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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 Commission File Number 1-8226
DI INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2144774
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 435-6100
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
The number of shares of the Registrant's Common Stock, par value $.10
per share, outstanding at August 7, 1997, was 151,561,591.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. Other Information
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 20
</TABLE>
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 54,294 $ 6,162
Restricted cash - insurance deposits -- 1,000
Accounts receivable, net of allowance of $1,866
and $1,333, respectively 42,813 15,866
Rig inventory and supplies 428 936
Assets held for sale 542 557
Prepaids and other current assets 5,867 3,690
--------- ---------
Total current assets 103,944 28,211
--------- ---------
Property and equipment:
Land, buildings and improvements 5,844 4,312
Drilling and well service equipment 317,740 95,059
Furniture and fixtures 1,407 1,088
--------- ---------
324,991 100,459
Less: accumulated depreciation and amortization (16,349) (11,983)
--------- ---------
Net property and equipment 308,642 88,476
--------- ---------
Other noncurrent assets 6,495 1,132
--------- ---------
$ 419,081 $ 117,819
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 582 $ 613
Accounts payable - trade 23,614 11,826
Accrued workers' compensation 3,693 1,502
Payroll and related employee costs 5,285 3,340
Customer advances 935 2,466
Taxes payable 1,045 845
Other accrued liabilities 11,973 1,424
--------- ---------
Total current liabilities 47,127 22,016
--------- ---------
Senior Notes 174,139 --
Other long-term debt net of current maturities 2,072 26,846
Other long-term liabilities and minority interest 3,598 3,299
Deferred income taxes 45,355 248
Series A preferred stock - mandatory redeemable 305 764
Commitments and contingent liabilities -- --
Shareholders' equity:
Series B preferred stock, $1 par value; 10,000 shares
authorized; none outstanding -- --
Common stock, $.10 par value; 300,000,000 shares
authorized 151,540,991 and 125,043,234 issued
and outstanding, respectively 15,154 12,504
Additional paid-in capital 175,136 99,301
Cumulative translation adjustments (404) (404)
Accumulated deficit (43,401) (46,755)
--------- ---------
Total shareholders' equity 146,485 64,646
--------- ---------
$ 419,081 $ 117,819
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amount in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1997 1996 1997 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Contract drilling $ 40,071 $ 19,183 $ 76,046 $ 39,285
Costs and expenses:
Drilling operations 33,340 19,382 62,132 38,318
Depreciation and amortization 2,973 1,124 5,180 2,221
General and administrative 1,715 1,075 3,369 1,795
Non-recurring charges - - - 602
----------- ----------- ----------- -----------
Total costs and expenses 38,028 21,581 70,681 42,936
----------- ----------- ----------- -----------
Operating income (loss) 2,043 (2,398) 5,365 (3,651)
Other income (expense):
Interest income 96 93 188 104
Gain on sale of assets 324 2,934 354 2,949
Interest expense (863) (204) (1,535) (466)
Minority interest 134 99 338 97
Other, net - - - -
----------- ----------- ----------- -----------
Other income (expense), net (309) 2,922 (655) 2,684
------------ ----------- ----------- -----------
Income (loss) before income taxes 1,734 524 4,710 (967)
Income taxes 694 - 1,356 -
----------- ----------- ----------- -----------
Net income (loss) 1,040 524 3,354 (967)
Series A preferred stock redemption premium (218) - (240) -
Series B preferred stock subscription
dividend requirement - (150) - (300)
----------- ----------- ----------- -----------
Net income (loss) applicable to common stock $ 822 $ 374 $ 3,114 $ (1,267)
=========== =========== =========== ===========
Net income (loss) per common share $ .01 $ .01 $ .02 $ (.03)
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding 138,152 38,694 135,756 38,682
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Series B
Preferred Common
Stock Stock Additional Cumulative
$1 par $.10 par Paid-in Translation
Value Value Capital Deficit Adjustments Total
--------- -------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 4,000 $ 3,867 $ 46,458 $ (34,631) - $ 19,694
Exercise of stock options - 12 115 - - 127
Series B preferred stock
dividend requirement 300 - - (300) - -
Net loss - - - (967) - (967)
Unrealized translation loss - - - - (404) (404)
--------- -------- ----------- ----------- --------- ----------
Balance, June 30, 1996 $ 4,300 $ 3,879 $ 46,573 $ (35,898) $ (404) $ 18,450
========= ======== =========== =========== ========= ==========
Balance, December 31, 1996 $ - $ 12,504 $ 99,301 $ (46,755) $ (404) $ 64,646
Issuance of shares in
Flournoy acquisition - 1,243 29,823 - - 31,066
Exercise of stock options - 7 52 - - 59
Redemption of Series A
preferred stock - - (240) - - (240)
Issuance of shares in
Grey Wolf merger - 1,400 46,200 - - 47,600
Net income - - - 3,354 - 3,354
--------- -------- ----------- ----------- --------- ----------
Balance, June 30, 1997 $ - $ 15,154 $ 175,136 $ (43,401) $ (404) $ 146,485
========= ======== =========== =========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,354 $ (967)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 5,180 2,221
Provision for deferred income taxes 951 -
Gain on sale of assets (354) (2,949)
Provision for doubtful accounts (200) 200
Net effect of changes in assets and liabilities
related to operating accounts (9,804) (1,705)
----------- -----------
Cash used in operating activities (873) (3,200)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (100,656) (1,954)
Proceeds from sale of property and equipment 2,010 4,363
----------- -----------
Cash provided by (used in) investing activities (98,646) 2,409
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Senior Notes 174,139 -
Proceeds from long-term debt 27,921 1,703
Repayments of long-term debt (48,761) (1,375)
Senior Notes financing costs (5,008) -
Proceeds from exercise of stock options 59 127
Redemption of Series A Preferred Stock (699) -
----------- -----------
Cash provided by financing activities 147,651 455
----------- -----------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH - (144)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 48,132 (480)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,162 1,859
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 54,294 $ 1,379
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
CASH PAID FOR INTEREST: $ 1,431 $ 463
=========== ===========
CASH PAID FOR TAXES: $ 459 $ -
=========== ===========
NON CASH TRANSACTIONS:
Issuance of common stock in Flournoy transaction
Change in property and equipment additions $ 40,503
Change in issuance of common stock 31,066
Change in deferred tax liability 9,437
Issuance of common stock for Grey Wolf acquisition
Change in property and equipment additions 85,842
Change in issuance of common stock 47,600
Change in deferred tax liability 34,720
Change in other assets 167
Change in long-term debt 1,043
Change in other long-term liabilities 359
Change in assets and liabilities related to operating accounts 2,287
</TABLE>
See accompanying notes to consolidated financial statements.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
The accompanying unaudited consolidated financial statements have been
prepared by DI Industries, Inc. (the "Company" or "DI") in accordance with the
rules and regulations of the Securities and Exchange Commission and include the
accounts of the Company and its majority-owned subsidiaries. In the opinion of
management, the accompanying unaudited consolidated financial statements
contain all adjustments, which are of a normal recurring nature, necessary to
present fairly the Company's financial position as of June 30, 1997, and the
results of operations and cash flows for the periods indicated. All significant
intercompany transactions have been eliminated. The results of operations for
the three months and six months ended June 30, 1997 and 1996 are not
necessarily indicative of the results for any other period or for the year as a
whole. These consolidated financial statements should be read in conjunction
with the Company's audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
(2) NET INCOME (LOSS) PER COMMON SHARE
The following table presents the weighted average number of shares of
common stock and common stock equivalents outstanding for the three months and
six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average shares of common
stock outstanding 138,152 38,694 135,756 38,682
Stock options (treasury method) - - - -
--------- --------- --------- ---------
138,152 38,694 135,756 38,682
========= ========= ========= =========
</TABLE>
Stock options are not included in the computation for the three months
and six months ended June 30, 1997 and 1996, since such inclusion would be
antidilutive or not significant to the computation.
(3) ACCOUNTING FOR INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal
income tax return. The Company's foreign owned subsidiaries file tax returns in
the country where they are domiciled. The Company records current income taxes
based on its estimated tax liability in the United States and foreign countries
for the period. The Company recorded a current tax provision of $405,000 and a
deferred tax provision of $951,000 for the six months ended June 30, 1997.
The Company accounts for income taxes based upon Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred income tax liabilities and assets for
the expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. Deferred income taxes reflect
the gross tax effect of (a) temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and tax reporting
purposes, and (b) operating loss and tax credit carryforwards.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4) SIGNIFICANT PROPERTY TRANSACTIONS
On January 31, 1997, the Company acquired the operating assets of
Flournoy Drilling Company ("Flournoy") for 12.4 million shares of DI common
stock and $800,000 in cash. The assets acquired include 13 drilling rigs, 17
rig hauling trucks, a yard and office facility in Alice, Texas, and various
other equipment and drill pipe. The Company agreed to issue additional shares
of common stock to Flournoy's shareholders if, and to the extent that on
January 31, 1998, the aggregate market value of one-half of the shares received
by the Flournoy shareholders less any shares sold, plus the gross proceeds from
certain sales of common stock received in the transaction by the Flournoy
shareholders prior to January 31, 1998, is, in total, less than $12.4 million.
In May 1997, the Company increased its inventory of rigs held for
refurbishment by purchasing three stacked rigs in three separate transactions
for an aggregate purchase price of $6.9 million in cash. One of the rigs was
purchased from an affiliate of one of the Company's directors.
In June 1997, the Company purchased three additional stacked rigs to
add to its inventory of rigs to be refurbished for $8.9 million. These rigs
were also purchased from an affiliate of one of the Company's directors.
On June 27, 1997, the Company acquired all of the outstanding capital
stock of Grey Wolf Drilling Company ("Grey Wolf") by merger in exchange for
$61.6 million cash and 14.0 million shares of DI common stock. Transaction
costs of approximately $0.4 million were incurred in connection with the
merger. Grey Wolf Drilling Company operates 18 large premium drilling rigs in
South Louisiana and along the upper Texas Gulf Coast. The merger was accounted
for using purchase accounting and as such, all revenues and expenses were
recorded by the Company beginning from the date of acquisition.
The June 30, 1997 consolidated balance sheet includes the effect of
the Flournoy acquisition and the Grey Wolf merger, the issuance of the Notes
and the May and June stacked rig purchases. The following unaudited pro forma
consolidated financial data for the six months ended June 30, 1997, includes
the historical results of the Company for the six months ended June 30, 1997,
and gives effect to the Flournoy Acquisition, the Grey Wolf merger and issuance
of the Notes as if they occurred on January 1, 1996. The following unaudited
pro forma consolidated financial data for the year ended December 31, 1996,
includes the historical results of the Company for the year ended December 31,
1996, and gives effect to each of the above transactions as well as the
previously disclosed merger, acquisition and sale transactions which occurred
before December 31, 1996, as if they occurred on January 1, 1996. The May and
June stacked rig purchases have no historical operations as the rigs have been
stacked and the impact on the unaudited pro forma consolidated financial data
is not material and has not been presented. (Amounts in thousands, except per
share amounts.):
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DI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Total revenues $ 108,918 $ 205,316
Net income (loss) applicable
to common stock (2,193) (29,888)
Net income (loss) per common share (.01) (.20)
</TABLE>
(5) LONG-TERM DEBT
On December 31, 1996, the Company closed a $35.0 million reducing
revolving line of credit (the "Facility") with a group of banks. On April 30,
1997, the Facility was amended and restated to increase the line of credit to
$50.0 million and to revise certain other terms and covenants, including the
elimination of mandatory $5.0 million reductions in the line in January 1998
and 1999 and a conversion of the interest rate to a sliding variable rate based
on certain financial ratios of either LIBOR plus 1.75% to 2.5% or prime plus
.75% to 1.5%. The Facility is secured by substantially all the Company's assets
and calls for quarterly interest payments on the outstanding balance. At June
30, 1997 and December 31, 1996, $0 and $26.0 million, respectively, were
outstanding under the line of credit. The Facility contains customary
affirmative and negative covenants with which the Company was in compliance at
June 30, 1997.
On June 27, 1997, the Company issued $175.0 million of Senior Notes
(the "Notes") receiving gross proceeds of $174.1 million. The Notes bear
interest at 87/8% per annum payable semiannually and mature on July 1, 2007.
The Notes are general unsecured senior obligations of the Company and are
guaranteed by the Company's domestic subsidiaries. Proceeds from the Notes were
used to fund the cash portion of the Grey Wolf acquisition, to repay the
outstanding Facility balance of $47.0 million and to fund future capital and
operating requirements. In connection with the issuance of the Notes, the
Company paid approximately $5.0 million in financing costs which will be
amortized over the life of the Notes.
Except as discussed below, the Notes are not redeemable at the option
of the Company prior to July 1, 2002. On or after such date, the Company shall
have the option to redeem the Notes in whole or in part during the twelve
months beginning July 1, 2002 at 104.4375%, beginning July 1, 2003 at
102.9580%, beginning July 1, 2004 at 101.4792% and beginning July 1, 2005 and
thereafter at 100.0000% together with any interest accrued and unpaid to the
redemption date. However, at any time during the first 36 months after the
issue date, the Company may at its option, redeem up to a maximum of 30% of the
aggregate principal amount with the net cash proceeds of one or more equity
offerings at a redemption price equal to 108.875% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date
provided that at least $120.0 million aggregate principal amount shall remain
outstanding immediately after the occurrence of any such redemption.
(6) COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in litigation incidental to the conduct of its
business, none of which management believes is, individually or in the
aggregate, material to the Company's consolidated financial condition or
results of operations.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Certain litigation, styled TEPCO, Inc. v. Grey Wolf Drilling Company
(Cause No. 96-49194), was pending against Grey Wolf Drilling Company in the
164th Judicial District Court of Harris County, Texas at the time of the
merger. In its petition filed on September 30, 1996, TEPCO, Inc. ("TEPCO")
alleges that Grey Wolf breached contractual obligations it owed to TEPCO by
failing to drill an oil and gas well or wells for it in the Treasure Isle
Field, located in Galveston, Texas. TEPCO also alleges that it lost rights
under an oil and gas lease it had under an alleged agreement with Mobil
Producing Texas and New Mexico, Inc., causing plaintiff to suffer money
damages, which it values in its petition at "many tens of millions of dollars."
TEPCO amended the lawsuit in April 1997, and in addition to continuing to
assert the breach of contract action previously asserted in its original
petition, TEPCO asserted it was fraudulently induced to enter into the drilling
contract it contends Grey Wolf breached and was fraudulently induced by Grey
Wolf to agree to release Grey Wolf's rig from TEPCO's drill site to allow Grey
Wolf to drill a well elsewhere for another customer. TEPCO also asserts a claim
for spoliation of evidence. The damages claimed with respect to these new
allegations are the same damages alleged it sustained as a result of Grey
Wolf's alleged breach of contract. TEPCO also asserts it is entitled to
recovery of punitive damages. As an alternative claim, TEPCO contends it is
entitled to restitution of all amounts paid to Grey Wolf under the contracts
between the parties, which was a sum of approximately $3.0 million. Grey Wolf
has filed a counterclaim in the lawsuit for approximately $154,000 for recovery
of unpaid invoices, and interest, for services rendered or materials provided
by Grey Wolf in connection with the drilling of two wells for TEPCO which were
completed before Grey Wolf ceased performing work for TEPCO. The Company is
vigorously defending the lawsuit. The court has set the action for trial in
September 1997. An escrow, consisting of $5.0 million of the cash portion of
the purchase price of Grey Wolf, was established to provide a source of payment
for the net costs to the Company, if any, for any eventual settlement by, or
the payment of a monetary court judgment against the Company arising out of
this or any other lawsuit by TEPCO based on the same facts and circumstances. A
judgment in favor of TEPCO in excess of $5.0 million could have a material
adverse effect on the Company.
Substantially all of the Company's contract drilling activities are
conducted with independent and major oil and gas companies in the United States
or with national utility or national petroleum companies in Venezuela.
Historically, the Company has not required collateral or other security to
support the related receivables from such customers. However, the Company has
required certain customers to deposit funds in escrow prior to the commencement
of drilling. Actions typically taken by the Company in the event of nonpayment
include filing a lien on the customer's producing property and filing suit
against the customer.
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DI INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto of DI Industries, Inc.
("DI" or the "Company") included elsewhere herein.
GENERAL
The Company's operations have been and will continue to be
significantly affected by the new management team installed in 1996, the
implementation of a new operating strategy in April 1996 and the major
transactions which have transformed the Company into the second largest
domestic land drilling contractor. Since the implementation of this strategy,
the Company has acquired 72 drilling rigs and now has the largest or second
largest active rig fleet in each of its three core domestic markets, the
Ark-La-Tex, South Texas and Gulf Coast markets. The Company also has a
significant inventory of refurbishable rigs. The Company's total rig fleet is
now 115 which includes one 1,000 horsepower mechanical rig acquired in July
1997 for $2.4 million. Since the fourth quarter of 1996, the Company has
refurbished and placed in service eight rigs out of inventory and returned from
foreign markets. The Company has exited unprofitable markets in Argentina and
Mexico. Of the six rigs previously operating in Argentina, three have been sold
and the other three have been returned to the United States where they are
awaiting refurbishment.
There is a general shortage in the industry of used drill pipe, and
the cost of obtaining new and used drill pipe is substantially higher than in
prior periods and continues to escalate. At present, the Company does not have
a shortage of drill pipe or other equipment but will need to purchase
additional drill pipe for newly refurbished rigs and rigs currently in service.
In response to this shortage, the Company has formed an alliance with a drill
pipe manufacturer in an effort to secure an adequate supply of new drill pipe
for its active rigs and the rigs that will be refurbished over the near term.
The Company believes that the alliance will satisfy its drill pipe needs
through 1998.
FINANCIAL CONDITION AND LIQUIDITY
During the first six months of 1997, the Company funded its activities
through a combination of cash generated from operations, borrowings under the
Company's loan facility (the "Facility"), the issuance of common stock and the
issuance of $175.0 million Senior Notes (the "Notes") discussed below. Until
its recent amendment, the Facility provided for an initial $35.0 million
reducing revolving line of credit with mandatory reductions of $5.0 million
each year until maturity on December 31, 1999. On April 30, 1997, the Facility
was amended and restated to increase the line of credit to $50.0 million and
amend certain other covenants and terms including the elimination of the
mandatory $5.0 million reductions and a reduction in the interest rate of
approximately 0.5%.
The following table summarizes the Company's financial position at
June 30, 1997 and as of December 31, 1996.
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<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
<S> <C> <C>
Working capital $ 56,817 $ 6,195
Property and equipment, net 308,642 88,476
Other noncurrent assets 6,495 1,132
----------- -----------
Total $ 371,954 95,803
=========== ===========
Long-term debt $ 176,211 $ 26,846
Other long-term liabilities 49,258 4,311
Shareholders' equity 146,485 64,646
----------- -----------
Total $ 371,954 $ 95,803
=========== ===========
</TABLE>
The significant changes in the Company's financial position from
December 31, 1996 to June 30, 1997, are primarily due to the acquisition of
Flournoy Drilling Company ("Flournoy"), the merger with Grey Wolf Drilling
Company ("Grey Wolf") and the closing of the $175.0 million Notes offering,
discussed further below.
On January 31, 1997, the Company acquired the operating assets of
Flournoy for 12.4 million shares of the Company's common stock and $800,000 in
cash. The assets acquired included 13 drilling rigs, 17 rig hauling trucks, a
yard and office facility in Alice, Texas and various other equipment and drill
pipe. The acquisition was accounted for using purchase accounting and as such,
all revenues and expenses were recorded by the Company beginning from the date
of acquisition.
On June 27, 1997, the Company acquired all of the outstanding capital
stock of Grey Wolf Drilling Company by merger in exchange for $61.6 million in
cash and 14,000,000 shares of DI common stock. Grey Wolf operates 18 large
premium drilling rigs in South Louisiana and along the upper Texas Gulf Coast.
In connection with the merger, Drillers, Inc., the Company's domestic operating
subsidiary, has changed its name to "Grey Wolf Drilling Company." The merger
was accounted for using purchase accounting and as such, all revenues and
expenses were recorded by the Company beginning from the date of acquisition.
Also on June 27, 1997, the Company closed a $175.0 million Notes
offering resulting in gross proceeds of $174.1 million. A portion of the
proceeds from the offering were used to fund the cash portion of the Grey Wolf
merger, pay off the outstanding balance under the Facility of $47.0 million and
to pay off the outstanding balance due on the purchase of three additional
drilling rigs for $8.9 million. The remaining proceeds will be used to fund the
Company's capital requirements as discussed below as well as fund the Company's
increased working capital requirement. The Notes bear interest at 87/8% per
annum payable semiannually and mature on July 1, 2007. The Notes are guaranteed
by the domestic subsidiaries of the Company.
Operating Activities
During the first six months of 1997, the Company used $0.9 million to
fund operating activities. While the Company generated cash from operations of
$8.9 million, working capital requirements increased by $9.8 million due to
recent acquisitions. In certain of these acquisitions, the Company purchased
drilling rigs and certain other related equipment which required working
capital to operate.
Investing Activities
During the six months ended June 30, 1997, the Company invested $98.6
million in fixed assets, net of asset sales. The cash portion of the Grey Wolf
merger, including transaction costs, accounted for $62.0 million and the
acquisition of six additional stacked rigs in May and June accounted for $15.8
million. Additionally, rig refurbishments consisted of $9.4 million and $5.5
million was spent to acquire drill pipe
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<PAGE> 13
and other drilling related equipment. In addition, the acquisition of Flournoy
and the merger with Grey Wolf resulted in $40.5 million and $85.8 million,
respectively, in non-cash additions to property and equipment.
Financing Activities
During the first six months of 1997, the Company obtained $147.7
million from financing activities, consisting principally of net proceeds from
the issuance of Notes of $169.1 million and borrowings and repayments under the
Facility. These borrowings were used to fund the cash portion of the Grey Wolf
merger, working capital requirements and capital expenditures discussed above.
The Company had cash and cash equivalents at June 30, 1997, of $54.3 million.
Future Activities
The Company anticipates substantial funding requirements in connection
with its rig refurbishment program. During the last quarter of 1996 and the
first half of 1997, the Company commenced and completed the refurbishment of
eight rigs at an aggregate cost of $10.7 million. In addition, as of July 31,
1997, the Company is in the process of refurbishing eight additional rigs. The
cost of refurbishing these rigs, including new drill strings, is estimated to
be $13.4 million, of which $2.0 million had been expended as of June 30, 1997.
The Company also anticipates that during the remainder of 1997, it may commence
the refurbishment of up to an additional ten rigs depending upon a variety of
factors, including market conditions, management's assessment of existing and
anticipated demand and day rates for land drilling rigs in the Company's
domestic and Venezuelan markets and the Company's success in bidding for
drilling contracts. The estimated cost of refurbishment could vary
substantially, depending upon the type of rig refurbished and its intended
market following refurbishment. The Company estimates that rigs destined for
its core domestic markets will cost an average of approximately $1.6 million to
refurbish, while rigs to be deployed to Venezuela will cost an average of up to
$12.0 million. In each of these instances, the cost includes the cost of new
drill string.
The Company believes that the balance of the proceeds from the Notes
offering, the cash flow from operations, and to the extent required, borrowings
under the Facility, will be sufficient to fund the Company's refurbishment
program and meet its other anticipated capital requirements for 1997. The
Company, however, continues to actively review possible acquisition
opportunities. While the Company has no definitive agreements to acquire
additional equipment, suitable opportunities may arise in the future. The
timing or success of any acquisition effort and the size of the associated
potential capital commitments cannot be predicted at this time. The ability of
the Company to consummate any such transaction will be dependent in large part
on its ability to fund such transaction. There can be no assurance that
adequate funding will be available with terms satisfactory to the Company.
Inflation and Changing Prices
Contract drilling revenues do not necessarily track the changes in
general inflation as they tend to respond to the level of activity on the part
of the oil and gas industry in combination with the supply of equipment and the
number of competing companies. Capital and operating costs are influenced to a
larger extent by specific price changes in the oil and gas industry and to a
lesser extent by changes in general inflation.
Foreign Exchange
Venezuelan operations are often performed by the Company pursuant to
drilling contracts under which payments to the Company are denominated in
United States Dollars but are payable in Venezuelan currency at a floating
exchange rate. Although the Company's Venezuelan contracts usually allow the
Company to exchange up to 35% of payments made to it in Venezuelan currency for
United States Dollars for a limited period of time following the payment and at
the official Venezuelan exchange rate in effect at
- 13 -
<PAGE> 14
the time the payment was made to the Company (thus offering limited protection
against adverse currency fluctuation), the Company is typically subject to the
risk of adverse currency fluctuations with respect to the balance of such
payments. Additionally, a significant portion of costs and expenses relating to
the Company's international operations are comprised of goods and services
procured in the respective foreign countries and paid for in the respective
countries' currencies. Accordingly, management expects that the Company's
subsidiaries operating in Venezuela will be required to maintain significant
cash balances in Venezuelan currency. The Company has not during the three-year
period ended December 31, 1996, entered into any currency hedges to protect it
from foreign currency losses. Instead, the Company attempts to manage assets in
foreign countries to minimize its exposure to currency fluctuations. Despite
these efforts, however, the Company remains subject to the risk of foreign
currency losses. During 1996, $404,000 was recorded as a decrease to
shareholders' equity due to a devaluation of the Venezuelan Bolivar.
Other
The Company has not paid any cash dividends on the Company's common
stock and does not anticipate paying dividends on the common stock at any time
in the foreseeable future. Furthermore, the Facility prohibits the payment of
dividends without the consent of the participating banks.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share." SFAS 128 specifies the compilation, presentation and disclosure
requirements for earnings per share for entities with publicly held common
stock or potential common stock. The requirements of this statement will be
effective for fiscal years ending after December 15, 1997. Management does not
believe that the implementation of SFAS 128 will have a material effect on its
financial statements.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended June 30, 1997 and 1996
The following tables highlight rig days worked, revenues and
operating expenses, for the Company's domestic and foreign operations for the
three months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
---------------------------------- ----------------------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
OPERATIONS OPERATIONS TOTAL OPERATIONS OPERATIONS TOTAL
---------- ---------- ----- --------- --------- -----
(In thousands, except rig days worked and average revenue per day)
<S> <C> <C> <C> <C> <C> <C>
Rig days worked 4,430 120 4,550 1,574 1,015 2,589
Drilling revenues $ 38,963 $ 1,108 $ 40,071 $ 11,883 $ 7,300 $ 19,183
Operating expenses(1) 31,874 1,466 33,340 12,099 7,283 19,382
--------- -------- --------- --------- --------- --------
Gross profit (loss) $ 7,089 $ (358) $ 6,731 $ (216) $ 17 $ (199)
========= ======== ========= ========= ========= ========
Average per rig day worked
Drilling revenue $ 8,795 $ 9,233 $ 8,807 $ 7,550 $ 7,192 $ 7,409
Operating expenses 7,195 12,217 7,327 7,687 7,175 7,486
--------- -------- --------- --------- --------- --------
Gross profit (loss) 1,600 (2,984) 1,480 (137) 17 (77)
========= ======== ========= ========= ========= ========
</TABLE>
- -----------------------------
(1) Operating expenses exclude depreciation and amortization and general and
administrative expenses.
- 14 -
<PAGE> 15
Revenues increased approximately $20.9 million, or 109%, to $40.1
million for the three months ended June 30, 1997, from $19.2 million for the
three months ended June 30, 1996. The increase is due to an increase in revenue
from domestic operations of $27.1 million partially offset by a decrease in
revenue from foreign operations of $6.2 million. Revenues from domestic
operations increased due to an increase in rig days worked of 2,856, and an
increase in the average revenue per day of $1,245. The increase in domestic
days worked is a result of an increase in the number of rigs owned and
available for service to 64 at June 30, 1997, compared to 31 at June 30, 1996.
The increase in rigs available for service is principally the result of the
acquisitions completed in 1996 and the first quarter of 1997 in which the
Company added 26 working rigs. In addition, eight refurbished rigs were placed
in service during the fourth quarter of 1996 and the first half of 1997. Rig
days worked in domestic operations consisted of 2,646 days worked in the
Company's South Texas division, 1,393 days worked in the Company's Ark-La-Tex
division, and 391 days worked in all other domestic divisions of the Company.
Revenue from foreign operations decreased due to a decrease in rig days worked
of 895 partially offset by an increase in average revenue per day of $2,041.
The decrease in days worked is primarily a result of the Company withdrawing
from Mexico and Argentina during the fourth quarter of 1996, and the decrease
in activity in Venezuela due to the expiration of four labor contracts and the
relocation of the divisions remaining rigs within Venezuela. Increases in
domestic and foreign average revenue per day are a result of the overall
increase in demand for land drilling rigs.
Drilling operating expenses increased by approximately $13.9 million,
or 72%, to $33.3 million for the three months ended June 30, 1997, as compared
to $19.4 million for the three months ended June 30, 1996. The increase is due
to a $19.8 million increase in drilling operating expenses from domestic
operations partially offset by a decrease of $5.9 million in drilling operating
expenses from foreign operations. The increase in domestic drilling operating
expenses is a direct result of the increase in the number of rigs owned and
available for service and the corresponding 2,856 increase in the days worked.
In addition, the 1997 period includes a non-recurring charge of $0.9 million to
transport three rigs from Argentina to the United States. The decrease in
drilling operating expenses from foreign operations is due to fewer rigs
operating as a result of the Company's withdrawal from Mexico and Argentina and
decreased activity in Venezuela as discussed above.
Depreciation and amortization expense increased by $1.9 million, or
164%, to $3.0 million for the three months ended June 30, 1997, compared to
$1.1 million for the three months ended June 30, 1996. The increase is
primarily due to additional depreciation associated with the acquisition in
late 1996 of 13 additional operating rigs and the acquisition of 13 operating
rigs in January 1997 and eight rigs refurbished from inventory and placed in
service during the fourth quarter of 1996 and the first half of 1997.
General and administrative expense increased by $640,000 or 60%, to
$1.7 million for the three months ended June 30, 1997, from $1.1 million for
the same period of 1996 due primarily to (i) higher payroll costs associated
with new management and increased corporate staff, (ii) higher professional
fees due to the Company's increased activity, and (iii) higher insurance
expense due to an increase in the number of rigs as well as an increase in
employee related insurance coverage.
Interest expense increased by $659,000, or 323%, to $863,000 for the
three months ended June 30, 1997, compared to $204,000 for the three months
ended June 30, 1996. The increase is due to an increase in the average
outstanding debt balance of $29.5 million to $41.9 million for the three months
ended June 30, 1997 from $12.4 million for the three months ended June 30,
1996.
Other income, net decreased by $2.6 million to $554,000 for the three
months ended June 30, 1997, as compared to $3.1 million for the three months
ended June 30, 1996. The principal reason for the decrease was the gain
recognized on the sale of the Company's well servicing division during the
second quarter of 1996 and no similar sale during the second quarter of 1997.
- 15 -
<PAGE> 16
For the three months ended June 30, 1997, the Company provided income
tax expense of $694,000. This expense is the result of the Company's profitable
operations and the resulting taxable income. The Company had no taxable income
for the second quarter of 1996.
Comparison of the Six Months Ended June 30, 1997 and 1996
The following tables highlight rig days worked, revenues and
operating expenses, for the Company's domestic and foreign operations for the
six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
----------------------------------- -----------------------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
OPERATIONS OPERATIONS TOTAL OPERATIONS OPERATIONS TOTAL
---------- ---------- ----- ----------- ---------- ------
(In thousands, except rig days worked and average revenue per day)
<S> <C> <C> <C> <C> <C> <C>
Rig days worked 8,405 570 8,975 2,927 2,340 5,267
Drilling revenues $ 71,564 $ 4,482 $ 76,046 $ 22,312 $ 16,973 $ 39,285
Operating expenses(1) 57,690 4,442 62,132 21,869 16,449 38,318
--------- -------- --------- --------- --------- --------
Gross profit (loss) $ 13,874 $ 40 $ 13,914 $ 443 $ 524 $ 967
========= ======== ========= ========= ========= ========
Average per rig day worked
Drilling revenue $ 8,514 $ 7,863 $ 8,473 $ 7,623 $ 7,253 $ 7,459
Operating expenses 6,864 7,793 6,923 7,471 7,029 7,275
--------- -------- --------- --------- --------- --------
Gross profit (loss) 1,650 70 1,550 152 224 184
========= ======== ========= ========= ========= ========
</TABLE>
- -----------------------------
(1) Operating expenses for depreciation and amortization and general and
administrative expenses.
Revenues increased approximately $36.7 million, or 94%, to $76.0
million for the six months ended June 30, 1997, from $39.3 million for the six
months ended June 30, 1996. The increase is due to an increase in revenue from
domestic operations of $49.2 million partially offset by a decrease in revenue
from foreign operations of $12.5 million. Revenues from domestic operations
increased due to an increase in rig days worked of 5,478, and an increase in
the average revenue per day of $891. The increase in domestic days worked is a
result of an increase in the number of rigs owned and available for service to
64 at June 30, 1997, compared to 31 at June 30, 1996. The increase in rigs
available for service is principally the result of the acquisitions completed
in 1996 and the first quarter of 1997 in which the Company added 26 working
rigs. In addition, eight rigs refurbished from inventory were placed in service
during the fourth quarter of 1996 and the first half of 1997. Rig days worked
in domestic operations consisted of 4,902 days worked in the Company's South
Texas division, 2,545 days worked in the Company's Ark-La-Tex division, and 958
days worked in all other domestic divisions of the Company. Revenue from
foreign operations decreased due to a decrease in rig days worked of 1,770
partially offset by an increase in average revenue per day of $610. The
decrease in days worked is primarily a result of the Company withdrawing from
Mexico and Argentina during the fourth quarter of 1996, the decrease in
activity in Venezuela due to the expiration of four labor contracts and the
relocation of the divisions remaining drilling rigs within Venezuela. Increases
in domestic and foreign average revenue per day are a result of the overall
increase in demand for land drilling rigs.
Drilling operating expenses increased by approximately $23.8 million,
or 62%, to $62.1 million for the six months ended June 30, 1997, as compared to
$38.3 million for the six months ended June 30, 1996. The increase is due to a
$35.8 million increase in drilling operating expenses from domestic operations
partially offset by a decrease of $12.0 million in drilling operating expenses
from foreign operations. The increase in domestic drilling operating expenses
is a direct result of the increase in the number of rigs owned and available
for service and the corresponding 5,478 increase in the days worked. In
addition, the 1997 period includes a non-recurring charge of $0.9 million to
transport three rigs from Argentina to the United States. The decrease in
drilling operating expenses from foreign operations is due to fewer rigs
operating
- 16 -
<PAGE> 17
as a result of the Company's withdrawal from Mexico and Argentina and decreased
activity in Venezuela as discussed above.
Depreciation and amortization expense increased by $3.0 million, or
133%, to $5.2 million for the six months ended June 30, 1997, compared to $2.2
million for the six months ended June 30, 1996. The increase is primarily due
to additional depreciation associated with the acquisition in late 1996 of 13
additional operating rigs, the acquisition of 13 operating rigs in January 1997
and eight rigs refurbished from inventory and placed in service during the
fourth quarter of 1996 and the first half of 1997.
General and administrative expense increased by $1.6 million, or 88%,
to $3.4 million for the six months ended June 30, 1997, from $1.8 million for
the same period of 1996 due primarily to (i) higher payroll costs associated
with new management and increased corporate staff, (ii) higher professional
fees due to the Company's increased activity, and (iii) higher insurance
expense due to an increase in the number of rigs as well as an increase in
employee related insurance coverage.
During the first half of 1996, the Company incurred $602,000 in
non-recurring charges relating to the contractual severance to be paid over a
two-year period to the Company's former president and chief executive officer.
Interest expense increased by $1.1 million or 229%, to $1.5 million
for the six months ended June 30, 1997, compared to $466,000 for the six months
ended June 30, 1996. The increase is due to an increase in the average
outstanding debt balance of $24.7 million to $37.1 million for the six months
ended June 30, 1997 from $12.4 million for the six months ended June 30, 1996.
Other income net decreased by $2.3 million to $880,000 for the six
months ended June 30, 1997, as compared to $3.2 million for the six months
ended June 30, 1996. The decrease is primarily due to the gain recognized on
the sale of the Company's well servicing division during the second quarter of
1996.
For the six months ended June 30, 1997, the Company provided income
tax expense of $1.4 million. This expense is the result of the Company's
profitable operations and the resulting taxable income. The Company had no
taxable income for the first half of 1996.
- 17 -
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Note 4 of the "Notes to Consolidated Financial Statements" is
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 14, 1997, the annual meeting of the holders of common stock of
DI Industries, Inc. was held. The only action taken by the shareholders was the
election of the following six directors to serve until the next annual meeting
or until his successor is elected and qualified.
<TABLE>
<CAPTION>
VOTES
NAME VOTES FOR WITHHELD
- ------------------------- ------------------------ ----------------
<S> <C> <C>
Lucien Flournoy 114,453,671 47,275
Peter M. Holt 114,464,921 36,025
Roy T. Oliver, Jr. 114,465,121 35,825
Ivar Siem 114,462,121 38,825
Steven A. Webster 114,465,121 35,825
William R. Ziegler 114,465,121 35,825
</TABLE>
ITEM 5. OTHER INFORMATION
This Quarterly Report on Form 10-Q contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical facts included in this
report including, without limitation, statements regarding the Company's
business strategy, plans, objectives and beliefs of management for future
operations, are forward-looking statements. Although the company believes the
expectations and beliefs reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
discussed in Management's Discussion and Analysis of Financial Condition and
Results of Operations and in the Company's final prospectus dated June 23, 1997
for the Notes offering under the caption "Risk Factors."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A current report on Form 8-K (Item 5), was filed with the Securities
and Exchange Commission on May 16, 1997. This current report reported the
filing of a Registration Statement on Form S-3 (the "Senior Notes Prospectus"
covering a proposed underwritten public offering by the Company of $125 million
"high yield" unsecured debt securities. The Senior Notes Prospectus contained
updated descriptions of (i) the Company's business and properties, including
the assets of Grey Wolf, (ii) the Company's Bank Credit Facility, and (iii) the
Senior Notes). The Form 8-K was filed in order to update disclosure of such
matters under the Exchange Act.
- 18 -
<PAGE> 19
Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ --------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement among DI Industries, Inc., Donaldson, Lufkin
& Jenrette Securities Corporation, BT Securities Corporation and ING
Barings (U.S.) Securities, Inc.
4.2 Trust Indenture relating to the Senior Notes due 2007 of DI
Industries, Inc., and Texas Commerce Bank National Association, as
Trustee.
10.3 Amendment No. 3 to the Credit Facility dated June 23, 1997.
11.1 Computation of Net Income (Loss) Per Common Stock Share.
27.0 Financial Data Schedule
</TABLE>
- 19 -
<PAGE> 20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
DI INDUSTRIES, INC.
Date: August 12, 1997 By: /s/ T. Scott O'Keefe
--------------------
T. Scott O'Keefe
Senior Vice President and
Chief Financial Officer
Date: August 12, 1997 By: /s/ David W. Wehlmann
---------------------
David W. Wehlmann
Vice President and Controller
- 20 -
<PAGE> 21
INDEX TO EXHIBITS:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ --------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement among DI Industries, Inc., Donaldson, Lufkin
& Jenrette Securities Corporation, BT Securities Corporation and ING
Barings (U.S.) Securities, Inc.
4.2 Trust Indenture relating to the Senior Notes due 2007 of DI
Industries, Inc., and Texas Commerce Bank National Association, as
Trustee.
10.3 Amendment No. 3 to the Credit Facility dated June 23, 1997.
11.1 Computation of Net Income (Loss) Per Common Stock Share.
27.0 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 1.1
$175,000,000
DI INDUSTRIES, INC.
DRILLERS, INC.
DI INTERNATIONAL, INC.
DI ENERGY, INC.
8-7/8% SENIOR NOTES DUE 2007
UNDERWRITING AGREEMENT
June 23, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT SECURITIES CORPORATION
ING BARING (U.S.) SECURITIES, INC.
as Underwriters
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
DI Industries, Inc., a Texas corporation (THE "COMPANY"), Proposes to
issue and sell $175,000,000 principal amount of its 8-7/8% Senior Notes due
2007 (THE "SECURITIES") to the several underwriters named in Schedule I hereto
(the "UNDERWRITERS"). The Securities will be unconditionally guaranteed on a
unsecured senior basis by certain subsidiaries of the Company, Drillers, Inc.,
a Texas corporation, DI International, Inc., a Texas corporation, and DI
Energy, Inc., a Texas corporation (COLLECTIVELY, THE "GUARANTORS"). The
Securities are to be issued pursuant to the provisions of an Indenture to be
dated as of June 27, 1997 (THE "INDENTURE") among the Company, as issuer, the
Guarantors, as guarantors, and Texas Commerce Bank National Association, as
Trustee (THE "TRUSTEE").
SECTION 1. Registration Statement and Prospectus. The Company and the
Guarantors have prepared and filed with the Securities and Exchange Commission
(THE "COMMISSION") in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
(COLLECTIVELY, THE "ACT"), a registration statement on Form S-3, including a
prospectus, relating to the Securities. The registration
<PAGE> 2
statement, as amended at the time it became effective, including the
information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the "REGISTRATION STATEMENT"; and the prospectus in the form
first used to confirm sales of Securities is hereinafter referred to as the
"PROSPECTUS" (including, in the case of all references to the Registration
Statement or the Prospectus, documents incorporated therein by reference). If
the Company and the Guarantors have filed or are required pursuant to the terms
hereof to file a registration statement pursuant to Rule 462(b) under the Act
registering additional Securities (A "RULE 462(B) REGISTRATION STATEMENT"),
then, unless otherwise specified, any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement. The terms "SUPPLEMENT" and "AMENDMENT" or "AMEND" as
used in this Agreement with respect to the Registration Statement or the
Prospectus shall include all documents subsequently filed by the Company and/or
the Guarantors with the Commission pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder
(COLLECTIVELY, THE "EXCHANGE ACT") that are deemed to be incorporated by
reference in the Prospectus.
SECTION 2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell, and each
Underwriter agrees, severally and not jointly, to purchase from the Company the
principal amount of Securities set forth opposite the name of such Underwriter
in Schedule I hereto at 96.772% of the principal amount thereof (THE "PURCHASE
PRICE").
The Company hereby confirms its engagement of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") as, and DLJ hereby confirms its
agreement with the Company to render services as, a "qualified independent
underwriter," within the meaning of Section (b)(15) of Rule 2720 of the
National Association of Securities Dealers, Inc. with respect to the offering
and sale of the Securities. DLJ, solely in its capacity as the qualified
independent underwriter and not otherwise, is referred to herein as the "QIU."
As compensation for the services of the QIU hereunder, the Company agrees to
pay the QIU $5,000 on the Closing Date. The yield on the Securities to be sold
to the public shall not be lower than that recommended by the QIU.
SECTION 3. Terms of Public Offering. The Company and the Guarantors
are advised by you that the Underwriters propose (i) to make a public offering
of their respective portions of the Securities as soon after the execution and
delivery of this Agreement as in your judgment is advisable and (ii) initially
to offer the Securities upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. Delivery to the Underwriters of and
payment for the Securities shall be made at 9:00 a.m., New York City time, on
June 27, 1997 (THE "CLOSING DATE") at such place as you shall designate. The
2
<PAGE> 3
Closing Date and the location of delivery of and payment for the Securities may
be varied by agreement among you and the Company.
Payment of the Purchase Price shall be made to the Company by wire
transfer of immediately available funds to a bank account designated by the
Company against delivery to you for the respective accounts of the several
Underwriters of the Securities with any transfer taxes thereon duly paid by the
Company. The Securities shall be issued in book-entry form through the
facilities of the Depository Trust Company ("DTC"). The Company shall deposit
the global certificate representing the Securities with DTC or its designated
custodian at the Closing Date, and the Company will deliver such global
certificate to the several underwriters by causing DTC to credit the Securities
to the respective accounts of the Underwriters with DTC.
SECTION 5. Agreements of the Company and the Guarantors. The Company
and the Guarantors agree with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, (iii) when
any amendment to the Registration Statement becomes effective, (iv) if the
Company and the Guarantors are required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, when the Rule 462(b)
Registration Statement has become effective and (v) of the happening of any
event during the period referred to in Section 5(d) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
and the Guarantors will use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish to you, without charge, four signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits and documents incorporated therein by reference,
and to furnish to you and each Underwriter designated by you such number of
conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits but including all documents incorporated
therein by reference, as you may reasonably request.
3
<PAGE> 4
(c) To prepare the Prospectus in a form approved by you and to file
the Prospectus in such form with the Commission within the applicable period
specified in Rule 424(b) under the Act; not to file any further amendment to
the Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and to prepare and file with
the Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or amendment or supplement to the Prospectus which may
be necessary or advisable in connection with the distribution of the Securities
by you, and to use its best efforts to cause any such amendment to the
Registration Statement to become promptly effective.
(d) Prior to 10:00 a.m., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur as a result of which, in the opinion of counsel for the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements of material facts therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus so that the statements of material facts in the
Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with applicable law, and to furnish to each Underwriter and to such
dealers as you shall specify, such number of copies thereof as such Underwriter
or dealers may reasonably request.
(f) Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Securities for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such qualification in effect so
long as required for distribution of the Securities and to file such consents
to service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that neither the Company
nor any Guarantor
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<PAGE> 5
shall be required to qualify as a foreign corporation in any jurisdiction in
which it is not already required to be so qualified or to take any action that
would subject it to general consent to service of process in any jurisdiction
in which it is not now so subject.
(g) To mail and make generally available to its security holders as
soon as practicable an earnings statement covering the twelve-month period
ending June 30, 1998 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) So long as the Securities are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Securities a financial report of the Company, the
Guarantors and their respective subsidiaries on a consolidated basis (and a
similar financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and for the
preceding year, certified by independent certified public accountants and (ii)
to mail and make generally available as soon as practicable after the end of
each quarterly period (except for the last quarterly period of each fiscal
year) to such holders, a consolidated balance sheet, a consolidated statement
of operations and a consolidated statement of cash flows (and similar financial
reports of all unconsolidated subsidiaries, if any) as of the end of and for
such period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(i) So long as the Securities are outstanding, to furnish to you as
soon as available copies of all reports or other communications furnished to
its security holders or furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the Company or
any Guarantor is listed and such other publicly available information
concerning the Company, the Guarantors and their respective subsidiaries as you
may reasonably request.
(j) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel
and the Company's accountants in connection with the registration and delivery
of the Securities under the Act and all other fees or expenses in connection
with the preparation, printing, filing and distribution of the Registration
Statement (including financial statements and exhibits), any preliminary
prospectus, the
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<PAGE> 6
Prospectus and all amendments and supplements to any of the foregoing prior to
or during the period specified in Section 5(d), including the mailing and
delivering of copies thereof to the Underwriters and dealers in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Underwriters, including any transfer or other
taxes payable thereon, (iii) all costs of printing or producing this Agreement
and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Securities, (iv) the costs and charges of any
transfer agent, registrar and/or depositary (including the Depository Trust
Company), (v) the filing fees for the Underwriters in connection with the
review and clearance of the offering of the Securities by the National
Association of Securities Dealers, Inc., (vi) any fees charged by rating
agencies for the rating of the Securities, (vii) the costs of printing
certificates representing the Securities, if any, (viii) the fees of the QIU
specified in Section 2 and (ix) and all other costs and expenses incident to
the performance of the obligations of the Company and the Guarantors hereunder
for which provision is not otherwise made in this Section.
(k) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
Guarantor or any warrants, rights or options to purchase or otherwise acquire
debt securities of the Company or any Guarantor substantially similar to the
Securities (other than (i) the Securities and (ii) commercial paper issued in
the ordinary course of business), without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation.
(l) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company and the
Guarantors prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Securities.
(m) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Securities, to file a Rule 462(b)
Registration Statement with the Commission registering the Securities not so
covered in compliance with Rule 462(b) by 10:00 p.m., New York City time, on
the date of this Agreement and to pay to the Commission the filing fee for such
Rule 462(b) Registration Statement at the time of the filing thereof or to give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Act.
SECTION 6. Representations and Warranties of the Company and the
Guarantors. The Company and the Guarantors, jointly and severally, represent
and warrant to each Underwriter that:
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<PAGE> 7
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company and the
Guarantors after the effectiveness of this Agreement); any Rule 462(b)
Registration Statement filed after the effectiveness of this Agreement will
become effective no later than 10:00 p.m., New York City time, on the date of
this Agreement; and no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for such purpose are
pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act; (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement to be
filed by the Company and the Guarantors after the effectiveness of this
Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, the (iii) Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company and the
Guarantors after the effectiveness of this Agreement) and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all material
respects with the Act, (iv) if the Company and the Guarantors are required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, such Rule 462(b) Registration Statement and any amendments thereto,
when they become effective (A) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (B) will comply in
all material respects with the Act and (v) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company or any Guarantor in writing by such Underwriter
through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this
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<PAGE> 8
paragraph do not apply to statements or omissions in any preliminary prospectus
based upon information relating to any Underwriter furnished to the Company or
any Guarantor in writing by such Underwriter through you expressly for use
therein.
(d) Each of the Company, the Guarantors and their respective
subsidiaries has been duly formed or incorporated, is validly existing in good
standing under the laws of its jurisdiction of formation or incorporation and
has the corporate or limited liability company power and authority to carry on
its business as described in the Prospectus and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
entity authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company, the Guarantors and their
respective subsidiaries, taken as a whole (A "MATERIAL ADVERSE EFFECT").
(e) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable.
(f) All of the outstanding shares of capital stock or other equity
interests of each of the Guarantors and the other subsidiaries of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable, and, except for INDRILLERS, L.L.C. which is a 65%-owned
subsidiary of the Company, are owned by the Company or a subsidiary, as
applicable, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature, other than such as may arise out of or in
connection with the Bank Credit Facility) (as defined in the Prospectus) and
would not have a Material Adverse Effect.
(g) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended (THE "TRUST INDENTURE ACT"), and has been duly
authorized, executed and delivered by the Company and the Guarantors and is a
valid and binding agreement of the Company and the Guarantors, enforceable in
accordance with its terms except as (A) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, moratorium or similar
laws, now or hereafter in effect, relating to or affecting creditors' rights
generally and (B) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such rights and remedies are sought to be enforced at
law or in equity).
(h) The Securities have been duly authorized by all necessary
corporate action on the part of the Company and Guarantors and, when executed
and
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<PAGE> 9
authenticated in accordance with the provisions of the Indenture and delivered
to and paid for by the Underwriters in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company and the Guarantors, enforceable in
accordance with their terms except as (A) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, moratorium or similar
laws, now or hereafter in effect, relating to or affecting creditors' rights
generally and (B) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such rights and remedies are sought to be enforced at
law or in equity).
(i) The Securities conform, in all material respects, as to legal
matters to the description thereof contained in the Prospectus.
(j) None of the Company, the Guarantors or any of their respective
subsidiaries is in violation of its respective charter or by-laws or in default
in the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that, the violation or default of which would have a Material
Adverse Effect, to which the Company, the Guarantors or any of their respective
subsidiaries is a party or by which the Company, the Guarantors or any of their
respective subsidiaries or their respective property is bound.
(k) The execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Company and the Guarantors, compliance by
the Company and the Guarantors with all the provisions hereof and thereof and
the consummation of the transactions contemplated hereby and thereby will not
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as
may be required under the securities or Blue Sky laws of the various states)
and will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company, the
Guarantors or any of their respective subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which the
Company, the Guarantors or any of their respective subsidiaries is a party or
by which the Company, the Guarantors or any of their respective subsidiaries or
their respective property is bound, except for any such matters of
non-compliance, conflict, breaches or defaults that would not have a Material
Adverse Effect or violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company, the Guarantors, any of their
respective subsidiaries or their respective property, except for such
violations or conflicts, if any, as would not have a Material Adverse Effect.
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<PAGE> 10
(l) There are no legal or governmental proceedings pending, or
threatened, to which the Company, the Guarantors or any of their respective
subsidiaries is, or could be a party, or to which any of their respective
property is, or could be subject, that are required to be described in the
Registration Statement or the Prospectus and are not so described; nor are
there any statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not so described or filed as
required.
(m) None of the Company, the Guarantors or any of their respective
subsidiaries has violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS") or any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder, except for such violations which, singly or
in the aggregate, would not have a Material Adverse Effect.
(n) Each of the Company, the Guarantors and their respective
subsidiaries has such permits, licenses, franchises and authorizations of
governmental or regulatory authorities ("PERMITS"), including, without
limitation, under any applicable Environmental Laws, as are necessary to own,
lease and operate its respective properties and to conduct its business and is
in compliance with all terms and conditions thereof; and no event has occurred
which allows or, after notice or lapse of time or both, would allow, revocation
or termination of such permits or results or, after notice or lapse of time or
both, would result in any other impairment of the rights of the holder of any
such permit; and such permits contain no restrictions that are burdensome to
the Company, the Guarantors or any of their respective subsidiaries; except
where such failure to have, or comply with the terms or conditions of, such
permits, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) that would, singly
or in the aggregate, have a Material Adverse Effect.
(p) This Agreement has been duly authorized by all necessary corporate
action, executed and delivered by the Company and the Guarantors.
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(q) KPMG Peat Marwick LLP are, and for the years ended December 31,
1994 and 1995, Deloitte & Touche LLP were, independent public accountants with
respect to the Company, the Guarantors and their respective subsidiaries as
required by the Act.
(r) The consolidated financial statements, together with related
schedules and notes forming part of the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company, the Guarantors and their respective subsidiaries on
the basis stated in the Registration Statement at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; and the other financial and statistical
information and data set forth in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) is, in all material respects,
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company.
(s) Neither the Company nor any of the Guarantors is not and, after
giving effect to the offering and sale of the Securities and the application of
the proceeds thereof as described in the Prospectus, will not be, an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
(t) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
include such securities with the Securities registered pursuant to the
Registration Statement.
(u) Since the date of the most recent balance sheet included in the
Prospectus, other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there has not occurred any change having a Material Adverse Effect or any
development that could reasonably be expected to have a Material Adverse
Effect, (ii) there has not been any material adverse change or any development
that could reasonably be expected to have a prospective material adverse change
in the capital stock or in the long-term debt of the Company, the Guarantors or
any of their respective subsidiaries and (iii) none of Company, the Guarantors
or any of its subsidiaries has incurred any material liability or obligation,
direct or contingent.
(v) The Company and the Guarantors have complied with all provisions
of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
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(w) The Company, the Guarantors and their respective subsidiaries have
good and indefeasible title in fee simple to all real property and good and
indefeasible title to all personal property owned by them which is material to
the business of the Company and its subsidiaries, in each case free and clear
of all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries; and any real property and building held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
building by the Company and its subsidiaries, in each case except as described
in the Prospectus.
(x) The Company, the Guarantors and each of their respective
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amount as are prudent and customary
in the businesses in which they are engaged; and none of the Company, the
Guarantors or any of their respective subsidiaries has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires to obtain similar coverage from similar insurers at a
cost that would not have a Material Adverse Effect.
(y) The pro forma financial statements of the Company and its
subsidiaries and the related notes thereto set forth in the Registration
Statement and the Prospectus present fairly the information shown therein, have
been prepared in accordance with the applicable requirements of Rule 11-02 of
Regulation S-X promulgated by the Commission and have been compiled on the pro
forma basis described therein; and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
SECTION 7. Indemnification. (a)(i) Each of the Company and the
Guarantors, jointly and severally, agrees to indemnify and hold harmless each
Underwriter, its directors, its officers and each person, if any, who controls
any Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with defending or investigating any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto) or
any preliminary
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prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished in writing to the Company and the Guarantors by such
Underwriter through you expressly for use therein and (ii) each of the Company
and the Guarantors, jointly and severally, agrees to indemnify and hold
harmless the QIU, its directors, its officers and each person, if any, who
controls the QIU within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act (A "QIU INDEMNIFIED PARTY"), from and against any and all
losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with defending
or investigating any matter, including any action, that could give rise to any
such losses, claims, damages, liabilities or judgments) related to, based upon
or arising out of (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) the QIU's activities as QIU under its engagement
pursuant to Section 2 hereof, except in the case of this clause (ii) insofar as
any such losses, claims, damages, liabilities or judgments are found in a final
judgment by a court of competent jurisdiction, not subject to further appeal,
to have resulted solely from the willful misconduct or gross negligence of the
QIU.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Guarantors and their respective directors
and officers who sign the Registration Statement and any person controlling the
Company or any Guarantor within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, to the same extent as the foregoing indemnity from the
Company and the Guarantors to such Underwriter but only with reference to
information relating to such Underwriter furnished in writing to the Company by
such Underwriter through you expressly for use in the Registration Statement
(or any amendment thereto), the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified
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<PAGE> 14
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 7(a) and 7(b), the Underwriter shall not be
required to assume the defense of such action pursuant to this Section 7(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of such Underwriter). Any indemnified party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by counsel selected by the indemnifying party that
there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and that, as a
matter of professional responsibility, such counsel is unable to represent both
the indemnifying and indemnified party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation, in the case of parties indemnified pursuant to
Section 7(a), and by the Company, in the case of parties indemnified pursuant
to Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action only if
such settlement is (i) effected with its written consent or (ii) effected in
good faith without its written consent if the settlement is entered into more
than 30 days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel
(in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request unless within
30 days after such reimbursement request is received, the indemnifying party
shall have made a good faith written challenge to the reasonableness of the
amount or nature of the reimbursement requested or the sufficiency of the
documentation supporting the reimbursement requested (which challenge shall set
forth the amount or nature of the requested reimbursement
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<PAGE> 15
which the indemnifying party in good faith believes to be reasonable or the
basis for the good faith claim as to the insufficiency of any supporting
documentation), in which event this clause (ii) shall apply only if, and to the
extent that, such indemnifying party shall not have reimbursed the indemnified
party for the amount which is not being so challenged. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 7
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors on the one hand and the Underwriters on the other
hand from the offering of the Securities or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company and the Guarantors and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Guarantors and the Underwriters shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Guarantors, and the total
underwriting discounts and commissions received by the Underwriters, bear to
the total price to the public of the Securities, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault of the
Company and the Guarantors and the Underwriters 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 and the Guarantors
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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The Company, the Guarantors and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter that
could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective
principal amount of Securities purchased by each of the Underwriters hereunder
and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party, including, without limitation, any QIU Indemnified Party, at
law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Securities under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
16
<PAGE> 17
(c) On or after the date hereof there shall not have occurred any
downgrading, nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not indicate the
direction of the possible change, in the rating of any of the Company's
securities (including, without limitation, the placing of any securities on
negative or developing watch or negative or developing outlook) by any
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act.
(d) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Thomas P. Richards and T. Scott O'Keefe, in their
capacities as the Chief Executive Officer and Chief Financial Officer,
respectively, of each of the Company and the Guarantors, confirming the matters
set forth in Sections 8(a), 8(b) and 8(c).
(e) Since the date of the most recent balance sheet in the Prospectus
other than as set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), (i) there shall
not have occurred any change having a Material Adverse Effect or any
development that could reasonably be expected to have a Material Adverse
Effect, (ii) there shall not have been any material adverse change or any
development involving a prospective material adverse change in the capital
stock or in the long-term debt of the Company, the Guarantors or any of their
respective subsidiaries and (iii) none of the Company, the Guarantors or any of
its subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(e)(i),
(ii) or (iii), in your judgment, is material and adverse and, in your judgment,
makes it impractical to market the Securities on the terms and in the manner
contemplated by the Prospectus.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Porter & Hedges L.L.P., counsel for the Company and the Guarantors in
substantially the form set forth in Schedule II.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the
Underwriters, as to certain matters agreed between you and such counsel.
(h) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from KPMG Peat Marwick LLP
and Deloitte & Touche LLP, independent public accountants, containing the
17
<PAGE> 18
information and statements of the type ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus.
(i) The Securities are rated "B+" by Standard & Poor's Corporation and
"B1" by Moody's Investors Service, Inc.
(j) The Company or any Guarantor shall not have failed at or prior to
the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or any
Guarantor at or prior to the Closing Date.
(k) You shall have received an opinion of Venezuelan counsel to the
Company substantially in the form attached as Schedule III hereto.
(l) All conditions precedent to the closing of the Grey Wolf
Acquisition (as defined in the Prospectus) shall have been satisfied or waived,
except for the payment of the purchase price by the Company, which shall be
paid contemporaneously with the Closing.
SECTION 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company and the Guarantors if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions
or in the financial markets of the United States or elsewhere that, in your
judgment, is material and adverse and would, in your judgment, make it
impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus, (ii) the suspension or material limitation of
trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities on any such exchange or the Nasdaq National
Market, (iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the
Company, the Guarantors and their respective subsidiaries, taken
18
<PAGE> 19
as a whole, (v) the declaration of a banking moratorium by either federal or
New York State authorities or (vi) the taking of any action by any federal,
state or local government or agency in respect of its monetary or fiscal
affairs which in your opinion has a material adverse effect on the financial
markets in the United States and would, in your opinion, make it impracticable
or inadvisable to market the Securities.
If on the Closing Date any one or more of the Underwriters shall fail
or refuse to purchase the Securities which it or they have agreed to purchase
hereunder on such date and the aggregate principal amount of Securities which
such defaulting Underwriter or Underwriters, as the case may be, agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date by all
Underwriters, each non-defaulting Underwriter shall be obligated severally, in
the proportion which the principal amount of Securities set forth opposite its
name in Schedule I bears to the aggregate principal amount of Securities which
all the non-defaulting Underwriters, as the case may be, have agreed to
purchase, or in such other proportion as you may specify, to purchase the
Securities which such defaulting Underwriter or Underwriters, as the case may
be, agreed but failed or refused to purchase on such date; provided that in no
event shall the aggregate principal amount of Securities which any Underwriter
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
Securities without the written consent of such Underwriter. If on the Closing
Date any Underwriter or Underwriters shall fail or refuse to purchase
Securities and the aggregate principal amount of Securities with respect to
which such default occurs is more than one-tenth of the aggregate principal
amount of Securities to be purchased by all Underwriters and arrangements
satisfactory to you and the Company for purchase of such Securities are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter and the Company. In any
such case which does not result in termination of this Agreement, either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
SECTION 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company to, or the
Guarantors c/o, DI Industries, Inc., 10370 Richmond Avenue, Suite 600, Houston,
Texas 77042, Attn: Chief Financial Officer, and (ii) if to any Underwriter or
to you, to you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park
19
<PAGE> 20
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors and the several
Underwriters set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and
payment for the Securities, regardless of (i) any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter, any QIU
Indemnified Party, the officers or directors of any Underwriter, any person
controlling any Underwriter, the Company, the Guarantors, the officers or
directors of the Company and the Guarantors or any person controlling the
Company and the Guarantors, (ii) acceptance of the Securities and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Securities are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 9), the Company agrees to reimburse the
several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Guarantors, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, QIU Indemnified Parties, the directors
and officers of the Company and the Guarantors who sign the Registration
Statement and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include a purchaser of any of the Securities from any of the several
Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
20
<PAGE> 21
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Guarantors, the several Underwriters and the QIU.
Very truly yours,
DI INDUSTRIES, INC.
By: /s/ T. P. Richards
----------------------------------
Name: Thomas P. Richards
-------------------------------
Title: President and Chief
-------------------------------
Executive Officer
-------------------------------
DRILLERS, INC.
By: /s/ T. P. Richards
----------------------------------
Name: Thomas P. Richards
-------------------------------
Title: President and
-------------------------------
Chief Executive Officer
-------------------------------
DI INTERNATIONAL, INC.
By: /s/ T. P. Richards
----------------------------------
Name: Thomas P. Richards
-------------------------------
Title: President and
------------------------------
Chief Executive Officer
------------------------------
DI ENERGY, INC.
By: /s/ T. P. Richards
----------------------------------
Name: Thomas P. Richards
-------------------------------
Title: President and
-------------------------------
Chief Executive Officer
-------------------------------
Signature Page - 1
<PAGE> 22
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT SECURITIES CORPORATION
ING BARING (U.S.) SECURITIES, INC.
as Underwriters
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Craig Klaasmeyer
-----------------------------
Name: Craig Klaasmeyer
----------------------------
Title: Vice President
----------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Qualified Independent Underwriter
By: /s/ Craig Klaasmeyer
------------------------------
Name: Craig Klaasmeyer
-----------------------------
Title: Vice President
-----------------------------
Signature Page - 2
<PAGE> 23
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities
Underwriters to be Purchased
- ------------ ---------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation $105,000,000
BT Securities Corporation 52,500,000
ING Baring (U.S.) Securities, Inc. 17,500,000
------------
Total $175,000,000
============
</TABLE>
<PAGE> 1
EXHIBIT 4.2
================================================================================
DI INDUSTRIES, INC.
AND
GUARANTORS
$175,000,000
8-7/8% Senior Notes due 2007
________________________
INDENTURE
Dated as of June 27, 1997
________________________
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE
Reconciliation and tie between The Trust Indenture Act as amended, and The
Indenture dated as of June 27,1997.
TIA Indenture
Section Section
------- -------
310(a)(1) . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . 7.08; 7.10
(c) . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . 2.07
(b) . . . . . . . . . . . . . . . . 12.06
(c) . . . . . . . . . . . . . . . . 12.06
313(a) . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . 7.06, 12.05
(d) . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . 4.02; 4.20;
12.05
(b) . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . 12.01, 12.02
(c)(2) . . . . . . . . . . . . . . . . 12.01; 12.02
(c)(3) . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . 12.01; 12.02
(f) . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . 4.20; 7.05; 12.02
(c) . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . 10.05
317(a)(1) . . . . . . . . . . . . . . . . 6.03; 6.08
(a)(2) . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . 12.04
1
<PAGE> 3
N.A. Means Not Applicable.
- --------------------------------
Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.
2
<PAGE> 4
TABLE OF CONTENTS
Page
----
ARTICLE 1 Definitions and Incorporation by Reference . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act . . 21
SECTION 1.03 Rules of Construction . . . . . . . . . . . . . . . . 21
ARTICLE 2 The Securities . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . 22
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . 23
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . 23
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . 24
SECTION 2.05. Global Securities . . . . . . . . . . . . . . . . . . 24
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . 24
SECTION 2.07. Holder Lists . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.08. Replacement Securities . . . . . . . . . . . . . . . . 24
SECTION 2.09. Outstanding Securities . . . . . . . . . . . . . . . . 24
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . 24
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.12. Payment of Interest: Interest Rights Preserved . . . . 24
SECTION 2.13. Authorized Denominations . . . . . . . . . . . . . . . 24
SECTION 2.14. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 3 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . 24
SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . . 24
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . 24
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . 24
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . 24
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . 24
SECTION 3.07. Optional Redemption . . . . . . . . . . . . . . . . . 24
ARTICLE 4 Cpvenants . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.01. Payments of Securities . . . . . . . . . . . . . . . . 24
SECTION 4.02. Commission Reports . . . . . . . . . . . . . . . . . . 24
SECTION 4.03. Limitation on Indebtedness . . . . . .. . . . . . . . 24
SECTION 4.04. Limitation on Subsidiary Indebtedness and
Preferred Stock . . . . . . . . . . . . . . . . . . 24
SECTION 4.05. Limitation on Restricted Payments. . . . . . . . . . . 24
SECTION 4.06. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries . . . . . . . . 24
i
<PAGE> 5
SECTION 4.07. Limitation on Asset Sales . . . . . . . . . . . . . . 24
SECTION 4.08. Limitation on Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.09. Change of Control . . . . . . . . . . . . . . . . . . 24
SECTION 4.10. Limitation on Liens 24
SECTION 4.11. Limitation on Guarantees by Guarantors . . . . . . . 24
SECTION 4.12. Unrestricted Subsidiaries . . . . . . . . . . . . . . 24
SECTION 4.13. Limitation on Sale and Lease-Back Transactions. . . . 24
SECTION 4.14. Limitation on Line of Business . . . . . . . . . . . 24
SECTION 4.15. Maintenance of Office or Agency . . . . . . . . . . . 24
SECTION 4.16. Money for the Security Payments to be Held in Trust . 24
SECTION 4.17. Corporate Existence . . . . . . . . . . . . . . . . . 24
SECTION 4.18. Maintenance of Property . . . . . . . . . . . . . . . 24
SECTION 4.19. Payment of Taxes and Other Claims . . . . . . . . . . 24
SECTION 4.20. Compliance Certificate; Notice of Default
or Event of Default . . . . . . . . . . . . . . . . 24
SECTION 4.21. Further Instruments and Acts . . . . . . . . . . . . 24
SECTION 4.22. Prohibition on Company and Guarantors
Becoming Investment Companies . . . . . . . . . . . 24
SECTION 4.23. Stay, Extension and Usury Laws . . . . . . . . . . . 24
ARTICLE 5 Consolidation, Merger, Conveyance, Lease or Transfer . . . . 24
SECTION 5.01. Consolidation, Merger, Conveyance, Lease
or Transfer . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.02. Officers Certificate and Opinion of Counsel . . . . . 24
SECTION 5.03. Substitution of Surviving Entity . . . . . . . . . . 24
ARTICLE 6 Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . 24
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . 24
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . 24
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . 24
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . 24
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . 24
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . 24
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . 24
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . 24
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . 24
SECTION 6.13. Rights and Remedies Cumulative . . . . . . . . . . . 24
SECTION 6.14. Delay or Omission Not Waiver . . . . . . . . . . . . 24
ARTICLE 7 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . 24
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . 24
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . 24
ii
<PAGE> 6
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . 24
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . 24
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . 24
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . 24
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . 24
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . 24
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . 24
SECTION 7.11. Preferential Collection of Claims . . . . . . . . . .
Against Company . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8 Satisfaction and Discharge. . . . . . . . . . . . . . . . . . . 24
SECTION 8.01. Satisfaction and Discharge . . . . . . . . . . . . . 24
SECTION 8.02. Application of Trust Money . . . . . . . . . . . . . 24
SECTION 8.03. Repayment to the Company. . . . . . . . . . . . . . . 24
SECTION 8.04. Reinstatement . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 9 Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.01. Company s Option to Effect Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . 24
SECTION 9.02. Defeasance and Discharge. . . . . . . . . . . . . . . 24
SECTION 9.03. Covenant Defeasance . . . . . . . . . . . . . . . . . 24
SECTION 9.04. Conditions to Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.05. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Miscellaneous Provisions . . . . . . . . . . . . . . 24
SECTION 9.06. Repayment to Company. . . . . . . . . . . . . . . . . 24
SECTION 9.07. Reinstatement . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 10 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10.01. Without Consent of Holders. . . . . . . . . . . . . . 24
SECTION 10.02. With Consent of Holders . . . . . . . . . . . . . . . 24
SECTION 10.03. Effect of Supplemental Indentures . . . . . . . . . . 24
SECTION 10.04. Compliance with Trust Indenture Act . . . . . . . . . 24
SECTION 10.05. Revocation and Effect of Consents and
Waivers . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10.06. Notation on or Exchange of Securities . . . . . . . . 24
SECTION 10.07. Trustee To Execute Supplemental Indentures . . . . . 24
SECTION 10.08. Payment for Consent . . . . . . . . . . . . . . . . . 24
ARTICLE 11 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.01. Guarantees . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.02. Limitation on Liability . . . . . . . . . . . . . . . 24
SECTION 11.03. Execution and Delivery of Guarantees . . . . . . . . 24
SECTION 11.04. When a Guarantor May Merge, etc. . . . . . . . . . . 24
SECTION 11.05. No Waiver . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.06. Modification . . . . . . . . . . . . . . . . . . . . 24
SECTION 11.07. Release of Guarantor . . . . . . . . . . . . . . . . 24
iii
<PAGE> 7
SECTION 11.08 Execution of Supplemental Indenture for Future
Guarantors . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 12.01. Compliance Certificates and Opinions . . . . . . . . . 24
SECTION 12.02. Form of Documents Delivered to Trustee . . . . . . . . 24
SECTION 12.03. Acts of Holders . . . . . . . . . . . . . . . . . . . 24
SECTION 12.04. Trust Indenture Act Controls . . . . . . . . . . . . . 24
SECTION 12.05. Notices . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 12.06. Communication by Holders with Other Holders. . . . . . 24
SECTION 12.07. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 12.08. Payments on Business Days . . . . . . . . . . . . . . 24
SECTION 12.09. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 24
SECTION 12.10. No Recourse Against Others . . . . . . . . . . . . . . 24
SECTION 12.11. Submission to Jurisdiction; Appointment of Agent
for Service of Process; Waiver of Immunities . . . . . 24
SECTION 12.12. Successors . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 12.13. Multiple Originals . . . . . . . . . . . . . . . . . . 24
SECTION 12.14. Table of Contents; Headings . . . . . . . . . . . . . 24
EXHIBIT A Form of Global Security
EXHIBIT B Form of Certificated Security
EXHIBIT C Form of Supplemental Indenture
Schedule 1.01(a) Indebtedness Existing on the Issue Date
Schedule 1.01(b) Investments Existing on the Issue Date
Schedule 1.01(c) Liens Existing on the Issue Date
Schedule 4.04 Subsidiary Indebtedness and Preferred Stock Existing
on the Issue Date
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INDENTURE dated as of June 27, 1997, among DI Industries, Inc., a
Texas corporation (the "Company"), certain of the Company's subsidiaries
signatory hereto (each, a "Guarantor", collectively, the "Guarantors") and
Texas Commerce Bank National Association, a national banking association, as
trustee (the "Trustee").
The Company, each Guarantor, jointly and severally, and the Trustee
agree as follows for the benefit of the other parties and for the equal and
ratable benefit of the Holders of the Company's 8-7/8% Senior Notes Due 2007
(the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a subsidiary of such specified
Person, but excluding Indebtedness which is extinguished, retired or repaid
in connection with such other Person merging with or into or becoming a
subsidiary of such specified Person.
"Act", when used with respect to any Holder, has the meaning set forth
in Section 12.03.
"Adjusted Net Assets" of a Guarantor at any date means the amount by
which the fair value of the assets and Property of such Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
its Guarantee, of such Guarantor at such date.
"Affiliate" of any specified Person means another Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies
of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control.
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"Agent Member" has the meaning specified in Section 2.05(a).
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease or other disposition (including, without limitation, by
way of merger or consolidation or by means of a Sale and Lease-Back
Transaction) by the Company or any Subsidiary to any Person other than the
Company, a Guarantor or a Wholly Owned Subsidiary, in one transaction, or a
series of related transactions, of (i) any Capital Stock of any Subsidiary
(except for directors' qualifying shares or certain minority interests
sold to other Persons solely due to local law requirements that there be
more than one stockholder, but which are not in excess of what is required
for such purpose), or (ii) any other Property or assets of the Company or
any Subsidiary, other than (A) sales of drill-string components and obsolete
or worn out equipment in the ordinary course of business or other assets
that, in the Company's reasonable judgment, are no longer used or useful
in the conduct of the business of the Company and its Subsidiaries), (B)
any drilling contract, charter or other lease of Property or other assets
entered into by the Company or any Subsidiary in the ordinary course of
business, other than any Bargain Purchase Contract, (C) a Restricted
Payment or Restricted Investment permitted under the provisions of
Section 4.05 of this Indenture, (D) a Change of Control, (E) a
consolidation, merger, continuance or the disposition of all or
substantially all of the assets of the Company and the Subsidiaries,
taken as a whole, in compliance with the provisions of Section 5.01 of
this Indenture, (F) any trade or exchange by the Company or any Subsidiary
of one or more drilling rigs for one or more other drilling rigs of like
kind owned or held by another Person, provided that (x) the Fair Value of
the rig or rigs traded or exchanged by the Company or such Subsidiary
(including cash or cash equivalents to be delivered by the Company or such
Subsidiary) is reasonably equivalent to the Fair Value of the drilling rig
or rigs (together with cash or cash equivalents to be received by the
Company or such Subsidiary) or other assets as determined by written
appraisal by a nationally (or industry) recognized investment banking firm
or appraisal firm and (y) such exchange is approved by a majority of the
disinterested directors of the Company. An Asset Sale shall include the
requisition of title to, seizure of or forfeiture of any Property or
assets, or any actual or constructive total loss or an agreed or compromised
total loss of any Property or assets.
"Asset Sale Offer" has the meaning specified in Section 4.07(b).
"Asset Sale Offer Purchase Date" has the meaning specified in
Section 4.07(c).
"Asset Sale Offer Purchase Price" has the meaning specified in
Section 4.07(b).
"Attributable Indebtedness" in respect of a Sale and Lease-Back
Transaction means, at any date of determination, the present value
(discounted at the interest rate borne by the Securities, compounded
annually) of the total obligations of the lessee for rental payments during
the remaining term of the lease (or to the first date on which the
lessee is permitted to terminate such lease without the payment of a
penalty) included in such Sale and Lease-Back Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of any date, with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of
(x) the number of years from such date to
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<PAGE> 10
the date of each scheduled principal payment (including any sinking fund
or mandatory redemption payment requirements) of such debt security
multiplied in each case by (y) the amount of such principal payment by
(ii) the sum of all such principal payments.
"Bank Credit Facility" means the $50,000,000 Amended and
Restated Senior Secured Revolving Credit Agreement dated December 31,
1996, as amended and restated as of April 30, 1997, among the Company
and Drillers, Inc., as co-borrowers, DI International, Inc., as
guarantor, the lending institutions party thereto, Bankers Trust Company,
as agent and administrative agent, and ING (US) Capital Corporation, as co-
agent and documentation agent, as from time to time amended.
"Bargain Purchase Contract" means a drilling contract, charter or
lease that provides for acquisition of Property by the other party to such
agreement during or at the end of the term thereof for less than Fair
Market Value thereof at the time such right to acquire such Property is
granted.
"Board of Directors" means the Board of Directors of the Company or
any Subsidiary, as applicable, or any committee thereof duly authorized to
act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or any Subsidiary, as
applicable, to have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions are authorized or
obligated by law or executive order or regulation to close in The City of
New York and Houston, Texas and, with respect to any payment of cash or
delivery of securities, the place of such payment or delivery.
"Capital Lease Obligation" means, at any time as to any Person with
respect to any Property leased by such Person as lessee, the amount of the
liability with respect to such lease that would be required at such time to
be capitalized and accounted for as a capital lease on the balance sheet of
such Person prepared in accordance with GAAP.
"Capital Stock" in any Person means any and all shares,
interests, partnership interests, participations or other equivalents in
the equity interest (however designated) in such Person and any rights
(other than debt securities convertible into an equity interest), warrants
or options to acquire any equity interest in such Person.
"Cash Proceeds" means, with respect to any Asset Sale by any
Person, the aggregate consideration received for such Asset Sale by such
Person in the form of cash or cash equivalents (including any amounts of
insurance or other proceeds received in connection with an Asset Sale of
the type described in the last sentence of the definition thereof),
including payments in respect of deferred payment obligations when
received in the form of cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to such Person or any
subsidiary thereof).
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"Certificated Security" has the meaning specified in Section
2.01(b).
"Change of Control" means (i) a determination by the Company that
any Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the
Exchange Act) has become the direct or beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of more than 50% of the Voting Stock of
the Company other than Permitted Holders; (ii) the Company is merged with or
into or consolidated with another corporation and, immediately after
giving effect to the merger or consolidation, less than 50% of the
outstanding voting securities entitled to vote generally in the election
of directors or persons who serve similar functions of the surviving or
resulting entity are then beneficially owned (within the meaning of Rule
13d-3 of the Exchange Act) in the aggregate by (x) the stockholders
of the Company immediately prior to such merger or consolidation, or
(y) if the record date has been set to determine the stockholders of the
Company entitled to vote on such merger or consolidation, the stockholders
of the Company as of such a record date; (iii) the Company, either
individually or in conjunction with one or more Subsidiaries, sells,
conveys, transfers or leases, or the Subsidiaries sell, convey, transfer
or lease, all or substantially all of the assets of the Company or the
Company and the Subsidiaries, taken as a whole (either in one
transaction or a series of related transactions), including Capital Stock of
the Subsidiaries, to any Person (other than a Wholly Owned Subsidiary); (iv)
the liquidation or dissolution of the Company; or (v) the first day on
which a majority of the individuals who constitute the Board of Directors of
the Company are not Continuing Directors.
"Change of Control Offer" has the meaning specified in
Section 4.09(a).
"Change of Control Payment Date" has the meaning specified in
Section 4.09(b)(ii).
"Change of Control Purchase Price" has the meaning specified in
Section 4.09(a).
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange
Act, or if at any time after the execution of this instrument, such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at such
time.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Consolidated Interest Coverage Ratio" means as of the date of the
transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio (the "Transaction Date"), the ratio of (i) the
aggregate amount of EBITDA of the Company and its consolidated Subsidiaries
for the four fiscal quarters for which financial information in respect
thereof is available immediately prior to the applicable Transaction
Date (the "Determination Period") to (ii) the aggregate Consolidated
Interest Expense of the Company and its consolidated Subsidiaries that is
anticipated to accrue during a period consisting of the fiscal quarter in
which the Transaction Date occurs and the three fiscal quarters
immediately subsequent thereto (based upon the pro forma amount and
maturity of, and interest payments in respect of,
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<PAGE> 12
Indebtedness of the Company and its consolidated Subsidiaries expected by
the Company to be outstanding on the Transaction Date), assuming for the
purposes of this measurement the continuation of market interest rates
prevailing on the Transaction Date and base interest rates in respect
of floating interest rate obligations equal to the base interest rates
on such obligations in effect as of the Transaction Date, provided that
if the Company or any of its consolidated Subsidiaries is a party to
any Interest Swap Obligation that would have the effect of changing the
interest rate on any Indebtedness of the Company or any of its consolidated
Subsidiaries for such four-quarter period (or a portion thereof), the
resulting rate shall be used for such four-quarter period or portion
thereof; provided, further, that any Consolidated Interest Expense of the
Company with respect to Indebtedness incurred or retired by the Company or
any of its Subsidiaries during the fiscal quarter in which the Transaction
Date occurs shall be calculated as if such debt was incurred or retired on
the first day of the fiscal quarter in which the Transaction Date occurs;
provided, further, that if the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio would have the effect of
increasing or decreasing EBITDA in the future and if such increase or
decrease is readily quantifiable and is attributable to such transaction,
EBITDA shall be calculated on a pro forma basis as if such transaction had
occurred on the first day of the four fiscal quarters referred to in clause
(i) of this definition, and if, during the same four fiscal quarters, (x)
the Company or any of its consolidated Subsidiaries shall have engaged in
any Asset Sale, EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive), or increased by an amount equal to the
EBITDA (if negative), directly attributable to the assets which are the
subject of such Asset Sale for such period calculated on a pro forma basis
as if such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period or (y) after the Issue Date, the
Company or any of its consolidated Subsidiaries shall have acquired any
material assets other than in the ordinary course of business, EBITDA
and Consolidated Interest Expense shall be calculated on a pro forma basis
as if such acquisition had occurred on the first day of such period.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication (A) the sum of (i) the aggregate amount
of cash and noncash interest expense (including capitalized interest) of
such Person and its subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP in respect of Indebtedness
(including, without limitation, (v) any amortization of debt discount, (w)
net costs associated with Interest Swap Obligations (including any
amortization of discounts), (x) the interest portion of any deferred
payment obligation calculated in accordance with the effective interest
method, (y) all accrued interest and (z) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bankers
acceptances or similar facilities) paid or accrued, or scheduled to be paid
or accrued, during such period; (ii) dividends on Preferred Stock or
Redeemable Stock of such Person (and Preferred Stock or Redeemable Stock
of its subsidiaries if paid to a Person other than such Person or its
subsidiaries) declared and payable in cash; (iii) the portion of any rental
obligation of such Person or its subsidiaries in respect of any Capital
Lease Obligation allocable to interest expense in accordance with GAAP; (iv)
the portion of any rental obligation of such Person or its subsidiaries in
respect of any Sale and Lease-Back Transaction allocable to interest
expense (determined as if such were treated as a Capital Lease Obligation);
and (v) to the extent any debt of any other Person is guaranteed by
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<PAGE> 13
such Person or any of its subsidiaries, the aggregate amount of interest
paid, accrued or scheduled to be paid or accrued, by such other Person
during such period attributable to any such debt, less (B) to the extent
included in (A) above, amortization or write-off of deferred financing
costs of such Person and its subsidiaries during such period and any
charge related or any premium or penalty paid in connection with
redeeming or retiring any Indebtedness of such Person and its subsidiaries
prior to its stated maturity; in the case of both (A) and (B) above,
after elimination of intercompany accounts among such Person and its
subsidiaries and as determined in accordance with GAAP. For purposes
of clause (ii) above, dividend requirements attributable to any Preferred
Stock or Redeemable Stock shall be deemed to be an amount equal to the
amount of dividend requirements on such Preferred Stock or Redeemable
Stock times a fraction, the numerator of which is the amount of such
dividend requirements, and the denominator of which is one minus the
applicable combined federal, state, local and foreign income tax rate of
the Company and its Subsidiaries (expressed as a decimal), on a
consolidated basis, for the fiscal year immediately preceding the date of
the transaction giving rise to the need to calculate Consolidated Interest
Expense.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and
its subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP, provided that there shall be excluded therefrom,
without duplication, (i) any net income of any Unrestricted Subsidiary,
except that the Company's or any Subsidiary's interest in the net income
of such Unrestricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash or cash
equivalents actually distributed by such Unrestricted Subsidiary during
such period to the Company or a Subsidiary as a dividend or other
distribution, (ii) gains and losses, net of taxes, from Asset Sales or
reserves relating thereto, (iii) the net income of any Person that is not a
subsidiary or that is accounted for by the equity method of accounting
which shall be included only to the extent of the amount of dividends or
distributions paid to such Person or its subsidiaries, (iv) items (but not
loss items) classified as extraordinary, unusual or nonrecurring (other
than the tax benefit, if any, of the utilization of net operating loss
carryforwards or alternative minimum tax credits), (v) the net income (but
not net loss) of any Person acquired by such specified Person or any of
its subsidiaries in a pooling-of-interests transaction for any period prior
to the date of such acquisition, (vi) any gain or loss, net of taxes,
realized on the termination of any employee pension benefit plan, (vii)
the net income (but not net loss) of any subsidiary of such specified
Person to the extent that the transfer to that Person of that income is
not at the time permitted, directly or indirectly, by any means
(including by dividend, distribution, advance or loan or otherwise), by
operation of the terms of its charter or any agreement with a Person other
than with such specified Person, instrument held by a Person other
than by such specified Person, judgment, decree, order, statute, law, rule
or governmental regulations applicable to such subsidiary or its
stockholders, except for any dividends or distributions actually paid by
such subsidiary to such Person, and (viii) with regard to a non-Wholly
Owned Subsidiary, any aggregate net income (or loss) in excess of such
Person's or such subsidiary's pro rata share of such non-Wholly Owned
Subsidiary's net income (or loss).
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<PAGE> 14
"Consolidated Net Worth" of any Person means, as of any date,
the sum of the Capital Stock and additional paid-in capital plus
retained earnings (or minus accumulated deficit) of such Person and its
subsidiaries on a consolidated basis at such date, each item determined in
accordance with GAAP, less amounts attributable to Redeemable Stock of such
Person or any of its subsidiaries.
"Continuing Director" means an individual who (i) is a member
of the Board of Directors of the Company and (ii) either (A) was a member
of the Board of Directors of the Company on the Issue Date or (B) whose
nomination for election or election to the Board of Directors of the Company
was approved by vote of at least a majority of the directors then still in
office who were either directors on the Issue Date or whose election or
nomination for election was previously so approved.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be
principally administered, which office at the date of execution of this
Indenture is located at 600 Travis Street, Suite 1150, Houston, Texas 77002.
"Covenant Defeasance" has the meaning specified in Section 9.03.
"Currency Hedge Obligations" means, at any time as to any Person,
the obligations of such Person at such time which were incurred in the
ordinary course of business pursuant to any foreign currency exchange
agreement, option or future contract or other similar agreement or
arrangement designed to protect against or manage such Person's or any of its
subsidiaries exposure to fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition the occurrence of
which is, or after notice or the passage time or both would be, an Event
of Default.
"Defaulted Interest" has the meaning specified in Section 2.12.
"Defeasance" has the meaning specified in Section 9.02.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Determination Period" has the meaning specified under clause (i)
of the definition of Consolidated Interest Coverage Ratio.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period, plus to the extent
reflected in the income statement of such Person for such period from which
Consolidated Net Income is determined, without duplication, (i) Consolidated
Interest Expense, (ii) income tax expense, (iii) depreciation expense,
(iv) amortization expense, (v) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity, (vi) any other non-cash charges and (vii) to the extent
not otherwise covered by the adjustments contained in the proviso to this
definition, non-recurring charges of approximately $6.1 million
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<PAGE> 15
incurred during 1996 in employment severance costs, exit costs
attributable to its exiting Argentina and Mexico and other non-recurring
charges, all as described in the Company's Form 10-K for the year
ended December 31, 1996 and minus, to the extent reflected in such income
statement, any noncash credits that had the effect of increasing
Consolidated Net Income of such Person for such period; provided that for
purposes of determining EBITDA with respect to the Company, Consolidated
Net Income shall exclude any net income or loss for the year ended December
31, 1996 associated with the Company's Argentine or Mexican divisions.
"Event of Default" has the meaning specified in Section 6.01.
"Excess Proceeds" has the meaning specified in Section 4.07(a).
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to consideration received
or to be received pursuant to any transaction by any Person, the fair
market value of such consideration as determined in good faith by the
Board of Directors of the Company.
"Fair Value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is
under undue pressure or compulsion to complete the transaction.
"GAAP" means, at any date, United States generally accepted
accounting principles, consistently applied, as set forth in the opinions
of the Accounting Principles Board of the American Institute of
Certified Public Accountants ("AICPA") and statements of the Financial
Accounting Standards Board, or in such other statements by such other
entity as may be designated by the AICPA, that are applicable to the
circumstances as of the date of determination; provided, however, that all
calculations made for purposes of determining compliance with the provisions
set forth in this Indenture shall utilize GAAP in effect at the Issue
Date.
"Global Security" has the meaning specified in Section 2.01(b).
"Grey Wolf" means Grey Wolf Drilling Company, a Texas corporation.
"Grey Wolf Acquisition" means the agreement to merge Grey Wolf
into Drillers, Inc. pursuant to an Agreement and Plan of Merger dated March 7,
1997, by and among the Company, Drillers, Inc. and Grey Wolf, as such may
be amended to the Issue Date.
"Guarantee" means an unconditional guaranty of the Securities
given by any Subsidiary pursuant to the provisions of Article 11 of this
Indenture.
"Guarantor" means Drillers, Inc., DI International Inc. and DI
Energy Inc., each a Texas corporation and a Subsidiary, and each other
Subsidiary of the Company that is required
8
<PAGE> 16
to guarantee the Company's Obligations under the Securities and this
Indenture pursuant to the provisions of Article 11 of this Indenture and
any other Subsidiary of the Company that executes a supplemental indenture
in which such Subsidiary agrees to guarantee the Company's Obligations
under the Securities and this Indenture.
"Holder" means the Person in whose name a Security is registered on
the Registrar's books.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, suffer to exist, incur (by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in
respect of such Indebtedness or other obligation or the recording, as
required pursuant to GAAP or otherwise, of any such Indebtedness or
obligation on the balance sheet of such Person (and "incurrence,"
"incurred," "incurrable" and "incurring" shall have meanings correlative to
the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness
shall not be deemed an incurrence of such Indebtedness. Indebtedness
otherwise incurred by a Person before it becomes a Subsidiary shall be
deemed to have been incurred at the time at which it becomes a Subsidiary.
"Indebtedness" as applied to any Person means, at any time, without
duplication, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person
for borrowed money; (ii) any obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including, without
limitation, any such obligations incurred in connection with
acquisition of Property, assets or businesses, excluding accounts payable
made in the ordinary course of business which are not more than 90
days overdue or which are being contested in good faith and by
appropriate proceedings; (iii) any obligation of such Person for all or
any part of the purchase price of Property or for the cost of Property
constructed or of improvements thereto (including any obligation under or in
connection with any letter of credit related thereto), other than accounts
payable incurred in respect of Property and services purchased in the
ordinary course of business which are no more than 90 days overdue or which
are being contested in good faith and by appropriate proceedings; (iv) any
obligation of such Person upon which interest charges are customarily paid
(other than accounts payable incurred in the ordinary course of business);
(v) any obligation of such Person under conditional sale or other title
retention agreements relating to purchased Property; (vi) any obligation of
such Person issued or assumed as the deferred purchase price of Property
(other than accounts payable incurred in the ordinary course of business
which are no more than 90 days overdue or which are being contested in good
faith and by appropriate proceedings); (vii) any Capital Lease Obligation
or Attributable Indebtedness pursuant to any Sale and Lease-Back
Transaction of such Person; (viii) any obligation of any other Person
secured by (or for which the obligee thereof has an existing right,
contingent or otherwise, to be secured by) any Lien on Property owned or
acquired, whether or not any obligation secured thereby has been assumed,
by such Person; (ix) any obligation of such Person in respect of any
letter of credit supporting any obligation of any other Person; (x)
the maximum fixed repurchase price of any Redeemable Stock of such Person
(or if such Person is a subsidiary, any Preferred Stock of such Person);
(xi) the notional
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<PAGE> 17
amount of any Interest Swap Obligation or Currency Hedge Obligation
of such Person at the time of determination; and (xii) any obligation
which is in economic effect a guarantee, regardless of its
characterization (other than an endorsement in the ordinary course of
business), with respect to any Indebtedness of another Person, to the
extent guaranteed. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock or subsidiary Preferred
Stock that does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Stock or subsidiary
Preferred Stock as if such Redeemable Stock or subsidiary Preferred Stock
were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture; provided, however, that if such
Redeemable Stock or subsidiary Preferred Stock is not then permitted to
be repurchased, the repurchase price shall be the book value of such
Redeemable Stock or subsidiary Preferred Stock. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of
all unconditional obligations as described above and the maximum liability
of any guarantees at such date; provided that for purposes of calculating
the amount of any non-interest bearing or other discount security, such
Indebtedness shall be deemed to be the principal amount thereof that would
be shown on the balance sheet of the issuer dated such date prepared in
accordance with GAAP but that such security shall be deemed to have been
incurred only on the date of the original issuance thereof.
"Indenture" means this Indenture as originally executed or as
it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, including, for all purposes of this Indenture and any
such supplemental indenture, the provisions of the Trust Indenture Act that
are deemed to be a part of and govern this Indenture, and any such
supplemental indenture, respectively.
"Indrillers" means INDRILLERS, L.L.C., a Michigan limited liability
company of which the Company is a member.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities, which date shall be January 1
and July 1 of each year.
"Interest Swap Obligation" means, with respect to any Person, the
obligation of such Person pursuant to any interest rate swap agreement,
interest rate cap, collar or floor agreement or other similar agreement or
arrangement designed to protect against or manage such Person's or any of
its subsidiaries' exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct,
indirect or contingent investment in another Person, whether by means
of a share purchase, capital contribution, loan, advance (other than
advances to employees for moving and travel expenses, drawing accounts
and similar expenditures in the ordinary course of business) or similar
credit extension constituting Indebtedness of such other Person, and any
guarantee of Indebtedness of any other Person; provided that the term
Investment shall not include any transaction involving the purchase or
other acquisition (including by way of merger) of Property (including
Capital Stock) by the Company or any Subsidiary in exchange for Capital
Stock (other than Redeemable Stock) of the Company. The amount of any
Person's Investment shall be the original cost of such Investment to such
Person, plus the cost of all additions thereto
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<PAGE> 18
paid by such Person, and minus the amount of any portion of such Investment
repaid to such Person in cash as a repayment of principal or a return of
capital, as the case may be, but without any other adjustments for
increases or decreases in value, or write-ups, writedowns, or write-offs
with respect to such Investment. In determining the amount of any
Investment involving a transfer of any Property or assets other than cash,
such Property or assets shall be valued at its Fair Value at the time of
such transfer as determined in good faith by the board of directors (or
comparable body) of the Person making such transfer. The Company shall be
deemed to make an "Investment" in the amount of the Fair Value of the Assets
of a Subsidiary at the time such Subsidiary is designated an Unrestricted
Subsidiary.
"Issue Date" means the date on which the Securities are first
authenticated and delivered under this Indenture.
"Joint Venture" means any Person (other than a Guarantor) designated
as such by a Board Resolution of the Company and as to which (i) the
Company, any Guarantor or any Joint Venture owns less than 50% of the
Capital Stock of such Person; (ii) no more than 10 unaffiliated Persons
own of record any Capital Stock of such Person; (iii) at all times, each
such Person owns the same proportion of each class of Capital Stock of such
Person outstanding at such time; (iv) no Indebtedness of such Person is
or becomes outstanding other than Non-Recourse Indebtedness; (v) there
exist no consensual encumbrances or restrictions on the ability of such
Person to (x) pay, directly or indirectly, dividends or make any other
distributions in respect of its Capital Stock to the holders of its Capital
Stock or (y) pay any Indebtedness or other obligation owed to the holders of
its Capital Stock or (z) make any Investment in the holders of its Capital
Stock, in each case other than the types of consensual encumbrances or
restrictions that would be permitted under the provisions of Section 4.06 of
this Indenture if such Person were a Subsidiary; and (vi) the business
engaged in by such Person is a Related Business.
"Lien" means any mortgage, pledge, hypothecation, charge,
assignment, deposit arrangement, encumbrance, security interest, lien
(statutory or other), or preference, priority or other security or
similar agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any agreement to give or grant
a Lien or any lease, conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Maturity" means the date on which the principal of a Security
becomes due and payable as provided therein or in this Indenture, whether
at the Stated Maturity or the Change of Control Payment Date or
purchase date established pursuant to the terms of this Indenture for an
Asset Sale Offer or by declaration of acceleration, call for redemption or
otherwise.
"Moody's" means Moody's Investor Service, Inc., or, if Moody's
Investors Service, Inc. shall cease rating the specified debt securities
and such ratings business with respect thereto shall have been
transferred to a successor Person, such successor person; provided that if
Moody's Investors Service, Inc. ceases rating the specified debt securities
and its ratings business with respect thereto shall not have been
transferred to any successor Person or such successor Person is S&P,
then Moody's shall mean any other nationally recognized rating
11
<PAGE> 19
agency (other than S&P) that rates the specified debt securities selected
in good faith by the Board of Directors of the Company in a Board
Resolution.
"Net Available" Proceeds means, (a) as to any Asset Sale (other
than a Bargain Purchase Contract), the Cash Proceeds therefrom, net of all
legal and title expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign, recording and local taxes
payable as a consequence of such Asset Sale, net of all payments made to
any Person other than the Company or a Subsidiary on any Indebtedness which
is secured by such assets, in accordance with the terms of any Lien upon or
with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Sale, or by applicable law, be
repaid out of the proceeds from such Asset Sale and, as for any Asset
Sale by a Subsidiary, net of the equity interest in such Cash Proceeds of
any holder of Capital Stock of such Subsidiary (other than the Company,
any other Subsidiary or any Affiliate of the Company or any such other
Subsidiary) and (b) as to any Bargain Purchase Contract, an amount equal to
(i) that portion of the rental or other payment stream arising under a
Bargain Purchase Contract that represents an amount in excess of the Fair
Market Value of the rental or other payments with respect to the pertinent
Property or other asset and (ii) the Cash Proceeds from the sale of such
Property or other asset, net of the amount set forth in clause (a) above,
in each case as and when received.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary or a foreign Subsidiary not
constituting a Guarantor as to which (a) neither the Company nor any other
Subsidiary (other than an Unrestricted Subsidiary or a Subsidiary of
such foreign Subsidiary) (i) provides credit support including any
undertaking, agreement or instrument which would constitute
Indebtedness or (ii) is directly or indirectly liable for such Indebtedness
and (b) no default with respect to such Indebtedness (including any
rights which the holders thereof may have to take enforcement action
against an Unrestricted Subsidiary or such foreign Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness
of the Company or its other Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"Obligations" means, with respect to any Indebtedness, any
obligation thereunder, including, without limitation, principal, premium
and interest (including post petition interest thereon), penalties,
fees, costs, expenses, indemnifications, reimbursements, damages and other
liabilities.
"Obligors" means the Company and the Guarantors, collectively;
"Obligor" means the Company or any Guarantor.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, a Vice Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer or a Vice President, and by
the Chief Financial Officer, the Chief Accounting Officer, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Company or a Subsidiary and delivered to the Trustee, which shall
comply with this Indenture.
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<PAGE> 20
"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, a Guarantor or the Trustee.
"Order" means a written order signed in the name of the Company
by an officer and delivered to the Trustee.
"Paying Agent" has the meaning specified in Section 2.03.
"Permitted Holders" means Norex Industries, Inc., Somerset Capital
Partners, Mike L. Mullen and Roy T. Oliver and their respective Affiliates.
"Permitted Indebtedness" means (a) Indebtedness of the Company under
the Securities; (b) Indebtedness (and any guarantee thereof) under one or
more credit or revolving credit facilities with a bank or syndicate of banks
or financial institutions or other lenders, including, without limitation,
the Bank Credit Facility, as such may be amended, modified, revised,
extended, replaced, or refunded from time to time, in an aggregate principal
amount at any one time outstanding not to exceed $100,000,000, less any
amounts derived from Asset Sales and applied to the required permanent
reduction of Senior Debt (and a permanent reduction of the related
commitment to lend or amount available to be reborrowed in the case of a
revolving credit facility) under such credit facilities as contemplated
by the provisions of Section 4.07 of this Indenture; (c) Indebtedness
of the Company or any Subsidiary under Interest Swap Obligations,
provided that (i) such Interest Swap Obligations are related to payment
obligations on Indebtedness otherwise permitted under the provisions of
Section 4.03 of this Indenture and (ii) the notional principal amount of
such Interest Swap Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligations relate; (d)
Indebtedness of the Company or any Subsidiary under Currency Hedge
Obligations, provided that (i) such Currency Hedge Obligations are related
to payment obligations on Indebtedness otherwise permitted under the
provisions of Section 4.03 of this Indenture or to the foreign currency cash
flows reasonably expected to be generated by the Company and the
Subsidiaries and (ii) the notional principal amount of such Currency
Hedge Obligations does not exceed the principal amount of the
Indebtedness and the amount of the foreign currency cash flows to which
such Currency Hedge Obligations relate; (e) Indebtedness of the Company or
any Subsidiary outstanding on the Issue Date and listed on Schedule 1.01(a)
attached hereto; (f) the Guarantees of the Securities (and any assumption
of the Obligations guaranteed thereby); (g) Indebtedness of the Company or
any Subsidiary in respect of bid performance bonds, surety bonds, appeal
bonds and letters of credit or similar arrangements issued for the
account of the Company or any Subsidiary, in each case in the ordinary
course of business and other than for an obligation for money borrowed; (h)
Indebtedness of the Company to a Guarantor or other Wholly Owned Subsidiary
and Indebtedness of a Guarantor or other Wholly Owned Subsidiary to the
Company or another Guarantor or other Wholly Owned Subsidiary; provided
that upon any subsequent issuance or transfer of any Capital Stock or any
other event which results in any such Guarantor ceasing to be a Guarantor
or such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary, as
the case may be, or any other subsequent transfer of any such Indebtedness
(except to the Company or a Guarantor or other Wholly Owned Subsidiary),
such Indebtedness shall be deemed, in each case, to be incurred
13
<PAGE> 21
and shall be treated as an incurrence for purposes of Section 4.03 of
this Indenture at the time the Guarantor in question ceased to be a
Guarantor or the Wholly Owned Subsidiary in question ceased to be a
Wholly Owned Subsidiary; (i) Subordinated Indebtedness of the Company to an
Unrestricted Subsidiary for money borrowed; (j) Indebtedness of the
Company in connection with a purchase of the Securities pursuant to a
Change of Control Offer, provided that the aggregate principal amount of
such Indebtedness does not exceed 101% of the aggregate principal amount
at Stated Maturity of the Securities purchased pursuant to such Change of
Control Offer; provided, further, that such Indebtedness (A) has an Average
Life equal to or greater than the remaining Average Life of the Securities
and (B) does not mature prior to one year following the Stated Maturity of
the Securities; (k) Permitted Refinancing Indebtedness; (l) Permitted
Subsidiary Refinancing Indebtedness; and (m) additional Indebtedness in an
aggregate principal amount not in excess of $2,500,000 at any one time
outstanding. So as to avoid duplication in determining the amount of
Permitted Indebtedness under any clause of this definition, guarantees
permitted to be incurred pursuant to this Indenture of, or Obligations
permitted to be incurred pursuant to this Indenture in respect of letters
of credit supporting, Indebtedness otherwise included in the determination of
such amount shall not also be included.
"Permitted Investments" means (a) certificates of deposit,
bankers acceptances, time deposits, Eurocurrency deposits and similar
types of Investments routinely offered by a commercial bank organized in
the United States with final maturities of one year or less issued by
commercial banks organized in the United States having capital and
surplus in excess of $300,000,000; (b) commercial paper issued by any
corporation, if such commercial paper has credit ratings of at least "A-1"
or its equivalent by S&P and at least "P-I" or its equivalent 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)
with any bank meeting the qualifications specified in clause (a) above; (e)
shares of money market mutual or similar funds having assets in excess of
$100,000,000; (f) payroll advances in the ordinary course of business; (g)
other advances and loans to officers and employees of the Company or
any 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 represented by that portion of the proceeds from Asset Sales
that is not required to be Cash Proceeds by Section 4.07 of this
Indenture; (i) Investments made by the Company in Guarantors or in its
other Wholly Owned Subsidiaries (or any Person that will be a Wholly Owned
Subsidiary as a result of such Investment) or by a Subsidiary in the
Company or in one or more Guarantors or other Wholly Owned Subsidiaries (or
any Person that will be a Wholly Owned 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 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
Subsidiary, in each case as to debt owing to the Company or any Subsidiary
that arose in the ordinary course of business of the Company or any
such Subsidiary; (k) certificates of deposit, bankers acceptances, time
deposits, Eurocurrency deposits and similar types of Investments routinely
offered by a commercial bank organized in the United States with final
maturities of one year or less and in an aggregate amount not to exceed
$5,000,000 at any one time outstanding with a commercial bank organized in
the United States having capital and surplus
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<PAGE> 22
in excess of $75,000,000; (l) Venezuelan and other foreign bank
deposits and cash equivalents in jurisdictions where the Company or its
Subsidiaries are then actively conducting business; (m) Investments in Grey
Wolf pursuant to the Grey Wolf Acquisition agreement; (n) Interest Swap
Obligations with respect to any floating rate Indebtedness that is permitted
by the terms of this Indenture to be outstanding; (o) Currency Hedge
Obligations, provided that such Currency Hedge Obligations constitute
Permitted Indebtedness permitted by clause (d) of the definition thereof;
(p) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility, worker's compensation and performance and
other similar deposits in the ordinary course of business; and (q)
Investments pursuant to any agreement or obligation of the Company or any
Subsidiary in effect on the Issue Date and listed on a Schedule 1.01(b)
attached hereto.
"Permitted Liens" means (a) Liens in existence on the Issue Date;
(b) Liens created for the benefit of the Securities and/or the Guarantees;
(c) Liens on Property of a Person existing at the time such Person is
merged or consolidated with or into the Company or a Subsidiary (and not
incurred as a result of, or in anticipation of, such transaction), provided
that any such Lien relates solely to such Property; (d) Liens on Property
existing at the time of the acquisition thereof (and not incurred as a
result of, or in anticipation of such transaction), provided that any such
Lien relates solely to such Property; (e) Liens incurred or pledges and
deposits made in connection with worker's compensation, unemployment
insurance and other social security benefits, statutory obligations, bid,
surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business; (f) Liens imposed by
law or arising by operation of law, including without limitation,
landlords', mechanics', carriers', warehousemen's, materialmen's,
suppliers' and vendors Liens and Liens for master's and crew's wages
and other similar maritime Liens, and incurred in the ordinary course of
business for sums not delinquent or being contested in good faith, if such
reserves or other appropriate provisions, if any, as shall be required by
GAAP shall have been made with respect thereof; (g) zoning restrictions,
easements, licenses, covenants, reservations, restrictions on the use
of real property and defects, irregularities and deficiencies in title
to real property that do not, individually or in the aggregate, materially
affect the ability of the Company or any Subsidiary to conduct its
business presently conducted; (h) Liens for taxes or assessments or
other governmental charges or levies not yet due and payable, or the
validity of which is being contested by the Company or a Subsidiary in
good faith and by appropriate proceedings upon stay of execution or
the enforcement thereof and for which adequate reserves in accordance
with GAAP or other appropriate provision has been made; (i) Liens to
secure Indebtedness incurred for the purpose of financing all or a part of
the purchase price or construction cost of Property acquired or constructed
after the Issue Date, provided that (l) the principal amount of
Indebtedness secured by such Liens shall not exceed 100% of the lesser of
cost or Fair Market Value of the Property so acquired, upgraded or
constructed plus transaction costs related thereto, (2) such Liens shall
not encumber any other assets or Property of the Company or any
Subsidiary (other than the proceeds thereof and accessions and upgrades
thereto) and (3) such Liens shall attach to such Property within 120 days
of the date of the completion of the construction or acquisition of such
Property; (j) Liens securing Capital Lease Obligations, provided,
further, that such Liens secure Capital Lease Obligations which, when
combined with (l) the outstanding secured Indebtedness of the Company and its
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<PAGE> 23
Subsidiaries (other than Indebtedness secured by Liens described under
clauses (b) and (i) hereof) and (2) the aggregate principal amount of all
other Capital Lease Obligations of the Company and Subsidiaries, does not
exceed $5,000,000 at any one time outstanding; (k) Liens to secure any
extension, renewal, refinancing or refunding (or successive extensions,
renewals, refinancings or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in the foregoing clauses (a), (c)
and (d), provided, further, that such Lien does not extend to any other
Property of the Company or any Subsidiary and the principal amount of the
Indebtedness secured by such Lien is not increased; (l) any charter or
lease; (m) leases or subleases of real property to other Persons; (n)
Liens securing Permitted Indebtedness described in clause (b) of the
definition thereof; (o) judgment liens not giving rise to an Event of
Default so long as any appropriate legal proceedings which may have been
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall
not have expired; (p) rights of off-set of banks and other Persons; and (q)
liens in favor of the Company.
"Permitted Refinancing Indebtedness" means Indebtedness of the
Company, incurred in exchange for, or the net proceeds of which are
used to renew, extend, refinance, refund or repurchase, outstanding
Indebtedness of the Company which outstanding Indebtedness was incurred in
accordance with, or is otherwise permitted by, the terms of clauses (a) and
(e) of the definition of "Permitted Indebtedness," provided that (i) if the
Indebtedness being renewed, extended, refinanced, refunded or repurchased is
pari passu with or subordinated in right of payment (without regard to
its being secured) to the Securities, then such new Indebtedness is pari
passu with or subordinated in right of payment (without regard to its being
secured) to, as the case may be, the Securities at least to the same
extent as the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, (ii) such new Indebtedness is scheduled to mature later
than the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, (iii) such new Indebtedness has an Average Life at the time
such Indebtedness is incurred that is greater than the Average Life
of the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, and (iv) such new Indebtedness is in aggregate principal amount
(or, if such Indebtedness is issued at a price less than the principal
amount thereof, the aggregate amount of gross proceeds therefrom is) not in
excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased
(or if the Indebtedness being renewed, extended, refinanced, refunded or
repurchased was issued at a price less than the principal amount thereof,
then not in excess of the amount of liability in respect thereof
determined in accordance with GAAP) plus the amount of reasonable fees,
expenses and premium, if any, incurred by the Company or such Subsidiary
in connection therewith.
"Permitted Subsidiary Refinancing Indebtedness" means
Indebtedness of any Subsidiary, incurred in exchange for, or the net
proceeds of which are used to renew, extend, refinance, refund or
repurchase, outstanding Indebtedness of such Subsidiary which outstanding
Indebtedness was incurred in accordance with, or is otherwise permitted by,
the terms of clauses (e) and (f) of the definition of "Permitted
Indebtedness," provided that (i) if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased is pari passu with or
subordinated in right of payment (without regard to its being secured) to the
Guarantee
16
<PAGE> 24
of such Subsidiary, then such new Indebtedness is pari passu with or
subordinated in right of payment (without regard to its being secured)
to, as the case may be, the Guarantee of such Subsidiary at least to the
same extent as the Indebtedness being renewed, extended, refinanced
refunded or repurchased, (ii) such new Indebtedness is scheduled to mature
later than the Indebtedness being renewed, extended, refinanced, refunded
or repurchased, (iii) such new Indebtedness has an Average Life at the
time such Indebtedness is incurred that is greater than the Average Life
of the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, and (iv) such new Indebtedness is in an aggregate principal
amount (or, if such Indebtedness is issued at a price less than the
principal amount thereof, the aggregate amount of gross proceeds
therefrom is) not in excess of the aggregate principal amount then
outstanding of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased (or if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses and premium, if any, incurred by the Company
or such Subsidiary in connection therewith.
"Person" means any individual, corporation, partnership,
joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or other agency
or political subdivision thereof or other entity of any kind.
"Preferred Stock" of any Person means Capital Stock of such Person
of any class or classes (however designated) that ranks prior, as to the
payment of dividends and/or as to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of at least one other class of such
Person.
"Proceeding" has the meaning specified in Section 12.11(a).
"Process Agent" has the meaning specified in Section 12.11(a).
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, excluding Capital Stock in any other Person.
"Qualified Equity Offering" means an offering of Capital Stock
(other than Redeemable Stock) of the Company for cash, whether pursuant
to an effective registration statement under the Securities Act or
pursuant to an available exemption from registration under the Securities
Act.
"Record Date" means, for the interest payable on any Interest
Payment Date, the date specified in Section 2.12.
"Redeemable Stock" means, with respect to any Person, any
equity security that by its terms or otherwise is required to be
redeemed, or is redeemable at the option of the holder thereof, at any time
prior to one year following the Stated Maturity of the Securities or is
exchangeable into Indebtedness of such Person or any of its subsidiaries.
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<PAGE> 25
"Redemption Date" means, when used with respect to any Security
or part thereof to be redeemed hereunder, the date fixed for redemption of
such Securities pursuant to the terms of the Securities and this Indenture.
"Redemption Price" means, when used with respect to any Security
or part thereof to be redeemed hereunder, the price fixed for redemption
of such Security pursuant to the terms of the Securities and this
Indenture, plus accrued and unpaid interest thereon, if any to the Redemption
Date.
"Registrar" has the meaning specified in Section 2.03.
"Related Business" means the land drilling business and
activities incidental thereto and any business related or ancillary
thereto.
"Replacement Asset" means a Property or asset that, as determined
by the Board of Directors of the Company as evidenced by a Board Resolution,
is used or is useful in a Related Business.
"Responsible Officer" means, when used with respect to the
Trustee, any officer assigned to the Corporate Trust Office, including any
vice president, assistant vice president, assistant secretary or any other
officer of the Trustee to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular
subject.
"Restricted Investment" means any Investment in any Person,
including an Unrestricted Subsidiary or the designation of a Subsidiary as
an Unrestricted Subsidiary, other than a Permitted Investment.
"Restricted Payment" means to (i) declare or pay any dividend on, or
make any distribution in respect of, or purchase, redeem, retire or
otherwise acquire for value, any Capital Stock of the Company or any
Affiliate of the Company, or warrants, rights or options to acquire
such Capital Stock, other than (x) dividends payable solely in the Capital
Stock (other than Redeemable Stock) of the Company or such Affiliate, as the
case may be, or in warrants, rights or options to acquire such Capital
Stock and (y) dividends or distributions by a Subsidiary to the Company or
to a Wholly Owned Subsidiary; (ii) make any principal payment on, or
redeem, repurchase, defease (including an in-substance or legal defeasance)
or otherwise acquire or retire for value (including pursuant to mandatory
repurchase covenants), prior to any scheduled principal payment, scheduled
sinking fund payment or other stated maturity, Indebtedness of the
Company or any Subsidiary which is subordinated (whether pursuant to its
terms or by operation of law) in right of payment to the Securities or the
Guarantees, as applicable; or (iii) make any Restricted Investment in any
Person.
"Retired Indebtedness or Stock" has the meaning specified in
Section 4.04.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., or if Standard & Poor 's Ratings Group shall cease rating
the specified debt securities and such ratings ceases with respect thereto
shall have been transferred to a successor Person, such
18
<PAGE> 26
successor Person, provided that if Standard & Poor's Ratings Group
ceases rating the specified debt securities and its ratings business
with respect thereto shall not have been transferred to any successor
Person or such successor Person is Moody's, then "S&P" shall mean any
other nationally recognized rating agency selected in good faith by the
Board of Directors of the Company in a Board Resolution.
"Sale and Lease-Back Transaction" means, with respect to any
Person, any direct or indirect arrangement pursuant to which Property is
sold or transferred by such Person or a subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by
such Person or one of its subsidiaries.
"Security" has the meaning stated in the first paragraph of
this Indenture and more particularly means any Security authenticated and
delivered under this Indenture.
"Security Register" has the meaning specified in Section 2.03.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means any Indebtedness incurred by the Company,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is subordinated in right of payment to the Securities,
provided that Senior Debt will not include (a) any liability for federal,
state, local or other taxes owed or owing, (b) any Indebtedness owing to any
Subsidiaries of the Company, (c) any trade payables or (d) any
Indebtedness that is incurred in violation of this Indenture.
"Significant Subsidiary" means a Subsidiary that is a "significant
subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act.
"Special Record Date" means a date fixed by the Trustee pursuant
to Section 2.12 for the payment of Defaulted Interest.
"Stated Maturity" when used with respect to a Security or any
installment of interest thereon, means the date specified in such
Security as the fixed date on which the principal of such Security or
such installment of interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the
Company or any Guarantor that is subordinated in right of payment to
the Securities or the Guarantees, as the case may be, and does not mature
prior to one year following the Stated Maturity of the Securities.
"subsidiary" means, with respect to any Person, (i) any corporation
more than 50% of the outstanding Voting Stock of which is owned, directly
or indirectly, by such Person, or by one or more other subsidiaries or such
Person, or by such Person and one or more other subsidiaries of such
Person, (ii) any general partnership, joint venture or similar entity,
more than 50% of the outstanding partnership or similar interest of
which is owned, directly or indirectly, by such Person, or by one or more
other subsidiaries of such Person, or by such
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Person and one or more other subsidiaries of such Person and (iii) any
limited partnership of which such Person or any subsidiary of such Person
is a general partner.
"Subsidiary" means a subsidiary of the Company other than an
Unrestricted Subsidiary; provided that Indrillers shall not be considered a
Subsidiary for purposes of this Indenture.
"Surviving Entity" has the meaning specified in Section 5.01.
"Transaction Date" has the meaning specified within the definition
of "Consolidated Interest Coverage Ratio."
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939, as amended, as in force at the date as of which this Indenture was
executed.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become
such pursuant to the applicable provision of this Indenture, and
thereafter Trustee shall mean such successor Trustee.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its
full faith and credit is pledged; (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case under clauses (i) or (ii) above, are not callable or redeemable
at the option of the issuers thereof; or (iii) depository receipts issued
by a bank or trust company as custodian with respect to any such U.S.
Government Obligations or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the
account of the holder of a Depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such Depository receipt from any
amount received by the custodian in respect of the U.S. Government Obligation
evidenced by such Depository receipt.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means any subsidiary of the Company that
the Company has classified as an Unrestricted Subsidiary and that has not
been reclassified as a Subsidiary pursuant to the terms of this
Indenture.
"Voting Stock" means with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holder
thereof (whether at all times or at the times that such class of Capital
Stock has voting power by reason of the happening of any contingency) to
vote in the election of members of the board of directors or comparable body
of such Person.
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"Wholly Owned Subsidiary" means any Subsidiary to the extent (i)
all of the Capital Stock or other ownership interests in such Subsidiary,
other than any directors' qualifying shares mandated by applicable law,
is owned directly or indirectly by the Company or (ii) such Subsidiary
is organized in a foreign jurisdiction and is required by the applicable
laws and regulations of such foreign jurisdiction to be partially owned
by the government of such foreign jurisdiction or individual or corporate
citizens of such foreign jurisdiction in order for such Subsidiary to
transact business in such foreign jurisdiction, provided that the Company,
directly or indirectly, owns the remaining Capital Stock or ownership
interest in such Subsidiary and, by contract or otherwise, controls the
management and business of such Subsidiary and derives the economic
benefits of ownership of such Subsidiary to substantially the same extent
as if such Subsidiary were a wholly owned Subsidiary.
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act. This Indenture is subject to the mandatory provisions of
the TIA which are incorporated by reference in and made a part of this
Indenture. The following TIA terms have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute or
defined by Commission rule have the meanings assigned to them by such
definitions.
SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
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(6) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision;
(7) provisions apply to successive events and
transactions;
(8) references to agreements and other instruments
include subsequent amendments and waivers but only to the extent
not prohibited by this Indenture; and
(9) unless otherwise expressly provided herein, the
principal amount of any Preferred Stock shall be the greater of
(i) the maximum liquidation value of such Preferred Stock or (ii)
the maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating.
(a) The Securities, with the notation of the Guarantees
endorsed thereon and the Trustee's certificate of authentication thereon,
shall be substantially in the forms of Exhibit A and Exhibit B, each of
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have such notations, legends or endorsements stamped,
printed, lithographed or engraved thereon as required by law, stock
exchange rule, agreements to which the Company is subject, if any, or
usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit A and
Exhibit B are part of the terms of this Indenture.
(b) The Securities shall be issued initially in the form of
one or more permanent global notes in definitive, fully registered form,
without coupons, substantially in the form set forth in Exhibit A hereto
(each a "Global Security"), each such Security containing the legend
relating to Global Securities set forth on the face of the Security as set
forth on Exhibit A hereto. Upon issuance, each such Global Security shall
be duly executed by the Company, with the endorsement of Guarantees therein
executed by the Guarantors, and authenticated by the Trustee as hereinafter
provided and deposited with the Trustee as custodian for the Depositary.
Any Certificated Security that may be issued pursuant to Section 2.06(a)
shall be issued in the form of a note in definitive, fully registered form,
without coupons, substantially in the form set forth in Exhibit B hereto
(each a "Certificated Security"). Upon issuance, any such Certificated
Security shall be duly executed by the Company, with the endorsement of
Guarantees thereon executed by the Guarantors, and authenticated by the
Trustee as hereinafter provided.
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SECTION 2.02. Execution and Authentication. The
aggregate principal amount at Stated Maturity of Securities outstanding
at any time shall not exceed $175,000,000 except as provided in
Section 2.08 hereof. Two executive officers of the Company shall sign
the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form. The Securities shall have
the notation relating to the Guarantees executed by each Guarantor in
the manner provided for in Section 11.03 hereof and endorsed thereon.
If an executive officer of the Company whose signature is
on a Security no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
Notwithstanding any other provision hereof, the Trustee
shall authenticate and deliver Notes only upon receipt by the Trustee of an
Officers' Certificate complying with Sections 12.01 and 12.02 hereof an
Opinion of Counsel with respect to satisfaction of all conditions precedent
contained in this Indenture to authentication and delivery of such
Securities.
Upon compliance by the Company with the provisions of the
previous paragraph, the Trustee shall, upon receipt of an Order requesting
such action, authenticate Securities for original issuance in an aggregate
principal amount at Stated Maturity not to exceed $175,000,000 in the form
of the Global Security. Such Order shall specify in the amount of Securities
to be authenticated and the date on which the Securities are to be
authenticated and shall further provide instructions concerning
registration, amounts for each Holder and delivery.
Upon the occurrence of any event specified in Section
2.06(a) hereof and compliance by the Company with the provisions of the
paragraph preceding the immediately preceding paragraph, the Company shall
execute and the Trustee shall authenticate and deliver to each beneficial
owner identified by the Depositary, in exchange for such beneficial owner s
interest in the Global Security, Certificated Securities representing
Securities theretofore represented by the Global Security.
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of authentication
on the Security. The signature shall be conclusive evidence, and the only
evidence, that the Security has been authenticated under this Indenture.
The Trustee may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Securities.
Unless limited by the terms of such appointment, an authenticating agent
may authenticate Securities whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication
by such agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange
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(the "Registrar") and an office or agency where Securities may be presented
for payment (the "Paying Agent"). The Registrar shall keep a register of
the Securities (the "Security Register") and of their transfer and
exchange. The Company may have one or more co-registrars and one or more
additional paying agents; provided, however, that so long as Texas Commerce
Bank National Association shall be the Trustee, without the consent of the
Trustee, there shall be no more than one Registrar or Paying Agent. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-registrar not a party
to this Indenture, which shall incorporate the terms of the TIA. The
agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify the Trustee of the name and address
of any such agent. If the Company fails to maintain a Registrar or Paying
Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation therefor pursuant to Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities. The Company may, upon
written notice to the Trustee, change the designation of the Trustee as
Registrar or Paying Agent and appoint another Person to act as Registrar
for purposes of this Indenture except that, for the purposes of Article
3, Article 8, Article 9 and Sections 4.07 and 4.09, none of the Company,
any Guarantor, any Restricted Subsidiary or any Affiliate of the Company
or of any Guarantor shall act as Paying Agent. If any Person other than
the Trustee acts as Registrar, the Trustee shall have the right at any
time, upon reasonable notice, to inspect or examine the Security
Register and to make such inquiries of the Registrar as the Trustee shall
in its discretion deem necessary or desirable in performing its duties
hereunder.
Upon surrender for registration of transfer of any
Security at an office or agency of the Company designated for such
purpose, the Company shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees,
one or more new Securities of any authorized denomination or
denominations, of like tenor and aggregate principal amount, all as
requested by the transferor.
Every Security presented or surrendered for registration
of transfer or for exchange shall (if so required by the Company, the
Trustee or the Registrar) be duly endorsed, or be accompanied by a duly
executed instrument of transfer in form satisfactory to the Company, the
Trustee and the Registrar, by the Holder thereof or such Holder's attorney
duly authorized in writing.
SECTION 2.04. Paying Agent To Hold Money in Trust.
Prior to each due date of the principal, premium, if any, and interest
on any Security, the Company shall deposit with the Paying Agent a sum
sufficient to pay such principal, premium, if any, and interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for
the benefit of Holders or the Trustee all money held by the Paying
Agent for the payment of principal, premium, if any, of or interest on
the Securities and shall notify the Trustee of any default by the Company in
making any such
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payment. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate the money held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed
by the Paying Agent. Upon complying with this Section, the Paying Agent
shall have no further liability for the money delivered to the Trustee.
SECTION 2.05 Global Securities.
(a) So long as a Global Security is registered in the name
of the Depositary or its nominee, beneficial owners, members of, or
participants in, the Depositary ("Agent Members") shall have no rights
under this Indenture with respect to the Global Note held on their behalf by
the Depositary or the Trustee as its custodian, and the Depositary may be
treated by the Company, the Guarantors, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Security for
all purposes. Notwithstanding the foregoing, nothing herein shall (i)
prevent the Company, the Guarantors, the Trustee or any agent of the Company
or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or (ii) impair, as
between the Depositary and its Agent Members, the operation of customary
practices governing the exercise of the rights of a Holder of Securities.
(b) The Holder of a Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that
may hold interests in such Global Securities through Agent Members, to take
any action which a Holder of Notes is entitled to take under this Indenture
or the Notes.
(c) Whenever, as a result of an optional redemption of
Securities by the Company, a Change of Control Offer, an Asset Sale Offer,
or an exchange pursuant to the second sentence of Section 2.06(a) hereof, a
Global Security is redeemed, repurchased or exchanged in part, such Global
Security shall be surrendered by the Holder thereof to the Trustee who
shall cause an adjustment to be made to a Schedule A attached thereto so
that the principal amount at Stated Maturity of such Global Security will
be equal to the portion of such Global Security not redeemed, repurchased
or exchanged and shall thereafter return such Global Security to such
Holder, provided that each such Global Security shall be in a principal
amount at Stated Maturity of $1,000 or an integral multiple thereof.
SECTION 2.06 Transfer and Exchange.
(a) Any Global Security shall be exchanged by the Company
for one or more Certificated Securities, if (x) the Depositary (i) has
notified the Company that it is unwilling or unable to continue as, or
ceases to be, a "Clearing Agency" registered under Section 17A of the
Exchange Act and (ii) a successor to the Depositary registered as a
"Clearing Agency" under Section 17A of the Exchange Act is not able to be
appointed by the Company within 90 days or (y) the Depositary is at any time
unwilling or unable to continue as Depositary and a successor to the
Depositary is not able to be appointed by the Company within 90 days. If
an Event of Default occurs and is continuing, the Company shall, at the
request of the Holder thereof, exchange all or part of any Global Security,
for one or more Certificated Securities, as the case
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may be; provided that the principal amount at Stated Maturity of each
such Certificated Security shall be $1,000 or an integral multiple thereof.
Whenever a Global Security is exchanged as a whole for one or more
Certificated Securities, it shall be surrendered by the Holder thereof
to the Trustee for cancellation. Whenever a Global Security is
exchanged in part for one or more Certificated Securities it shall be
surrendered by the Holder thereof to the Trustee and the Trustee shall
make the appropriate notations to Schedule A thereof pursuant to Section
2.05(c) hereof. All Certificated Securities issued in exchange for a
Global Security or any portion thereof shall be registered in such names,
and delivered, as the Depositary shall instruct the Trustee.
(b) A Holder may transfer a Security only upon the surrender
of such Security for registration of transfer. No such transfer shall be
effected until, and the transferee shall succeed to the rights of a Holder
only upon, final acceptance and registration of the transfer in the
Security Register by the Registrar. When Securities are presented to the
Registrar with a request to register the transfer of, or to exchange, such
Securities, the Registrar shall register the transfer or make such
exchange as requested if its requirements for such transactions and any
applicable requirements hereunder are satisfied. To permit registrations
of transfers and exchanges, the Company shall execute and the Trustee
shall authenticate Certificated Securities at the Registrar's request.
(c) The Company shall not be required to make and the
Registrar need not register transfers or exchanges of (a) Certificated
Securities selected for redemption (except, in the case of
Certificated Securities to be redeemed in part, the portion thereof not to
be redeemed), or (b) any Certificated Security for a period of 15 days
before a selection of Certificated Securities to be redeemed or the
mailing of a notice of a Change of Control Offer pursuant to Section
4.09 hereof or an Asset Sale Offer pursuant to Section 4.07 hereof and
ending on the close of business on the day of such mailing.
(d) No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection with any registration of transfer of Securities
(other than in respect of exchanges or transfers pursuant to Sections
2.10, 3.06, 407, 4.09 and 10.06).
(e) All Securities issued upon any registration of transfer,
exchange or substitution pursuant to the terms of this Indenture will
evidence the same debt and will be entitled to the same benefits under
this Indenture as the Securities surrendered for such registration of
transfer, exchange or substitution.
(f) Any Holder of a Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book entry system
maintained by the Holder of such Global Security (or its agent), and that
ownership of a beneficial interest in the Securities represented hereby
shall be required to be reflected in book entry form. Transfers of a
Global Security shall be limited to transfers in whole and not in part,
to the Depositary, its successors, and their respective nominees. Interests
of
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beneficial owners in a Global Security may be transferred in accordance with
the rules and procedures of the Depositary (or its successors).
SECTION 2.07. Holder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of Holders. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee,
in writing at least five Business Days before each Interest Payment Date
and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the
names and addresses of Holders.
SECTION 2.08. Replacement Securities. If a mutilated
Security is surrendered to the Registrar or if the Holder of a Security
claims that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement
Security if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Company, such
Holder shall furnish an indemnity bond sufficient in the judgment of
the Company and the Trustee to protect the Company, the Guarantors,
the Trustee, the Paying Agent, the Registrar and any co-registrar from any
loss which any of them may suffer if a Security is replaced. In case any
such mutilated, destroyed, lost or stolen Security has become or is about
to become due and payable, the Company, in its discretion may, instead of
issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section
2.08, the Company may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 2.08 in
lieu of any destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section 2.08 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect
to the replacement or payment of mutilated, destroyed, lost or stolen
Securities.
SECTION 2.09. Outstanding Securities. Securities
outstanding at any time are all Securities authenticated by the
Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. A
Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.08, it
ceases to be outstanding unless the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a bona fide
purchaser, in which event the replacement Security shall cease to be
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outstanding, subject to the provisions of Section 8-405 of the Uniform
Commercial Code. A mutilated Security ceases to be outstanding upon surrender
of such Security and replacement thereof pursuant to Section 2.08.
If the Paying Agent (other than the Company, a Guarantor or
an Affiliate of the Company or a Guarantor) segregates and holds in trust,
in accordance with this Indenture, on a Redemption Date or Maturity date
money sufficient to pay all principal, premium, if any, interest and any
other amounts payable on that date with respect to the Securities (or
portions thereof) to be redeemed or maturing, as the case may be, then on
and after that date such Securities (or such portions thereof) shall
cease to be outstanding and interest on them shall cease to accrue.
In determining whether the Holders of the required
principal amount of Securities have concurred in any direction, waiver
or consent or any amendment, modification or other change to this
Indenture, Securities held or beneficially owned by the Company or
Guarantor or an Affiliate of the Company or a Guarantor of the Company or
by agents of any of the foregoing shall be disregarded, except that for the
purposes of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent or any amendments, modification
or other change to this Indenture, only Securities which a
Responsible Officer knows are so owned shall be so disregarded. Securities
so owned which have been pledged in good faith shall not be disregarded if
the pledgee establishes to the satisfaction of the Trustee such pledgee s
right so to act with respect to the Securities and that the pledgee is not
the Company, a Guarantor or an Affiliate of the Company or of a Guarantor or
any of their agents.
SECTION 2.10. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have
variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities and deliver them in exchange for temporary
Securities.
SECTION 2.11. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the
Paying Agent shall forward to the Trustee any Securities surrendered to
them for registration of transfer, exchange or payment. The Trustee and
no one else shall cancel and destroy (subject to the record retention
requirements of the Exchange Act) all Securities surrendered for
registration of transfer, exchange, payment or cancellation and deliver a
certificate of such destruction to the Company. The Company may not
issue new Securities to replace Securities it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.12 Payment of Interest: Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date, shall be paid to the Person
in whose name such Security is registered at the close of business on
the Record Date for such interest payment, which shall be the June 15 or
December 15 (whether or not a Business Day) immediately preceding such
Interest Payment Date.
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Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Record Date, and, except as
hereinafter provided, such Defaulted Interest and any interest payable on
such Defaulted Interest may be paid by the Company, at its election, as
provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest, and any interest payable on such Defaulted Interest, to the Persons
in whose names the Securities are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on the Securities and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as provided in this clause (a). Thereupon
the Trustee shall fix a Special Record Date for the payment of such
Default Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be sent, first class mail, postage prepaid, to each Holder at
such Holder's address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid to
the Persons in whose names the Securities are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant
to the following clause (b).
(b) The Company may make payment of any Defaulted Interest,
and any interest payable on such Defaulted Interest, on the Securities in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section,
each Security delivered under this Indenture upon registration of transfer
of, or in exchange for, or in lieu of, or in substitution for, any other
Security, shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
SECTION 2.13 Authorized Denominations. The Securities
shall be issuable in denominations of $1,000 and any integral multiple
thereof.
SECTION 2.14. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP"
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numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the
Securities or as contained in any notice of a redemption and that reliance
may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in
or omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects
to redeem Securities pursuant to Section 3.07 and paragraph 5 of the
Securities, it shall notify the Trustee in writing of the Redemption
Date, the principal amount of Securities to be redeemed, the Redemption
Price and the Section of this Indenture and the paragraph of the
Securities pursuant to which the redemption will occur.
The Company shall give each notice to the Trustee provided
for in this Section at least 60 days before the Redemption Date unless
the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers Certificate and an Opinion of Counsel from the
Company to the effect that such redemption will comply with the conditions
herein and in the Securities.
SECTION 3.02. Selection of Securities To Be Redeemed. If less
than all the Securities are to be redeemed at any time, the Trustee shall
select the Securities to be redeemed on a pro rata basis, or by any other
method which the Trustee shall determine to be fair and appropriate and
which complies with any securities exchange and other applicable
requirements, provided that the Trustee may select for redemption in part
only Securities in denominations larger than $1,000. In selecting
Securities to be redeemed pursuant to this Section 3.02, the Trustee shall
make such adjustments, reallocations and eliminations as it shall deem
proper so that the principal amount at Stated Maturity of each Security to
be redeemed shall be $1,000 or an integral multiple thereof, by increasing,
decreasing or eliminating any amount less than $1,000 which would be
allocable to any Holder. If the Notes to be redeemed are Certificated
Securities, the Certificated Securities to be redeemed shall be selected
by the Trustee by prorating, as nearly as may be, or by any other method
which the Trustee shall determine to be fair and appropriate and which
complies with any securities exchange and other applicable requirements,
the principal amount of Certificated Securities to be redeemed among the
Holders of Certificated Securities registered in their respective names.
The Trustee in its discretion may determine the particular Securities (if
there are more than one) registered in the name of any Holder which are to
be redeemed, in whole or in part. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the Company promptly of
the Securities or portions of Securities to be redeemed.
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SECTION 3.03. Notice of Redemption. At least 30 days but
not more than 60 days before a date for redemption of Securities, the
Company shall mail a notice of redemption by first-class mail to each
Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if any Global Security is being redeemed in
part, the portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, the Global Security,
with a notation on Schedule A thereof adjusting the principal
amount thereof to be equal to the unredeemed portion, will be
returned to the Holder thereof;
(6) if any Certificated Security is being redeemed in
part, the portion of the principal amount of such Security to be
redeemed and that, after the Redemption Date, a new Certificated
Security or Certificated Securities in principal amount equal
to the unredeemed portion will be issued;
(7) if fewer than all the outstanding Securities are
to be redeemed, the identification and principal amounts of the
particular Securities to be redeemed;
(8) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making
such payment pursuant to the terms of this Indenture, interest on
Securities (or portion thereof) called for redemption ceases to
accrue on and after the redemption date;
(9) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in
such notice or printed on the Securities;
(10) the paragraph of the Securities and the Section
of the Indenture pursuant to which the Securities are being called
for redemption; and
(11) any other information necessary to enable
Holders to comply with the notice of redemption.
At the Company's request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's expense. In
such event, the Company shall provide the
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Trustee with the information required by this Section at least 45 days
before the redemption date unless the Trustee consents to a shorter period.
SECTION 3.04. Effect of Notice of Redemption. Once
notice of redemption is mailed, Securities called for redemption become
due and payable on the Redemption Date and at the Redemption Price stated
in the notice. Upon surrender to the Paying Agent, such Securities shall
be paid at the Redemption Price stated in the notice, plus accrued and
unpaid interest to the Redemption Date. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in
trust) money sufficient to pay the Redemption Price of and accrued and
unpaid interest on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which have been
delivered by the Company to the Trustee for cancellation.
So long as the Company complies with the preceding
paragraph and the other provisions of this Article 3, interest on the
Securities to be redeemed on the applicable Redemption Date shall cease
to accrue from and after such date and such Securities or portions thereof
shall be deemed not to be entitled to any benefit under this Indenture
except to receive payment of the Redemption Price on the Redemption Date.
If any Security called for redemption shall not be so paid upon
surrender for redemption, then, from Redemption Date until such principal
is paid, interest shall be paid on the unpaid principal and, to the
extent permitted by law, on any accrued but unpaid interest thereon, in
each case at the rate prescribed therefor by this Indenture and such
Securities.
SECTION 3.06 Securities Redeemed in Part. Upon
surrender and cancellation of a Certificated Security that is redeemed
in part, the Company shall issue and the Trustee shall authenticate and
deliver to the surrendering Holder (at the Company's expense) a new
Certificated Security equal in principal amount to the unredeemed portion
of the Certificated Security surrendered and canceled, provided that each
such Certificated Security shall be in a principal amount at Stated
Maturity of $1,000 or an integral multiple thereof.
Upon surrender of a Global Security that is redeemed in
part, the Paying Agent shall forward such Global Security to the Trustee
who shall make a notation on Schedule A thereof to reduce the principal
amount of such Global Security to an amount equal to the unredeemed portion
of such Global Note, as provided in Section 2.05 hereof.
SECTION 3.07 Optional Redemption.
(a) Except as set forth in subsection (b) of this
Section 3.07, the Company shall not have the option to redeem the
Securities pursuant to this Section 3.07 prior to July 1, 2002. On or
after such date, the Company shall have the option to redeem the
Securities, in whole or in part upon not less than 30 days' nor more than
60 days' notice, at the Redemption
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Prices (expressed as percentages of principal amount at Stated Maturity),
if redeemed during the twelve month period beginning July 1 of the years
indicated below, in each case, together with any interest accrued and
unpaid to the Redemption Date:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . . . . . . . . 104.4375%
2003 . . . . . . . . . . . . . . . . . . . . . . . . 102.9580%
2004 . . . . . . . . . . . . . . . . . . . . . . . . 101.4792%
2005 and thereafter . . . . . . . . . . . . . . . . 100.0000%
(b) Notwithstanding the foregoing, at any time
during the first 36 months after the Issue Date, the Company may, at its
option, redeem up to a maximum of 30% of the aggregate principal amount at
Stated Maturity of the Securities with the net cash proceeds of one or more
Qualified Equity Offerings at a Redemption Price equal to 108.875% of
the principal amount thereof, plus accrued and unpaid interest thereon to
the Redemption Date; provided that at least $120,000,000 aggregate
principal amount at Stated Maturity of the Securities shall remain
outstanding immediately after the occurrence of any such redemption; and
provided, further, that each such redemption shall occur within 90 days of
the closing of such Qualified Equity Offering.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of, premium, if any, on and interest on the
Securities on the dates and in the manner provided in the Securities and in
this Indenture. Principal, premium and interest shall be considered paid
on the date due if on or before 10:00 a.m., Houston time, on such date
the Trustee or a Paying Agent, other than the Company or a Guarantor, or
an Affiliate of the Company or a Guarantor, holds in accordance with
this Indenture money sufficient to pay all principal, premium and interest
then due and the Trustee or the Paying Agent, as the case may be, is not
prohibited from paying such money to the Holders on that date pursuant to
the terms of this Indenture.
The Company shall pay interest on overdue principal at
the rate specified therefor in the Securities plus 1% per annum, and it
shall pay interest on overdue installments of interest (without regard to
any applicable grace period) at the same rate to the extent lawful.
SECTION 4.02. Commission Reports. So long as any
Securities are outstanding, whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the
Company shall file with the Commission the annual reports, quarterly
reports and other documents which the Company would have been required to
file with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto if the
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Company were subject thereto, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates")
by which the Company would have been required to file them. The Company
shall also (whether or not it is required to file reports with the
Commission), within 30 days of each Required Filing Date, (i) transmit by
mail to all Holders of Securities, as their names and addresses appear in the
Security Register, without cost to such Holders or Persons, and (ii) file
with the Trustee, copies of the annual reports, quarterly reports and other
documents (without exhibits) which the Company has filed or would have filed
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act,
any successor provisions thereto or this Section 4.02. The Company shall
not be required to file any report, document or other information with the
Commission if the Commission does not permit such filing.
SECTION 4.03. Limitation on Indebtedness. The Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, incur any Indebtedness (including Acquired Indebtedness)
unless, after giving pro forma effect to the incurrence of such
Indebtedness, the Consolidated Interest Coverage Ratio for the
Determination Period would be at least 2.0 to 1.0 if such Indebtedness is
incurred prior to July 1, 1998 and at least 2.25 to 1.0 if such
Indebtedness is incurred thereafter. Notwithstanding the foregoing, the
Company or any Subsidiary may incur Permitted Indebtedness. Any
Indebtedness of a Person existing at the time at which such Person becomes
a Subsidiary (whether by merger, consolidation, acquisition or otherwise)
shall be deemed incurred by such Subsidiary at the time at which it becomes a
Subsidiary.
SECTION 4.04. Limitation on Subsidiary Indebtedness and
Preferred Stock . The Company will not permit any Subsidiary to, directly
or indirectly, incur any Indebtedness or issue any Preferred Stock except:
(i) Indebtedness or Preferred Stock issued to and held by the
Company, a Guarantor or a Wholly Owned Subsidiary, so long as any transfer
of such Indebtedness or Preferred Stock to a Person other than the
Company, Guarantor or a Wholly Owned Subsidiary will be deemed to
constitute an incurrence of such Indebtedness or Preferred Stock by the
issuer thereof as of the date of such transfer;
(ii) Acquired Indebtedness or Preferred Stock of a Subsidiary
issued and outstanding prior to the date on which such Subsidiary was
acquired by the Company (other than Indebtedness or Preferred Stock issued
in connection with or in anticipation of such acquisition);
(iii) Indebtedness or Preferred Stock outstanding on the Issue
Date and listed on Schedule 4.04 attached hereto;
(iv) Indebtedness described in clauses (b), (c), (d), (e), (f),
(g) and (h) under the definition of "Permitted Indebtedness";
(v) Permitted Subsidiary Refinancing Indebtedness of such
Subsidiary;
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(vi) Indebtedness or Preferred Stock issued in exchange for, or
the proceeds of which are used to refinance, repurchase or redeem,
Indebtedness or Preferred Stock described in clauses (i) and (iii) of this
Section (the "Retired Indebtedness or Stock"), provided that the
Indebtedness or the Preferred Stock so issued has (A) a principal amount
or liquidation value, as the case may be, not in excess of the principal
amount or liquidation value of the Retired Indebtedness or Stock plus
related expenses for redemption and issuance, (B) a final redemption date
later than the stated maturity or final redemption date (if any) of the
Retired Indebtedness or Stock and (C) an Average Life at the time of
issuance of such Indebtedness or Preferred Stock that is greater than the
Average Life of the Retired Indebtedness or Stock;
(vii) Indebtedness of a Subsidiary which represents the
assumption by such Subsidiary of Indebtedness of another Subsidiary in
connection with a merger of such Subsidiaries, provided that no
Subsidiary or any successor (by way of merger) thereto existing on the
Issue Date shall assume or otherwise become responsible for any
Indebtedness of an entity which is not a Subsidiary on the Issue Date,
except to the extent that a Subsidiary would be permitted to incur such
Indebtedness under this Section; and
(viii) Non-Recourse Indebtedness incurred by a foreign Subsidiary
not constituting a Guarantor.
SECTION 4.05. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any
of its Subsidiaries to, make any Restricted Payment, unless at the time of
and after giving effect to the proposed Restricted Payment, (i) no Default
shall have occurred and be continuing (or would result therefrom), (ii)
the Company could incur at least $1.00 of additional Indebtedness under
the tests described in the first sentence of Section 4.03 of this
Indenture and (iii) the aggregate amount of all Restricted Payments
declared or made on or after the Issue Date by the Company or any
Subsidiary shall not exceed the sum of (A) 50% (or if such Consolidated Net
Income shall be a deficit, minus 100% of such deficit) of the aggregate
Consolidated Net Income accrued during the period beginning on the first
day of the fiscal quarter in which the Issue Date falls and ending on the
last day of the fiscal quarter ending immediately prior to the date of
such proposed Restricted Payment, minus 100% of the amount of any
writedowns, write-offs and other negative extraordinary charges not
otherwise reflected in Consolidated Net Income during such period, plus (B)
an amount equal to the aggregate net cash proceeds received by the
Company, subsequent to the Issue Date, from the issuance or sale (other
than to a Subsidiary) of shares of its Capital Stock (excluding Redeemable
Stock, but including Capital Stock issued upon the exercise of options,
warrants or rights to purchase Capital Stock (other than Redeemable
Stock) of the Company) and the liability (expressed as a positive number)
as expressed on the face of a balance sheet in accordance with GAAP in
respect of any Indebtedness of the Company or any of its
Subsidiaries, or the carrying value of Redeemable Stock, which has been
converted into, exchanged for or satisfied by the issuance of shares of
Capital Stock (other than Redeemable Stock) of the Company, subsequent to
the Issue Date, plus (C) 100% of the net reduction in Restricted
Investments, subsequent to the Issue Date, in any Person, resulting from
payments of interest on Indebtedness, dividends,
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repayments of loans or advances, or other transfers of Property (but
only to the extent such interest, dividends, repayments or other transfers
of Property are not included in the calculation of Consolidated Net Income),
in each case to the Company or any Subsidiary from any Person (including,
without limitation, from Unrestricted Subsidiaries) or from redesignations
of Unrestricted Subsidiaries as Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed in the case of
any Person the amount of Restricted Investments previously made by the
Company or any Subsidiary in such Person and in each such case which was
treated as a Restricted Payment.
(b) The foregoing provisions will not prevent
(i) the payment of any dividend on Capital Stock of any class within 60
days after the date of its declaration if at the date of declaration such
payment would be permitted by this Indenture; (ii) any repurchase or
redemption of Capital Stock or Subordinated Indebtedness of the Company or
a Subsidiary made by exchange for Capital Stock of the Company (other than
Redeemable Stock), or out of the net cash proceeds from the substantially
concurrent issuance or sale (other than to a Subsidiary) of Capital Stock
of the Company (other than Redeemable Stock), provided that the net cash
proceeds from such sale are excluded from computations under Section
4.05(a)(iii)(B) above to the extent that such proceeds are applied to
purchase or redeem such Capital Stock or Subordinated Indebtedness;
(iii) so long as no Default shall have occurred and be continuing or
should occur as a consequence thereof, any repurchase or redemption of
Subordinated Indebtedness of the Company or a Subsidiary solely in exchange
for, or out of the net cash proceeds from the substantially concurrent
sale of, new Subordinated Indebtedness of the Company or a Subsidiary,
so long as such Subordinated Indebtedness is permitted under Section
4.03 of this Indenture and (1) is subordinated to the Securities at least to
the same extent as the Subordinated Indebtedness so exchanged, purchased or
redeemed, (2) has a stated maturity later than the stated maturity of the
Subordinated Indebtedness so exchanged, purchased or redeemed and (3) has
an Average Life at the time incurred that is greater than the
remaining Average Life of the Subordinated Indebtedness so exchanged,
purchased or redeemed; (iv) Investments in any Joint Ventures,
foreign Subsidiaries not constituting Guarantors and Indrillers in an
aggregate amount not to exceed $10,000,000 and (v) redemptions of the
Company's Series A Preferred Stock issued and outstanding on the Issue
Date for an aggregate redemption price of not more than $1,000,000.
Notwithstanding the foregoing, the amount available for Investments in
Joint Ventures and foreign Subsidiaries pursuant to clause (iv) of the
preceding sentence may be increased by the aggregate amount received by the
Company and its Subsidiaries from a Joint Venture or a foreign Subsidiary on
or before such date resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances or other transfers of
Property made to such Joint Venture or foreign Subsidiary (but only to
the extent such interest dividends, repayments or other transfers of
Property are not included in the calculation of Consolidated Net Income).
Restricted Payments permitted to be made as described in the first
sentence of this Section 4.05(b) will be excluded in calculating the
amount of Restricted Payments thereafter, except that any such Restricted
Payments permitted to be made pursuant to clause (iv) will be included in
calculating the amount of Restricted Payments made pursuant to such clause
(iv) thereafter.
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(c) For purposes of this Section 4.05, if a particular
Restricted Payment involves a non- cash payment, including a distribution
of assets, then such Restricted Payment shall be deemed to be an amount
equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the Fair Market Value of the non-cash portion of such
Restricted Payment.
SECTION 4.06. Limitation on Dividends and
Other Payment Restrictions Affecting Subsidiaries. The Company will not,
and will not permit any Subsidiary, directly or indirectly, to create,
enter into any agreement with any Person or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of
any kind which by its terms restricts the ability of any Subsidiary to (a)
pay dividends, in cash or otherwise, or make any other distributions on
its Capital Stock to the Company or any Subsidiary, (b) pay any
Indebtedness owed to the Company or any Subsidiary, (c) make loans or
advances to the Company or any Subsidiary or (d) transfer any of its
Property or assets to the Company or any Subsidiary except any encumbrance
or restriction contained in any agreement or instrument:
(i) existing on the Issue Date;
(ii) relating to any Property or assets acquired after the Issue
Date, so long as such encumbrance or restriction relates only to the
Property or assets so acquired and is not and was not created in
anticipation of such acquisition;
(iii) relating to any Acquired Indebtedness of any Subsidiary at
the date on which such Subsidiary was acquired by the Company or any
Subsidiary (other than Indebtedness incurred in anticipation of such
acquisition);
(iv) effecting a refinancing of Indebtedness incurred pursuant to
an agreement referred to in the foregoing clauses (i) through (iii), so
long as the encumbrances and restrictions contained in any such
refinancing agreement are no more restrictive than the encumbrances and
restrictions contained in such agreements;
(v) constituting customary provisions restricting subletting or
assignment of any lease of the Company or any Subsidiary or provisions
in license agreements or similar agreements that restrict the assignment
of such agreement or any rights thereunder;
(vi) constituting restrictions on the sale or other
disposition of any Property securing Indebtedness as a result of a
Permitted Lien on such Property; or
(vii) constituting any temporary encumbrance or restriction with
respect to a Subsidiary pursuant to an agreement that has been entered into
for the sale or disposition of all or substantially all of the
Capital Stock of, or Property and assets of, such Subsidiary.
SECTION 4.07. Limitation on Asset Sales.
The Company will not engage in, and will not permit
any Subsidiary to engage in, any Asset Sale unless (a) except in the case
of (i) an Asset Sale resulting from the requisition of title to, seizure
or forfeiture of any Property or assets or any actual or constructive
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total loss or an agreed or compromised total loss or (ii) a Bargain
Purchase Contract, the Company or such Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the Property; (b) at least 75% of such consideration
consists of Cash Proceeds (or the assumption of Indebtedness of the
Company or such Subsidiary relating to the Capital Stock or Property or
asset that was the subject of such Asset Sale and the unconditional release
of the Company or such Subsidiary from such Indebtedness); (c) after giving
effect to such Asset Sale, the total non-cash consideration held by the
Company from all such Asset Sales does not exceed $10,000,000; and (d)
the Company delivers to the Trustee an Officers' Certificate certifying
that such Asset Sale complies with clauses (a), (b) and (c). The Company or
such Subsidiary, as the case may be, may apply the Net Available Proceeds
from each Asset Sale (x) to the acquisition of one or more Replacement
Assets, or (y) to repurchase or repay Senior Debt (with a permanent
reduction of availability in the case of revolving credit
borrowings); provided that such acquisition or such repurchase or
repayment shall be made within 365 days after the consummation of the
relevant Asset Sale. Any Net Available Proceeds from any Asset Sale
that are not used to so acquire Replacement Assets or to repurchase or
repay Senior Debt within 365 days after consummation of the relevant Asset
Sale constitute "Excess Proceeds".
(b) When the aggregate amount of Excess Proceeds
exceeds $15,000,000, the Company shall within 30 days thereafter, or at
any time after receipt of Excess Proceeds but prior to there being
$15,000,000 of Excess Proceeds, the Company may, at its option, make a pro
rata offer (an "Asset Sale Offer") to purchase from all holders an aggregate
principal amount of Securities equal to the Excess Proceeds, at a price in
cash (the "Asset Sale Offer Purchase Price") equal to 100% of the
outstanding principal amount at Stated Maturity thereof plus accrued
interest, if any, to the Asset Sale Purchase Date, in accordance with the
procedures set forth in Section 4.07(c).
(c) Within 30 days of the date that the amount of
Excess Proceeds exceeds $15,000,000, the Company, or the Trustee at the
request and expense of the Company, shall send to each Holder by first
class mail, postage prepaid, a notice prepared by the Company stating:
(i) that an Asset Sale Offer is being made
pursuant to this Section 4.07 and that all Securities properly
tendered will be accepted for payment, subject to proration in the
event that the amount of Excess Proceeds is less than the aggregate
Asset Sale Offer Purchase Price of all Securities properly tendered
pursuant to the Asset Sale Offer;
(ii) the Asset Sale Offer Purchase Price, the
amount of Excess Proceeds that are available to be applied to
purchase tendered Securities, and the date Securities are to be
purchased pursuant to the Asset Sale Offer (the "Asset Sale Offer
Purchase Date"), which date shall be a date no earlier than 30 days
and not later than 40 days subsequent to the date such notice is
mailed;
(iii) that any Securities or portions thereof
not properly tendered or accepted for payment will continue to
accrue interest;
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(iv) that, unless the Company defaults in the
payment of the Asset Sale Offer Purchase Price with respect
thereto, all Securities or portions thereof accepted for payment
pursuant to the Asset Sale Offer shall cease to accrue interest
from and after the Asset Sale Offer Purchase Date;
(v) that any Holder electing to have any
Securities or portions thereof purchased pursuant to the Asset
Sale Offer will be required to surrender such Securities, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of such Securities completed, to the Paying Agent at the
address specified in the notice, prior to the close of business on
the third Business Day preceding the Asset Sale Offer Purchase Date;
(vi) that any Holder shall be entitled to
withdraw such election if the Paying Agent receives, not later than
the close of business on the second Business Day preceding the
Asset Sale Offer Purchase Date, a telegram, telex, facsimile
transmission or letter, setting forth the name of the Holder, the
principal amount of Securities delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election
to have such Securities or portions thereof purchased pursuant to
the Asset Sale Offer;
(vii) that any Holder electing to have
Securities purchased pursuant to the Asset Sale Offer must specify
the principal amount at Stated Maturity that is being tendered for
purchase, which principal amount at Stated Maturity must be $1,000
or an integral multiple thereof;
(viii) if Certificated Securities have been
issued pursuant to Section 2.06(a), that any Holder of Certificated
Securities whose Certificated Securities are being purchased only
in part will be issued new Certificated Securities equal in
principal amount at Stated Maturity to the unpurchased portion of
the Certificated Security or Securities surrendered, which
unpurchased portion will be equal in principal amount at Stated
Maturity to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the
Holder of a Global Security that is being purchased in part,
such Global Security with a notation on Schedule A thereof
adjusting the principal amount at Stated Maturity thereof to be
equal to the unpurchased portion of such Global Security; and
(x) the instructions and any other information
necessary to enable any Holder to tender Securities and to have such
Securities purchased, or to withdraw such tender, pursuant to this
Section 4.07.
(d) If the aggregate Asset Sale Offer Purchase Price
of the Securities surrendered by Holders exceeds the amount of Excess
Proceeds as indicated in the notice required by Section 4.07(c) hereof, the
Trustee shall select the Securities to be purchased on a pro rata basis
based on the principal amount of the Securities tendered, with such
adjustments as
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may be deemed appropriate by the Trustee and to comply with any
securities exchange and other applicable requirements, so that only
Securities in denominations of $1,000 or integral multiples thereof
shall be purchased.
(e) On or before the Asset Sale Offer Purchase Date,
the Company shall (i) accept for payment any Securities or portions thereof
properly tendered and selected for purchase pursuant to the Asset Sale and
Section 4.07(d) hereof; (ii) irrevocably deposit with the Paying Agent, by
10:00 a.m., New York City time, on such date, in immediately available
funds, an amount equal to the Asset Sale Offer Purchase Price in respect of
all Securities or portions thereof so accepted; and (iii) deliver, or
cause to be delivered, to the Trustee the Securities so accepted together
with an Officers' Certificate listing the Securities or portions thereof
tendered to the Company and accepted for payment. The Paying Agent shall
promptly send by first class mail, postage prepaid, to each Holder of
Securities or portions thereof so accepted for payment, payment in an
amount equal to the Asset Sale Offer Purchase Price for such Securities or
portions thereof. The Company shall publicly announce the results of the
Asset Sale Offer on or as soon as practicable after the Asset Sale Offer
Purchase Date. For purposes of this Section 4.07, the Trustee shall act as
the Paying Agent.
(f) Upon surrender and cancellation of a
Certificated Security that is purchased in part, the Company shall
promptly issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Certificated Security a new Certificated
Security equal in principal amount to the unpurchased portion of such
surrendered Certificated Security; provided that each such new Certificated
Security shall be in a principal amount at Stated Maturity of $1,000 or an
integral multiple thereof.
Upon surrender of a Global Security that is purchased in part
pursuant to an Asset Sale Offer, the Paying Agent shall forward such
Global Security to the Trustee who shall make a notation on Schedule A
thereof to reduce the principal amount of such Global Security to an amount
equal to the unpurchased portion of such Global Security, as provided in
Section 2.05 hereof.
(g) Upon completion of an Asset Sale Offer (including
payment of the Asset Sale Offer Purchase Price for accepted Securities),
any surplus Excess Proceeds that were subject to such offer shall cease to
be Excess Proceeds, the amount of Excess Proceeds shall be reset to zero and
the Company may use any remaining amount for general corporate purposes.
(h) The Company shall comply with any applicable
tender offer rules (including, without limitation, any applicable
requirements of Rule 14e-1 under the Exchange Act) in the event that an
Asset Sale Offer is required under the circumstances described herein.
SECTION 4.08. Limitation on Transactions with Affiliates.
(a) Subsequent to the Issue Date, the Company will not, and will not
permit any Subsidiary to, directly or indirectly, enter into or permit to
exist any transaction or series of related transaction (including, but
not limited to, the purchase, sale or exchange of Property, the making
of any Investment, the giving of any guarantee or the rendering of any
service with any Affiliate of
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the Company, other than transactions among the Company and any Guarantors
or any Wholly Owned Subsidiaries) unless (i) such transaction or series of
related transactions is on terms no less favorable to the Company or such
Subsidiary than those that could be obtained in a comparable arm's length
transaction with a Person that is not such an Affiliate and (ii) (A) with
respect to a transaction or series of related transactions that has a Fair
Market Value in excess of $2,000,000 but less than $5,000,000, the Company
delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (i)
above; or (B) with respect to a transaction or series of related
transactions that has a Fair Market Value equal to or in excess of
$5,000,000, the transaction or series of related transactions is
approved by a majority of the Board of Directors of the Company
(including a majority of the disinterested directors), which approval is
set forth in a Board Resolution certifying that such transaction or series
of transactions complies with clause (i) above.
(b) The foregoing provisions shall not be applicable
to (i) reasonable and customary compensation, indemnification and other
benefits paid or made available to an officer, director or employee of the
Company or a Subsidiary for services rendered in such person's capacity
as an officer, director or employee (including reimbursement or
advancement of reasonable out-of-pocket expenses and provisions of
directors and officers liability insurance) or (ii) the making of
any Restricted Payment otherwise permitted by this Indenture.
SECTION 4.09. Change of Control.
(a) Upon the occurrence of a Change of Control,
each Holder will have the right to require the Company to repurchase all
of such Holder's Securities in whole or in part (the "Change of Control
Offer") at a purchase price (the "Change of Control Purchase Price") in
cash equal to 101% of the aggregate principal amount at Stated Maturity
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date on the terms described below.
(b) Within 30 days following any Change of Control,
the Company or the Trustee (at the expense of the Company) will mail a
notice to each Holder and to the Trustee stating,
(i) that a Change of Control has occurred and
a Change of Control Offer is being made pursuant to this Section
4.09, and that, although Holders are not required to tender
their Securities, all Securities that are timely tendered will be
accepted for payment;
(ii) the Change of Control Purchase Price and
the repurchase date, which will be no earlier than 30 days and no
later than 60 days after the date such notice is mailed (the
"Change of Control Payment Date");
(iii) that any Security or portion thereof
accepted for payment pursuant to the Change of Control Offer (and
duly paid for on the Change of Control Payment Date) will cease
to accrue interest after the Change of Control Payment Date;
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(iv) that any Security or portion thereof not
properly tendered will continue to accrue interest;
(v) that any Holder electing to have any
Securities or portions thereof purchased pursuant to a Change of
Control Offer will be required to surrender such Securities, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of such Securities completed, to the Paying Agent at the
address specified in the notice, prior to the close of business
on the third Business day preceding the Change of Control Date;
(vi) that any Holder shall be entitled to
withdraw such election if the Paying Agent receives, not later
than the close of business on the second Business Day preceding the
Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter, setting forth the name of the Holder, the
principal amount of Securities delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election
to have such Securities or portions thereof purchased pursuant to
the Change of Control Offer;
(vii) that any Holder electing to have
Securities purchased pursuant to the Change of Control Offer must
specify the principal amount at Stated Maturity that is being
tendered for purchase, which principal amount at Stated Maturity
must be $1,000 or an integral multiple thereof;
(viii) if Certificated Securities have been
issued pursuant to Section 2.06(a), that any Holder of
Certificated Securities whose Certificated Notes are being
purchased only in part will be issued new Certificated Securities
equal in principal amount at Stated Maturity to the unpurchased
portion of the Certificated Security or Securities surrendered,
which unpurchased portion will be equal in principal amount at
Stated Maturity to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the
Holder of a Global Security that is being purchased in part, such
Security with a notation on Schedule A thereof adjusting the
principal amount at Stated Maturity thereof to be equal to the
unpurchased portion of such Global Security;
(x) the instructions and any other information
necessary to enable any Holder to accept a Change of Control Offer
or effect withdrawal of such acceptance; and
(xi) the instructions and any other
information necessary to enable Holders to tender their Securities
and have such Securities purchased pursuant to the Change of Control
Offer.
(c) On or before the Change of Control Payment Date,
the Company shall (i) accept for payment any Securities or portions
thereof properly tendered pursuant to the Change of Control Offer;
(ii) irrevocably deposit with the Paying Agent, by 10:00 a.m., New
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York City time, on such date, in immediately available funds, an amount
equal to the Change of Control Purchase Price in respect of all
Securities or portions thereof so accepted, including interest, if
applicable; and (iii) deliver, or cause to be delivered, to the Trustee the
Securities so accepted together with an Officers' Certificate listing the
Securities or portions thereof tendered to the Company and accepted for
payment. The Paying Agent shall promptly send by first class mail, postage
prepaid, to each Holder of Securities or portions thereof so accepted for
payment, payment in an amount equal to the Change of Control Purchase Price
for such Securities or portions thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of
this Section 4.09, the Trustee shall act as the Paying Agent.
(d) Upon surrender and cancellation of a Certificated
Security that is purchased in part pursuant to the Change of Control Offer,
the Company shall promptly issue and the Trustee shall authenticate and
deliver to the surrendering Holder of such Certificated Security, a new
Certificated Note equal in principal amount at Stated Maturity to the
unpurchased portion of such surrendered Certificated Note; provided that
each such new Certificated Security shall be in a principal amount of
$1,000 at Stated Maturity or an integral multiple thereof.
Upon surrender of a Global Security that is purchased in part
pursuant to a Change of Control Offer, the Paying Agent shall forward
such Global Security to the Trustee who shall make a notation on
Schedule A thereof to reduce the principal amount at Stated Maturity of
such Global Note to an amount equal to the unpurchased portion of such
Global Security, as provided in Section 2.05 hereof.
(e) The Company will not be required to make
a Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Company and repurchases
all Securities validly tendered and not withdrawn under such Change of
Control Offer.
(f) The Company will comply with any
applicable tender offer rules (including, without limitation, any
applicable requirements of Rule 14e-1 under the Exchange Act) in the event
that the Change of Control Offer is triggered under the circumstances
described herein.
SECTION 4.10. Limitation on Liens. The Company will
not, and will not permit any Subsidiary to, directly or indirectly,
create, affirm, incur, assume or suffer to exist any Liens of any kind other
than Permitted Liens on or with respect to any Property or assets of the
Company or such Subsidiary or any interest therein or any income or
profits therefrom, whether owned at the Issue Date or thereafter
acquired, without effectively providing that the Securities shall be
secured equally and ratably with (or prior to) the Indebtedness so secured
for so long as such obligations are so secured.
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SECTION 4.11. Limitation on Guarantees by Guarantors.
The Company will not permit any Guarantor to guarantee the payment of
any Subordinated Indebtedness of the Company unless such guarantee shall
be subordinated to such Guarantor s Guarantee at least to the same
extent as such Subordinated Indebtedness is subordinated to the
Securities; provided that this covenant will not be applicable to any
guarantee of any Guarantor that (i) existed at the time at which such
Person became a Subsidiary of the Company and (ii) was not incurred in
connection with, or in contemplation of, such Person becoming a
Subsidiary of the Company.
SECTION 4.12 Unrestricted Subsidiaries
(a) The Company may designate a subsidiary (including
a newly formed or newly acquired subsidiary) of the Company or any of
its Subsidiaries as an Unrestricted Subsidiary; provided that (i)
immediately after giving effect to the transaction, the Company could
incur $1.00 of additional Indebtedness pursuant to the first sentence
of Section 4.03 and (ii) such designation is at the time permitted
under Section 4.05. Notwithstanding any provisions of this covenant
all subsidiaries of an Unrestricted Subsidiary will be Unrestricted
Subsidiaries.
(b) The Company will not, and will not permit any
of its Subsidiaries to, take any action or enter into any transaction or
series of transactions that would result in a Person (other than a newly
formed subsidiary having no outstanding Indebtedness (other than
Indebtedness to the Company or a Subsidiary) at the date of
determination) becoming a Subsidiary (whether through an acquisition,
the redesignation of an Unrestricted Subsidiary or otherwise) unless,
after giving effect to such action, transaction or series of
transactions on a pro forma basis, (i) the Company could incur at least
$1.00 of additional Indebtedness pursuant to the first sentence of
Section 4.03 and (ii) no Default or Event of Default would occur.
(c) Subject to Sections 4.12(a) and (b), an
Unrestricted Subsidiary may be redesignated as a Subsidiary. The
designation of a subsidiary as an Unrestricted Subsidiary or the
designation of an Unrestricted Subsidiary as a Subsidiary in compliance
with this Section 4.12 shall be made by the Board of Directors pursuant
to a Board Resolution delivered to the Trustee and shall be effective as
of the date specified in such Board Resolution, which shall not be prior
to the date such Board Resolution is delivered to the Trustee. Any
Unrestricted Subsidiary shall become a Subsidiary if it incurs any
Indebtedness other than Non-Recourse Indebtedness. If at any time
Indebtedness of an Unrestricted Subsidiary which was Non-Recourse
Indebtedness no longer so qualifies, such Indebtedness shall be deemed to
have been incurred when such Non-Recourse Indebtedness becomes Indebtedness.
SECTION 4.13 Limitation on Sale and Lease-Back
Transactions. The Company will not, and will not permit any Subsidiary
to, directly or indirectly, enter into, assume, guarantee or otherwise
become liable with respect to any Sale and Lease-Back Transaction unless (i)
the proceeds from such Sale and Lease-Back Transaction are at least equal
to the Fair Market Value of such Property being transferred and (ii) the
Company or
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such Subsidiary would have been permitted to enter into such transaction
under the provisions of Sections 4.03, 4.04 and 4.10.
SECTION 4.14 Limitation on Line of Business. None
of the Company or any of its Subsidiaries will directly or indirectly
engage to any substantial extent in any line or lines of business activity
other than a Related Business.
SECTION 4.15. Maintenance of Office or Agency. The
Company shall maintain in The City of New York, an office or agency where
Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. Unless otherwise designated by the
Company by written notice to the Trustee such office or agency shall be
the office of the Trustee's agent, Texas Commerce Trust Company of New
York, which is located at 55 Water Street, North Building, Room 234,
Windows 20 and 21, New York, New York 10041, Attention: Vice President,
Global Trust Services. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee its agent to receive all
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in or outside of The City of New York)
where the Securities may be presented or surrendered for any or all of such
purposes, and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in The City of
New York, for such purposes. The Company shall give prompt written notice
to the Trustee of any such designation and any change in the location of any
such other office or agency.
SECTION 4.16. Money for the Security Payments to be Held
in Trust. If the Company, any Subsidiary of the Company or any of their
respective Affiliates shall at any time act as Paying Agent with respect to
the Securities, such Paying Agent shall, on or before each due date of
the principal of (and premium, if any) or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto money sufficient to pay the principal (and premium, if
any) or interest so becoming due until such money shall be paid to such
Persons or otherwise disposed of as herein provided, and shall promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents
with respect to the Securities, it shall, prior to or on each due date of
the principal of (and premium, if any) or interest on any of the
Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to
be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying
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Agent is the Trustee) the Paying Agent shall promptly notify the Trustee of
the Company's action or failure so to act.
SECTION 4.17. Corporate Existence. The Company
will, and will cause each of its Subsidiaries to, preserve and keep
in full force and effect its corporate existence in accordance with
applicable law, except as permitted in Sections 5.01 and 5.02;
provided, however, that the Company may terminate the corporate existence
of any Subsidiary if, in the good faith judgment of the Board of Directors
of the Company, such termination is desirable in the conduct of the
business of the Company and its Subsidiaries and is not disadvantageous
in any material respect to the Holders of the Securities.
SECTION 4.18 Maintenance of Property. The Company shall
cause all Property used in the conduct of its business or the business
of any of its Subsidiaries to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as, in the judgment of the Company, may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided that nothing in this Section
4.18 shall prevent the Company from discontinuing the operation or
maintenance of any of such Property if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business or the
business of any of its Subsidiaries and not disadvantageous in any material
respect to the Holders of the Securities.
SECTION 4.19. Payment of Taxes and Other Claims. The
Company shall pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any
of its Subsidiaries and (b) all material lawful claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon the
Property or assets of the Company or any of its Subsidiaries; provided that
the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP or other appropriate provision has been made.
SECTION 4.20 Compliance Certificate; Notice of Default or Event of Default.
(a) The Company shall deliver to the Trustee within
120 days after the end of each fiscal year of the Company ending after
the date hereof, an Officers' Certificate (which shall be signed by
officers satisfying the requirements of Section 314 of the Trust Indenture
Act) stating whether or not, to the best knowledge of such officers, the
Company has complied with all conditions and covenants under this
Indenture, and, if the Company shall be in Default, specifying all such
Defaults and the nature thereof of which such officer may have knowledge.
(b) The year-end financial statements delivered
pursuant to Section 4.02 above shall be accompanied by a written statement
of the Company's independent public
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accountants (who shall be a firm of established national reputation
reasonably satisfactory to the Trustee) that in making the examination
necessary for certification of such financial statements nothing has come
to their attention which would lead them to believe that the Company or any
of its Subsidiaries has violated the provisions of Section 4.01, 4.03,
4.04, 4.05, 4.07, 4.09 or 4.17 hereof or of Article 5 of this Indenture or,
if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any person for any failure to obtain
knowledge of any such violation, and it being further understood that
such statement may not be provided to the extent contrary to the then
current recommendations of the accountants governing body.
(c) The Company will, so long as any of the
Securities are outstanding, deliver to the Trustee, within 5 days of any
Officer becoming aware of (i) any Default or Event of Default or (ii) any
event of default under any other mortgage, indenture or instrument
referred to in Section 6.01(e), an Officers' Certificate specifying such
Default, Event of Default or other event of default and what action the
Company or applicable Subsidiary is taking or proposes to take with respect
thereto.
SECTION 4.21. Further Instruments and Acts. Upon request
of the Trustee, the Company will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 4.22. Prohibition on Company and Guarantors
Becoming Investment Companies. None of the Company or the Guarantors shall
become an investment company as defined in the Investment Company Act of
1940, as amended.
SECTION 4.23. Stay, Extension and Usury Laws. The
Company and each of the Guarantors covenant (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit of advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this
Indenture; and the Company and each of the Guarantors (to the extent that
it may lawfully do so) hereby expressly waive all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
ARTICLE 5
Consolidation, Merger, Conveyance, Lease or Transfer
SECTION 5.01. Consolidation, Merger, Conveyance, Lease or Transfer.
(a) The Company will not, in any transaction or series
of transactions, consolidate with or merge into any other Person (other than
a merger of a Subsidiary into the Company in which the Company is the
continuing corporation), or continue in any new
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jurisdiction, or sell, convey, assign, transfer, lease or otherwise dispose
of all or substantially all of the Property and assets of the Company and
the Subsidiaries, taken as a whole, to any Person, unless
(i) either (A) the Company shall be the
continuing corporation or (B) the corporation (if other
than the Company) formed by such consolidation or into
which the Company is merged, or the Person which acquires,
by sale, assignment, conveyance, transfer, lease or
disposition, all or substantially all of the Property and
assets of the Company and the Subsidiaries, taken as a
whole (such corporation or Person, the Surviving Entity
), shall be a corporation organized and validly existing
under the laws of the United States of America, any
political subdivision thereof or any state thereof or the
District of Columbia, and shall expressly assume, by a
supplemental indenture, the due and punctual payment of the
principal of (and premium, if any) and interest on all the
Securities and the performance of the Company s covenants
and obligations under this Indenture;
(ii) immediately before and after giving effect
to such transaction or series of transactions on a pro
forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series
of transactions), no Event of Default or Default shall
have occurred and be continuing or would result therefrom;
(iii) immediately after giving effect to
such transaction or series of transactions on a pro
forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series
of transactions), the Company (or the Surviving Entity if
the Company is not continuing) shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transactions;
and
(iv) immediately after giving effect to any
such transaction or series of transactions on a pro
forma basis as if such transaction or series of
transactions had occurred on the first day of the
Determination Period, the Company (or the Surviving Entity
if the Company is not continuing) would be permitted
to incur $1.00 of additional Indebtedness pursuant to
the provisions of the first sentence of Section 4.03.
(b) The provision of Section 5.01(a)(iv) above
shall not apply to any merger or consolidation into or with, or any
such transfer of all or substantially all of the Property and assets of the
Company and the Subsidiaries taken as a whole into, the Company.
SECTION 5.02. Officers' Certificate and Opinion of
Counsel In connection with any consolidation, merger, continuance,
transfer of assets or other transactions contemplated by Section 5.01,
the Company shall deliver, or cause to be delivered, to the
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Trustee, in form and substance reasonably satisfactory to the Trustee,
an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, continuance, sale, assignment, conveyance or
transfer and the supplemental indenture in respect thereto comply with the
provisions of this Indenture and that all conditions precedent in this
Indenture relating to such transactions have been complied with.
SECTION 5.03. Substitution of Surviving Entity
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, this Article 5, the
Surviving Entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and
the Securities with the same effect as if such Surviving Entity had been
named as the Company in this Indenture; and when a Surviving Person duly
assumes all of the obligations and covenants of the Company pursuant to
this Indenture and the Securities, except in the case of a lease, the
predecessor Person shall be relieved of all such obligations.
If such Surviving Entity shall have succeeded to and been
substituted for the Company, such Surviving Entity may cause to be signed,,
and may issue either in its own name or in the name of the Company prior to
such succession any or all of the Securities delivered to the Trustee; and,
upon the order of such Surviving Entity, instead of the Company, and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Securities
which previously shall have been signed and delivered by the officers of
the Company to the Trustee for authentication, and any Securities which
such Surviving Entity thereafter shall cause to be signed and delivered to
the Trustee for that purpose (in each instance with endorsements of
Guarantees thereon by the Guarantors). All of the Securities so issued
and so endorsed shall in all respects have the same legal rank and benefit
under this Indenture as the Securities theretofore or thereafter issued
and endorsed in accordance with the terms of this Indenture and the
Guarantee as though all of such Securities had been issued and endorsed at
the date of the execution hereof.
In case of any such consolidation, merger, continuance,
sale, transfer, conveyance or other disposal, such changes in phraseology
and form (but not in substance) may be made in the Securities
thereafter to be issued or the Guarantees to be endorsed thereon as may be
appropriate.
For all purposes of this Indenture and the Securities,
Subsidiaries of any Surviving Entity will, upon such transaction or series
of transactions, become Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to this Indenture and all Indebtedness, and all Liens
on Property or assets, of the Surviving Entity and its Subsidiaries
immediately prior to such transaction or series of transactions shall be
deemed to have been incurred upon such transaction or series of transactions.
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ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. Whenever used herein, an
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of interest on any
Security pursuant to this Indenture when the same becomes due and
payable, and the continuance of such Default for a period of 30
days;
(b) default in the payment of principal of (or
premium, if any, on) any Security when the same becomes due and
payable, whether upon Maturity, upon optional redemption,
required repurchase (including pursuant to a Change of Control
Offer or an Asset Sale Offer) or otherwise or the failure to make
an offer to purchase any such Security as required pursuant to the
provisions of the Securities and this Indenture;
(c) the Company fails to comply with any of its
covenants or agreements contained in Sections 4.03, 4.04, 4.05,
4.07, 4.09, 4.13 and 5.01 of this Indenture;
(d) the Company defaults in the performance, or
breach, of any covenant or warranty of the Company in this
Indenture (other than a covenant or warranty addressed in clause
(a), (b) or (c) above) and continuance of such Default or breach
for a period of 30 days after written notice thereof has been
given to the Company by the Trustee or to the Company and the
Trustee by Holders of at least 25% of the aggregate principal
amount at Stated Maturity of the outstanding Securities;
(e) Indebtedness of the Company or any Subsidiary is
not paid when due within the applicable grace period, if any, or
is accelerated by the holders thereof and, in either case, the
principal amount of such unpaid or accelerated Indebtedness exceeds
$10,000,000;
(f) the entry by a court of competent
jurisdiction of one or more final judgments against the Company
or any Subsidiary in an uninsured or unindemnified aggregate
amount in excess of $5,000,000 which is not discharged, waived,
appealed, stayed, bonded or satisfied for a period of 60 consecutive
days;
(g) the entry by a court having jurisdiction in the
premises of (i) a decree or order for relief in respect of the
Company or any Significant Subsidiary in an involuntary case or
proceeding under U.S. bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal, state, or foreign
bankruptcy, insolvency, or other similar law or (ii) a decree or
order adjudging the Company or any Significant
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Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company or any
Significant Subsidiary under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or
foreign bankruptcy, insolvency, or similar law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any Significant
Subsidiary or of any substantial part of the Property or assets of
the Company or any Significant Subsidiary, or ordering the winding
up or liquidation of the affairs of the Company or any
Significant Subsidiary, and the continuance of any such decree
or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days;
(h) (i) the commencement by the Company or any
Significant Subsidiary of a voluntary case or proceeding under
U.S. bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal, state or foreign bankruptcy, insolvency
or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent; or (ii) the consent by the
Company or any Significant Subsidiary to the entry of a decree or
order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under U.S.
bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal, state, or foreign bankruptcy, insolvency
or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Company or any
Significant Subsidiary; or (iii) the filing by the Company or any
Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state
or foreign bankruptcy, insolvency or other similar law; or (iv)
the consent by the Company or any Significant Subsidiary to the
filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or any
Significant Subsidiary or of any substantial part of the
Property or assets of the Company or any Significant Subsidiary
or of any substantial part of the Property or assets of the Company
or any Significant Subsidiary, or the making by the Company or any
Significant Subsidiary of an assignment for the benefit of
creditors; or (v) the admission by the Company or any Significant
Subsidiary in writing of its inability to pay its debts generally
as they become due; or (vi) the taking of corporate action by
the Company or any Significant Subsidiary in furtherance of any such
action; or
(i) any Guarantee shall for any reason cease to be,
or be asserted by the Company or any Guarantor, as applicable,
not to be, in full force and effect (except pursuant to the
release of any such Guarantee in accordance with the provisions
of this Indenture).
SECTION 6.02. Acceleration. If an Event of Default
(other than an Event of Default described in clause (g) or (h) of Section
6.01) occurs and shall be continuing, then in each and every case the
Trustee or the Holders of not less than 25% of the outstanding
aggregate principal amount at Stated Maturity of the Securities may declare
the principal amount at Stated
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Maturity of the Securities to be due and payable immediately by a notice
in writing to the Company (and to the Trustee if given by Holders of such
Securities), and upon any such declaration the principal amount at Stated
Maturity of, premium, if any, on, any accrued and unpaid interest on, and any
other amounts payable in respect of, the Securities then outstanding will
become and be immediately due and payable. If any Event of Default
specified in clause (g) or (h) of Section 6.01 occurs, the principal
amount at Stated Maturity of, premium, if any, and any accrued and unpaid
interest on, and any other amount payable in respect of, the Securities
then outstanding shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder of such
Securities. In the event of a declaration of acceleration because an
Event of Default set forth in Section 6.01(e) above has occurred and
is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of
Default pursuant to Section 6.01(e) shall be remedied or cured or waived
by the holders of the relevant Indebtedness within 30 days after such event
of default; provided that no judgment or decree for the payment of the money
due on the Securities has been obtained by the Trustee as provided in this
Indenture.
After any such acceleration, but before a judgment or
decree based on acceleration, the Holders of a majority in aggregate
principal amount at Stated Maturity of the Securities at the time
outstanding may rescind and annul such acceleration if
(a) the Company or any Guarantor has paid or deposited
with the Trustee a sum sufficient to pay
(i) all money paid or advanced by the
Trustee hereunder and the reasonable compensation,
expenses, disbursement and advances of the Trustee, its
agents and counsel,
(ii) all overdue installments of interest on
any other amounts due in respect of all Securities;
(iii) the principal of (and premium, if any, on)
any Securities that have become due otherwise than by
such declaration of acceleration and interest thereon at
the rate or rates prescribed therefor in the Securities and
this Indenture; and
(iv) to the extent that payment of such
interest is lawful, interest upon Defaulted Interest at
the rate or rates prescribed therefor in the Securities
and this Indenture;
(b) all Events of Default, other than the nonpayment
of principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided
in Section 6.04;
(c) the annulment of such acceleration would not
conflict with any judgment or decree of a court of competent
jurisdiction; and
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(d) the Company has delivered an Officers' Certificate
to the Trustee to the effect of clauses (b) and (c) of this
sentence.
No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available remedy to
collect the payment of principal (and premium, if any) of or interest on,
and any other amounts then due in respect of, the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in
exercising any right or remedy accruing upon an Event of Default shall
not impair the right or remedy or constitute a waiver of or acquiescence
in the Event of Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of
a majority in principal amount at Stated Maturity of the Securities then
outstanding by notice to the Trustee may waive an existing Default and its
consequences except (i) a Default in the payment of the principal of or
interest on a Security or (ii) a Default in respect of a provision that
under Section 9.02 cannot be amended without the consent of each Holder
affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a
majority in principal amount at Stated Maturity of the Securities then
outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly
prejudicial to the rights of other Holders, it being understood that the
Trustee shall have no duty to ascertain whether or not such actions or
forbearances are unduly prejudiced to such Holders, or would involve
the Trustee in personal liability; provided that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with
such direction. Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion
against all losses and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. No Holder of any
Securities shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy hereunder, unless:
(i) such Holder has previously given to the Trustee
written notice of a continuing Event of Default with respect to the
Securities;
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(ii) the Holders of at least 25% in aggregate principal
amount at Stated Maturity of the Securities then outstanding have
made written request, and such Holder or Holders have offered
reasonable indemnity, to the Trustee to institute such proceeding as
trustee; and
(iii) the Trustee has failed to institute such
proceeding, and has not received from the Holders of a majority
in aggregate principal amount at Stated Maturity of the
Securities then outstanding a direction inconsistent with such
request, within 60 days after such notice, request and offer.
A Holder may not use this Indenture to prejudice the rights
of another Holder or to obtain a preference or priority over another Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on the Securities
held by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without
the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event
of Default specified in Section 6.01(a) or (b) occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an
express trust against the Company for the whole amount then due and owing
(together with interest on any unpaid interest to the extent lawful) and the
amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The
Trustee shall be entitled and empowered, without regard to whether the
Trustee or any Holder shall have made any demand or performed any other
act pursuant to the provisions of this Article and without regard to
whether the principal of the Securities shall then be due and payable as
therein expressed or by declaration or otherwise, by intervention in any
proceedings relative to the Company or any Obligor upon the Securities,
or to the creditors or Property or assets of the Company, any Guarantor
or any other Obligor or otherwise, to take any and all actions authorized
under the Trust Indenture Act in order to have claims of the Holders and
the Trustee allowed in any such proceeding. In particular, the
Trustee shall be entitled and empowered in such instances:
(a) to file and prove a claim or claims for the whole
amount of principal (and premium, if any), interest and any other amounts
owing and unpaid in respect of the Securities, and to file such other papers
or documents as may be necessary or advisable in order to have the claims
of the Trustee (including all amounts owing to the Trustee and each
predecessor Trustee pursuant to Section 7.07 hereof) and of the Holders
allowed in any judicial proceedings relative to the Company or other
obligor upon the Securities, or to the creditors or property of the Company,
any Guarantor, or any such other Obligor,
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(b) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of the Securities in any
election of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or Person
performing similar functions in comparable proceedings, and
(c) to collect and receive any moneys or other
Property or assets payable or deliverable on any such claims, and to
distribute all amounts received with respect to the claims of the Holders
and of the Trustee on their behalf; and any trustee, receiver, or
liquidator, custodian or other similar official is hereby authorized by
each of the Holders to make payments to the Trustee, and, in the event that
the Trustee shall consent to the making of payments directly to the
Holders, to pay to the Trustee such amounts as shall be sufficient to cover
all amounts owing to the Trustee and each predecessor Trustee pursuant
to Section 7.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof,
or to authorize the Trustee to vote in respect of the claim of any Holder in
any such proceeding except, as aforesaid, to vote for the election of a
trustee in bankruptcy or similar person.
In any proceedings brought by the Trustee (and also
any proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party), the Trustee shall be held
to represent all the Holders of the Securities, and it shall not be
necessary to make any Holders of the Securities parties to any such
proceedings.
SECTION 6.10. Priorities. If the Trustee collects any
money or property pursuant to this Article 6, it shall pay out the money or
property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable
on the Securities for principal (premium, if any) and interest,
respectively; and
THIRD: to the Company or the Guarantors or to such
other party as a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for
any payment to Holders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Holder and the Trustee
a notice that states the record date, the payment date and amount to be
paid. The Trustee may mail such notice in the name and at the expense of
the Company.
SECTION 6.11. Undertaking for Costs. In any suit for
the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or
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omitted by it as Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee,
a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount at Stated Maturity of the Securities.
SECTION 6.12 Restoration of Rights and Remedies. If
the Trustee or any Holder of Securities has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, the Trustee and the Holders shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding has
been instituted.
SECTION 6.13 Rights and Remedies Cumulative. Except as
otherwise provided in Section 2.08 hereof, no right or remedy conferred
herein, upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14 Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise any
right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article 6 or by
law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in their
exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of
Default:
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(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(1) this subsection does not limit the effect of subsection
(b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to subsections (a), (b) and (c) of this
Section.
(e) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in writing with the
Company.
(f) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section and to the
provisions of the Trust Indenture Act.
SECTION 7.02. Rights of Trustee.
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(a) Subject to the provisions of Section 7.01(a)
hereof, the Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however, that the
Trustee's conduct does not constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating
to this Indenture and the Securities shall be full and complete
authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) Prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of Default, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, Officer's Certificate, or other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in aggregate principal amount
of the Securities then outstanding; provided that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may
require reasonable indemnity against such expenses or liabilities as a
condition to proceeding; the reasonable expenses of every such
examination shall be paid by the Company or, if advanced by the Trustee,
shall be repaid by the Company upon demand.
(g) The Trustee shall not be required to give any
bond or surety in respect of the performance of its powers and duties
hereunder.
(h) The Trustee shall not be bound to ascertain or
inquire as to the performance or observance of any covenants, conditions,
or agreements on the part of the Company, except as otherwise set forth
herein, but the Trustee may require of the Company full information and
advice as to the performance of the covenants, conditions and agreements
contained herein and shall be entitled in connection herewith to examine
the books, records and premises of the Company.
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(i) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty.
(j) Except for (i) a default under Section 6.01(a) or
(b), or (ii) any other event of which the Trustee has "actual knowledge"
and which event, with the giving of notice or the passage of time or both,
would constitute an Event of Default under this Indenture, the Trustee
shall not be deemed to have notice of any Default or Event of Default
unless specifically notified in writing of such event by the Company or
the Holders of not less than 25% in aggregate principal amount at
Stated Maturity of the Securities then outstanding; provided that the
Trustee shall comply with the "automatic stay" provisions contained in
the U.S. bankruptcy laws, if applicable; and as used herein, the term
"actual knowledge" means the actual fact or statement of knowing by a
Responsible Officer, without any duty to make any investigation with regard
thereto.
SECTION 7.03. Individual Rights of Trustee. The Trustee
in its individual or any other capacity may become the owner or pledgee
of Securities and may otherwise deal with the Company or its Affiliates
with the same rights it would have if it were not Trustee. Any Paying
Agent, Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not
be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and
it shall not be responsible for any statement of the Company in this
Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and
is continuing and if it is known to the Trustee, the Trustee shall mail to
each Holder notice of the Default within 90 days after it occurs. Except
in the case of a Default in payment of principal of (or premium, if any) or
interest on any Security (including payments pursuant to the mandatory
repurchase provisions of such Security, if any), the Trustee may withhold
the notice if and so long as the Trustee in good faith determines that
withholding the notice is in the interests of Holders.
SECTION 7.06. Reports by Trustee to Holders. As
promptly as practicable after May 15 beginning with the May 15 following
the date of this Indenture, and in any event prior to August 15 in each
year, the Trustee shall mail to each Holder a brief report dated as of
such date that complies with TIA Section 313(a) if and to the extent
required by TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to
Holders shall be filed with the Commission and each stock exchange (if
any) on which the Securities are listed. The Company agrees to notify
promptly the Trustee whenever the Securities become listed on any stock
exchange and of any delisting thereof.
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SECTION 7.07. Compensation and Indemnity. The Company
shall pay to the Trustee promptly upon request from time to time the
compensation for its services as agreed to by the Trustee and the Company.
The Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee
promptly upon request for all reasonable out-of-pocket expenses incurred
or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Company shall
indemnify the Trustee against any and all loss, liability or reasonable
expense (including reasonable attorneys' fees) incurred by it in connection
with the acceptance and administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the
Trustee may have separate counsel and the Company shall pay the fees and
expenses of such counsel. The Company need not reimburse any expense
or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own willful misconduct, negligence or bad
faith. The Company need not pay for any settlement made by the Trustee
without the Company's consent, such consent not to be unreasonably withheld.
To secure the Company's payment obligations in this
Section, the Trustee shall have a Lien prior to the Securities on all
money or property held or collected by the Trustee other than money or
property held in trust to pay principal of and interest on particular
Securities.
The Company's payment obligations pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee
incurs expenses after the occurrence of a Default specified in Section
6.01(g) or (h) with respect to the Company, the expenses are
intended to constitute expenses of administration under any applicable
bankruptcy laws.
SECTION 7.08. Replacement of Trustee. The Trustee may
resign at any time by so notifying the Company. The Holders of a majority
in principal amount at Stated Maturity of the Securities may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee. If
at any time:
(i) the Trustee shall fail to comply with
Section 310(b) of the Trust Indenture Act after written request
thereof by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, unless the Trustees
duty to resign is stayed in accordance with the provisions of TIA
Section 310(b); or
(ii) the Trustee shall cease to be eligible
under Section 7.10 hereof and shall fail to resign after written
request therefor by the Company or by any Holder; or
(iii) the Trustee shall become incapable of
acting or a decree or order for relief by a court having
jurisdiction in the premises shall have been entered in respect of
the Trustee in an involuntary case under the United States
bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or
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similar law, or a decree or order by a court having jurisdiction
in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Trustee or of its Property
and assets or affairs, or any public officer shall take charge
or control of the Trustee or of its Property and assets or
affairs for the purpose of rehabilitation, conservation,
winding-up or liquidation; or
(iv) the Trustee shall commence a voluntary
case under the United States bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or similar law or shall consent to the
appointment of or taking possession by a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trustee or of its Property and assets or
affairs, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts generally as they become due, or shall take corporate action
in furtherance of any such action,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee with respect to the Securities, or (ii) subject to Section
6.11 hereof, any Holder who has been a bona fide Holder of a Note for at
least six months may, on behalf of such Holder and all others similarly
situated, petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee for the
Securities.
If the Trustee resigns, is removed by the Company or
by the Holders of a majority in principal amount at Stated Maturity of
the Securities and such Holders do not reasonably promptly appoint a
successor Trustee, or if a vacancy exists in the office of Trustee for any
reason (the Trustee in such event being referred to herein as the retiring
Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Thereupon
the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall
mail a notice of its succession to Holders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor
Trustee, subject to the Lien provided for in Section 7.07.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the retiring
Trustee or the Holders of 10% in principal amount at Stated Maturity of the
Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Holder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
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Notwithstanding the replacement of the Trustee pursuant
to this Section, the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee
may adopt the certificate of authentication of any predecessor trustee,
and deliver such Securities so authenticated; and in case at that time any
of the Securities shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor to the Trustee; and
in all such cases such certificates shall have the full force which it
is anywhere in the Securities or in this Indenture provided that the
certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The
Trustee shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA Section 310(b); provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities
or certificates of interest or participation in other securities of the
Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
Satisfaction and Discharge
SECTION 8.01 Satisfaction and Discharge. This
Indenture shall upon the request of the Company cease to be of further
effect (except as to surviving rights of registration of transfer or
exchange of Securities herein expressly provided for, the Company's
obligations under Sections 7.07 and 8.04 hereof, and the Company's, the
Trustee's and the Paying Agent s obligations under Section 8.03 hereof)
and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture when
(a) either
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(i) all Securities therefore authenticated
and delivered (other than (A) Securities which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.08 and (B) Securities for whose payment
money has been deposited in trust with the Trustee or any
Paying Agent and thereafter paid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation; or
(ii) all such Securities 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, or
(C) are to be called for redemption
within one year under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense,
of the Company,
and the Company, in the case of clause (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for such purpose money or U.S.
Government Obligations in an amount sufficient (as certified by an
independent public accountant designated by the Company) to pay
and discharge the entire indebtedness of such Securities not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any, on) and interest, if any, to the
date of such deposit (in the case of Securities which have become
due and payable) or the Stated Maturity or Redemption Date, as the
case may be;
(b) the Company has paid or caused to be paid all
other sums then due and payable hereunder by the Company;
(c) no Default or Event of Default with respect to
the Securities shall have occurred and be continuing on the date of such
deposit and after giving effect to such deposit; and
(d) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the Company s obligations in Sections 2.03, 2.04, 2.06, 2.08,
2.11, 7.07, 7.08, 8.02, 8.03 and 8.04, and the Trustee s and Paying
Agent s obligations in Section 8.03 shall survive until the
Securities are no longer outstanding. Thereafter, only the Company s
obligations in Sections 7.07, 8.03 and 8.04 and the Trustee s and Paying
Agent s obligations in Section 8.03 shall survive.
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In order to have money available on a payment date to
pay principal (and premium, if any, on) or interest on the Securities, the
U.S. Government Obligations shall be payable as to principal (and
premium, if any) or interest at least one Business Day before such
payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer s option.
SECTION 8.02 Application of Trust Money. All money
deposited with the Trustee pursuant to Section 8.01 shall be held in
trust and, at the written direction of the Company, be invested prior to
maturity in U.S. Government Obligations, and applied by the Trustee in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent as the Trustee may
determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for the payment of which money has been
deposited with the Trustee; but such money need not be segregated from
other funds except to the extent required by law.
SECTION 8.03 Repayment to the Company.
The Trustee and the Paying Agent shall promptly pay to the
Company upon written request any excess money or securities held by them at
any time.
The Trustee and the Paying Agent shall pay to the Company
upon written request any money held by them for the payment of principal
or interest that remains unclaimed for two years after the date upon
which such payment shall have become due; provided that the Company shall
have either caused notice of such payment to be mailed to each
Securityholder entitled thereto no less than 30 days prior to such
repayment or within such period shall have published such notice in a
financial newspaper of widespread circulation published in The City of New
York, including, without limitation, The Wall Street Journal. After payment
to the Company, Holders entitled to the money must look to the Company
for payment as general creditors unless an applicable abandoned property
law designates another Person, and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
SECTION 8.04 Reinstatement.
If the Trustee or Paying Agent is unable to apply any
money or U.S. Government Obligations in accordance with Section 8.01 by
reason of any legal proceeding or by reason of any order or judgment of
any court of governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company s and Guarantors obligations
under this Indenture, the Securities and the Guarantees shall be
revived and reinstated as though no deposit has occurred pursuant to
Section 8.01 until such time as the Trustee or Paying Agent is permitted
to apply all such money or U.S. Government Obligations in accordance with
Section 8.02; provided, however, that if the Company or the Guarantors have
made any payment of interest on or principal of any Securities because of
the reinstatement of their Obligations, the Company or such Guarantors
shall be subrogated to the rights of the Holders of such Securities to
receive
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such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE 9
Defeasance
SECTION 9.01 Company's Option to Effect Defeasance or
Covenant Defeasance. The Company may elect, at its option, at any time,
to have Section 9.02 or Section 9.03 hereof applied to the outstanding
Securities (in whole and not in part) upon compliance with the conditions
set forth below in this Article 9, such election to be evidenced by a Board
Resolution delivered to the Trustee.
SECTION 9.02 Defeasance and Discharge. Upon the Company's
exercise of its option to have this Section 9.02 applied to the
outstanding Securities (in whole and not in part), the Company shall be
deemed to have been discharged from its Obligations with respect to such
Securities as provided in this Section 9.02 on and after the date on
which the conditions set forth in Section 9.04 hereof are satisfied
(hereinafter called "Defeasance"). For this purpose, Defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Securities and the Company and the
Guarantors shall be deemed to have satisfied all of their other
obligations under such Securities, this Indenture and the Guarantees
(and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), subject to the following which shall
survive until otherwise terminated or discharged hereunder:
(a) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 9.04 hereof and
as more fully set forth in Section 9.04, payments in respect of the
principal of and any premium and interest on such Securities when payments
are due,
(b) the Company's obligations with respect to such
Securities under Sections 2.06, 2.08, 2.10, 4.15, 4.16 and 4.17 hereof,
(c) the rights, powers, trusts, duties and
immunities of the Trustee under this Indenture,
(d) Article 3 hereof, and
(e) this Article 9.
Subject to compliance with this Article 9, the Company may
exercise its option to have this Section 9.02 applied to the outstanding
Securities notwithstanding the prior exercise of its option to have Section
9.03 hereof applied to such Securities.
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SECTION 9.03 Covenant Defeasance. Upon the Company's
exercise of its option to have this Section 9.03 applied to the
outstanding Securities (in whole and not in part), (i) the Company and
the Guarantors shall be released from their respective obligations under
Sections 5.01 and 5.02, Sections 4.02 through 4.14, inclusive, Sections
4.18, 4.19 and 4.21 and any covenant added to this Indenture subsequent to
the Issue Date pursuant to Section 10.01 hereof, and (ii) the occurrence
of any event specified in Section 6.01(c) or 6.01(d) hereof, with
respect to any of Section 5.01 and 5.02, Sections 4.03 through 4.14,
inclusive, Sections 4.18, 4.19 and 4.21, and any covenant added to this
Indenture subsequent to the Issue Date pursuant to Section 10.01 hereof,
shall be deemed not to be or result in an Event of Default, in each case
with respect to such Securities as provided in this Section 9.03 on and
after the date on which the conditions set forth in Section 9.04 hereof
are satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, Covenant Defeasance means that, with respect to such Securities,
the Company and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such specified Section (to the extent so specified in the case of Section
6.01(c) and 6.01(d) hereof), whether directly or indirectly by reason of
any reference elsewhere herein to any such Section or by reason of any
reference in any such Section to any other provisions herein or in any
other document; but the remainder of this Indenture, the Guarantees and such
Securities shall be unaffected thereby.
SECTION 9.04 Conditions to Defeasance or Covenant
Defeasance. The following shall be the conditions to the application of
Section 9.03 or Section 9.04 hereof to the outstanding Securities:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for, and dedicated solely to the benefits of the Holders of such Securities,
(i) money in an amount, or (ii) U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one Business Day
before the due date of any payment, money in an amount, or (iii) a
combination thereof, in each case sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge the
principal of (premium, if any on) and any installment of interest on such
Securities on the Stated Maturity thereof, in accordance with the terms
of this Indenture and such Securities.
(b) In the event of an election to have Section 9.02
hereof apply to the outstanding Securities, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the date of this Indenture, there
has been a change in the applicable United States federal income tax law, in
either case (i) or (ii) to the effect that, and based thereon such opinion
shall confirm that, the Holders of such Securities will not recognize gain
or loss for United States federal income tax purposes as a result of the
deposit, Defeasance and discharge to be effected with respect to such
Securities and will be subject to United States federal income tax in the
same amount, in the same manner and at the same times as would be the case
if such deposit, Defeasance and discharge were not to occur.
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(c) In the event of an election to have Section 9.03
hereof apply to the outstanding Securities, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Securities will not recognize gain or loss for United States
federal income tax purposes as a result of the deposit and Covenant
Defeasance to be effected with respect to such Securities and will be
subject to United States federal income tax in the same amount, in the same
manner and at the same times as would be the case if such deposit, Covenant
Defeasance and discharge were not to occur.
(d) No Default or Event of Default with respect to the
outstanding Securities shall have occurred and be continuing at the time of
such deposit after giving effect thereto or and no Default or Event of
Default under Section 6.01(g) or 6.01(h) shall have occurred at any time on
or prior to the 91st day after the date of such deposit and be continuing
on such 91st day (it being understood that this condition shall not be
deemed satisfied until after such 91st day).
(e) Such Defeasance or Covenant Defeasance shall
not cause the Trustee to have a conflicting interest within the meaning
of the Trust Indenture Act (assuming for the purpose of this clause (e)
that all Securities are in default within the meaning of such Act).
(f) Such Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company or the Guarantor is a party or
by which it is bound.
(g) Such Defeasance or Covenant Defeasance shall not
result in the trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act of 1940, as
amended, unless such trust shall be registered under such Act or exempt from
registration thereunder.
(h) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant Defeasance
have been complied with.
SECTION 9.05 Deposited Money and U.S. Government
Obligations to be Held in Trust; Miscellaneous Provisions. Subject to
Section 9.06 hereof, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee pursuant to
Section 9.04 hereof in respect of the outstanding Securities shall be held
in trust and applied by the Trustee, in accordance with the provisions of
such Securities and this Indenture, to the payment, either directly or
through any such Paying Agent as the Trustee may determine, to the Holders
of such Securities, of all sums due and to become due thereon in respect
of principal and any premium and interest, but money so held in trust
need not be segregated upon other funds except to the extent required by
law. The Company shall pay and indemnity the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 9.04 hereof or the principal and
interest received in
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respect thereof other than any such tax, fee or other charge which by
law is for the account of the Holders of outstanding Securities.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon
Company Order any money or U.S. Government Obligations held by it as
provided in Section 9.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the
amount thereof that would then be required to be deposited to effect the
Defeasance or Covenant Defeasance, as the case may be, with respect to the
outstanding Securities.
SECTION 9.06 Repayment to Company. Any money deposited
with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium, if any, or interest,
if any, on any Security and remaining unclaimed for two years after such
principal, premium, if any, or interest, if any, have become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Company as trustee thereof,
shall thereupon cease; provided that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall
Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication,
any unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 9.07 Reinstatement. If the Trustee or Paying
Agent is unable to apply any money in accordance with this Article 9 with
respect to any Notes by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations under this Indenture, the Guarantees and
such Securities from which the Company or the Guarantors have been
discharged or released pursuant to Section 9.02 or 9.03 hereof shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article 9 with respect to such Securities, until such time as the
Trustee or Paying Agent is permitted to apply all money held in trust
pursuant to Section 9.05 hereof with respect to such Securities in
accordance with this Article 9; provided that if the Company or any
Guarantor makes any payment of principal of, premium, if any, or
interest on any such Security following such reinstatement of its
obligations, the Company or such Guarantor, as the case may be, shall be
subrogated to the Holders of such Securities to receive such payment from the
money so held in trust.
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ARTICLE 10
Amendments
SECTION 10.01. Without Consent of Holders.
(a) The Company, the Guarantors and the Trustee may at
any time and from time to time, without notice to or consent of any
Holder, enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(i) to evidence the succession of another
Person to the Company and the Guarantors and the
assumption by such successor of the covenants and
Obligations of the Company under this Indenture and
contained in the Securities and the Guarantors contained in
this Indenture and the Guarantees;
(ii) to add to the covenants of the Company,
for the benefit of the Holders, or to surrender any
right or power conferred upon the Company or the
Guarantors by this Indenture;
(iii) to add any additional Events of Default;
(iv) to provide for uncertificated Securities
in addition to or in place of certificated Securities;
(v) to evidence and provide for the
acceptance of appointment under this Indenture by the
successor Trustee;
(vi) to secure the Securities and/or the
Guarantees;
(vii) to cure any ambiguity, to correct or
supplement any provision in this Indenture which may be
inconsistent with any other provision therein or to add
any other provisions with respect to matters or questions
arising under this Indenture, provided that such actions
will not adversely affect the interests of the Holders in
any material respect; or
(viii) to add or release any Guarantor pursuant
to the terms of this Indenture.
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SECTION 10.02. With Consent of Holders. With the
consent of the Holders of at least a majority of the principal amount
at Stated Maturity of the outstanding Securities (including consents
obtained in connection with a tender offer or an exchange offer for the
Securities), by Act delivered to the Company, the Guarantors and the
Trustee, the Company, the Guarantors and the Trustee may enter into one
or more indentures supplemental hereto for the purpose of adding any
provisions to or changing or eliminating any of the provisions of this
Indenture or modifying the rights of the Holders of the Securities,
provided that no such supplemental indenture, without the consent of the
Holder of each outstanding Security affected thereby, will:
(a) change the Stated Maturity of the principal of,
or any installment of interest on, any Security, or reduce the principal
amount thereof (or any premium, if any), or the interest thereon, that
would be due and payable upon Maturity thereof, or change the place of
payment where, or in the coin or currency in which, any Security or
any premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof; or
(b) reduce the percentage in principal amount at Stated
Maturity of the outstanding Securities, the consent of whose Holders is
required for any such supplemental indenture or required for any waiver of
compliance with the provisions of this Indenture; or
(c) modify any of the provisions of Section 6.04
hereof, except to increase the percentage set forth therein or to provide
that certain other provisions of this Indenture cannot be amended or waived
without the consent of the Holder of each outstanding Security affected
thereby; or
(d) subordinate in right of payment, or otherwise
subordinate, the Securities or the Guarantees to any other Indebtedness; or
(e) modify any provision of this Indenture relating to
the obligations of the Company to make offers to purchase Securities upon a
Change of Control or from the proceeds of an Asset Sale; or
(f) modify any of the provisions of this Section 10.02
except to increase any percentage set forth herein or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holders of each outstanding Security affected
thereby; or
(g) amend, supplement or otherwise modify the
provisions of this Indenture relating to the Guarantees.
It shall not be necessary for any Act of Holders under
this Section 10.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
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SECTION 10.03 Effect of Supplemental Indentures. Upon
the execution of any supplemental indenture under this Article 10, this
Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby. After a
supplemental indenture becomes effective, the Company shall mail to
Holders a notice briefly describing such amendment. The failure to give
such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section.
SECTION 10.04. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall comply with the
Trust Indenture Act as then in effect.
SECTION 10.05. Revocation and Effect of Consents and Waivers.
(a) A consent to an amendment or a waiver by a
Holder of a Security shall bind the Holder and every subsequent Holder of
that Security or portion of the Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent or waiver
is not made on the Security. However, any such Holder or subsequent Holder
may revoke the consent or waiver as to such Holder's Security or portion of
the Security if the Trustee receives the notice of revocation before the
date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Holder. An amendment or
waiver becomes effective upon the execution of a supplemental
indenture containing such amendment or waiver by the Trustee.
(b) The Company may, but shall not be obligated to, fix
a record date for the purpose of determining the Holders entitled to give
their consent or take any other action described above or required or
permitted to be taken pursuant to this Indenture. If a record date is
fixed, then notwithstanding the immediately preceding subsection, those
Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any such
action, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 10.06. Notation on or Exchange of Securities. If
an amendment changes the terms of a Security, the Trustee may require the
Holder of the Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security regarding the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment.
SECTION 10.07. Trustee To Execute Supplemental
Indentures. The Trustee shall execute any supplemental indenture
authorized pursuant to this Article 10 if such supplemental indenture
does not adversely affect the rights, duties, liabilities or immunities of
the Trustee. If it does, the Trustee may, but shall not be required to,
execute such supplemental
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indenture. In executing any supplemental indenture, the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and to
receive, and (subject to Section 7.01 hereof) shall be fully protected in
relying upon, an Officers' Certificate (which need only cover the matters
set forth in clause (a) below) and an Opinion of Counsel provided by the
Company stating that:
(a) such supplemental indenture is authorized or
permitted by this Indenture and that all conditions precedent to the
execution, delivery and performance of such supplemental indenture have been
satisfied:
(b) the Company and the Guarantors have all necessary
corporate power and authority to execute and deliver the supplemental
indenture and that the execution, delivery and performance of such
supplemental indenture has been duly authorized by all necessary
corporate action of the Company and the Guarantors;
(c) the execution, delivery and performance of the
supplemental indenture do not conflict with, or result in the breach of
or constitute a default under any of the terms, conditions or provisions
of (i) this Indenture, (ii) the charter documents and by-laws of the Company
or any Guarantor, or (iii) any material agreement or instrument to which the
Company or any Guarantor is subject and of which such counsel is aware;
(d) to the knowledge of legal counsel writing such
Opinion of Counsel, the execution, delivery and performance of the
supplemental indenture do not conflict with, or result in the breach of any
of the terms, conditions or provisions of (i) any law or regulation
applicable to the company or any Guarantor, or (ii) any material
order, writ, injunction or decree of any court or governmental
instrumentality applicable to the Company or any Guarantor;
(e) such supplemental indenture has been duly and
validly executed and delivered by the Company and the Guarantors, and the
Indenture together with such supplemental indenture constitutes a legal,
valid and binding obligations of the Company and the Guarantors
enforceable against the Company and the Guarantors, as applicable, in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors rights generally and general equitable principles;
and
(f) the Indenture together with such amendment or
supplement complies with the Trust Indenture Act.
SECTION 10.08. Payment for Consent. Neither the Company
nor any Affiliate of the Company shall, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise,
to any Holder for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of this Indenture or the Securities
unless such consideration is offered to be paid to all Holders that so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
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ARTICLE 11
Guarantees
SECTION 11.01. Guarantees.
(a) For good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, each of the Guarantors,
together with each Subsidiary of the Company which in accordance with
Section 11.08 is required in the future to guarantee the Obligations of the
Company and the Guarantors under the Securities, the Guarantees and this
Indenture upon execution of a supplemental indenture, hereby jointly and
severally and irrevocably and unconditionally guarantees to the Trustee and
to each Holder of a Security authenticated and delivered by the Trustee
irrespective of the validity or enforceability of this Indenture or the
Securities or the Obligations of the Company and the Guarantors under this
Indenture, that: (i) the principal of, premium, if any, and any
interest, on the Securities (including, without limitation, any interest
that accrues after the filing of a proceeding of the type described in
Sections 6.01(g) and (h)) and any fees, expenses and other amounts owing
under this Indenture will be duly and punctually paid in full when due,
whether at Stated Maturity, by acceleration, call for redemption, upon a
Change of Control Offer, Asset Sale Offer, purchase or otherwise, and
interest on the overdue principal and (to the extent permitted by law)
interest, if any, on the Securities and any other amounts due in respect
of the Securities, and all other Obligations of the Company and the
Guarantors to the Holders of the Securities under this Indenture and the
Securities, whether now or hereafter existing, will be promptly paid in
full or performed, all strictly in accordance with the terms hereof and of
the Securities; and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other Obligations, the same will
be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at Stated Maturity, by acceleration,
call for redemption, upon Change of Control Offer, Asset Sale Offer,
purchase or otherwise. If payment is not made when due of any amount so
guaranteed for whatever reason, each Guarantor shall be jointly and severally
obligated to pay the same individually whether or not such failure to pay
has become an Event of Default which could cause acceleration pursuant to
Section 6.02. Each Guarantor agrees that this is a guarantee of payment
and not a guarantee of collection. An Event of Default under this
Indenture or the Securities shall constitute an Event of Default under
this Guarantee, and shall entitle the Holders to accelerate the
Obligations of each Guarantor hereunder in the same manner and to the
same extent as the Obligations of the Company. This Guarantee is
intended to be superior to or pari passu in right of payment with all
Indebtedness of the Guarantors and each Guarantor s Obligations are
independent of any Obligation of the Company or any other Guarantor.
(b) Each Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the Obligations under
this Indenture or the Securities and also waives notice of protest for
nonpayment. Each Guarantor waives notice of any default under the
Securities or the Obligations. The Obligations of each Guarantor hereunder
shall not be affected by (a) the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or
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any other agreement or otherwise; (b) any extension or renewal of any
thereof; (c) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or the
Trustee for the Obligations or any of them; (e) the failure of any
Holder or the Trustee to exercise any right or remedy against any
other guarantor of the Obligations; or (f) any change in the ownership of
such Guarantor.
(c) The Obligations of each Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or termination for
any reason, including any claim of waiver, release, surrender, alteration
or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Obligations of the
Company or otherwise. Without limiting the generality of the
foregoing, the Obligations of each Guarantor herein shall not be
discharged or impaired or otherwise affected by the failure of any Holder
or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver
or modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations of the Company, or by any
other act or thing or omission or delay to do any other act or thing which
may or might in any manner or to any extent vary the risk of such Guarantor
or would otherwise operate as a discharge of such Guarantor as a matter of
law or equity.
(d) Each Guarantor further agrees that its
Guarantee herein shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of,
premium, if any, on or interest on any Obligation of the Company is
rescinded or must otherwise be restored by any Holder or the Trustee upon
the bankruptcy or reorganization of the Company or otherwise.
(e) In furtherance of the foregoing and not in
limitation of any other right which any Holder or the Trustee has at law or
in equity against any Guarantor by virtue hereof, upon the failure of the
Company to pay the principal of, premium, if any, on or interest on any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any
other Obligation, each Guarantor hereby promises to and will, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be
paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest
on such Obligations (but only to the extent not prohibited by law) and
(iii) all other monetary Obligations of the Company to the Holders and the
Trustee.
(f) Until such time as the Securities and the
other Obligations of the Company guaranteed hereby have been satisfied in
full, each Guarantor hereby irrevocably waives any claim or other rights
that it may now or hereafter acquire against the Company or any other
Guarantor that arise from the existence, payment, performance or
enforcement of such Guarantor's Obligations under this Guarantee,
including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right
to participate in any claim or remedy of the Holders or the Trustee against
the Company or any
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other Guarantor or any security, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from the
Company or any other Guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right. If any amount shall be paid to
such Guarantor in violation of the preceding sentence at any time prior to
the later of the payments in full of the Securities and all other amounts
payable under this Indenture, this Guarantee and the Stated Maturity of the
Notes, such amount shall be held in trust for the benefit of the
Holders and the Trustee and shall forthwith be paid to the Trustee to be
credited and applied to the Notes and all other amounts payable under this
Guarantee, whether matured or unmatured, in accordance with the terms of
this Indenture, or to be held as security for any Obligations or other
amounts payable under this Guarantee thereafter arising.
(g) Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture and that the waiver set forth in this Section 11.01 is
knowingly made in contemplation of such benefits. Each Guarantor further
agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) subject to this Article 11, the
maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
acceleration of such Obligations guaranteed hereby as provided in Article
6, such Obligations (whether or not due and payable) shall further then
become due and payable by the Guarantors for the purposes of this Guarantee.
(h) A Guarantor that makes a distribution or payment
under a Guarantee shall be entitled to contribution from each other
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
such other Guarantor for all payments, damages and expenses incurred
by that Guarantor in discharging the Company s obligations with respect
to the Securities and this Indenture or any other Guarantor with respect to
its Guarantee, so long as the exercise of such right does not impair the
rights of the Holders of the Securities under the Guarantees.
(i) Each Guarantor also agrees to pay any and
all costs and expenses (including reasonable attorneys' fees) incurred by
the Trustee or any Holder in enforcing any rights under this Section.
SECTION 11.02. Limitation on Liability. Any term or
provision of this Indenture to the contrary notwithstanding, the maximum
aggregate amount of the Obligations guaranteed hereunder by any
Guarantor shall not exceed the maximum amount that can be hereby guaranteed
without rendering this Indenture, as it relates to such Guarantor, void,
voidable or unenforceable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. To effectuate the foregoing intention, the Obligations
of each Guarantor shall 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 hereunder, result in the Obligations of such Guarantor under its
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Guarantee not constituting a fraudulent conveyance or fraudulent transfer
under federal, state or foreign law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on
the Adjusted Net Assets of each Guarantor.
SECTION 11.03 Execution and Delivery of Guarantees. To
further evidence its Guarantee set forth in Section 11.01 hereof, each
Guarantor hereby agrees that notation of such Guarantee shall be endorsed
on each Security authenticated and delivered by the Trustee and executed
by either manual or facsimile signature of an authorized officer of such
Guarantor. Each Guarantor hereby agrees that its Guarantee set forth in
Section 11.01 hereof shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Guarantee. If an
officer of a Guarantor whose signature is on this Indenture or a Security
no longer holds that office at the time the Trustee authenticates such
Security or at any time thereafter, such Guarantor's Guarantee of such
Security shall be valid nevertheless. The delivery of any Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of any Guarantee set forth in this Indenture on behalf of the
Guarantor.
SECTION 11.04 When a Guarantor May Merge, etc. No
Guarantor shall consolidate with or merge with or into (whether or not
such Guarantor is the surviving person) another corporation, Person or
entity whether or not affiliated with such Guarantor (but excluding any
consolidation, amalgamation or merger if the surviving corporation is no
longer a Subsidiary) unless (i) subject to the provisions of Section 11.07
hereof, the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the Obligations of
such Guarantor pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee under the Securities and this Indenture and
(ii) immediately after giving effect to such transaction, no Default or
Event of Default exists. In connection with any such consolidation or
merger, the Trustee shall be entitled to receive an Officers' Certificate
and an Opinion of Counsel stating that such consolidation or merger is
permitted by this Section 11.04.
SECTION 11.05. No Waiver. Neither a failure nor a delay
on the part of either the Trustee or the Holders in exercising any right,
power or privilege under this Article 11 shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
or further exercise of any right, power or privilege. The rights,
remedies and benefits of the Trustee and the Holders herein expressly
specified are cumulative and not exclusive of any other rights, remedies
or benefits which either may have under this Article 11 at law, in equity,
by statute or otherwise.
SECTION 11.06. Modification. No modification, amendment
or waiver of any provision of this Article 11, nor the consent to any
departure by any Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Trustee, and then
such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand on any
Guarantor in any case shall entitle such Guarantor to any other or further
notice or demand in the same, similar or other circumstances.
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SECTION 11.07. Release of Guarantor. Upon the sale or
other transfer of all of the Capital Stock of a Guarantor to any Person that
is not an Affiliate of the Company in compliance with the terms of this
Indenture (including, without limitation, Section 4.07 hereof) and in a
transaction that does not result in a Default or an Event of Default being
in existence or continuing immediately thereafter, such Guarantor shall be
deemed automatically and unconditionally released and discharged from all
obligations under this Indenture without any further action required on the
part of the Trustee or any Holder; provided that the Net Available Proceeds
of such sale or other disposition are applied in accordance with Section
4.07 of this Indenture as if such sale or disposition were an Asset Sale
and in accordance with the applicable provisions of this Indenture. The
Trustee shall deliver at the expense of the Company an appropriate
instrument or instruments evidencing such release upon receipt of a
request of the Company accompanied by an Officers' Certificate and Opinion
of Counsel certifying as to the compliance with this Section 11.07 and
the other applicable provisions of this Indenture.
SECTION 11.08. Execution of Supplemental Indentures for
Future Guarantors. Any Wholly Owned Subsidiary that is a domestic
Subsidiary or any other Subsidiary that guarantees any Indebtedness of an
Obligor is required to become a Guarantor and the Company shall cause
each such Subsidiary to promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit C hereto pursuant to which such
Subsidiary shall become a Guarantor under this Article 11 and shall
guarantee the Obligations of the Company under the Securities and this
Indenture. Concurrently with the execution and delivery of such
supplemental indenture, the Company shall deliver to the Trustee an
Opinion of Counsel to the effect that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors' rights
generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms, and as to any such other matters
as the Trustee may reasonably request.
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ARTICLE 12
Miscellaneous
SECTION 12.01. Compliance Certificates and Opinions.
Upon any application or request by the Company or the Guarantors to the
Trustee to take any action under any provision of this Indenture, the
Company and the Guarantors, as applicable, shall furnish to the Trustee, to
the extent required by the TIA or this Indenture, (i) an Officers'
Certificate stating that all conditions precedent, if any, provided for in
this Indenture (including any covenant, compliance with which constitutes a
condition precedent) relating to the proposed action have been complied
with and (ii) an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which
the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to
compliance with a condition or covenant provided for in this Indenture
shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such individual, such condition or covenant has been complied with.
SECTION 12.02. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to some matters
and one or more other such Persons as to other matters, and any such Person
may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company or any
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the
matters upon which his certificate or
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opinion is based are erroneous. Any such certificate or opinion of counsel
may be based, and may state that it is so based, insofar as it
relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or such Guarantor
stating that the information with respect to such factual matters is in the
possession of the Company or such Guarantor, unless such counsel knows, or
in the exercise of reasonable care should know, that the certificate of
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 12.03. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by a specified percentage of Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such
specified percentage of Holders in person or by agents duly appointed in
writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are received by
the Trustee and, where it is hereby expressly required, to the Company and
the Guarantors. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to
Sections 7.01 and 7.02) conclusive in favor of the Trustee, the Company and
the Guarantors, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact
and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient, including the execution of
such instrument or writing without more.
(c) The ownership, principal amount and serial numbers of
Securities held by any Person, and the date of holding the same, shall be
proved by the Security Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, by or
pursuant to Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Such record date shall be
the record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the
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date 30 days prior to the first solicitation is completed. If such a
record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such
record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Securities shall be computed as of such
record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later
than eleven months after the record date.
(e) Except to the extent otherwise expressly provided in this
Indenture, any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action with regard to any particular Security
may do so with regard to all or any part of the principal amount of such
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any different part of
such principal amount.
SECTION 12.04. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Indenture by
Sections 310 to 318, inclusive, of the Trust Indenture Act, the required
provision shall control. If any provision of this Indenture modifies or
excludes any provision of the TIA that may be so modified or excluded,
the latter provision shall be deemed to apply to this Indenture as so
modified or excluded, as the case may be.
SECTION 12.05. Notices. Any notice or communication
shall be in writing and delivered in person, or sent by registered or
certified mail, by air courier guaranteeing overnight delivery or by fax
(promptly confirmed by telephone) and addressed as follows:
if to the Company or any Guarantor:
DI Industries, Inc.
10370 Richmond Avenue
Suite 600
Houston, Texas 77042
Attn: Chief Financial Officer
Phone: (281) 435-6100
Fax: (281) 435-6171
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if to the Trustee:
Texas Commerce Bank National Association
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Corporate Trust Division
Phone: (713) 216-5811
Fax: (713) 216-5476
with a copy to the Trustees Dallas Payment Office:
Texas Commerce Bank National Association
1201 Main Street
Dallas, Texas 75202
Attn: Corporate Trust Services
The Company, the Guarantors or the Trustee by notice to
the others may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Holder shall be
sent to the Holder by first class mail, postage prepaid, at the Holder's
address as it appears in the Security Register and shall be given if so
sent within the time prescribed. Failure to mail a notice or communications
to a Holder or any default in it shall not affect its sufficiency with
respect to other Holders. If a notice or communication is mailed or faxed
to the Company, the Guarantors, the Trustee or a Holder in the manner
provided above, it is duly given, whether or not the addressee receives it
but shall not be effective unless in the case of the Company, the
Guarantors or the Trustee actually received. In case by reason of the
suspension of regular mail service or by reason or any other cause it
shall be impracticable to give notice by mail to Holders, then such
notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 12.06. Communication by Holders with Other
Holders. Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar
and anyone else shall have the protection of TIA Section 312(c).
SECTION 12.07. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules for action by or a
meeting of Holders. The Registrar and the Paying Agent may make
reasonable rules for their functions.
SECTION 12.08. Payments on Business Days. If a payment
hereunder is scheduled to be made on a date that is not a Business Day,
payment shall be made on the next succeeding day that is a Business Day,
and no interest shall accrue with respect to that payment during the
intervening period. If a regular Record Date is not a Business Day, such
Record Date shall not be affected.
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SECTION 12.09. GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company or any Guarantor
shall not have any liability for any obligations of the Company or a
Guarantor under the Securities, the Guarantees or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder shall waive and release
all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
SECTION 12.11 Submission to Jurisdiction; Appointment
of Agent for Service of Process; Waiver of Immunities.
(a) The Company and each Guarantor hereby
irrevocably, to the fullest extent it may do so under applicable law,
submits to the jurisdiction of any New York State or federal court sitting
in the Borough of Manhattan, The City of New York and to the courts of
its own corporate domicile with respect to all actions brought against it as
a defendant in respect of any suit, action or proceeding or arbitral award
arising out or relating to this Indenture, the Securities or any
transaction contemplated hereby or thereby (a "Proceeding"), and
irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid
courts, to the fullest extent it may do so under applicable law. The
Company and each Guarantor irrevocably waives, to the fullest extent it may
do so under applicable law, trial by jury and any objection which it may now
or hereafter have to the laying of the venue of any such Proceeding brought
in any such court and any claim that any such Proceeding brought in any
such court has been brought in an inconvenient forum. The Company and each
Guarantor acknowledges that it has, by separate written instrument,
irrevocably appointed CT Corporation System (the "Process Agent"), with
an office at 1633 Broadway, New York, New York 10019, as its authorized
agent to receive on behalf of the Company and each Guarantor and its
property service of copies of the summons and complaint and any other
process which may be served in any Proceeding, and that the Process Agent
has accepted such appointment. If for any reason such Process Agent shall
cease to be such agent for service of process, the Company and each
Guarantor shall forthwith appoint a new agent of recognized standing for
service of process in the State of New York, United States and deliver to
the Trustee a copy of the new agent's acceptance of that appointment within
30 days. Nothing herein shall affect the right of the Trustee, any
Paying Agent or any Holder to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed
against the Company or the Guarantors in any other court of competent
jurisdiction.
(b) Service may be made by delivering by hand a copy
of such process to the Company or the Guarantors, as the case may be, in
care of the Process Agent at the address
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specified above. The Company and the Guarantors hereby irrevocably
authorize and direct the Process Agent to accept such service on their
behalf. Failure of the Process Agent to give notice to the Company or
the Guarantors or failure of the Company or the Guarantors to receive notice
of such service of process shall not affect in any way the validity of such
service on the Process Agent or the Company or the Guarantors. As an
alternative method of service, the Company and the Guarantors also
irrevocably consent to the service of any and all process in any such
proceeding by the delivery by hand of copies of such process to the
Company or the Guarantors, as the case may be, at the applicable address
specified in Section 12.05 hereof or at the address most recently furnished
in writing by the Company or the Guarantors to the Trustee. The Company and
the Guarantors covenant and agree that they shall take any and all
reasonable action, including the execution and filing of any and all
documents, that may be necessary to continue the designation of the
Process Agent specified above in full force and effect during the term of
the Securities, and to cause the Process Agent to continue to act as such.
(c) The Company and the Guarantors irrevocably agree
that, in any Proceedings anywhere (whether for an injunction, specific
performance or otherwise), no immunity (to the extent that it may at any
time exist, whether on the grounds of sovereignty or otherwise) from
such Proceedings, from attachment (whether in aid of execution, before
judgment or otherwise) of their assets or from execution of judgment
shall be claimed by them or on their behalf or with respect to their assets,
except to the extent required by applicable law, any such immunity being
irrevocably waived, to the fullest extent permitted by applicable law.
The Company and the Guarantors irrevocably agree that, where permitted by
applicable law, they and their assets are, and shall be, subject to
such Proceedings, attachment or execution in respect of their obligations
under this Indenture or the Securities.
SECTION 12.12. Successors. All agreements of the
Company in this Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.13. Multiple Originals. The parties may
sign any number of copies of this Indenture. Each signed copy shall be
an original, but all of them together represent the same agreement. One
signed copy is enough to prove this Indenture. This Indenture may be
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute but one and
the same instrument.
SECTION 12.14. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections
of this Indenture have been inserted for convenience of reference only,
are not intended to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties have caused this Indenture
to be duly executed as of the date first above written.
COMPANY:
DI INDUSTRIES, INC.
By: /s/ T. Scott O'Keefe
Name: T. Scott O'Keefe
Title: Senior Vice President, Chief
Financial Officer & Secretary
GUARANTORS:
DRILLERS, INC.
By: /s/ T. Scott O'Keefe
Name: T. Scott O'Keefe
Title: Senior Vice President, Chief
Financial Officer & Secretary
DI INTERNATIONAL, INC.
By: /s/ T. Scott O'Keefe
Name: T. Scott O'Keefe
Title: Senior Vice President, Chief
Financial Officer & Secretary
DI ENERGY, INC.
By: /s/ T. Scott O'Keefe
Name: T. Scott O'Keefe
Title: Senior Vice President, Chief
Financial Officer & Secretary
<PAGE> 92
TRUSTEE:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ Mauri J. Cowen
Name: Mauri J. Cowen
Title: Vice President and Trust Officer
<PAGE> 93
EXHIBIT A
[FORM OF FACE OF GLOBAL SECURITY]
DI INDUSTRIES, INC.
No. _______ 8-7/8% SENIOR NOTE DUE 2007 CUSIP No. 232909 AA 9
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC" OR THE
"DEPOSITARY"), NEW YORK, NEW YORK, TO DI INDUSTRIES, INC. (THE "COMPANY") OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.06 OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES IN DEFINITIVE, FULLY
REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC NOTIFIES THE COMPANY THAT
IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITARY FOR THIS GLOBAL SECURITY OR
IF AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY" REGISTERED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A SUCCESSOR DEPOSITARY IS NOT
APPOINTED BY THE COMPANY WITHIN 90 DAYS OF SUCH NOTICE OR (B) AN EVENT OF
DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED AND IS CONTINUING WITH RESPECT TO
THE SECURITIES.
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<PAGE> 94
DI INDUSTRIES, INC., a Texas corporation, hereby promises to pay to CEDE &
CO., or registered assigns, the principal sum indicated on Schedule A hereof,
on July 1, 2007.
Interest Payment Dates: January 1 and July 1, commencing January 1, 1998.
Record Dates: June 15 and December 15.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth in this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
IN WITNESS WHEREOF, DI INDUSTRIES, INC. has caused this instrument to be
duly executed under its corporate seal.
Dated:
DI INDUSTRIES, INC.
By:
-------------------------------------
Name:
Title:
[Corporate Seal]
By:
-------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.
By:
--------------------------------
Authorized Signatory
2
<PAGE> 95
[FORM OF REVERSE SIDE OF SECURITY]
8-7/8% SENIOR NOTE DUE 2007
1. Interest
DI Industries, Inc., a Texas corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semiannually on January 1 and July 1 of each year (an "Interest
Payment Date") commencing on January 1, 1998, until the principal amount is
paid or made available for payment. Interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the Issue Date. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. Method of Payment
The Company will pay interest on the Securities (except Defaulted
Interest) to the Persons who are registered Holders of Securities at the close
of business on the June 15 or December 15 immediately preceding the Interest
Payment Date even if Securities are canceled after the Record Date and on or
before the Interest Payment Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal,
premium, if any, and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. Payments in
respect of the Securities represented by a Global Security (including
principal, premium, if any, and interest) will be made by wire transfer of
immediately available funds to the accounts specified by the Depositary, but,
at the option of the Company, interest may be paid by check mailed to the
registered Holders at their registered addresses.
3. Paying Agent and Registrar
Initially, Texas Commerce Bank National Association, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. In certain situations, the Company or any of its Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of June 27,
1997 (as such
3
<PAGE> 96
may be amended from time to time, the "Indenture"), among the Company, the
corporations acting as guarantors and named therein (the "Guarantors") and
Texas Commerce Bank National Association, as trustee (the "Trustee," which term
includes any successor trustee under the Indenture), to which Indenture
reference is hereby made for a statement of the respective rights, duties and
immunities thereunder of the Company, the Guarantors, the Trustee and each
Holder of the Securities and the terms upon which the Securities are, and are
to be, authenticated and delivered. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) as in
effect on the date of the Indenture (the "Act"). Terms defined in the Indenture
and not defined herein have the meanings ascribed thereto in the Indenture.
The Securities are subject to all such terms, and Holders are referred to the
Indenture and the Act for a statement of those terms.
The Securities are limited to $175,000,000 aggregate principal amount at
Stated Maturity at any one time outstanding (subject to Section 2.08 of the
Indenture). This Security is one of the Securities referred to in the
Indenture. The Indenture imposes certain limitations on the incurrence of
additional Indebtedness by the Company and its Subsidiaries; the payment of
dividends on, and redemption of, Capital Stock of the Company and its
Subsidiaries and the redemption of Subordinated Indebtedness of the Company and
its Subsidiaries; Investments; sales of assets and Subsidiary Capital Stock;
certain transactions with Affiliates of the Company and the right of the
Company and its Subsidiaries to engage in unrelated lines of business.
5. Optional Redemption
Except as provided in the next paragraph, the Securities are not
redeemable prior to July 1, 2002. At any time on or after July 1, 2002, the
Securities are redeemable at the option of the Company, in whole or in part, on
not less than 30 nor more than 60 days' notice, at the following Redemption
Prices (expressed as percentages of principal amount at Stated Maturity), if
redeemed during the 12 months beginning July 1 of the years indicated below,
plus accrued and unpaid interest (if any) thereon to the Redemption Date:
<TABLE>
<CAPTION>
Redemption
Year Price
----------- -------------
<S> <C>
2002 .......................... 104.4375%
2003 .......................... 102.9580%
2004 .......................... 101.4792%
2005 and thereafter ............. 100.0000%
</TABLE>
Notwithstanding the foregoing, on and prior to July 1, 2000, the Company
may redeem up to 30% of the aggregate principal amount of the Securities
originally outstanding at a redemption price of 108.875% of the principal
amount at Stated Maturity thereof, plus accrued and unpaid interest (if any)
thereon to the Redemption Date, with the net proceeds of one or
4
<PAGE> 97
more Qualified Equity Offerings of the Company; provided that at least
$120,000,000 aggregate principal amount at Stated Maturity of the Securities
shall remain outstanding immediately after the occurrence of any such
redemption; and provided, further, that such redemption shall occur not later
than 90 days after the date of the closing of any such Qualified Equity
Offering. The redemption shall be made in accordance with procedures set forth
in the Indenture.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail, postage prepaid,
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at his address as it appears in the
Security Register. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If less than all of
the Securities are to be redeemed at any time, the Securities to be redeemed
will be chosen by the Trustee in accordance with the Indenture. If any
Security is redeemed subsequent to a Record Date with respect to any Interest
Payment Date specified above and on or prior to such Interest Payment Date,
then any accrued interest will be paid on such Interest Payment Date to the
Holder of the Security at the close of business on such Record Date. If money
sufficient to pay the Redemption Price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent on or before the Redemption Date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
7. Change of Control
Upon the occurrence of a Change of Control, each Holder of Securities
shall have the right to require the Company to purchase such Holder's
Securities, in whole or in part in a principal amount at Stated Maturity that
is an integral multiple of $1,000, pursuant to a Change of Control Offer, at a
purchase price in cash equal to 101% of the principal amount at Stated Maturity
thereof on any Change of Control Payment Date, plus accrued and unpaid
interest, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Company shall
send, or cause to be sent, by first class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder of Securities. The Holder
of this Security may elect to have this Security or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Security pursuant
to the Change of Control Offer. Unless the Company defaults in the payment of
the Change of Control Purchase Price with respect thereto, all Securities or
portions thereof accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest from and after the Change of Control Payment
Date.
5
<PAGE> 98
8. Repurchase at the Option of Holders upon Asset Sale
Subject to the limitations set forth in the next following paragraph, if
at any time the Company or any Subsidiary engages in any Asset Sale, as a
result of which the aggregate amount of Excess Proceeds exceeds $15,000,000,
the Company shall, within 30 calendar days of the date the amount of Excess
Proceeds exceeds $15,000,000, or at any time after receipt of Excess Proceeds
but prior to there being $15,000,000 of Excess Proceeds, the Company may, at
its option, use the then-existing Excess Proceeds to make an offer to purchase
from all Holders, on a pro rata basis, Securities in an aggregate principal
amount at Stated Maturity equal to the maximum principal amount that may be
purchased out of the then-existing Excess Proceeds, at a purchase price in cash
equal to 100% of the principal amount at Stated Maturity thereof, plus accrued
and unpaid interest, if any, to the Asset Sale Offer Purchase Date. Upon
completion of an Asset Sale Offer (including payment of the Asset Sale Offer
Purchase Price for accepted Securities), any surplus Excess Proceeds that were
the subject of such offer shall cease to be Excess Proceeds, and the Company
may then use such amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess Proceeds exceeds
$15,000,000, the Company shall send, or cause to be sent, by first class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder of
Securities. The Holder of this Security may elect to have this Security or a
portion hereof in an authorized denomination purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below and tendering
this Security pursuant to the Asset Sale Offer. Unless the Company defaults in
the payment of the Asset Sale Offer Purchase Price with respect thereto, all
Securities or portions thereof selected for payment pursuant to the Asset Sale
Offer will cease to accrue interest from and after the Asset Sale Offer
Purchase Date.
9. The Global Security
So long as this Global Security is registered in the name of the
Depositary or its nominee, members of, or participants in, the Depositary
("Agent Members") shall have no rights under the Indenture with respect to this
Global Security held on their behalf by the Depositary or the Trustee as its
custodian, and the Depositary may be treated by the Company, the Guarantors,
the Trustee and any agent of the Company, the Guarantors or the Trustee as the
absolute owner of this Global Security for all purposes. Notwithstanding the
foregoing, nothing herein shall (i) prevent the Company, the Guarantors, the
Trustee or any agent of the Company, the Guarantors or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or (ii) impair, as between the Depositary and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
Holder of Securities.
The Holder of this Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in this Global Note through Agent Members, to take any action which a
Holder of Securities is entitled to take under the Indenture or the Securities.
Whenever, as a result of an optional redemption of Securities by the
Company, a
6
<PAGE> 99
Change of Control Offer, an Asset Sale Offer or an exchange for Certificated
Securities, this Global Security is redeemed, repurchased or exchanged or
substituted in part, this Global Security shall be surrendered by the Holder
thereof to the Trustee who shall cause an adjustment to be made to Schedule A
hereof so that the principal amount of this Global Security will be equal to
the portion not redeemed, repurchased or exchanged and shall thereafter return
this Global Security to such Holder; provided that this Global Security shall
be in a principal amount at Stated Maturity of $1,000 or an integral multiple
of $1,000.
10. Transfer and Exchange
The Holder of this Global Security shall, by its acceptance of this Global
Security, agree that transfers of beneficial interests in this Global Security
may be effected only through a book entry system maintained by such Holder (or
its agent), and that ownership of a beneficial interest in the Securities
represented thereby shall be required to be reflected in book entry form.
Transfers of this Global Security shall be limited to transfers in whole,
and not in part, to the Depositary, its successors and their respective
nominees. Interests of beneficial owners in this Global Security may be
transferred in accordance with the rules and procedures of the Depositary (or
its successors).
This Global Security will be exchanged by the Company for one or more
Certificated Securities if (a) the Depositary (i) has notified the Company that
it is unwilling or unable to continue as, or ceases to be, a "Clearing Agency"
registered under Section 17A of the Exchange Act and (ii) a successor to the
Depositary registered as a "Clearing Agency" under Section 17A of the Exchange
Act is not appointed by the Company within 90 calendar days or (b) the
Depositary is at any time unwilling or unable to continue as Depositary and a
successor to the Depositary is not able to be appointed by the Company within
90 calendar days. If an Event of Default occurs and is continuing, the Company
shall, at the request of the Holder hereof, exchange all or a part of this
Global Security for one or more Certificated Securities; provided that the
principal amount at Stated Maturity of each of such Certificated Securities and
this Global Security, after such exchange, shall be $1,000 or an integral
multiple thereof. Whenever this Global Security is exchanged as a whole for
one or more Certificated Securities, it shall be surrendered by the Holder to
the Trustee for cancellation. Whenever this Global Security is exchanged in
part for one or more Certificated Securities, it shall be surrendered by the
Holder to the Trustee and the Trustee shall make the appropriate notations
thereon pursuant to Section 2.05 of the Indenture. Interests in this Global
Security may not be exchanged for Certificated Securities other than as provided
in this paragraph.
7
<PAGE> 100
11. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Company
at its written request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only
to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate some
or all of its Obligations and the Guarantors' Obligations under the Securities,
the Guarantees and the Indenture if the Company deposits with the Trustee money
or U.S. Government Obligations for the payment of principal, premium and
interest on the Securities to redemption or Maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount at Stated
Maturity of the Securities and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority
in outstanding principal amount at Stated Maturity outstanding of the
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holder, the Company, the Guarantors and the Trustee may
amend the Indenture or the Securities (a) to evidence the succession of another
Person to the Company and the Guarantors and the assumption by such successor
of the covenants and Obligations of the Company under the Indenture and
contained in the Securities and of the Guarantors contained in the Indenture
and the Guarantees, (b) to add to the covenants of the Company, for the benefit
of the Holders, or to surrender any right or power conferred upon the Company
or the Guarantors by the Indenture, (c) to add any additional Events of
Default, (d) to provide for uncertificated Securities in addition to or in
place of Certificated Securities, (e) to evidence and provide for the
acceptance of appointment under the Indenture by the successor Trustee, (f) to
secure the Securities and/or the Guarantees, (g) to cure any ambiguity, to
correct or supplement any provision in the Indenture which may be inconsistent
with any other provision therein or to add any other provision with respect to
matters or questions arising under the Indenture, provided that such actions
will not adversely affect the interests of the Holders in any material respect
or (h) to add or release any Guarantor pursuant to the terms of the Indenture.
Certain provisions of the Securities and the Indenture may not be amended or
waived without the consent of each Holder affected thereby.
15. Defaults and Remedies
Under the Indenture, Events of Default include in summary form (i) default
in the payment
8
<PAGE> 101
of principal of (or premium, if any, on) the Securities when due; (iii)
failure to comply with certain of the covenants in the Indenture, including the
Change of Control covenant, the Asset Sale covenant and the Restrictive Payments
covenant; (iv) failure to perform any other covenant of the Company or any
Guarantor in the Indenture, continued for 30 days after written notice as
provided in the Indenture; (v) Indebtedness of the Company or any Subsidiary is
not paid when due within the applicable grace period, or is accelerated and, in
either case, the principal amount of such unpaid Indebtedness exceeds
$10,000,000; (vi) one or more final judgments or orders by a court of competent
jurisdiction are entered against the Company or any Subsidiary in an uninsured
or unindemnified aggregate amount in excess of $5,000,000 and such judgments or
orders are not discharged, waived, appealed, stayed, satisfied or bonded for a
period of 60 consecutive days; (vii) certain events of bankruptcy, insolvency or
reorganization; or (viii) a Guarantee ceases to be in full force and effect
(other than in accordance with the terms of the Indenture and such Guarantee) or
a Guarantor denies or disaffirms its obligations under its Guarantee.
Holders may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the
Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount at Stated
Maturity of the Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders. The Holders of a
majority in principal amount at Stated Maturity of the outstanding Securities,
by written notice to the Company and the Trustee, may rescind any declaration
of acceleration and its consequences if the rescission would not conflict with
any judgment or decree, and if all Events of Default have been cured or waived
except nonpayment of principal and interest that has become due solely because
of the acceleration.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the Trust Indenture Act, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company or
any Guarantor shall not have any liability for any obligations of the Company
or a Guarantor under the Securities, the Guarantees or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
9
<PAGE> 102
18. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Securities or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture which has in it the text of this
Security.
10
<PAGE> 103
SECURITY GUARANTEE
Subject to the limitations set forth in the Indenture, the Guarantors (as
defined in the Indenture referred to in this Security and each hereinafter
referred to as a "Guarantor," which term includes any successor or additional
Guarantor under the Indenture) have jointly and severally, irrevocably and
unconditionally guaranteed (a) the due and punctual payment of the principal
(and premium, if any) of and interest on the Securities, whether at Stated
Maturity, by acceleration, call for redemption, upon a Change of Control Offer,
Asset Sale Offer, purchase or otherwise, (b) the due and punctual payment of
interest on the overdue principal of and interest on the Securities, if any, to
the extent lawful, (c) the due and punctual performance of all other
Obligations of the Company and the Guarantors to the Holders under the
Indenture and the Notes and (d) in case of any extension of time of payment or
renewal of any Securities or any of such other Obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at Stated Maturity, by acceleration, call for
redemption, upon a Change of Control Offer, Asset Sale Offer, purchase or
otherwise. Capitalized terms used herein shall have the same meanings assigned
to them in the Indenture unless otherwise indicated.
Payment on each Security is guaranteed jointly and severally, by the
Guarantors pursuant to Article 11 of the Indenture and reference is made to
such Indenture for the precise terms of the Guarantees.
The Obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to such maximum amount and 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 or state law or not otherwise being void,
voidable or unenforceable under any similar other bankruptcy, receivership,
insolvency, liquidation or other similar legislation or legal principles under
applicable foreign law. Each Guarantor that makes a payment or distribution
under a Guarantee shall be entitled to a contribution from each other Company
in a pro rata amount based on the Adjusted Net Assets of each Guarantor.
Certain of the Guarantors may be released from their Guarantees upon the
terms and subject to the conditions provided in the Indenture.
11
<PAGE> 104
The Guarantee shall be binding upon each Guarantor and its successors and
assigns and shall inure to the benefit of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the
terms and conditions hereof and in the Indenture.
DRILLERS, INC.
By:
--------------------------------------
DI INTERNATIONAL, INC.
By:
---------------------------------------
DI ENERGY, INC.
By:
---------------------------------------
12
<PAGE> 105
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint _______________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Dated: Your Signature:
---------------- -----------------------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee:
- -----------------------------
Signature must be guaranteed
- --------------------------------------------------------------------------------
Notice: Signature(s) must be guaranteed by an institution which is a participant
in the Securities Transfer Agent Medallion Program ("STAMP") or similar program.
1
<PAGE> 106
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.07 or Section 4.09 of the Indenture, check the
appropriate box:
Section 4.07 [ ]
Section 4.09 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.07 or Section 4.09 of the Indenture, state the
amount in principal amount (must be an integral of $1,000): $_______________
Dated: Your Signature:
----------------- -----------------------------------------
(Sign exactly as your name appears on
the other side of this Security.)
Signature Guarantee:
--------------------------------
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Notice: Signature(s) must be guaranteed by an institution which is a participant
in the Securities Transfer Agent Medallion Program ("STAMP") or similar program.
2
<PAGE> 107
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN PRINCIPAL AMOUNT
The initial principal amount at Maturity of this Global Security shall be
$175,000,000. The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
Signature of
Total Principal authorized
amount of this signatory of
Date of Amount of decrease Amount of increase Global Security Trustee or
Increase/ in Principal in Principal Amount following such Securities
Decrease Amount at Maturity at Maturity Decrease/ Increase Custodian
- -------- -------------------- -------------------- -------------------- -------------
<S> <C> <C> <C> <C>
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________
</TABLE>
3
<PAGE> 108
EXHIBIT B
[FORM OF FACE OF CERTIFICATED SECURITY]
DI INDUSTRIES, INC.
No._______ 8-7/8% SENIOR NOTE DUE 2007 CUSIP No. 232909 AA 9
DI INDUSTRIES, INC., a Texas corporation, hereby promises to pay to
_________________, or registered assigns, the principal sum of _______________
on July 1, 2007.
Interest Payment Dates: January 1 and July 1, commencing January 1, 1998.
Record Dates: June 15 and December 15.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth in this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
IN WITNESS WHEREOF, DI INDUSTRIES, INC. has caused this instrument to be
duly executed under its corporate seal.
Dated:
----------------------
DI INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
[Corporate Seal]
By:
--------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.
By:
----------------------------------
Authorized Signatory
1
<PAGE> 109
[FORM OF REVERSE SIDE OF SECURITY]
8-7/8% Senior Note Due 2007
1. Interest
DI Industries, Inc., a Texas corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will
pay interest semiannually on January 1 and July 1 of each year (an "Interest
Payment Date") commencing on January 1, 1998, until the principal amount is
paid or made available for payment. Interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the Issue Date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
2. Method of Payment
The Company will pay interest on the Securities (except Defaulted
Interest) to the Persons who are registered Holders of Securities at the
close of business on the June 15 or December 15 immediately preceding the
Interest Payment Date even if Securities are canceled after the Record Date
and on or before the Interest Payment Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company
will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a
Global Security (including principal, premium, if any, and interest) will be
made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company, but, at the option of the
Company, interest may be paid by check mailed to the registered Holders at
their registered addresses.
3. Paying Agent and Registrar
Initially, Texas Commerce Bank National Association, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar. The
Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. In certain circumstances, the Company or any of its
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of June
27, 1997 (as such may be amended from time to time, the "Indenture"), among
the Company, the corporations acting as guarantors and named therein (the
"Guarantors") and the Texas Commerce Bank National Association, as trustee (the
"Trustee", which term includes any successor trustee under the Indenture), to
which
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<PAGE> 110
Indenture reference is hereby made for a statement of the respective rights,
duties and immunities thereunder of the Company, the Guarantors, the Trustee and
each Holder of the Securities and the terms upon which the Securities are, and
are to be, authenticated and delivered. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) as
in effect on the date of the Indenture (the "Act"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Holders are
referred to the Indenture and the Act for a statement of those terms.
The Securities are limited to $175,000,000 aggregate principal amount
at Stated Maturity at any one time outstanding (subject to Section 2.08 of
the Indenture). This Security is one of the Securities referred to in the
Indenture. The Indenture imposes certain limitations on the incurrence of
additional Indebtedness by the Company and its Subsidiaries; the payment of
dividends on, and redemption of, Capital Stock of the Company and its
Subsidiaries and the redemption of Subordinated Indebtedness of the Company
and its Subsidiaries; Investments; sales of assets and Subsidiary Capital
Stock; certain transactions with Affiliates of the Company and the right of
the Company and its Subsidiaries to engage in unrelated lines of business.
5. Optional Redemption
Except as provided in the next paragraph, the Securities are not
redeemable prior to July 1, 2002. At any time on or after July 1, 2002, the
Securities are redeemable at the option of the Company, in whole or in part,
on not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of principal amount at Stated
Maturity), if redeemed during the 12 months beginning July 1 of the years
indicated below, plus accrued and unpaid interest (if any) thereon to the
Redemption Date:
<TABLE>
<CAPTION>
Redemption
Year Price
---------------------- ----------
<S> <C>
2002 .................................... 104.4375%
2003 .................................... 102.9580%
2004 .................................... 101.4792%
2005 and thereafter ..................... 100.0000%
</TABLE>
Notwithstanding the foregoing, on and prior to July 1, 2000, the
Company may redeem up to 30% of the aggregate principal amount at Stated
Maturity of the Securities originally outstanding at a redemption price of
108.875% of the principal amount at Stated Maturity thereof, plus accrued
and unpaid interest (if any) thereon to the Redemption Date, with the net
proceeds of one or more Qualified Equity Offerings of the Company; provided
that at least $120,000,000 aggregate principal amount of the Securities shall
remain outstanding immediately after the occurrence of any such redemption; and
provided, further, that such redemption shall occur not later than 90 days
after the date of the closing of any such Qualified Equity Offering. The
redemption shall be made in accordance with procedures set forth in the
Indenture.
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<PAGE> 111
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail, postage
prepaid, at least 30 days but not more than 60 days before the Redemption
Date to each Holder of Securities to be redeemed at his address as it
appears in the Security Register. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If
less than all of the Securities are to be redeemed at any time, the
Securities to be redeemed will be chosen by the Trustee in accordance with
the Indenture. If any Security is redeemed subsequent to a Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on such
Interest Payment Date to the Holder of the Security at the close of business
on such Record Date. If money sufficient to pay the Redemption Price of and
accrued interest on all Securities (or portions thereof) to be redeemed on
the Redemption Date is deposited with the Paying Agent on or before the
Redemption Date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Change of Control
Upon the occurrence of a Change of Control, each Holder of Securities
shall have the right to require the Company to purchase such Holder's
Securities, in whole or in part in a principal amount at Stated Maturity
that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount at
Stated Maturity thereof on any Change of Control Payment Date, plus accrued
and unpaid interest, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Company
shall send, or cause to be sent, by first class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder of Securities.
The Holder of this Security may elect to have this Security or a portion
hereof in an authorized denomination purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below and tendering
this Security pursuant to the Change of Control Offer. Unless the Company
defaults in the payment of the Change of Control Purchase Price with respect
thereto, all Securities or portions thereof accepted for payment pursuant to
the Change of Control Offer will cease to accrue interest from and after the
Change of Control Payment Date.
8. Repurchase at the Option of Holders upon Asset Sale.
Subject to the limitations set forth in the next following paragraph,
if at any time the Company or any Subsidiary engages in any Asset Sale, as a
result of which the aggregate amount of Excess Proceeds exceeds $15,000,000,
the Company shall, within 30 calendar days of the date the amount of Excess
Proceeds exceeds $15,000,000, or at any time after receipt of Excess
Proceeds but prior to there being $15,000,000 of Excess Proceeds, the
Company may, at its option, use the then-existing Excess Proceeds to make an
offer to purchase from all Holders, on a pro rata basis,
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<PAGE> 112
Securities in an aggregate principal amount equal to the maximum principal
amount that may be purchased out of the then-existing Excess Proceeds, at a
purchase price in cash equal to 100% of the principal amount at Stated Maturity
thereof, plus accrued and unpaid interest, if any, to the Asset Sale Offer
Purchase Date. Upon completion of an Asset Sale Offer (including payment of the
Asset Sale Offer Purchase Price for accepted Securities), any surplus Excess
Proceeds that were the subject of such offer shall cease to be Excess Proceeds,
and the Company may then use such amounts for general corporate purposes.
Within 30 calendar days of the date the amount of Excess Proceeds
exceeds $15,000,000, the Company shall send, or cause to be sent, by first
class mail, postage prepaid, a notice regarding the Asset Sale Offer to each
Holder of Securities. The Holder of this Security may elect to have this
Security or a portion hereof in an authorized denomination purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below and tendering this Security pursuant to the Asset Sale Offer. Unless
the Company defaults in the payment of the Asset Sale Offer Purchase Price
with respect thereto, all Securities or portions thereof selected for
payment pursuant to the Asset Sale Offer will cease to accrue interest from
and after the Asset Sale Offer Purchase Date.
9. Transfer and Exchange
A Holder may transfer a Security only upon the surrender of such
Security for registration of transfer. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only
upon, final acceptance and registration of the transfer in the Security
Register by the Registrar. When Securities are presented to the Registrar
with a request to register the transfer of, or to exchange, such Securities,
the Registrar shall register the transfer or make such exchange as requested
if its requirements for such transactions and any applicable requirements
hereunder are satisfied.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer of Securities.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must
look only to the Company and not to the Trustee for payment.
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<PAGE> 113
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its Obligations and the Guarantors' Obligations under the
Securities, the Guarantees and the Indenture if the Company deposits with
the Trustee money or U.S. Government Obligations for the payment of
principal, premium and interest on the Securities to redemption or Maturity,
as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in outstanding principal amount at Stated
Maturity of the Securities and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a
majority in outstanding principal amount at Stated Maturity outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Company, the Guarantors and the
Trustee may amend the Indenture or the Securities (a) to evidence the
succession of another Person to the Company and the Guarantors and the
assumption by such successor of the covenants and Obligations of the Company
under the Indenture and contained in the Securities and of the Guarantors
contained in the Indenture and the Guarantees, (b) to add to the covenants
of the Company, for the benefit of the Holders, or to surrender any right or
power conferred upon the Company or the Guarantors by the Indenture, (c) to
add any additional Events of Default, (d) to provide for uncertificated
Securities in addition to or in place of certificated Securities, (e) to
evidence and provide for the acceptance of appointment under the Indenture
by the successor Trustee, (f) to secure the Securities and/or the
Guarantees, (g) to cure any ambiguity, to correct or supplement any
provision in the Indenture which may be inconsistent with any other
provision therein or to add any other provision with respect to matters or
questions arising under the Indenture, provided that such actions will not
adversely affect the interests of the Holders in any material respect or (h)
to add or release any Guarantor pursuant to the terms of the Indenture.
Certain provisions of the Securities and the Indenture may not be amended or
waived without the consent of each Holder affected thereby.
6
<PAGE> 114
14. Defaults and Remedies
Under the Indenture, Events of Default include in summary form (i)
default in the payment of interest on the Securities when due, continued for
30 days; (ii) default in the payment of principal of (or premium, if any,
on) the Securities when due; (iii) failure to comply with certain of the
covenants in the Indenture, including the Change of Control covenant, the
Asset Sale covenant and the Restrictive Payments covenant; (iv) failure to
perform any other covenant of the Company or any Guarantor in the Indenture,
continued for 30 days after written notice as provided in the Indenture; (v)
Indebtedness of the Company or any Subsidiary is not paid when due within
the applicable grace period, or is accelerated and, in either case, the
principal amount of such unpaid Indebtedness exceeds $10,000,000; (vi) one
or more final judgments or orders by a court of competent jurisdiction are
entered against the Company or any Subsidiary in an uninsured or
unindemnified aggregate amount in excess of $5,000,000 and such judgments or
orders are not discharged, waived, appealed, stayed, satisfied or bonded for
a period of 60 consecutive days; (vii) certain events of bankruptcy,
insolvency or reorganization; or (viii) a Guarantee ceases to be in full
force and effect (other than in accordance with the terms of the Indenture
and such Guarantee) or a Guarantor denies or disaffirms its obligations
under its Guarantee.
Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount at
Stated Maturity of the Securities may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders notice of any
continuing Default (except a Default in payment of principal or interest) if
it determines that withholding notice is in the interest of the Holders.
The Holders of a majority in principal amount at Stated Maturity of the
outstanding Securities, by written notice to the Company and the Trustee,
may rescind any declaration of acceleration and its consequences if the
rescission would not conflict with any judgment or decree, and if all Events
of Default have been cured or waived except nonpayment of principal and
interest that has become due solely because of the acceleration.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Trust Indenture Act, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee.
7
<PAGE> 115
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or any Guarantor shall not have any liability for any obligations of the
Company or a Guarantor under the Securities, the Guarantees or the Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Holder waives and releases
all such liability. The waiver and release are part of the consideration
for the issue of the Securities.
17. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
18. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to
be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture which has in it the text of
this Security.
8
<PAGE> 116
SECURITY GUARANTEE
Subject to the limitations set forth in the Indenture, the Guarantors
(as defined in the Indenture referred to in this Security and each
hereinafter referred to as a "Guarantor," which term includes any successor
or additional Guarantor under the Indenture) have jointly and severally,
irrevocably and unconditionally guaranteed (a) the due and punctual payment
of the principal (and premium, if any) of and interest on the Securities,
whether at Stated Maturity, by acceleration, call for redemption, upon a
Change of Control Offer, Asset Sale Offer, purchase or otherwise, (b) the
due and punctual payment of interest on the overdue principal of and
interest on the Securities, if any, to the extent lawful, (c) the due and
punctual performance of all other Obligations of the Company and the
Guarantors to the Holders under the Indenture and the Notes and (d) in case
of any extension of time of payment or renewal of any Securities or any of
such other Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether
at Stated Maturity, by acceleration, call for redemption, upon a Change of
Control Offer, Asset Sale Offer, purchase or otherwise. Capitalized terms
used herein shall have the same meanings assigned to them in the Indenture
unless otherwise indicated.
Payment on each Security is guaranteed jointly and severally, by the
Guarantors pursuant to Article 11 of the Indenture and reference is made to
such Indenture for the precise terms of the Guarantees.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to such maximum amount and 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 conveyance or fraudulent transfer under
federal or state law or not otherwise being void, voidable or unenforceable
under any similar other bankruptcy, receivership, insolvency, liquidation or
other similar legislation or legal principles under applicable foreign law.
Each Guarantor that makes a payment or distribution under a Guarantee shall
be entitled to a contribution from each other Company in a pro rata amount
based on the Adjusted Net Assets of each Guarantor.
Certain of the Guarantors may be released from their Guarantees upon
the terms and subject to the conditions provided in the Indenture.
9
<PAGE> 117
The Guarantee shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of the Trustee and the Holders
and, in the event of any transfer or assignment of rights by any Holder or
the Trustee, the rights and privileges herein conferred upon that party
shall automatically extend to and be vested in such transferee or assignee,
all subject to the terms and conditions hereof and in the Indenture.
DRILLERS, INC.
By:
----------------------------------
DI INTERNATIONAL, INC.
By:
----------------------------------
DI ENERGY, INC.
By:
----------------------------------
10
<PAGE> 118
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint _________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: Your Signature:
---------------- -----------------------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
Signature Guarantee:
- -------------------------------
Signature must be guaranteed
- --------------------------------------------------------------------------------
Notice: Signature(s) must be guaranteed by an institution which is a participant
in the Securities Transfer Agent Medallion Program ("STAMP") or similar
program.
11
<PAGE> 119
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.07 or Section 4.09 of the Indenture, check the
appropriate box:
Section 4.07 [ ]
Section 4.09 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.07 or Section 4.09 of the Indenture, state the
amount in principal amount (must be an integral of $1,000): $_______________
Dated: Your Signature:
--------------- ------------------------------------------
(Sign exactly as your name appears on
the other side of this Security.)
Signature Guarantee:
------------------------------
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Notice: Signature(s) must be guaranteed by an institution which is a participant
in the Securities Transfer Agent Medallion Program ("STAMP") or similar
program.
12
<PAGE> 120
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among [GUARANTOR] (the "New Guarantor"), a subsidiary of DI
Industries, Inc. (or its successor), a Texas corporation (the "Company"), DI
INDUSTRIES, INC., the Guarantors (the "Existing Guarantors") under the
Indenture referred to below, and Texas Commerce Bank National Association, a
national banking association, as trustee under the Indenture referred to below
(the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the Trustee
an Indenture (as such may be amended from time to time, the "Indenture"), dated
as of June 27, 1997, providing for the issuance of an aggregate principal
amount of $175,000,000 of 8-7/8% Senior Notes due 2007 (the "Securities");
WHEREAS Section 11.08 of the Indenture provides that the Company is
required to cause the New Guarantor to execute and deliver to the Trustee a
supplemental indenture pursuant to which the New Guarantor shall jointly and
severally and unconditionally and irrevocably guarantee all of the Company's
Obligations under the Securities and the Indenture pursuant to a Guarantee
contained in the Indenture on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 10.01 of the Indenture, the Trustee, the
Company and Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
1. Definitions. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as otherwise
herein expressly provided or unless the context otherwise requires: (i) the
terms and expressions used herein shall have the same meanings as corresponding
terms and expressions used in the Indenture; and (ii) the words "herein,"
"hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
2. Agreement to Guarantee. The New Guarantor hereby agrees, jointly and
severally and unconditionally and irrevocably, with all other Guarantors, to
guarantee the
1
<PAGE> 121
Company's Obligations under the Securities and the Indenture on the terms and
subject to the conditions set forth in Article 11 of the Indenture and to be
bound by all other applicable provisions of the Indenture. From and after the
date hereof, the New Guarantor shall be a Guarantor for all purposes under the
Indenture and the Securities.
3. Ratification of Indenture; Supplemental Indentures Part of Indenture.
Except as expressly amended hereby, the Indenture is in all respects ratified
and confirmed and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no representation as
to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for convenience
only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR]
By:
-------------------------------------------
Name:
Title:
DI INDUSTRIES, INC.
By:
-------------------------------------------
Name:
Title:
[ALL EXISTING GUARANTORS]
By:
-------------------------------------------
Name:
Title:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Trustee
By:
-------------------------------------------
Name:
Title:
2
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NO. 3 AND WAIVER
This AMENDMENT NO. 3 AND WAIVER ("Amendment") is made as of
June 23, 1997 by and among DI INDUSTRIES, INC., a Texas corporation (the
"Company"), DRILLERS, INC., a Texas corporation ("DI" and with the Company the
"Borrowers"), each of the Subsidiary Guarantors party thereto (the "Subsidiary
Guarantors"), the lending institutions from time to time party thereto (each a
"Lender" and collectively the "Lenders") and Bankers Trust Company, as Agent
and Administrative Agent, and ING (US) Capital Corporation, as Co-Agent and
Documentation Agent. This Amendment is made with reference to that certain
Amended and Restated Senior Secured Revolving Credit Agreement dated as of
December 31, 1996 by and among the Borrowers, the Subsidiary Guarantor, the
Agent and the Co-Agent and Nordlandsbanken ASA, as a Lender (as amended to
date, the "Credit Agreement"). All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Credit
Agreement.
Whereas, the Borrowers, Subsidiary Guarantor, Agent, CO-Agent
and the Lender entered into the Senior Secured Reducing Revolving Credit
Agreement on December 31, 1996 (the "Initial Agreement"); and
Whereas, the Borrowers, Subsidiary Guarantor, Agent, Co-Agent
and the Lender have amended and restated the Initial Agreement by entering into
an Amended-and Restated Senior Secured Revolving Credit Agreement on April 30,
1997 (the "Amended and Restated Agreement"); and
Whereas, the Borrowers, Subsidiary Guarantor, Agent and
Co-Agent have further amended the Amended and Restated Agreement by entering
into Amendment No. 2 and Waiver on June 6, 1997; and
Whereas, the Borrowers, Subsidiary Guarantor, Agent, Co-Agent
and the Lender desire to further amend and waive certain terms of the Credit
Agreement as set forth below in order to accommodate the transactions described
in the Company's Registration Statement under the Securities Act of 1933 on
Form S-3, as amended, as filed with the Securities and Exchange Commission on
June 6, 1997.
Now, therefore, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE> 2
-2-
SECTION 1. AMENDMENTS AND WAIVERS
1.1. Section 8 of the Credit Agreement is hereby amended
by adding a new Section 8.04(j) as follows:
"and (j) Indebtedness evidenced by the Company's Senior Notes due 2007
in an aggregate principal amount up to $175,000,000."
SECTION 2. RATIFICATION OF AGREEMENT
2.1. To induce the Required Lenders to enter into this
Amendment, each Borrower represents and warrants that after giving effect to
this Amendment no violation of the terms of the Credit Agreement exist and all
representations and warranties contained in the Credit Agreement are true,
correct and complete in all material respects on and as of the date hereof
except to the extent such representations and warranties specifically relate to
an earlier date in which case they were true, correct and complete in all
material respects on and as of such earlier date.
2.2. Except as expressly set forth in this Amendment, the
terms, provisions and conditions of the Credit Agreement and other Credit
Documents are unchanged, and said agreements, as amended, shall remain in full
force and effect and are hereby confirmed and ratified.
SECTION 3. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts,
and all such counterparts taken together shall be deemed to constitute one and
the same instrument. Signature pages may be detached from counterpart documents
and reassembled to form duplicate executed originals. This Amendment shall
become effective as of the date hereof upon the execution of the counterparts
hereof by each of the Borrowers, the Subsidiary Guarantor and the Required
Lenders.
<PAGE> 3
-3-
SECTION 4. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 5. ACKNOWLEDGMENT AND CONSENT BY SUBSIDIARY
GUARANTOR
The Subsidiary Guarantor hereby acknowledges that it has read
this Amendment and consents to the terms hereof and further confirms and agrees
that, notwithstanding the effectiveness of this Amendment, its obligations
under the Guarantee shall not be impaired or affected and the Guarantee is, and
shall continue to be, in full force and effect and is hereby confirmed and
ratified in all respects.
<PAGE> 4
-4-
Witness the execution hereof by the respective duly authorized
officers of the undersigned as of the date first above written.
<TABLE>
<S> <C>
BANKERS TRUST COMPANY, DI INDUSTRIES, INC.,
Individually and as Agent as Borrower
BY: /s/ CALLI S. HAYES By: /s/ DONALD J. GUEDRY, JR.
----------------------------------------- -----------------------------------------
Calli S. Hayes
Title: Managing Director Title: Treasurer
-------------------------------------- ---------------------------------------
ING (US) CAPITAL CORPORATION, DRILLERS, INC.,
Individually and as Co-Agent as Borrower
By: /s/ FRANK FERRARA By: /s/ DONALD J. GUEDRY, JR.
----------------------------------------- -----------------------------------------
Title: Senior Associate Title: Treasurer
-------------------------------------- ---------------------------------------
DI INTERNATIONAL, INC.,
as Guarantor
By: /s/ DONALD J. GUEDRY, JR.
-----------------------------------------
Title: Treasurer
---------------------------------------
</TABLE>
<PAGE> 1
Exhibit 11
DI INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON STOCK SHARE
(in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1997 1996 1997 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income (loss) per share:
Net income (loss) $ 1,040 $ 524 $ 3,354 $ (967)
Less: Series A preferred stock
redemption premium (218) - (240) -
Series B preferred stock subscription
dividend requirement - (150) - (300)
----------- ----------- ----------- -----------
Net income (loss) applicable to common stock $ 822 $ 374 $ 3,114 $ (1,267)
=========== =========== =========== ===========
Income (loss) per common share $ .01 $ .01 $ .02 $ (.03)
=========== =========== =========== ===========
Weighted average shares of common stock
outstanding for per share computation 138,152 38,694 135,756 38,682
=========== =========== =========== ===========
</TABLE>
Note: Reference is made to Note 2 to Consolidated Financial Statements
regarding computation of per common stock share amounts.
(a) Stock options are not included since inclusion would be either
antidilutive or not significant for all the periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 54,294
<SECURITIES> 0
<RECEIVABLES> 44,679
<ALLOWANCES> 1,866
<INVENTORY> 428
<CURRENT-ASSETS> 103,944
<PP&E> 324,991
<DEPRECIATION> (16,349)
<TOTAL-ASSETS> 419,081
<CURRENT-LIABILITIES> 47,127
<BONDS> 174,139
305
0
<COMMON> 15,154
<OTHER-SE> 131,331
<TOTAL-LIABILITY-AND-EQUITY> 419,081
<SALES> 76,046
<TOTAL-REVENUES> 76,046
<CGS> 62,132
<TOTAL-COSTS> 70,681
<OTHER-EXPENSES> 655
<LOSS-PROVISION> (200)
<INTEREST-EXPENSE> 1,535
<INCOME-PRETAX> 4,710
<INCOME-TAX> 1,356
<INCOME-CONTINUING> 3,354
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,354
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
