed charges by $3.4 million in that
year. Fixed charges for the year ended December 31, 1997 and 1998 exclude
interest cost of $7.3 million and $22.5 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 for
the year ended December 31, 1998 is 1.8x.
(5) 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.
9
<PAGE> 13
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(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. 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 offering of
the outstanding notes 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 the
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 are using these proceeds for general corporate
purposes, including funding our deepwater rig construction program.
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<PAGE> 14
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 notes as well as the exchange
notes.
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 certain 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 seven wholly-owned
deepwater drilling rigs. We estimate the gross capital expenditures on these
projects will be approximately $1.8 billion, of which approximately $1.0 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 $279.4
million for the first quarter of 1998 to $228.7 million for the fourth quarter
of 1998. Similarly, although our EBITDA increased by $114.5 million from 1997 to
1998, we experienced a decline in EBITDA from $136.8 million in the first
quarter of 1998 to $64.6 million in the fourth quarter. 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,
will 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 will 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 our ability to repay the notes.
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.
We must generate substantial cash flow in order to repay the notes. 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 declined significantly since 1997. This decline has adversely
affected our rig utilization and dayrates. Utilization of our domestic jack-up
fleet has declined from approximately 100% in January 1998 to approximately 32%
in March 1999, and dayrates on new contracts have declined from a range of
$35,000 to $40,000 in January 1998 to a range of $10,000 to $13,000 at present.
Dayrates for our domestic barge drilling rig fleet have not declined materially,
but utilization of the fleet declined from approximately 96% in January 1998 to
approximately 24% in March 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 oil and gas industry do not improve in the future, we may be
unable to repay the notes.
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<PAGE> 15
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. This substantial indebtedness will have
important consequences to you. For example, it will:
- make it more difficult for us to make the required payments on the notes;
- 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.
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 ability
to repay the notes.
MOST OF THE FUNDS TO PAY OUR DEBT OBLIGATIONS WILL COME FROM OUR SUBSIDIARIES,
AND YOUR RIGHT TO RECEIVE PAYMENT ON THE NOTES IS JUNIOR TO THE INDEBTEDNESS OF
OUR NON-GUARANTOR SUBSIDIARIES.
Most of our operating income and cash flow from operations is generated by
our subsidiaries. We expect that funds necessary to meet our debt service
obligations will be provided primarily by distributions or advances from our
subsidiaries. Our ability to obtain cash from our subsidiaries to meet our debt
service obligations, including the payment of principal and interest on the
notes, may be limited by contractual and legal restrictions on our subsidiaries
and by their financial condition and requirements for cash to conduct their
operations.
None of our subsidiaries currently guarantee the notes. Our subsidiaries
will not be obligated with respect to the notes unless any subsidiary guarantees
any of our funded indebtedness on or after the date the notes were issued. If
this occurs, the subsidiary will be obligated to equally and ratably guarantee
the notes. Because our subsidiaries do not guarantee the notes, the claims of
creditors of our subsidiaries effectively have priority on the assets and
earnings of the subsidiaries over the claims of the holders of the notes. If any
subsidiary is required to guarantee the notes in the future, its guarantee will
be subordinate to any secured indebtedness of the subsidiary to the extent of
the value of the collateral securing the indebtedness.
In the event of an insolvency, liquidation or reorganization of any of our
subsidiaries, any creditors of the subsidiary, including trade creditors, would
be entitled to payment in full from the assets of the subsidiary before we, as a
stockholder, would be entitled to receive any distribution from the subsidiary.
As of March 31, 1999, our subsidiaries had approximately $225.8 million of
indebtedness, in addition to
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<PAGE> 16
other substantial liabilities (primarily trade payables and accrued expenses).
All of this indebtedness and these other liabilities effectively ranks senior to
the notes.
YOUR RIGHT TO RECEIVE PAYMENT ON THE NOTES IS JUNIOR TO OUR SECURED
INDEBTEDNESS.
We have $800 million of secured indebtedness under our loan agreements with
RBF Finance Co. that is secured by liens on ten drilling rigs or construction
contracts for rigs. Accordingly, RBF Finance Co. has claims on these drilling
rigs that are prior to your claims as the holders of the notes. If we default in
paying the notes or if we declare or undergo bankruptcy, liquidation or
reorganization, these assets will be applied to satisfy our obligations for the
secured indebtedness before any payment from these assets could be used to pay
the notes. This means that the secured indebtedness will be senior to the notes
to the extent that the value of the collateral is adequate to satisfy the
secured indebtedness.
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 customer for
our drillship Peregrine VII recently cancelled their contract with us because of
our late delivery of the rig. If our customers cancel some of our significant
contracts, it could have a material adverse effect on our financial condition
and our ability to meet our obligations under the notes.
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 customer may seek to terminate a contract for
operational problems is increased during market downturns like the one currently
being experienced. If our customers cancel some of our significant contracts, it
could have a material adverse effect on our financial condition and our ability
to meet our obligations under the notes.
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 customer for our drillship Peregrine VII has cancelled its
drilling contract due to late delivery of this rig. We will be subject to late
delivery penalties to our customers for our drillships Peregrine IV and Falcon
100, and our drilling contracts for these rigs give the customer cancellation
rights if deliveries are delayed significantly. 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 and make it more
difficult for us to make the required payments on the notes.
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<PAGE> 17
REDUCED DAYRATES RESULTING FROM COMPETITION ADVERSELY EFFECT OUR RESULTS OF
OPERATIONS BECAUSE WE CANNOT SIGNIFICANTLY REDUCE OUR OPERATING COTS.
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 operates 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 (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 IS NO ESTABLISHED MARKET FOR THE NOTES.
The notes that are currently outstanding have not been registered under the
Securities Act or any state securities law. Therefore, these notes may not be
offered or sold except pursuant to an effective
14
<PAGE> 18
registration statement on an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act and any applicable state
securities laws.
Although the exchange notes may be resold or otherwise transferred by the
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 exchange notes on a national securities exchange or for
quotation of the exchange notes on an automated dealer quotation system. The
liquidity of any market for the exchange notes will depend upon the number of
holders of the exchange notes, the interest of securities dealers in making a
market in the exchange notes and other factors. Accordingly, there can be no
assurance as to the development or liquidity of any market for the exchange
notes. If an active trading market for the exchange notes does not develop, the
market price and liquidity of the exchange notes may be adversely affected. If
the exchange notes 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 certain other factors. The exchange notes will
be eligible for trading in The PORTAL Market.
Even though we are registering our offer of the exchange notes 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
exchange notes only in compliance with provisions of Rule 144 under the
Securities Act.
YOUR NOTES WILL CONTINUE TO BE SUBJECT TO TRANSFER RESTRICTIONS IF YOU DO NOT
EXCHANGE THEM IN THE EXCHANGE OFFER.
If you do not exchange your notes for the exchange notes pursuant to the
exchange offer, you will continue to be subject to the restrictions on transfer
of your notes described in the legend on your notes. The restrictions on
transfer of your notes arise because we issued the notes pursuant to 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 notes if they are registered under the
Securities Act and applicable state securities laws, or offered and sold
pursuant to an exemption from these registration requirements. We do not intend
to register the currently outstanding notes under the Securities Act. In
addition, if you exchange your notes in the exchange offer for the purpose of
participating in a distribution of the exchange notes, 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 notes decreases because noteholders tendered their notes
in the exchange offer, the trading market, if any, for the currently outstanding
notes after the closing of the exchange offer would be adversely affected.
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;
our ability to secure adequate
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<PAGE> 19
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.
16
<PAGE> 20
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING NOTES
Subject to the terms and conditions set forth in this prospectus and in the
letter of transmittal, we are offering to exchange up to $100 million in
aggregate principal amount of our 9 1/8% Series B Senior Notes Due 2003 for an
equal amount of our outstanding 9 1/8% Series A Senior Notes Due 2003 and up to
$300 million in aggregate principal amount of our 9 1/2% Series B Senior Notes
Due 2008 for an equal amount of our outstanding 9 1/2% Series A Senior Notes Due
2008. We will accept for exchange 9 1/8% Series A Senior Notes due 2003 and
9 1/2% Series B Senior Notes due 2008 which are properly tendered on or prior to
the expiration date and not withdrawn as permitted below. As used in this
prospectus, the term "expiration date" means 5:00 p.m., New York City time, on
, 1999; provided, however, that if we, in our sole
discretion, have extended the period of time during which the exchange offer is
open, the term "expiration date" means the latest time and date to which we
extend the exchange offer.
The currently outstanding notes were issued on December 22, 1998 in a
private offering. As of the date of this prospectus, there are $100 million
aggregate amount of 9 1/8% Series A Senior Notes due 2003 and $300 million
aggregate amount of our 9 1/2% Series A Senior Notes due 2008 outstanding. This
prospectus and the letter of transmittal are first being sent on or about
, 1999, to all holders of outstanding notes known to us. Our
obligation to accept outstanding notes for exchange pursuant to the exchange
offer is subject to certain conditions as set forth below under "-- Certain
Conditions to the Exchange Offer."
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the exchange offer is open, and thereby delay
acceptance for exchange of any outstanding notes, by giving oral or written
notice of such extension to the holders of outstanding notes as described below.
During any extension, all outstanding notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. We will
return at no expense to the holder any outstanding notes not accepted for
exchange as promptly as practicable after the expiration or termination of the
exchange offer.
Outstanding notes tendered in the exchange offer must be in denominations
of principal amount of $1,000 and any integral multiple thereof.
If any of the events specified in "-- Certain Conditions to the Exchange
Offer" should occur, we expressly reserve the right to amend or terminate the
exchange offer, and not to accept for exchange any outstanding notes not
theretofore accepted for exchange. We will give oral or written notice of any
extension, amendment, non-acceptance or termination to holders of outstanding
notes as promptly as practicable. In the case of an extension, we will issue a
press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
Following consummation of the exchange offer, we may, in our sole
discretion, commence one or more additional exchange offers to those holders of
currently outstanding notes who do not exchange their notes in this exchange
offer on terms which may differ from those contained in this prospectus. We may
use this prospectus, as amended or supplemented from time to time, in connection
with additional exchange offers. These additional exchange offers may take place
from time to time until all of the currently outstanding notes have been
exchanged for exchange notes.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender by a holder of a series of the outstanding notes and our
acceptance of that holder's notes will constitute a binding agreement between us
and that holder subject to the terms and conditions set forth in this prospectus
and the accompanying letter of transmittal. Except as set forth below in the
section entitled "Guaranteed Delivery Procedures," to tender in the exchange
offer, a holder must transmit to
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<PAGE> 21
Chase Bank of Texas, National Association, the exchange agent, at the address
set forth under "-- Exchange Agent" on or prior to the expiration date either:
- a properly completed and duly executed letter of transmittal, including
all other documents required by the letter of transmittal, or
- if the notes are tendered pursuant to the book-entry procedures set forth
below, the tendering note holder may transmit an agent's message
(described below) instead of the letter of transmittal.
In addition, on or prior to the expiration date, either:
- the exchange agent must receive the certificates for the notes along with
the letter of transmittal; or
- the exchange agent must receive a timely confirmation of a book-entry
transfer of the tendered notes into the exchange agent's account at The
Depository Trust Company according to the procedure for book-entry
transfer described below, along with a letter of transmittal or an
agent's message in lieu of the letter of transmittal; or
- the holder must comply with the guaranteed delivery procedures described
below.
An "agent's message" is a message, transmitted by The Depository Trust
Company and received by the exchange agent and forming a part of the book-entry
confirmation, which states that The Depository Trust Company has received an
express acknowledgment from the tendering holder that the holder has received
and agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against the holder.
The method of delivery of outstanding notes, letters of transmittal or
agent's messages and all other required documents is at the election and risk of
the holders. If such delivery is by mail, we recommend registered mail, properly
insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. Do not send letters of transmittal,
agent's messages or outstanding notes to us.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the outstanding notes surrendered for exchange are tendered
either by a registered holder of the notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal or for the account of an eligible institution. An
"eligible institution" is a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States. If signatures on a letter of transmittal or
a notice of withdrawal are required to be guaranteed, the guarantor must be an
eligible institution. If outstanding notes are registered in the name of a
person other than a signer of the letter of transmittal, the outstanding notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by us in our sole discretion, duly executed by, the registered holder
with the signature guaranteed by an eligible institution.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of outstanding notes tendered for
exchange in our sole discretion. Our determination will be final and binding. We
reserve the absolute right to reject any and all tenders of outstanding notes
improperly tendered or to not accept any outstanding notes which acceptance
might, in our judgment or that of our counsel, be unlawful. We also reserve the
absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any outstanding notes either before or after the expiration
date (including the right to waive the ineligibility of any holder who seeks to
tender outstanding notes in the exchange offer). Our interpretation of the terms
and conditions of the exchange offer as to any particular outstanding notes
either before or after the expiration date (including the letter of transmittal
and its instructions) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of outstanding notes
for exchange must be cured within such reasonable period of time as we shall
determine. Neither we, the exchange agent nor any other person shall be under
any duty
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<PAGE> 22
to give notification of any defect or irregularity with respect to any tender of
outstanding notes for exchange, nor shall we or any of them incur any liability
for failure to give such notification.
If a person other than the registered holder of outstanding notes signs the
letter of transmittal, the outstanding notes must be endorsed or accompanied by
appropriate powers of attorney, in either case signed exactly as the name of the
registered holder that appears on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any outstanding notes or powers of
attorney, such persons should so indicate when signing, and you must submit
proper evidence satisfactory to us of such persons' authority to so act unless
we waive this requirement.
By tendering, each holder represents to us that, among other things, the
exchange notes acquired pursuant to the exchange offer are being obtained in the
ordinary course of business of the person receiving the exchange notes, whether
or not the person is the holder, and that neither the holder nor any person for
whom the holder is acting has any arrangement or understanding with any person
to participate in the distribution of the exchange notes. In the case of a
holder that is not a broker-dealer, the holder, by tendering, also represents to
us that the holder is not engaged in, nor intends to engage in, a distribution
of the exchange notes. If any holder or any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of our company, or is engaged
in or intends to engage in or has an arrangement or understanding with any
person to participate in a distribution of the exchange notes to be acquired
pursuant to the exchange offer, the holder or any such other person could not
rely on the applicable interpretations of the staff of the SEC and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
exchange notes for its own account in exchange for outstanding notes, where the
outstanding notes were acquired by that broker dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
See "Plan of Distribution." The letter of transmittal states that by
acknowledging this 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.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding notes
properly tendered and will issue the exchange notes promptly after acceptance of
the outstanding notes. See "-- Certain Conditions to the Exchange Offer." For
purposes of the exchange offer, we shall be deemed to have accepted properly
tendered outstanding notes for exchange when we have given oral or written
notice to the exchange agent, with written confirmation of any oral notice to be
given promptly thereafter.
For each outstanding note of a series that we accept for exchange, the
outstanding note holder will receive an exchange note of the same series having
a principal amount and maturity equal to that of the surrendered outstanding
note. If we consummate the exchange offer by June 1, 1999, interest on the
exchange notes will accrue from December 22, 1998, the original issue date of
the outstanding notes. If we consummate the exchange offer after June 1, 1999,
interest on the exchange notes will accrue from June 15, 1999, which is the
first interest payment date. Because we did not file the registration statement
of which this prospectus is a part within the time period required by the
registration rights agreement, we will pay additional interest of 0.25% per year
for the period from February 20, 1999 to April , 1999. We will pay this
additional interest on June 15, 1999. If the exchange offer is not consummated
by June 20, 1999, the interest rate on each series of the outstanding notes from
and including such date until but excluding the date of consummation of the
exchange offer will increase by 0.25% for the first 90 days and then by 0.5%
thereafter. Payments of this additional interest, if any, on outstanding notes
in exchange for which exchange notes were issued will be made to the persons
who, at the close of business on June 1 or December 1 immediately preceding the
interest payment date, are registered holders of the outstanding notes if such
record date occurs prior to the exchange, or are registered holders of the
exchange notes if
19
<PAGE> 23
the record date occurs on or after the date of the exchange, even if notes are
cancelled after the record date and on or before the interest payment date.
In all cases, issuance of exchange notes for outstanding notes that are
accepted for exchange pursuant to the exchange offer will be made only after the
exchange agent timely receives either certificates for the outstanding notes or
a book-entry confirmation of the outstanding notes into the exchange agent's
account at The Depository Trust Company, a properly completed and duly executed
letter of transmittal and all other required documents or, in the case of a
book-entry confirmation, an agent's message. If for any reason set forth in the
terms and conditions of the exchange offer we do not accept any tendered notes
or if outstanding notes are submitted for a greater principal amount than the
holder desired to exchange, we will return such unaccepted or non-exchanged
outstanding notes without expense to the tendering holder (or, in the case of
outstanding notes tendered by book-entry transfer into the exchange agent's
account at The Depository Trust Company pursuant to the book-entry procedures
described below, such unaccepted or non-exchanged outstanding notes will be
credited to an account maintained with The Depository Trust Company) as promptly
as practicable after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at The Depository Trust Company for the exchange offer
within two business days after the date of this prospectus, and any financial
institution that is a participant in The Depository Trust Company's systems may
make book-entry delivery of outstanding notes by causing The Depository Trust
Company to transfer such outstanding notes into the exchange agent's account at
The Depository Trust Company in accordance with The Depository Trust Company's
procedures for transfer. However, although delivery of outstanding notes may be
effected through book-entry transfer at The Depository Trust Company, the letter
of transmittal or facsimile thereof, with any required signature guarantees, or
an agent's message in lieu of a letter of transmittal, and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at one of the addresses set forth below under "-- Exchange Agent" on or
prior to the expiration date or the guaranteed delivery procedures described
below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the outstanding notes desires to tender its
outstanding notes and its outstanding notes are not immediately available, or
time will not permit the holder's outstanding notes or other required documents
to reach the exchange agent before the expiration date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal (or a facsimile thereof) and notice of guaranteed delivery,
substantially in the form provided by us (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address
of the holder of outstanding notes and the amount of outstanding notes
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 the notice of guaranteed delivery, the certificates for all
physically tendered outstanding notes, in proper form for transfer, or a
book-entry confirmation and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
- the exchange agent receives the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation and all other documents required by the letter of
transmittal, within three NYSE trading days after the date of execution
of the notice of guaranteed delivery.
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<PAGE> 24
WITHDRAWAL RIGHTS
You may withdraw tenders of outstanding notes at any time prior to the
expiration date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the outstanding notes to be withdrawn, identify the
outstanding notes to be withdrawn (including the principal amount of those
outstanding notes), and (where certificates for outstanding notes have been
transmitted) specify the name in which those outstanding notes are registered,
if different from that of the withdrawing holder. If certificates for
outstanding notes have been delivered or otherwise identified to the exchange
agent, then, prior to the release of those certificates the withdrawing holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
eligible institution unless such holder is an eligible institution. If
outstanding notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at The Depository Trust Company to be credited with the
withdrawn outstanding notes and otherwise comply with the procedures of such
facility. We will determine all questions as to the validity, form and
eligibility (including time of receipt) of these notices. Our determination will
be final and binding on all parties. Any outstanding notes that are withdrawn
will be deemed not to have been validly tendered for exchange for purposes of
the exchange offer. Any outstanding notes which have been tendered for exchange
but which are not exchanged for any reason will be returned to the holder
without cost to the holder (or, in the case of outstanding notes tendered by
book-entry transfer into the exchange agent's account at The Depository Trust
Company pursuant to the book-entry transfer procedures described above, the
outstanding notes will be credited to an account maintained with The Depository
Trust Company for the outstanding notes) as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding notes may be retendered by following one of the procedures
described under "-- Procedures for Tendering Outstanding Notes" above at any
time on or prior to the expiration date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue exchange notes in exchange for, any
outstanding notes. We may terminate or amend the exchange offer if, at any time
before the acceptance of the outstanding notes for exchange or the exchange of
the exchange notes for the outstanding notes, we determine in our sole and
absolute discretion that the exchange offer would violate applicable law or any
applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
We have appointed Chase Bank of Texas, National Association, as the
exchange agent for the exchange offer. You should send all executed letters of
transmittal to the exchange agent at one of the addresses set forth below.
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 Registered or Certified Mail or by Facsimile:
Overnight Delivery (212) 638-7380
Chase Bank of Texas, National Association Confirm by Telephone
c/o The Chase Manhattan Bank (212) 638-0454
55 Water Street, North Building
Room 234, Windows 20 and 21
New York, New York 10041
</TABLE>
21
<PAGE> 25
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE IS NOT VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptances of the exchange offer.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer, which we estimate will be approximately $250,000.
TRANSFER TAXES
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the tender, except that
holders who instruct us to register exchange notes in the name of, or request
that outstanding notes not tendered or not accepted in the exchange offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OUTSTANDING NOTES
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes pursuant to the exchange offer will continue to be subject to
the provisions in the indenture regarding transfer and exchange of the
outstanding notes and the restrictions on transfer of the outstanding notes as
set forth in the legend on the outstanding notes. In general, the outstanding
notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do not currently
anticipate that we will register outstanding notes under the Securities Act. See
"Description of the Notes -- Registered Exchange Offer; Registration Rights."
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, we believe that exchange notes issued pursuant
to the exchange offer in exchange for outstanding notes may be offered for
resale, resold or otherwise transferred by the holders (other than any holder
that is an "affiliate" of our company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the exchange notes are acquired
in the ordinary course of the holders' business and the holders have no
arrangement or understanding with any person to participate in the distribution
of such exchange notes. However, we do not intend to request the SEC to
consider, and the SEC has not considered, the exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to the exchange offer.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of exchange notes
and has no arrangement or understanding to participate in a distribution of
exchange notes. If any holder is an affiliate of our company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the exchange notes to be acquired pursuant to the exchange
offer, such holder:
- could not rely on the applicable interpretations of the staff of the SEC,
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where the outstanding notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. See "Plan of Distribution."
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<PAGE> 26
In addition, to comply with state securities laws, the exchange notes may
not be offered or sold in any state unless they have been registered or
qualified for sale in the state or an exemption from registration or
qualification is available and is complied with. The offer and sale of the
exchange notes to "qualified institutional buyers" (as such term is defined
under Rule 144A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. We currently do not intend to
register or qualify the sale of the exchange notes in any state where an
exemption from registration or qualification is required and not available.
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<PAGE> 27
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes offered hereby. In consideration for issuing the exchange notes of a
series as contemplated in this prospectus, we will receive in exchange
outstanding notes of the corresponding series in like principal amount. The form
and terms of each series of the exchange notes are identical in all material
respects to the form and terms of such series of outstanding notes of the
corresponding series, except that:
- the offering of the exchange notes has been registered under the
Securities Act,
- the exchange notes will not be subject to transfer restrictions, and
- the holders of the exchange notes will not be entitled to registration or
other rights under the registration rights agreement, including the
payment of additional interest upon our failure to consummate the
exchange offer or the occurrence of certain other events.
The outstanding notes surrendered in exchange for exchange notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange notes will not result in a change in our indebtedness.
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<PAGE> 28
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization as
of December 31, 1998 and our unaudited consolidated capitalization as adjusted
to reflect the offering of the outstanding notes, the offering of the senior
notes in March 1999, our borrowings from RBF Finance Co., and our offering of
preferred stock and warrants in April 1999, and the application of the net
proceeds from these offerings. 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
DECEMBER 31, 1998
-------------------------
AS
ACTUAL ADJUSTED
----------- -----------
(IN MILLIONS, UNAUDITED)
<S> <C> <C>
Cash and cash equivalents(1)................................ $ 177.4 $1,083.3
======== ========
Short-term obligations(2)................................... $ 123.4 $ --
Current portion of long-term debt........................... 6.3 6.3
Long-term debt, excluding current portion:
Bank facilities(3)........................................ 150.0 --
Loans from RBF Finance Co. due 2006(4).................... -- 400.0
Loans from RBF Finance Co. due 2009(5).................... -- 400.0
12 1/4% Senior Notes due 2006............................. -- 200.0
6 1/2% Senior Notes due 2003.............................. 249.2 249.2
6 3/4% Senior Notes due 2005.............................. 348.1 348.1
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............................. 202.9 202.9
Other debt 18.8 18.8
-------- --------
Total long-term debt, including current portion,
and short-term obligations....................... 1,995.9 2,722.5
-------- --------
Minority interest........................................... 62.8 62.8
-------- --------
Mandatorily redeemable preferred stock(6)................... -- 221.0
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share.................... 1.9 1.9
Capital in excess of par.................................. 1,061.5 1,061.5
Warrants(7)............................................... -- 68.0
Retained earnings(8)...................................... 199.1 198.0
Other..................................................... (12.3) (12.3)
-------- --------
Total stockholders' equity.................................. 1,250.2 1,317.1
-------- --------
Total capitalization, including short-term obligations and
current portion of long-term debt......................... $3,308.9 $4,323.4
======== ========
</TABLE>
- ---------------
(1) Approximately $99.4 million of cash and cash equivalents were restricted
from our use outside of Arcade Drilling's activity. Approximately $100.0
million of the proceeds of the loans from RBF Finance Co. is escrowed
pending completion of our drillship Deepwater Millennium. Of the $1,083.3
million as adjusted cash and cash equivalents, approximately $201.6 million
was used to repay the portion of our revolving credit facility and
short-term obligations which were drawn down subsequent to December 31,
1998. The as adjusted cash and cash equivalents has been reduced by $81.0
million to reflect the repayment of our portion of the interim construction
facility related to the Deepwater Frontier.
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<PAGE> 29
(2) Represents our borrowings under the Deepwater Millennium interim
construction facility, which was repaid out of the proceeds of the loans
from RBF Finance Co.
(3) We repaid all outstanding amounts under our revolving credit facility with
proceeds of the loans from RBF Finance Co.
(4) Comprised of ten tranches with interest rates of 11.02%.
(5) Comprised of ten tranches with interest rates of 11.395%.
(6) 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.
(7) 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.
(8) Retained earnings has been adjusted to reflect the write-off of deferred
financing costs, less the effect of income taxes.
26
<PAGE> 30
DESCRIPTION OF THE NOTES
The outstanding notes were issued under an indenture dated as of December
22, 1998 (the "Indenture") between our company, as issuer, and Chase Bank of
Texas, National Association, as trustee (the "Trustee"). Upon the issuance of
the exchange notes the Indenture will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
description is a summary of the material provisions of the Indenture. It does
not restate these provisions in their entirety. We urge you to read the
Indenture because it, and not this description, define your rights as holders of
the exchange notes. You can find the definition of capitalized terms used in
this description without definition in the Indenture. As used in this section
only, references to "we," "us" and the "Company" refer to R&B Falcon Corporation
and exclude our Subsidiaries. Unless otherwise indicated, references to the
"Notes" shall include each series of the outstanding notes and the exchange
notes.
GENERAL
The outstanding notes were, and the exchange notes will be, issued in two
series that will be limited to the following respective total principal amounts:
- $100,000,000 of 9 1/8% Senior Notes due 2003 (the "5-Year Notes") and
- $300,000,000 of 9 1/2% Senior Notes due 2008 (the "10-Year Notes").
The Notes will mature on the following dates:
- The 5-Year Notes will mature on December 15, 2003.
- The 10-Year Notes will mature on December 15, 2008.
If we consummate the exchange offer by June 1, 1999, each series of the
exchange notes will bear interest at their respective annual rate from December
22, 1998. If we consummate the exchange offer after June 1, 1999, interest on
the exchange notes will accrue at that rate from June 15, 1999. We will pay
interest semiannually on June 15 and December 15 of each year, beginning June
15, 1999. We will make each interest payment to the person in whose name the
Note is registered at the close of business on the June 1 or December 1 next
preceding such interest payment date. We will compute interest on the basis of a
360-day year of twelve 30-day months.
We will make payments on the Notes (including principal, premium and
interest) by wire transfer of immediately available funds to the accounts
specified by the holders or, if no such account is specified, by mailing a check
to each holder's address, as it appears in the register of the Notes (the
"Register") maintained by the Registrar. You may transfer and exchange the Notes
at the office of the Registrar and any co-registrar. We will issue the Notes in
fully registered form, without coupons, in denominations of $1,000 and any
integral multiple thereof. We may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection with
certain transfers and exchanges.
We may redeem each series of Notes at our option, in whole or in part, at a
price equal to 100% of the principal amount, plus accrued and unpaid interest,
if any, to the applicable date of redemption plus the applicable Make-Whole
Premium (as defined) relating to the then prevailing applicable Treasury Yield
(as defined) and the remaining life of such series of the Notes. See
"-- Optional Redemption."
RANKING AND GUARANTEES
The outstanding notes are, and the exchange notes will be, our senior
unsecured obligations and will rank equally in right of payment with all our
other existing and future senior unsecured indebtedness, and senior in right of
payment to all our existing and future indebtedness that is, by its terms,
expressly subordinated to the Notes.
27
<PAGE> 31
The outstanding notes are, and the exchange notes will be, effectively
subordinated to indebtedness and other liabilities of our Subsidiaries and to
our secured indebtedness. As of March 31, 1999, our Subsidiaries had
approximately $225.8 million of Indebtedness, in addition to other substantial
liabilities (primarily trade payables and accrued expenses). In addition, our
$800 million of borrowings from RBF Finance Co. is secured.
If any of our Subsidiaries guarantee or become a co-obligor on any of our
Funded Indebtedness other than the Notes at any time after the date on which the
Notes were originally issued (including, without limitation, following any
release of such Subsidiary from its Guarantee as described below), then we will
cause the Notes to be equally and ratably guaranteed by such Subsidiary, and
such Subsidiary will become a Guarantor. Each of the Guarantees will be an
unsecured obligation of the Guarantor providing such Guarantee and will rank
equally with all existing and future unsecured indebtedness of such Guarantor
that is not, by its terms, expressly subordinated in right of payment to such
Guarantee.
A Guarantor may be released from its Guarantee if such Guarantor is not a
guarantor of (or co-obligor on) any of our Funded Indebtedness other than the
Notes and other than Funded Indebtedness of the Company (1) that is subject to a
release provision similar to the release provision described in this paragraph
and (2) the related guarantee (or obligation) of which will be released
concurrently with the release of the Guarantee of such Guarantor pursuant to
such release provision, provided that no Default or Event of Default under the
Indenture has occurred and is continuing.
The obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under its Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal,
state or foreign law.
OPTIONAL REDEMPTION
Each series of the outstanding notes are, and each series of the exchange
notes will be, redeemable, at our option, at any time in whole or from time to
time in part upon not less than 30 and not more than 60 days' notice mailed to
each holder of Notes of such series to be redeemed at the holder's address
appearing in the Register, on any date prior to maturity at a price equal to
100% of the principal amount thereof plus accrued and unpaid interest to the
Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date that is on or
prior to the Redemption Date) plus the Make-Whole Premium applicable to such
series of Notes (the "Redemption Price"). In no event will the Redemption Price
ever be less than 100% of the principal amount of the Notes plus accrued and
unpaid interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Note (or portion
thereof) of any series to be redeemed will be equal to the excess, if any, of:
(a) the sum of the present values, calculated as of the Redemption Date,
of:
(1) each interest payment that, but for such redemption, would have
been payable on the Note (or portion thereof) of such series being redeemed
on each Interest Payment Date occurring after the Redemption Date
(excluding any accrued and unpaid interest for the period prior to the
Redemption Date); and
(2) the principal amount that, but for such redemption, would have
been payable at the final maturity of the Note (or portion thereof) of such
series being redeemed,
over
(b) the principal amount of the Note (or portion thereof) of such series
being redeemed.
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<PAGE> 32
The present values of interest and principal payments referred to in clause
(a) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield (as defined below) plus:
- 50 basis points in the case of the 5-Year Notes and
- 50 basis points in the case of the 10-Year Notes.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by us; provided, that if we
fail to make such appointment at least 45 business days prior to the Redemption
Date, or if the institution so appointed is unwilling or unable to make such
calculation, such calculation will be made by Credit Suisse First Boston
Corporation or, if such firm is unwilling or unable to make such calculation, by
an independent investment banking institution of national standing appointed by
the Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Notes, calculated to the nearest 1/12 of a
year (the "Remaining Term"). The Treasury Yield will be determined as of the
third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200 of 1% or above being rounded upward. If weekly average yields for United
States Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
If less than all of the Notes of any series are to be redeemed, the Trustee
will select the Notes of such series to be redeemed by such method as the
Trustee shall deem fair and appropriate. The Trustee may select for redemption
Notes and portions of Notes of such series in amounts of $1,000 or whole
multiples of $1,000.
The Notes will not be entitled to the benefit of any sinking fund or other
mandatory redemption provisions.
CERTAIN COVENANTS
Covenant Termination
In the event that at any time (a) the ratings assigned to the Notes by both
of the Rating Agencies are Investment Grade Ratings and (b) no Default has
occurred and is continuing under the Indenture, the Company and its Restricted
Subsidiaries will no longer be subject to the provisions of the Indenture
described below under "Limitation on Indebtedness" and "Limitation on Restricted
Payments" (together, the "Suspended Covenants"). In the event that the Company
is not subject to the Suspended Covenants for any period of time as a result of
the preceding sentence and, subsequently, one or both Rating Agencies withdraws
its ratings or downgrades the ratings assigned to the Notes below the required
29
<PAGE> 33
Investment Grade Ratings, then the Company and its Restricted Subsidiaries will
again be subject to the Suspended Covenants and compliance with the Suspended
Covenants 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.
Limitation on Indebtedness
(a) The Company will not, and will not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; provided, however, the Company
may Incur Indebtedness if the pro forma Consolidated EBITDA Coverage Ratio at
the date of such Incurrence exceeds 2.25 to 1.0.
(b) Notwithstanding clause (a), the following Indebtedness may be Incurred:
(1) Indebtedness of the Company pursuant to one or more Credit
Facilities (and the guarantee of such Indebtedness by Restricted
Subsidiaries); provided, however, that the aggregate amount of such
Indebtedness outstanding at such time shall not exceed $350 million;
(2) Indebtedness of the Company or a Restricted Subsidiary owed to and
held by a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary
owed to and held by the Company; provided, however, that any subsequent
issuance or transfer of any Capital Stock that results in such Restricted
Subsidiary to whom Indebtedness is owed ceasing to be a Restricted
Subsidiary or any transfer of such Indebtedness (other than to the Company
or another Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness;
(3) The Notes and Indebtedness Incurred in exchange for, or the
proceeds of which are used to refund or refinance, any Indebtedness
permitted by this clause (3); provided, however, that (i) the principal
amount of the Indebtedness so Incurred shall not exceed the principal
amount of the Indebtedness so exchanged, refunded or refinanced (plus the
amount of reasonable fees and expenses incurred in connection therewith,
including any premium or defeasance costs) and (ii) the Indebtedness so
Incurred (A) shall not mature prior to the Stated Maturity of the
Indebtedness so exchanged, refunded or refinanced and (B) shall have an
Average Life equal to or greater than the remaining Average Life of the
Indebtedness so exchanged, refunded or refinanced;
(4) Indebtedness of the Company or any Restricted Subsidiary (other
than Indebtedness described in clause (1), (2) or (3) above) (x)
outstanding on the Issue Date (including without limitation, the 10 1/4%
Senior Notes due 2003 of Cliffs Drilling Company) or Incurred pursuant to
agreements as in effect on the Issue Date and (y) Indebtedness Incurred in
exchange for, or the proceeds of which are used to refund or refinance, any
Indebtedness permitted by this clause (4) or permitted by clause (a) above;
provided, however, that (i) the principal amount of the Indebtedness so
Incurred shall not exceed the principal amount of the Indebtedness so
exchanged, refunded or refinanced (plus the amount of reasonable fees and
expenses incurred in connection therewith, including any premium or
defeasance costs); and (ii) the Indebtedness so Incurred (A) shall not
mature prior to the Stated Maturity of the Indebtedness so exchanged,
refunded or refinanced and (B) shall have an Average Life equal to or
greater than the remaining Average Life of the Indebtedness so exchanged,
refunded or refinanced;
(5) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees in connection with any synthetic lease obligations
of Persons Incurred to finance the construction or upgrade of the drillship
Deepwater Frontier and the drillship Pathfinder pursuant to agreements
governing such obligations;
(6) Acquired Indebtedness of any Restricted Subsidiary in an aggregate
amount not to exceed $300 million, provided that the Company on a pro forma
basis could Incur $1.00 of additional Indebtedness pursuant to paragraph
(a) of this covenant;
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(7) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock;
(8) The Incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Indebtedness of any Unrestricted Subsidiary,
subject to the definition of "Unrestricted Subsidiary", such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (8);
(9) Obligations of the Company or a Restricted Subsidiary under
performance or surety bonds relating to building contracts for the
construction of drilling rigs, drillships or similar vessels or contracts
for the installation of related equipment;
(10) Hedging Obligations; and
(11) Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount which, together with all other Indebtedness of
the Company then outstanding (other than Indebtedness permitted by clauses
(1) through (10) of this paragraph (b) or paragraph (a)) does not exceed
$50 million.
(c) Notwithstanding clauses (a) and (b), the Company shall not issue any
Indebtedness if the proceeds thereof are used, directly or indirectly, to repay,
prepay, redeem, defease, retire, refund or refinance any Subordinated
Obligations unless such Indebtedness shall be subordinated to the Notes to at
least the same extent as such Subordinated Obligations.
Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary of the
Company to, issue, assume or guarantee any Indebtedness for borrowed money
secured by any Lien on any property or asset now owned or hereafter acquired by
the Company or such Restricted Subsidiary without making effective provision
whereby any and all Notes then or thereafter outstanding will be secured by a
Lien equally and ratably with any and all other obligations thereby secured for
so long as any such obligations shall be so secured.
The foregoing restriction does not, however, apply to:
(1) Liens existing on the date on which the Notes are originally
issued or provided for under the terms of agreements existing on such date;
(2) Liens on property securing (a) all or any portion of the cost of
acquiring, constructing, altering, improving or repairing any property or
assets, real or personal, or improvements used or to be used in connection
with such property or (b) Indebtedness incurred by the Company or any
Restricted Subsidiary of the Company prior to or within one year after the
later of the acquisition, the completion of construction, alteration,
improvement or repair or the commencement of commercial operation thereof,
which Indebtedness is incurred for the purpose of financing all or any part
of the purchase price thereof or construction or improvements thereon;
(3) Liens securing Indebtedness owed by a Restricted Subsidiary of the
Company to the Company or to any other Restricted Subsidiary of the
Company;
(4) Liens on property existing at the time of acquisition of such
property by the Company or any of its Restricted Subsidiaries or Liens on
the property of any Person existing at the time such Person becomes a
Restricted Subsidiary of the Company and, in any case, not incurred as a
result of (or in connection with or in anticipation of) the acquisition of
such property or such Person becoming a Restricted Subsidiary of the
Company, provided that such Liens do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries other than the
property encumbered at the time such property is acquired by the Company or
any of its Restricted
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Subsidiaries or such Person becomes a Restricted Subsidiary of the Company
and, in any case, do not secure Indebtedness with a principal amount in
excess of the principal amount outstanding at such time;
(5) Liens on any property securing (a) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or (b) Indebtedness issued or Guaranteed by the United States or
any State thereof or any department, agency or instrumentality of either;
(6) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted
under clause (1), (2), (4) or (5) above, provided that such Lien extends to
or covers only the property that is subject to the Lien being extended,
renewed or replaced and that the principal amount of the Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so
secured at the time of such extension, renewal or replacement: or
(7) Liens (exclusive of any Lien of any type otherwise permitted under
clauses (1) through (6) above) securing Indebtedness for borrowed money of
the Company or any Restricted Subsidiary of the Company in an aggregate
principal amount which, together with the aggregate amount of Attributable
Indebtedness deemed to be outstanding in respect of all Sale/Leaseback
Transactions entered into pursuant to clause (1) of the covenant described
under "Limitation on Sale/Leaseback Transactions" below (exclusive of any
such Sale/Leaseback Transactions otherwise permitted under clauses (1)
through (6) above), does not at the time such Indebtedness is incurred
exceed 15% of the Consolidated Net Worth of the Company (as shown in the
most recent audited consolidated balance sheet of the Company and its
Restricted Subsidiaries).
Limitation on Restricted Payments
(a) The Company 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 the Company) 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 the Company 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
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);
(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 Obligations (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); or
(4) make any Investment other than a Permitted Investment (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being herein referred to as a
"Restricted Payment"),
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if at the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(i) a Default shall have occurred and be continuing (or would result
therefrom); or
(ii) the Company would not be permitted to Incur an additional $1.00
of Indebtedness pursuant to paragraph (a) under " -- Limitation on
Indebtedness" after giving pro forma effect to such Restricted Payment; or
(iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the date on which the Notes were originally
issued would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter during which the Notes were originally issued 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
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) subsequent to the Issue Date (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 the Issue Date 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 (other than Permitted Investments) in such
Restricted Subsidiary made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary after the Issue Date; and
(E) $20 million.
(b) The provisions of Section (a) shall not prohibit:
(1) 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 than 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
(4)(iii)(B) and (4)(iii)(C) of Section (a);
(2) 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, Indebtedness of the Company which is permitted to be
issued pursuant to the provisions of "-- Limitation on Indebtedness" above;
provided, however, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments; and
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(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.
Limitation on Sale/Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/ Leaseback Transaction with any Person (other than the
Company or a Restricted Subsidiary) unless:
(1) the Company or such Restricted Subsidiary would be entitled to
incur Indebtedness, in a principal amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction, secured by a
Lien on the property subject to such Sale/Leaseback Transaction pursuant to
the covenant described under "Limitation on Liens" above without equally
and ratably securing the Notes pursuant to such covenant;
(2) after the date on which the Notes are originally issued and within
a period commencing six months prior to the consummation of such
Sale/Leaseback Transaction and ending six months after the consummation
thereof, the Company or such Restricted Subsidiary shall have expended for
property used or to be used in the ordinary course of business of the
Company and its Restricted Subsidiaries an amount equal to all or a portion
of the net proceeds of such Sale/Leaseback Transaction and the Company
shall have elected to designate such amount as a credit against such
Sale/Leaseback Transaction (with any such amount not being so designated to
be applied as set forth in clause (3) below), or
(3) the Company, during the 12-month period after the effective date
of such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Notes or any Pari Passu Indebtedness an amount
equal to the greater of the net proceeds of the sale or transfer of the
property leased in such Sale/Leaseback Transaction and the fair value, as
determined by the Board of Directors of the Company, of such property at
the time of entering into such Sale/Leaseback Transaction (in either case
adjusted to reflect the remaining term of the lease and any amount expended
by the Company as set forth in clause (2) above), less an amount equal to
the principal amount of Notes and Pari Passu Indebtedness voluntarily
defeased or retired by the Company within such 12-month period and not
designated as a credit against any other Sale/Leaseback Transaction entered
into by the Company or any Restricted Subsidiary during such period.
Limitations on Mergers and Consolidations
Neither the Company nor any Guarantor (other than any Guarantor that shall
have been released from its Guarantee pursuant to the provisions of the
Indenture) will consolidate with or merge into any Person, 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 such Guarantor, as the case may be), 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 (or, alternatively, in the case of a Guarantor organized under the
laws of a jurisdiction outside the United States, a corporation organized
and existing under the laws of such foreign jurisdiction), and the
Successor assumes by supplemental indenture in a form satisfactory to the
Trustee all of the obligations of the Company or such Guarantor, as the
case may be, under the Indenture and under the Notes;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
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(3) in the case of the Company, immediately after giving effect to
such transaction, the resulting, surviving or transferee Person would be
able to incur at least $1.00 of Indebtedness pursuant to clause (a) of the
"Limitation on Indebtedness" covenant.
SEC Reports
Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the SEC and provide the Trustee and Noteholders with
such annual reports and such information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act.
In addition, whether or not required by the rules and regulations of the
SEC, the Company will file a copy of all such information and reports with the
SEC for public availability (unless the SEC will not accept such filing). In
addition, the Company shall furnish to the Noteholders and to prospective
investors, upon the requests of such Noteholders, any information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the
Notes are not freely transferable under the Securities Act.
DEFINITIONS
The following is a summary of some of the defined terms 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 Notes and not defined below.
"Acquired Indebtedness" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Attributable Indebtedness," when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at the rate set forth or implicit in the terms of the lease included
in such transaction) of the total obligations of the lessee for rental payments
(other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"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 generally accepted accounting principles and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
generally accepted accounting principles.
"Consolidated EBITDA Coverage Ratio" as of any date of determination means
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at
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least 45 days prior to the date of such determination to (b) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio is an issuance of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been issued on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any asset disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such asset
disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company
and its continuing Subsidiaries in connection with such asset dispositions
for such period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Subsidiaries are no longer liable for
such Indebtedness after such sale),
(3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially
all of an operating unit of a business, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto (including the issuance of any Indebtedness) as if such Investment
or acquisition occurred on the first day of such period, and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any asset disposition or any Investment that would have
required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such asset disposition or Investment
occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating thereto,
and the amount of Consolidated Interest Expense associated with any Indebtedness
issued in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest of such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Protection Agreement
applicable to such Indebtedness if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months).
For purposes of this definition, in the case of the acquisition since the
beginning of such period of a drilling rig or drillship (or of a Restricted
Subsidiary owning same) by the Company or by a Restricted Subsidiary pursuant to
a binding purchase agreement or the delivery since the beginning of such period
of
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a drilling rig or drillship to the Company or a Restricted Subsidiary pursuant
to a binding construction contract, if such drilling rig or drillship has been
subject for at least one full fiscal quarter to a binding drilling contract
constituting a Qualifying Contract, pro forma effect shall be given to the
earnings (losses) of such drilling rig or drillship as if such drilling rig or
drillship were acquired on the first day of such period, by basing such earnings
(losses) on the annualized (x) historical revenues actually earned from such
Qualifying Contract and (y) actual expenses related thereto, in each case for
each quarter during such period in which the Qualifying Contract was in effect.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such interest expense:
(1) interest expense attributable to Capitalized Lease Obligations,
(2) amortization of debt discount and debt issuance cost,
(3) capitalized interest,
(4) non-cash interest payments,
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(6) net costs under Interest Rate Protection Agreements (including
amortization of fees),
(7) dividends in respect of any Redeemable Stock held by Persons other
than the Company or a Restricted Subsidiary,
(8) interest expense attributable to deferred payment obligations, and
(9) interest expense on Indebtedness of another Person to the extent
that such Indebtedness is guaranteed by the Company or a Restricted
Subsidiary.
"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 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;
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(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 Falcon
Drilling Company; and
(g) the cumulative effect of a change in accounting principles;
"Consolidated Net Worth" of the Company means the consolidated
stockholders' equity of the Company and our Subsidiaries, as determined in
accordance with generally accepted accounting principles.
"Credit Facilities" means, with respect to the Company or any Restricted
Subsidiary, one or more debt facilities or commercial paper facilities, in each
case with banks or other institutional lenders providing for revolving credit
loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following (but without duplication) to the extent deducted in
calculating such Consolidated Net Income for such period: (a) income tax
expense, (b) Consolidated Interest Expense, (c) depreciation expense and (d)
amortization expense.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company which
is neither Exchangeable Stock nor Redeemable Stock).
"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option of any
obligor thereon to a date, more than one year after the date on which such
Indebtedness is originally incurred.
"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,
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(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, valued at its maximum fixed repurchase price,
and
(9) all Hedging Obligations of such Person.
"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 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. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under the "Limitation on Restricted Payments" covenant, (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Investment Grade" 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 Rating Categories of any Rating
Agencies substituted for S&P or Moody's.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law. For
the purposes of the Indenture, we or any Subsidiary of ours shall be deemed to
own subject to a Lien any asset which it 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.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Non-Convertible Capital Stock" means, with respect to any corporation, any
non-convertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into non-convertible common stock of such
corporation; provided, however, that Non-Convertible Capital Stock shall not
include any Redeemable Stock or Exchangeable Stock.
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"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary as to which neither the Company or
any Restricted Subsidiary:
(1) provides credit support including any undertaking, agreement or
instrument which would constitute Indebtedness; or
(2) is directly or indirectly liable for such Indebtedness.
"Pari Passu Indebtedness" means any Indebtedness of ours, whether
outstanding on the date on which the Notes 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 the Notes.
"Permitted Investments" means:
(a) certificates of deposit, bankers acceptances, time deposits,
Eurocurrency deposits and similar types of Investments routinely offered by
commercial banks with final maturities of one year or less issued by commercial
banks having capital and surplus in excess of $100 million;
(b) commercial paper issued by any corporation, if such commercial paper
has credit ratings of at least "A-1" by S&P and at least "P-1" by Moody's;
(c) U.S. Government Obligations with a maturity of four years or less;
(d) repurchase obligations for instruments of the type described in clause
(c);
(e) shares of money market mutual or similar funds having assets in excess
of $100 million;
(f) payroll advances in the ordinary course of business;
(g) other advances and loans to officers and employees of the Company or
any Restricted Subsidiary, so long as the aggregate principal amount of such
advances and loans does not exceed $500,000 at any one time outstanding;
(h) Investments in any Person in the form of a capital contribution of the
Company's common stock;
(i) Investments made by the Company in its Restricted Subsidiaries (or any
Person that will be a Restricted Subsidiary as a result of such Investment) or
by a Restricted Subsidiary in the Company or in one or more Restricted
Subsidiaries (or any Person that will be a Restricted Subsidiary as a result of
such Investment);
(j) Investments in stock, obligations or securities received in settlement
of debts owing to the Company or any Restricted Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of the Company or any Restricted Subsidiary, in
each case as to debt owing to the Company or any Restricted Subsidiary that
arose in the ordinary course of business of the Company or any such Restricted
Subsidiary;
(k) Investments made in exchange for Indebtedness permitted by Sections
(b)(4) and (b)(5) of the "Limitation on Indebtedness" covenant;
(l) Investments in the capital stock of Navis ASA, a Norwegian corporation,
in exchange for cash and non-cash assets (the fair market value of which shall
be determined in good faith by the Board of Directors of the Company), in an
aggregate amount not to exceed $50 million at any time outstanding;
(m) Investments consisting of the redesignation of the Subsidiary owning or
operating the drillships Deepwater Millennium or Deepwater Frontier as an
Unrestricted Subsidiary, or the contribution, transfer or other disposition of
the drillships Deepwater Millennium and Deepwater Frontier and related equipment
and assets (including any drilling contract) by the Company or any Restricted
Subsidiary to a Person other than a Restricted Subsidiary, in connection with
the refinancing of the Indebtedness Incurred to finance the construction of such
drillships;
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(n) Investments in a Person other than a Restricted Subsidiary for the
purpose of financing the construction or upgrade prior to delivery of the
drillship Deepwater Frontier, the drillship Deepwater Millennium or the
semisubmersible RBS8M pursuant to the terms of applicable construction and
equipment installation agreements; and
(o) Investments in a Person other than a Restricted Subsidiary for the
purpose of financing the construction or upgrade of new drilling rigs,
drillships or similar vessels and related equipment, in an aggregate amount not
to exceed at any time outstanding (i) $100 million less (ii) the aggregate
amount of all payments actually made pursuant to paragraph (n) of this
definition that represent payments for amounts in excess of the Company's
estimated costs for the vessels referred to therein, as in effect on the Issue
Date; provided, however, that at the time of such Investment, the Company or
such Person has entered into a Qualifying Contract with respect thereto.
"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 corporation,
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
corporation, over shares of Capital Stock of any other class of such
corporation.
"Qualifying Contract" with respect to a drilling rig, drillship or similar
vessel means a contract for the use thereof (i) between the Company or a
Restricted Subsidiary or, for the purposes of clause (o) of the definition of
"Permitted Investments," a Person other than a Restricted Subsidiary and a
counterparty that, as certified in an Officers' Certificate delivered to the
Trustee in connection therewith, is either generally recognized in the offshore
drilling industry as a major oil company or has an investment grade rating on
its long-term debt from Moody's or S&P's, (ii) having a minimum term of two
years and (iii) containing a minimum day rate for such drilling rig, drillship
or similar vessel.
"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 Notes 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.
"Rating Categories" means:
(a) with respect to S&P, any of the following categories (any of which may
include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent
successor categories);
(b) with respect to Moody's, any of the following categories (any of which
may include a "1," "2" or "3"): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or
equivalent successor categories); and
(c) the equivalent of any such categories of S&P or Moody's used by another
Rating Agency, if applicable.
"Redeemable Stock" means, with respect to any series of Notes, 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 Notes of such series 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 the covenant
described above under the caption "-- Limitation on Restricted Payments"
covenant.
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"Restricted Subsidiary" means any Subsidiaries other than an Unrestricted
Subsidiary.
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by us or any Subsidiary of ours, for a period of more
than three years, of any real or tangible personal property, which property has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person in contemplation of such leasing.
"Significant Subsidiary" has the meaning set forth in Regulation S-X under
the Exchange Act.
"S&P" means Standard & Poor's Rating Service, a division of the McGraw-Hill
Companies, Inc., and its successors.
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the date hereof or hereafter incurred) which is subordinate or
junior in right of payment to the Notes.
"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.
"Tangible Property" means all land, buildings, machinery and equipment and
leasehold interests and improvements which would be reflected on a balance sheet
of the Company prepared in accordance with GAAP, excluding (a) all rights,
contracts and other intangible assets of any nature whatsoever and (b) all
inventories and other current assets.
"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:
(1) it has no Indebtedness other than Non-Recourse Indebtedness;
provided, however, that notwithstanding any other provision of this
Indenture, a Subsidiary shall not fail to constitute an Unrestricted
Subsidiary by reason of (a) the guarantee by the Company or a Restricted
Subsidiary in connection with synthetic lease obligations Incurred to
finance the construction or upgrade of drilling rigs, drillships or similar
vessels; and (b) obligations of the Company or a Restricted Subsidiary
relating to Indebtedness of an Unrestricted Subsidiary if such Indebtedness
constituted a Permitted Investment or a Restricted Payment permitted by the
"Limitation on Restricted Payments" covenant at the time of its Incurrence
or at the time of designation of such Subsidiary as an Unrestricted
Subsidiary; and
(2) after giving effect thereto, such designation was permitted by the
"Limitation on Restricted Payments" covenant.
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,
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immediately after giving effect to such designation, (A) no Default or Event of
Default shall have occurred and be continuing and (B) the Company could incur
$1.00 of additional Indebtedness under paragraph (a) of the "Limitation on
Indebtedness" covenant.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture with respect to Notes of
any series as being:
(1) default by us or any Guarantor for 30 days in payment of any
interest on Notes of such series;
(2) default by us or any Guarantor in any payment of principal of or
premium, if any, on Notes of such series;
(3) default by us or any Guarantor in compliance with any of its other
covenants applicable to Notes of such series or agreements in, or
provisions of, the Notes of such series, the Guarantees, if any, or the
Indenture which shall not have been remedied within 60 days after written
notice by the Trustee or by the holders of at least 25% in principal amount
of each series of Notes then outstanding;
(4) the acceleration of the maturity of any Indebtedness (other than
of Notes of such series or any Non-Recourse Indebtedness) of ours or any
Restricted Subsidiary of ours having an outstanding principal amount of $20
million or more individually or in the aggregate, or a default in the
payment of any principal or interest in respect of any Indebtedness (other
than the Notes of such series or any Non-Recourse Indebtedness) of ours or
any Restricted Subsidiary of ours having an outstanding principal amount of
$20 million or more individually or in the aggregate and such default shall
be continuing for a period of 30 days without our or such Restricted
Subsidiary, as the case may be, effecting a cure of such default;
(5) a final judgment or order for the payment of money in excess of
$20 million (net of applicable insurance coverage) having been rendered
against us, a Guarantor or any Significant Subsidiary of ours that is a
Restricted Subsidiary and such judgment or order shall continue unsatisfied
and unstayed for a period of 60 days; or
(6) certain events involving bankruptcy, insolvency or reorganization
of us, a Guarantor, or any Significant Subsidiary of ours that is a
Restricted Subsidiary.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal of or premium, if
any, or interest on the Notes) if the Trustee considers it in the interest of
the holders of the Notes to do so.
If an Event of Default occurs and is continuing with respect to the
Indenture (other than certain events of bankruptcy, insolvency or
reorganization) with respect to any series of Notes, the Trustee or the holders
of not less than 25% in principal amount of such series of Notes outstanding may
declare the principal of and premium, if any, and accrued but unpaid interest on
all the Notes of such series to be due and payable. Upon such a declaration,
such principal, premium, if any, and interest 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 on all the Notes 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 Notes.
The amount due and payable on the acceleration of any Note will be equal to
100% of the principal amount of such Note, plus accrued interest to the date of
payment.
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Under certain circumstances, the holders of a majority in principal amount
of the outstanding Notes of any series may rescind any such acceleration with
respect to the Notes of such series and its consequences.
No holder of a Note of any series 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 such series of Notes 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 a Note to sue for enforcement of any
overdue payment thereon.
The holders of a majority in principal amount of any series of Notes then
outstanding have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee under the
Indenture, subject to certain limitations specified in the Indenture with
respect to such series.
The Indenture requires us to file annually with the Trustee a written
statement as to compliance with the covenants contained in the Indenture.
MODIFICATION AND WAIVER
We, the Guarantors, if any, and the Trustee may make modifications and
amendments to the Indenture or the Notes with the consent of the holders of a
majority in principal amount of each series of the Notes then outstanding;
provided that no such modification or amendment may, without the consent of the
holder of each Note then outstanding affected thereby of any series:
(1) reduce the amount of Notes of such series whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Note of such series;
(3) reduce the principal of or change the fixed maturity of any Note
of such series or alter the premium or other provisions with respect to
redemption;
(4) make any Note payable in money other than that stated in the Note
of such series;
(5) impair the right to institute suit for the enforcement of any
payment of principal of, or premium, if any, or interest on, any Note of
such series;
(6) make any change in the percentage of principal amount of Notes
necessary to waive compliance with certain provisions of the Indenture; or
(7) waive a continuing Default or Event of Default in the payment of
principal of, or premium, if any, or interest on the Notes of such series.
We, the Guarantors, if any, and the Trustee may make modifications and
amendments of the Indenture without the consent of any holders of Notes in
certain limited circumstances, including:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption of our obligations or any
Guarantor's obligations under the Indenture upon the merger, consolidation
or sale or other disposition of all or substantially all of our assets or
any such Guarantor's assets;
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(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(4) to reflect the release of any Guarantor from its Guarantee, or the
addition of any of our Subsidiaries as a Guarantor, in the manner provided
by the Indenture;
(5) to comply with any requirement in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act of 1939; or
(6) to make any change that does not adversely affect the rights of
any holder of Notes in any material respect.
The holders of a majority in aggregate principal amount of the Notes of any
series then outstanding may waive any past default under the Indenture with
respect to such series, except a default in the payment of principal, or
premium, if any, or interest.
DISCHARGE AND TERMINATION
Defeasance of Certain Obligations
We and the Guarantors, if any, may terminate certain of our and their
obligations under the Indenture with respect to Notes of any series, including
those described under the section "Certain Covenants," if:
(1) we irrevocably deposit in trust with the Trustee cash or
non-callable U.S. Government Obligations or a combination thereof
sufficient to pay principal of and interest on such series of Notes to
maturity, and to pay all other sums payable by us under the Indenture;
(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(3) we shall have delivered to the Trustee an Opinion of Counsel from
nationally recognized counsel acceptable to the Trustee or a tax ruling to
the effect that the holders of the Notes of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of our
exercise of our option under such section and will be subject to Federal
income tax on the same amount and in the same manner and at the same times
as would have been the case if such option had not been exercised;
(4) we deliver to the Trustee certain other documents called for by
the Indenture, including an Officers' Certificate and Opinions of Counsel;
and
(5) we satisfy certain other conditions.
Our payment obligations and the Guarantors' Guarantees, if any, shall
survive until the Notes are no longer outstanding.
Discharge
The Indenture shall cease to be of further effect with respect to Notes of
any series (subject to certain exceptions relating to compensation and indemnity
of the Trustee and repayment to us of excess money or securities) when:
(1) either all outstanding Notes of such series theretofore
authenticated and issued (other than destroyed, lost or stolen Notes that
have been replaced or paid) have been delivered to the Trustee for
cancellation; or all outstanding Notes of such series not theretofore
delivered to the Trustee for cancellation (a) have become due and payable
or (b) will become due and payable at their stated maturity within one year
and we have deposited or caused to be deposited with the Trustee as funds
(immediately available to the holders in the case of clause (a)) in trust
for such purpose an amount which, together with earnings thereon, will be
sufficient to pay and discharge the entire indebtedness on such Notes of
such series for principal and interest to the date of such deposit (in the
case of
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Notes of such series which have become due and payable) or to the stated
maturity, as the case may be;
(2) we have paid all other sums payable by us under the Indenture; and
(3) we have delivered to the Trustee an Officers' Certificate stating
that all conditions precedent to satisfaction and discharge of the
Indenture have been complied with, together with an Opinion of Counsel to
the same effect.
GOVERNING LAW
The Indenture provides that it will be governed by and will be construed in
accordance with the laws of the State of New York.
THE TRUSTEE
Chase Bank of Texas, National Association is the Trustee under the
Indenture. Its address is 600 Travis Street, Suite 1150, Houston, Texas 77002.
We have also appointed the Trustee as the initial Registrar and as initial
Paying Agent under the Indenture.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of ours, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act of 1939, as amended), it must eliminate such conflict or
resign.
The Indenture provides that in case an Event of Default shall occur and be
continuing, the Trustee will be required to use the degree of care and skill of
a prudent man in the conduct of his own affairs. The Trustee will be under no
obligation to exercise any of its powers under the Indenture at the request of
any of the holders of the Notes, unless such holders shall have offered the
Trustee indemnity reasonably satisfactory to it.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
We have agreed pursuant to a registration rights agreement (the
"Registration Rights Agreement") with the Initial Purchasers, for the benefit of
the holders of the Notes, that we will, at our cost, use our best efforts to
cause the registration statement of which this Prospectus is a part (the
"Exchange Offer Registration Statement") to be declared effective under the
Securities Act within 180 days after the Issue Date.
Upon the effectiveness of the Exchange Offer Registration Statement, we
will offer the applicable series of exchange notes in exchange for surrender of
the corresponding series of outstanding notes. We will keep the Registered
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Registered Exchange Offer is mailed
to the holders of the Notes. For each Note surrendered to us pursuant to the
Registered Exchange Offer, the holder of such Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Note at
maturity. Interest on each Exchange Note will accrue from the last interest
payment date on which interest was paid on the Note surrendered in exchange
thereof or, if no interest has been paid on such Note, from the date interest
begins to accrue on such Note.
Under existing SEC interpretations, the exchange notes would be freely
transferable by holders other than our affiliates after the Registered Exchange
Offer without further registration under the Securities Act if the holder of the
exchange notes acquires the exchange notes in the ordinary course of its
business, has no arrangement or understanding with any Person to participate in
the distribution of the exchange notes and is not an affiliate of ours, as such
terms are interpreted by the SEC; provided, however, that broker-dealers
("Participating Broker-Dealers") receiving exchange notes in the Registered
Exchange Offer will have a prospectus delivery requirement with respect to
resales of such exchange notes. The SEC has taken
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the position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to exchange notes (other than a resale of an
unsold allotment from the original sale of the Notes) with the prospectus
contained in the Exchange offer Registration Statement. Under the Registration
Rights Agreement, we are required to allow Participating Broker-Dealers and
other Persons, if any, with similar prospectus delivery requirements to use the
prospectus contained in the Exchange offer Registration Statement in connection
with the resale of such exchange notes.
A holder of Notes (other than certain specified holders) who wishes to
exchange such Notes for exchange notes in the Registered Exchange Offer will be
required to represent that any exchange notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Registered Exchange Offer it has no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the exchange notes and that it is not an
affiliate of ours, as defined in Rule 405 of the Securities Act, or if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
In the event that applicable interpretations of the staff of the SEC do not
permit us to effect such a Registered Exchange Offer, or if for any other reason
the Registered Exchange Offer is not consummated within 180 days of the Issue
Date, or if the Initial Purchasers so request with respect to Notes not eligible
to be exchanged for exchange notes in the Registered Exchange Offer, or if any
holder of Notes is not eligible to participate in the Registered Exchange Offer
or does not receive freely tradeable exchange notes in the Registered Exchange
Offer, at our cost we will:
(1) as promptly as practicable, file a shelf registration statement
(the "Shelf Registration Statement") with the SEC covering resales of the
Notes;
(2) use our best efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act; and
(3) keep the Shelf Registration Statement effective until the earlier
of (a) the time when the Notes covered by the Shelf Registration Statement
can be sold pursuant to Rule 144 without any limitations under clauses (c),
(e), (f) and (h) of Rule 144 and (b) two years from the Issue Date.
We will, in the event a Shelf Registration Statement is filed, among other
things, provide to each holder for whom such Shelf Registration Statement was
filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes. A holder selling Notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
If:
(1) by June 20, 1999, neither the Registered Exchange Offer is
consummated nor the Shelf Registration Statement is declared effective; or
(2) after either the Exchange offer Registration Statement or the
Shelf Registration Statement is declared effective, such Registration
Statement thereafter ceases to be effective or usable (subject to certain
exceptions) in connection with resales of Notes or exchange notes in
accordance with and during the periods specified in the Registration Rights
Agreement (each such event referred to in clause (1) through (2) being
herein called a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration
Default Period"), additional cash interest will accrue on the Notes and the
exchange notes at the rate of 0.25% per annum for the first 90 days of the
Registration Default Period and at the rate of 0.50% per annum thereafter
for the remaining portion of the Registration Default Period, calculated on
the principal amount of the Notes
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<PAGE> 51
as of the date on which such interest is payable. Such interest is payable
in addition to any other interest payable from time to time with respect to
the Notes.
If we effect the Registered Exchange Offer, we will be entitled to close
the Registered Exchange Offer 30 days after the commencement thereof provided
that we have accepted all Notes theretofore validly tendered in accordance with
the terms of the Registered Exchange Offer.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will be issued in fully registered form without interest
coupons. The exchange notes will be represented by one or more permanent global
Notes in definitive, fully registered form without interest coupons (the "Global
Note") and will be deposited with the Trustee as custodian for The Depository
Trust Company and registered in the name of a nominee of The Depository Trust
Company. The Global Note (and any Notes issued in exchange therefor) will be
subject to certain restrictions on transfer set forth therein and will bear the
legend regarding such restrictions set forth under "Transfer Restrictions."
Upon the issuance of the Global Note, The Depository Trust Company will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the accounts
of Persons who have accounts with such depositary. Ownership of beneficial
interests in a Global Note will be limited to Persons who have accounts with The
Depository Trust Company ("participants") or Persons who hold interests through
participants. Ownership of beneficial interests in the Global Note will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by The Depository Trust Company or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of Persons other than participants).
So long as The Depository Trust Company, or its nominee, is the registered
owner or holder of a Global Note, The Depository Trust Company or such nominee,
as the case may be, will be considered the sole owner or holder of the Notes
represented by such Global Note for all purposes under the Indenture and the
Notes. In addition, no beneficial owner of an interest in a Global Note will be
able to transfer that interest except in accordance with the applicable
procedures of The Depository Trust Company and, if applicable, Morgan Guaranty
Trust Company of New York, as operator of the Euroclear system ("Euroclear").
Payments of the principal of, and interest on, the Global Note will be made
to The Depository Trust Company or its nominee, as the case may be, as the
registered owner thereof. Neither we, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
We expect that The Depository Trust Company or its nominee, upon receipt of
any payment of principal or interest in respect of a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of The Depository Trust Company or its nominee. We also
expect that payments by participants to owners of beneficial interests in such
Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in The Depository Trust Company will be
effected in the ordinary way in accordance with The Depository Trust Company's
rules and will be settled in same-day funds. Transfers
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<PAGE> 52
between participants in Euroclear will be effected in the ordinary way in
accordance with its rules and operating procedures.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a holder of Notes (including the presentation of Notes
for exchange as described below) only at the direction of one or more
participants to whose account The Depository Trust Company's interests in the
Global Note is credited and only in respect of such portion of the aggregate
principal amount of Notes as to which such participant or participants has or
have given such direction. However, if there is an Event of Default under the
Notes, The Depository Trust Company will exchange the Global Note for
Certificated Notes which it will distribute to its participants.
The Depository Trust Company has advised us as follows: The Depository
Trust Company is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meanings of New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "Clearing Agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository Trust Company was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to The Depository Trust Company system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although The Depository Trust Company and Euroclear are expected to follow
the foregoing procedures in order to facilitate transfers of interests in the
Global Note among participants of The Depository Trust Company and Euroclear,
they are under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither we nor the Trustee
will have any responsibility for the performance by The Depository Trust
Company, Euroclear or the participants or indirect participants of their
respective obligations under the rules and procedures governing their respective
operations.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in a
Global Note may, upon request to us or the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Notes in the name of, and cause the
same to be delivered to, such Person or Persons (or the nominee of any thereof).
In addition, if:
(1) The Depository Trust Company or any successor depositary (the
"Depositary") notifies the Company in writing that it is no longer willing
or able to act as a depositary and we are unable to locate a qualified
successor within 90 days or
(2) we, at our option, notify the Trustee in writing that we elect to
cause the issuance of Notes in the form of Certificated Notes under the
Indenture, then, upon surrender by the registered owner or holder of a
Global Note (a "Global Note Holder") of its Global Note, Notes in such form
will be issued to each Person that such Global Note Holder and the
Depositary identify as the beneficial owner of the related Notes.
Neither we nor the Trustee will be liable for any delay by the related
Global Note Holder or the Depositary in identifying the beneficial owners of the
related Notes, and we and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from such Global Note Holder or of the
Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Notes to be issued).
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DESCRIPTION OF CERTAIN INDEBTEDNESS
BANK FACILITIES
As of December 31, 1998, we had $150.0 million outstanding under our
revolving credit facility. We repaid all amounts on March 22, 1999 out of the
proceeds of our borrowings from RBF Finance Co. Upon repayment, we terminated
this Credit Facility.
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 (the "$1.1 Billion Senior Notes"). As a result,
we received net proceeds of $1,082 million after deducting estimated offering
related expenses. The $1.1 Billion Senior Notes bear interest at varying rates
from 6.5% to 7.375%. Interest on the $1.1 Billion Senior Notes is payable
semiannually on April 15 and October 15; and the $1.1 Billion Senior Notes
mature at varying times from 2003 to 2018. The $1.1 Billion Senior Notes are
unsecured obligations, ranking pari passu in right of payment with all of our
other existing and future senior unsecured indebtedness. We used the proceeds
from the offering of the $1.1 Billion 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 the $400 million principal amount of
outstanding notes that are the subject of the exchange offer. As a result, we
received net proceeds 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 $200 million of our 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.
For accounting purposes, we will consolidate RBF Finance Co.
CLIFFS DRILLING NOTES
Cliffs Drilling has outstanding an aggregate principal amount of $200.0
million of its 10 1/4% Senior Notes due 2003 (the "Cliffs Drilling Notes") and
debt premium, net of amortization, of $3.1 million as of September 30, 1998.
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 certain subsidiaries of Cliffs Drilling (the "Cliffs
Subsidiary Guarantors"), which guarantees rank pari passu in right of payment
with all senior indebtedness of the Cliffs Subsidiary Guarantors and senior to
all subordinated indebtedness of the Cliffs 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.
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UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of United States federal income and
estate tax consequences of the acquisition, ownership and disposition of Notes
by an initial beneficial owner of Notes that, for United States federal tax
purposes, is not a "United States person" (a "Non-United States Holder"). This
discussion is based upon the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as in effect on the date hereof, which are
subject to change, possibly retroactively. For purposes of this discussion, a
"United States person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in the United
States or under the law of the United States or of any state thereof or the
District of Columbia (unless, in the case of a partnership, Treasury regulations
provide otherwise), an estate whose income is subject to United States federal
income taxation regardless of its source, or a trust if a U.S. court is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. Notwithstanding the previous sentence, to the extent
provided in Treasury regulations, certain trusts in existence on August 20,
1996, and treated as United States persons prior to such date, that elect to
continue to be treated as United States persons will also be United States
persons. This discussion applies only to those Non-United States Holders who
purchased Notes from the Initial Purchasers at the price set forth on the cover
page of this Prospectus and hold the Notes as a capital asset. The tax treatment
of the holders of the Notes may vary depending upon their particular situations.
United States persons acquiring the Notes are subject to different rules than
those discussed below. In addition, certain other holders (including insurance
companies, tax exempt organizations, financial institutions and broker-dealers)
may be subject to special rules not discussed below. Prospective investors are
urged to consult their tax advisors regarding the United States federal tax
consequences of acquiring, holding and disposing of Notes, as well as any tax
consequences that may arise under the laws of any relevant foreign, state, local
or other taxing jurisdiction.
INTEREST
Interest that we pay to a Non-United States Holder will not be subject to
United States federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such Non-United States Holder and, among other things, such Non-
United States Holder (i) does not actually or constructively own 10% or more of
the total combined voting power of all classes of our stock; (ii) is not a
controlled foreign corporation with respect to the United States and to which we
are a related person and (iii) certifies to us, our paying agent or the person
who would otherwise be required to withhold United States tax, on Form W-8 or
W-9 or substantially similar form signed under penalties of perjury, that such
holder is not a United States person and provides such holder's name and address
(the "Certification Requirement"). In the case of interest on a Note that is not
"effectively connected with the conduct of a trade or business within the United
States" and does not satisfy the three requirements of the preceding sentence,
the Non-United States Holder's interest on a Note would generally be subject to
United States withholding tax at a flat rate of 30% (or a lower applicable
treaty rate). If a Non-United States Holder's interest on a Note is "effectively
connected with the conduct of a trade or business within the United States,"
then the Non-United States Holder will be subject to United States federal
income tax on such interest income in essentially the same manner as a United
States person and, in the case of a Non-United States Holder that is a foreign
corporation, may also be subject to the branch profits tax.
GAIN ON DISPOSITION
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain recognized on a sale, redemption or
other disposition of a Note unless (i) the gain is effectively connected with
the conduct of a trade or business within the United States by the Non-United
States Holder or (ii) in the case of a Non-United States Holder who is a
nonresident alien individual and
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holds the Note as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other requirements are met.
FEDERAL ESTATE TAXES
If interest on a Note is exempt from withholding of United States federal
income tax under the rules described above, the Note held by an individual who
at the time of death is a Non-United States Holder generally will not be subject
to United States federal estate tax as a result of such individual's death.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We will, when required, report to the holders of the Notes and the Internal
Revenue Service the amount of any interest paid on the Notes in each calendar
year and the amounts of tax withheld, if any, with respect to such payments.
In the case of payments of interest to Non-United States Holders, the
general 31% backup withholding tax and certain information reporting will not
apply to such payments with respect to which either the Certification
Requirement has been satisfied or an exemption has otherwise been established,
provided that neither we nor our payment agent has actual knowledge that the
holder is a United States person or that the conditions of any other exemption
are not in fact satisfied. Information reporting and backup withholding
requirements will apply to the gross proceeds paid to a Non-United States Holder
on the disposition of the Notes by or through a United States office of a United
States or foreign broker, unless the holder certifies to the broker under
penalties of perjury as to its name, address and status as a foreign person or
the holder otherwise establishes an exemption. Information reporting
requirements, but not backup withholding, will also apply to a payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
United States broker or foreign brokers with certain types of relationships to
the United States unless such broker has documentary evidence in its file that
the holder of the Notes is not a United States person and such broker has no
actual knowledge to the contrary, or the holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the Notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.
The United States Treasury Department recently promulgated new regulations
regarding the withholding and information reporting rules discussed above. In
general, the new regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify reliance standards. The new
regulations require, however, that a foreign person furnish its taxpayer
identification number in certain circumstances to claim a reduction in United
States federal withholding tax and new rules are provided for foreign persons
that hold debt instruments thorough a foreign intermediary. The new regulations
are generally effective for payments made after December 31, 1999, subject to
certain transition rules. NON-UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW REGULATIONS.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that for a period of 180 days after the expiration date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resales.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes 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 exchange notes 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 exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
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.
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
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.
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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;
- Current Report on Form 8-K/A filed January 20, 1999, amending Current
Report on Form 8-K filed December 15, 1998; and
- Current Report on Form 8-K filed March 16, 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 exchange notes offered hereby
will be passed upon for us by Gardere Wynne Sewell & Riggs, L.L.P., Houston,
Texas.
EXPERTS
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 reports.
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.
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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>
<C> <S>
4.1 -- Indenture dated as of December 22, 1998 between R&B
Falcon Corporation, as Issuer, and Chase Bank of Texas,
National Association, as Trustee, with respect to Series
A and Series B of each of $100,000,000 9 1/8% Senior
Notes due 2003 and $300,000,000 9 1/2% Senior Notes due
2008 (incorporated by reference to Exhibit 4.21 of
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998)
4.2 -- Registration Rights Agreement dated as of December 17,
1998 among R&B Falcon Corporation and Credit Suisse First
Boston, Paribas Corporation and NationsBanc Montgomery
Securities LLC (incorporated by reference to Exhibit 4.6
of Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998)
5.1* -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P., counsel
for R&B Falcon Corporation
10.1* -- Purchase Agreement dated December 17, 1998 among R&B
Falcon Corporation and Credit Suisse First Boston,
Paribas Corporation and NationsBanc Montgomery Securities
LLC
12.1* -- Statement regarding computation of ratio of earnings to
fixed charges
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)
</TABLE>
II-1
<PAGE> 59
<TABLE>
<C> <S>
25.1* -- Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 on Form T-1 of Chase Bank of
Texas, National Association
99.1* -- Form of Letter of Transmittal
99.2* -- Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Filed herewith.
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> 60
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 April 28, 1999.
R&B FALCON CORPORATION
By: /s/ STEVEN A. WEBSTER
----------------------------------
Steven A. Webster
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Tim W. Nagle, Robert F. Fulton and Leighton E.
Moss, 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/ STEVEN A. WEBSTER Chief Executive Officer and April 28, 1999
- --------------------------------------------------- President (Principal Executive
Steven A. Webster Officer) and Director
/s/ PAUL B. LOYD Chairman of the Board and April 28, 1999
- --------------------------------------------------- Director
Paul B. Loyd
/s/ ROBERT F. FULTON Executive Vice President April 28, 1999
- --------------------------------------------------- (Principal Financial Officer)
Robert F. Fulton
/s/ TIM W. NAGLE Executive Vice President April 28, 1999
- --------------------------------------------------- (Principal Accounting Officer)
Tim W. Nagle
/s/ PURNENDU CHATTERJEE Director April 28, 1999
- ---------------------------------------------------
Purnendu Chatterjee
</TABLE>
II-3
<PAGE> 61
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ARNOLD L. CHAVKIN Director April 28, 1999
- ---------------------------------------------------
Arnold L. Chavkin
/s/ CHARLES A. DONABEDIAN Director April 28, 1999
- ---------------------------------------------------
Charles A. Donabedian
/s/ DOUGLAS A.P. HAMILTON Director April 28, 1999
- ---------------------------------------------------
Douglas A.P. Hamilton
Director
- ---------------------------------------------------
Macko A.E. Laqueur
/s/ MICHAEL E. PORTER Director April 28, 1999
- ---------------------------------------------------
Michael E. Porter
/s/ ROBERT L. SANDMEYER Director April 28, 1999
- ---------------------------------------------------
Robert L. Sandmeyer
/s/ WILLIAM R. ZIEGLER Director April 28, 1999
- ---------------------------------------------------
William R. Ziegler
/s/ DOUGLAS E. SWANSON Director April 28, 1999
- ---------------------------------------------------
Douglas E. Swanson
</TABLE>
II-4
<PAGE> 62
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1 -- Indenture dated as of December 22, 1998 between R&B
Falcon Corporation, as Issuer, and Chase Bank of Texas,
National Association, as Trustee, with respect to Series
A and Series B of each of $100,000,000 9 1/8% Senior
Notes due 2003 and $300,000,000 9 1/2% Senior Notes due
2008 (incorporated by reference to Exhibit 4.21 of
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
4.2 -- Registration Rights Agreement dated as of December 17,
1998 among R&B Falcon Corporation and Credit Suisse First
Boston, Paribas Corporation and NationsBanc Montgomery
Securities LLC (incorporated by reference to Exhibit 4.6
of Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998)
5.1* -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P., counsel
for R&B Falcon Corporation.
10.1* -- Purchase Agreement dated December 17, 1998 among R&B
Falcon Corporation and Credit Suisse First Boston,
Paribas Corporation and NationsBanc Montgomery Securities
LLC.
12.1* -- Statement regarding computation of ratio of earnings to
fixed charges.
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 of Chase Bank of
Texas, National Association.
99.1* -- Form of Letter of Transmittal.
99.2* -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 5.1
April 28, 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 notes to be exchanged
(the "Exchange Notes") for up to $100 million aggregate principal amount of its
9 1/8 % Series A Senior Notes Due 2003 and up to $300 million of its 9 1/2%
Series A Senior Notes Due 2008 (collectively, the "Private Notes"). The Exchange
Notes are to have terms substantially identical in all material respects to the
Private Notes, except that such Exchange Notes will not contain terms with
respect to transfer restrictions. The Exchange Notes are proposed to be issued
in accordance with the provisions of the Indenture, dated as of December 22,
1998, between the Company and Chase Bank of Texas, National Association, as
Trustee (the "Indenture").
As the basis for the opinions expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Indenture, which
is filed as an exhibit to the Prospectus, 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, (ii) the Indenture will have been
qualified under the Trust Indenture Act of 1939, as amended, and (iii) the
Exchange Notes 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
April 28, 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 the Exchange Notes 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 1933 Act and
in compliance with any applicable state securities laws, when executed,
authenticated, issued, delivered and exchanged in accordance with the Exchange
Offer and the Indenture, will be legally issued and will constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their terms.
The opinion expressed above with respect to the Exchange Notes is
subject to the qualifications (x) that the enforcement of the Exchange Notes 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 (y) that a waiver of rights under any usury
laws may be unenforceable. Furthermore, we express no opinion as to the
enforceability of any provisions of the Exchange Notes that would require the
performance thereof in the presence of fraud or illegality on the part of the
holders of the Exchange Notes 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
$400,000,000
R&B FALCON CORPORATION
$100 MILLION 9 1/8% SENIOR NOTES DUE 2003
$300 MILLION 9 1/2% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
December 17, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
PARIBAS CORPORATION
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. R&B Falcon Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"Purchasers") $100 million aggregate principal amount of its 9 1/8% Senior Notes
due 2003 (the "5-Year Notes"), and $300 million aggregate principal amount of
its 9 1/2% Senior Notes due 2008 (the "10-Year Notes" and, collectively with the
5-Year Notes, the "Offered Securities") to be issued under an indenture to be
dated as of December 22, 1998 (the "Indenture") between the Company and Chase
Bank of Texas, National Association, as Trustee (the "Trustee"). The Company
will also enter into an amended revolving credit agreement (the "Amended Bank
Facility") effective simultaneously with the closing of the sale of Offered
Securities. The United States Securities Act of 1933, as amended, is herein
referred to as the "Securities Act."
The Company hereby agrees with the several Purchasers as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the several Purchasers that:
(a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers have been
prepared by the Company. Such preliminary
<PAGE> 2
offering circular and offering circular, as supplemented as of the date of this
Agreement, together with any other document approved by the Company for use in
connection with the contemplated resale of the Offered Securities are
hereinafter collectively referred to as the "Offering Document." On the date of
this Agreement, the Offering Document does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Offering Document based upon written information furnished to
the Company by any Purchaser through Credit Suisse First Boston Corporation
("CSFBC") specifically for use therein, it being understood and agreed that the
only such information is that described as such in Section 7(b) hereof. On the
date of this Agreement, (i) the Company's Annual Report on Form 10-K most
recently filed with the Securities and Exchange Commission (the "Commission")
and all subsequent reports (collectively, the "Exchange Act Reports") which have
been filed by the Company with the Commission or sent to shareholders pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act") and (ii) the Annual
Report on Form 10-K of Cliffs Drilling Company, a Delaware corporation
("Cliffs"), most recently filed with the Commission and all subsequent reports
("Cliffs Exchange Act Reports") which have been filed by Cliffs with the
Commission or sent to Cliffs' shareholders pursuant to the Exchange Act do not
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Such documents, when they were filed
with the Commission, conformed in all material respects to the applicable
requirements of the Exchange Act and the applicable rules and regulations of the
Commission thereunder.
(b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Document; and the Company is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the condition (financial
or other), business, properties or results of operation of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect").
(c) 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 or formed and is an existing corporation or limited
liability entity in good standing under the laws of the jurisdiction of its
incorporation or formation, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Offering
Document; and each of the Subsidiaries is duly qualified to do business as a
foreign corporation or limited liability entity in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; all of the issued and
2
<PAGE> 3
outstanding capital stock or member interests of each Subsidiary has been duly
authorized and validly issued and is fully paid and nonassessable; and the
capital stock or member interests of each Subsidiary is owned directly or
indirectly by the Company free from liens, encumbrances and defects.
(d) The Indenture has been duly authorized; the Offered
Securities have been duly authorized; and when the Offered Securities are
executed and authenticated in accordance with the terms thereof and delivered
and paid for pursuant to this Agreement on the Closing Date (as defined below),
the Indenture will have been duly executed and delivered, such Offered
Securities will have been duly executed, issued and delivered and will conform
to the description thereof contained in the Offering Document and the Indenture
and such Offered Securities will constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(e) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Purchaser for a
brokerage commission, finder's fee or other like payment in connection with the
sale of the Offered Securities.
(f) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required for (i)
the consummation of the transactions contemplated by this Agreement and the
Registration Rights Agreement, dated the date hereof, between the Company and
the Purchasers (the "Registration Rights Agreement") in connection with the
issuance and sale of the Offered Securities by the Company or (ii) the
execution, performance and delivery of the Amended Bank Facility, except such as
may be required under state securities laws and except for such filings with the
Securities and Exchange Commission as are required in connection with the
Registration Rights Agreement.
(g) Neither the execution, delivery and performance of the
Indenture, the Registration Rights Agreement and this Agreement, and the
issuance and sale of the Offered Securities and compliance with the terms and
provisions thereof nor the execution, delivery and performance of the Amended
Bank Facility will result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any rule, regulation
or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or any of its properties,
or any agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound or to which any of the
properties of the Company or any Subsidiary is subject, or the Certificate of
Incorporation or other organizational documents and Bylaws of the Company and
each of the Subsidiaries, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated by this
Agreement.
3
<PAGE> 4
(h) Each of this Agreement, Registration Rights Agreement and
the Amended Bank Facility has been duly authorized, executed and delivered by
the Company.
(i) The Amended Bank Facility has been executed by the
Required Lenders (as such term is defined in the Company's credit agreement,
dated April 24, as amended).
(j) Except as disclosed in the Offering Document or as would
not have a Material Adverse Effect, the Company and the Subsidiaries have good
and marketable title to all real properties and all other properties and assets
owned by them, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made or
to be made thereof; and except as disclosed in the Offering Document or as would
not have a Material Adverse Effect, the Company and the Subsidiaries hold any
leased real or personal property under valid and enforceable leases.
(k) The Company and the Subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or any Subsidiary, would individually or in the aggregate have a
Material Adverse Effect.
(l) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent that should
reasonably be expected to have a Material Adverse Effect.
(m) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and the rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "intellectual property rights") necessary
to conduct the business currently conducted by them, or presently employed by
them, and have not received any notice of infringement of or conflict with
asserted rights of others with respect to any intellectual property rights that,
if determined adversely to the Company or any Subsidiary, would individually or
in the aggregate have a Material Adverse Effect.
(n) None of the Company or any Subsidiary is in violation of
any statute, any rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any environmental
laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental
laws, which violation, contamination, liability or claim would individually or
in the aggregate have a Material Adverse Effect; and none of the Company and any
Subsidiary is aware of any pending investigation which might lead to such a
claim.
4
<PAGE> 5
(o) There are no pending actions, suits or proceedings against
or affecting the Company, the Subsidiaries or any of their respective properties
that, if determined adversely to the Company and the Subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or would
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, the Indenture, the Registration Rights
Agreement or the Amended Bank Facility, or which are otherwise material in the
context of the sale of the Offered Securities; and no such actions, suits or
proceedings are threatened.
(p) The financial statements included in the Offering Document
present fairly, in all material respects, the financial position of the Company
and its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with the generally accepted accounting
principles in the United States applied on a consistent basis.
(q) Since the date of the latest audited financial statements
included in the Offering Document there has been no material adverse change, nor
any development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations of
the Company and the Subsidiaries taken as a whole, and there has been no
dividend or distribution of any kind declared, paid or made by the Company.
(r) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to be
registered under Section 8 of the United States Investment Company Act of 1940
(the "Investment Company Act"); and the Company is not and, after giving effect
to the offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will not be an
"investment company" as defined in the Investment Company Act.
(s) No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the Exchange
Act or quoted in a U.S. automated inter-dealer quotation system.
(t) Assuming the accuracy of the representation of the
Purchasers contained in Section 4 hereof, the offer and sale of the Offered
Securities in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof, Regulation D thereunder and Regulation S thereunder ("Regulation S");
and prior to the effectiveness of a registration statement as contemplated in
the Registration Rights Agreement, it is not necessary to qualify an indenture
in respect of the Offered Securities under the United States Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act").
(u) None of the Company or any of its affiliates, or any
person acting on its or their behalf (other than the Purchasers, with respect to
which the Company makes no representation) (i) has, within the six-month period
prior to the date hereof, offered or sold in the United States or to any U.S.
person (as such terms are defined in Regulation S under the Securities Act) the
Offered
5
<PAGE> 6
Securities or any security of the same class or series as the Offered Securities
or (ii) has offered or will offer or sell the Offered Securities (A) in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act or (B)
with respect to any such securities sold in reliance on Rule 903 of Regulation S
under the Securities Act, by means of any directed selling efforts within the
meaning of Rule 902(b) of Regulation S. The Company, its affiliates and any
person acting on their behalf (other than the Purchasers, with respect to which
the Company makes no representation) have complied and will comply with the
offering restrictions requirement of Regulation S. The Company has not entered
and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement and the
Registration Rights Agreement.
(v) The proceeds to the Company from the offering of the
Offered Securities will not be used to purchase or carry any security.
(w) The proceeds to the Company from the offering of the
Offered Securities will be used as described in the Offering Document.
(x) None of the Company, the Subsidiaries, any of their
respective affiliates, or any director, officer, agent, employee or other person
associated with or acting on behalf of the Company, the Subsidiaries or any of
their respective affiliates has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
(y) The Company is subject to Section 13 or 15(d) of the
Exchange Act.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Company, at respective purchase prices of (a) 100% of the principal
amount of the 5-Year Notes and (b) 100% of the principal amount of the 10-Year
Notes, in each case plus accrued interest from December 22, 1998 to the Closing
Date (as hereinafter defined) the respective principal amounts of Securities set
forth opposite the names of the several Purchasers in Schedule A hereto.
The Company will deliver against payment of the purchase price the
Offered Securities in the form of one or more permanent global Securities in
registered form without interest coupons (the "Global Securities") which will be
deposited with the Trustee as custodian for The Depository Trust Company ("DTC")
and registered in the name of Cede & Co., as nominee for DTC. Interests in any
permanent global Securities will be held only in book-entry form through DTC,
except in the limited circumstances described in the Offering Document. Payment
for the Offered Securities shall be
6
<PAGE> 7
made by the Purchasers in Federal (same day) funds by wire transfer to an
account at a bank acceptable to CSFBC at 10:00 a.m. (New York time) on December
22, 1998, or at such other time not later than seven full business days
thereafter as CSFBC and the Company determine, such time being herein referred
to as the "Closing Date", against delivery to the Trustee as custodian for DTC
of the Global Securities representing all of the Offered Securities. The Global
Securities will be made available for checking at the offices of Andrews & Kurth
L.L.P., 600 Travis Street, Suite 4200, Houston, Texas 77002, at least 24 hours
prior to the Closing Date.
4. Representations by Purchasers; Resale by Purchasers. 34. Each
Purchaser severally represents and warrants to the Company that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S or pursuant to an
exemption from the registration requirements of the Securities Act. Each
Purchaser severally represents and agrees that it has offered and sold the
Offered Securities, and will offer and sell the Offered Securities as part of
its distribution at any time, only in accordance with Rule 903 or Rule 144A
under the Securities Act ("Rule 144A"). Accordingly, neither such Purchaser nor
its affiliates, nor any persons acting on its or their behalf, have engaged or
will engage in any directed selling efforts with respect to the Offered
Securities, and such Purchaser, its affiliates and all persons acting on its or
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S. Each Purchaser severally agrees that, at or prior
to confirmation of sale of the Offered Securities, other than a sale pursuant to
Rule 144A, such Purchaser will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases the
Offered Securities from it during the restricted period a confirmation or notice
to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons as part of their
distribution at any time or except in accordance with
Regulation S (or Rule 144A if available) under the Securities
Act. Terms used above have the meanings given to them by
Regulation S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for any such
arrangements with the other Purchasers or affiliates of the other Purchasers
with the prior written consent of the Company.
7
<PAGE> 8
(d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act, including, but not limited to
(i) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each Purchaser severally agrees, with
respect to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the resale of
such Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the date six months after the
date of issue of the Offered Securities will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Offered Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.
5. Certain Agreements of the Company. The Company agrees with the
several Purchasers that:
(a) The Company will advise CSFBC promptly of any proposal to
amend or supplement the Offering Document and will not effect such amendment or
supplementation without CSFBC's consent, which CSFBC agrees it will not
unreasonably withhold. If, at any time prior to the completion of the resale of
the Offered Securities by the Purchasers, any event occurs as a result of which
the Offering Document as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, the Company promptly will notify CSFBC of
such event and promptly will prepare, at its own expense, an amendment or
supplement which will correct such statement or omission. Neither CSFBC's
consent to, nor the Purchasers' delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the conditions set
forth in Section 6.
(b) The Company will furnish to CSFBC copies of any
preliminary offering circular, the Offering Document and all amendments and
supplements to such documents, in each
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<PAGE> 9
case as soon as available and in such quantities as CSFBC requests, and the
Company will furnish to CSFBC on the date hereof five copies of the Offering
Document signed by a duly authorized officer of the Company, one of which will
include the independent accountants' reports therein manually signed by such
independent accountants. At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to
be furnished to CSFBC (and, upon request, to each of the other Purchasers) and,
upon request of holders and prospective purchasers of the Offered Securities, to
such holders and purchasers, copies of the information required to be delivered
to holders and prospective purchasers of the Offered Securities pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) in
order to permit compliance with Rule 144A in connection with resales by such
holders of the Offered Securities. The Company will pay the expenses of printing
and distributing to the Purchasers all such documents.
(c) The Company will arrange for the qualification of the
Offered Securities for sale and the determination of their eligibility for
investment under the laws of such jurisdictions in the United States and Canada
as CSFBC designates and will continue such qualifications in effect so long as
required for the resale of the Offered Securities by the Purchasers, provided
that the Company will not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such state.
(d) During the period of five years hereafter, the Company
will furnish to CSFBC and, upon request, to each of the other Purchasers, as
soon as practicable after the end of each fiscal year, a copy of its annual
report to stockholders for such year; and the Company will furnish to CSFBC and,
upon request, to each of the other Purchasers (i) as soon as available, a copy
of each report or financial statement furnished to or filed with the Commission
or any securities exchange on which any class of securities of either of the
Company is listed, and (ii) from time to time, such other information concerning
the Company as CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the
Company will, upon request, furnish to CSFBC, each of the other Purchasers and
any holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.
(f) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined in Rule
144 under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them.
(g) During the period of two years after the Closing Date, the
Company will not be or become, an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be registered
under Section 8 of the Investment Company Act.
(h) The Company will pay all expenses incidental to the
performance of its obligations under this Agreement, the Indenture and the
Registration Rights Agreement, including (i) the reasonable fees and expenses of
the Trustee and its professional advisers; (ii) all expenses in
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<PAGE> 10
connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities, the preparation and printing of this
Agreement, the Offered Securities, the Registration Rights Agreement and the
Indenture, the Offering Document and amendments and supplements thereto, and any
other document relating to the issuance, offer, sale and delivery of the Offered
Securities; (iii) the cost of listing the Offered Securities and qualifying the
Offered Securities for trading in The Portal(SM) Market ("PORTAL") of The Nasdaq
Stock Market, Inc. and any expenses incidental thereto; (iv) the cost of any
advertising approved by the Company in connection with the issue of the Offered
Securities; (v) any reasonable expenses (including fees and disbursements of
counsel) incurred in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions in the United States and Canada as
CSFBC designates and the printing of memoranda relating thereto; (vi) any fees
charged by investment rating agencies for the rating of the Securities; and
(vii) any expenses incurred in distributing preliminary offering circulars and
the Offering Document (including any amendments and supplements thereto) to the
Purchasers. The Company will also pay or reimburse the Purchasers (to the extent
incurred by them) for all reasonable travel expenses of the Purchasers and the
Company's officers and employees and any other reasonable expenses of the
Purchasers and the Company in connection with attending or hosting meetings with
prospective purchasers of the Offered Securities from the Purchasers.
(i) In connection with the offering, until CSFBC shall have
notified the Company and the other Purchasers of the completion of the resale of
the Offered Securities, neither the Company nor any of its affiliates has or
will, either alone or with one or more other persons, bid for or purchase for
any account in which it or any of its affiliates has a beneficial interest any
Offered Securities or attempt to induce any person to purchase any Offered
Securities; and neither the Company nor any of its affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading in, or
of raising the price of, the Offered Securities.
6. Conditions of the Obligations of the Purchasers. The
obligations of the several Purchasers to purchase and pay for the Offered
Securities will be subject to the accuracy of the representations and warranties
on the part of the Company herein, to the accuracy of the statements of officers
of the Company made pursuant to the provisions hereof, to the performance by the
Company and each Subsidiary of their obligations hereunder and to the following
additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the
date of this Agreement, of Arthur Andersen LLP confirming that they are
independent public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder (the "Rules and
Regulations") and to the effect that:
(i) in their opinion the financial statements audited by them
and included in the Exchange Act Reports and incorporated by reference
in the Offering Document comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and
the related published Rules and Regulations;
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<PAGE> 11
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements included in the Exchange Act Reports and
incorporated by reference in the Offering Document;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to believe
that the unaudited financial statements included in the Exchange Act
Reports or incorporated by reference in the Offering Document do not
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the related published
Rules and Regulations or any material modifications should be made to
such unaudited financial statements for them to be in conformity with
generally accepted accounting principles;
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Offering Document and the Exchange Act
Reports incorporated by reference therein (in each case to the extent
that such dollar amounts, percentages and other financial information
are derived from the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by analysis
or computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter; and
(v) they have read the unaudited pro forma condensed combined
balance sheet as of September 30, 1998, and the unaudited pro forma
condensed combined statements of operations for the year ended December
31, 1997, and the nine month period ended September 30, 1998, included
in the Offering Document; inquired of certain officials of the Company
who have responsibility for financial and accounting matters about the
basis for their determination of the pro forma adjustments; and proved
the arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the unaudited pro forma condensed combined
financial statements.
(b) The Purchasers shall have received a letter, dated the
date of this Agreement, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Securities Act and the
Rules and Regulations and to the effect that:
(i) in their opinion the financial statements examined by them
and included in Cliffs Exchange Act Reports and incorporated by
reference in the Offering Document
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<PAGE> 12
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the related published
Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements included in the Cliffs Exchange Act Reports and
incorporated by reference in the Offering Document;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of Cliffs, inquiries of officials of Cliffs who have responsibility for
financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that the
unaudited financial statements included in the Cliffs Exchange Act
Reports and incorporated by reference in the Offering Document do not
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the related published
Rules and Regulations or any material modifications should be made to
such unaudited financial statements for them to be in conformity with
generally accepted accounting principles; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Offering Document and the Cliffs Exchange
Act Reports incorporated by reference therein (in each case to the
extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of Cliffs
and its subsidiaries subject to the internal controls of Cliffs'
accounting system or are derived directly from such records by analysis
or computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) a change in U.S. or international
financial, political or economic conditions or currency exchange rates or
exchange controls as would, in the judgment of CSFBC, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings in
the secondary market, or (ii) (A) any change, or any development or event
involving a prospective change, in the condition (financial or other), business,
properties or results of operations of the Company which, in the judgment of a
majority in interest of the Purchasers including CSFBC, is material and adverse
and makes it impractical or inadvisable to proceed with completion of the
offering or the sale of and payment for the Offered Securities; (B) any
downgrading in the rating of any debt securities of the Company by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act), or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement
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<PAGE> 13
with positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating); (C) any suspension or limitation of
trading in securities generally on the New York Stock Exchange or any suspension
of trading of any securities of the Company on any exchange or over-the-counter
market; (D) any banking moratorium declared by U.S. Federal or New York
authorities; or (E) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of a majority in interest of the Purchasers including CSFBC, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the offering or sale of
and payment for the Offered Securities.
(d)(i) The Purchasers shall have received an opinion, dated
the Closing Date, of Gardere Wynne Sewell & Riggs, L.L.P., counsel for the
Company, to the effect that:
(A) When the Offered Securities have been
authenticated by the Trustee in accordance with the Indenture and
delivered to and paid for by the Purchasers in accordance with the
terms of this Agreement, the Offered Securities and the Indenture will
have been duly executed and delivered and will constitute valid and
legally binding obligations of the Company, enforceable against it in
accordance with their terms, and the Offered Securities will conform in
all material respects to the description thereof in the Offering
Document and the Indenture.
(B) The Company is not, and after giving effect to
the offering and sale of the Offered Securities and the application of
the proceeds thereof as described in the Offering Document, will not
be, an "investment company" as defined in the Investment Company Act of
1940, as amended, and the rules and regulations promulgated by the
Commission thereunder.
(C) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court, in each
case of the United States or the States of Texas or New York, is
required for the consummation of the transactions described in this
Agreement and the Registration Rights Agreement in connection with the
issuance or sale of the Offered Securities by the Company, or for the
execution, delivery and performance of the Indenture by the Company,
except such as may be required under state securities laws and except
for such filings with and orders of the Commission as are required in
connection with the Registration Rights Agreement.
(D) The execution, delivery and performance of the
Indenture, this Agreement and the Registration Rights Agreement and the
issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof by the Company will not result in a breach
or violation of any of the terms and provisions of, or constitute a
default under, any statute, rule or regulation of any governmental
agency or body of the United
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<PAGE> 14
States or the States of Texas or New York having jurisdiction over the
Company or any of its properties or to which any of the properties of
the Company is subject.
(E) The Company has full corporate power and
authority to authorize, issue and sell the Offered Securities as
described in this Agreement.
(F) The descriptions in the Offering Document of
statutes fairly present in all material respects the information
purported to be shown.
(G) It is not necessary in connection with (1) the
offer, sale and delivery of the Offered Securities by the Company to
the Purchasers pursuant to this Agreement or (2) the resales of the
Offered Securities by the Purchasers in the manner described in this
Agreement, to register the Offered Securities under the Securities Act
or to qualify the Indenture under the Trust Indenture Act.
Such opinion shall also state that such counsel has no reason to
believe that the Offering Document, as of its date or the date of such opinion,
contains an untrue statement of a material fact or omits 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.
(ii) The Purchasers shall have received an opinion, dated the
Closing Date, of Leighton E. Moss, Esq., General Counsel of the Company, to the
effect that:
(A) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Offering Document; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all states of the United States in which its ownership
or lease of property or the conduct of its business requires such
qualification.
(B) R&B Falcon Holdings, Inc. ("Falcon") has been
duly incorporated and is an existing corporation in good standing under
the laws of the State of Delaware, with corporate power and authority
to own its properties and conduct its business as described in the
Offering Document. Falcon is duly qualified to do business as a foreign
corporation in good standing in all states of the United States in
which its ownership or lease of property or the conduct of its business
requires such qualification, with the possible exception of the State
of Louisiana; provided, the failure to so qualify in Louisiana, if
required, would not have a Material Adverse Effect.
(C) R&B Falcon Drilling (International & Deepwater)
Inc. ("R&B") has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Offering Document. R&B is duly qualified
to do business as a
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<PAGE> 15
foreign corporation in good standing in all states of the United States
in which its ownership or lease of property or the conduct of its
business requires such qualification.
(D) Cliffs has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Offering Document. Cliffs is
duly qualified to do business as a foreign corporation in good standing
in all states of the United States in which its ownership or lease of
property or the conduct of its business requires such qualification.
(E) R&B Falcon Drilling USA, Inc. ("R&B USA") has
been duly incorporated and is an existing corporation in good standing
under the laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its business as described
in the Offering Document. R&B USA is duly qualified to do business as a
foreign corporation in good standing in all states of the United States
in which its ownership or lease of property or the conduct of its
business requires such qualification.
(F) R&B Falcon Drilling Co. ("Drilling") has been
duly incorporated and is an existing corporation in good standing under
the laws of the State of Oklahoma, and is duly qualified to do business
as a foreign corporation in each state of the United States in which
its ownership or lease of property or the conduct of its business
requires such qualifications.
(G) All of the outstanding capital stock of the
Company, Falcon, R&B and Cliffs has been duly authorized and validly
issued and is fully paid and non-assessable. To such counsel's
knowledge, all of the outstanding stock of Falcon, R&B, Cliffs, R&B USA
and Drilling is owned directly or indirectly by the Company, free from
any liens and encumbrances (except for the stock of R&B which has been
pledged as security for the first $100 million of borrowings under the
Amended Bank Facility).
(H) The Indenture and the Offered Securities have
been duly authorized, executed and delivered by the Company.
(I) The Amended Bank Facility has been duly
authorized, executed and delivered by the Company and, upon delivery to
Paribas Corporation of the required portion of the net proceeds from
the sale of the Offered Securities pursuant to the Amended Bank
Facility, will constitute the valid and legally binding obligation of
the Company, enforceable against the Company in accordance with its
terms subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(J) The execution, delivery and performance of the
Indenture, the Amended Bank Facility, this Agreement and the
Registration Rights Agreement and the
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<PAGE> 16
issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under
(i) to such counsel's knowledge, any order of any governmental agency
or body or any court having jurisdiction over the Company or any of its
properties, (ii) to such counsel's knowledge, any agreement or
instrument to which the Company is a party or by which the Company is
bound or to which any of the properties of the Company is subject, or
(iii) the charter, other organizational documents or by-laws of the
Company. The Company has full corporate power and authority to
authorize, issue and sell the Offered Securities as contemplated by the
Agreement.
(K) Except with respect to any potential claims or
causes of action arising out of the Company's contract with Mobil North
Sea Limited regarding the Jack Bates, and except with respect to the
litigation pending in the 16th Judicial District Court, Parish of St.
Mary, State of Louisiana, styled Mobil Exploration & Producing U.S.,
Inc. et al v. Cliffs Drilling Company et al., to such counsel's
knowledge, there are no pending actions, suits or proceedings against
or affecting the Company, any of its Subsidiaries or any of their
respective properties that, if determined adversely to the Company or
any of its Subsidiaries, would individually or in the aggregate have a
Material Adverse Effect, or would materially and adversely affect the
ability of the Company to perform its obligations under the Indenture,
this Agreement, the Registration Rights Agreement or the Amended Bank
Facility or which are otherwise material in the context of the sale of
the Offered Securities; and, to such counsel's knowledge, no such
actions, suits or proceedings are threatened or contemplated.
(L) As of the date of the Offering Document and the
date hereof, such counsel has no reason to believe that the Offering
Document or any Exchange Act Report, or any Cliffs Exchange Act Report,
contained any untrue statement of material fact or omitted to state any
material fact necessary to make the statements therein not misleading.
The descriptions in the Offering Document of legal proceedings,
contracts, and other documents, insofar as they pertain to the Company,
are accurate and fairly present the information in all material
respects, it being understood that such counsel expresses no opinion as
to (i) the financial statements or other financial data contained in
the Offering Document and the Exchange Act Reports or (ii) the
information contained in the Offering Document under "Description of
the Notes."
(M) Each of this Agreement and the Registration
Rights Agreement has been duly authorized, executed and delivered by
the Company.
In addition, with respect to the opinion delivered by Leighton E. Moss,
Esq., such opinion shall provide that Andrews & Kurth L.L.P. be entitled to rely
on the opinion delivered by Leighton E. Moss, Esq. in connection with the
closing of the Amended Bank Facility. To the extent matters relating to the
Amended Bank Facility are covered in such opinion, they need not be separately
opined to in the opinion set forth above.
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(e) The Purchasers shall have received from Andrews & Kurth
L.L.P., counsel for the Purchasers, such opinion, dated the Closing Date, with
respect to the formation of the Company, the validity of the Offered Securities,
the Offering Document, the exemption from registration for the offer and sale of
the Offered Securities by the Company to the several Purchasers and the resales
by the several Purchasers as contemplated hereby and other related matters as
CSFBC may require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon such
matters.
(f) The Purchasers shall have received a certificate, dated
the Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to the
best of their knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are true and
correct, that the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, and that, subsequent to the date of the most recent financial
statements in the Offering Document there has been no material adverse change,
nor any development or event involving a prospective material adverse change, in
the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole, except as set
forth in or contemplated by the Offering Document or as described in such
certificate.
(g) The Purchasers shall have received a letter, dated the
Closing Date, of Arthur Andersen LLP which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in such
subsection will be a date not more than three business days prior to the Closing
Date for the purposes of this subsection.
(h) The Purchasers shall have received a letter, dated the
Closing Date, of Ernst & Young LLP which meets the requirements of subsection
(b) of this Section, except that the specified date referred to in such
subsection will be a date not more than three business days prior to the Closing
Date for the purposes of this subsection.
(i) The Amended Bank Facility shall have been duly executed
and delivered by the parties thereto and shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms.
(j) The Offered Securities shall have been made eligible for
trading in PORTAL.
The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFBC may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder,
whether in respect of the Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Purchaser against any losses, claims, damages or liabilities,
joint or several, to which
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such Purchaser may become subject, under the Securities Act or the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any breach of any of the
representations and warranties of the Company contained herein or any untrue
statement or alleged untrue statement of any material fact contained in the
Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, the Exchange Act Reports or the Cliffs Exchange
Act Reports, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse each Purchaser for any legal or other expenses
reasonably incurred by such Purchaser in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Purchaser
through CSFBC specifically for use therein, it being understood and agreed that
the only such information consists of the information described as such in
subsection (b) below.
(b) Each Purchaser will severally and not jointly indemnify
and hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Purchaser through CSFBC specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Purchaser consists of
the following information in the Offering Document furnished on behalf of each
Purchaser: under the caption "Plan of Distribution," the third sentence of
paragraph two, the third sentence of paragraph six, and paragraphs seven and
eight; provided, however, the Purchasers shall not be liable for any losses,
claims, damages or liabilities arising out of or based upon the Company's
failure to perform its obligations under Section 5(a) of this Agreement.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under
18
<PAGE> 19
subsection (a) or (b) above. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent will not be
unreasonably withheld), effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party from
all liability on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Purchasers on the other from the offering of
the Offered Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Purchasers on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company bear to the total discounts and commissions received by the
Purchasers from the Company under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Purchasers
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total price at which the Offered
Securities purchased by it were resold exceeds the amount of any damages which
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.
19
<PAGE> 20
(e) The obligations of the Company under this Section shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Purchaser within the meaning of the Securities Act or the Exchange Act; and
the obligations of the Purchasers under this Section shall be in addition to any
liability which the respective Purchasers may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
amount of Offered Securities that such defaulting Purchaser or Purchasers agreed
but failed to purchase does not exceed 10% of the total principal amount of
Offered Securities, CSFBC may make arrangements satisfactory to the Company for
the purchase of such Offered Securities by other persons, including any of the
Purchasers, but if no such arrangements are made by such Closing Date, the
non-defaulting Purchasers shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Purchasers agreed but failed to purchase. If any Purchaser or
Purchasers so default and the aggregate principal amount of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
principal amount of Offered Securities and arrangements satisfactory to CSFBC
and the Company for the purchase of such Offered Securities by other persons are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Purchaser or the Company,
except as provided in Section 9. As used in this Agreement, the term "Purchaser"
includes any person substituted for a Purchaser under this Section. Nothing
herein will relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Purchaser and the Company or any of their respective officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the Purchasers
is not consummated, the Company shall remain responsible for the expenses to be
paid or reimbursed by it pursuant to Section 5 and the respective obligations of
the Company and the Purchasers pursuant to Section 7 shall remain in effect. If
the purchase of the Offered Securities by the Purchasers is not consummated for
any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (C),
(D) or (E) of Section 6(c)(ii), the Company will reimburse the Purchasers for
all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by them in connection with the offering of the Offered
Securities. If this Agreement is terminated as provided in the second and third
sentences of this Section 9 or the purchase of the Offered Securities is not
consummated, the Company's sole liability shall be as provided for in this
Section 9.
20
<PAGE> 21
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to
the Purchasers c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at R&B Falcon Corporation,
901 Threadneedle, Suite 200, Houston, Texas 77079, Attention: Leighton E. Moss,
Senior Vice President and Co-Counsel; provided, however, that any notice to a
Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed and
confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7 and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Company as if such
holders were parties thereto.
12. Representation of Purchasers. You will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by you jointly or by CSFBC will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
principles of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
* * * * *
21
<PAGE> 22
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among the Company and the several
Purchasers in accordance with its terms.
Very truly yours,
R&B FALCON CORPORATION
By /s/ LEIGHTON MOSS
------------------------------
Name: Leighton Moss
Title: V.P.
The foregoing Purchase Agreement is hereby
confirmed and accepted as of the date first
above written.
Acting on behalf of itself and as the
Representative of the several Purchasers
CREDIT SUISSE FIRST BOSTON CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
PARIBAS CORPORATION
By CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ ROBERT A. HANSEN
-------------------------------------------
Name: Robert A. Hansen
Title: Director
22
<PAGE> 23
SCHEDULE A
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
PURCHASER 5-YEAR NOTES 10-YEAR NOTES
- ------------------------------------------------- ------------ -------------
<S> <C> <C>
Credit Suisse First Boston Corporation........... $ 70,000,000 $210,000,000
NationsBanc Montgomery Securities LLC............ 15,000,000 45,000,000
Paribas Corporation.............................. 15,000,000 45,000,000
------------ ------------
Total.......................... $100,000,000 $300,000,000
</TABLE>
23
<PAGE> 24
SCHEDULE B
<TABLE>
<CAPTION>
SUBSIDIARIES OF R&B FALCON CORPORATION
NAME JURISDICTION OF FORMATION
---- -------------------------
<S> <C>
R&B Falcon Drilling (International & Deepwater) Inc. Delaware
R&B Falcon Holdings Inc. Delaware
R&B Falcon Drilling Co. Oklahoma
Arcade Drilling A.S. Norway
R&B Falcon Drilling USA, Inc. Delaware
Cliffs Drilling Company Delaware
Cliffs Drilling Trinidad Offshore Limited Trinidad
Deep Sea Investors, L.L.C. Delaware
R&B Falcon Exploration Co. Oklahoma
R&B Falcon Offshore, Limited Oklahoma
R&B Falcon (A) Pty. Ltd. Australia
R&B Falcon Borneo Drilling Co., Ltd. Oklahoma
R&B Falcon (Caledonia) Limited United Kingdom
RBF Rig Corporation Oklahoma
RBF FPSO L.P. Cayman Islands, B.W.I.
Deepwater Drilling L.L.C. Delaware
Deepwater Drilling II L.L.C. Delaware
</TABLE>
24
<PAGE> 1
EXHIBIT 12.1
R&B FALCON CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ IN MILLIONS)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations before income
tax expense, minority interest and extraordinary gain ................ $ 161.2 $ 123.9 $ 140.4 $ 32.6 $ (2.8)
Add
Portion of rents representative of the interest factor ............... 14.3 12.1 6.8 3.2 5.9
Interest on indebtedness inclusive of amortization
of deferred financing charges ................................ 63.9 41.6 40.8 34.6 26.4
--------- --------- --------- --------- --------
Income as adjusted ................................... $ 239.4 $ 177.6 $ 188.0 $ 70.4 $ 29.5
========= ========= ========= ========= ========
Fixed charges
Interest on indebtedness inclusive of amortization
of deferred financing charges ................................ $ 63.9 $ 41.6 $ 40.8 $ 34.6 $ 26.4
Interest capitalized ................................. 39.1 13.7 7.6 0.4 0.6
Portion of rents representative of the interest factor 14.3 12.1 6.8 3.2 5.9
Fixed charges ........................................ $ 117.3 $ 67.4(a)$ 55.2 $ 38.2 $ 32.9
========= ========= ======= ========= ========
Ratio of earnings to fixed charges ........................................... 2.0 2.6 3.4 1.8 -(b)
========= ========= ========= ========= ========
</TABLE>
(a) Fixed charges for the year ended December 31, 1998 and 1997 exclude interest
cost of $22.5 million and $7.3 million, respectively, related to the debt of
joint venture companies guaranteed by R&B.
(b) As a result of the loss incurred in 1994 earnings did not cover fixed
charges by $3.4 million.
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
($ 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.
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Income as adjusted.............................................................................. $ 239.4
=========
Fixed charges................................................................................... $ 117.3
Pro forma adjustments
Interest on portion of senior notes that will be used to retire existing debt ................ 36.3
Amortization of deferred financing charges on portion of senior notes that will be used
to retire existing debt..................................................................... 3.6
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.................................. (22.4)
---------
Pro-forma fixed charges......................................................................... $ 134.8
=========
Pro-forma ratio of earnings to fixed charges.................................................... 1.8
=========
</TABLE>
<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 (File No. 333-______) 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
April 28, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC 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
$400 million Senior Notes 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
April 22, 1999
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
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) ____
----------------------
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer Identification Number)
712 MAIN STREET, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip code)
LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002 (713)216-2448
(Name, address and telephone number of agent for service)
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 Number)
901 THREADNEEDLE
HOUSTON, TEXAS 77079
(Address of principal executive offices) (Zip code)
9-1/8% SENIOR NOTES DUE 2003
9-1/2% SENIOR NOTES DUE 2008
(Title of indenture securities)
================================================================================
<PAGE> 2
ITEM 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.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington,
D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
The obligor is not an affiliate of the trustee. (See Note on
Page 7.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE.
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER
WHICH ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY
OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING
INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH
OTHER INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
1
<PAGE> 3
ITEM 4. (CONTINUED)
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR
THE CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF
SECTION 310(b)(1) OF THE ACT ARISES AS A RESULT OF THE
TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE, INCLUDING A
STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS
COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER
INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH
OBLIGOR OR UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICER OF
THE TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR
REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY
EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH
CONNECTION.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES
OF THE TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ ------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
2
<PAGE> 4
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ ------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO THE SECURITIES OF THE OBLIGOR
OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
WHETHER THE BENEFICIALLY OR PERCENT OF
SECURITIES HELD AS COLLATERAL CLASS
ARE VOTING SECURITY FOR REPRESENTED BY
OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS SECURITIES DEFAULT COL. C
- -------------- ------------ ------- ------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
3
<PAGE> 5
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
- --------------- ------------ ------------------ ------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR OR (2)
IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
- --------------- ------------ ------------------ ------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
4
<PAGE> 6
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OR SUCH PERSON ANY OF WHICH
ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE COL. C
- --------------- ------------ ------------------ ------
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
------------ ----------- --------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not, nor has there been, a default with respect to the securities
under this indenture. (See Note on Page 7.)
5
<PAGE> 7
ITEM 13. (CONTINUED)
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There has not been a default under any such indenture or series. (See Note
on Page 7.)
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
o 1. A copy of the articles of association of the trustee now in
effect.
# 2. A copy of the certificate of authority of the trustee to commence
business.
* 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors of the
Federal Reserve System under date of January 21, 1948.
+ 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6. The consent of the United States institutional trustees required by
Section 321(b) of the Act.
6
<PAGE> 8
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
NOTE REGARDING INCORPORATED EXHIBITS
Effective January 20, 1998, the name of the Trustee was changed from
Texas Commerce Bank National Association to Chase Bank of Texas, National
Association. The exhibits incorporated herein by reference, were filed under the
former name of the Trustee.
o Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-56195.
# Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-42814.
* Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-11 File No. 33-25132.
+ Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to the
Form S-3 File No. 33-65055.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based on incomplete information. Such Items may,
however, be considered as correct unless amended by an amendment to this Form
T-1.
7
<PAGE> 9
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, FORMERLY KNOWN AS TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO AUTHORIZED, ALL IN THE CITY OF HOUSTON, AND STATE OF TEXAS, ON THE 28
DAY OF APRIL, 1999.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, AS TRUSTEE
By: /s/ MAURI J. COWEN
---------------------------------
Mauri J. Cowen
Vice President and Trust Officer
8
<PAGE> 10
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
The undersigned is trustee under an Indenture between R & B Falcon
Corporation, a Delaware corporation (the "Company"), and Chase Bank of Texas,
National Association, as Trustee, entered into in connection with the issuance
of the Company's Senior Notes.
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By: /s/ MAURI J. COWEN
------------------------------
Mauri J. Cowen
Vice President and Trust Officer
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
R&B FALCON CORPORATION
OFFER TO EXCHANGE
9 1/8% SERIES B SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING SERIES A 9 1/8% SENIOR NOTES DUE 2003
and
9 1/2% SERIES B SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 9 1/2% SERIES A SENIOR NOTES DUE 2008
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:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
Chase Bank of Texas, National Association (For Eligible Institutions Only)
c/o The Chase Manhattan Bank (212) 638-7380
55 Water Street, North Building
Room 234, Windows 20 and 21 Confirm by Telephone:
New York, New York 10041 (212) 638-0454
Attention: Carlos Esteves
For Inquiries:
Mauri Cowen
(713) 216-6686
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 9 1/8% Series A
Senior Notes due 2003 shall be defined as the "5-Year Outstanding Notes" and the
outstanding 9 1/2% Series A Senior Notes due 2008 shall be defined as the
"10-Year Outstanding Notes," and the 5-Year Outstanding Notes and the 10-Year
Outstanding Notes shall be defined collectively as the "Outstanding Notes." 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--Procedures for
Tendering" in the Prospectus and an Agent's Message (as defined below) is not
delivered. Certificates, or book-entry confirmation of a book-entry transfer of
such Outstanding Notes 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
<PAGE> 2
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 Outstanding Notes 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 Outstanding Notes whose certificates (the "Certificates") for
such Outstanding Notes 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 Notes
according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering" 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 5-YEAR OUTSTANDING NOTES (CUSIP NO. 74912 EAJ 0)
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CERTIFICATE AGGREGATE TENDERED FOR
NAME(S) AND ADDRESS(ES) OF REGISTERED NUMBER(S) PRINCIPAL EXCHANGE (MUST
HOLDER(S) OF 5-YEAR PRIVATE NOTE(S), EXACTLY (ATTACH SIGNED AMOUNT BE IN INTEGRAL
AS NAME(S) APPEAR(S) ON CERTIFICATE(S) LIST IF REPRESENTED BY MULTIPLES OF
(PLEASE FILL IN, IF BLANK) NECESSARY)(1) CERTIFICATE(S) $1,000)(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TOTAL AMOUNT OF 5-YEAR OUTSTANDING NOTES 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 5-YEAR OUTSTANDING NOTES HELD. 5-YEAR OUTSTANDING NOTES
MAY BE TENDERED IN WHOLE OR IN PART IN INTEGRAL MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 5-YEAR
OUTSTANDING NOTES HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS SPECIFIED IN THIS COLUMN.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF 10-YEAR OUTSTANDING NOTES (CUSIP NO. 74912 EAL 5)
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CERTIFICATE AGGREGATE TENDERED FOR
NAME(S) AND ADDRESS(ES) OF REGISTERED NUMBER(S) PRINCIPAL EXCHANGE (MUST
HOLDER(S) OF 10-YEAR PRIVATE NOTE(S), EXACTLY (ATTACH SIGNED AMOUNT BE IN INTEGRAL
AS NAME(S) APPEAR(S) ON CERTIFICATE(S) LIST IF REPRESENTED BY MULTIPLES OF
(PLEASE FILL IN, IF BLANK) NECESSARY)(1) CERTIFICATE(S) $1,000)(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
- ----------------------------------------------------------------------------------------------------------------
TOTAL AMOUNT OF 10-YEAR OUTSTANDING NOTES 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 10-YEAR OUTSTANDING NOTES HELD. 10-YEAR OUTSTANDING
NOTES MAY BE TENDERED IN WHOLE OR IN PART IN INTEGRAL MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT.
ALL 10-YEAR OUTSTANDING NOTES 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 NOTES 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 Outstanding Notes 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 Notes 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 Notes 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 OUTSTANDING NOTES 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
OUTSTANDING NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OUTSTANDING NOTES
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 aggregate principal amount of
its 5-Year Outstanding Notes in exchange for a like aggregate principal amount
of its 9 1/8% Series B Senior Notes due 2003 (the "5-Year Exchange Notes") and
its 10-Year Outstanding Notes in exchange for a like aggregate principal amount
of its 9 1/2% Series B Senior Notes due 2008 (the "10-Year Exchange Notes," and
together with the 5-Year Exchange Notes the "Exchange Notes"), which Exchange
Notes 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 all or any
portion of the Outstanding Notes 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 Outstanding
Notes 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
Outstanding Notes, 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
Outstanding Notes 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 Exchange Notes to be
issued in exchange for such Outstanding Notes, (ii) present Certificates for
such Outstanding Notes for registration of transfer, and transfer the
Outstanding Notes 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 Notes, 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
OUTSTANDING NOTES 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 OUTSTANDING NOTES 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
OUTSTANDING NOTES 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 Outstanding Notes tendered hereby should be printed above, if they
are not already set forth above, as they appear on the Certificates representing
such Outstanding Notes. The Certificate number(s) of the Outstanding Notes that
the undersigned wishes to tender should be indicated in the appropriate boxes
above.
If any tendered Outstanding Notes are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Outstanding Notes than are tendered or accepted for exchange, Certificates for
such nonexchanged or nontendered Outstanding Notes will be returned (or, in the
case of Outstanding Notes tendered by book-entry transfer, such Outstanding
Notes 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 Outstanding Notes pursuant to
any one of the procedures described under "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions herein will, upon the
Company's acceptance for exchange of such tendered Outstanding Notes, constitute
a binding agreement between the undersigned and the Company upon the terms and
subject to the conditions
5
<PAGE> 6
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 Outstanding Notes 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 Notes, that such Exchange Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Outstanding Notes not exchanged or not accepted for exchange will
be issued to the undersigned or, in the case of a book-entry transfer of
Outstanding Notes, will be credited to the account indicated above maintained at
DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions"
below, please deliver Exchange Notes to the undersigned at the address shown
below the undersigned's signature.
BY TENDERING OUTSTANDING NOTES 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
EXCHANGE NOTES 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 EXCHANGE NOTES 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 EXCHANGE NOTES. BY TENDERING OUTSTANDING
NOTES 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 NOTES 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 OUTSTANDING NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A
NOMINEE OR (B) SUCH OUTSTANDING NOTES 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 EXCHANGE NOTES (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 EXCHANGE NOTES RECEIVED IN EXCHANGE FOR OUTSTANDING NOTES, WHERE SUCH
OUTSTANDING NOTES 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
EXCHANGE NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN
THAT REGARD, EACH PARTICIPATING BROKER-DEALER, BY TENDERING SUCH OUTSTANDING
NOTES 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 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 EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED
OR SUPPLEMENTED THE PROSPECTUS
6
<PAGE> 7
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 EXCHANGE NOTES 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 EXCHANGE NOTES 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 THE EXCHANGE NOTES 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 EXCHANGE NOTES RECEIVED IN EXCHANGE FOR
OUTSTANDING NOTES 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."
If the Company consummates the Exchange Offer by June 1, 1999, the
Exchange Notes will bear interest from December 22, 1998. If the Company
consummates the Exchange Offer after June 1, 1999, the Exchange Notes will bear
interest from June 15, 1999. Holders of Outstanding Notes that are accepted for
exchange will not have the right to receive any payment of interest on such
notes accrued from December 22, 1998 (if the Company consummates the Exchange
Offer by June 1, 1999) or June 15, 1999 (if the Company consummates the
Exchange Offer after June 1, 1999) to the date of the issuance of the Exchange
Notes. Consequently, holders who exchange their Outstanding Notes for Exchange
Notes will receive the same interest payment on the interest payment date
immediately following the date the Exchange Offer is consummated that they
would have received had they not accepted the Exchange Offer.
The undersigned agrees that acceptance of any tendered Outstanding Notes
and transfer of tendered Outstanding Notes 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 Outstanding Notes 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 NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED
TO HAVE TENDERED THE OUTSTANDING NOTES 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 Outstanding Notes 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 Notes to comply with the
restrictions on transfer applicable to the Outstanding Notes). 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 the Exchange Notes or any Outstanding Notes
that are not tendered are to be issued in the name of someone other than the
registered holder of the Outstanding Notes whose name appears above.
Issue
[ ] Exchange Notes and/or
[ ] Outstanding Notes not tendered
Designate Series
-------------------------------------------------------
to:
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 the Exchange Notes or any Outstanding Notes that are
not tendered are to be sent to someone other than the registered holder of the
Outstanding Notes whose name appears above, or to such registered holder at an
address other than that shown above.
Mail
[ ] Exchange Notes and/or
[ ] Outstanding Notes not tendered
Designate Series
-------------------------------------------------------
to:
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--Procedures for Tendering" in the Prospectus and an Agent's
Message is not delivered. Certificates, or book-entry confirmation of a
book-entry transfer of such Outstanding Notes 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. Outstanding Notes may be tendered in
whole or in part in integral multiples of $1,000 in aggregate principal amount.
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available or (ii) who cannot deliver their
Outstanding Notes, 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 Outstanding Notes by properly completing and
duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedures set forth under "The Exchange Offer--Procedures for
Tendering" 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
Outstanding Notes, 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--Procedures for Tendering" 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 Outstanding Notes
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 Notes) of Outstanding Notes 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 Outstanding Notes are tendered for the account of a firm that
is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature on
this Letter of Transmittal. See Instruction 5.
10
<PAGE> 11
3. INADEQUATE SPACE. If the space provided in the boxes captioned
"Description of Outstanding Notes" is inadequate, the Certificate numbers and/or
the principal amount of Outstanding Notes 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. Tenders of Outstanding Notes will
be accepted only in integral multiples of $1,000 in aggregate principal amount.
If less than all the Outstanding Notes evidenced by any Certificate submitted
are to be tendered, fill in the principal amount of Outstanding Notes that are
to be tendered in the box entitled "Principal Amount of Outstanding Notes
Tendered (If Less than All)." In such case, a new Certificate for the remainder
of the Outstanding Notes that were evidenced by the old Certificate will be sent
to the holder of the Outstanding Notes promptly after the Expiration Date,
unless the appropriate boxes on this Letter of Transmittal are completed. All
Outstanding Notes 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 Outstanding Notes 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 Notes to be withdrawn, the aggregate
principal amount of Outstanding Notes to be withdrawn, and (if Certificates for
Outstanding Notes have been tendered) the name of the registered holder of the
Outstanding Notes as set forth on the Certificate for the Outstanding Notes, if
different from that of the person who tendered such Outstanding Notes. If
Certificates for the Outstanding Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Certificates for the Outstanding Notes, the tendering holder must submit the
serial numbers shown on the particular Certificates for the Outstanding Notes to
be withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Outstanding Notes tendered for
the account of an Eligible Institution. If Outstanding Notes have been tendered
pursuant to the procedures for book-entry transfer set forth under "The Exchange
Offer--Procedures for Tendering," the notice of withdrawal must specify the name
and number of the account at DTC to be credited with the withdrawal of
Outstanding Notes, 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 Notes may not be
rescinded. Outstanding Notes 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--Procedures for
Tendering."
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 Outstanding Notes 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
Outstanding Notes 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 Outstanding Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Outstanding Notes 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
Outstanding Notes listed and transmitted hereby, no endorsement of Certificates
or separate bond powers are required unless Exchange Notes 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 Notes 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
11
<PAGE> 12
and other information as the Company or the Exchange Agent may require in
accordance with the restrictions on transfer applicable to the Outstanding
Notes. Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes 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 Outstanding Notes 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 Outstanding Notes, 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 to
Exchange Offer," or any conditions or irregularities in any tender of
Outstanding Notes 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 Outstanding Notes 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 Outstanding Notes
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 Outstanding Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the
Outstanding Notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of Outstanding Notes 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 Outstanding Notes 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 Outstanding Notes, by
executing this Letter of Transmittal, shall waive any right to receive notice of
the acceptance of Outstanding Notes 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.
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
Outstanding Notes 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.
- --------------------------------------------------------------------------------
12
<PAGE> 13
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Outstanding Notes 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 Exchange Notes 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
Notes 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 Outstanding Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Outstanding Notes. If the Outstanding Notes 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: THE CHASE MANHATTAN BANK
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <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
TAXPAYER IDENTIFICATION
NUMBER ("TIN")
Part II -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(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
9 1/8% SERIES A SENIOR NOTES DUE 2003
and
9 1/2% SERIES A SENIOR NOTES DUE 2008
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 the Company's (as defined below) its 9 1/8% Series A Senior
Notes due 2003 (the "5-Outstanding Notes") and 9 1/2% Series A Senior Notes due
2008 (the "10-Year Outstanding Notes," and together with the 5-Year Outstanding
Notes, the "Outstanding Notes"), are not immediately available, (ii) Outstanding
Notes, the Letter of Transmittal and all other required documents cannot be
delivered to Chase Bank of Texas, National Association (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--Procedures for Tendering" and
"--Guaranteed Delivery Procedures" in the Prospectus. In addition, in order to
utilize the guaranteed delivery procedure to tender Outstanding Notes pursuant
to the Exchange Offer, a completed, signed and dated Letter of Transmittal
relating to the Outstanding Notes (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:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
Chase Bank of Texas, National Association (For Eligible Institutions Only)
c/o The Chase Manhattan Bank (212) 638-0454
55 Water Street, North Building
Room 234, Windows 20 and 21 Confirm by Telephone:
New York, New York 10041 (713) 216-6686
Attention: Carlos Esteves
For Inquiries:
Mauri Cowen
(212) 638-7380
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 principal amount of Outstanding Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" and
"--Guaranteed Delivery Procedures."
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
5-YEAR OUTSTANDING NOTES (CUSIP NO. 74912 EAJ 0)
- -------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
AGGREGATE PRINCIPAL TENDERED FOR EXCHANGE
CERTIFICATE NUMBER(S) AMOUNT REPRESENTED BY (MUST BE IN INTEGRAL
(IF AVAILABLE) CERTIFICATE(S) MULTIPLES OF $1,000)*
- -------------------------------------------------------------------------------------
<S> <C> <C>
$ $
- -------------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------------
TOTAL AMOUNT OF 5-YEAR
OUTSTANDING NOTES TENDERED: $ $
- -------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL 5-YEAR OUTSTANDING
NOTES HELD. 5-YEAR OUTSTANDING NOTES MAY BE TENDERED IN WHOLE OR IN PART
IN INTEGRAL MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 5-YEAR
OUTSTANDING NOTES HELD SHALL BE DEEMED TENDERED UNLESS A LESSER NUMBER IS
SPECIFIED IN THIS COLUMN.
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
10-YEAR OUTSTANDING NOTES (CUSIP NO. 74912 EAL 5)
- -------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
AGGREGATE PRINCIPAL TENDERED FOR EXCHANGE
CERTIFICATE NUMBER(S) AMOUNT REPRESENTED BY (MUST BE IN INTEGRAL
(IF AVAILABLE) CERTIFICATE(S) MULTIPLES OF $1,000)*
- -------------------------------------------------------------------------------------
<S> <C> <C>
$ $
- -------------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------------
TOTAL AMOUNT OF 10-YEAR
OUTSTANDING NOTES TENDERED: $ $
- -------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED IF TENDERING FOR EXCHANGE ALL 10-YEAR OUTSTANDING
NOTES HELD. 10-YEAR OUTSTANDING NOTES MAY BE TENDERED IN WHOLE OR IN PART
IN INTEGRAL MULTIPLES OF $1,000 IN AGGREGATE PRINCIPAL AMOUNT. ALL 10-YEAR
OUTSTANDING NOTES 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.
================================================================================
If Outstanding Notes will be tendered by book-entry transfer, please provide the
following information:
Name of Tendering Institution
- --------------------------------------------------------------------------------
The Depository Trust Company
Account No.
- --------------------------------------------------------------------------------
================================================================================
================================================================================
PLEASE SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
Name(s) (Please Print)
- -------------------------------------------------------------------------------
Address (Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Phone Number)
- --------------------------------------------------------------------------------
Date
================================================================================
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as its (their) name(s) appear on
certificates for Outstanding Notes, 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 Outstanding Notes tendered
hereby in proper form for transfer, or confirmation of the book-entry transfer
of such Outstanding Notes 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 OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
4
