<PAGE> 1
As filed with the Securities and Exchange Commission on July 22, 1998
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
BAYARD DRILLING TECHNOLOGIES, INC.
BAYARD DRILLING, L.L.C.
BAYARD DRILLING, L.P.
BONRAY DRILLING CORPORATION
TREND DRILLING CO.
(Exact names of Registrants as specified in their charters)
<TABLE>
<S> <C> <C>
DELAWARE 1381 73-1508021
DELAWARE 1381 73-1519377
DELAWARE 1381 73-1532348
DELAWARE 1381 73-1086424
OKLAHOMA 1381 73-1141066
(States or other jurisdictions of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4005 NORTHWEST EXPRESSWAY, SUITE 550E
OKLAHOMA CITY, OKLAHOMA 73116
(405) 840-9550
(Address, including zip code, and telephone number,
including area code, of Registrants' principal executive offices)
---------------------
JAMES E. BROWN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BAYARD DRILLING TECHNOLOGIES, INC.
4005 NORTHWEST EXPRESSWAY, SUITE 550E
OKLAHOMA CITY, OKLAHOMA 73116
(405) 840-9550
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
GEOFFREY L. NEWTON
BAKER & BOTTS, L.L.P.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 953-6500
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]_________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] ________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED NOTE(1) PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11% Senior Notes due June 30,
2005, Series B . . . . . . . . . $100,000,000 100% $100,000,000 $29,500
- --------------------------------------------------------------------------------------------------------------------
Guarantees (2) . . . . . . . . . N/A N/A N/A N/A
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2) Each of Bayard Drilling, L.L.C., a Delaware limited liability company,
Bayard Drilling, L.P., a Delaware limited partnership, Bonray Drilling
Corporation, a Delaware corporation, and Trend Drilling Co., an Oklahoma
corporation, (each of which is a direct or indirect wholly owned
subsidiary of Bayard Drilling Technologies, Inc.) is registering a
guarantee of the obligations of Bayard Drilling Technologies, Inc. in
respect of the Senior Notes being registered hereby. Pursuant to Rule
457(n) under the Securities Act of 1933, as amended, no registration fee
is required with respect to such guarantees.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY __, 1998
PROSPECTUS
BAYARD DRILLING TECHNOLOGIES, INC.
OFFER TO EXCHANGE ITS 11% SENIOR NOTES DUE 2005, SERIES B FOR ANY AND ALL OF
ITS OUTSTANDING 11% SENIOR NOTES DUE 2005, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED.
Bayard Drilling Technologies, a Delaware corporation, ("Bayard" or the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its 11% Senior Notes due June 30, 2005, Series B (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for each $1,000 principal amount of its outstanding 11% Senior Notes
due June 30, 2005, Series A (the "Old Notes"), of which $100,000,000 principal
amount is outstanding. The form and terms of the Exchange Notes are the same as
the form and terms of the Old Notes (which they are intended to replace) except
that the Exchange Notes will bear a Series B designation and have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer. See "The Exchange Offer." The Exchange Notes will
evidence the same debt as the Old Notes (which they are intended to replace) and
will be issued under and be entitled to the benefits of the Indenture (the
"Indenture") dated June 26, 1998 among the Company, the Guarantors (as
hereinafter defined) and U.S. Trust Company of Texas, N.A., as Trustee (the
"Trustee"), governing the Old Notes. See "The Exchange Offer" and "Description
of Exchange Notes."
The Exchange Notes will mature on June 30, 2005. Interest on the Exchange
Notes will be payable semi-annually on June 30 and December 31 of each year,
commencing on December 31, 1998. The Company will not be required to make any
mandatory sinking fund or redemption payments with respect to the Exchange
Notes. The Exchange Notes will not be redeemable prior to June 30, 2003, on or
after which the Exchange Notes will be redeemable, in whole or in part, at the
option of the Company, at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as hereinafter defined), if any,
thereon to the date of redemption. In addition, at any time on or before June
30, 2001, the Company may redeem up to 35% of the original aggregate principal
amount of the Exchange Notes with the net proceeds of a Qualified Equity
Offering (as hereinafter defined) at a redemption price equal to 111% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption, provided that at least $65
million in aggregate principal amount of Exchange Notes remains outstanding
immediately after the occurrence of such redemption. See "Description of
Exchange Notes -- Optional Redemption." Upon a Change of Control (as hereinafter
defined) each holder of the Exchange Notes will have the right to require the
Company to repurchase all or any part of such holder's Exchange Notes at a price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of repurchase. See
"Description of Exchange Notes -- Change of Control." (Cover text continued on
next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE> 3
The Old Notes were issued by the Company in an offering (the "Old Notes
Offering") consummated on June 26, 1998. The Company used $75 million of the
proceeds from the sale of the Old Notes to finance the acquisition (the
"TransTexas Acquisition") of 25 drilling rigs and certain related equipment and
other assets from TransTexas Gas Corporation ("TransTexas"), which occurred
concurrently with the Old Notes Offering. The remainder of the net proceeds to
the Company from the Old Notes Offering have been, or will be, used for general
corporate purposes.
The Exchange Notes will be senior unsecured obligations of the Company
and will rank pari passu in right of payment with all existing and future senior
indebtedness and other senior obligations of the Company, and senior in right of
payment to all future subordinated indebtedness of the Company. The Company is a
holding company and conducts substantially all of its operations through its
wholly owned subsidiaries. The Exchange Notes will be guaranteed (the
"Guarantees") by the present and future domestic Subsidiaries (as hereinafter
defined) of the Company (the "Guarantors"). The Guarantees will be senior
unsecured obligations of each Guarantor and will rank pari passu in right of
payment with all senior indebtedness and other senior obligations of such
Guarantor. The holders of secured indebtedness of the Company and the Guarantors
will have claims with respect to the assets constituting collateral for such
indebtedness that are prior to claims of holders of the Exchange Notes. See
"Description of Exchange Notes." As of June 15, 1998, on a pro forma basis after
giving effect to the TransTexas Acquisition (as hereinafter defined) and the Old
Notes Offering, the Company had approximately $121.1 million of outstanding
senior indebtedness, of which $21.1 million is secured by certain assets of the
Subsidiaries.
The Company will accept for exchange any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York time, on , 1998, unless
extended by the Company in its sole discretion to no later than 30th business
day (or, with the Initial Purchasers' consent, to no later than the 40th
business day) after the registration statement to which this Prospectus relates
is declared effective (the "Expiration Date"). Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Exchange
Offer is subject to certain customary conditions. The Old Notes were sold by the
Company on June 26, 1998 to the Initial Purchasers (as hereinafter defined) in
the Old Notes Offering, which was a transaction effected without registration
under the Securities Act in reliance upon an exemption under the Securities Act.
The Initial Purchasers subsequently placed the Old Notes in the United States
with qualified institutional buyers in reliance upon Rule 144A under the
Securities Act and outside the United States with non-U.S. persons in reliance
on Regulation S under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Company under the
Registration Rights Agreement (the "Exchange Offer Registration Rights
Agreement") entered into by the Company in connection with the Old Notes
Offering. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. See "The Exchange Offer -- Purpose
and Effect of the Exchange Offer" and "-- Resale of the Exchange Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Notwithstanding the
foregoing, any purchaser of Old Notes who is an "affiliate" of the Company or
who intends to participate in the Exchange Offer for the purpose of distributing
the Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make
ii
<PAGE> 4
this Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of Distribution."
There has not previously been any public market for the Old Notes or the
Exchange Notes. Although the Initial Purchasers have informed the Company that
they intend to make a market in the Exchange Notes, they are not obligated to do
so, and any such market-making activities with respect to the Exchange Notes may
be interrupted or discontinued at any time without notice. The Company does not
intend to list the Exchange Notes on any securities exchange or to seek approval
for quotation through any automated quotation system.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company generally will have
no further obligation to such holders to provide for registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected. See "Risk Factors -- Exchange
Offer Procedures" and "Exchange Offer -- Consequences of Failure to Exchange."
The Exchange Notes will be available initially only in book-entry form.
The Company expects that the Exchange Notes issued pursuant to this Exchange
Offer will be issued in the form of one or more Global Notes (as hereinafter
defined), which will be deposited with, or on behalf of, The Depository Trust
Company ("DTC" or the "Depositary") and registered in its name or in the name of
Cede & Co., its nominee. Beneficial interests in a Global Note representing the
Exchange Notes will be shown on, and transfers thereof will be effected through,
records maintained by the Depositary and its participants. After the initial
issuance of the Global Notes, Exchange Notes in certificated form will be issued
in exchange for a Global Note only on the terms set forth in the Indenture. See
"Description of Exchange Notes -- Book Entry, Delivery, Form and Transfer."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Old Notes as of , 1998.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. The Company will pay all expenses incurred by it
incident to the Exchange Offer. See "Use of Proceeds" and "Plan of
Distribution."
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law.
iii
<PAGE> 5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). All statements other than
statements of historical fact included in this Prospectus, including without
limitation certain statements under the captions "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," may constitute forward-looking statements.
Forward-looking statements can often, but not always, be identified by
terminology such as "anticipate," "believe," "estimate," "intend" and "expect"
and similar expressions. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Important factors
that could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed in this Prospectus,
including without limitation in conjunction with the forward-looking statements
included in this Prospectus and in the section of this Prospectus entitled "Risk
Factors" under the headings "Cyclical Conditions; Recent Weakening of Demand for
Drilling Services," "Substantial Leverage," "Holding Company Structure,"
"Ranking of the Exchange Notes," "Restrictions Imposed by Lenders," "Dependence
on Oil and Gas Industry," "Concentration of Customer Base," "Limited Operating
History," "Management of Growth; Risks of Acquisition Strategy," "Shortage of
Qualified and Experienced Labor," "Competition," "TransTexas Drilling Alliance,"
"Class Action Litigation," "Operating Hazards and Uninsured Risks," "Shortage of
Drilling Equipment and Supplies," "Capital Requirements and Liquidity,"
"Reliance on Key Personnel," "Control by Existing Management and Stockholders;
Voting Agreement among Certain Stockholders," "Inability to Purchase Exchange
Notes Upon a Change of Control," "Governmental Regulation and Environmental
Matters," "Risks Associated with Footage and Turnkey Drilling," "Lack of Public
Market for the Notes," "Fraudulent Conveyance Considerations" and "Exchange
Offer Procedures; Consequences of Failure to Exchange." All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the Cautionary
Statements. The Company disclaims any intention or obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
iv
<PAGE> 6
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 (the "Exchange Offer Registration Statement," which term shall
encompass all amendments, exhibits and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Prospectus does not contain all of
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
In connection with the Company's initial public offering of 11,040,000
shares of its common stock, par value $0.01 per share ("Common Stock"),
consummated in November 1997 (the "Initial Public Offering"), the Company became
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. The
Exchange Offer Registration Statement and such other reports, proxy statements
and other information filed by the Company with the Commission can be inspected
at, and copies may be obtained at prescribed rates from, the public reference
facilities maintained by the Commission at its principal offices located at
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549, as well as at the
Commission's regional offices located at Seven World Trade Center, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. The Exchange Offer Registration Statement and such
other reports, proxy statements and other information may also be obtained from
the web site that the Commission maintains at http://www.sec.gov. Reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the American Stock Exchange, 86 Trinity Place, New York 10016,
where the Common Stock is listed.
The Company will furnish periodic reports to the Trustee, which will make
them available upon request to the holders of the Exchange Notes.
To permit compliance with Rule 144A in connection with resales of Old
Notes, the Company will furnish upon the request of the holder of an Old Note
and prospective purchaser designated by such holder the information required to
be delivered under Rule 144A(d)(4) under the Securities Act if at the time of
such request the Company is not a reporting company under Section 13 or 15(d) of
the Exchange Act or exempt from reporting pursuant to Rule 12g3-2(b) thereunder.
v
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless otherwise indicated or the context otherwise requires,
the terms "Bayard" and the "Company" include Bayard Drilling Technologies, Inc.
and its predecessors and subsidiaries. All capitalized terms used in this
Prospectus with respect to the Old Notes or the Exchange Notes (collectively,
the "Notes") and not otherwise defined herein have the meanings set forth under
"Description of Exchange Notes -- Certain Definitions." Unless otherwise
indicated, the information contained herein (including the historical and pro
forma financial information) relating to periods prior to June 26, 1998, the
date of the TransTexas Acquisition, does not give effect to the TransTexas
Acquisition. The 1997 pro forma financial results presented herein reflect
operating results attributable to all acquisitions completed by the Company
during 1997.
THE COMPANY
The Company is a leading provider of contract land drilling services to
major and independent oil and gas companies. As of June 15, 1998, pro forma for
the TransTexas Acquisition, the Company's rig fleet consisted of 88 rigs, of
which 73 were being marketed and 15 were available for refurbishment. For the
three months ended March 31, 1998, and the months of April and May, 1998, the
Company experienced overall utilization rates of approximately 85%, 78% and 70%,
respectively, for its marketed rigs (excluding the 25 drilling rigs (21 of which
are operational and four of which require refurbishment) acquired in the
TransTexas Acquisition (the "TransTexas Rigs")). See "-- Recent Operating
Performance."
The Company's fleet consists primarily of rigs capable of deep drilling
applications (well depths of 15,000 feet or greater). The Company believes that
deep drilling targets are more attractive to oil and gas companies due to new
technologies, including (i) three-dimensional seismic techniques, (ii)
increasingly accurate down hole measurement devices and (iii) improved guidance
systems and directional drilling motors for horizontal and directional wells. Of
the Company's 88 rigs, 69 are capable of drilling to depths of 15,000 feet or
greater and 43 are capable of drilling to depths of 20,000 feet or greater. The
Company's large percentage of diesel electric silicon controlled rectifier
("SCR") rigs, comprising 31 of its 88 rigs, positions the Company's fleet as one
of the most technically advanced in the industry.
The Company was formed in December 1996 as the successor to Anadarko
Drilling Company ("Anadarko"), which owned ten rigs. Through June 15, 1998, pro
forma for the TransTexas Acquisition, the Company had acquired 78 additional
rigs (net of sales). Many of the acquired rigs were put into service in the
later months of 1997 and therefore did not contribute significantly to operating
results in 1997.
For the quarter ended March 31, 1998, the Company reported revenues of
$24 million, EBITDA of $6 million and net income of $1.8 million. For the year
ended December 31, 1997, pro forma for the acquisitions completed in that year,
the Company reported revenue of $81.4 million, EBITDA of $18.2 million and net
income of $3.7 million. Because the TransTexas Rigs were utilized solely for
TransTexas' internal purposes, the 1997 pro forma data included in this
Prospectus does not give effect to the TransTexas Acquisition.
CORE OPERATING AREAS
The Company's rig fleet is currently concentrated in two core operating
regions--the Mid-Continent region and the Gulf Coast region. With the completion
of the TransTexas Acquisition the Company added a third core operating region in
South Texas. The Company is among the largest rig suppliers in each of these
regions.
1
<PAGE> 8
MID-CONTINENT REGION
The Mid-Continent region is comprised principally of Oklahoma, North
Texas and the Texas Panhandle. At June 15, 1998, the Company had 38 rigs
marketed in the Mid-Continent region and was the most active drilling contractor
in the region. The Company's rigs operated in the Mid-Continent region are
generally capable of drilling to depths of 10,000 feet or greater and are
marketed by the Company to meet the specific well depths and mobility needs of
producers in that region. At June 5, 1998, 153 rigs were being utilized in this
region, making it the most active domestic onshore drilling market at that time.
This area is characterized by well-defined target formations and long-lived
natural gas reserves.
GULF COAST REGION
The Gulf Coast region is comprised of the onshore Gulf of Mexico areas in
Texas, Louisiana, Mississippi and Alabama. At June 15, 1998, the Company had 14
rigs marketed in the Gulf Coast region, including 13 diesel electric SCR rigs.
The Company believes that its high quality equipment, including diesel electric
SCR rigs, powerful mud pumps and high horsepower drawworks, give the Company a
competitive advantage in attracting premium jobs with customers engaged in
multi-well drilling programs in this region. At June 5, 1998, 110 rigs were
being utilized in this region, making it the fourth most active domestic onshore
drilling market at that time. The Gulf Coast region is characterized by
significant drilling activity in deep, technically challenging formations for
which the Company's SCR and deep mechanical rigs are particularly well suited.
While recent results in certain areas of the Gulf Coast have been disappointing
to producers, most notably the Austin Chalk formation in Louisiana and the
Pinnacle Reef in Texas, significant exploration and development activity is
ongoing.
SOUTH TEXAS REGION
The South Texas region is comprised of the southern portion of onshore
Texas. At June 15, 1998, pro forma for the TransTexas Acquisition, the Company
had 21 rigs available to be marketed in the South Texas region (of which nine
rigs were being utilized by TransTexas) and four rigs available to be
refurbished as market conditions warrant. The TransTexas Rigs have been utilized
historically only to meet the internal drilling requirements of TransTexas. With
the completion of the TransTexas Acquisition, the Company intends to begin to
actively market the acquired rigs not being utilized by TransTexas under the
Alliance Agreement (as hereinafter defined). At June 5, 1998, 119 rigs were
being utilized in this region, making it the third most active domestic onshore
drilling market at that time. The South Texas region is predominately a gas
producing region, and, accordingly, its drilling activity levels are less
sensitive to declining oil prices. The Company believes that the TransTexas Rigs
operating in this region are well suited for the mobility, drilling flexibility
and hydraulic efficiency required for this region's drilling applications.
2
<PAGE> 9
RIG FLEET
The following table sets forth, as of June 15, 1998, certain information
with respect to the drilling rigs owned by the Company and the rigs acquired in
the TransTexas Acquisition. This table includes information for (i) the 52 rigs
marketed by the Company at June 15, 1998, (ii) the 11 rigs available to be
refurbished as market conditions warrant and (iii) the 25 rigs acquired by the
Company in the TransTexas Acquisition. See "Business--Drilling Equipment and
Supplies."
<TABLE>
<CAPTION>
DEPTH CAPACITY (FEET)
---------------------------------------------------
7,000 10,000 15,000 20,000
TO TO TO OR
9,999 14,999 19,999 GREATER TOTAL
<S> <C> <C> <C> <C> <C>
Rigs Owned at June 15, 1998:
Gulf Coast Region:
SCR .......................................... 0 0 0 13 13
Mechanical ................................... 0 0 1 0 1
--------- --------- --------- --------- ---------
Total ........................................ 0 0 1 13 14
Mid-Continent Region:
SCR .......................................... 0 0 3 5 8
Mechanical ................................... 1 14 8 7 30
--------- --------- --------- --------- ---------
Total ........................................ 1 14 11 12 38
Available for Refurbishment:
SCR .......................................... 0 0 4 6 10
Mechanical ................................... 0 1 0 0 1
--------- --------- --------- --------- ---------
Total ........................................ 0 1 4 6 11
RIGS ACQUIRED FROM TRANSTEXAS:
South Texas Region:
Mechanical ................................... 0 2 7 12 21
Available for Refurbishment:
Mechanical ................................... 0 1 3 0 4
Total Rigs (Including TransTexas Rigs) .. 1 18 26 43 88
========= ========= ========= ========= =========
</TABLE>
BUSINESS STRATEGY
The Company believes that growth in earnings and cash flow can be
achieved by pursuing the following business strategy:
OPERATING A TECHNOLOGICALLY ADVANCED RIG FLEET
The Company has assembled its existing rig fleet, and will pursue further
acquisitions, with the goal of operating one of the most technologically
sophisticated land drilling fleets in the United States. Many of the Company's
rigs include engines, pumps and drilling mud systems that represent the best
drilling technology available and that the Company believes offer greater
efficiencies for customers than many of the rigs available from its competitors.
For example, by deploying its diesel electric SCR rigs with two or three high
horsepower pumps and top drive drilling systems in challenging deep and
horizontal drilling situations, the Company believes that it can reduce its
customers' overall drilling costs, thus securing and enhancing its relationships
with some of the most active operators in the domestic market. The Company is
committed to making the capital investments required to maintain and, in
appropriate circumstances, increase the technological sophistication and
operational efficiencies of its fleet.
DEVELOPING DEEP DRILLING CAPABILITIES
The Company believes there is greater demand for rigs capable of drilling
deeper, more complex wells, including 1,500 horsepower and larger rigs, and has
focused, and will continue to focus, on acquiring rigs with these capabilities.
Of the 25 TransTexas Rigs, 12 are 1,500 horsepower or larger rigs and an
additional 10 are 1,000 horsepower or larger rigs. At June 15, 1998, pro forma
for the TransTexas Acquisition, 78% of the Company's rig fleet
3
<PAGE> 10
had deep drilling capability (15,000 feet or greater). Management believes that
demand and utilization rates for these types of rigs, particularly SCR rigs,
will remain higher than for rigs with lesser depth capacities due to their
greater operational flexibility and efficiency.
FOCUSING ON CORE MARKETS
The Company believes that its strong asset position and operating
expertise in the Mid-Continent and Gulf Coast regions enable it to achieve
operating efficiencies and to provide premium service to its customers in these
markets. The Company is the largest provider of drilling rigs in Oklahoma and is
among the largest operators of deep rigs in the onshore Gulf Coast region. The
TransTexas Acquisition will make the Company one of the largest suppliers of
drilling rigs in the South Texas region and positions the Company to mobilize
additional rigs in that region as market conditions warrant.
DEVELOPING AND MAINTAINING RELATIONSHIPS WITH OPERATORS
In order to maximize the utilization rate of its rig fleet and to
minimize exposure to market downturns, the Company seeks to maintain and build
relationships with operators committed to active domestic drilling programs. The
Company's largest current customers include Apache Corporation, Chesapeake
Energy Corporation ("Chesapeake"), Enron Oil and Gas Company, Marathon Oil
Company, Sonat Exploration Company ("Sonat") and Union Pacific Resources
Corporation ("UPR"). Each of these companies was among the most active onshore
operators in the United States during the last three years. As a result of the
Alliance Agreement (as hereinafter defined), the Company will make up to 15 rigs
available to TransTexas to meet its drilling requirements, if any, in an area
that includes, among others, the South Texas and Gulf Coast regions. During the
three months ended March 31, 1998, the three largest customers for the Company's
contract drilling services were Chesapeake, UPR and Sonat, which accounted for
approximately 17%, 12% and 10% of total revenues, respectively.
ACQUIRING AND REFURBISHING ADDITIONAL RIGS AND RELATED EQUIPMENT
The Company intends to pursue selective acquisitions of additional rigs
and related equipment, including top drive drilling systems. Additionally, the
Company has experience in the acquisition of component parts from which rigs can
be assembled or refurbished and intends to continue to seek similar
opportunities for the expansion and enhancement of its rig fleet by such means.
Since its formation and through June 26, 1998, the date of the TransTexas
Acquisition, the Company had acquired 78 additional rigs (net of sales).
THE TRANSTEXAS ACQUISITION
The TransTexas Acquisition was consummated on June 26, 1998, concurrently
with the closing of the Old Notes Offering.
In the TransTexas Acquisition, the Company acquired certain assets of
TransTexas, including (i) 25 drilling rigs (21 of which are operational and
include drill pipe and four of which require refurbishment) and related
equipment (including approximately 325,000 feet of surplus drill pipe), (ii) a
drilling support facility located in Laredo, Texas and related maintenance and
repair equipment and (iii) trucks and equipment used for rig hauling activities.
All of the TransTexas Rigs are mechanical rigs capable of drilling to depths of
12,000 feet or greater, with 12 of the rigs capable of drilling to depths of
20,000 feet or greater. The Company will pay cash consideration of $75 million
in the TransTexas Acquisition and intends to offer positions to approximately
200 TransTexas employees currently involved in its drilling operations.
In connection with the TransTexas Acquisition, the Company and TransTexas
entered into a drilling alliance agreement (the "Alliance Agreement"). The
Alliance Agreement provides that, for a period of 30 months, if TransTexas
4
<PAGE> 11
engages in any land drilling activities in Alabama, Louisiana, Mississippi,
Oklahoma, New Mexico and Texas (the "Alliance Area"), TransTexas will engage the
Company to provide up to 15 rigs for wells on which TransTexas serves as
operator. Immediately following the consummation of the TransTexas Acquisition,
eight of the TransTexas Rigs were being utilized by TransTexas. Although the
Company expects TransTexas to continue to utilize certain of the TransTexas Rigs
during the term of the Alliance Agreement, there can be no assurance that
TransTexas will do so and, therefore, there can be no assurance as to the number
of TransTexas Rigs (or other drilling rigs) that the Company will ultimately
provide to TransTexas under the Alliance Agreement or of the timing or receipt
of revenues therefrom.
RECENT OPERATING PERFORMANCE
The Company reported net income for the three months ended March 31, 1998
of $1.8 million on revenues of $24 million compared with a loss of $84,000 on
revenues of $4.1 million for the three months ended March 31, 1997. EBITDA
increased to $6 million for the first quarter of 1998 from $869,000 in the first
quarter of 1997. These increases are due to the growth in the Company's rig
fleet from 11 marketed rigs at March 31, 1997 to 51 marketed rigs at March 31,
1998.
Of the 52 rigs being marketed by the Company at June 15, 1998, 14 were
located in the Gulf Coast region and 38 in the Mid-Continent region. In the Gulf
Coast region, the Company had nine rigs under contract and five rigs available
for work. In the Mid-Continent region, the Company had 27 rigs under contract,
10 rigs available, and one rig undergoing repairs.
For the first quarter of 1998, the Company experienced a decline in
average rig utilization to approximately 85% from its 1997 average rig
utilization of 93%. In April and May 1998, the Company's average rig utilization
rate declined further to approximately 78% and 70%, respectively. In the
Mid-Continent region, the Company experienced utilization rates of 88% during
the first quarter of 1998, 83% during April 1998 and 80% during May 1998. The
Company was the most active drilling contractor in the Mid-Continent region
during the first quarter of 1998. The Gulf Coast market weakened during the
first five months of 1998, producing utilization rates of 80% during the first
quarter of 1998, 64% during April 1998 and 41% during May 1998, during which
time the Company has been attempting to transition rigs from Chesapeake and UPR
to other operators. Since December 1997, Chesapeake has released five rigs and
UPR has released three rigs in the Gulf Coast region. On June 15, 1998,
Chesapeake and UPR were utilizing five and three rigs in the Gulf Coast region,
respectively. However, there can be no assurance that Chesapeake, UPR or other
customers of the Company will not release additional rigs in the future.
The Company's operating results are substantially affected by industry
conditions such as the levels and volatility of market prices of oil and gas. In
recent months, the market price for oil has declined significantly, resulting in
a decrease in demand for rigs targeting oil reserves. Over the same period, gas
prices have declined to a lesser extent than oil prices, as has the demand for
gas drilling rigs. However, there can be no assurance that gas prices and
related demand for gas drilling rigs will not decline significantly in the
future. In the first quarter of 1998, approximately 93% of the Company's
revenues and 97% of its operating income were generated from natural gas
drilling activities. See "Risk Factors -- Cyclical Conditions; Weakening of
Demand for Drilling Services."
5
<PAGE> 12
THE OLD NOTES OFFERING
<TABLE>
<S> <C>
OLD NOTES . . . . . . . . . . . . . . . The Old Notes were sold by the Company on June 26, 1998 to
Donaldson Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc., BT Alex. Brown and Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated (the "Initial
Purchasers"), pursuant to a Purchase Agreement (the "Purchase
Agreement") dated June 19, 1998. The Initial Purchasers
subsequently resold the Old Notes in the United States to
qualified institutional buyers in reliance on Rule 144A under
the Securities Act and outside the United States to non-U.S.
persons in reliance on Regulation S under the Securities Act.
EXCHANGE OFFER REGISTRATION RIGHTS
AGREEMENT . . . . . . . . . . . . . . . Pursuant to the Purchase Agreement, the Company and the
Purchasers entered into a Registration Rights Agreement dated
June 19, 1998 (the "Exchange Offer Registration Rights
Agreement") which grants the holders of the Old Notes certain
exchange and registration rights. The Exchange Offer is
intended to satisfy such exchange rights, which terminate
upon the consummation of the Exchange Offer.
</TABLE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
SECURITIES OFFERED . . . . . . . . . . $100,000,000 principal amount of 11% Senior Notes due 2005,
Series B (the "Exchange Notes").
THE EXCHANGE OFFER . . . . . . . . . . $1,000 principal amount of the Exchange Notes in exchange for
each $1,000 principal amount of Old Notes. As of the date
hereof, $100,000,000 aggregate principal amount of Old Notes are
outstanding. The Company will issue the Exchange Notes to
holders on or promptly after the Expiration Date. See "The
Exchange Offer."
Based on an interpretation by the staff of the Commission set forth in
Exxon Capital Holdings Corp., SEC No-Action Letter, available April
13, 1989, and similar no-action letters issued to third parties, the
Company believes that Exchange Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course
of such holder's business and that such holder does not intend to
participate and has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
</TABLE>
6
<PAGE> 13
<TABLE>
<S> <C>
Each Participating Broker-Dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other
trading activities (other than a resale of an unsold allotment from
the original sale of Old Notes). The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-Dealer for use
in connection with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of
the Exchange Notes cannot rely on the position of the staff of the
Commission enunciated in the relevant no- action letters and, in
the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Failure to comply with
such requirements in such instance may result in such holder incurring
liability under the Securities Act for which the holder is not
indemnified by the Company. See "The Exchange Offer -- Resale of the
Exchange Notes."
EXPIRATION DATE . . . . . . . . . . . . 5:00 p.m., New York time, on , 1998
unless the Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date and time to which the
Exchange Offer is extended.
ACCRUED INTEREST ON THE NOTES . . . . . Each Exchange Note will bear interest from the most recent date
to which interest has been paid or duly provided for on the Old
Note surrendered in exchange for such Exchange Note or, if no
interest has been paid or duly provided for on such Old Note,
from June 26, 1998. Interest on the Exchange Notes is payable
on June 30 and December 31 of each year, commencing on December
31, 1998.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after
the last date to which interest has been paid or duly provided for on
the Old Notes prior to the original issue date of the Exchange Notes or,
if no such interest has been paid or duly provided for, will not receive
any accrued interest on such Old Notes, and will be deemed to have
waived the right to receive any interest on such Old Notes accrued
from and after June 26, 1998. See "The Exchange Offer -- Interest on
the Exchange Notes."
</TABLE>
7
<PAGE> 14
<TABLE>
<S> <C>
CONDITIONS TO THE EXCHANGE OFFER . . . The Exchange Offer is subject to certain customary conditions,
which may be waived by the Company. See "The Exchange Offer --
Conditions."
PROCEDURES FOR TENDERING OLD NOTES . . Each holder of Old Notes wishing to accept the Exchange Offer
must complete, sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, in accordance with the
instructions contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile, together
with the Old Notes and any other required documentation to U.S.
Trust Company of Texas, N.A., as exchange agent (the "Exchange
Agent"), at the address set forth in the Letter of Transmittal.
By executing the Letter of Transmittal, each holder will
represent to the Company that, among other things, the Exchange
Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that
neither the holder nor any such other person has any arrangement
or understanding with any person to participate in the
distribution of such Exchange Notes and that neither the holder
nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act. See "The Exchange Offer --
Purpose and Effect of the Exchange Offer" and "The Exchange
Offer -- Procedures for Tendering."
UNTENDERED OLD NOTES; CONSEQUENCES OF
FAILURE TO EXCHANGE . . . . . . . . . . Following the consummation of the Exchange Offer, holders of Old
Notes eligible to participate but who do not tender their Old
Notes will not have any further exchange rights and such Old
Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Old
Notes could be adversely affected. The Old Notes that are not
exchanged pursuant to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be resold only (i)
to the Company, (ii) pursuant to an effective registration
statement under the Securities Act, (iii) pursuant to Rule 144A
or Rule 144 under the Securities Act, (iv) outside the United
States to a foreign person pursuant to the requirements of Rule
904 under the Securities Act, or (v) pursuant to some other
exemption under the Securities Act (and based upon an opinion of
counsel, if the Company so requests). See "The Exchange Offer
-- Consequences of Failure to Exchange."
</TABLE>
8
<PAGE> 15
<TABLE>
<S> <C>
SHELF REGISTRATION STATEMENT . . . . . In the event that (i) the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) in certain
circumstances the holder notifies the Company that it is unable
to participate in the Exchange Offer or is unable to use this
Prospectus, the Company will cause to be filed with the
Commission, no later than 45 days after the date that the
Company determines the Exchange Offer is not permitted or, if
earlier, the date the Company receives such notice from a holder
(the "Filing Deadline"), a shelf registration statement (the
"Shelf Registration Statement"). If required, the Company will
use its reasonable best efforts to cause the Shelf Registration
Statement to be declared effective on or before the 180th day
after the Filing Deadline. The Company has agreed to maintain
the effectiveness of the Shelf Registration Statement, under
certain circumstances, for a maximum of two years following the
effective date of the Shelf Registration Statement.
SPECIAL PROCEDURES FOR BENEFICIAL Any beneficial owner whose Old Notes are registered in the name
OWNERS . . . . . . . . . . . . . . . . of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender should contact such registered
holder promptly and instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to tender on
such owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering its Old Notes, either
make appropriate arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed bond power from
the registered holder. The transfer of registered ownership may take
considerable time. The Company will keep the Exchange Offer open for not
less than 20 business days in order to provide for the transfer of
registered ownership. See "The Exchange Offer -- Procedures for
Tendering."
GUARANTEED DELIVERY PROCEDURES . . . . Holders of Old Notes who wish to tender their Old Notes and
whose Old Notes are not immediately available or who cannot
deliver their Old Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for book-entry transfer)
prior to the Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS . . . . . . . . . . . Tenders may be withdrawn at any time prior to 5:00 p.m., New
York time, on the Expiration Date. See "The Exchange Offer --
Withdrawal of Tenders."
</TABLE>
9
<PAGE> 16
<TABLE>
<S> <C>
ACCEPTANCE OF OLD NOTES AND DELIVERY OF
EXCHANGE NOTES . . . . . . . . . . . . The Company will accept for exchange, subject to the conditions
described under "The Exchange Offer -- Conditions," any and all
Old Notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange Offer."
USE OF PROCEEDS . . . . . . . . . . . . There will be no cash proceeds to the Company from the exchange
pursuant to the Exchange Offer. See "Use of Proceeds."
EXCHANGE AGENT . . . . . . . . . . . . U.S. Trust Company of Texas, N.A. The Exchange Agent also
serves as trustee under the Indenture.
</TABLE>
THE EXCHANGE NOTES
<TABLE>
<S> <C>
GENERAL . . . . . . . . . . . . . . . . The form and terms of the Exchange Notes are the same as the
form and terms of the Old Notes (which they are intended to
replace) except that (i) the Exchange Notes bear a Series B
designation and (ii) the Exchange Notes have been registered
under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. Additionally, the holders of
Exchange Notes will not be entitled to certain rights under the
Exchange Offer Registration Rights Agreement, including the
provisions providing for Liquidated Damages in certain
circumstances, which rights will terminate when the Exchange
Offer is consummated. See "The Exchange Offer -- Purpose and
Effect of the Exchange Offer." The Exchange Notes will evidence
the same debt as the Old Notes and will be entitled to the
benefits of the Indenture. See "Description of Exchange Notes."
The Old Notes and the Exchange Notes are referred to herein
collectively as the "Notes."
SECURITIES OFFERED . . . . . . . . . . . $100,000,000 principal amount of the Company's 11% Senior Notes due
2005, Series B.
MATURITY DATE . . . . . . . . . . . . . . June 30, 2005.
INTEREST . . . . . . . . . . . . . . . . Interest on the Exchange Notes will accrue at a rate of 11% per
annum and will be payable semi-annually in cash in arrears on June
30 and December 31 of each year, commencing December 31, 1998.
</TABLE>
10
<PAGE> 17
<TABLE>
<S> <C>
GUARANTEES . . . . . . . . . . . . . . . The Company is a holding company which conducts operations through
its wholly owned subsidiaries. The Exchange Notes will be
unconditionally guaranteed, jointly and severally, by each of the
Guarantors. The Guarantees will be senior unsecured obligations of
each Guarantor and will rank pari passu in right of payment with
all other indebtedness and senior obligations of such Guarantor
that are not subordinated by their terms to other indebtedness of
such Guarantor. In addition, the Guarantees will be effectively
subordinated to secured indebtedness of the Guarantors, including
guarantees of indebtedness under an $18.2 million term loan (the
"Term Loan") among the Company, The CIT Group/Equipment Financing,
Inc. ("CIT") and Fleet Capital Corporation ("Fleet"), and a $10
million revolving loan facility (the "Revolving Loan") between
Fleet and the Company (collectively, the "Loan Agreements"), which
is secured by certain assets of the Guarantors. See "Description
of Exchange Notes--Guarantees of Exchange Notes."
RANKING OF THE EXCHANGE NOTES . . . . . . The Exchange Notes will be senior unsecured obligations of the
Company, ranking pari passu in right of payment with all existing
and future senior indebtedness and other senior obligations of the
Company and senior in right of payment to all future subordinated
indebtedness of the Company. The holders of secured indebtedness
of the Company (including indebtedness secured by certain assets of
the Subsidiaries under the Company's Loan Agreements) will have
claims with respect to the assets constituting collateral for such
indebtedness that are prior to claims of holders of the Exchange
Notes and the Trustee. As of June 15, 1998, on a pro forma basis
after giving effect to the issuance of the Notes and the completion
of the TransTexas Acquisition, the Company had approximately $121.1
million of outstanding senior indebtedness, of which $21.1 million
is secured by certain assets of the Subsidiaries. See "Description
of Exchange Notes--Guarantees of Exchange Notes" and "--General."
OPTIONAL REDEMPTION . . . . . . . . . . . The Exchange Notes will be redeemable, at the Company's option, in
whole or in part from time to time on or after June 30, 2003, at
the redemption prices set forth herein, plus accrued and unpaid
interest to the redemption date. In the event the Company
consummates one or more Qualified Equity Offerings on or prior to
June 30, 2001, the Company at its option may use all or a portion
of the net cash proceeds from such Qualified Equity Offerings to
redeem up to 35% of the aggregate principal amount of the Exchange
Notes at a redemption price equal to 111% of the aggregate
principal amount thereof, together with accrued and unpaid interest
to the date of redemption, provided that at least $65 million of
the aggregate principal amount of Exchange Notes remains
outstanding immediately after such redemption. See "Description of
Exchange Notes--Optional Redemption."
</TABLE>
11
<PAGE> 18
<TABLE>
<S> <C>
CHANGE OF CONTROL . . . . . . . . . . . . Upon a Change of Control, each holder of Exchange Notes will have
the right to require the Company to repurchase all or any part of
such holder's Exchange Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid
interest to the date of purchase. See "Description of Exchange
Notes--Change of Control."
CERTAIN COVENANTS . . . . . . . . . . . . The Indenture contains certain covenants, including, but not
limited to, covenants limiting the Company and its Subsidiaries
with respect to the following: (i) transactions with affiliates,
(ii) dividend and other restricted payments, (iii) the incurrence
of additional indebtedness by the Company and the Subsidiaries and
the issuance of preferred stock, (iv) dividend and other payment
restrictions affecting the Subsidiaries, (v) asset sales, (vi) sale
and lease-back transactions, (vii) liens, (viii) the issuance of
additional guarantees by the Guarantors, (ix) changes in business
and (x) mergers and consolidations. See "Description of Exchange
Notes--Certain Covenants" and "--Consolidation, Merger, Conveyance,
Lease or Transfer."
</TABLE>
RISK FACTORS
See "Risk Factors," beginning on page 15 hereof, for a discussion of
certain factors that should be considered by investors in connection with the
Exchange Offer.
12
<PAGE> 19
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA
FINANCIAL AND OPERATING DATA
The following table sets forth summary historical financial and operating
data for the Company for each of the years in the three year period ended
December 31, 1997, for the three months ended March 31, 1997 and 1998, and as of
December 31, 1997 and March 31, 1998. The financial results for the period ended
and as of December 31, 1997 include the results of the Company's consolidated
subsidiaries, Trend, beginning May 1, 1997, Ward, beginning May 30, 1997, and
Bonray, beginning October 16, 1997. The Company's historical results with
respect to periods prior to December 31, 1996 reflect the operations of its
predecessor, Anadarko. The pro forma consolidated operating data for the year
ended December 31, 1997 gives effect to the Trend Acquisition, the Ward
Acquisition and the Bonray Acquisition (each as hereinafter defined) and the
reduction of interest expense resulting from payment of certain Subordinated
Notes from proceeds of the Initial Public Offering, all of which occurred at
various dates in 1997, as if such transactions occurred at January 1, 1997. The
1997 pro forma data set forth below does not give pro forma effect to the
TransTexas Acquisition because the TransTexas Rigs were utilized by TransTexas
solely for internal purposes and generated no revenues. The consolidated
financial data for the three months ended March 31, 1997 and 1998 is derived
from the unaudited financial statements of the Company. In the opinion of
management, the financial data for the three months ended March 31, 1997 and
1998 reflects all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. The following information should
be read together with Management's Discussion and Analysis of Financial
Condition and Results of Operations, the historical financial statements of the
Company, including the notes thereto, and the Pro Forma Consolidated Financial
Data, including the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ ------------------------
1995 1996 1997 1997 1997 1998
HISTORICAL PRO FORMA HISTORICAL
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues ....................... $ 7,708 $ 9,853 $ 55,747 $ 81,373 $ 4,111 $ 23,962
Operating expenses:
Drilling and other ................. 6,122 7,699 40,705 59,704 3,047 17,221
Depreciation and amortization ...... 791 1,126 7,943 11,576 876 3,169
General and administrative ......... 880 658 1,868 3,440 195 755
--------- --------- --------- --------- --------- ---------
Total operating expenses ....... 7,793 9,483 50,516 74,720 4,118 21,145
--------- --------- --------- --------- --------- ---------
Operating income (loss) .............. (85) 370 5,231 $ 6,653 (7) 2,817
=========
Interest expense and financing cost .. (3) (11) (3,065) -- (145) (367)
Other income (expense) ............... (134) 71 1,178 -- 17 582
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes .... (222) 430 3,344 -- (135) 3,032
Income tax expense(1) ................ -- 163 1,428 -- 51 1,275
--------- --------- --------- --------- --------- ---------
Net income (loss) before
extraordinary loss ........... $ (222) $ 267 $ 1,916 -- $ (84) $ 1,757
========= ========= ========= ========= ========= =========
CASH FLOW DATA:
Operating activities ................. $ 310 $ (462) $ (1,308) -- $ 3,043 $ 6,975
Investing activities ................. (1,710) (10,441) (86,470) -- (14,441) (26,676)
Financing activities ................. 1,400 15,866 132,117 -- 8,476 (1,863)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997 MARCH 31, 1998
------------ ------------------------------
HISTORICAL HISTORICAL AS ADJUSTED(2)
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments................................................ $ 50,182 $ 28,262 $ 41,701
Working capital, excluding current portion of long-term debt........ 56,404 33,662 47,101
Property, plant and equipment, net.................................. 155,673 179,807 254,807
Total assets........................................................ 240,488 246,594 338,283
Long-term debt, including current portion........................... 32,610 30,698 122,387
Total stockholders' equity.......................................... 178,462 180,232 180,232
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- -----------------------
1995 1996 1997 1997 1998
HISTORICAL HISTORICAL
(UNAUDITED)
(IN THOUSANDS, EXCEPT RIG AND DAY RATE DATA)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(3)................................... $ 706 $ 1,496 $13,174 $ 869 $ 5,986
Capital expenditures........................ 2,088 10,578 86,980 13,711 27,094
Ratio of EBITDA to interest expense......... 235.3x 136.0x 4.3x 6.0x 16.3x
Ratio of earnings to fixed charges(4)....... 18.2x 1.7x 3.9x
PRO FORMA AS ADJUSTED DATA: (2)
EBITDA(3)................................... $18,229
Cash interest expense....................... 12,659 $ 3,003
Ratio of EBITDA to cash interest expense.... 1.4x 2.0x
Ratio of net debt to EBITDA (5)............. 4.4x NM
DRILLING RIG ACTIVITY DATA:
Total rigs at end of period................. 8 17 63 11 63
Marketed rigs at end of period.............. 8 8 49 11 51
Average utilization rate of drilling rigs
available for service(6).................. 86% 88% 93% 99% 85%
Average day rate(7)......................... $ 4,298 $ 4,731 $ 5,393 $ 4,618 $ 5,957
</TABLE>
(1) Since the Company's predecessor was a nontaxable entity, income tax
expense is presented on a pro forma basis (assuming a 38% statutory rate)
for the year ended December 31, 1996.
(2) Reflects each of the following transactions as if they occurred on the
first day of the relevant period: (i) the repayment by the Company of
25% ($6.2 million) of the outstanding principal amount of the Term Loan,
(ii) the repayment and retirement of the $2.52 million principal amount
of Subordinated Notes previously held by Energy Spectrum (as hereinafter
defined) and (iii) the issuance of the Notes. While interest expense
related to the Notes is reflected, no adjustment has been made to
reflect potential revenues deriving from the operation of the TransTexas
Rigs. The Company used $75 million of the net proceeds of the Old Notes
Offering to fund the purchase price of the TransTexas Acquisition.
(3) EBITDA represents operating income before depreciation and amortization.
EBITDA is frequently used by securities analysts and is presented herein
to provide additional information about the Company's operations.
EBITDA is not a measurement presented in accordance with generally
accepted accounting principles. EBITDA should not be considered in
isolation or as a substitute for net income or cash flow data prepared
in accordance with generally accepted accounting principles or as a
measure of a company's profitability or liquidity.
(4) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of operating lease
rental expense that represents the interest factor).
(5) Net debt is defined as total debt less cash and cash equivalents.
(6) Rig utilization rates are calculated on a weighted average basis
assuming 365 days availability for all rigs available for service. Rigs
acquired have been treated as added to the rig fleet as of the date of
acquisition. Rigs under contract that generate revenues during moves
between locations or during mobilization/ demobilization are also
considered to be utilized. Rigs that are owned but not being marketed,
including rigs being refurbished, are not considered in determining the
utilization rate.
(7) Represents total contract drilling revenues (excluding mobilization, cost
reimbursements and fuel), divided by the total number of days the
Company's drilling rig fleet operated during the period, divided by the
average number of rigs in operation.
14
<PAGE> 21
RISK FACTORS
An investment in the Exchange Notes offered hereby involves a high degree
of risk. Prospective investors should carefully consider and evaluate the
following factors relating to the Company and the Exchange Notes, together with
the information and financial data set forth elsewhere in this Prospectus, prior
to participating in the Exchange Offer.
CYCLICAL CONDITIONS; RECENT WEAKENING OF DEMAND FOR DRILLING SERVICES
Historically, the contract drilling industry has been cyclical, with
significant volatility in profitability and rig values. This industry
cyclicality has been due to changes in the level of domestic oil and gas
exploration and development activity and the available supply of drilling rigs.
The market for contract land drilling services has generally been depressed
since 1982, when oil and gas prices began to weaken following a period of
significant increase in new drilling rig capacity. Since that time and except
during occasional upturns, there have been substantially more drilling rigs
available than necessary to meet demand in most operating and geographic
segments of the domestic drilling industry, including the geographic areas in
which the Company operates.
Although the Company believes that improved technologies and stable oil
and gas prices contributed to increased activity in the exploration and
production sector during 1997, there has been a general decline in oil and, to a
lesser extent, gas prices in recent months and there can be no assurance that
such decline will not continue. The recent decline in oil and gas prices has
caused demand for the Company's drilling services, and therefore the Company's
rig utilization rates, to decrease in recent periods. The Company's 1997 average
rig utilization rate was approximately 93%. For the three months ended March 31,
1998, however, the Company's average rig utilization rate declined to
approximately 85%. In April and May 1998, the Company's average rig utilization
rate declined to approximately 78% and 70%, respectively. The Company believes
that this decrease in utilization is due to an overall weakening of demand for
land drilling services in its two core markets and, more specifically, by
releases of rigs by Chesapeake and UPR, its two largest customers. The generally
reduced demand for land drilling services in the first quarter of 1998 is
believed by the Company to be attributable to the lower prices received for oil
and gas production, and to widespread uncertainty among potential customers as
to the future level and trend of oil and gas prices. Oil prices have continued
to decline in the second quarter and in June reached their lowest level since
1986. The average revenues per rig day worked received by the Company under its
most recently awarded day rate drilling contracts in its core domestic markets
have reflected an average decline of approximately 15% in the Gulf Coast region,
and have remained relatively stable in the Mid-Continent region, from that
received under prior day rate contracts for the same or comparable rigs. If
these industry conditions persist or worsen, they could have a material adverse
effect on the Company's financial condition and results of operations. The
Company cannot predict the future level of demand for its contract drilling
services and resulting rig utilization rates, future conditions in the contract
drilling industry or future contract drilling rates.
SUBSTANTIAL LEVERAGE
The Company has a substantial amount of indebtedness. As of March 31,
1998, on a pro forma basis after giving effect to the Old Notes Offering, the
TransTexas Acquisition, the repayment and retirement of the Subordinated Notes
(which occurred in April 1998) and the repayment of $6.2 million of the
principal amount outstanding under the Term Loan (which occurred in May 1998),
the Company would have had approximately $122.4 million of consolidated
indebtedness and a ratio of debt to total capitalization of 40%. See
"Capitalization." The Indenture permits the Company to incur additional
indebtedness under certain conditions, and the Company expects that it may incur
additional indebtedness to the extent it is permitted to do so.
The degree to which the Company is leveraged could have important
consequences to the Company and the holders of the Notes, including the
following: (i) funds available for the Company's operations or capital
expenditures will be reduced as a result of the dedication of a substantial
portion of the Company's net cash flow from operations to the payment of
principal of and interest on the indebtedness (including the Notes), (ii) the
Company's ability to obtain additional financing may be impaired, (iii) the
Company may be more vulnerable to economic downturns and more limited in its
ability to withstand competitive pressures than competitors that are not as
highly leveraged, (iv) financial
15
<PAGE> 22
and other restrictive covenants which are imposed on the Company as a result of
its indebtedness (including by the Indenture) could limit the Company's
operating and financial flexibility and, if violated, create an event of default
resulting in material adverse effects on the Company, (v) certain of the
Company's borrowings, primarily under the Loan Agreements, will be at variable
rates of interest which could cause the Company to be vulnerable to increases in
interest rates and (vi) the Company's ability to pursue acquisitions and other
business opportunities may be impaired.
The ability of the Company to make principal and interest payments under
long-term indebtedness (including the Exchange Notes) and bank loans will be
dependent upon the Company's future performance, which is subject to financial,
economic and other factors, some of which are beyond its control. There can be
no assurance that the current level of operating results of the Company will
continue or improve.
HOLDING COMPANY STRUCTURE
The Company is a holding company and substantially all of its operations
are conducted through its subsidiaries. As a result, the Company expects that
funds necessary to meet its debt service obligations will be provided primarily
by distributions or advances from the subsidiaries. All of the current
subsidiaries of the Company will execute Guarantees. If the Guarantees were not
enforced for any reason, the Company's cash flow and, consequently, its ability
to service its indebtedness, including the Exchange Notes, would be dependent on
its ability to gain access to the cash flow of the Guarantors (whether through
loans, dividends, distributions or otherwise) and would be subject to any legal,
contractual or other restrictions that could hinder or prevent the Company from
doing so. The Guarantors are separate and distinct legal entities from the
Company and, except under the terms of the Guarantees, have no obligation,
contingent or otherwise, to pay any amounts due in respect of the Notes or to
make any amounts available for the payment thereof. In addition, many
jurisdictions recognize suretyship defenses available to guarantors such as the
Guarantors which could create an impediment to the enforcement of the
Guarantees. Although the Guarantors will generally waive all such defenses,
there can be no assurance that such waivers will be enforceable. In general, if
the Guarantees were not enforced for any reason, the Exchange Notes would be
effectively subordinated to all indebtedness and other obligations of the
Guarantors to other third parties.
With respect to any future Unrestricted Subsidiary (as hereinafter
defined) of the Company, the holders of the Exchange Notes will have no direct
claim against the assets of such future subsidiary and such future subsidiary
will have no obligation in respect of the payment of the principal amount of or
interest on the Exchange Notes. Any claim that the Company might have by virtue
of its status as a stockholder of such subsidiary would be effectively
subordinated to the claims of every creditor of such subsidiary, including trade
creditors and the holders of subordinated indebtedness of such subsidiary. Any
intercompany obligations that such future subsidiary owed to the Company could
also be subordinated or treated as equity claims under the laws of the
applicable jurisdiction. See "--Fraudulent Conveyance Considerations" and
"Description of Exchange Notes."
RANKING OF THE EXCHANGE NOTES
The Exchange Notes will be senior unsecured obligations of the Company,
will rank pari passu in right of payment with all existing and future senior
indebtedness and other obligations of the Company and will rank senior in right
of payment to any future subordinated indebtedness of the Company. The Company's
obligations under the Exchange Notes will be jointly and severally guaranteed by
the Guarantors. Currently, 12 rigs owned by certain of the Subsidiaries and
certain equipment and drilling contracts related to such rigs, substantially all
of the Subsidiaries' accounts receivable and other intangibles, certain property
owned by the Company in El Reno, Oklahoma and certain other assets are pledged
as security for other indebtedness, including under the Loan Agreements. As of
June 15, 1998, the Company had $18.2 million of indebtedness outstanding under
the Term Loan, $2.9 million of other secured indebtedness and no indebtedness
outstanding under the Revolving Loan. The Guarantors have guaranteed the
obligations under the Loan Agreements. Accordingly, the lenders under the Loan
Agreements and other secured debt of the Company have claims with respect to the
rigs and other assets constituting collateral for any indebtedness thereunder
and the assets of any subsidiary guaranteeing such indebtedness, which will be
satisfied to the extent of their collateral prior to the unsecured claims of
holders of the Exchange Notes. In the event of a default on the Exchange
16
<PAGE> 23
Notes or a bankruptcy, liquidation or reorganization of the Company, such assets
will be available to satisfy obligations with respect to the indebtedness
secured thereby before any payment therefrom could be made on the Exchange
Notes.
In addition, the Exchange Notes are effectively subordinated to the
claims of all of the creditors, including trade creditors and tort claimants, of
the Company's subsidiaries that are not Guarantors and to all secured creditors
of the Guarantors. In the event of an insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any subsidiary of
the Company that is not a Guarantor, creditors of such subsidiary generally will
have the right to be paid in full before any distribution will be made to the
Company or the holders of the Exchange Notes. In addition, certain financing
arrangements that the Company's subsidiaries are party to may impose
restrictions on the ability of the Company to gain access to the cash flow or
assets of its subsidiaries. See "--Restrictions Imposed by Lenders,"
"Description of Certain Indebtedness" and "Description of Exchange
Notes--General."
RESTRICTIONS IMPOSED BY LENDERS
The instruments governing the indebtedness of the Company impose
significant operating and financial restrictions on the Company. Such
limitations will affect, and in many respects significantly restrict or
prohibit, among other things, the ability of the Company to pay dividends, make
investments, incur additional indebtedness, repay indebtedness prior to its
stated maturity, sell assets or engage in mergers and acquisitions. These
restrictions could limit the ability of the Company to effect future financings,
make needed capital expenditures, withstand a future downturn in the Company's
business or the economy in general, or otherwise conduct necessary corporate
activities. The Loan Agreements also contain a number of financial covenants
that require the Company to meet certain financial ratios and tests and provide
that a "change of control" will constitute an event of default. A failure to
comply with the obligations contained in the Loan Agreements or the Indenture,
if not cured or waived, could permit acceleration of the related indebtedness
and acceleration of indebtedness under other instruments that contain
cross-acceleration or cross-default provisions. If the Company were obligated to
repay all or a significant portion of its indebtedness, there can be no
assurance that the Company would have sufficient cash to do so or that the
Company could successfully refinance such indebtedness. Other indebtedness of
the Company that may be incurred in the future may contain financial or other
covenants more restrictive than those applicable to the Loan Agreements or the
Exchange Notes. In addition, the obligations of the Company under the Loan
Agreements will be secured by certain assets of the Guarantors and the Indenture
will permit other senior indebtedness to be secured. In the case of an event of
default under the Loan Agreements or such other secured indebtedness, the
lenders thereunder would be entitled to exercise the remedies available to a
secured lender under applicable law. See "Description of Exchange Notes--Certain
Covenants."
DEPENDENCE ON OIL AND GAS INDUSTRY
The Company's revenues, cash flows and earnings are substantially
dependent upon, and affected by, the level of domestic oil and gas exploration
and development activity. Such activity and the resulting level of demand for
contract land drilling and related services are directly influenced by many
factors over which the Company has no control. Such factors include, among
others, the market prices of oil and gas, market expectations about future
prices, the volatility of such prices, the cost of producing and delivering oil
and gas, government regulations and trade restrictions, local and international
political and economic conditions, levels of production by, and other activities
of, the Organization of Petroleum Exporting Countries and other oil and gas
producers, the development of alternate energy sources and the long-term effects
of worldwide energy conservation measures. As a result of significant recent
decreases in oil prices, substantial uncertainty exists as to the future level
of oil and gas exploration and development activity. There can be no assurance
that the current level of oil and gas exploration and development activity will
be maintained or that demand for the Company's contract drilling services will
reflect the level of such activity.
CONCENTRATION OF CUSTOMER BASE
During the three months ended March 31, 1998, the three largest customers
for the Company's contract drilling services were Chesapeake, UPR and Sonat,
which accounted for approximately 17%, 12% and 10% of total revenues,
respectively. Additionally, as a result of the Alliance Agreement, TransTexas
became a significant customer of the Company. Under the Alliance Agreement,
TransTexas may utilize up to 15 of the Company's rigs. Immediately
17
<PAGE> 24
following the consummation of the TransTexas Acquisition on June 26, 1998,
TransTexas was utilizing eight of the Company's rigs under the Alliance
Agreement. Chesapeake has reduced its drilling program in the Gulf Coast region,
an area in which it utilizes a number of the Company's rigs. Since late November
1997, Chesapeake has released six rigs under contract with the Company that it
was using in the Gulf Coast region. As of June 15, 1998, Chesapeake continued to
utilize five of the Company's rigs; however, there can be no assurance that
Chesapeake or any of the Company's other principal customers (including
TransTexas) will employ the Company's services in the future or that the loss of
any of such customers or adverse developments affecting the ability of such
customers to pay for the Company's services would not have a material adverse
effect on the Company's financial condition and results of operations.
LIMITED OPERATING HISTORY
The Company was founded in December 1996 as the successor to Anadarko,
which had operated as a contract land drilling rig service company since 1982 in
Oklahoma. Although Anadarko was owned by and provided drilling services to AnSon
Partners Limited Partnership (together with its affiliates, "APLP") prior to
December 1996, Anadarko had also provided drilling services to 23 different
third party customers between 1982 and December 1996. Prior to December 1996,
however, the Company had not operated as an independent entity. Although the
President and Chief Executive Officer of the Company had been employed by
Anadarko for 14 years and several other key employees of the Company had been
with Anadarko for extended periods, much of the Company's management group has
been assembled recently. Despite the extensive experience and qualifications of
many of the recently added individual managers, there can be no assurance that
the management group will be able to manage the stand-alone entity as a cohesive
team or to implement effectively the Company's business strategy. The pro forma
financial results presented herein include the operating results of drilling
rigs which were not under the Company's control and may not be indicative of the
Company's future operating results.
MANAGEMENT OF GROWTH; RISKS OF ACQUISITION STRATEGY
The Company has experienced rapid and substantial growth since its
formation as a result of acquisitions. The Company anticipates the further
expansion of the Company's drilling fleet through additional selective
acquisitions. Certain risks are inherent in an acquisition strategy, such as
increasing leverage and debt service requirements and combining disparate
company cultures, which could adversely affect the Company's operating results.
Continued growth and the process of integrating such acquired businesses may
involve unforeseen difficulties and may require a disproportionate amount of
management's attention and the Company's financial and other resources. No
assurance can be given that the Company will be able to continue to identify
suitable acquisition opportunities, negotiate acceptable terms, obtain financing
for acquisitions on satisfactory terms or successfully acquire identified
targets. There can be no assurance that the Company will be able to successfully
manage and integrate the acquired businesses and assets into its existing
operations or that it will be able to successfully maintain the market share
attributable to operable drilling rigs acquired by the Company. If the Company
is unable to manage its growth and successfully integrate the acquired
businesses into the Company's existing operations, or if the Company encounters
unexpected costs or liabilities in the acquired businesses, the Company's
results of operations or financial condition could be materially adversely
affected. See "Business -- Business Strategy."
Competition in the market for drilling rigs caused substantial increases
in the acquisition prices paid for rigs in 1997. Continued competition and price
escalation could adversely affect the Company's growth strategy if it is unable
to purchase additional drilling rigs or related equipment on favorable terms.
There can be no assurance that the Company will be able to compete successfully
in the future for acquisitions of available drilling rigs or related equipment,
or that such competition will not have a material adverse effect on the
Company's business, financial condition and results of operations.
SHORTAGE OF QUALIFIED AND EXPERIENCED LABOR
Increases in both onshore and offshore domestic oil and gas exploration
and production since 1995 and resultant increases in contract drilling activity
have at times created, and may in the future create, a shortage of qualified
18
<PAGE> 25
drilling rig personnel in the industry. If the Company is unable to attract and
retain sufficient qualified operating personnel, its ability to market and
operate its drilling rigs will be restricted. In addition, labor shortages could
result in wage increases, which could reduce the Company's operating margins and
have a material adverse effect on the Company's financial condition and results
of operations.
COMPETITION
The contract drilling industry is a highly competitive and fragmented
business characterized by high capital and maintenance costs. As a result, even
though the Company has the fifth largest active land drilling rig fleet in the
United States, the Company believes such fleet represents a market share of
approximately 6% of the domestic land drilling industry. Drilling contracts are
usually awarded through a competitive bid process and, while the Company
believes that operators consider factors such as quality of service, type and
location of equipment, or the ability to provide ancillary services, price and
rig availability are the primary factors in determining which contractor is
awarded a job. Certain of the Company's competitors have greater financial and
human resources than the Company, which may enable them to better withstand
periods of low rig utilization, to compete more effectively on the basis of
price and technology, to build new rigs or acquire existing rigs and to provide
rigs more quickly than the Company in periods of high rig utilization. There can
be no assurance that the Company will be able to compete successfully against
its competitors in the future or that the level of competition will allow the
Company to obtain adequate margins from its drilling services.
TRANSTEXAS DRILLING ALLIANCE
In connection with the TransTexas Acquisition, the Company and TransTexas
entered into the Alliance Agreement, which provides that, for a period of 30
months, if TransTexas engages in any land drilling activities in the Alliance
Area, TransTexas will engage the Company to provide up to 15 rigs for wells on
which TransTexas serves as operator. Although immediately following the
consummation of the TransTexas Acquisition on June 26, 1998, TransTexas was
utilizing eight of the Company's rigs under the Alliance Agreement, the Alliance
Agreement does not guarantee any minimum utilization of the TransTexas Rigs (or
other drilling rigs) and there can be no assurance as to the level of
TransTexas' drilling requirements during the term of the Alliance Agreement or
that any of the TransTexas Rigs not employed under the Alliance Agreement can be
effectively marketed to other customers of the Company. If TransTexas or any of
the Company's other significant customers determine to reduce drilling activity
for any reason, the Company's financial condition and results of operations
could be materially and adversely affected.
Under the Alliance Agreement, all drilling rigs will be provided on pre-
agreed terms under separate drilling contracts to be entered into by the
parties. Although the Company believes that, as of the date hereof, the pre-
agreed day rates provided for under the Alliance Agreement approximate
prevailing market rates in the South Texas region, there can be no assurance
that such rates will continue to be competitive throughout the term of the
Alliance Agreement.
Pursuant to the terms of the purchase agreement entered into in
connection with the TransTexas Acquisition (the "TransTexas Purchase
Agreement"), at the time of the closing of the TransTexas Acquisition,
TransTexas entered into an escrow agreement and placed into escrow $2 million
(the "TransTexas Security Arrangement") to secure the obligations of TransTexas
under any drilling contracts entered into pursuant to the Alliance Agreement.
Although the Company will have recourse to the TransTexas Security Arrangement,
such arrangement is not intended to and will not cover all credit or collection
risks that may arise in connection with the performance of the Alliance
Agreement and related drilling contracts. Any failure on the part of TransTexas
or any of the Company's other significant customers to pay all amounts due for
drilling services provided by the Company (whether as a result of financial
difficulties experienced by such customers or for any other reason) could have a
material adverse effect on the Company and its business, financial condition or
results of operations.
CLASS ACTION LITIGATION
A purported class action lawsuit is currently pending against the
Company, certain directors and officers of the Company, the managing
underwriters of the Initial Public Offering, and certain current and former
stockholders of
19
<PAGE> 26
the Company, alleging violations of federal and state securities laws in
connection with the Initial Public Offering. The lawsuit alleges, among other
things, that the registration statement and prospectus for the Initial Public
Offering contained materially false and misleading information and omitted to
disclose material facts. The Company believes the allegations in the lawsuit are
without merit and is defending vigorously the claims brought against it. The
Company is required under certain circumstances to indemnify the named
directors, officers, underwriters and selling stockholders against losses
incurred as a result of such lawsuits and to advance to such parties ongoing
legal expenses incurred in connection with the defense. The Company expects to
continue to incur legal expenses on its behalf and on behalf of such officers,
directors, underwriters and selling stockholders in connection with this
litigation. In addition, defending this litigation has and will likely continue
to result in the diversion of management's attention from the day-to-day
operations of the Company's business. The Company is unable to predict the
outcome of this lawsuit or the costs to be incurred in connection with its
defense and there can be no assurance that this litigation will be resolved in
the Company's favor. An adverse result or prolonged litigation could have a
material adverse effect on the Company's financial position or results of
operations. See "Business--Legal Proceedings."
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to many hazards inherent in the land
drilling business, including, for example, blowouts, cratering, fires,
explosions, loss of well control, loss of hole, damaged or lost drill strings
and damage or loss from inclement weather. These hazards could cause personal
injury or death, serious damage to or destruction of property and equipment,
suspension of drilling operations, or substantial damage to the environment,
including damage to producing formations and surrounding areas. Generally,
drilling contracts provide for the division of responsibilities between a
drilling company and its customer, and the Company seeks to obtain
indemnification from its customers by contract for certain of these risks. To
the extent not transferred to customers by contract, the Company seeks
protection against certain of these risks through insurance. Although the
Company believes that it is adequately insured for public liability and property
damage to others and injury or death to persons in accordance with industry
standards with respect to its operations, no assurance can be given that such
insurance will be sufficient to protect the Company against liability for all
consequences of well disasters, personal injury, extensive fire damage or damage
to the environment. No assurance can be given that the Company will be able to
maintain adequate insurance in the future at rates it considers reasonable or
that any particular types of coverage will be available. The occurrence of
events, including any of the above-mentioned risks and hazards, that are not
fully insured or the failure of a customer to meet its indemnification
obligations could subject the Company to significant liability and could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business--Operating Hazards and Insurance."
SHORTAGE OF DRILLING EQUIPMENT AND SUPPLIES
There is a general shortage of certain drilling equipment and supplies
used in the Company's business. Because, until recent years, the land drilling
industry was characterized by an oversupply of land rigs, rig manufacturers have
generally focused on the production of more expensive offshore rigs and rig
equipment. As a result, most rig manufacturers are not currently building new
land rigs and those manufacturers that are building new land rigs and components
charge premium prices (approximately $13 million for a new 2,000 horsepower rig)
and require that orders be placed at least 120 days in advance of requested
delivery. The limited availability of new rigs and equipment has caused land rig
owners and operators, including the Company, to maintain and enhance their
fleets primarily through acquisitions and refurbishments using previously
manufactured rig components and equipment. As the land drilling industry
continues to refurbish rigs using existing components and equipment, the
available supply of such components and equipment continues to deplete. There
can be no assurance that a continued shortage of such equipment and supplies
will not result in a material increase in the costs incurred by the Company to
refurbish and maintain its rigs.
The Company requires a substantial amount of drill pipe in order to
achieve the drilling depths required by its customers. A shortage of drill pipe
exists in the contract drilling industry in the United States. This shortage has
caused the price of drill pipe to increase significantly over the past 24 months
and has required orders for new drill pipe to be placed at least one year in
advance of expected use. While the Company believes it currently has sufficient
drill pipe
20
<PAGE> 27
for its existing rigs, in the event the shortage continues, the Company may be
unable to obtain the drill pipe required to expand its contract drilling
operations.
CAPITAL REQUIREMENTS AND LIQUIDITY
The oil and gas contract drilling industry is capital intensive. The
Company's cash flow from operations and the continued availability of credit are
subject to a number of variables, including the Company's utilization rate,
operating margins and ability to maintain costs and obtain contracts in a
competitive industry. There can be no assurance that the Company's cash flow
from operations, proceeds from the Old Notes Offering and the Initial Public
Offering and present borrowing capacity will be sufficient to fund its
anticipated capital expenditures and working capital requirements. The Company
may from time to time seek additional financing, either in the form of bank
borrowings, sales of the Company's debt or equity securities or otherwise.
Except for the Notes and the Company's loan agreements with its lenders, the
Company has no agreements for any such financing and there can be no assurance
as to the availability or terms of any such financing. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition and Liquidity" and "Description of Certain
Indebtedness." To the extent the Company's capital resources and cash flow from
operations are at any time insufficient to fund its activities or repay its
indebtedness as due, the Company will need to raise additional funds through
public or private financings or additional borrowings. No assurance can be given
as to the Company's ability to obtain any such capital resources. If the Company
is at any time not able to obtain the necessary capital resources, its financial
condition and results of operations could be materially adversely affected.
RELIANCE ON KEY PERSONNEL
The success of the Company's business is highly dependent upon the
services, efforts and abilities of James E. Brown, the Company's President and
Chief Executive Officer and certain other officers and key employees,
particularly Edward S. Jacob, III, the Company's Executive Vice
President--Operations & Marketing, David E. Grose, III, the Company's Vice
President and Chief Financial Officer, and Ron Tyson, the Company's
Construction Manager. The business of the Company could be materially and
adversely affected by the loss of any of these individuals. The Company does
not maintain key man life insurance on the lives of any of its executive
officers or key employees. The Company has employment agreements with Messrs.
Brown, Jacob and Grose. See "Management--Executive Compensation."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS; VOTING AGREEMENT AMONG CERTAIN
STOCKHOLDERS
The Company's directors, executive officers and holders of more than 5%
of the Common Stock beneficially own approximately 27.7% of the outstanding
shares of Common Stock. In addition, holders of approximately 25.0% of the
outstanding shares of Common Stock are parties to a stockholders and voting
agreement (the "Stockholders and Voting Agreement") with the Company that
provides for, among other things, the nomination of certain individuals for
election to the Board of Directors of the Company (the "Board"). Pursuant to the
Stockholders and Voting Agreement, each of APLP and Energy Spectrum Partners LP
("Energy Spectrum") are entitled to nominate one person for election to the
Board, subject to maintaining certain ownership thresholds. Each of APLP, Energy
Spectrum, a group of individuals consisting of Mike Liddell, Mark Liddell and
Charles E. Davidson (the "DLB Group"), and Carl B. Anderson, III are obligated
to vote all of their shares of Common Stock for the election of such nominees.
Accordingly, if all stockholders who are party to the Stockholders and Voting
Agreement were to act in concert, they would be able to nominate up to two
members of the Board and exercise significant influence over the Company's
affairs. The Stockholders and Voting Agreement also requires that any transferee
of stock from a party thereto (other than sales into the public market) be bound
by the terms thereof as a condition precedent to such transfer. See "Principal
Stockholders" and "Certain Relationships and Related Transactions--Stockholders
and Voting Agreement."
INABILITY TO PURCHASE EXCHANGE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the Indenture),
the Company will be required to offer to repurchase all of the outstanding Notes
at a price equal to 101% of the principal amount thereof, plus accrued
21
<PAGE> 28
and unpaid interest and Liquidated Damages, if any, to the repurchase date.
There can be no assurance that the Company would have sufficient resources to
repurchase the Notes upon the occurrence of a Change of Control. The failure to
repurchase all of the Notes tendered to the Company would constitute an event of
default under the Indenture. Furthermore, the repurchase of the Notes by the
Company upon a Change of Control might result in a default on the part of the
Company in respect of other indebtedness of the Company, as a result of the
financial effect of such repurchase on the Company or otherwise. The change of
control repurchase feature of the Notes may have anti-takeover effects and may
delay, defer or prevent a merger, tender offer or other takeover attempt. See
"Description of Exchange Notes."
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
The domestic oil and gas industry is affected from time to time in
varying degrees by political developments and federal, state and local laws and
regulations. In particular, oil and gas production, operations and economics are
or have been affected by price controls, taxes and other laws relating to the
oil and gas industry, by changes in such laws and by changes in administrative
regulations. Except for the handling of solid wastes directly generated from the
operation and maintenance of the Company's drilling rigs, such as waste oils and
wash water, it is the Company's practice to require its customers to
contractually assume responsibility for compliance with environmental
regulations. However, the Company's operations are vulnerable to certain risks
arising from the numerous environmental health and safety laws and regulations.
These laws and regulations may restrict the types, quantities and concentration
of various substances that can be released into the environment in connection
with drilling activities, require reporting of the storage, use or release of
certain chemicals and hazardous substances, require removal or cleanup of
contamination under certain circumstances, and impose substantial civil
liabilities or criminal penalties. Environmental laws and regulations may impose
strict liability, rendering a person liable for environmental damage without
regard to negligence or fault, and could expose the Company to liability for the
conduct of, or conditions caused by, others, or for acts of the Company that
were in compliance with all applicable laws at the time such acts were
performed. Moreover, there has been a trend in recent years toward stricter
standards in environmental, health and safety legislation and regulation which
is likely to continue.
The Company has made and will continue to make expenditures to comply
with governmental regulations, including environmental, health and safety
requirements. As part of the Bonray Acquisition, the Company acquired an
equipment yard which may require certain expenditures or remedial actions for
the removal or cleanup of contamination. In exchange for a $1 million cash
payment to the Company at closing, the Company did not require DLB to indemnify
the Company with respect to such expenditures or remedial actions. While the
Company has not determined whether and to what extent such expenditures or
remedial actions may be necessary or advisable, based on the presently available
information, the Company does not believe that such expenditures will exceed $1
million. There can be no assurance, however, that the Company will not incur
material liability with respect to this property or any of the Company's other
properties or operations. The Company cannot predict how existing laws and
regulations may be interpreted by enforcement agencies or court rulings, whether
additional laws and regulations will be adopted, or the effect such changes may
have on the Company's business, financial condition or results of operations.
Because the requirements imposed by such laws and regulations are subject to
change, the Company is unable to forecast the ultimate cost of compliance with
such requirements. The modification of existing laws and regulations or the
adoption of new laws or regulations curtailing exploratory or development
drilling for oil and gas for economic, political, environmental or other reasons
could have a material adverse effect on the Company by limiting drilling
opportunities. See "Business--Government Regulation and Environmental Matters."
RISKS ASSOCIATED WITH FOOTAGE AND TURNKEY DRILLING
The Company in the past has performed drilling services under footage and
turnkey contracts and may enter into such arrangements in the future. Revenues
from footage contracts accounted for approximately 2% of total revenues during
the year ended December 31, 1997 and the Company had no turnkey contracts during
such period. As of June 15, 1998, the Company was operating five rigs under
footage contracts. The Company expects that the number of its rigs operating
under footage contracts will increase in the future unless the market for
drilling rigs improves. Under footage contracts, the Company is paid a fixed
amount for each foot drilled, regardless of the time required or
22
<PAGE> 29
the problems encountered in drilling the well. Under turnkey drilling contracts,
the Company contracts to drill a well to an agreed depth under specified
conditions for a fixed price, regardless of the time required or the problems
encountered in drilling the well. In addition, the Company provides technical
expertise and engineering services, as well as most of the equipment required
for the well, and is compensated only when the contract terms have been
satisfied. On a turnkey well, the Company often subcontracts for related
services and manages the drilling process. The risks to the Company under
footage and turnkey contracts are substantially greater than under daywork
contracts because the Company assumes most of the risks associated with drilling
operations that in a daywork contract are generally assumed by the operator,
including risk of blowout, loss of hole, stuck drill pipe, machinery breakdowns,
abnormal drilling conditions and risks associated with subcontractors' services,
supplies, cost escalation and personnel. While the Company's current strategy is
to operate primarily under daywork contracts, management continually analyzes
market conditions, customer requirements, rig demand and the experience of its
personnel to determine how to most profitably contract its fleet. If the Company
were to encounter less favorable conditions within its industry, competitive
pressures and customer demands might require it to consider entering into a
larger number of footage and turnkey drilling contracts. Accordingly, there can
be no assurance that the Company will not suffer a loss that is not insured as a
result of entering into such contracts, and any such uninsured loss could have a
material adverse effect on the Company's financial position and results of
operations. See "Business--Contract Drilling Operations."
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes will constitute a new class of securities with no
established trading market. The Company does not intend to list the Exchange
Notes on any national securities exchange or to seek the admission thereof for
trading on any automated dealer quotation system. The Company has been advised
by the Initial Purchasers that they intend to make a market in the Exchange
Notes; however, the Initial Purchasers are not obligated to do so and any such
market-making activities may be discontinued at any time without notice. No
assurance can be given as to the liquidity of any trading market for the
Exchange Notes. If a market for the Exchange Notes were to develop, the Exchange
Notes could trade at prices that may be higher or lower than their principal
amount, depending upon many factors, including prevailing interest rates, the
Company's operating results and the markets for similar securities.
Historically, the market for non-investment grade debt such as the Exchange
Notes has been subject to disruptions that have caused substantial volatility in
the prices of securities similar to the Exchange Notes. There can be no
assurance that, if a market for the Exchange Notes were to develop, such a
market will not be subject to similar disruptions. See "Description of Exchange
Notes," and "Notice to Investors."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Company believes that the indebtedness represented by the Notes has
been incurred for proper purposes and in good faith, and that, based on present
forecasts, asset valuations and other financial information, after the
consummation of the Old Notes Offering and the Exchange Offer, the Company will
be solvent, will have sufficient capital for carrying on its business and will
be able to pay its debts as they mature. Notwithstanding the Company's belief,
however, if a court of competent jurisdiction in a suit by an unpaid creditor or
a representative of creditors (such as a trustee in bankruptcy or a debtor-
in-possession) were to find that, at the time of the incurrence of such
indebtedness, the Company was insolvent, was rendered insolvent by reason of
such incurrence, was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, or intended to hinder, delay or defraud its creditors, and the
indebtedness was incurred for less than reasonably equivalent value, then such
court could, among other things, (i) void all or a portion of the Company's
obligations to the holders of the Exchange Notes, the effect of which would be
that the holders of the Exchange Notes may not be repaid in full and/or (ii)
subordinate the Company's obligations under the Exchange Notes to other existing
and future indebtedness of the Company to a greater extent than would otherwise
be the case, the effect of which would be to entitle such other creditors to be
paid in full before any payment could be made on the Exchange Notes.
The Company's obligations under the Exchange Notes will be guaranteed,
jointly and severally, by each of the Guarantors. The Company believes that
indebtedness represented by the Guarantees has been incurred by the Guarantors
for proper purposes and in good faith, and that, based on present forecasts,
asset valuations and other
23
<PAGE> 30
financial information, after the consummation of the Old Notes Offering and the
Exchange Offer, each of the Guarantors will be solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as they
mature. Notwithstanding the Company's belief, however, if a court of competent
jurisdiction in a suit by an unpaid creditor or a representative of creditors
(such as a trustee in bankruptcy or a debtor-in-possession) were to find that,
at the time of the incurrence of such indebtedness, the Guarantors were
insolvent, were rendered insolvent by reason of such incurrence, were engaged in
a business or transaction for which their remaining assets constituted
unreasonably small capital, intended to incur, or believed that they would
incur, debts beyond their ability to pay such debts as they matured, or intended
to hinder, delay or defraud their creditors, and that the indebtedness was
incurred for less than reasonably equivalent value, then such court could, among
other things, (i) void all or a portion of such Guarantors' obligations to the
holders of the Exchange Notes, the effect of which would be that the holders of
the Exchange Notes may not be repaid in full and/or (ii) subordinate such
Guarantors' obligations under the Exchange Notes to other existing and future
indebtedness of such Guarantors to a greater extent than would otherwise be the
case, the effect of which would be to entitle such other creditors to be paid in
full before any payment could be made on the Exchange Notes. Among other things,
a legal challenge to a guarantee on fraudulent conveyance grounds may focus on
the benefits, if any, realized by the Guarantors as a result of the issuance by
the Company of the Exchange Notes.
EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof and, upon
consummation of the Exchange Offer, registration rights under the Exchange Offer
Registration Rights Agreement generally will terminate. In addition, any holder
of Old Notes who tenders in the Exchange Offer for the purpose of participating
in a distribution of the Exchange Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transactions. Each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution." To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
24
<PAGE> 31
THE COMPANY
The Company was formed in December 1996 as a Delaware corporation through
a series of affiliated entity transactions in which the Company became the
successor to Anadarko, the contract drilling subsidiary of privately held APLP.
In connection with the formation of the Company (i) APLP contributed ten
drilling rigs, including two rigs requiring refurbishment, for shares of Common
Stock, (ii) Roy T. Oliver and related entities exchanged six additional drilling
rigs for shares of Common Stock, (iii) Energy Spectrum contributed cash for
shares of Common Stock and (iv) Chesapeake entered into drilling contracts with
two-year terms for six of the Company's rigs in consideration for an option to
purchase shares of Common Stock (together, the "Formation Transactions"). Since
the Formation Transactions, the Company has expanded its business and enhanced
its original fleet through the transactions described below.
o Trend Acquisition. In May 1997, the Company completed the
acquisition of Trend Drilling Co. and its 14 rigs ("Trend") for
$18 million in cash and 250,000 shares of Common Stock (the "Trend
Acquisition").
o Ward Acquisition. Also in May 1997, the Company acquired the
assets of Ward Drilling Company, Inc. including six rigs ("Ward")
for $8 million in cash, 400,000 shares of Common Stock and
warrants to purchase an additional 200,000 shares of Common Stock
(the "Ward Acquisition").
o Bonray Acquisition. In October 1997, the Company acquired Bonray
Drilling Corporation ("Bonray") from DLB Oil & Gas, Inc. ("DLB")
for 3,015,000 shares of Common Stock (the "Bonray Acquisition").
In the Bonray Acquisition, the Company acquired 13 rigs, including
seven rigs with depth capacities of 15,000 feet or greater and two
diesel electric SCR rigs.
o Oliver Acquisition. In January 1998, the Company purchased six
additional rigs from R.T. Oliver Drilling, Inc. for approximately
$14 million in cash (the "Oliver Acquisition"). The Company
expects to refurbish and purchase complementary equipment,
including drill pipe, for these rigs as market conditions warrant.
o Individual Rig Acquisitions. In addition to the Trend, Ward,
Bonray and Oliver Acquisitions, through March 31, 1998, the
Company invested $5.5 million to acquire six rigs in five
transactions involving purchases of individual rigs or rig
components (the "Individual Rig Acquisitions" and, together with
the Formation Transactions, the Trend, Ward, Bonray and Oliver
Acquisitions, the "Consolidation Transactions"). In addition,
the Company has purchased one rig for approximately $54,000 and
has two rigs which may be assembled from inventoried components.
In August 1997, the Company sold one rig.
o Initial Public Offering. In November 1997, the Company completed
the Initial Public Offering of 11,040,000 shares of Common Stock.
Of the total shares sold in the Initial Public Offering, the
Company sold 4,229,050 shares of Common Stock and received net
proceeds of $89.5 million. Through March 31, 1998, the Company
used $34.3 million of such proceeds to purchase machinery and
equipment.
o Refurbishment. The Consolidation Transactions included a number
of rigs in need of refurbishment. From January 1, 1997 through
March 31, 1998, the Company completed refurbishment of 14 rigs at
an average cost of approximately $2.7 million per rig (including
drill pipe). These rigs were placed in service at various dates
between January 1, 1997 and March 31, 1998. At March 31, 1998,
the Company had 12 additional rigs in various stages of
refurbishment. The Company has recently revised its schedule for
rig refurbishment as a result of changes in market conditions
that have caused an industry-wide decrease in rig utilization.
The Company placed one of its construction project rigs into
service during May 1998 and anticipates refurbishing and placing
the remaining eleven rigs into service as market conditions
warrant.
o Holding Company Reorganization. Prior to the consummation of the
Old Notes Offering, the Company completed a reorganization of its
corporate structure and obtained the release of certain collateral
for its secured indebtedness. In the reorganization of the
corporate structure, Bayard and its subsidiaries Trend, Bayard
Drilling, L.L.C. and Bonray transferred substantially all of their
drilling rigs, associated equipment
25
<PAGE> 32
and other assets to a wholly owned partnership, Bayard Drilling,
L.P. ("Bayard Drilling"), subject to the transferors' secured
indebtedness, in exchange for the assumption by Bayard Drilling of
associated liabilities and the issuance by Bayard Drilling of
partnership interests. Concurrently with the transfers, (i) the
Company's secured lenders under the Loan Agreements released from
liens securing the Term Loan all assets except 12 drilling rigs
and associated equipment and released from liens securing the
Revolving Loan all drilling rigs and drilling contracts, except
the 12 rigs remaining as collateral under the Term Loan and the
drilling contracts associated with those 12 rigs, (ii) Bayard
Drilling and its general partner Bayard Drilling, L.L.C. ("Bayard
LLC") issued guarantees in favor of the lenders and (iii) the
Company repaid approximately $6.2 million of its indebtedness to
CIT and Fleet under the Term Loan. See "Management's Discussion
and Analysis of Financial Condition and Results of
Operations--Financial Condition and Liquidity" and "Description of
Certain Indebtedness."
o TransTexas Acquisition. In June 1998, the Company acquired 25
rigs and related equipment from TransTexas for $75 million in
cash. See "The TransTexas Acquisition."
The Company's principal executive offices are located at 4005 Northwest
Expressway, Suite 550E, Oklahoma City, Oklahoma 73116, and its telephone number
at such offices is (405) 840-9550.
26
<PAGE> 33
THE TRANSTEXAS ACQUISITION
Concurrently with the consummation of the Old Notes Offering on June 26,
1998, the Company completed the TransTexas Acquisition, resulting in the
acquisition by Bayard Drilling of 25 rigs and related equipment for aggregate
cash consideration of $75 million.
On May 26, 1998, Bayard Drilling entered into the TransTexas Purchase
Agreement providing for the purchase from TransTexas of certain assets,
including (i) 25 drilling rigs and related equipment (including approximately
745,000 feet of drill pipe), (ii) a drilling support facility located in Laredo,
Texas and related maintenance and repair equipment, (iii) trucks and equipment
used for rig hauling activities, (iv) certain rental equipment used in the
drilling business and (v) certain office equipment, permits and licenses and
other assets used in connection with the drilling operations conducted by
TransTexas. All of the acquired rigs are mechanical rigs capable of drilling to
depths of 12,000 feet or greater, with 12 of the rigs capable of drilling to
depths of 20,000 feet or greater. Since the TransTexas Acquisition, the Company
has hired approximately 300 persons formerly employed in TransTexas' drilling
and trucking operations.
The TransTexas Purchase Agreement contains a covenant prohibiting
TransTexas and its affiliates, for a period of 30 months, from (i) providing any
land drilling services for hire in the Alliance Area or (ii) hiring or
attempting to hire any employee of Bayard Drilling or any of its affiliates.
The TransTexas Purchase Agreement contains customary provisions relating
to indemnification for certain liabilities. Under the TransTexas Purchase
Agreement, TransTexas has agreed to indemnify Bayard Drilling against (i) debts,
liabilities and obligations arising prior to the closing date in connection with
its land drilling operations and (ii) liabilities for breaches on the part of
TransTexas of its representations and warranties. Likewise, Bayard Drilling has
agreed to indemnify TransTexas against (i) debts, liabilities and obligations
arising after the closing date in connection with its land drilling operations
(to the extent that TransTexas has not made representations and warranties
regarding such matters to Bayard Drilling) and (ii) liabilities on the part of
Bayard Drilling for breaches of its representations and warranties.
In connection with the TransTexas Acquisition, Bayard Drilling and
TransTexas entered into the Alliance Agreement. The Alliance Agreement provides
that, for a period of 30 months, if TransTexas engages in any land drilling
activities in the Alliance Area, TransTexas will engage Bayard Drilling to
provide up to 15 of the TransTexas Rigs (or any reasonably equivalent drilling
rigs designated by Bayard Drilling) for wells on which TransTexas serves as
operator.
Under the Alliance Agreement, all drilling rigs will be provided by
Bayard Drilling to TransTexas on pre-agreed terms under separate drilling
contracts to be entered into by the parties. The dayrates set forth in such
drilling contracts shall be revised (i) on a quarterly basis to reflect any
actual increases or decreases in the compensation paid to employees (including
benefit costs) of Bayard Drilling and (ii) on the fifteenth month anniversary of
the Alliance Agreement by mutual agreement of Bayard Drilling and TransTexas
(or, if the parties fail to agree, by decision of an arbitrator as required to
ensure that the drilling contracts reflect commercially reasonable
arrangements). The Company believes that, as of the date of the Alliance
Agreement, the day rates provided for under the Alliance Agreement approximated
prevailing market rates in the South Texas region. However, there can be no
assurance that such rates will continue to be competitive throughout the term of
the Alliance Agreement.
Bayard Drilling will not be required to provide any drilling rig to
TransTexas (i) if TransTexas in good faith requires the commencement of drilling
activities at any proposed drilling site less than 20 days after notice to
Bayard Drilling and Bayard Drilling determines that it is not able to provide a
rig on the accelerated schedule or (ii) if no drilling rig of a type requested
by TransTexas is available within a 125 mile radius of the proposed drilling
site (unless TransTexas agrees to bear all moving costs associated with
transporting the rig to the well site). If Bayard Drilling is not able to
provide drilling rigs to TransTexas under the circumstances set forth in clauses
(i) and (ii) above, TransTexas may obtain a drilling rig for such well site from
a third party other than Bayard Drilling.
27
<PAGE> 34
The term of the Alliance Agreement will be 30 months from June 26, 1998,
unless it is sooner terminated by (i) Bayard Drilling if TransTexas fails to
make any payment as and when required under any drilling contract, (ii) either
party upon 30 days' prior written notice if there is a material breach by the
other party of any obligation under the Alliance Agreement or the drilling
contracts, taken as a whole, which has a material adverse effect on the
performance of the breaching party under such agreements or (iii) either party
upon the insolvency or bankruptcy of the other party.
Immediately following the consummation of the TransTexas Acquisition,
eight of the TransTexas Rigs were being utilized by TransTexas under the
Alliance Agreement. Although the Company expects TransTexas to continue to
utilize certain of the TransTexas Rigs during the term of the Alliance
Agreement, there can be no assurance that TransTexas will do so and, therefore,
no assurance can be given as to the number of TransTexas Rigs (or other drilling
rigs) that Bayard Drilling will ultimately provide to TransTexas under the
Alliance Agreement or of the timing or receipt of revenues therefrom.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. The Exchange Offer is intended to satisfy certain
of the Company's obligations under the Exchange Offer Registration Rights
Agreement. The Old Notes surrendered in Exchange for the Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, the issuance of the
Exchange Notes will not result in any increase in the outstanding debt of the
Company.
The net proceeds of the sale of the Old Notes were approximately $96.8
million, after deducting the discount to the Initial Purchasers and estimated
expenses of the Old Notes Offering. The Company used $75 million of such
proceeds to fund the TransTexas Acquisition. All remaining proceeds have been or
will be used for general corporate purposes, possibly including acquisitions of
additional drilling rigs and related equipment.
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<PAGE> 35
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1998 on an historical and as adjusted basis. The information presented below
on an as adjusted basis reflects each of the following transactions as if they
occurred on March 31, 1998: (i) the repayment by the Company of $6.2 million of
the outstanding principal amount of the Term Loan, (ii) the repayment and
retirement of the $2.52 million principal amount of Subordinated Notes
previously held by Energy Spectrum, (iii) the Old Notes Offering and (iv) the
TransTexas Acquisition. The table should be read in conjunction with "Selected
Consolidated Financial and Operating Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and Pro Forma Consolidated Financial Data of the Company
and related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
HISTORICAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,262 $ 41,701
========= ==========
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . $ 7,450 $ 7,450
--------- ----------
Long-term debt:
Term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,137 14,937 (1)
Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,111 -- (1)
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 100,000
--------- ----------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . 23,248 114,937
--------- ----------
Stockholders' equity:
Preferred Stock, par value $0.01 per share; no shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common Stock, par value $0.01 per share; 18,183,945 shares
outstanding(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 182
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 180,413 180,413
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . . . . . (363) (363)
--------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 180,232 180,232
--------- ----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . $ 210,930 $ 302,619
========= ==========
</TABLE>
(1) In April 1998, the Company repaid and retired the $2.52 million
principal amount of Subordinated Notes held by Energy Spectrum. On May
14, 1998, the Company used a portion of the remaining proceeds of the
Initial Public Offering to repay $6.2 million of the amount outstanding
under the Term Loan. As of June 15, 1998, no borrowings were
outstanding under the Revolving Loan, approximately $18.2 million was
outstanding under the Term Loan and approximately $2.9 million was
outstanding on three amortizing term notes secured by certain of the
Company's top drives (the "Top Drive Notes"). See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition and Liquidity" and "Certain
Relationships and Related Transactions--Chesapeake Transactions."
(2) Does not include (i) 815,100 shares of Common Stock subject to issuance
pursuant to outstanding options awarded under the Company's 1997 Stock
Option and Stock Award Plan (the "Employee Stock Plan") (30,500 of which
relate to options awarded after March 31, 1998), (ii) 100,000 shares of
Common Stock subject to issuance pursuant to options awarded under the
Company's 1997 Non- Employee Directors' Stock Option Plan (the "Director
Stock Plan") (25,000 of which relate to options awarded after March 31,
1998) or (iii) 297,000 shares of Common Stock subject to issuance
pursuant to outstanding warrants issued by the Company. See
"Management--1997 Stock Option and Stock Award Plan," "--1997 Non-
Employee Directors' Stock Option Plan" and "Certain Relationships and
Related Transactions."
29
<PAGE> 36
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The historical financial data presented in the table below for the period
ended and as of December 31, 1997 are derived from the audited financial
statements of the Company and include the results of the Company's consolidated
subsidiaries, Trend, beginning May 1, 1997, Ward, beginning May 30, 1997, and
Bonray, beginning October 16, 1997. The historical financial data presented in
the table below for and at the end of each of the years in the three-year period
ended December 31, 1996 are derived from the audited financial statements of the
Company and relate to the operations of Anadarko, the predecessor of the
Company, and include, generally, the financial results of the operation of eight
rigs.
The historical financial data presented in the table below for the year
ended December 31, 1993 and at the end of the three month periods ended March
31, 1997 and 1998 are derived from the unaudited consolidated financial
statements of the Company. In the opinion of management of the Company, such
unaudited consolidated condensed financial statements include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial data for such periods. The results for the three months ended
March 31, 1998 are not necessarily indicative of the results to be achieved for
the full year.
The data presented below should be read together with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements of the Company, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Contract drilling .................. $ 8,349 $ 9,910 $ 7,405 $ 9,793 $ 55,747 $ 4,111 $ 23,962
Other .............................. -- -- 303 60 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total revenues ................. 8,349 9,910 7,708 9,853 55,747 4,111 23,962
--------- --------- --------- --------- --------- --------- ---------
Operating expense:
Drilling ........................... 7,690 8,572 6,075 7,653 40,705 3,047 17,221
Depreciation, depletion and
amortization ..................... 1,374 1,557 791 1,126 7,943 876 3,169
General and administrative ......... 819 786 880 658 1,868 195 755
Other .............................. -- -- 47 46 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating costs .......... 9,883 10,915 7,793 9,483 50,516 4,118 21,145
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss) .............. (1,534) (1,005) (85) 370 5,231 (7) 2,817
--------- --------- --------- --------- --------- --------- ---------
Other income and (expense):
Interest expense and financing
cost ............................. (30) (18) (3) (11) (3,065) (145) (367)
Interest income .................... -- -- -- -- 597 17 496
Gain (loss) on sale of assets ...... -- 366 (131) 54 544 -- 52
Other income (expense) ............. 24 -- (3) 17 37 -- 34
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes .............................. (1,540) (657) (222) 430 3,344 (135) 3,032
Income tax expense(1) ................ -- -- -- 163 1,428 51 1,275
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) before
extraordinary loss ................. $ (1,540) $ (657) $ (222) $ 267 $ 1,916 $ (84) $ 1,757
========= ========= ========= ========= ========= ========= =========
Earnings (loss) per share before
extraordinary loss:
Basic .............................. $ (.04) $ .05 $ .21 $ (.01) $ .10
========= ========= ========= ========= =========
Diluted ............................ $ (.04) $ .05 $ .17 $ (.01) $ .10
========= ========= ========= ========= =========
Cash Flow Data:
Operating activities ................. $ (51) $ 445 $ 310 $ (462) $ (1,308) $ 3,043 $ 6,975
Investing activities ................. (1,671) (454) (1,710) (10,441) (86,470) (14,441) (26,676)
Financing activities ................. 1,722 9 1,400 15,866 132,117 8,476 (1,863)
</TABLE>
30
<PAGE> 37
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ..................... $ 6,791 $ 6,149 $ 8,054 $ 34,673 $ 240,488 $ 48,091 $ 246,594
Working capital (deficit),
excluding current portion of
long-term debt ................. 711 802 12 4,974 56,404 (20) 33,662
Total long-term debt, including
current portion ................ 365 -- -- 7,000 32,610 15,537 30,698
Total stockholders' equity ....... (913) (54) (276) 26,251 178,462 26,185 180,232
OTHER FINANCIAL DATA:
EBITDA(2) ........................ $ (160) $ 552 $ 706 $ 1,496 $ 13,174 $ 869 $ 5,986
Capital expenditures ............. 1,671 1,183 2,088 10,578 86,980 13,711 27,094
Ratio of EBITDA to interest
expense ........................ 30.7x 235.3x 136.0x 4.3x 6.0x 16.3x
Ratio of earnings to fixed
charges(3) ..................... 18.2x 1.7x 3.9x
DRILLING RIG ACTIVITY DATA
(UNAUDITED):
Total rigs at end of period ...... 8 7 8 17 63 11 63
Marketed rigs at end of period ... 8 7 8 8 49 11 51
Average utilization rate of
drilling rigs available for
service(4) ..................... 71% 84% 86% 88% 93% 99% 85%
Average day rate(5) .............. $ 4,332 $ 4,148 $ 4,298 $ 4,731 $ 5,393 $ 4,618 $ 5,957
</TABLE>
============
(1) Since the Company's predecessor was a nontaxable entity, income tax
expense is presented on a pro forma basis (assuming a 38% statutory rate)
for the year ended December 31, 1996.
(2) EBITDA represents operating income (loss) before depreciation and
amortization. EBITDA is frequently used by securities analysts and is
presented herein to provide additional information about the Company's
operations. EBITDA is not a measurement presented in accordance with
generally accepted accounting principles. EBITDA should not be
considered in isolation or as a substitute for net income or cash flow
data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
(3) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of operating lease
rental expense that represents the interest factor).
(4) Rig utilization rates are calculated on a weighted average basis
assuming 365 days availability for all rigs available for service. Rigs
acquired have been treated as added to the rig fleet as of the date of
acquisition. Rigs under contract that generate revenues during moves
between locations or during mobilization/ demobilization are also
considered to be utilized. Rigs that are owned but not being marketed,
including rigs being refurbished, are not considered in determining the
utilization rate.
(5) Represents total contract drilling revenues (excluding mobilization, cost
reimbursements and fuel), divided by the total number of days the
Company's drilling rig fleet operated during the period, divided by the
average number of rigs in operation.
31
<PAGE> 38
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 of the Company and notes thereto included
elsewhere in this Prospectus.
GENERAL
The Company's operations have been significantly affected by an
acquisition program which has transformed the Company from a regional competitor
with ten rigs in late 1996 to the fifth largest land drilling fleet in the
United States, with a total of 88 rigs. The historical financial results
presented herein do not include the effects of the TransTexas Acquisition (25
rigs) but do reflect the effects of the Formation Transactions (16 rigs), the
Trend Acquisition (14 rigs), the Ward Acquisition (6 rigs), the Bonray
Acquisition (13 rigs), the Oliver Acquisition (6 rigs), the Individual Rig
Acquisitions (6 rigs) and the addition of three other rigs available for
refurbishment (one of which was purchased for approximately $54,000 and two of
which were assembled from inventoried components), for the periods following
such transactions and events. In addition, the historical financial results
include periods in which a number of rigs were being refurbished and did not
contribute to revenues. Accordingly, the Company does not believe that the
historical statements of operations presented herein are necessarily indicative
of the Company's future operating results, particularly in light of the
magnitude of its recent acquisitions and rig refurbishment projects. See
"Business--Formation and Other Transactions."
DOMESTIC LAND DRILLING INDUSTRY OVERVIEW
Demand for the Company's contract land drilling services is substantially
dependent upon, and affected by, the level of domestic oil and gas exploration
and development activity. Industry sources estimate that from its peak in 1982,
the supply of domestic rigs has fallen as a result of normal attrition,
cannibalization of components to refurbish rigs, the inability of smaller
competitors to raise capital needed to upgrade and modernize rigs and the export
of rigs to international markets. As a result of these factors, the contract
land drilling industry has been cyclical with significant volatility in
profitability and rig values.
The Company's operating margins are influenced by contract drilling
rates, operating costs and drilling rig utilization. Although the Company
believes that improved technologies, the long-term decline in the supply of rigs
and stable oil and gas prices contributed to increased activity in the
exploration and production sector during 1997, there has been a general decline
in oil and, to a lesser extent, gas prices during 1998 and there can be no
assurance that such decline will not continue. The recent decline in oil and gas
prices has contributed to a decrease in the Company's rig utilization rates from
88% for the fourth quarter of 1997 to 85% for the first quarter of 1998, 78% for
April 1998 and 70% for May 1998. There can be no assurance that oil and gas
prices will not continue to decline or that any such decline would not have a
material adverse effect on the Company's utilization rates. In addition, ongoing
movement or reactivation of land drilling rigs (including the movement of rigs
from outside the United States into domestic markets) or new construction of
drilling rigs could increase rig supply and adversely affect contract drilling
rates and utilization levels. The Company cannot predict the future level of
demand for its contract drilling services, future conditions in the contract
drilling industry or future contract drilling rates.
FINANCIAL CONDITION AND LIQUIDITY
Since December 1996, the Company has completed the Consolidation
Transactions and in June 1998 consummated the TransTexas Acquisition. The
Formation Transactions involved the issuance of an aggregate of 5,600,000 shares
of Common Stock in consideration for the contribution to the Company of 16 rigs
and $10 million in cash. At the time of the Formation Transactions, the Company
entered into a $24 million term loan facility with CIT, principally for the
refurbishment of certain of the Company's rigs. In May 1997, contemporaneously
with the Trend Acquisition and in anticipation of the Ward Acquisition, the
Company completed a financing transaction in which it (i) issued to Chesapeake
and Energy Spectrum additional shares of Common Stock, and two series of
warrants together
32
<PAGE> 39
with subordinated notes due May 1, 2003 (the "Subordinated Notes") for $28.5
million in cash and (ii) increased the availability under its debt facilities
from $24 million to $40.5 million (collectively, the "May Financing").
The Company's principal requirements for capital, in addition to the
funding of ongoing contract drilling operations, have been capital expenditures,
including the refurbishment of existing rigs and acquisitions. From December
1996 through March 31, 1998, the Company spent $20.7 million on the Trend
Acquisition, $11.9 million on the Ward Acquisition, $35 million on the Bonray
Acquisition, $14 million on the Oliver Acquisition, $5.5 million on the
Individual Rig Acquisitions, and approximately $62 million on refurbishments and
other related equipment purchases, including drill pipe. As a result, the
Company's net property and equipment increased from $27 million at December 31,
1996 to $155.7 million at December 31, 1997 and $179.8 million at March 31,
1998. The Company's principal sources of liquidity have been the issuance of
Common Stock, warrants to purchase Common Stock, the Subordinated Notes and
borrowings under Loan Agreements. See "Description of Certain Indebtedness."
The most significant change in the Company's balance sheet from December
31, 1996 to March 31, 1998 was a $152.8 million increase in net property and
equipment. During this same period, long-term debt, net of current maturities,
increased by $17.2 million and stockholders' equity increased by $154 million.
These changes are a direct result of the acquisition and financing transactions,
including the Initial Public Offering, described herein.
From December 31, 1996 to March 31, 1998, the Company's working capital
position increased by $22.1 million to $26.2 million. This was primarily the
result of the increase in cash resulting from proceeds of the Initial Public
Offering.
OPERATING ACTIVITIES
During the year ended December 31, 1996, the Company required $462,000 of
cash to fund operating activities. This was the result of $1.5 million of cash
provided by operations, partially offset by changes in working capital items
that required $2 million of cash. Cash required for changes in working capital
items included (i) increase in accounts receivable of $2.1 million, (ii)
increase in other assets totaling $185,000 and (iii) decrease of $383,000 in
accounts payable, which were partially offset by an increase of $663,000 of
other current liabilities.
During the year ended December 31, 1997, net cash used in operating
activities totaled $1.3 million. The Company generated cash from operations of
$10.8 million and working capital changes used $12.1 million.
During the three months ended March 31, 1998, net cash provided from
operating activities totaled $6.9 million. The Company generated cash from
operations of $6.1 million and working capital changes provided $813,000.
INVESTING ACTIVITIES
During the year ended December 31, 1996, the Company invested $21.7
million in fixed assets, net of asset sales. The major components of these
expenditures were $10.4 million of cash expenditures to acquire and refurbish
five diesel electric SCR rigs and $9.8 million of Common Stock issued to acquire
rigs in the Formation Transactions.
During the year ended December 31, 1997, the Company invested $135
million in fixed assets, including the Trend Acquisition, the Ward Acquisition,
the Bonray Acquisition and the Individual Rig Acquisitions. Rig refurbishments
consisted of $51.5 million, and $10.6 million was invested in drill pipe and
other drilling related equipment. The acquisitions of Trend, Ward, and Bonray
were partially funded through the issuance of Common Stock valued at $42.3
million.
During the three months ended March 31, 1998, the Company invested $27
million in fixed assets, including $11.1 million in the Oliver Acquisition. Rig
refurbishments consisted of $25.1 million, and $1.6 million was invested in
drill pipe and other drilling related equipment.
33
<PAGE> 40
FINANCING ACTIVITIES
During the year ended December 31, 1996, the Company raised $15.9 million
from financing activities. The Company borrowed $7 million during the year under
the Term Loan as described below. The Company also issued 3,600,000 shares of
Common Stock for assets and cash and made debt payments totaling $900,000 during
the year.
During the year ended December 31, 1997, the Company obtained $132.1
million from financing activities, including net borrowings under the Loan
Agreements totaling $25.8 million and $107.1 million from the issuance of Common
Stock. The proceeds from these transactions were used to fund the Company's
working capital requirements and capital expenditures as discussed above.
During the three months ended March 31, 1998, the Company's payments
under the Loan Agreements totaled $1.8 million.
RECENT EVENTS AND FUTURE ACTIVITIES
The Company has recently revised its schedule for rig refurbishment as a
result of changes in market conditions that have caused an industry-wide
decrease in rig utilization. The Company placed one of its construction project
rigs into service during May 1998 and anticipates refurbishing and placing the
remaining such rigs into service as market conditions warrant.
In April 1998, the Company redeemed in full the $2.52 million principal
amount of Subordinated Notes issued to Energy Spectrum together with accrued
interest of $47,740. In connection therewith, Energy Spectrum waived its rights
to require the Company to redeem the Subordinated Notes at 110% of par value.
This redemption, coupled with the redemption of $18 million principal amount of
Subordinated Notes from Chesapeake at the time of the Initial Public Offering,
leaves no Subordinated Notes outstanding.
In June 1998, the Company consummated the Old Notes Offering, resulting in
net proceeds to the Company of approximately $96.8 million, after deducting
discounts to the Initial Purchasers and estimated expenses of the Old Notes
Offering. Concurrently with the Old Notes Offering, the Company consummated the
purchase of the drilling business of TransTexas, utilizing $75 million of the
net proceeds from the sale of the Old Notes. See "--The TransTexas Acquisition."
The Company believes that the balance of the proceeds from the Initial
Public Offering and the Old Notes Offering, cash flow from operations and, to
the extent available, borrowings under the Revolving Loan Agreement will be
sufficient to meet its anticipated capital requirements for 1998. As of July 17,
1998, the Company had approximately $17.8 million of borrowings outstanding
under the Term Loan and no borrowings outstanding under the Revolving Loan, and
cash or cash equivalents of approximately $33 million.
Until shortly before the issuance of the Old Notes, Bayard and Trend were
co-borrowers under a Revolving Loan Agreement (the "Old Revolving Loan
Agreement") with Fleet that provided revolving credit loans, subject to a
borrowing base comprised of a portion of the co-borrowers' accounts receivable,
of up to $10 million ($2 million of which is available for letters of credit)
for general corporate purposes. In connection with the reorganization of the
Company's corporate structure in May 1998, Bayard entered into an amendment and
restatement of the Old Revolving Loan Agreement (the "Revolving Loan Agreement")
that resulted in a release of Trend as a co-borrower. Trend, Bayard LLC, Bayard
Drilling and Bonray have guaranteed the Company's obligations under the
Revolving Loan Agreement, which are also secured by the accounts receivable, 12
drilling rigs and certain other assets of Bayard, Trend, Bonray, Bayard LLC and
Bayard Drilling. The Company has not borrowed under the Revolving Loan
Agreement since November 1997, but has approximately $1.3 million of letters of
credit outstanding thereunder. The Company believes it has adequate liquidity
for its needs in the near term. The Company may terminate the Revolving Loan
Agreement upon 60 days' prior written notice to Fleet and the payment of a
termination fee of 2% of the facility. See "Description of Certain
Indebtedness."
34
<PAGE> 41
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1997 1998
----------------------------------- -----------------------------------
GULF COAST MID-CONTINENT TOTAL GULF COAST MID-CONTINENT TOTAL
(IN THOUSANDS, EXCEPT RIG AND PER DAY DATA)
<S> <C> <C> <C> <C> <C> <C>
Rig days worked(1) ........... 561 270 831 1,006 2,750 3,756
Average revenues per day(2) .. $ 5,132 $ 4,563 $ 4,947 $ 8,026 $ 5,777 $ 6,380
Average costs per day(3) ..... 3,781 3,430 3,667 5,436 4,273 4,585
Average margin per day(4) .... 1,351 1,133 1,280 2,589 1,504 1,795
Drilling revenues ............ $ 2,879 $ 1,232 $ 4,111 $ 8,074 $ 15,888 $ 23,962
Drilling costs(5) ............ 2,121 926 3,047 5,469 11,752 17,221
Operating margin ............. 758 306 1,064 2,605 4,136 6,741
Utilization rate ............. 99% 100% 99% 80% 88% 85%
</TABLE>
(1) Rig days worked represents the number of rigs being marketed by the
Company multiplied by the number of days during which such rigs are being
operated, mobilized, assembled or dismantled while under contract. Rig
days are a common measurement of both utilization rates and fleet size.
(2) Represents total contract drilling revenues (including mobilization
revenues and reimbursement for fuel and other costs) divided by the total
number of rig days worked by the Company's drilling rig fleet marketed
during the period.
(3) Represents direct operating costs divided by the total number of rig days
worked by the Company's drilling fleet marketed during the period.
(4) Represents the difference between average revenues per day and average
costs per day.
(5) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $19.8 million, or 483% to $23.9
million for the three months ended March 31, 1998, from $4.1 million for the
three months ended March 31, 1997. Drilling revenues increased due to a 2,925
day, or 352%, increase in rig days worked, and a $1,433, or 29%, increase in the
average revenue per day. The increase in days worked was a result of an increase
in the average number of rigs owned and available for service. As of March 31,
1998, the Company had 51 rigs available for service. The increase in rigs
available for service was principally the result of acquisitions consummated in
1997. Rig days worked consisted of 1,006 days worked in the Gulf Coast region
and 2,750 days worked in the Mid-Continent region. Increases in revenues per day
were a result of the increase in the dayrates and the average number of land
drilling rigs being marketed by the Company, offset by a decrease in the
utilization rate from 99% to 85%.
Drilling costs increased by approximately $14.2 million, or 465%, to
$17.2 million for the three months ended March 31, 1998, from $3 million for the
three months ended March 31, 1997. The increase in drilling operating expenses
was a direct result of the increase in the number of rigs owned and available
for service and the corresponding 2,925 day increase in the days worked.
The Company's operating margin increased by approximately $5.7 million,
or 534%, to $6.7 million for the three months ended March 31, 1998, as compared
to $1.1 million for the three months ended March 31, 1997. The increase in
operating margin resulted from the increase in the average revenue per day and
the increase in days worked.
35
<PAGE> 42
Depreciation and amortization expense increased by $2.3 million, or 262%,
to $3.2 million for the three months ended March 31, 1998, as compared to
$876,000 for the three months ended March 31, 1997. The increase was primarily
due to additional depreciation associated with the acquisitions consummated in
1997.
General and administrative expense increased by $560,000, or 287%, to
$755,000 for the three months ended March 31, 1998, from $195,000 for the same
period of 1997 due primarily to increased payroll costs associated with new
management and increased corporate staff and increased legal fees due to the
Company's acquisition activities and public status.
Interest expense was $367,000 for the three months ended March 31, 1998,
as compared to $145,000 for the three months ended March 31, 1997.
Other income increased for the three months ended March 31, 1998, as
compared to the three months ended March 31, 1997, primarily due to interest
income received on funds being invested in short-term investments.
For the three months ended March 31, 1998, the income tax provision was
$1.2 million, compared to $51,000 for the three months ended March 31, 1997.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1996 1997
------------- -----------------------------------------
MID-CONTINENT GULF COAST MID-CONTINENT TOTAL
(IN THOUSANDS, EXCEPT RIG AND PER DAY DATA)
<S> <C> <C> <C> <C>
Rig days worked(1).................................... 2,029 3,672 5,807 9,479
Average revenues per day(2)........................... $4,826 $ 6,426 $ 5,536 $ 5,881
Average costs per day(3).............................. 3,772 5,031 3,828 4,294
Average margin per day(4)............................. 1,054 1,395 1,708 1,587
Drilling revenues..................................... $9,793 $23,598 $32,149 $55,747
Drilling costs(5)..................................... 7,653 18,474 22,231 40,705
Operating margin...................................... 2,140 5,124 9,918 15,042
Utilization rate...................................... 89% 98% 89% 93%
</TABLE>
(1) Rig days worked represents the number of rigs being marketed by the
Company multiplied by the number of days during which such rigs are being
operated, mobilized, assembled or dismantled while under contract. Rig
days are a common measurement of both utilization rates and fleet size.
(2) Represents total contract drilling revenues (including mobilization
revenues and reimbursement for fuel and other costs) divided by the total
number of rig days worked by the Company's drilling rig fleet marketed
during the period.
(3) Represents direct operating costs divided by the total number of rig days
worked by the Company's drilling fleet marketed during the period.
(4) Represents the difference between average revenues per day and average
costs per day.
(5) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $46.0 million, or 469%, to
$55.7 million for the year ended December 31, 1997, from $9.8 million for the
year ended December 31, 1996. Drilling revenues increased due to a 7,450 day, or
367%, increase in rig days worked, and a $1,055, or 22%, increase in the average
revenue per day. The increase in days worked was a result of an increase in the
average number of rigs owned and available for service. As
36
<PAGE> 43
of December 31, 1997, the Company had 49 rigs available for service. The
increase in rigs available for service was principally the result of the
acquisitions consummated during the year. Rig days worked consisted of 3,672
days worked in the Gulf Coast region and 5,807 days worked in the Mid-Continent
region. Increases in revenues per day were a result of the overall increase in
demand for land drilling rigs as reflected in the utilization rate increase from
89% to 93%.
Drilling costs increased by approximately $33.1 million, or 432%, to
$40.7 million for the year ended December 31, 1997, as compared to $7.7 million
for the year ended December 31, 1996. The increase in drilling operating
expenses was a direct result of the increase in the number of rigs owned and
available for service and the corresponding 7,450 day increase in the days
worked.
Depreciation and amortization expense increased by $6.8 million, or 605%,
to $7.9 million for the year ended December 31, 1997, as compared to $1.1
million for the year ended December 31, 1996. The increase was primarily due to
additional depreciation associated with the acquisitions consummated during the
year.
General and administrative expense increased by $1.2 million, or 184%, to
$1.9 million for the year ended December 31, 1997, from $658,000 for the same
period of 1996 due primarily to increased payroll costs associated with new
management and increased corporate staff and increased professional fees due to
the Company's acquisition activities.
Interest expense increased to $3.1 million for the year ended December
31, 1997 from $11,000 for the year ended 1996 due to increased debt outstanding
during 1997.
Other income increased for the year ended December 31, 1997 as compared
to the year ended December 31, 1996, primarily due to gains on the sale of
assets.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
YEAR ENDED
DECEMBER 31,
----------------------------
1995 1996
(IN THOUSANDS, EXCEPT RIG
AND PER DAY DATA)
<S> <C> <C>
Rig days worked(1) . . . . . . . . . . . . 1,489 2,029
Average revenues per day(2) . . . . . . . . $4,973 $4,826
Average costs per day(3) . . . . . . . . . 4,080 3,772
Average margin per day(4) . . . . . . . . . 893 1,054
Drilling revenues . . . . . . . . . . . . . 7,405 9,793
Drilling costs(5) . . . . . . . . . . . . . 6,075 7,653
Operating margin . . . . . . . . . . . . . 1,330 2,140
Utilization rate . . . . . . . . . . . . . 86% 88%
</TABLE>
- ------------------
(1) Rig days worked represents the number of rigs being marketed by the
Company multiplied by the number of days during which such rigs are being
operated, mobilized, assembled or dismantled while under contract. Rig
days are a common measurement of both utilization rates and fleet size.
(2) Represents total contract drilling revenues (including mobilization
revenues and reimbursement for fuel and other costs) divided by the total
number of rig days worked by the Company's drilling rig fleet marketed
during the period.
37
<PAGE> 44
(3) Represents direct operating costs divided by the total number of rig days
worked by the Company's drilling fleet marketed during the period.
(4) Represents the difference between average revenues per day and average
costs per day.
(5) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $2.4 million, or 32%, to $9.8
million for the year ended December 31, 1996 from $7.4 million for the year
ended December 31, 1995. This improvement was due to an increase in the number
of rig days worked offset by a decrease in the average revenue per day. Rig
utilization also improved from 86% to 89% in 1996, due to an overall improvement
in the contract drilling market.
Drilling costs increased by $1.6 million, or 26%, to $7.7 million for the
year ended December 31, 1996, from $6.1 million for the year ended December 31,
1995. This increase was primarily due to increased utilization and, to a lesser
extent, increased direct labor costs.
Depreciation and amortization expenses increased by $335,000, or 42%, to
$1.1 million for the year ended December 31, 1996 from $791,000 for the year
ended December 31, 1995. The increase in depreciation expense was primarily
attributable to acquisition and refurbishment costs.
General and administrative expenses decreased by $222,000 to $658,000 for
the year ended December 31, 1996, from $880,000 for the year ended December 31,
1995, due to the discontinued allocation of expenses associated with the
predecessor company.
Interest expense remained fairly constant for the year end December 31,
1996 primarily as a result of the outstanding debt level remaining fairly
constant. Interest rates during these periods remained relatively unchanged.
Other income increased $197,000 from 1995 to 1996, primarily as a result
of a loss recorded in 1995 in connection with the sale of certain assets.
The Company's income tax expense of $163,000 in 1996 was attributable to
the Company's profitable operations.
The Company had net income of $267,000 in 1996 as compared to a net loss
of $222,000 in 1995. The Company's net loss in 1995 includes net losses from the
sale of assets, for which there was no similar transaction in 1996.
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.
38
<PAGE> 45
BUSINESS
GENERAL
The Company is a leading provider of contract land drilling services to
major and independent oil and gas companies. As of June 15, 1998, pro forma for
the TransTexas Acquisition, the Company's rig fleet consisted of 88 rigs, of
which 73 were being marketed and 15 were available for refurbishment. For the
three months ended March 31, 1998, and the months of April and May, 1998, the
Company experienced overall utilization rates of approximately 85%, 78% and 70%,
respectively, for its marketed rigs (excluding the TransTexas Rigs).
The Company's fleet consists primarily of rigs capable of deep drilling
applications (well depths of 15,000 feet or greater). The Company believes that
deep drilling targets are more attractive to oil and gas companies due to new
technologies, including (i) three-dimensional seismic techniques, (ii)
increasingly accurate down hole measurement devices and (iii) improved guidance
systems and directional drilling motors for horizontal and directional wells. Of
the Company's 88 rigs, 69 are capable of drilling to depths of 15,000 feet or
greater and 43 are capable of drilling to depths of 20,000 feet or greater. The
Company's large percentage of SCR rigs, comprising 31 of its 88 rigs, positions
the Company's fleet as one of the most technically advanced in the industry.
The Company was formed in December 1996 as the successor to Anadarko,
which owned ten rigs. Through June 15, 1998, pro forma for the TransTexas
Acquisition, the Company had acquired 78 additional rigs (net of sales). Many of
the acquired rigs were put into service in the later months of 1997 and
therefore did not contribute significantly to operating results in 1997.
CORE OPERATING AREAS
The Company's rig fleet is currently concentrated in two core operating
regions--the Mid-Continent region and the Gulf Coast region. With the completion
of the TransTexas Acquisition the Company added a third core operating region in
South Texas. The Company is among the largest rig suppliers in each of these
regions.
MID-CONTINENT REGION
The Mid-Continent region is comprised principally of Oklahoma, North
Texas and the Texas Panhandle. At June 15, 1998, the Company had 38 rigs
marketed in the Mid-Continent region and was the most active drilling contractor
in the region. The Company's rigs operated in the Mid-Continent region are
generally capable of drilling to depths of 10,000 feet or greater and are
marketed by the Company to meet the specific well depths and mobility needs of
producers in that region. At June 5, 1998, 153 rigs were being utilized in this
region, making it the most active domestic onshore drilling market at that time.
This area is characterized by well-defined target formations and long-lived
natural gas reserves.
GULF COAST REGION
The Gulf Coast region is comprised of the onshore Gulf of Mexico areas in
Texas, Louisiana, Mississippi and Alabama. At June 15, 1998, the Company had 14
rigs marketed in the Gulf Coast region, including 13 diesel electric SCR rigs.
The Company believes that its high quality equipment, including diesel electric
SCR rigs, powerful mud pumps and high horsepower drawworks, give the Company a
competitive advantage in attracting premium jobs with customers engaged in
multi-well drilling programs in this region. At June 5, 1998, 110 rigs were
being utilized in this region, making it the fourth most active domestic onshore
drilling market at that time. The Gulf Coast region is characterized by
significant drilling activity in deep, technically challenging formations for
which the Company's SCR and deep mechanical rigs are particularly well suited.
While recent results in certain areas of the Gulf Coast have been disappointing
to producers, most notably the Austin Chalk formation in Louisiana and the
Pinnacle Reef in Texas, significant exploration and development activity is
ongoing.
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<PAGE> 46
SOUTH TEXAS REGION
The South Texas region is comprised of the southern portion of onshore
Texas. At June 15, 1998, pro forma for the TransTexas Acquisition, the Company
had 21 rigs available to be marketed in the South Texas region (of which 8 rigs
were being utilized by TransTexas) and four rigs available to be refurbished as
market conditions warrant. The TransTexas Rigs have been utilized historically
only to meet the internal drilling requirements of TransTexas. With the
completion of the TransTexas Acquisition, the Company intends to begin to
actively market the acquired rigs not being utilized by TransTexas under the
Alliance Agreement. At June 5, 1998, 119 rigs were being utilized in this
region, making it the third most active domestic onshore drilling market at that
time. The South Texas region is predominately a gas producing region, and,
accordingly, its drilling activity levels are less sensitive to declining oil
prices. The Company believes that the TransTexas Rigs operating in this region
are well suited for the mobility, drilling flexibility and hydraulic efficiency
required for this region's drilling applications.
BUSINESS STRATEGY
The Company believes that growth in earnings and cash flow can be
achieved by pursuing the following business strategy:
OPERATING A TECHNOLOGICALLY ADVANCED RIG FLEET
The Company has assembled its existing rig fleet, and will pursue further
acquisitions, with the goal of operating one of the most technologically
sophisticated land drilling fleets in the United States. Many of the Company's
rigs include engines, pumps and drilling mud systems that represent the best
drilling technology available and that the Company believes offer greater
efficiencies for customers than many of the rigs available from its competitors.
For example, by deploying its diesel electric SCR rigs with two or three high
horsepower pumps and top drive drilling systems in challenging deep and
horizontal drilling situations, the Company believes that it can reduce its
customers' overall drilling costs, thus securing and enhancing its relationships
with some of the most active operators in the domestic market. The Company is
committed to making the capital investments required to maintain and, in
appropriate circumstances, increase the technological sophistication and
operational efficiencies of its fleet.
DEVELOPING DEEP DRILLING CAPABILITIES
The Company believes there is greater demand for rigs capable of drilling
deeper, more complex wells, including 1,500 horsepower and larger rigs, and has
focused, and will continue to focus, on acquiring rigs with these capabilities.
Of the 25 TransTexas Rigs, 12 are 1,500 horsepower or larger rigs and an
additional 10 are 1,000 horsepower or larger rigs. At June 15, 1998, pro forma
for the TransTexas Acquisition, 78% of the Company's rig fleet had deep drilling
capability (15,000 feet or greater). Management believes that demand and
utilization rates for these types of rigs, particularly SCR rigs, will remain
higher than for rigs with lesser depth capacities due to their greater
operational flexibility and efficiency.
FOCUSING ON CORE MARKETS
The Company believes that its strong asset position and operating
expertise in the Mid-Continent and Gulf Coast regions enable it to achieve
operating efficiencies and to provide premium service to its customers in these
markets. The Company is the largest provider of drilling rigs in Oklahoma and is
among the largest operators of deep rigs in the onshore Gulf Coast region. The
TransTexas Acquisition makes the Company one of the largest suppliers of
drilling rigs in South Texas and positions the Company to mobilize additional
rigs in that region as market conditions warrant.
DEVELOPING AND MAINTAINING RELATIONSHIPS WITH OPERATORS
In order to maximize the utilization rate of its rig fleet and to
minimize exposure to market downturns, the Company seeks to maintain and build
relationships with operators committed to active domestic drilling programs.
The
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<PAGE> 47
Company's largest current customers include Apache Corporation, Chesapeake,
Enron Oil and Gas Company, Marathon Oil Company, Sonat and UPR. Each of these
companies was among the most active onshore operators in the United States
during the last three years. As a result of the Alliance Agreement, the Company
will make up to 15 rigs available to TransTexas to meet its drilling
requirements, if any, in an area that includes, among others, the South Texas
and Gulf Coast regions. During the three months ended March 31, 1998, the three
largest customers for the Company's contract drilling services were Chesapeake,
UPR and Sonat, which accounted for approximately 17%, 12% and 10% of total
revenues, respectively.
ACQUIRING AND REFURBISHING ADDITIONAL RIGS AND RELATED EQUIPMENT
The Company intends to pursue selective acquisitions of additional rigs
and related equipment, including top drive drilling systems. Additionally, the
Company has experience in the acquisition of component parts from which rigs can
be assembled or refurbished and intends to continue to seek similar
opportunities for the expansion and enhancement of its rig fleet by such means.
Since its formation and through June 26, 1998, the date of the TransTexas
Acquisition, the Company has acquired 78 land rigs (net of sales) in eleven
transactions.
DRILLING EQUIPMENT AND SUPPLIES
A land drilling rig consists of various components, including engines,
drawworks, a derrick or mast, substructure, pumps to circulate drilling fluid,
blowout preventers, drill pipe and related equipment. The actual drilling
capacity of a rig may be more or less than its rated drilling capacity due to
numerous factors, including the length of its drill pipe and the drilling
conditions of any particular well. The intended well depth and the drill site
conditions determine the rig, drill pipe length and other equipment needed to
complete a well. The Company's rigs can be relocated to areas where demand, well
specifications and day rates allow for maximization of gross operating margins
and utilization. Generally, land rigs operate with crews of five to six persons.
As of June 15, 1998, pro forma for the TransTexas Acquisition, the
Company's fleet included 31 rigs that are diesel electric SCR rigs and 57 that
are mechanical rigs. Mechanical rigs utilize diesel engines to produce power
that is transferred to drilling equipment, such as drawworks and pumps, by way
of a compound consisting of a series of chains, sprockets and pneumatic
clutches. SCR rigs employ diesel engines that generate alternating current
electricity which is converted and transferred into amps as alternating current
or direct current electricity, which in turn drives electric motors powering the
drilling equipment. The Company believes that SCR rigs offer a number of
advantages over mechanical rigs. SCR rigs enable flexible power distribution to
selected individual drilling equipment components, providing for more precise
drilling control and efficient operation. SCR rigs are also quieter and safer
because the diesel engines are typically located away from the rig floor and
well bore, allowing for better communication among rig crews. SCR rigs are also
more easily adapted to the use of top drive drilling systems which are typically
electrically powered. The Company has developed a fleet that uses the advanced
drilling technology of diesel electric SCR rigs to provide greater efficiencies
to its customers, especially in deep drilling, horizontal and directional
applications, and uses mechanical rigs primarily in areas such as the
Mid-Continent region where operators target shallower well depths and require
more frequent mobility.
In addition to its SCR rigs, the Company has focused its acquisitions on
rigs with efficient and flexible drilling mud systems as well as high horsepower
drawworks and mud pumps, features which give the Company a competitive advantage
in attracting premium jobs with customers engaged in multi-well horizontal
drilling programs. The majority of the Company's rigs employ diesel engines
manufactured by Caterpillar, Inc. as the rigs' main power sources. The Company
believes that such engines are lighter and more fuel efficient than other
available engines, thus saving the Company and its customers money in terms of
lower trucking costs and reduced fuel consumption.
Finally, the Company has begun equipping certain of its deep drilling
rigs with top drive drilling systems. Top drives provide the Company's customers
with greater control in transferring horsepower to the bit, precise orientation
of drilling tools while drilling complex directional wells, and reduced
incidence of stuck drill pipe in high risk areas. Moreover, top drives enable
the contractor to drill in 90 foot sections (rather than conventional 45 foot
sections), a capability which reduces connection time, and are safer for rig
employees and equipment during tubular handling
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operations and in well control situations. Currently, the Company has five rigs
equipped with top drives and has ordered one additional top drive.
RIG FLEET
The following table identifies certain information as of June 15, 1998
regarding the rigs owned and operated by the Company and the rigs acquired in
the TransTexas Acquisition.
<TABLE>
<CAPTION>
HORSEPOWER
RIG DEPTH ------------
NO. CAPACITY DRAWWORKS RIG TYPE(1) DRAWWORKS(2) TOTAL(3) STATUS
<S> <C> <C> <C> <C>
GULF COAST REGION
21 30,000 Continental Emsco C-3 SCR 3,000 4,400 Available
11 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Working
12 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Working
14 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Working
15 25,000 Mid Continent U-1220-EB(4) SCR 2,500 3,600 Available
16 25,000 Mid Continent U-1220-EB(4) SCR 2,500 3,600 Available
17 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Working
18 25,000 Mid Continent U-1220-EB(4) SCR 2,500 3,600 Working
22 25,000 National 1320-UE(4) SCR 2,000 3,300 Working
23 25,000 Gardner Denver 1500-E(4) SCR 2,000 3,600 Available
40 25,000 National 1320-UE SCR 2,000 3,300 Available
69 25,000 Mid Continent U-1220-EB SCR 2,500 3,975 Working
20 20,000 Oilwell 840-E SCR 1,500 2,700 Working
4 18,000 Mid Continent U-712-A Mechanical 1,200 2,700 Working
MID-CONTINENT REGION
10 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Working
52 25,000 National 1320-M Mechanical 2,000 2,700 Working
63 25,000 Gardner Denver 1500-E SCR 2,000 3,300 Available
7 20,000 Mid Continent U-914-C Mechanical 1,500 2,700 Available
19 20,000 Continental EMSCO C-1 SCR 1,500 2,700 Working
35 20,000 National 110-UE SCR 1,500 3,300 Available
36 20,000 National 110-M Mechanical 1,500 2,700 Working
46 20,000 BDW 1350 Mechanical 1,500 2,900 Working
59 20,000 Oilwell 860 Mechanical 1,500 2,700 Available
60 20,000 National 1320-M Mechanical 2,000 2,700 Working
61 20,000 National 110-M Mechanical 1,500 2,700 Available
62 20,000 Mid Continent U914 SCR 1,500 2,700 Available
5 16,000 Gardner Denver 800 Mechanical 1,000 2,900 Available
8 16,000 National 80-B Mechanical 1,000 1,650 Working
31 16,000 Gardner Denver 800-E SCR 1,000 2,200 Working
32 16,000 BDW 800 MI Mechanical 1,000 1,650 Working
33 16,000 Brewster N-46 Mechanical 1,000 2,000 Working
34 16,000 Ideco E-900 SCR 900 1,800 Working
39 16,000 Ideco E-900 SCR 900 2,350 Working
47 16,000 Ideco H-900 Mechanical 900 1,650 Working
51 16,000 Oilwell 760 Mechanical 1,000 1,650 Working
42 15,000 Gardner Denver 700 Mechanical 800 1,650 Working
44 15,000 Gardner Denver 700 Mechanical 800 1,650 Working
26 14,000 National 610 Mechanical 750 1,650 Working
29 13,000 Continental Emsco D-2 Mechanical 750 1,450 Working
38 13,000 Mid Continent U-36A Mechanical 600 1,650 Working
41 13,000 Mid Continent U-36A Mechanical 600 1,650 Available
9 12,000 Gardner Denver 500 Mechanical 650 2,250 Working
43 12,000 Superior 700 Mechanical 650 1,450 Working
45 12,000 Gardner Denver 500 Mechanical 650 1,450 Working
53 12,000 Unit U-40 Mechanical 850 1,650 Working
57 12,000 National 55 Mechanical 550 2,000 Working
58 12,000 Ideco 750 Mechanical 750 1,650 Repairing
28 11,000 BDW 650 Mechanical 650 1,350 Working
37 11,000 Gardner Denver 500 Mechanical 650 1,900 Working
</TABLE>
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<TABLE>
<C> <C> <C> <C> <C> <C> <C>
30 10,000 Brewster N-42 Mechanical 550 1,725 Working
56 10,000 Cooper LTD 750 Mechanical 750 1,550 Available
55 7,500 Cooper LTD 550 Mechanical 550 1,400 Available
AVAILABLE FOR REFURBISHMENT
24 25,000 National 1320-UE SCR 2,000 3,960
68 25,000 Continental Emsco C-2 SCR 2,000 3,975
50 20,000 BDW 1350 SCR 1,500 2,700
65 20,000 Oilwell E-2000 SCR 2,000 3,975
66 20,000 Oilwell 840-E SCR 1,500 3,975
67 20,000 Oilwell 840-E SCR 1,500 3,975
27 16,000 National 80-B SCR 1,000 50
48 16,000 SCR 1,000 2,280
49 16,000 SCR 1,000 2,280
64 16,000 Ideco E-1200 SCR 1,200 2,280
54 10,000 National 50-A Mechanical 450 900
TRANSTEXAS RIGS
86 25,000 National 1320 Mechanical 2,000 2,700 Working
80 20,000 National 110-M Mechanical 1,500 2,700 Working
81 20,000 National 110-M Mechanical 1,500 2,700 Available
82 20,000 National 110-M Mechanical 1,500 2,700 Working
83 20,000 National 110-M Mechanical 1,500 2,700 Available
84 20,000 National 110-M Mechanical 1,500 2,700 Working
85 20,000 National 110-M Mechanical 1,500 2,700 Working
87 20,000 National 110-M Mechanical 1,500 2,280 Available
88 20,000 National 110-M Mechanical 1,500 2,280 Available
89 20,000 Oilwell 860 Mechanical 1,500 3,380 Working
90 20,000 Gardner Denver 1100 Mechanical 1,500 2,280 Available
93 20,000 Gardner Denver 1100 Mechanical 1,500 2,700 Available
79 18,000 Ideco 1200 Mechanical 1,200 3,300 Working
74 16,000 BDW 800 Mechanical 1,000 2,700 Available
76 16,000 National 80-B Mechanical 1,000 3,800 Working
77 16,000 National 80-B Mechanical 1,000 2,700 Available
78 16,000 National 80-B Mechanical 1,000 2,550 Available
92 16,000 National 80-B Mechanical 1,000 3,450 Available
94 16,000 National 80-B Mechanical 1,000 2,900 Available
73 14,000 National 610 Mechanical 750 1,650 Working
70 12,000 Cabot 900 Mechanical 900 2,570 Available
TRANSTEXAS RIGS AVAILABLE FOR REFURBISHMENT
72 16,000 Gardner Denver 800 Mechanical 1,000 3,100
75 16,000 National 80-B Mechanical 1,000 2,750
91 16,000 National 80-B Mechanical 1,000 2,600
71 12,000 Cabot 900 Mechanical 900 2,570
</TABLE>
- ----------------------
(1) "SCR" denotes a diesel electric silicon controlled rectifier rig.
"Mechanical" denotes a mechanical rig powered by diesel engines.
(2) Drawworks horsepower represents the amount of input power required to
achieve the maximum hoisting capability of the drawworks.
(3) Total horsepower represents the maximum horsepower produced by a rig's
diesel engines for consumption by the drilling equipment.
(4) Five rigs in the Gulf Coast region are equipped with National PS350/500
top drives.
Drilling rigs and related equipment deteriorate over time unless they are
operated and maintained properly. The Company strives to keep its drilling rigs
well maintained and technologically competitive. An active maintenance program
during the life of a drilling rig permits the maintenance, replacement and
upgrading of its components on an individual basis. Over the life of a typical
drilling rig, major components, such as engines, pumps, drawworks and drill
pipe, are replaced or rebuilt on a periodic basis as required while other
components, such as the mast and substructure, can be utilized for extended
periods of time with proper maintenance.
In connection with the TransTexas Acquisition, the Company acquired 45
trucks which will be utilized to move the Company's drilling rigs and related
equipment. The fleet includes various types of trucks, including pole, winch,
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<PAGE> 50
tandem and hauling vehicles. Additionally, the Company acquired approximately 60
lowboy and float trailers, three cranes and three forklifts.
There is a general shortage of certain drilling equipment and supplies
used in the Company's business. Because, until recent years, the land drilling
industry was characterized by an oversupply of land rigs, rig manufacturers have
generally focused on the production of more expensive offshore rigs and rig
equipment. As a result, most rig manufacturers are not currently building new
land rigs and those manufacturers that are building new land rigs and components
charge premium prices (approximately $13 million for a new 2,000 horsepower rig)
and require that orders be placed at least 120 days in advance of requested
delivery. The limited availability of new rigs and equipment has caused land rig
owners and operators, including the Company, to maintain and enhance their
fleets primarily through acquisitions and refurbishments using previously
manufactured rig components and equipment. As the land drilling industry
continues to refurbish rigs using existing components and equipment, the
available supply of such components and equipment continues to deplete.
Additionally, a shortage of drill pipe in the contract drilling industry has
caused the price of drill pipe to increase significantly over the past two years
and has required orders for new drill pipe to be placed at least one year in
advance of expected use. The Company has established arrangements to meet its
current needs for certain necessary drilling equipment and supplies, including
drill pipe, on satisfactory terms, but there can be no assurance that it will
continue to be able to do so. Accordingly, there can be no assurance that the
Company will not experience shortages of, or material price increases in,
drilling equipment and supplies, including drill pipe, in the future. Any such
shortages could delay and adversely affect the Company's ability to refurbish
its construction project rigs and obtain contracts for its marketed rigs.
CONTRACT DRILLING OPERATIONS
The Company's drilling rigs are employed under individual contracts which
extend either over a stated period of time or the time required to drill a well
or a number of wells. Drilling contracts are obtained through either a
competitive bidding process or as a result of direct negotiations with
customers. Terms of the Company's drilling contracts vary based on factors such
as the complexity and risk of operations, on-site drilling conditions, type of
equipment used and the anticipated duration of the work to be performed.
Contracts are typically entered into on a single well basis and obligate the
Company to pay certain operating expenses, including wages of drilling
personnel, maintenance expenses and costs for incidental rig supplies, equipment
and local office facilities. Contracts generally are subject to termination by
the customer on short notice, but are sometimes written on a firm basis for a
specified number of wells or years. The Company has ongoing relationships with a
number of customers that often engage a specific rig for the drilling of
consecutive wells.
At June 15, 1998, all of the Company's working rigs were operating under
daywork contracts except for five rigs which were operating under footage
contracts. In addition, the Company and its predecessors in the past have
performed drilling services under turnkey contracts and the Company may do so
again in the future. Revenues from daywork contracts accounted for approximately
98% and 97% of total drilling revenues (excluding mobilization revenues) during
the year ended December 31, 1997 and the three months ended March 31, 1998,
respectively, with the remainder from footage contracts.
Daywork Contracts. Under daywork contracts, the Company provides a
drilling rig with required personnel to the operator, who supervises the
drilling of the well. The Company is paid based on a negotiated fixed rate per
day while the rig is utilized. The rates for the Company's services depend on
market and competitive conditions, the nature of the operations to be performed,
the duration of the work, the equipment and services to be provided, the
geographic area involved and other variables. Lower rates may be paid when the
rig is in transit, or when drilling operations are interrupted or restricted by
equipment breakdowns, actions of the customer or adverse weather conditions or
other conditions beyond the control of the Company. In addition, daywork
contracts typically provide for a lump sum fee for the mobilization and
demobilization of the drilling rig. Daywork drilling contracts generally specify
the type of equipment to be used, the size of the hole and the depth of the
well. Under a daywork drilling contract, the customer bears a large portion of
out-of-pocket costs of drilling and the Company generally bears no part of the
usual capital risks associated with oil and gas exploration (such as time delays
for various reasons, including stuck drill pipe and blowouts).
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<PAGE> 51
Footage and Turnkey Contracts. Under footage contracts, the Company is
paid a fixed amount for each foot drilled, regardless of the time required or
the problems encountered in drilling the well. The Company pays more of the
out-of-pocket costs associated with footage contracts compared to daywork
contracts. Under turnkey contracts, the Company contracts to drill a well to an
agreed depth under specified conditions for a fixed price, regardless of the
time required or the problems encountered in drilling the well. The Company
provides technical expertise and engineering services, as well as most of the
equipment required for the well, and is compensated when the contract terms have
been satisfied. Turnkey contracts afford an opportunity to earn a higher return
than would normally be available on daywork or footage contracts if the contract
can be completed successfully without complications.
The risks to the Company under footage and turnkey contracts are
substantially greater than under daywork contracts because the Company assumes
most of the risks associated with drilling operations generally assumed by the
operator in a daywork contract, including risk of blowout, loss of hole, lost or
damaged drill pipe, machinery breakdowns, abnormal drilling conditions and risks
associated with subcontractors' services, supplies, cost escalation and
personnel. See "Risk Factors--Risks Associated with Footage and Turnkey
Drilling."
CUSTOMERS AND MARKETING
The Company's customers include major oil companies and independent oil
and gas producers. During the three months ended March 31, 1998, the three
largest customers for the Company's contract drilling services were Chesapeake,
UPR and Sonat, which accounted for approximately 17%, 12% and 10% of total
revenues, respectively. Chesapeake recently announced that it was reducing its
drilling program in the Gulf Coast region, an area in which it utilizes a number
of the Company's rigs. In late 1997, Chesapeake released two rigs under contract
with the Company and has subsequently released three additional rigs it was
using in the Gulf Coast region. As of June 15, 1998, Chesapeake was utilizing
five of the Company's rigs; however, there can be no assurance that Chesapeake
or any of the Company's other principal customers will continue to employ the
Company's services or that the loss of any of such customers or adverse
developments affecting any of such customers would not have a material adverse
effect on the Company's financial condition and results of operations.
The Company enters into informal, nonbinding commitments with many of its
customers to provide drilling rigs for future periods at agreed upon rates plus
fuel and mobilization charges, if applicable, and escalation provisions. This
practice is customary in the land drilling business during times of tightening
rig supply. Although neither the Company nor the customer is legally required to
honor these commitments, the Company strives to satisfy such commitments in
order to maintain good customer relations.
The Company's sales force consists of industry professionals with
significant land drilling sales experience who utilize industry contacts and
available public data to determine how to most appropriately market available
rigs.
Chesapeake Drilling Agreements. In December 1996 in connection with the
Formation Transactions, Chesapeake and its operating subsidiary (collectively
referred to in this discussion as "Chesapeake") entered into drilling contracts
(the "Chesapeake Drilling Agreements") with the Company pursuant to which
Chesapeake agreed to engage six of the Company's rigs for two-year terms. For
the year ended December 31, 1997, the Company recognized aggregate revenues of
$10.9 million from the Chesapeake Drilling Agreements.
Under the terms of the Chesapeake Drilling Agreements, the standard day
rates were subject to upward, but not downward, adjustment annually in November
to the average then-current market rates for the areas of operation, less $100
per day. The Company and Chesapeake were required to consider such adjustment
each November during the term of the particular Chesapeake Drilling Agreement
and if no agreement could be timely reached as to the appropriate rate
adjustment, the Company had the option to terminate the contract for such rig at
the conclusion of operations at the well then being drilled. In December 1997,
the Company and Chesapeake were unable to agree on an appropriate rate
adjustment, so the Company exercised its option to terminate the Chesapeake
Drilling Agreements. At June 15, 1998, three of the Company's six rigs formerly
covered by the Chesapeake Drilling Agreements remained under contract with
Chesapeake on a well-to-well basis.
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COMPETITION
The contract drilling industry is a highly competitive and fragmented
business characterized by high capital and maintenance costs. As a result, even
though the Company has the fifth largest active land drilling rig fleet in the
United States, the Company believes that such fleet represents a market share of
approximately 6% of the domestic land drilling industry. Drilling contracts are
usually awarded through a competitive bid process and, while the Company
believes that operators consider factors such as quality of service, type and
location of equipment, or the ability to provide ancillary services, price and
rig availability are the primary factors in determining which contractor is
awarded a job. Certain of the Company's competitors have greater financial and
human resources than the Company, which may enable them to better withstand
periods of low rig utilization, to compete more effectively on the basis of
price and technology, to build new rigs or acquire existing rigs and to provide
rigs more quickly than the Company in periods of high rig utilization.
Competition in the market for drilling rigs caused substantial increases
in the acquisition prices paid for rigs in 1997. Continued competition and price
escalation could adversely affect the Company's growth strategy if it is unable
to purchase additional drilling rigs or related equipment on favorable terms.
See "Risk Factors--Competition" and "--Management of Growth; Risks of
Acquisition Strategy."
OPERATING HAZARDS AND INSURANCE
The Company's operations are subject to many hazards inherent in the land
drilling business, including, for example, blowouts, cratering, fires,
explosions, loss of well control, loss of hole, damaged or lost drill strings
and damage or loss from inclement weather. These hazards could cause personal
injury or death, serious damage to or destruction of property and equipment,
suspension of drilling operations, or substantial damage to the environment,
including damage to producing formations and surrounding areas. Generally, the
Company seeks to obtain indemnification from its customers by contract for
certain of these risks. To the extent not transferred to customers by contract,
the Company seeks protection against certain of these risks through insurance,
including property casualty insurance on its rigs and drilling equipment,
commercial general liability and commercial contract indemnity, commercial
umbrella and workers' compensation insurance.
The Company's insurance coverage for property damage to its rigs and
drilling equipment is based on the Company's estimate of the cost of comparable
used equipment to replace the insured property. There is a deductible per
occurrence on rigs and equipment of $500,000.
The Company's third party liability insurance coverage under the general
policy is $1 million per occurrence, with a self insured retention of $100,000
per occurrence. The commercial umbrella policy has a self insured retention of
$10,000 per occurrence with coverage of $5 million per occurrence. The Company
believes that it is adequately insured for public liability and property damage
to others with respect to its operations. However, such insurance may not be
sufficient to protect the Company against liability for all consequences of well
disasters, extensive fire damage or damage to the environment. See "Risk
Factors--Operating Hazards and Uninsured Risks."
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
GENERAL
The Company's operations are affected from time to time in varying
degrees by political developments and federal, state and local laws and
regulations. In particular, oil and gas production, operations and economics are
or have been affected by price controls, taxes and other laws relating to the
oil and gas industry, by changes in such laws and by changes in administrative
regulations. Although significant capital expenditures may be required to comply
with such laws and regulations, to date, such compliance costs have not had a
material adverse effect on the earnings or competitive position of the Company.
In addition, the Company's operations are vulnerable to risks arising from the
numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection.
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ENVIRONMENTAL REGULATION
The Company's activities are subject to existing federal, state and local
laws and regulations governing environmental quality, pollution control and the
preservation of natural resources. Such laws and regulations concern, among
other things, air emissions, the containment, disposal and recycling of waste
materials, and reporting of the storage, use or release of certain chemicals or
hazardous substances. Numerous federal and state environmental laws regulate
drilling activities and impose liability for discharges of waste or spills,
including those in coastal areas. The Company has conducted drilling activities
in or near ecologically sensitive areas, such as wetlands and coastal
environments, which are subject to additional regulatory requirements. State and
federal legislation also provide special protections to animal and marine life
that could be affected by the Company's activities. In general, under various
applicable environmental programs, the Company may potentially be subject to
regulatory enforcement action in the form of injunctions, cease and desist
orders and administrative, civil and criminal penalties for violations of
environmental laws. The Company may also be subject to liability for natural
resource damages and other civil claims arising out of a pollution event.
Except for the handling of solid wastes directly generated from the
operation and maintenance of the Company's drilling rigs, such as waste oils and
wash water, it is the Company's practice to require its customers to
contractually assume responsibility for compliance with environmental
regulations. Laws and regulations protecting the environment have become more
stringent in recent years, and may, in certain circumstances, impose strict
liability, rendering a person liable for environmental damage without regard to
negligence or fault on the part of such person. Such laws and regulations may
expose the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company which were in compliance with all applicable
laws at the time such acts were performed. The application of these requirements
or adoption of new requirements could have a material adverse effect on the
Company.
Environmental regulations that affect the Company's customers also have
an indirect impact on the Company. Increasingly stringent environmental
regulation of the oil and gas industry has led to higher drilling costs and a
more difficult and lengthy well permitting process.
The primary environmental statutory and regulatory programs that affect
the Company's operations include the following:
Oil Pollution Act and Clean Water Act. The Oil Pollution Act of 1990
("OPA") amends certain provisions of the federal Water Pollution Control Act of
1972, commonly referred to as the Clean Water Act ("CWA"), and other statutes as
they pertain to the prevention of and response to spills or discharges of
hazardous substances or oil into navigable waters. Under OPA, a person owning or
operating a facility or equipment (including land drilling equipment) from which
there is a discharge or threat of a discharge of oil into or upon navigable
waters and adjoining shorelines is liable, regardless of fault, as a
"responsible party" for removal costs and damages. Federal law imposes strict,
joint and several liability on facility owners for containment and clean-up
costs and certain other damages, including natural resource damages, arising
from a spill.
The United States Environmental Protection Agency ("EPA") is also
authorized to seek preliminary and permanent injunctive relief and, in certain
cases, criminal penalties and fines. State laws governing the control of water
pollution also provide varying civil and criminal penalties and liabilities in
the case of releases of petroleum or its derivatives into surface waters or into
the ground. In the event that a discharge occurs at a well site at which the
Company is conducting drilling or pressure pumping operations, the Company may
be exposed to claims that it is liable under the CWA or similar state laws.
Certain of the Company's operations are also subject to EPA regulations,
including regulations that require the preparation and implementation of spill
prevention control and countermeasure ("SPCC") plans to address the possible
discharge of oil into navigable waters. Where so required, the Company has SPCC
plans in place.
Superfund. The Comprehensive Environmental, Response, Compensation, and
Liability Act, as amended ("CERCLA"), also known as the "Superfund" Law,
imposes liability, without regard to fault or the legality of the
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<PAGE> 54
original conduct, on certain classes of persons with respect to the release of a
"hazardous substance" into the environment. These persons include (i) the
current owner and operator of a facility from which hazardous substances are
released, (ii) owners and operators of a facility at the time any hazardous
substances were disposed, (iii) generators of hazardous substances who arranged
for the disposal or treatment at or transportation to such facility of hazardous
substances and (iv) transporters of hazardous substances to disposal or
treatment facilities selected by them. The Company may be responsible under
CERCLA for all or part of the costs to clean up sites at which hazardous
substances have been released. To date, however, the Company has not been named
a potentially responsible party under CERCLA or any similar state Superfund
laws.
Hazardous Waste Disposal. The Company's operations involve the generation
or handling of materials that may be classified as hazardous waste and subject
to the federal Resource Conservation and Recovery Act and comparable state
statutes. The EPA and various state agencies have limited the disposal options
for certain hazardous and nonhazardous wastes and is considering the adoption of
stricter handling and disposal standards for nonhazardous wastes.
As part of the Bonray Acquisition, the Company acquired an equipment yard
which may require certain expenditures or remedial actions for the removal or
cleanup of contamination. In exchange for a $1 million cash payment to the
Company at closing, the Company did not require DLB to indemnify the Company
with respect to such expenditures or remedial actions. While the Company has not
determined whether and to what extent such expenditures or remedial actions may
be necessary or advisable, based on the presently available information, the
Company does not believe that such expenditures will exceed $1 million.
Management believes that the Company and its operations are in material
compliance with applicable environmental laws and regulations.
HEALTH AND SAFETY MATTERS
The Company's facilities and operations are also governed by laws and
regulations, including the federal Occupational Safety and Health Act ("OSHA"),
relating to worker health and workplace safety. As an example, the Occupational
Safety and Health Administration has issued the Hazard Communication Standard
("HCS") requiring employers to identify the chemical hazards at their facilities
and to educate employees about these hazards. HCS applies to all private-sector
employers, including the oil and gas exploration and producing industry. HCS
requires that employers assess their chemical hazards, obtain and maintain
certain written descriptions of these hazards, develop a hazard communication
program and train employees to work safely with the chemicals on site. Failure
to comply with the requirements of the standard may result in administrative,
civil and criminal penalties. The Company believes that appropriate precautions
are taken to protect employees and others from harmful exposure to materials
handled and managed at its facilities and that it operates in substantial
compliance with all OSHA regulations. While it is not anticipated that the
Company will be required in the near future to expend material amounts by reason
of such health and safety laws and regulations, the Company is unable to predict
the ultimate cost of compliance with these changing regulations.
FACILITIES AND OTHER PROPERTY
The Company leases approximately 7,500 square feet of office space for
its principal executive offices in Oklahoma City, Oklahoma at a cost of
approximately $7,000 per month and leases approximately 5,000 square feet of
office and warehouse space and ten acres of land in El Reno, Oklahoma for $2,000
per month. In addition, the Company owns approximately ten acres of land in El
Reno, Oklahoma and five acres of land in Weatherford, Oklahoma that it uses for
rig storage and maintenance. The Company leases a facility in Houston, Texas
that includes approximately 5,000 square feet of warehouse space and 1,300
square feet of office space. Rental payments on the Houston facility are
approximately $1,400 per month. As part of the Bonray Acquisition, the Company
acquired approximately 40 acres of land in Oklahoma City with facilities
including 3,600 square feet of office space, an 8,000 square foot repair shop
and three warehouses. In the TransTexas Acquisition, the Company acquired
approximately 24 acres of land in Laredo, Texas with office and warehouse
facilities totaling approximately 125,000 square feet. The Company considers all
of its facilities to be in good operating condition and adequate for their
present uses.
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<PAGE> 55
EMPLOYEES
As of July 20, 1998, the Company had approximately 985 employees, of
which approximately 150 were salaried and approximately 835 were employed on
an hourly basis. This includes approximately 300 recently hired employees who
were formerly involved in TransTexas' drilling and trucking operations. None of
the Company's employees is represented by any collective bargaining unit.
Management believes that the Company's relationship with its employees is good.
LEGAL PROCEEDINGS
A purported class action lawsuit is pending against the Company, certain
directors and officers of the Company, the managing underwriters of the Initial
Public Offering, and certain current and former stockholders of the Company,
alleging violations of federal securities laws in connection with the Initial
Public Offering. The lawsuit, Yuan v. Bayard Drilling Technologies, Inc., et al.
("Yuan"), was filed on February 3, 1998 in the United States District Court for
the Western District of Oklahoma. The principal plaintiff in Yuan is Tom Yuan.
The defendants in this case include the Company, Chesapeake, Energy Spectrum
LLC, James E. Brown, David E. Grose, Carl B. Anderson, III, Merrill A. Miller,
Jr., Sidney L. Tassin, Lew O. Ward, Mike Mullen, Roy T. Oliver, Donaldson,
Lufkin & Jenrette Securities Corporation, Lehman Brothers, Inc., Prudential
Securities, Inc., Rauscher Pierce Refsnes, Inc. (a predecessor to Dain Rauscher
Incorporated) and Raymond James & Associates, Inc.
The plaintiffs in this lawsuit purport to sue on their own behalf and on
behalf of all persons who purchased shares of Common Stock on or traceable to
the Initial Public Offering. In the lawsuit, plaintiffs allege claims against
all defendants under the Securities Act. The plaintiffs allege that the
registration statement and prospectus for the Initial Public Offering contained
materially false and misleading information and omitted to disclose material
facts. In particular, the plaintiffs allege that such registration statement and
prospectus failed to disclose financial difficulties of Chesapeake, the
Company's largest customer, and the effects of such difficulties on Chesapeake's
ability to continue to provide the Company with substantial drilling contracts.
The petitions further allege that the Company failed to disclose pre-offering
negotiations with R.T. Oliver Drilling, Inc., whom the plaintiffs allege was a
related party, for the purchase of drilling rigs. In addition, the petitions
allege that the Company failed to disclose that its growth strategy required
costly refurbishment of older drilling rigs that would dramatically increase the
Company's costs, which could not be sustained by internally generated cash
flows. In each of these lawsuits, the plaintiffs are seeking rescission and
damages.
Two other suits, Khan v. Bayard Drilling Technologies, Inc., et al.
("Khan") and Burkett v. Bayard Drilling Technologies, Inc., et al. ("Burkett"),
which were filed in District Court in and for Oklahoma County, State of Oklahoma
on January 14, 1998 and February 2, 1998, respectively, and alleged essentially
the same claims as Yuan, were dismissed without prejudice in May 1998 on a joint
application filed by all parties. The plaintiffs in Khan and Burkett, along with
others, have joined in Yuan's motion to be appointed as lead plaintiffs in the
Yuan federal court suit.
The Company is also involved in other litigation arising from time to
time in the ordinary course of its business, including workers' compensation
claims and disputes arising out of its drilling activities. Such disputes
include a claim filed against Bayard and Sperry-Sun Drilling Services, Inc. on
May 29, 1998 in the District Court of Oklahoma County in the State of Oklahoma.
R.C. Taylor Companies, Inc., the plaintiff in that lawsuit, seeks actual and
punitive damages for costs allegedly incurred in connection with a directional
drilling project that utilized one of the Company's rigs.
The Company believes the allegations in the lawsuits referenced above are
without merit and is defending vigorously the claims brought against it. The
Company is unable, however, to predict the outcome of these lawsuits or the
costs to be incurred in connection with their defense and there can be no
assurance that this litigation will be resolved in the Company's favor. An
adverse result or prolonged litigation could have a material adverse effect on
the Company's financial position or results of operations.
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<PAGE> 56
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
Company's directors and executive officers, including their respective ages.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
James E. Brown . . . . . . . 46 Chairman of the Board, President and Chief
Executive Officer
Edward S. Jacob, III . . . . 45 Executive Vice President--Operations & Marketing
David E. Grose, III . . . . . 45 Vice President and Chief Financial Officer
Carl B. Anderson, III . . . . 42 Director
Mark Liddell . . . . . . . . 43 Director
Merrill A. Miller, Jr. . . . 47 Director
Sidney L. Tassin . . . . . . 41 Director
Lew O. Ward . . . . . . . . . 67 Director
</TABLE>
James E. Brown is Chairman of the Board and has served as President and
Chief Executive Officer and as a director of the Company since its formation in
1996. From 1992 until joining the Company in 1996, Mr. Brown served as President
of Anadarko Drilling Company, an Oklahoma general partnership and the
predecessor of the Company. From 1982 through 1992, Mr. Brown served as Chief
Financial Officer of AnSon Gas Corporation and its predecessor entities. From
1979 through 1982, Mr. Brown served as Vice President, Treasurer and Controller
of Blocker Energy Corporation. Prior thereto, Mr. Brown served as an accountant
in various positions with Arthur Andersen & Co.
Edward S. Jacob, III has served as Executive Vice President--Operations &
Marketing since April 1997 and prior thereto served as Vice President of
Operations and Marketing for the Company since its formation in 1996. From 1983
until joining the Company, Mr. Jacob was employed by Helmerich & Payne
International Drilling Co., serving as U.S. Marketing Manager from 1990 through
1996. Mr. Jacob is a Director of the International Association of Drilling
Contractors ("IADC"), serving on its Contracts and Marketing Committee, and is a
former IADC Chapter Chairman.
David E. Grose, III has served as Vice President and Chief Financial
Officer of the Company since July 1997. Prior to joining the Company, Mr. Grose
was affiliated with Alexander Energy Corporation from its inception in March
1980, serving from 1987 through 1996 as a director and Vice President, Treasurer
and Chief Financial Officer. In August 1996, National Energy Group acquired
Alexander Energy Corporation and Mr. Grose served as Vice President--Finance and
Treasurer through February 1997.
Carl B. Anderson, III has served as a director of the Company since its
formation in December 1996. Since 1994, Mr. Anderson has served as Managing
General Partner and Chief Executive Officer of APLP, a diversified energy
company and parent of Anadarko, the Company's predecessor. From 1978 through
1994, Mr. Anderson served in various capacities for APLP.
Mark Liddell has served as a director of the Company since November 1997.
Mr. Liddell has served as a director of Gulfport Energy Corporation since July
1997 and as its President since April 1998. Mr. Liddell is also a director of
Davidson Oil & Gas, Inc. From 1991 through April 1998, Mr. Liddell served in
various capacities for DLB, including Director from 1995 to April 1998,
President from October 1994 through April 1998 and Vice President from 1991 to
1994. From 1991 to May 1995, Mr. Liddell served as a director of TGX
Corporation, a publicly traded oil and gas company, and from 1989 to 1990, Mr.
Liddell served as a director of Kaneb Services, Inc., a publicly traded
industrial services and pipeline transportation company.
Merrill A. Miller, Jr. has served as a director of the Company since
October 1997. Since February 1996, Mr. Miller has served in various capacities
for National-Oilwell, Inc., a publicly traded oil field services company,
including
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President of its Products & Technology Group since May 1997, Vice President and
General Manager of Drilling Systems since July 1996 and Vice President of
Marketing, Drilling Systems from February 1996 through July 1996. Prior thereto,
Mr. Miller served in various capacities for Anadarko, the Company's predecessor,
from January 1995 through February 1996. From May 1980 through January 1995, Mr.
Miller served in various capacities with Helmerich & Payne International
Drilling Co., including Vice President of U.S. Operations.
Sidney L. Tassin has served as a director of the Company since its
formation in 1996. Since March 1996, Mr. Tassin has been the President of Energy
Spectrum Capital LP, the general partner of Energy Spectrum, an equity fund that
invests in the energy industry. From 1980 to 1994, Mr. Tassin was associated
with MESA Inc., serving in various financial executive capacities, including
Vice President--Finance from 1986 to 1988 and President of BTC Partners Inc., a
financial and strategic consultant to MESA Inc., from 1988 to 1994.
Lew O. Ward has served as a director of the Company since May 1997.
Since 1981, Mr. Ward has served as Chairman and Chief Executive Officer of Ward
Petroleum Corporation, an independent oil and gas company founded by Mr. Ward.
Mr. Ward is a former Director and Area Vice President of the Independent
Petroleum Association of America ("IPAA") and is the immediate past Chairman of
the IPAA.
BOARD OF DIRECTORS
Board Composition. The Board is currently composed of six directors.
Directors are elected for one-year terms at each annual meeting of
stockholders. Three of the Company's current directors were elected pursuant
to the terms of the Stockholders and Voting Agreement. See "Certain
Relationships and Related Transactions-- Stockholders and Voting Agreement."
Board Committees. The Company has established two standing committees
of the Board: a Compensation Committee and an Audit Committee. The current
members of the Compensation Committee are Carl B. Anderson, III, Merrill A.
Miller, Jr. and Sidney L. Tassin. The Compensation Committee recommends to the
Board the base salaries and incentive bonuses for the officers of the Company
and is charged with administering the Employee Stock Plan and the Director
Stock Plan. The current members of the Audit Committee are Merrill A. Miller,
Jr., Sidney L. Tassin and Lew O. Ward. The Audit Committee reviews the
functions of the Company's management and independent auditors pertaining to
the Company's financial statements and performs such other related duties and
functions as are deemed appropriate by the Audit Committee or the Board. The
Board does not have a standing nominating committee or other committee
performing similar functions.
Director Compensation. Directors who are also employees of the Company
are not compensated for service on the Board or on any committee of the Board.
Non-employee directors of the Company receive an annual retainer of $10,000.
Additionally, all directors of the Company are entitled to reimbursement for
their reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the Board or committees thereof. In October 1997, the
Company adopted the Director Stock Plan pursuant to which each non-employee
director is entitled to receive (i) upon such director's initial election to the
Board, an option to purchase 15,000 shares of Common Stock and (ii) immediately
following each annual meeting at which such director is reelected to the Board,
an option to purchase 5,000 shares of Common Stock. Such non-employee directors
are also entitled under the Director Stock Plan to elect to receive options to
purchase Common Stock in lieu of their annual cash retainer and to receive
certain other stock option awards. Directors who are also employees of the
Company are not eligible to receive awards under the Director Stock Plan. See
"--1997 Non-Employee Directors' Stock Option Plan."
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth, for each completed
fiscal year since the Company's formation, the compensation earned by the
Company's Chief Executive Officer and its only other executive officer who
received total annual salary and bonus in excess of $100,000 for 1997.
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<PAGE> 58
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ----------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(1) OPTIONS
<S> <C> <C> <C> <C> <C> <C>
James E. Brown..................... 1996 $ 9,167 -- $ 900 -- 200,000
President and Chief Executive 1997 111,816 $ 50,000 2,568 100,000 400,000
Officer
Edward S. Jacob, III............... 1996 -- -- -- -- --
Vice President--Operations & 1997 105,733 25,000 5,429 -- 150,000
Marketing
</TABLE>
- ------------------
(1) The dollar value of Mr. Brown's Restricted Stock Award is not set forth
as the Company's Common Stock was not publicly traded at the time of
grant, February 1997. Mr. Brown purchased such shares at a price of $2.50
per share, which shares vest at a rate of 20% per year beginning on
December 10, 1997. No dividends will be paid on such shares of Restricted
Stock.
Option Grants. On December 10, 1996, the Company granted Mr. Brown an
option (the "1996 Brown Option") to purchase 200,000 shares of Common Stock at
an exercise price of $5 per share, becoming exercisable with respect to 20% of
the underlying shares each anniversary of the grant date. The option terminates
as to any unexercised portion on December 10, 2002. If the 1996 Brown Option was
fully exercisable and exercised on December 31, 1997, on which the closing price
of a share of Common Stock on the American Stock Exchange (the "AMEX") was $16
1/4, the realized value of the option would have been $2.25 million. The Company
did not grant any options to purchase Common Stock to any other executive
officer or other employee of the Company during the fiscal year ended December
31, 1996. The Company has not granted any stock appreciation rights.
The Company adopted the Employee Stock Plan in April 1997 and made the
terms thereof applicable to the 1996 Brown Option. Through December 31, 1997 and
including the 1996 Brown Option, the Company had granted to James E. Brown,
Edward S. Jacob, III, and David E. Grose, III options to purchase 200,000,
50,000 and 50,000 shares of Common Stock, respectively, at exercise prices of
$5, $5 and $10 per share, respectively. Additionally, the Company has granted to
Messrs. Brown, Jacob and Grose, options to purchase 200,000, 100,000 and 10,000
shares of Common Stock, respectively, at an exercise price of $23 per share (the
Initial Public Offering price). Effective March 10, 1998, the Company granted
Mr. Jacob an option to purchase an additional 40,000 shares of Common Stock at
an exercise price of $14 per share. Except for options for 10,000 shares that
were exercised by Mr. Jacob in April 1998, none of such options has been
exercised, and all of such options remain outstanding, as of the date of this
Prospectus. Each of the option agreements relating to stock options granted
under the Employee Stock Plan provides for the vesting of 20% of the shares
subject to the option each year beginning on the first anniversary of the date
of grant. The option ceases to be exercisable on the earliest of (i) the sixth
anniversary of the date of grant, (ii) the date of the employee's voluntary
termination of employment with the Company or the Company's termination of the
employee's employment for Due Cause (as defined in the employee's employment
agreement) or (iii) the date that is 90 days after termination of the employee's
employment by means of retirement, disability or death. In the event of a Change
of Control (as defined in the Employee Stock Plan), the committee that is
charged with administering the Employee Stock Plan (the "Committee") may
accelerate the exercisability of the options or take certain other actions
provided in the Employee Stock Plan. See "--1997 Stock Option and Stock Award
Plan." The options are exercisable for cash, or in the Committee's discretion,
in an acceptable equivalent, by the assignment of shares of Common Stock owned
by the option holder or the surrender of another Incentive Award (as hereinafter
defined).
The Company and James E. Brown are parties to a restricted stock award
agreement (the "Restricted Stock Award Agreement") pursuant to which Mr. Brown
purchased 100,000 shares (the "Restricted Shares") of Common Stock at a price of
$2.50 per share in February 1997. The Restricted Stock Award Agreement provides
for vesting of the Restricted Shares at a rate of 20% per year beginning on
December 10, 1997. Mr. Brown is required to remain continuously employed by the
Company through each vesting date for the applicable portion of the Restricted
Shares to vest and, prior to vesting, the Restricted Shares are not
transferable. In the event of termination of Mr. Brown's employment due to a
Change of Control (as defined in the Employee Stock Plan), all Restricted Shares
will vest
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<PAGE> 59
immediately and all restrictions on transfer will terminate. If Mr. Brown's
employment with the Company terminates for any other reason, all unvested
Restricted Shares (the "Unvested Shares") will no longer be eligible for
vesting but, under certain circumstances, will be eligible for purchase by the
Company or Mr. Brown, as applicable. If Mr. Brown resigns or is terminated by
the Company for Due Cause (as defined in the Restricted Stock Award Agreement),
the Company may purchase the Unvested Shares from Mr. Brown for $2.50 per
share. If the Company elects not to purchase the Unvested Shares from Mr.
Brown, Mr. Brown will forfeit such Unvested Shares to the Company without any
payment therefor. If the Company terminates Mr. Brown's employment for any
reason other than Due Cause or if Mr. Brown's employment with the Company
terminates due to the death or disability of Mr. Brown, Mr. Brown may keep the
Unvested Shares by paying the Company an additional $5.00 per share. If Mr.
Brown elects not to make such additional payment, the Company may purchase the
Unvested Shares from Mr. Brown for $2.50 per share or allow Mr. Brown to keep
the Unvested Shares.
The following table sets forth information concerning stock options
granted to the Company's executive officers during the fiscal year ended
December 31, 1997 under the Employee Stock Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS PRESENT
SHARES GRANTED VALUE OF
UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION EACH GRANT
NAME OPTIONS GRANTED FISCAL YEAR PRICE($/SH) DATE OF OPTION(1)
<S> <C> <C> <C> <C> <C>
James E. Brown . . . . . . 200,000 12.500% $23.00 11/04/03 $2,024,000
Edward S. Jacob, III . . . 50,000 3.125% $ 5.00 01/01/03 $ 104,500
Edward S. Jacob, III . . . 100,000 6.250% $23.00 11/04/03 $1,012,000
David E. Grose, III . . . . 50,000 3.125% $10.00 06/18/03 $ 179,500
David E. Grose, III . . . . 10,000 .625% $23.00 11/04/03 $ 101,200
</TABLE>
(1) The fair value of each option granted is estimated using the Black-
Scholes model. This model includes, among others, a variable of stock
volatility. As the Company has not established a significant trading
history, the volatility used in the model was .40 for options granted
through June 30, 1997 and .43 for options granted since July 1, 1997
based on volatility of the stock price of a similar entity that has been
publicly traded for several years. Dividend yield was estimated to
remain at zero with risk free interest rates ranging between 5.72 and
6.31 percent. As there is no prior experience available to use in
estimating an expected life for the options, an average of the time
between the vesting and expiration dates of the options was used in
determining the expected lives of the options ranging from 3.5 to 5.5
years.
The following table sets forth certain information with respect to
exercises by the Company's executive officers of stock options during fiscal
year 1997 and the value of all unexercised employee stock options as of December
31, 1997 held by the Company's executive officers.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(2)
ACQUIRED ------------------------------------- -----------------------------
NAME ON EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
EXERCISE(1)
<S> <C> <C> <C> <C> <C>
James E. Brown . . . . -- 40,000 360,000 $450,000 $1,800,000
Edward S. Jacob, III . -- -- 150,000 -- $562,500
David E. Grose, III . . -- -- 60,000 -- $312,500
</TABLE>
(1) None of the identified persons exercised options during the fiscal year
ended December 31, 1997.
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<PAGE> 60
(2) The value of unexercised in-the-money options is based upon the $16.25
per share closing price of the Company's Common Stock on the AMEX on
December 31, 1997.
Employment Agreements. The Company has entered into employment
agreements with James E. Brown, Edward S. Jacob, III and David E. Grose, III.
The aggregate of the annual base salaries for all three executive officers
(taken as a group) was $375,000 for the fiscal year ended December 31, 1997.
Pursuant to an employment agreement dated December 10, 1996 (the "Brown
Agreement"), James E. Brown is employed as President of the Company and, if
elected by the Board, the Chairman of the Board. The Brown Agreement provides
that Mr. Brown will receive an annual salary of not less than $120,000, subject
to annual adjustment in the sole discretion of the Board based upon the
performance and accomplishments of Mr. Brown. Currently, Mr. Brown's annual
salary is $140,000. If the Company's earnings before deducting interest, taxes
and depreciation during any full quarterly period equal or exceed the greater of
(i) $1.5 million or (ii) 5% of the sum of the Company's stockholders' equity and
long-term debt (averaged on a daily basis throughout such quarterly period),
then Mr. Brown will be eligible to receive a quarterly bonus of $12,500. The
Brown Agreement also provides for the grant of non-transferable options to
purchase 200,000 shares of Common Stock at an exercise price of $5 per share,
which options are subject to vesting and other restrictions provided in an
option agreement. Pursuant to the Brown Agreement, Mr. Brown purchased 100,000
shares of restricted Common Stock which are subject to vesting in equal amounts
annually over a five year period and other restrictions provided in the
agreement, including Mr. Brown's continued employment with the Company and Mr.
Brown's right, under certain circumstances, to purchase unvested shares for
$2.50 per share. See "--Executive Compensation." Mr. Brown is also entitled to
reimbursement of reasonable business expenses incurred by him in the performance
of his duties, as well as certain fringe benefits. The initial term of the Brown
Agreement expires on November 30, 1998 and is subject to extension for
additional one-year periods by mutual consent of Mr. Brown and the Company. In
the event Mr. Brown's employment is terminated by Mr. Brown voluntarily or by
the Company for Due Cause (as defined in the Brown Agreement), Mr. Brown has
agreed, for a period of two years thereafter, not to take certain actions in
competition with the Company in the states of Oklahoma, Texas, New Mexico,
Louisiana or any other state in which the Company then owns, leases or operates
its assets. If, in the event of a Change of Control (as defined in the Brown
Agreement), Mr. Brown is terminated without Due Cause or Mr. Brown voluntarily
elects to terminate his employment for any reason, then Mr. Brown will be
entitled to continue to receive his base salary and other employee benefits
through the remaining term of the Brown Agreement and to receive a cash payment
in an amount equal to any earned but unpaid quarterly bonus for the previous
quarter.
The Company has entered into employment agreements dated as of January 1,
1997 with Edward S. Jacob, III (the "Jacob Agreement") and July 16, 1997 with
David E. Grose, III (the "Grose Agreement" and collectively with the Jacob
Agreement, the "Executive Agreements"). Pursuant to the Executive Agreements,
Mr. Jacob is employed as Executive Vice President--Operations & Marketing and
Mr. Grose is employed as Vice President and Chief Financial Officer. The Jacob
Agreement provides that Mr. Jacob will receive an annual salary of not less than
$105,000 in 1997 and $115,000 in 1998, subject to annual adjustment in the sole
discretion of the Board based upon performance and accomplishments of Mr. Jacob.
Currently, Mr. Jacob's annual salary is $130,000. The Grose Agreement provides
that Mr. Grose will receive an annual salary of not less than $105,000, subject
to annual adjustment in the sole discretion of the Board based upon performance
and accomplishments of Mr. Grose. Currently, Mr. Grose's salary is $105,000. If
the Company's earnings before deducting interest, taxes and depreciation during
any full quarterly period equal or exceed the greater of (i) $1.5 million or
(ii) 5% of the sum of the Company's stockholders' equity and long-term debt
(averaged on a daily basis throughout such quarterly period), then each of
Messrs. Jacob and Grose will be eligible to receive a quarterly bonus of $5,000.
The Executive Agreements also provide for the grant of non-transferable options
to purchase 50,000 shares of Common Stock to each of Messrs. Jacob and Grose at
an exercise price of $5 per share, for Mr. Jacob, and $10 per share, for Mr.
Grose. Such options were granted to Mr. Jacob on January 1, 1997 and to Mr.
Grose on July 16, 1997 and are subject to vesting and other restrictions. Such
options generally become exercisable in equal annual amounts over five years.
Each of Messrs. Jacob and Grose are entitled to reimbursement of reasonable
business expenses incurred by him in the performance of his duties, as well as
certain fringe benefits. The Jacob Agreement also provided for payment to Mr.
Jacob of a relocation allowance of $50,000, which was paid by the Company in
January 1997. The initial terms of the Jacob Agreement and the Grose Agreement
expire on December
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<PAGE> 61
31, 1998 and June 30, 1999, respectively, and are subject to extension for
additional one-year periods by mutual consent. Each of the Executive Agreements
provides that if the applicable executive officer's employment is terminated by
the executive voluntarily or by the Company for Due Cause (as defined in the
Executive Agreements), for a period of two years thereafter, the executive will
not take certain actions in competition with the Company in the states of
Oklahoma, Texas, New Mexico, Louisiana or any other state in which the Company
then owns, leases or operates its assets. If, in the event of a Change of
Control (as defined in the Executive Agreement), the executive is terminated
without Due Cause or the executive voluntarily elects to terminate his
employment for any reason, then the executive will be entitled to continue to
receive his base salary and other employee benefits through the remaining term
of his Executive Agreement and to receive a cash payment in an amount equal to
any earned but unpaid quarterly bonus for the previous quarter.
1997 STOCK OPTION AND STOCK AWARD PLAN
The description set forth below represents a summary of the principal
terms and conditions of the Employee Stock Plan and does not purport to be
complete. Such description is qualified in its entirety by reference to the
Employee Stock Plan, a copy of which has been filed with the Commission as an
exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
Purpose. The Company adopted the Employee Stock Plan for the purposes of
strengthening the ability of the Company and its subsidiaries to attract,
motivate and retain employees of superior capability and encouraging valued
employees to have a proprietary interest in the Company. To accomplish these
purposes, the Employee Stock Plan provides terms upon which certain eligible
employees of the Company and its subsidiaries may be granted stock options
("Options"), stock appreciation rights ("SARs"), restricted stock, performance
units, performance shares or phantom stock rights (collectively, "Incentive
Awards").
Administration. The Employee Stock Plan is administered by a committee
(the "Committee") consisting of two or more non-employee members of the Board
elected to the Committee by a majority of the Board. Presently, the members of
the Committee are Carl B. Anderson, III and Sidney L. Tassin. Subject to the
terms of the Employee Stock Plan, the Committee has the ability to (i)
determine, among other things, which full-time employees (by individual or by
class) are eligible to receive Incentive Awards and the time or times at which
Incentive Awards are granted, (ii) determine the number of shares of Common
Stock, Options, SARs, restricted stock awards, performance units or shares or
phantom stock rights that will be subject to each Incentive Award and the terms
and provisions of each Incentive Award, (iii) interpret the Employee Stock Plan
and agreements thereunder, (iv) prescribe, amend and rescind any rules relating
to the Employee Stock Plan and (v) make all other determinations necessary for
Employee Stock Plan administration.
Shares Subject to Employee Stock Plan. As of January 1, 1998, an
aggregate of 1,818,394 shares of Common Stock (subject to certain adjustments)
may be issued, transferred or exercised pursuant to Incentive Awards under the
Employee Stock Plan. If the total number of issued and outstanding shares of
Common Stock increases, (other than any increase due to issuances of Common
Stock in connection with Incentive Awards under the Employee Stock Plan), then
the number of shares reserved under the Employee Stock Plan will be increased
one time per year, each January 1 during the existence of the plan, commencing
January 1, 1998, such that the number of shares reserved and available for
issuance under the Employee Stock Plan will equal 10% of the total number of
shares of issued and outstanding Common Stock. Notwithstanding the foregoing,
only a total of 400,000 shares of Common Stock reserved under the Employee Stock
Plan may be issued, transferred or exercised pursuant to incentive stock options
("ISOs") that comply with the requirements of Section 422 of the Internal
Revenue Code of 1986 (the "Code") under the Employee Stock Plan, and the number
of shares eligible for such treatment as ISOs shall not be subject to annual
adjustment. At the discretion of the Board or the Committee, the shares of
Common Stock delivered under the Employee Stock Plan may be made available from
(i) authorized but unissued shares, (ii) treasury shares or (iii) previously
issued but reacquired shares (or through a combination thereof).
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<PAGE> 62
Eligibility and Participation. The Employee Stock Plan authorizes the
Committee to designate, by individual or class, those persons who are eligible
to receive Incentive Awards under the Plan ("Participants"). Participants must
be employed on a full-time basis by the Company or its subsidiaries. Members of
the Board who are not officers or employees of the Company may not be
Participants.
INCENTIVE AWARDS
Except to the extent that the Committee in a written agreement evidencing
an Incentive Award (an "Incentive Award Agreement") or the Employee Stock Plan
provides otherwise, Incentive Awards vest and become exercisable in equal
amounts on the first, second, third, fourth and fifth anniversaries of their
grant. For purposes of all Incentive Awards under the Employee Stock Plan, the
term "Fair Market Value" means the closing price per share of such Common Stock
on the principal stock exchange or quotation system on which the Common Stock is
traded or listed on the date of grant or other specified measuring date, or, if
there shall have been no such price so reported or listed on that date, on the
last preceding date on which a price was so reported or listed. If Common Stock
is not publicly traded, then "Fair Market Value" shall mean the value of a share
of Common Stock, as determined by the Committee, in the Committee's sole and
absolute discretion, at least annually. The Committee may utilize the services
of an independent third party in determining the Fair Market Value of the Common
Stock for this purpose. The types of Incentive Awards that may be made under the
Employee Stock Plan are as follows:
Options. Options are rights to purchase a specified number of shares of
Common Stock at a specified price. An Option granted pursuant to the Employee
Stock Plan may consist of either an ISO or a non-qualified stock option ("NQSO")
that does not comply with the requirements of section 422 of the Code. ISOs may
not be granted to any employee who owns or would own immediately after the grant
of such ISO, directly or indirectly, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company (unless at the time
of such grant, the incentive stock option price is at least 110% of fair market
value and such Option is not exercisable after the expiration of five years from
the date of grant). The exercise price for an ISO must be at least equal to fair
market value of the Common Stock on the date of grant and the term of such
option cannot be greater than 10 years. The exercise price for a NQSO must be
equal to at least the greater of (i) the par value of the Common Stock or (ii)
50% of the fair market value of the Common Stock on the date of grant. The
exercise price of an Option is payable in cash or an equivalent acceptable to
the Committee. At the discretion of the Committee, the exercise price for an
Option may be paid in Common Stock valued at fair market value on the exercise
date, another Incentive Award valued at fair market value, or a combination
thereof equal in value to the exercise price. Subject to the foregoing, the
exercise price and other terms and conditions relating to each Option are
determined by the Committee at the time of grant.
Stock Appreciation Rights. SARs are rights to receive a payment, in cash
or Common Stock, equal to the excess of the fair market value of a specified
number of shares of Common Stock on the date of exercise over a specified strike
price. The Committee may grant SARs in connection with an Option (either at the
time of grant or at any time during the term of the Option) or without relation
to an Option. For SARs related to Options, the applicable strike price is the
exercise price of the related Stock Option and for SARs granted without
relationship to an Option, the applicable strike price is the fair market value
of a share of Common Stock on the date of grant of the SAR. Options related to
SARs cease to be exercisable when the SAR is exercised. Subject to certain
exceptions, an SAR granted in connection with an Option is exercisable at such
time or times and only to the extent that the related Option is exercisable, and
may not be disposed by the holder except to the extent that such related Option
may be disposed. The Committee may provide at the date of grant of an SAR for a
limit on the amount payable upon exercise of the SAR. Any such limitation must
be noted in the agreement evidencing the holder's SAR.
Restricted Stock Awards. The Committee may grant shares of restricted
stock pursuant to the Employee Stock Plan. Shares of restricted stock may not be
disposed of until the restrictions are removed or expire, and the Committee may
impose other conditions on such shares as it may deem advisable. The
restrictions upon restricted stock awards lapse as determined by the Committee,
subject to certain other lapse provisions. Shares of restricted stock may remain
subject to certain restrictions as set forth in the restricted stock agreement.
Each restricted stock award may have a different restriction period, in the
discretion of the Committee. The Committee may, in its discretion, prospectively
change the restriction period applicable to a particular restricted stock award.
Subject to certain provisions, the
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<PAGE> 63
Committee may, in its discretion, determine what rights, if any, a grantee of a
restricted stock award will have with respect to such stock, including the right
to vote the shares and receive all dividends and other distributions paid or
made with respect thereto.
Performance Awards. Performance units or performance shares
(collectively, "Performance Awards") may be granted under the Employee Stock
Plan subject to the attainment of one or more performance goals. Performance
goals may relate to any financial, production, sales or cost performance
objectives determined by the Committee at the beginning of a designated period.
If minimum performance is achieved or exceeded, the value of a Performance Award
will be based on the degree to which actual performance exceeds the
preestablished minimum performance standards. The Committee may, at any time,
modify the performance measures previously established for a Performance Award
as it considers appropriate and equitable. Payments with respect to Performance
Awards are made in cash or Common Stock valued at fair market value as of the
close of the applicable performance period (or a combination of both) in the
discretion of the Committee following the close of the applicable performance
period.
Phantom Stock Rights. Phantom stock rights entitle a holder, upon
conversion, to receive payment of cash or in shares of Common Stock valued at
fair market value on the date of conversion of the phantom stock right (or both)
in the discretion of the Committee. Upon conversion of a phantom stock right,
the Participant shall be entitled to receive payment of an amount determined by
multiplying (i) the fair market value of a share of Common Stock on the date of
conversion, by (ii) the number of shares of Common Stock as to which such
phantom stock right has been converted. Any payment of shares of Common Stock
upon conversion of a phantom stock right may be made in shares of restricted
stock.
ADDITIONAL PROVISIONS OF THE EMPLOYEE STOCK PLAN
Expiration of Incentive Awards and Effects of Employment Separation.
Except to the extent that the Committee provides otherwise in an Incentive Award
Agreement, Incentive Awards (whether or not vested) expire immediately or are
forfeited by the recipient upon termination of such recipient's employment with
the Company or any subsidiary employing such recipient for any reason other than
death, disability or retirement. Most, if not all, of the Incentive Award
Agreements provide that vested Incentive Awards are not forfeited if the
recipient is terminated for reasons other than Due Cause (as defined in the
Incentive Award Agreement). Upon death, retirement, or disability resulting in
the cessation of an employee's employment with the Company or its subsidiaries,
any unexercised Options or SARs or outstanding phantom stock rights terminate on
the date that is 90 days following the date of death, retirement or disability
(unless it expires by its terms on an earlier date). In the event of death,
disability or retirement, or other reasons that the Committee deems appropriate,
the Performance Awards will continue after the date of the applicable event for
such period of time as determined by the Committee, subject to the terms of the
Incentive Award Agreement or any other applicable agreement, but only to the
extent exercisable on the date of the applicable event.
If a holder of a restricted stock award ceases to be an employee because
of retirement, death, permanent and total disability, or because of other
reasons as the Committee deems appropriate, the Committee may determine that
restrictions on all or some portion of the restricted stock award subject to
restrictions at the time of such employment termination will be deemed to have
lapsed. If an eligible employee who has purchased restricted stock under the
Employee Stock Plan terminates employment with the Company for any reason, then
all shares of restricted stock that have not previously vested will be
repurchased by the Company at the cost paid by such employee. In addition, upon
an eligible employee's termination of employment with the Company and all of its
subsidiaries for any reason (including by reason of death or disability), the
Company has the right to purchase from such employee all shares of Common Stock
awarded under the Employee Stock Plan on the terms and conditions set forth in
the applicable Incentive Award.
Adjustment Provisions. The Employee Stock Plan provides that upon the
dissolution or liquidation of the Company, certain types of reorganizations,
mergers or consolidations, the sale of all or substantially all of the assets of
the Company, or a "change of control" (as defined in the Employee Stock Plan),
the Committee may determine (without stockholder approval), subject to the terms
of any applicable agreement evidencing an Incentive Award, that (i) all or some
Incentive Awards then outstanding under the Employee Stock Plan will be fully
vested and exercisable or convertible, as applicable, (ii) some or all
restrictions on restricted stock lapse immediately, or (iii) there will be a
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<PAGE> 64
substitution of new Incentive Awards by such successor employer corporation or a
parent or subsidiary company therefor, with appropriate adjustments as to the
number and kind of shares or units subject to such awards and prices. In
addition, in the event of a "change of control," the Committee may take certain
actions, without stockholder approval, including but not limited to (i)
acceleration of the exercise dates of any outstanding SARs or Options or
immediate vesting, (ii) acceleration of the restriction (lapse of forfeiture
provision) period of any restricted stock award, (iii) grants of SARs to holders
of outstanding Options, (iv) payment of cash to holders of Options in exchange
for the cancellation of their outstanding Options, (v) payment for outstanding
Performance Awards, (vi) acceleration of the conversion dates of outstanding
phantom stock rights, (vii) grants of new Incentive Awards or (viii) other
adjustments or amendments to outstanding Incentive Awards.
Transfer of Incentive Awards. No Incentive Award and no right under the
Employee Stock Plan, contingent or otherwise, may be assigned, transferred or
otherwise disposed by a recipient other than pursuant to a court order, by will
or beneficiary designation, or pursuant to the laws of descent and distribution.
Upon an employee's death, the Company has the right to purchase all or some of
the Common Stock that such employee obtained pursuant to an Incentive Award at
its fair market value within nine months of the employee's death.
Amendment and Termination of the Employee Stock Plan. Subject to
stockholder approval where expressly required by law, the Board may amend,
suspend or terminate the Employee Stock Plan at any time. No amendment, unless
approved by the holders of a majority of the outstanding shares of voting stock
of the Company may (i) change the class of persons eligible to receive Incentive
Awards, (ii) materially increase the benefits accruing to Participants, (iii)
increase by more than 10% the number of shares of Common Stock subject to the
Employee Stock Plan (except for certain adjustments required by the Employee
Stock Plan) or (iv) transfer the administration of the Employee Stock Plan to
any person who is not a non-employee director. Except as otherwise provided in
the Employee Stock Plan, the Committee may not, without the applicable
Participant's consent, modify the terms and conditions of such Participant's
Incentive Award. No amendment, suspension, or termination of the Employee Stock
Plan may, without the applicable Participant's consent, alter, terminate or
impair any right or obligation under any Incentive Award previously granted
under the Employee Stock Plan. Unless previously terminated, the Employee Stock
Plan will terminate and no more Incentive Awards may be granted after the tenth
anniversary of the adoption of the Employee Stock Plan by the Board. The
Employee Stock Plan will continue in effect with respect to Incentive Awards
granted before termination of the Employee Stock Plan and until such Incentive
Awards have been settled, terminated or forfeited.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The description set forth below represents a summary of the principal
terms and conditions of the Director Stock Plan and does not purport to be
complete. Such description is qualified in its entirety by reference to the
Director Stock Plan, a copy of which has been filed with the Commission as an
exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
Purpose. The Company adopted the Director Stock Plan for the purposes of
strengthening the ability of the Company to attract and retain experienced and
knowledgeable independent individuals to act as non-employee directors of the
Company and encouraging such directors to have a proprietary interest in the
Company. To accomplish these purposes, the Director Stock Plan provides terms
upon which members of the Board who are not employees of the Company or any of
its subsidiaries ("non-employee directors") will be granted non-qualified
Options.
Administration. The Director Stock Plan is administered by a committee
(the "Director Plan Committee") consisting of two or more non-employee
directors elected to the Director Plan Committee by a majority of the Board.
Currently, the members of the Director Plan Committee are Carl B. Anderson,
III, Merrill A. Miller, Jr. and Sidney L. Tassin. Subject to the terms of the
Director Stock Plan, the Director Plan Committee has the ability to (i)
determine the terms and provisions of the agreements under which Options are
granted under the Director Stock Plan, (ii) to interpret the Director Stock
Plan and the agreements thereunder, (iii) to prescribe, amend and rescind any
rules relating to the Director Stock Plan and (iv) to make all other
determinations necessary for the administration of the Director Stock Plan.
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<PAGE> 65
The Director Plan Committee does not have discretion or authority to disregard
or change any of the terms and conditions under which Options are granted to
non-employee directors.
Shares Subject to Director Stock Plan. As of January 1, 1998, an
aggregate of 218,207 shares of Common Stock may be issued, transferred or
exercised pursuant to Options under the Director Stock Plan (the "Authorized
Shares"). If the total number of issued and outstanding shares of Common Stock
increases after the consummation of the Initial Public Offering (other than any
increase due to issuances of Common Stock in connection with awards of Options
under the Director Stock Plan), then the number of Authorized Shares
automatically increases one time per year, commencing January 1, 1998 and
occurring each January 1 thereafter during the existence of the Director Stock
Plan, by a sufficient number of shares of Common Stock such that the number of
Authorized Shares reserved and available for issuance under the Plan shall equal
1.2% of the total number of shares of issued and outstanding Common Stock. As a
result, on January 1, 1998, the number of Authorized Shares increased to 218,207
shares. At the discretion of the Board or the Director Plan Committee, the
shares of Common Stock delivered under the Director Stock Plan may be made
available from (i) authorized but unissued shares, (ii) treasury shares or (iii)
previously issued but reacquired shares (or through a combination thereof).
Eligibility and Participation. Each non-employee director is
automatically eligible to participate in the Director Stock Plan unless he does
not retain the annual retainer to which he is entitled for service on the Board.
No non-employee director may be issued an Option to acquire more than 15,000
shares of Common Stock in any plan year.
OPTIONS
Automatic Initial and Annual Awards of Options. Upon the consummation of
the Initial Public Offering, each person who was then a non-employee director
received, and thereafter on the date at which a person first becomes a
non-employee director, such non-employee director will receive, a one-time grant
of an Option to acquire 15,000 shares of Common Stock (an "Initial Award"),
which shall be exercisable on or after November 4, 1998 except for the Initial
Award granted to Mark Liddell, which shall be exercisable on or after November
24, 1998. In each year succeeding the year in which a non-employee director
receives an Initial Award, the non-employee director, if reelected to the Board,
will be granted an additional Option to acquire 5,000 shares of Common Stock (an
"Annual Award"). Annual Awards will be made as of the date of the Company's
regular annual meeting of stockholders and will be immediately exercisable. No
Option granted as an Initial Award or Annual Award will be exercisable after the
tenth anniversary of the date of grant.
Retainer Options. Under the Director Stock Plan, a non-employee director
may elect to receive, in lieu of any or all of the annual cash retainer he would
otherwise receive in cash during the succeeding plan year (currently $10,000
annually), Options for the purchase of a number of shares equal to the amount of
the annual retainer so forgone divided by the fair market value of the Common
Stock on the date of grant.
Exercise Price. Each Option granted pursuant to the Director Stock Plan
will be exercisable at a per share price equal to the fair market value of a
share of Common Stock as of the date of grant. Such price may be paid in cash
or, in the discretion of the Director Plan Committee, by assigning to the
Company shares equal in value to the exercise price.
Termination. Except to the extent the Director Plan Committee provides
otherwise in the agreement evidencing an Option under the Director Stock Plan,
all Options granted under the Director Stock Plan that are held by a
non-employee director will expire and be forfeited upon the date of resignation
or removal from the Board of such non-employee director, unless such resignation
or removal results from the death or permanent and total disability of the
director, or resignation upon the attainment of 65 years. Upon such death,
disability or resignation at age 65, such Options will remain exercisable and
effective for six months following the date of the event causing the
non-employee director to cease membership on the Board.
Effect of Corporate Changes. In the event of certain significant
corporate changes, including (i) dissolution or liquidation of the Company,
(ii) a reorganization, merger or consolidation (other than for purposes of
reincorporation
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in a different state) in which the Company is not the survivor, (iii) the sale
of all or substantially all of the assets of the Company, or (iv) a Change of
Control (as defined in the Director Stock Plan), subject to the terms of any
applicable agreement, the Director Plan Committee may, in its discretion,
without obtaining stockholder approval, take any one or more of the following
actions: (a) determine that all or some Options then outstanding will be fully
vested and exercisable, (b) substitute new Options by a successor employer with
appropriate adjustments as to the number and kind of shares subject to such
awards and prices or (c) cancel such Options and pay the non-employee directors
or their beneficiaries the difference between the exercise price and the fair
market value of the shares subject to the Options as of the date of such
corporate change.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Carl B. Anderson, III and
Sidney L. Tassin, neither of whom are employees or current or former officers
of the Company. See "Board of Directors--Board Committees." Mr. Anderson and
Mr. Tassin each had direct or indirect interests in certain transactions
described in "Certain Relationships and Related Transactions."
INDEMNIFICATION AGREEMENTS
The Company has entered into Indemnification Agreements (the
"Indemnification Agreements") with its directors and certain of its officers
(the "Indemnitees"). Under the terms of the Indemnification Agreements, the
Company is required to indemnify the Indemnitees against certain liabilities
arising out of their services for the Company. The Indemnification Agreements
require the Company to indemnify each Indemnitee to the fullest extent permitted
by law and to advance certain expenses incurred by an Indemnitee. The
Indemnification Agreements provide limitations on the Indemnitees' rights to
indemnification in certain circumstances. To the extent that indemnification
provisions contained in the Indemnification Agreements purport to include
indemnification for liabilities arising under the Securities Act, the Company
has been informed that in the opinion of the Commission, such indemnification is
contrary to public policy and is therefore unenforceable.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of July 14, 1998 by (i) each person
known by the Company to own more than 5% of the outstanding shares of Common
Stock, (ii) each of the Company's directors, (iii) the Chief Executive Officer
of the Company and each of the two other persons who served as executive
officers of the Company during 1997, (iv) all parties to the Stockholders and
Voting Agreement as a group and (v) all executive officers and directors as a
group. All persons listed have an address in care of the Company's principal
executive offices and have sole voting and investment power with respect to
their shares unless otherwise indicated.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE(2)
<S> <C> <C>
Charles E. Davidson . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,708,231 9.4%
411 West Putnam Avenue
Greenwich, Connecticut 06830
Carl B. Anderson, III . . . . . . . . . . . . . . . . . . . . . . . . . . 1,288,000(3)(4) 7.1
c/o AnSon Partners Limited Partnership
4005 Northwest Expressway, Suite 400E
Oklahoma City, Oklahoma 73116
Energy Spectrum LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000(5) 6.0
5956 Sherry Lane, Suite 600
Dallas, Texas 75225
James E. Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,000(6) 1.7
Edward S. Jacob, III . . . . . . . . . . . . . . . . . . . . . . . . . . --(7) --
David E. Grose, III . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000(8) *
Mark Liddell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,515(4) 1.6
6307 Waterford Boulevard, Suite 100
Oklahoma City, Oklahoma 73118
Merrill A. Miller, Jr . . . . . . . . . . . . . . . . . . . . . . . . . . --(4) --
c/o National-Oilwell, Inc.
5555 San Felipe
Houston, Texas 77056
Sidney L. Tassin . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000(4)(9) 6.0
c/o Energy Spectrum Partners LP
5956 Sherry Lane, Suite 600
Dallas, Texas 75225
Lew O. Ward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423,125(4)(10) 2.3
c/o Ward Petroleum Corporation
502 South Fillmore Road
Enid, Oklahoma 73703
All parties to the Stockholders and Voting Agreement as a
group(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,583,110 25.0
All directors and executive officers as a group (8 persons) . . . . . . . 3,415,640(12) 18.4
</TABLE>
- -------------------
* Less than one percent.
(1) The information contained in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under
the Exchange Act. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, shares of
Common Stock subject to options or warrants held by that person that are
exercisable on July 14, 1998 or become exercisable within 60 days
following July 14, 1998 are deemed outstanding. However, such shares
are not deemed outstanding for the purpose of
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<PAGE> 68
computing the percentage ownership of any other person. All information
with respect to the beneficial ownership of any stockholder has been
furnished by such stockholder and, unless otherwise indicated, each
stockholder has sole voting and investment power with respect to the
shares listed as beneficially owned by such stockholder, subject to
community property laws where applicable.
(2) Percentage of ownership is based on 18,193,945 shares of Common Stock
outstanding.
(3) Includes (i) 1,018,000 shares held of record by APLP, of which Mr.
Anderson is managing general partner, (ii) 170,000 shares held of record
by James E. Brown that are subject to voting rights retained by Mr.
Anderson pursuant to an irrevocable proxy and (iii) 100,000 shares held
of record and beneficially by Mr. Anderson.
(4) Excludes 20,000 shares of Common Stock that may be acquired upon exercise
of options granted pursuant to the Director Stock Plan. None of such
options are exercisable within the next 60 days.
(5) Represents shares of Common Stock (including 112,000 shares of Common
Stock that may be acquired within the next 60 days upon exercise of
outstanding Series B Warrants) held of record by Energy Spectrum
Partners LP, of which Energy Spectrum Capital LP is the sole general
partner. Energy Spectrum LLC is the sole general partner of Energy
Spectrum Capital LP and possesses sole voting and investment power with
respect to such shares. Sidney L. Tassin, as President and a member of
Energy Spectrum LLC, may be deemed to have beneficial ownership of these
shares. Mr. Tassin disclaims beneficial ownership of such shares.
(6) Includes (i) 100,000 shares of Common Stock held by Mr. Brown which vest
pro rata over five years starting on December 10, 1997 and are subject
to certain restrictions on resale and provisions for the repurchase by
the Company at a specified price and upon certain conditions, including
termination of employment with the Company, (ii) 170,000 shares for
which an irrevocable voting proxy has been granted to Carl B. Anderson,
III and (iii) 40,000 shares subject to options granted pursuant to the
Employee Stock Plan that are currently exercisable. Excludes options to
purchase an aggregate of 360,000 shares held by Mr. Brown which were
granted pursuant to the Employee Stock Plan, subject to vesting and
other conditions contained in stock option agreements, none of which
options are exercisable within the next 60 days.
(7) Excludes options to purchase an aggregate of 180,000 shares held by Mr.
Jacob which were granted pursuant to the Employee Stock Plan, subject to
vesting and other conditions contained in stock option agreements, none
of which options are exercisable within the next 60 days.
(8) Includes 10,000 shares subject to options granted pursuant to the
Employee Stock Plan that are currently exercisable. Excludes options to
purchase an aggregate of 50,000 shares held by Mr. Grose which were
granted pursuant to the Employee Stock Plan, subject to vesting and other
conditions contained in stock option agreements, none of which options
are exercisable within the next 60 days.
(9) Represents shares held of record by Energy Spectrum Partners LP and
beneficially by Energy Spectrum LLC. Mr. Tassin, a director of the
Company, is the President of Energy Spectrum LLC, which is the ultimate
general partner of Energy Spectrum Partners LP. Mr. Tassin disclaims
beneficial ownership of such shares. See note (5) above.
(10) Includes (i) 253,725 shares held of record by Will-Cas Investments, L.P.,
a family limited partnership controlled by Ward Petroleum and family
trusts for the benefit of Mr. Ward's children, William C. Ward and Casidy
Ward, of which they act as trustees, and (ii) 169,400 shares that may be
acquired within the next 60 days upon the exercise of outstanding
warrants held by Will-Cas Investments, L.P.
(11) The parties to the Stockholders and Voting Agreement are Energy
Spectrum, APLP, Carl B. Anderson, III, Mike Liddell, Mark Liddell and
Charles E. Davidson. See "Certain Relationships and Related
Transactions--Stockholders and Voting Agreement."
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(12) Includes (i) 112,000 shares that may be acquired by Energy Spectrum
Partners LP within the next 60 days upon the exercise of outstanding
Series B Warrants, (ii) 170,000 shares subject to voting rights retained
by Mr. Anderson, (iii) 100,000 shares of restricted stock held by Mr.
Brown, (iv) 40,000 shares subject to options granted to Mr. Brown
pursuant to the Employee Stock Plan that are currently exercisable and
(v) 169,400 shares that may be acquired by Will-Cas Investments, L.P.
within the next 60 days upon the exercise of outstanding warrants.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion identifies certain of the Company's
relationships and related transactions since January 1, 1997 in which any
director or executive officer of the Company, any person known to the Company to
own of record or beneficially over 5% of the Common Stock, or any member of the
immediate family of any such persons had, or has, a direct or indirect material
interest. Transactions involving any former directors of the Company that have
occurred since the formation of the Company in December 1996 are also included.
Charles E. Davidson, Energy Spectrum and APLP are each record or beneficial
owners of over 5% of the Common Stock. Prior to the Initial Public Offering,
Chesapeake and the Oliver Companies were record or beneficial owners of over 5%
of the Common Stock. Prior to April 28, 1998, DLB was the record and beneficial
owner of over 5% of the Common Stock. Three of the Company's former directors,
Aubrey K. McClendon, Tom L. Ward and Marcus C. Rowland, are stockholders,
executive officers and/or directors of Chesapeake. One of the Company's
directors, Sidney L. Tassin, and one of the Company's former directors, James W.
Spann, are executive officers and partners of the ultimate general partner of
Energy Spectrum. Roy T. Oliver, a former director of the Company, is a director,
executive officer and significant stockholder of certain of the Oliver
Companies. Mike Mullen is a director, executive officer and significant
stockholder of certain of the Oliver Companies. Prior to the Ward Acquisition,
Lew O. Ward, a director of the Company, was a director, executive officer and
significant stockholder of Ward. Carl B. Anderson, III, a director of the
Company, and Robert E. Bell, a former director of the Company, are directors,
executive officers and holders of substantial ownership interests in APLP (of
which Anadarko was a subsidiary). James E. Brown is a director and executive
officer of the Company and, prior to the formation of the Company, was a
director and executive officer of Anadarko. Edward S. Jacob, III and David E.
Grose, III are each executive officers of the Company. Each of such persons and
entities has or had a direct or indirect material interest in one or more of the
arrangements and transactions described below.
REGISTRATION RIGHTS AGREEMENTS
The Company and certain of its investors, including certain directors,
officers and significant stockholders, are party to a Registration Rights
Agreement (the "Registration Rights Agreement") covering shares of Common Stock,
including the shares of Common Stock issuable upon the exercise of options,
warrants and other Company securities (collectively, "Common Stock
Equivalents"), owned by such investors (the "Registrable Securities"). The
Registration Rights Agreement applies to Registrable Securities owned by Energy
Spectrum, APLP, the Oliver Companies and certain of their affiliates, Ward and
certain of its transferees, Carl B. Anderson, III, James E. Brown, Edward S.
Jacob, III, David E. Grose, III and certain other persons. As of July 14, 1998,
up to 3,664,725 outstanding shares of Common Stock and 1,057,000 Common Stock
Equivalents (610,000 of which remain subject to further vesting pursuant to the
Employee Stock Plan and the Director Stock Plan) were subject to the
Registration Rights Agreement.
The Registration Rights Agreement provides, among other things, that
(subject to customary "black-out" periods) certain holders of Registrable
Securities with a minimum aggregate share value of at least $20 million may
require the Company to effect the registration under the Securities Act of the
Registrable Securities owned by such holders, subject to certain limitations.
The Registration Rights Agreement also provides certain "piggyback" registration
rights to the holders of Registrable Securities whenever the Company proposes to
register an offering of any of its capital stock under the Securities Act,
subject to certain exceptions, including pro rata reduction if, in the
reasonable opinion of the managing underwriter of the offering, such a reduction
is necessary to prevent an adverse effect on the marketability or offering price
of all the securities proposed to be offered in such offering.
The Registration Rights Agreement contains customary provisions regarding
the payment of expenses by the Company and regarding mutual indemnification
agreements between the Company and the holders of Registrable Securities for
certain securities law violations.
In connection with the Bonray Acquisition, the Company entered into a
registration rights agreement (the "DLB Registration Rights Agreement") for the
benefit of DLB and Donaldson, Lufkin & Jenrette Securities Corporation, its
financial advisor with respect to such transaction. The DLB Registration Rights
Agreement covers 3,015,000 shares of Common Stock issued in the Bonray
Acquisition. Pursuant to the DLB Registration Rights Agreement, on December 31,
1997, the Company filed with the Commission a Registration Statement on Form S-1
(Registration No. 333-43535)
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relating to the registration of the distribution (the "DLB Distribution") by DLB
of 2,955,000 shares of Common Stock to the shareholders of DLB. On March 30,
1998, such Registration Statement was declared effective by the Commission and
on April 28, 1998, the merger effecting the DLB Distribution was consummated and
2,955,000 shares of Common Stock formerly held by DLB were distributed to the
former stockholders of DLB.
The DLB Registration Rights Agreement requires the Company to pay
expenses associated with the DLB Distribution. In addition, the DLB Registration
Rights Agreement contains customary provisions regarding mutual indemnification
agreements between the Company and the holders of registrable securities for
certain securities law violations.
The foregoing summary of the principal provisions of the Company's
registration rights agreements does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all of the provisions of the
Registration Rights Agreement and the DLB Registration Rights Agreement, copies
of which have been filed with the Commission as exhibits to the Registration
Statement of which this Prospectus is a part.
STOCKHOLDERS AND VOTING AGREEMENT
The Company is party to the Stockholders and Voting Agreement among
Energy Spectrum, APLP, Carl B. Anderson, III, Charles E. Davidson, Mark Liddell
and Mike Liddell that provides for certain agreements regarding the corporate
governance of the Company, transfer restrictions on shares of Common Stock and
Common Stock Equivalents (as defined in the Stockholders and Voting Agreement),
and other customary terms and conditions. DLB, which was formerly a party to the
Stockholders and Voting Agreement, ceased to be a party to that agreement upon
the consummation of the DLB Distribution. At that time, Messrs. Liddell and Mr.
Davidson (the "DLB Group") were added as parties to the Stockholders and Voting
Agreement. As of July 14, 1998, the current parties to the Stockholders and
Voting Agreement beneficially owned approximately 4,583,110 shares of Common
Stock, representing approximately 25.0% of the outstanding shares of Common
Stock. The Stockholders and Voting Agreement will terminate on November 4, 2007.
Board Representation. The Stockholders and Voting Agreement provides that
the Board shall not consist of more than ten members. In addition, the
Stockholders and Voting Agreement provides that, certain stockholders who are
party thereto have the right to designate a specified number of persons to be
nominated for election as directors. Each of Energy Spectrum and APLP have the
right to designate one nominee for director as follows: (i) Energy Spectrum has
the right to designate one nominee for director as long as it owns at least (a)
5% of the outstanding Common Stock of the Company, (b) 50% in principal amount
of the Subordinated Notes purchased by it in the May Financing or (c) 600,000
shares of Common Stock and (ii) APLP has the right to designate one nominee for
director as long as it owns at least (a) 5% of the outstanding Common Stock of
the Company or (b) 600,000 shares of Common Stock. The DLB Group, which formerly
had the right to designate one nominee for director as long as the DLB Group
owned at least 5% of the outstanding Common Stock of the Company, irrevocably
waived such right effective June 2, 1998. The parties to the Stockholders and
Voting Agreement (the "Bound Stockholders") are obligated to vote all of their
voting securities (including certain Common Stock Equivalents) of the Company
for these designees.
Certain Transfer Restrictions. In accordance with the Stockholders and
Voting Agreement. The Bound Stockholders have agreed that any such Bound
Stockholder holding 5% or more of the Common Stock (on a fully diluted basis)
shall not, subject to certain exceptions, transfer 5% or more of the Common
Stock (on a fully diluted basis) unless such Bound Stockholder has received the
prior written consent of the Board, with any member of the Board designated by
such Bound Stockholder abstaining.
The foregoing summary of the material provisions of the Stockholders and
Voting Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of such
agreement, a copy of which has been filed with the Commission as an exhibit to
the Registration Statement of which this Prospectus is a part.
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CERTAIN ARRANGEMENTS RELATED TO THE CONSOLIDATION TRANSACTIONS
THE FORMATION TRANSACTIONS
The Company was formed in December 1996 through a series of affiliated
entity transactions in which the Company became the successor to Anadarko, the
contract drilling subsidiary of privately held APLP. In connection with the
Formation Transactions (i) APLP contributed ten drilling rigs, including two
rigs requiring refurbishment, for 2,000,000 shares of Common Stock, (ii) the
Oliver Companies exchanged six drilling rigs requiring refurbishment for
1,600,000 shares of Common Stock, (iii) Energy Spectrum acquired 2,000,000
shares of Common Stock for $10 million and (iv) Chesapeake entered into drilling
contracts with two-year terms for six of the Company's rigs in consideration for
the Chesapeake Option. See "Business-- Formation and Other Transactions." In
connection with the Formation Transactions, the ten rigs acquired from APLP were
valued at an aggregate of $10.8 million, the six rigs acquired from the Oliver
Companies were valued at an aggregate of $9.5 million and the six Chesapeake
Drilling Agreements were valued at an aggregate of $1.1 million. The valuations
of the rigs acquired in the Formation Transactions from APLP and the Oliver
Companies, the values placed upon the Chesapeake Drilling Agreements and the
consideration to be received by each such founder were determined and
established through negotiations among representatives of APLP and Anadarko
(including Carl B. Anderson, III), Energy Spectrum (including Sidney L. Tassin),
the Oliver Companies (including Roy T. Oliver and Mike Mullen) and Chesapeake
(including Aubrey McClendon), taking into account the then existing market
values of available rigs, the anticipated costs to complete the necessary
refurbishment of the contributed rigs and the expected values of revenues to be
received by the Company from the Chesapeake Drilling Agreements.
Three of the rigs acquired by the Company from APLP were acquired by APLP
within the two years prior to their contribution to the Company. APLP acquired
one rig in each of August, September and October 1996 for $1.3 million, $922,000
and $450,000, respectively. At the time of their contribution to the Company,
such rigs were valued on the books of the Company at $2.7 million. Four of the
rigs acquired by the Company from the Oliver Companies were acquired by the
contributing party within the two years prior to their contribution to the
Company at an aggregate cost of $2.6 million. At the time of their contribution
to the Company, such rigs were valued on the books of the Company at $4.4
million.
Chesapeake Option. Upon issuance by the Company, the Chesapeake Option
provided Chesapeake with the right to purchase up to 2,000,000 shares of Common
Stock from the Company at an exercise price of $6 per share. The Chesapeake
Option would have expired (i) as to 668,000 shares, on December 5, 2000 and (ii)
as to 1,332,000 shares, on December 5, 1998, subject to extension to December 5,
2000 if Chesapeake extended four of the Chesapeake Drilling Agreements for
additional two-year terms. In August 1997, Chesapeake relinquished the
Chesapeake Option in connection with the Chesapeake Transactions. See
"--Chesapeake Transactions."
Chesapeake Drilling Agreements. In December 1996 in connection with the
Formation Transactions, Chesapeake and its operating subsidiary (collectively
referred to in this discussion as "Chesapeake") entered into drilling contracts
(the "Chesapeake Drilling Agreements") with the Company pursuant to which
Chesapeake agreed to engage six of the Company's rigs for two-year terms.
Through December 31, 1997, the Company had recognized aggregate revenues of
$11.3 million from the Chesapeake Drilling Agreements.
Under the terms of the Chesapeake Drilling Agreements, the standard day
rates were subject to upward, but not downward, adjustment annually in November
to the average then-current market rates for the areas of operation, less $100
per day. The Company and Chesapeake were required to consider such adjustment
each November during the term of the applicable Chesapeake Drilling Agreement
and if no agreement could be timely reached as to the appropriate rate
adjustment, the Company had the option to terminate the contract for such rig at
the conclusion of operations at the well then being drilled. In December 1997,
the Company and Chesapeake were unable to agree on an appropriate rate
adjustment, so the Company exercised its option to terminate the Chesapeake
Drilling Agreements. At June 15, 1998, three of the Company's six rigs formerly
covered by the Chesapeake Drilling Agreements remained under contract with
Chesapeake on a well-to-well basis.
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In addition to the Chesapeake Drilling Agreements, during the year ended
December 31, 1997, Chesapeake engaged five of the Company's rigs under short
term drilling contracts on standard daywork terms. The Company recognized
aggregate revenues of $7.1 million from such contracts over that period. The
Company recognized aggregate revenues of $18 million over that period from all
drilling contracts with Chesapeake.
Oliver Companies' Put Rights. Also in connection with the Formation
Transactions, the Company granted the Oliver Companies a right, exercisable at
any time between June 2, 1998 and July 2, 1998 if the Company had not previously
completed an initial public offering, to require the Company to either (at the
Company's option) (i) repurchase all 1,600,000 of the shares of Common Stock
held by the Oliver Companies for an aggregate purchase price of $12 million
($7.50 per share) in cash or (ii) issue to the Oliver Companies an aggregate of
400,000 additional shares of Common Stock. This right terminated upon
consummation of the Initial Public Offering.
Fees Paid to Energy Spectrum. In January 1997, the Company paid Energy
Spectrum Capital LP ("ESC"), the general partner of Energy Spectrum, a fee in
the amount of $300,000 in consideration for assistance provided by Energy
Spectrum in the structuring of the Formation Transactions and arrangement and
negotiation of external financing. The Company also reimbursed ESC for expenses
incurred in connection with the rendering of such services.
THE WARD ACQUISITION
On May 31, 1997, the Company completed the Ward Acquisition involving the
acquisition by the Company of all of the issued and outstanding common units of
a subsidiary of Ward that held six drilling rigs in consideration for $8 million
in cash, 400,000 shares of Common Stock and a warrant (the "Ward Warrant") to
purchase up to 200,000 shares of Common Stock at an exercise price of $10 per
share. The Ward Warrant is exercisable at any time on or before the later of (i)
May 30, 2000 or (ii) one year after the completion of an initial public offering
of the Common Stock (which was satisfied by the Initial Public Offering), but no
later than June 1, 2003.
In connection with the Ward Acquisition, the Company entered into an
agreement (the "Ward Transportation Agreement") with Geronimo Trucking Company
("Geronimo"), a company owned and controlled by Lew O. Ward, a director of the
Company. The Ward Transportation Agreement provides that the Company will have a
preferential right to engage Geronimo's trucking services for covered
transportation needs and that Geronimo will make its trucking services available
to the Company at rates that are competitive in the area. The Ward
Transportation Agreement also provides Geronimo with the preferential right to
perform trucking services contracted for by the Company for the movement of the
rigs acquired by the Company in the Ward Acquisition. The Company is obligated
to allow Geronimo to bid on any covered rig movement required by the Company and
to allow Geronimo the opportunity to match or better any bid received from a
third party. Unless earlier terminated by the parties, the Ward Transportation
Agreement is effective through May 2000. The Company paid an aggregate of
$338,000 under the Ward Transportation Agreement for the year ended December 31,
1997 and approximately $509,000 from January 1, 1998 through June 15, 1998.
THE BONRAY ACQUISITION
In October 1997, the Company acquired all of the issued and outstanding
capital stock of Bonray from DLB in consideration for the issuance of 3,015,000
shares of Common Stock. In connection with the Bonray Acquisition, DLB obtained
certain rights to require the Company to effect the registration under the
Securities Act of the shares of Common Stock acquired by DLB in the Bonray
Acquisition. See "-- Registration Rights Agreements." Additionally, prior to the
DLB Distribution, DLB was a party to the Stockholders and Voting Agreement and
was entitled to designate one Board nominee as long as it owned at least 5% of
the Common Stock of the Company. As a result of the DLB Distribution, the
members of the DLB Group became parties to the Stockholders and Voting Agreement
and are entitled to designate one Board nominee as long as the DLB Group owns at
least 5% of the Common Stock of the Company. See "-- Stockholders and Voting
Agreement."
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INDIVIDUAL RIG ACQUISITIONS
In May 1997, the Company purchased from R.T. Oliver Drilling, Inc. two
drilling rigs for an aggregate purchase price consisting of $3.3 million in cash
and warrants (the "Oliver Warrants") for the purchase of an aggregate of 100,000
shares of Common Stock at an exercise price of $8 per share. One of the Oliver
Warrants was issued to RR&T, Inc., an affiliate of Roy T. Oliver, and the other
was issued to Mike Mullen. Each of the Oliver Warrants expires on May 1, 2000
and is separately exercisable for 50,000 shares of Common Stock.
CERTAIN FINANCING ARRANGEMENTS
On May 1, 1997, the Company completed the May Financing in which the
Company issued shares of Common Stock, subordinated notes and warrants to
purchase Common Stock to certain significant stockholders in exchange for an
aggregate of $28.5 million in cash, as described below. The following summary of
terms of the May Financing does not purport to be complete and is qualified in
its entirety by reference to the Securities Purchase Agreement, dated as of
April 30, 1997 (the "May Securities Purchase Agreement"), the Subordinated
Notes, Series A Warrants and Series B Warrants, copies or forms of which are
filed with the Commission as exhibits to the Registration Statement relating to
the Initial Public Offering.
Common Stock and Subordinated Notes. In the May Financing, the Company
issued 1,000,000 shares of Common Stock to Chesapeake in consideration for $7
million in cash and 140,000 shares of Common Stock to Energy Spectrum in
consideration for $980,000 in cash. Additionally, the Company issued the
Subordinated Notes due May 1, 2003 in the original principal amounts of $18
million and $2.52 million to Chesapeake and Energy Spectrum, respectively. The
Subordinated Notes bore interest at the Company's option at either (i) 11% per
annum, payable in cash, or (ii) 12.875% per annum, payable in the form of
additional Subordinated Notes, which interest was payable quarterly in arrears.
On each quarterly interest payment date, the Company was entitled to make an
election as to the interest rate to be applied for the previous quarter. The
Subordinated Notes were redeemable, solely at the option of the Company, in
whole or in part, at any time at varying redemption prices. The Company was
obligated to offer to redeem the Subordinated Notes upon the occurrence of
certain events constituting a "Change of Control" (as defined in the
Subordinated Notes) at a redemption price equal to 100% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
redemption. The Subordinated Notes were convertible into Common Stock at the
option of the Company, in whole or in part, in conjunction with a "Convertible
Event" (as defined in the Subordinated Notes), which includes certain
underwritten public offerings (including the Initial Public Offering), mergers,
consolidations and other business combination transactions. The Subordinated
Notes were general unsecured subordinated obligations of the Company that were
subordinated in right of payment to all existing and future senior indebtedness
of the Company, pari passu with all existing and future subordinated
indebtedness of the Company and senior in right of payment to all future junior
subordinated indebtedness of the Company. Upon consummation of the Initial
Public Offering, the Company redeemed in full the $18 million principal amount
of Subordinated Notes issued to Chesapeake in consideration for the payment by
the Company to Chesapeake of $18.2 million in cash, based on the price to public
in the Initial Public Offering. See "--Chesapeake Transactions." In April 1998,
the Company redeemed in full the remaining $2.52 million principal amount of
Subordinated Notes, together with accrued interest of $47,740. In connection
therewith, Energy Spectrum waived its right to require the Company to redeem the
Subordinated Notes at 110% of par value. In May 1997, the Company paid
Chesapeake a commitment fee of $250,000 in connection with the funding of the
Common Stock and Subordinated Notes in the May Financing.
Warrants. In the May Financing, the Company also issued two series of
detachable warrants (the "Warrants") for the purchase of shares of Common Stock,
designated as "Series A Warrants" and "Series B Warrants." The Warrants are
exercisable on or prior to May 1, 2003 at a price of $0.01 per share in the case
of the Series A Warrants and $7.50 per share in the case of the Series B
Warrants. In the May Financing, Chesapeake was issued Series A Warrants and
Series B Warrants representing the right to purchase 700,000 shares and 800,000
shares of Common Stock, respectively, and Energy Spectrum was issued Series A
Warrants and Series B Warrants representing the right to purchase 98,000 shares
and 112,000 shares of Common Stock, respectively. The Warrants expire on May 1,
2003 and are exercisable (i) at any time with a cash payment or (ii) pursuant to
a cashless exercise at any time after the completion of a "Qualified IPO" (as
defined in the Warrants), which includes certain underwritten public offerings
(including the Initial Public
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Offering), mergers, consolidations and other business combination transactions.
The exercise prices, as well as the number and kind of shares issuable under the
Warrants, are subject to adjustment upon the happening of certain events
described in the Warrants, including, the payment of in-kind dividends or
distributions and the subdivision, reclassification or recapitalization of the
Common Stock, whether in connection with a consolidation or merger or otherwise.
On July 31, 1997, Energy Spectrum exercised in full its Series A Warrants. On
the date hereof, Energy Spectrum holds all of the Series B Warrants issued to it
in the May Financing. In August 1997, Chesapeake relinquished its Series A
Warrants and Series B Warrants as part of the Chesapeake Transactions. See
"--Chesapeake Transactions."
CHESAPEAKE TRANSACTIONS
In August 1997, Chesapeake and the Company agreed to complete a series of
transactions (the "Chesapeake Transactions") pursuant to which the Company
issued 3,194,000 shares of Common Stock to Chesapeake in consideration for (i)
$9 million in cash, (ii) the relinquishment and cancellation of the Chesapeake
Option and the Warrants issued to Chesapeake in connection with the May
Financing and (iii) the redemption in full of the $18 million principal amount
of Subordinated Notes held by Chesapeake at a cash redemption price of $18.2
million which was paid from the proceeds of the Initial Public Offering. Also in
connection with the Chesapeake Transactions, the Company waived its right under
the May Securities Purchase Agreement to require Chesapeake to purchase
additional Common Stock, Warrants and Subordinated Notes for $3 million.
OTHER RELATED PARTY TRANSACTIONS AND ARRANGEMENTS
Weatherford Storage Yard. In connection with the Formation Transactions,
Anadarko granted the Company a transferrable option, exercisable at any time
prior to June 30, 1998, to either purchase from Anadarko a storage yard located
in Weatherford, Oklahoma (the "Weatherford Storage Yard") for a price of $1,000
in cash or lease from Anadarko, for any period specified by the Company through
a date not later than December 31, 1999, the Weatherford Storage Yard for a
lease price of $100 per year. In August 1997, the Company acquired from Anadarko
approximately five acres of land also in Weatherford, Oklahoma, in consideration
for the relinquishment of the Company's option to acquire or lease the
Weatherford Storage Yard.
Fees Paid to Energy Spectrum. In May 1997, the Company paid ESC a fee in
the amount of $220,000 for financial advisory and other services rendered to the
Company in connection with the evaluation, negotiation and closing of the Trend
Acquisition, for assistance in the arrangement of alternative financing sources,
and for structuring, negotiating and closing the amended financing arrangements
with CIT and Fleet. The Company also reimbursed ESC for expenses incurred in
connection with the rendering of such services.
Fees Paid to Energy Spectrum Advisors. The Company has engaged Energy
Spectrum Advisors Inc. ("ESA") to provide financial advisory and investment
banking services to the Company in connection with a possible restructuring or
refinancing of the Company's existing funded debt. As compensation for such
services, the Company has agreed to pay ESA an initial fee of $50,000 and an
additional fee of $25,000 per month through the term of the engagement. The
engagement letter expires on June 30, 1998. Through June 15, 1998, the Company
has paid $150,000 in fees to ESA in connection with this arrangement. ESA is an
affiliate of Energy Spectrum, which is the beneficial owner of approximately 6%
of the Common Stock. Sidney L. Tassin, a director of the Company designated to
serve on the Board by Energy Spectrum pursuant to the Stockholders and Voting
Agreement, has a right under certain circumstances to acquire, and as a result
may be deemed to beneficially own, a minority equity interest in ESA.
Transactions with Affiliates of Roy T. Oliver. The Company has in the
past purchased drilling rig equipment from U.S. Rig & Equipment, Inc., an
affiliate of Roy T. Oliver, a former director of the Company and control person
of certain of the Oliver Companies. From December 1996 through December 31,
1997, the Company paid U.S. Rig & Equipment, Inc. an aggregate of $5 million in
connection with such purchases. Additionally, in August 1997, the Company sold
to an affiliate of Mr. Oliver one rig acquired in the Trend Acquisition that did
not meet the Company's operational and technical standards. The Company believes
that the $500,000 price received by the Company in that sale is equivalent to
the price that would have been received from an unaffiliated third party.
Furthermore, in the Oliver Acquisition, which was completed in January 1998, the
Company acquired six rigs and related drilling equipment from
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R.T. Oliver Drilling, Inc. for $14 million. Such rigs will require additional
refurbishment prior to placement into service.
APLP Trucking Services. The Company has engaged affiliates of APLP for
the provision of trucking services related to the movement of the Company's rigs
on numerous occasions. For the year ended December 31, 1997 and three months
ended March 31, 1998, the Company paid such affiliates of APLP an aggregate of
approximately $1.7 million in consideration for such trucking services.
APLP Administrative Services. From December 13, 1996 through December 31,
1997, APLP made available to the Company certain of APLP's employees, office
space and administrative equipment, such as computer and telephone systems. In
consideration for such assistance, the Company reimbursed APLP an aggregate of
approximately $236,000.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on June 26, 1998 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities Act and pursuant to offers and sales that
occurred outside the United States within the meaning of Regulation S under the
Securities Act. As a condition to the completion of the Old Notes Offering, the
Company entered into the Exchange Offer Registration Rights Agreement with the
Initial Purchasers pursuant to which the Company agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to an offer to exchange the Old Notes for
Exchange Notes. The Exchange Notes will be substantially identical to the Old
Notes, except that the Exchange Notes will bear a Series B designation and will
have been registered under the Securities Act and, therefore will not contain
terms with respect to transfer restrictions (other than those that might be
imposed by state securities laws).
Under existing interpretations of the staff of the Commission, the
Exchange Notes would, in general, be freely transferable after the Exchange
Offer without further registration under the Securities Act. However, any
purchaser of Old Notes who is an "affiliate" of the Company or intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes (i) will not be able to rely on the interpretations of the staff of the
Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer
and (iii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the Old Notes,
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Each holder who wishes to exchange such Old Notes for Exchange Notes in
the Exchange Offer will be required to make certain representations, including
representations that (i) it is not an affiliate of the Company, (ii) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Exchange
Notes and (iii) it is acquiring the Exchange Notes in its ordinary course of
business. In addition, broker-dealers receiving Exchange Notes in the Exchange
Offer will have a prospectus delivery requirement with respect to resales of
Exchange Notes. The Commission has taken the position that such broker-dealers
may fulfill their prospectus delivery requirements with respect to the Exchange
Notes (other than a resale of an unsold allotment from the original sale of Old
Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Company is required to
allow such broker-dealers to use the prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of such Exchange Notes for
a period of 180 days after the Exchange Offer Registration Statement is declared
effective.
The Exchange Offer Registration Rights Agreement provides that, to the
extent not prohibited by any applicable law or applicable interpretation of the
staff of the Commission, the Company and the Guarantors will file the Exchange
Offer Registration Statement with the Commission within 60 days after the Issue
Date, and use their respective reasonable best efforts to have it declared
effective at the earliest possible time but in no event later than 180 days
after the Issue Date. The Company and the Guarantors have also agreed to use
their reasonable best efforts to cause the Exchange Offer Registration Statement
to be effective continuously, to keep the Exchange Offer open for a period of
not less than 20 business days and to cause the Exchange Offer to be consummated
no later than the 30th business day after the Exchange Offer Registration
Statement is declared effective by the Commission (subject to extension to the
40th business day with the consent of the Initial Purchasers).
If (i) the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Notes which are Transfer Restricted
Securities (as hereinafter defined) notifies the Company on or prior to the 20th
business day following the consummation of the Exchange Offer that (a) it is
prohibited by law or Commission policy from participating in the Exchange Offer,
(b) it may not resell the Exchange Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus, and this Prospectus is not
appropriate or available for such resales by it, or (c) it is a broker-dealer
and holds Old Notes acquired directly from the Company or any of the Company's
affiliates, the Company and the Guarantors will file with the Commission the
Shelf Registration Statement to register for public
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resale the Transfer Restricted Securities held by any such Holder who provides
the Company with certain information for inclusion in the Shelf Registration
Statement.
During any consecutive 365 day period, the Company may suspend the
effectiveness of the Shelf Registration Statement on up to two occasions for a
period of not more than 45 consecutive days, whereafter a Registration Default
(as hereinafter defined) shall occur, if there is a possible acquisition or
business combination transaction, business development or event involving the
Company that may require disclosure in the Shelf Registration Statement and the
Board determines in the exercise of its reasonable judgment that such disclosure
is not in the best interests of the Company and its stockholders, or obtaining
any financial statements relating to a possible acquisition or business
combination required to be included in the Shelf Registration Statement would be
impractical. In such a case, the Company shall promptly notify the holders of
the suspension of the Shelf Registration Statement's effectiveness, provided
that such notice shall not require the Company to disclose the business purpose
for such suspension if the Board determines in good faith that such acquisition
or business combination or other transaction, business development or event
should remain confidential. The relevant period during which the Shelf
Registration Statement is required to remain effective will be extended by the
number of days the use of the Shelf Registration Statement is suspended.
As used in this Prospectus and in the Exchange Offer Registration Rights
Agreement, "Transfer Restricted Securities" means the following securities: (i)
each Old Note, until the earliest to occur of (a) the date on which such Old
Note is exchanged in the Exchange Offer for an Exchange Note which is entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Securities Act, (b) the date on which
such Old Note has been disposed of in accordance with a Shelf Registration
Statement (and the purchasers thereof have been issued Exchange Notes), (c) the
date on which such Old Note is distributed to the public pursuant to Rule 144
under the Securities Act (and the purchasers thereof have been issued Exchange
Notes) or (d) the date on which such Old Note is eligible for distribution to
the public pursuant to paragraph (k) of Rule 144 under the Securities Act and
(ii) each Exchange Note issued to a broker-dealer in the Exchange Offer until
the date on which such Exchange Note is disposed of by a broker-dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the prospectus contained therein).
The Exchange Offer Registration Rights Agreement also provides that (i)
if the Company or the Guarantors fail to file an Exchange Offer Registration
Statement with the Commission on or prior to the 60th day after the Issue Date,
(ii) if the Exchange Offer Registration Statement is not declared effective by
the Commission on or prior to the 180th day after the Issue Date, (iii) if the
Exchange Offer is not consummated on or before the 30th business day (or, if
extended with the Initial Purchasers' consent, the 40th business day) after the
Exchange Offer Registration Statement is declared effective, (iv) if obligated
to file the Shelf Registration Statement and the Company and the Guarantors fail
to file the Shelf Registration Statement with the Commission on or prior to the
45th day after such filing obligation arises, (v) if obligated to file a Shelf
Registration Statement and the Shelf Registration Statement is not declared
effective on or prior to the 180th day after the obligation to file a Shelf
Registration Statement arises, or (vi) if the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, is declared
effective but thereafter ceases to be effective or useable in connection with
resales of the Transfer Restricted Securities without being succeeded within
five days by an appropriate post-effective amendment, for such time of non-
effectiveness or non-usability (each, a "Registration Default"), the Company and
the Guarantors agree to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages ("Liquidated Damages") in an amount equal to
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90-day period immediately following the
occurrence of such Registration Default, increasing by an additional $0.05 per
week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages of $0.20 per week per
$1,000 in principal amount of Transfer Restricted Securities. The Company and
the Guarantors shall not be required to pay Liquidated Damages for more than one
Registration Default at any given time. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease. All accrued Liquidated
Damages shall be paid by the Company or the Guarantors to Holders entitled
thereto in the manner provided for the payment of interest in the Indenture on
each interest payment date.
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The summary herein of certain provisions of the Exchange Offer
Registration Rights Agreement does not purport to be complete and is subject to,
and is qualified in its entirety by, all the provisions of the Exchange Offer
Registration Rights Agreement, a copy of which is filed as an exhibit to the
Exchange Offer Registration Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Old Notes will not have any further registration rights and such
Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York time, on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for Liquidated Damages in certain
circumstances relating to the timing of the Exchange Offer, all of which rights
generally will terminate when the Exchange Offer is terminated. The Exchange
Notes will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered. As of the date of this Prospectus, $100 million aggregate
principal amount of Old Notes are outstanding.
Holders of Old Notes do not have any appraisal or dissenters rights under
the DGCL or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See " -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York time, on
,1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange offer is extended.
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In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
time, on the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer (except that extension
beyond the 30th business day after the effectiveness of the Exchange Offer
Registration Statement requires consent of the Initial Purchasers) or to
terminate the Exchange Offer if any of the conditions set forth below under " --
Conditions" shall not have been satisfied, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent or (ii) to amend the
terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the most recent date to which
interest has been paid or duly provided for on the Old Note surrendered in
exchange for such Exchange Note or, if no interest has been paid or duly
provided for on such Old Note, from June 26, 1998. Interest on the Exchange
Notes is payable semi-annually on each June 30 and December 31, commencing on
December 31, 1998.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last date to which interest has been paid or duly provided for on the Old Notes
prior to the original issue date of the Exchange Notes or, if no such interest
has been paid or duly provided for will not receive any accrued interest on such
Old Notes, and will be deemed to have waived, the right to receive any interest
on such Old Notes accrued from and after June 26, 1998.
PROCEDURES FOR TENDERING
For a holder of Old Notes to tender Old Notes validly pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer), an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents, must be received by the Exchange Agent at the
address set forth in the Letter of Transmittal prior to 5:00 p.m., New York
time, on the Expiration Date. In addition, prior to 5:00 p.m., New York time, on
the Expiration Date, either (i) certificates for tendered Old Notes must be
received by the Exchange Agent at such address or (ii) such Old Notes must be
transferred pursuant to the procedures for book-entry transfer described below
(and a confirmation of such tender received by the Exchange Agent, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal).
The term "Agent's Message" means a message transmitted by the Depository,
received by the Exchange Agent and forming part of the confirmation of a
book-entry transfer, which states that the Depository has received an express
acknowledgment from the participant in the Depository tendering Old Notes which
are the subject of such book-entry confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant. In the
case of an Agent's Message relating to guaranteed delivery, the term means a
message transmitted by the Depository and received by the Exchange Agent, which
states that the Depository has received an express acknowledgment from the
participant in the Depository tendering Old Notes that such participant has
received and agrees to be bound by the Notice of Guaranteed Delivery.
By tendering Old Notes pursuant to the procedures set forth above, each
holder will make to the Company the representations set forth above in the third
paragraph under the heading " -- Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
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THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. see "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as hereinafter)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the book-entry transfer facility, The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility, an appropriate Letter of Transmittal properly completed and
duly executed with any required signature guarantee, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal and
all other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth in the Letter of
Transmittal on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Old Notes to the Exchange Agent in accordance with
DTC's ATOP procedures for transfer. DTC will then send an Agent's Message to the
Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
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will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, none of the
Company, the Exchange Agent or any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent or (iii)
who cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice
of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number(s) of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility), and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificates representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth in the Letter of Transmittal prior
to 5:00 p.m., New York time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number(s) and principal amount of such Old
Notes, or, in the case of Old Notes transferred by book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility to be credited),
(iii) be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to
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have the Trustee with respect to the Old Notes register the transfer of such Old
Notes into the name of the person withdrawing the tender and (iv) specify the
name in which any such Old Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
" -- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept any Old Notes for exchange, and may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Old Notes,
if:
(a) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to the
Exchange Offer which, in the Company's reasonable discretion, might
materially impair the ability of the Company to proceed with the Exchange
Offer or any material adverse development has occurred in any existing
action or proceeding with respect to the Company or any of its
subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the
staff of the Commission is proposed, adopted or enacted, which, in the
Company's reasonable discretion, might materially impair the ability of
the Company to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which
approval the Company shall, in the Company's reasonable discretion, deem
necessary for the consummation of the Exchange Offer as contemplated
hereby.
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "-- Withdrawal of Tenders"), or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
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EXCHANGE AGENT
U.S. Trust Company of Texas, N.A. has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
770 Broadway 111 Broadway P.O. Box 841
13th Floor- Corporate Trust Operations Lower Level Cooper Station
New York, New York 10003-9598 New York, New York 10006-1906 New York, New York 10276-0841
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
By Facsimile:
(212) 420-6504
The Exchange Agent also serves as Trustee under the Indenture.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary and holders of Old Notes
should carefully consider whether to accept. Holders of Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities
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Act in a transaction meeting the requirements of Rule 144A, in accordance with
Rule 144 under the Securities Act, (iii) pursuant to another exemption from the
registration requirements of the Securities Act, (iv) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act, or (v) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties (for example, the letters of the commission to (i) Exxon Capital
Holdings Corporation, available May 13, 1988, (ii) Morgan Stanley & Co., Inc.,
available June 5, 1991, and (iii) Shearson & Sterling, available July 2, 1993),
the Company believes that a holder or other person (other than a person that is
an affiliate of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker- Dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Company, (ii) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes and (iii) it is acquiring
the Exchange Notes in its ordinary course of business. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Company believes that Participating Broker-Dealers who acquired Old
Notes for their own accounts as a result of market-making activities or other
trading activities may fulfill their prospectus delivery requirements with
respect to the Exchange Notes received upon exchange of such Old Notes (other
than Old Notes which represent an unsold allotment from the original sale of the
Old Notes) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such Exchange Notes. Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
such other trading activities. Subject to certain provisions set forth in the
Exchange Offer Registration Rights Agreement, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such Exchange
Notes for a period ending 180 days after the date on which the Exchange Offer
Registration Statement is declared effective. However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Notes received in exchange for Old Notes pursuant to the Exchange
Offer must notify the Company, or cause the Company to be notified, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. Such notice
may be given in the space provided for that purpose in the Letter of Transmittal
or may be delivered to the Exchange Agent at one of the addresses set forth in
the Letter of Transmittal.
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See "Plan of Distribution." Any Participating Broker-Dealer who is an
"affiliate" of the Company may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
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DESCRIPTION OF EXCHANGE NOTES
The Old Notes were issued and the Exchange Notes are to be issued
pursuant to an Indenture dated as of June 26, 1998 among the Company, the
Guarantors and U.S. Trust Company of Texas, N.A., as trustee ("Trustee"). A copy
of the Indenture is available upon request from the Company as set forth under
"Available Information." The Indenture is by its terms subject to and governed
by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Indenture is by its terms subject to and governed by the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The following summaries of certain
provisions of the Notes and the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the Notes and
the Indenture, including the definitions therein of certain capitalized terms
used but not defined herein. For purposes of this section of this Prospectus,
references to the "Company" mean Bayard Drilling Technologies, Inc., excluding
its subsidiaries. The Old Notes and the Exchange Notes are collectively referred
to herein as the "Notes". Certain other terms used herein are defined below
under "-- Certain Definitions."
GENERAL
The Old Notes are, and the Exchange Notes will be, general unsecured
senior obligations of the Company, limited in aggregate principal amount at
Stated Maturity to $100 million. The Indebtedness evidenced by the Notes will
rank pari passu in right of payment with all existing and future senior
indebtedness and other obligations of the Company and senior in right of payment
to all future subordinated indebtedness of the Company. The Company is a holding
company that conducts substantially all of its operations through its
subsidiaries. As of June 15, 1998, on a pro forma basis after giving effect to
the TransTexas Acquisition and the Old Notes Offering, the Company had
approximately $121.1 million of outstanding senior indebtedness, of which $21.1
million is secured by certain assets of the Subsidiaries. At such date, the
Company would have had no Indebtedness subordinated to the Notes.
The Indenture provides that each of the Company's wholly owned domestic
Subsidiaries (and any other Subsidiaries that guarantee any Indebtedness of the
Company) shall be a Guarantor. The Guarantees will be senior unsecured
obligations of each respective Guarantor and will rank pari passu in right of
payment with all other indebtedness and liabilities of such Guarantor that are
not subordinated by their terms to other Indebtedness of such Guarantor, and
senior in right of payment to all Subordinated Indebtedness of such Guarantor.
The holders of secured indebtedness of the Company and the Guarantors (including
Indebtedness under the Loan Agreements, which is secured by first priority liens
on certain of the assets of the Company's domestic Subsidiaries), will have
claims with respect to the assets constituting collateral for such Indebtedness
that are prior to claims of holders of the Notes and the Trustee. In the event
of a default on the Notes or the Guarantees, or a bankruptcy, liquidation or
reorganization of the Company or any Guarantors, such assets will be available
to satisfy obligations with respect to the Loan Agreements or other secured
Indebtedness before any payment therefrom could be made on the Notes. To the
extent that the value of such collateral is not sufficient to satisfy the
indebtedness secured thereby, amounts remaining outstanding on such Indebtedness
would be entitled to share with the holders of the Notes and the Trustee and
their claims with respect to any other assets of the Company and the Guarantors.
The Old Notes are, and the Exchange Notes will be, effectively
subordinated to claims of creditors (other than the Company) of the Company's
Subsidiaries other than the Guarantors. Claims of creditors (other than the
Company) of such Subsidiaries, including trade creditors, tort claimants,
secured creditors, taxing authorities and creditors holding guarantees, will
generally have priority as to assets of such Subsidiaries over the claims and
equity interest of the Company and, thereby indirectly, the holders of the
indebtedness of the Company, including the Notes and the Guarantees. In
addition, the Indenture permits under limited circumstances the creation of, or
the designation of existing Subsidiaries as, Unrestricted Subsidiaries. At the
Issue Date, none of the Company's subsidiaries will be an Unrestricted
Subsidiary. Unrestricted Subsidiaries will not be generally subject to the
covenants applicable to the Company and the Subsidiaries under the Indenture.
The Notes will be effectively subordinated to claims of creditors (other than
the Company) of the Unrestricted Subsidiaries. See "-- Certain Covenants --
Unrestricted Subsidiaries."
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The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes (which they are intended to replace) except that (i) the
Exchange Notes bear a Series B designation, (ii) the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. Additionally, the holders of Exchange Notes
will not be entitled to certain rights under the Exchange Offer Registration
Rights Agreement, including the provisions providing for Liquidated Damages in
certain circumstances, which rights will terminate when the Exchange Offer is
consummated. The Exchange Notes will be issued solely in exchange for an equal
principal amount of Old Notes. As of the date hereof, $100 million aggregate
principal amount of Old Notes is outstanding. See "The Exchange Offer."
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on June 30, 2005, and will bear interest at the
rate per annum stated on the cover page hereof from the date of issuance or from
the most recent interest payment date to which interest has been paid or
provided for. Interest on the Notes will be payable semi-annually in arrears on
June 30 and December 31 of each year, commencing December 31, 1998, to the
Persons in whose names such Notes are registered at the close of business on
June 15 or December 15, immediately preceding such interest payment date.
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
The Notes may be presented or surrendered for payment of principal,
premium, if any, and interest and for registration of transfer or exchange at
the office or agency of the Company within the City and State of New York
maintained for such purpose. In addition, in the event the Notes do not remain
in book-entry form, interest may be paid, at the option of the Company, by check
mailed to the registered holders of the Notes at the respective addresses as set
forth on the Note Register. The Notes will be issued only in fully registered
form, without coupons, in denominations of $1,000 and integral multiples
thereof. No service charge will be made for any registration of transfer or
exchange or redemption of Notes, but the Company or Trustee may require in
certain circumstances payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
GUARANTEES OF NOTES
Each Guarantor will unconditionally guarantee, jointly and severally, to
each holder and the Trustee, the full and prompt performance of the Company's
Obligations under the Indenture and the Notes, including the payment of
principal of, premium, if any, and interest on the Notes pursuant to its
Guarantee. If any Subsidiary of the Company that is not an initial Guarantor
guarantees any Indebtedness of the Company at any time in the future, then the
Company will cause the Notes to be equally and ratably guaranteed by such
Subsidiary. In addition, the Company will cause each wholly owned domestic
subsidiary that is or becomes a Subsidiary to execute and deliver a supplement
to the Indenture pursuant to which such Subsidiary will guarantee the payment of
the Notes on the same terms and conditions as the Guarantees by the initial
Guarantors.
The Obligations of each Guarantor will be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the Obligations of such
other Guarantor under its Guarantee or pursuant to its contribution obligations
under the Indenture, result in the Obligations of such Guarantor under its
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law or otherwise not being void, voidable or unenforceable
under any bankruptcy, reorganization, receivership, insolvency, liquidation or
other similar legislation or legal principles under any applicable 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.
Each Guarantor may consolidate with or merge into or sell or otherwise
dispose of all or substantially all of its Property and assets to the Company or
another Guarantor without limitation, except to the extent any such transaction
is subject to the "Consolidation, Merger, Conveyance, Lease or Transfer"
covenant of the Indenture. Each Guarantor may consolidate with or merge into or
sell all or substantially all of its Property and assets to a Person other than
the Company or another Guarantor (whether or not Affiliated with the Guarantor),
provided that (a) if the surviving Person
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is not the Guarantor, the surviving Person agrees to assume such Guarantor's
Guarantee and all its Obligations pursuant to the Indenture (except to the
extent the following paragraph would result in the release of such Guarantee)
and (b) such transaction does not result in a Default or Event of Default
existing or continuing immediately thereafter.
Upon the sale or other disposition (by merger or otherwise) of a
Guarantor (or all or substantially all of its Property and assets) to a Person
other than the Company or another Guarantor and pursuant to a transaction that
is otherwise in compliance with the Indenture (including as described in clause
(b) of the foregoing paragraph and as described below in the covenant described
"-- Certain Covenants -- Limitation on Asset Sales"), such Guarantor (unless it
otherwise remains a Subsidiary) shall be deemed released from its Guarantee and
the related Obligations set forth in the Indenture; provided that any such
termination shall occur only to the extent that all Obligations of such
Guarantor under all of its guarantees of and under all of its pledges of assets
or other security interests which secure, other Indebtedness of the Company
shall also terminate or be released upon such sale or other disposition. Each
Guarantor that is designated as an Unrestricted Subsidiary in accordance with
the Indenture shall be released from its Guarantee and the related Obligations
set forth in the Indenture so long as it remains an Unrestricted Subsidiary.
OPTIONAL REDEMPTION
Except as provided in the next paragraph, the Notes will not be
redeemable at the option of the Company prior to June 30, 2003. On or after such
date, the Notes will be redeemable at the option of the Company, in whole at any
time or in part from time to time, at the following prices (expressed in
percentages of the principal amount), if redeemed during the 12 months beginning
June 30 of the years indicated below, in each case together with interest
accrued to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.500%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or before June 30, 2001,
the Company may, at its option, redeem up to a maximum of 35% of the aggregate
principal amount of the Notes with the net cash proceeds of one or more
Qualified Equity Offerings at a redemption price equal to 111% of the principal
amount thereof, plus accrued and unpaid interest thereon to the redemption date;
provided that at least $65 million of the aggregate principal amount of Notes
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.
If fewer than all the Notes are redeemed, selection for redemption will
be made by the Trustee in accordance with the principal stock exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or by any other means which the Trustee determines to be fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but no
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest ceases to accrue on Notes or portions thereof called for
redemption.
CHANGE OF CONTROL
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 Notes in whole
or in part (the "Change of Control Offer") at a purchase price (the "Change of
Control Purchase Price") in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date (as defined below) on the terms described below.
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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, among other things, (i) that a Change of Control has
occurred and a Change of Control Offer is being made as provided for in the
Indenture, and that, although holders are not required to tender their Notes,
all Notes 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 Note 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; and (iv) the instructions and any other information necessary to
enable holders to tender their Notes and have such Notes purchased pursuant to
the Change of Control Offer. 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.
The existence of the holders' rights to require, subject to certain
conditions, the Company to repurchase Notes upon a Change of Control may deter a
third party from acquiring the Company in a transaction that constitutes a
Change of Control. The source of funds for the repurchase of Notes upon a Change
of Control will be the Company's cash or cash generated from operations or other
sources, including borrowings or sales of assets. Further, a "Change of Control"
(as defined under any Loan Agreement) may constitute an event of default
thereunder and allow the lenders to accelerate the Indebtedness outstanding
hereunder and prevent the Company from borrowing thereunder. There can be no
assurance that sufficient funds will be available at the time of any Change of
Control to repay all amounts owing under such other Indebtedness or to make the
required payments of the Notes. In the event that a Change of Control Offer
occurs at a time when the Company does not have sufficient available funds to
pay the Change of Control Purchase Price for all Notes timely tendered pursuant
to such offer or at a time when the Company is prohibited from purchasing the
Notes (and the Company is unable either to obtain the consent of the holders of
the relevant Indebtedness or to repay such Indebtedness), an Event of Default
would occur under the Indenture. In addition, one of the events that constitutes
a Change of Control under the Indenture is a sale, conveyance, transfer or lease
of all or substantially all of the assets of the Company or the Company and the
Subsidiaries, taken as a whole. The Indenture will be governed by New York law,
and there is no established quantitative definition under New York law of
"substantially all" of the assets of a corporation. Accordingly, if the Company
or its Subsidiaries were to engage in a transaction in which it or they disposed
of less than all of the assets of the Company or the Company and its
Subsidiaries taken as a whole, as applicable, a question or interpretation could
arise as to whether such disposition was of "substantially all" of its assets
and whether the Company was required to make a Change of Control Offer.
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 the Indenture applicable to a Change of Control Offer made by the Company and
repurchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders to require the
Company to repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring. The provisions of the Indenture may
not afford holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction affecting the
Company that may adversely affect holders because (i) such transactions may not
involve a shift in voting power or beneficial ownership or, even if they do, may
not involve a shift of the magnitude required under the definition of Change of
Control to require the Company to make a Change of Control Offer or (ii) such
transactions may include an actual shift in voting power or beneficial ownership
to a Permitted Holder which is excluded under the definition of Change of
Control from the amount of shares involved in determining whether or not the
transaction involves a shift of the magnitude required to trigger the
provisions. A transaction involving the management of the Company or its
Affiliates, or a transaction involving a recapitalization of the Company, will
result in a Change of Control only if it is the type of transaction specified in
such definition.
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CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture:
Transactions with Affiliates. 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 transactions
(including, but not limited to, the purchase, sale or exchange of Property, the
making of any Investment, the giving of any guarantee to, or the rendering of
any service with, any Affiliate of the Company, other than transactions among
the Company and any Guarantor 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 of the
Company and (ii) (a) with respect to a transaction or series of related
transactions that has a Fair Market Value in excess of $5 million but less than
$10 million, 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 $10 million,
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. 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 as well as stock
option agreements, restricted stock agreements and consulting or similar
agreements), (ii) the making of any Restricted Payment otherwise permitted by
the Indenture, (iii) any existing employment agreement, stock option agreement,
restricted stock agreement, consulting agreement or similar agreement, (iv) any
agreement in effect on the Issue Date or any amendment thereto (so long as such
amendment is, taken as a whole, no less favorable to the holders of the Notes
than the original agreement as in effect on the Issue Date) and any transactions
contemplated thereby, or (v) any transaction described in "Certain Relationships
and Related Transactions."
Limitation on Restricted Payments. The Company will not, and will not
permit any Subsidiary to, make any Restricted Payment, unless at the time of and
after giving effect to the proposed Restricted Payment, (a) no Default shall
have occurred and be continuing (or would immediately result therefrom), (b) the
Company could incur at least $1.00 of additional Indebtedness under the tests
described in the first sentence under the caption "-- Certain Covenants --
Limitation on Indebtedness" and (c) 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 (i) 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 for which internal financial statements are available 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 (ii) 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 (iii) 100% of the net reduction in Restricted Investments,
subsequent to the Issue Date, in any Person, resulting from payments of interest
on Indebtedness, dividends, 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
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<PAGE> 92
made by the Company or any Subsidiary in such Person and in each such case which
was treated as a Restricted Payment, plus (iv) $10 million.
The foregoing provisions will not prevent (A) 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 the Indenture;
(B) 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 clause (c)
(ii) above to the extent that such proceeds are applied to purchase or redeem
such Capital Stock or Subordinated Indebtedness; (C) 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
the covenant described under "-- Limitation on Indebtedness" and (x) is
subordinated to the Notes at least to the same extent as the Subordinated
Indebtedness so exchanged, purchased or redeemed, (y) has a stated maturity
later than the stated maturity of the Subordinated Indebtedness so exchanged,
purchased or redeemed and (z) 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; (D) Investments in any Joint Ventures and
foreign Subsidiaries not constituting Guarantors in an aggregate amount not to
exceed $5 million; (E) the payment of any dividend or distribution by a
Subsidiary of the Company or any of its Wholly Owned Subsidiaries; (F) so long
as no Default or Event of Default shall have occurred and be continuing or
should occur as a consequence thereof, the repurchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held by
any employee of the Company or any of its Subsidiaries, provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Capital Stock pursuant to the terms of an employee benefit plan or employment or
similar agreement shall not exceed $500,000 in any calendar year; and (G) the
acquisition of Capital Stock by the Company in connection with the exercise of
stock options or stock appreciation rights by way of cashless exercise or in
connection with the satisfaction of withholding tax obligations. Notwithstanding
the foregoing, the amount available for Investments in Joint Ventures and
foreign Subsidiaries pursuant to clause (D) 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 paragraph will be excluded in calculating the amount of
Restricted Payments thereafter, except that any such Restricted Payments
permitted to be made pursuant to clauses (A), (D), (E) (but only to the extent
paid to someone other than the Company or any of its Wholly Owned Subsidiaries)
and (F) will be included in calculating the amount of Restricted Payments
thereafter.
For purposes of this covenant, 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.
Limitation on Indebtedness. The Company will not, and will not permit any
Subsidiary 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 preceding the Transaction Date is at least 2.5 to 1.0.
Notwithstanding the foregoing, the Company or any Subsidiary (subject to the
following paragraph) may incur Permitted Indebtedness. Any Indebtedness of a
Person existing at time at which such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Subsidiary at the time at which it becomes a Subsidiary.
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Limitation on Subsidiary Indebtedness and Preferred Stock. Subject to the
covenant captioned "Limitation on Indebtedness," the Company will not permit any
Subsidiary to, directly or indirectly, incur any Indebtedness or issue any
Preferred Stock except:
(a) 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;
(b) 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);
(c) Indebtedness or Preferred Stock outstanding on the Issue Date
and listed in a schedule attached to the Indenture;
(d) Indebtedness described in clauses (b), (c), (d), (e), (f),
(g), (h), (k) and (n) under the definition of "Permitted Indebtedness";
(e) Permitted Subsidiary Refinancing Indebtedness of such
Subsidiary;
(f) 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 (a) and (c) of this
paragraph (the "Retired Indebtedness or Stock"), provided that the
Indebtedness or the Preferred Stock so issued has (i) 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, (ii) a final redemption
date later than the stated maturity or final redemption date (if any) of
the Retired Indebtedness or Stock and (iii) 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;
(g) 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
paragraph;
(h) Non-Recourse Indebtedness incurred by a foreign Subsidiary
not constituting a Guarantor; and
(i) Indebtedness incurred to finance all or a part of the purchase
price or construction, repair or improvement cost of Property acquired,
constructed, repaired or improved after the Issue Date.
Limitations 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;
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(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 are 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;
(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;
(viii) existing under or by reason of applicable law, rules or
regulations, or any order or ruling by any governmental authority;
(ix) constituting customary restrictions on cash or other deposits
imposed by customers under contracts entered into in the ordinary course
of business;
(x) constituting restrictions with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all of the capital stock or assets of such Subsidiary
pending the closing of such sale or disposition; or
(xi) constituting provisions contained in agreements or
instruments relating to Indebtedness which prohibit the transfer of all
or substantially all of the assets of the obligor thereunder unless the
transferee shall assume the obligations of the obligor under such
agreement or instrument.
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 an Asset Sale resulting from the requisition of title to, seizure or
forfeiture of any Property or assets or any actual or constructive total loss or
an agreed or compromised total loss 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; and (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); and (c) the Company
delivers to the Trustee an Officers' Certificate certifying that such Asset Sale
complies with clauses (a) and (b); provided, however that any Asset Sale
pursuant to a condemnation, appropriation or other similar taking, including by
deed in lieu of condemnation, or pursuant to the foreclosure or other
enforcement of a Permitted Lien or exercise by the related lienholder of rights
with respect thereto, including by deed or assignment in lieu of foreclosure
shall not be required to satisfy the conditions set forth in clauses (a) and (b)
of this sentence. 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
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within 365 days after the consummation of the relevant Asset Sale; provided,
further, however, that the amount of (A) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto) of the Company or any Subsidiary that are assumed by the transferee of
any such assets and (B) any notes or other obligations received by the Company
or any such Subsidiary from such transferee that are converted by the Company or
such Subsidiary into cash (to the extent of the case received) within 90 days of
such Asset Sale, shall be deemed to be cash for purposes of this provision.
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." When
the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall
within 30 days thereafter be required to make an offer to all Holders of Notes
and other Indebtedness that ranks by its terms pari passu in right of payment
with the Notes and the terms of which contain substantially similar requirements
with respect to the application of net proceeds from asset sales as are
contained in the Indenture (an "Asset Sale Offer") to purchase on a pro rata
basis the maximum principal amount of the Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. If the aggregate principal amount of
Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset to zero and the Company may use any remaining amount for general corporate
purposes. Pending the final application of any such Net Available Proceeds, the
Company may temporarily reduce Indebtedness under any Credit Facility or
otherwise invest such Net Available Proceeds in any manner that is not
prohibited by the Indenture.
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 an Asset Sale Offer is required under the
circumstances described herein.
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 such Subsidiary would have been permitted to enter into
such transaction under the covenants described in "-- Certain Covenants --
Limitation on Indebtedness" and "-- Certain Covenants -- Limitation on Liens,"
and "-- Certain Covenants -- Limitation on Subsidiary Indebtedness and Preferred
Stock."
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 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 Notes shall be secured equally
and ratably with (or prior to) the Indebtedness so secured for so long as such
obligations are so secured.
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 Notes; 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.
Unrestricted Subsidiaries. The Indenture provides that 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 "-- Certain Covenants -- Limitation on Indebtedness" and (ii) such
designation is at the time permitted under "-- Certain Covenants -- Limitation
on Restricted Payments."
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Notwithstanding any provisions of this covenant all subsidiaries of an
Unrestricted Subsidiary will be Unrestricted Subsidiaries.
The Indenture further provides that 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 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 "-- Certain Covenants
- -- Limitation on Indebtedness" and (ii) no Default or Event of Default would
occur.
Subject to the preceding paragraphs, 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 the preceding paragraphs 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.
Limitations on Line of Business. The Indenture provides that neither the
Company nor 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.
Reports. The Indenture provides that, 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 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 Notes, as their names and addresses appear in the
applicable 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 covenant. The Company shall not be required
to file any report with the Commission if the Commission does not permit such
filing.
CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
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 Person), or
continue in a new 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 Person or (b)
the Person (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 Person, the "Surviving Entity"),
shall be a Person 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 Notes and the performance
of the Company's covenants and obligations under the Indenture;
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(ii) 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), 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 test described in the first sentence under the caption
"-- Certain Covenants -- Limitation on Indebtedness."
The provision of clause (iv) 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 or a Wholly Owned Subsidiary.
In connection with any consolidation, merger, transfer of assets or other
transactions contemplated by this provision, the Company shall deliver, or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, conveyance or transfer and
the supplemental indenture in respect thereto comply with the provisions of the
Indenture and that all conditions precedent in the Indenture relating to such
transactions have been complied with.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, the foregoing paragraphs, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture and the Notes with the
same effect as if such Surviving Entity had been named as the Company in the
Indenture; and when a Surviving Person duly assumes all of the obligations and
covenants of the Company pursuant to the Indenture and the Notes, except in the
case of a lease, the predecessor Person shall be relieved of all such
obligations.
EVENTS OF DEFAULT
Each of the following is an "Event of Default" under the Indenture:
(a) default in the payment of interest on any Note issued pursuant
to the 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 the principal of (or premium, if
any, on) any Note issued pursuant to the Indenture at its Maturity,
whether 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 Note as required;
(c) the Company fails to comply with any of its covenants or
agreements contained in "-- Change of Control," "-- Certain Covenants --
Limitation on Restricted Payments," "-- Certain Covenants -- Limitation
on Asset Sales," "-- Certain Covenants -- Limitation on Indebtedness,"
"-- Certain Covenants -- Limitations on Subsidiary Indebtedness and
Preferred Stock," "-- Certain Covenants -- Limitation on Sale and Lease-
back Transactions" or "-- Consolidation, Merger, Conveyance, Lease or
Transfer";
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(d) default in the performance, or breach, of any covenant or
warranty of the Company in the 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 60 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 Notes;
(e) Indebtedness of the Company or any Subsidiary (other than
Non-Recourse Indebtedness) 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 million;
(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 $10 million 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
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 Indenture).
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) above) occurs and is continuing, then and in every such case
the Trustee or the holders of not less than 25% of the outstanding aggregate
principal amount at Stated Maturity of the Notes, may declare the principal
amount at Stated Maturity, premium, if any,
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and any accrued and unpaid interest on all such Notes then outstanding to be
immediately due and payable by a notice in writing to the Company (and to the
Trustee if given by holders of such Notes), and upon any such declaration all
amounts payable in respect of the Notes will become and be immediately due and
payable. If any Event of Default specified in clause (g) or (h) above occurs,
the principal amount at Stated Maturity, premium, if any, and any accrued and
unpaid interest on the Notes 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 Notes. In the event of a declaration of acceleration because an
Event of Default set forth in clause (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 clause (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 Notes has been
obtained by the Trustee as provided in the Indenture. Under certain
circumstances, the holders of a majority in principal amount at Stated Maturity
of the outstanding Notes by notice to the Company and the Trustee may rescind an
acceleration and its consequences.
The holders of a majority in principal amount at Stated Maturity of the
Notes then outstanding by notice to the Trustee may waive an existing Default
and its consequences under the Indenture except (a) a Default in the payment of
interest on, or the principal of, such Notes or (b) a Default in respect of a
provision that under the "Defeasance and Discharge" section of the Indenture
cannot be amended without the consent of each holder of Notes affected. Subject
to the provisions of the Indenture relating to the duties of the Trustee, the
Trustee is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the holders, unless such
holders have offered to such Trustee reasonable security or indemnity. Subject
to the provisions of the Indenture and applicable law, the holders of a majority
in aggregate principal amount at Stated Maturity of the Notes at the time
outstanding have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required within five
Business Days after becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement describing such Default or Event of Default,
its status and what action the Company is taking or proposes to take with
respect thereto.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Company, the Subsidiaries or the Unrestricted Subsidiaries, as such, shall have
any liability for any obligations of the Company under the Notes, the Guarantees
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Securities and Exchange Commission that such a waiver is against public policy.
AMENDMENT, SUPPLEMENT AND WAIVER
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 to the Indenture (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 Notes and 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 Notes in addition to or in place of certificated
Notes, (e) to evidence and provide for the acceptance of appointment under the
Indenture by the successor Trustee, (f) to secure the Notes 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 provisions 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.
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With the consent of the holders of not less than a majority in principal
amount at Stated Maturity of the outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer for the Notes), the Company,
the Guarantors and the Trustee may enter into one or more indentures
supplemental to the Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of the holders; provided, however, that no
such supplemental indenture will, without the consent of the holder of each
outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, or reduce the
principal amount thereof (or premium, if any), or the interest thereon that
would be due and payable upon Maturity thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof, (b) reduce the
percentage in principal amount at Stated Maturity of the Outstanding Notes, the
consent of whose Holders is necessary for any such supplemental indenture or
required for any waiver of compliance with certain provisions of the Indenture,
or certain Defaults thereunder, (c) modify the Obligations of the Company to
make offers to purchase Notes upon a Change of Control or from the proceeds of
Asset Sales, (d) subordinate in right of payment, or otherwise subordinate, the
Notes or the Guarantees to any other Indebtedness, (e) amend, supplement or
otherwise modify the provisions of the Indenture relating to Guarantees or (f)
modify any of the provisions of this paragraph (except to increase any
percentage set forth herein or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holders of
each outstanding Note affected thereby).
The holders of not less than a majority in principal amount at Stated
Maturity of the outstanding Notes may, by notice to the Trustee, waive an
existing Default under the Indenture and its consequences, except a Default or
Event of Default (a) in the payment of the principal of or interest on any Note
or (b) in respect of a covenant or provision hereof which under the proviso to
the prior paragraph cannot be modified or amended without the consent of the
holder of each outstanding Note affected.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Company may terminate its obligations and the obligations of the
Guarantors under the Notes, the Indenture, and the Guarantees when (i) either
(A) all outstanding Notes have been delivered to the Trustee for cancellation or
(B) all such Notes not therefore delivered to the Trustee for cancellation have
become due and payable, will become due and payable within one year or are to be
called for redemption within one year under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name and at the expense of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of
(premium, if any, on) and interest to the date of deposit or Maturity or date of
redemption; (ii) the Company has paid or caused to be paid all sums then due and
payable by the Company under the Indenture; and (iii) the Company has delivered
an Officers' Certificate and an opinion of counsel relating to compliance with
the conditions set forth in the Indenture.
The Company, at its election, shall (a) be deemed to have paid and
discharged its debt on the Notes and the Indenture and Guarantees shall cease to
be of further effect as to all outstanding Notes (except as to (i) rights of
registration of transfer, substitution and exchange of Notes, (ii) the Company's
right of optional redemption, (iii) rights of holders to receive payments of
principal of, premium, if any, and interest on the Notes (but not the Change of
Control Purchase Price or the Asset Sale Offer Purchase Price) and any rights of
the holders with respect to such amounts, (iv) the rights, obligations and
immunities of the Trustee under the Indenture, and (v) certain other specified
provisions in the Indenture) or (b) cease to be under any obligation to comply
with certain restrictive covenants that are described in the Indenture, after
the irrevocable deposit by the Company with the Trustee, in trust for the
benefit of the holders, at any time prior to the Stated Maturity of the Notes,
of (A) money in an amount, (B) U.S. Government Obligations which through the
payment of interest and principal will provide, not later than one day before
the due date of payment in respect of such Notes, money in an amount, or (C) a
combination thereof sufficient to pay and discharge the principal of, premium,
if any on, and interest on, such Notes then outstanding on the dates on which
any such payments are due in accordance with the terms of the Indenture and of
such Notes. Such defeasance or covenant defeasance shall be deemed to occur only
if certain conditions are satisfied, including, among other things, delivery by
the Company to the
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Trustee of an opinion of outside counsel acceptable to the Trustee to the effect
that (i) such deposit, defeasance and discharge will not be deemed, or result
in, a taxable event for federal income tax purposes with respect to the holders;
and (ii) the Company's deposit will not result in the trust or such Trustee
being subject to regulation under the Investment Company Act of 1940.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any capitalized terms used herein for which no definition
is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (a)
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, and (b) Indebtedness existing and secured by an asset
acquired by such specified Person but not incurred in contemplation of such
acquisition.
"Adjusted Net Assets" of a Guarantor at any date shall mean the amount by
which the fair value of the properties and assets 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.
"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
Subsidiary, in one transaction, or a series of related transactions, of (i) any
Capital Stock of any Subsidiary (except for directors' qualifying shares or
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, (C) a Restricted
Payment or Restricted Investment permitted under "-- Certain Covenants --
Limitation on Restricted Payments," (D) a Change of Control, (E) a sale, lease,
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 provision of the Indenture described in "-- Consolidation,
Merger, Conveyance, Lease or Transfer," (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 having a Fair Market Value in excess of $10
million 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 and (G) any
transfer of assets pursuant
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to a Permitted Investment. 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.
"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 Notes, compounded annually) of the total
obligations of the lessee for rental payments (other than amounts required to be
paid on account of property taxes, maintenance, repairs, insurance, assessments,
utilities, operating and labor costs and other items which do not constitute
payments for property rights) during the remaining term of the lease (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 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.
"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,
membership 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).
"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.
"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 lesser of the
aggregate amount of EBITDA of the Company and its consolidated Subsidiaries for
either (a) the four fiscal quarters immediately prior to the applicable
Transaction Date for which financial information in respect thereof is available
or (b) the immediately preceding fiscal quarter for which financial information
in respect thereof is available multiplied by four (the period yielding such
lesser amount shall be 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
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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, 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 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 Determination
Period referred to in clause (i) of this definition, and if, during the same
Determination Period, (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 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
one, 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
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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, (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) and (ix) the cumulative effect of any changes
in accounting principles.
"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) on a consolidated basis at such date, less amounts
attributable to Redeemable Stock of such Person or any of its subsidiaries with
each item determined in accordance with GAAP.
"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.
"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.
"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 sum of,
without duplication, the amounts for such period, taken as a single accounting
period, of 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 and (vi) any other non-cash charges and minus, to the extent
reflected in such income statement, any non-cash credits that had the effect of
increasing Consolidated Net Income of such Person for such period.
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"Fair Market Value" means, with respect to consideration or other amount
received or to be received pursuant to any transaction by any Person, the fair
market value of such consideration or other amount 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 the Indenture shall utilize GAAP in effect at the
Issue Date.
"Guarantee" means any guarantee of the Notes by any Guarantor in
accordance with the provisions described under "-- Guarantees of Notes."
"Guarantor" means each Subsidiary of the Company that is required to
guarantee the Company's Obligations under the Notes and the Indenture as
described in "-- Guarantees of Notes" 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 Notes and the Indenture.
"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,
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, excluding accounts payable and
accrued liabilities arising in the ordinary course of business; (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 and accrued liabilities arising
in respect of Property and services purchased in the ordinary course of
business; (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; (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 described in clauses (i)
through (viii); (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 amount of any Interest Swap Obligation or Currency
Hedge Obligation of such Person at the time of determination; and (xii) any
obligation under a bond, note, payment guarantee or similar instrument 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
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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 Supplement; 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.
"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
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 paid by such Person, and minus
the amount of any portion of such Investment repaid or loaned to such Person 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 Notes are first authenticated
and delivered under the Indenture.
"Joint Venture" means any Person (other than a Guarantor) designated as
such by a resolution of the Board of Directors 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 ten 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 by the
"Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries"
covenant 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).
"Loan Agreements" means the Term Loan, the Revolving Loan and the Top
Drive Notes.
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"Maturity" means the date on which the principal of a Note becomes due
and payable as provided therein or in the Indenture, whether at the Stated
Maturity or the Change of Control Payment Date or purchase date established
pursuant to the terms of the Indenture for an Asset Sale Offer or by declaration
of acceleration, call for redemption or otherwise.
"Net Available Proceeds" means, as to any Asset Sale, the Cash Proceeds
therefrom, net of all legal and title expenses, commissions and other fees and
expenses incurred (including, without limitation, fees and expenses of legal
counsel and accountants and fees, expenses, discounts or commissions of
underwriters, placement agents and investment bankers), and all Federal, state,
foreign, recording and local taxes payable or provided for 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 net of appropriate amounts to be provided by the Company or any
Subsidiary of the Company, as the case may be, as a reserve required in
accordance with GAAP against any liabilities associated with such Asset Sale and
retained by the Company or any Subsidiary of the Company, as the case may be,
after such Asset Sale including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"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 constituting 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 the Indenture.
"Permitted Holders" means the parties to the Stockholders and Voting
Agreement.
"Permitted Indebtedness" means (a) Indebtedness of the Company under the
Notes; (b) Indebtedness under the Loan Agreements; (c) Indebtedness (and any
guarantee thereof) under one or more credit or revolving Loan Agreements with a
bank or syndicate of banks or financial institutions or other lenders, as such
may be amended, modified, revised, extended, replaced, or refunded from time to
time, provided that at the date such Indebtedness is incurred and after giving
effect to the incurrence of such Indebtedness, the aggregate amount of all
Indebtedness outstanding at such time under this clause (c) shall not exceed $50
million, 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 Loan Agreement) under such Loan Agreements as contemplated by the
"Limitation on Asset Sales" covenant; (d) Indebtedness of the Company or any
Subsidiary under
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Interest Swap Obligations, provided that (i) such Interest Swap Obligations are
related to payment obligations on Indebtedness otherwise permitted under the
covenants described in "-- Certain Covenants -- Limitation on Indebtedness" 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; (e) 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
covenants described in "-- Certain Covenants -- Limitation on Indebtedness" 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; (f) Indebtedness of the Company or any
Subsidiary outstanding on the Issue Date; (g) the Guarantees of the Notes (and
any assumption of the Obligations guaranteed thereby); (h) 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; (i) 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 and shall be treated as an incurrence for purposes
of the "Limitation on Indebtedness" covenants 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; (j) Subordinated Indebtedness of the
Company to an Unrestricted Subsidiary; (k) Indebtedness of the Company and its
Subsidiaries in connection with a purchase of the Notes 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
Notes 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 Notes and (B) does not mature prior to one year
following the Stated Maturity of the Notes; (l) Permitted Refinancing
Indebtedness; (m) Permitted Subsidiary Refinancing Indebtedness; and (n)
additional Indebtedness in an aggregate principal amount not in excess of $5.0
million 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 the Indenture of, or obligations
permitted to be incurred pursuant to the Indenture in respect of letters of
credit supporting, Indebtedness otherwise included in the determination of such
amount shall not also be included. For purposes of determining compliance with
the covenant captioned "-- Limitation on Indebtedness," in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness or is entitled to be incurred pursuant to the first
paragraph of such covenant, the Company shall, in its sole discretion, classify
such item of Indebtedness in any manner that complies with this covenant and
such item of Indebtedness will be treated as having been incurred pursuant to
only one of such clauses or pursuant to the first paragraph of such covenant.
"Permitted Investments" means (a) certificates of deposit, bankers
acceptances, time deposits, Eurocurrency deposits and similar types of
Investments routinely offered by commercial banks 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 million; (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 or 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 million; (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 the covenant described in "-- Certain Covenants
- -- Limitation on Asset Sales"; (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
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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 or otherwise in the Company's reasonable credit judgment; (k)
certificates of deposit, bankers acceptances, time deposits, Eurocurrency
deposits and similar types of Investments routinely offered by commercial banks
organized in the United States with final maturities of one year or less and in
an aggregate amount not to exceed $5 million at any one time outstanding with a
commercial bank organized in the United States having capital and surplus in
excess of $75 million; (l) Interest Swap Obligations with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture to be
outstanding; (m) Currency Hedge Obligations, provided that such Currency Hedge
Obligations constitute Permitted Indebtedness permitted by clause (d) of the
definition thereof, (n) 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 (o)
Investments pursuant to any agreement or obligation of the Company or any
Subsidiary in effect on the Issue Date and listed on a schedule attached to the
Indenture.
"Permitted Liens" means (a) Liens in existence on the Issue Date; (b)
Liens created for the benefit of the Notes 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 or tender bonds
or leases 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 (1) 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 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 180 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 (1) the outstanding secured
Indebtedness of the Company and its 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 million 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; (1) any charter or lease; (m) leases or
subleases of real property to other Persons; (n) Liens securing Permitted
Indebtedness described in clause (c) 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; (q) liens in favor of the Company; (r) other deposits made to secure
liability to insurance
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carriers under insurance or self insurance arrangements; (s) Liens securing
reimbursement obligations under letters of credit, provided in each case that
such Liens cover only the title documents and related goods (and any proceeds
thereof) covered by the related letter of credit and (t) Liens or equitable
encumbrances deemed to exist by reason of a negative pledge or other agreements
to refrain from permitting Liens.
"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 Notes, 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 Notes 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 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, limited liability company,
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.
"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.
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"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 (other than on Form S-8) or any
private placement of Capital Stock (other than Redeemable Stock) of the Company
which offering or placement is consummated after the Issue Date.
"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 Notes or is exchangeable into Indebtedness of such Person
or any of its subsidiaries.
"Related Business" means the contract drilling business and activities
incidental thereto and any business related, complimentary 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.
"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 Notes or the
Guarantees, as applicable; or (iii) make any Restricted Investment in any
Person.
"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.
"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 Notes, 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 the
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.
"Stated Maturity" when used with respect to a Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note 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 Notes or the
Guarantees, as the case may be, and does not mature prior to the Stated Maturity
of the Notes.
"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 of such Person,
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or by such Person and one or more other subsidiaries of such Person, (ii) any
general partnership, limited liability company, joint venture or similar entity,
more than 50% of the outstanding partnership, membership 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 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. For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
"Subsidiary" means a subsidiary of the Company other than an
Unrestricted Subsidiary.
"Transaction Date" has the meaning specified within the definition of
Consolidated Interest Coverage Ratio.
"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.
"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 the 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.
"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.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes will initially be issued in the form of one or more
Global Notes (the "Global Notes"). The Global Notes will be deposited on the
date of the closing of the sale of the Notes offered hereby (the "Closing Date")
with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee
for DTC. Transfer of beneficial interests in any Global Notes will be subject to
the applicable rules and procedures of DTC and its Direct or Indirect
Participants (including, if applicable, those of Euroclear and Cedel), which may
change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be exchanged
for Notes in certificated form in certain limited circumstances. See "--
Transfer of Interests in Global Notes for Certificated Notes."
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Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and Cedel. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect, custodial relationship with
a Direct Participant (collectively, the "Indirect Participants").
DTC has advised the Company that, pursuant to DTC's procedures, (i) upon
deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes allocated by the Initial Purchasers to such Direct
Participants, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global Notes and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global Notes. Direct Participants and Indirect Participants must maintain their
own records of the ownership interests of, and the transfer of ownership
interests by and between, Indirect Participants and other owners of beneficial
interests in the Global Notes.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in a
Global Note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons or entities that are not Direct Participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Notes see "-- Transfers of Interests
in Global Notes for Certificated Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFER OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Company, the Guarantors and the
Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, if any, and interest on Global
Notes registered in the name of DTC or its nominee will be payable by the
Trustee to DTC or its nominee as the registered holder under the Indenture.
Consequently, neither the Company, the Trustee nor any agent of the Company, or
the Trustee has or will leave any responsibility or liability for (i) any aspect
of DTC's records or any Direct Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Notes or for maintaining, supervising or reviewing any of DTC's records
or any Direct Participant's or Indirect Participant's records relating to the
beneficial ownership interests in any Global Note or (ii) any other matter
relating to the actions and practices of DTC or any of its Direct Participants
or Indirect Participants.
DTC has advised the Company that its current payment practice (for
payments of principal, interest and the like) with respect to securities such as
the Notes is to credit the accounts of the relevant Direct Participants with
such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be
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the responsibility of DTC, the Trustee, the Company or the Guarantors. Neither
the Company, the Guarantors nor the Trustee will be liable for any delay by DTC
or its Direct Participants or Indirect Participants in identifying the
beneficial owners of the Notes and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
as the registered owner of the Notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System
and, therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the Notes through Euroclear or Cedel) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interest in the Notes through Euroclear and Cedel will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose accounts interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its Direct Participants) for legended Notes in certificated form, and to
distribute such certificated forms of Notes to its Direct Participants. See "--
Transfers of Interests in Global Notes for Certificated Notes."
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Notes in
registered, certificated form without interest coupons ("Certificated Notes") if
(i) DTC (x) notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes and the Company thereupon fails to appoint a
successor depositary within 90 days or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Certificated Notes or
(iii) there shall have occurred and be continuing a Default or an Event of
Default with respect to the Notes. In any such case, the Company will notify the
Trustee in writing that, upon surrender by the Direct and Indirect Participants
of their interest in such Global Note, Certificated Notes will be issued to each
person that such Direct and Indirect Participants and the DTC identify as being
the beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct and Indirect Participants (in accordance with DTC's
customary procedures).
None of the Company, the Guarantors or the Trustee will be liable for any
delay by the holder of the Notes or the DTC in identifying the beneficial owners
of Notes, and the Company, the Guarantors and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of the
Global Note or the DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented
by the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
same day funds to the accounts specified by the holder of interests in such
Global Note. With respect to Certificated Notes, the Company will make all
payments of principal, premium, if any, interest and Liquidated Damages, if any,
by
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wire transfer of immediately available same day funds to the accounts specified
by the holders thereof or, if no such account is specified, by mailing a check
to each such holder's registered address. The Company expects that secondary
trading in the Certificated Notes will also be settled in immediately available
funds.
CERTAIN U.S. FEDERAL TAX CONSEQUENCES TO U.S. HOLDERS
The following summary describes all material United States federal income
tax consequences for holders of the Exchange Notes who are subject to U.S. net
income tax with respect to the Exchange Notes ("U.S. persons") and who will hold
the Exchange Notes as capital assets. There can be no assurance that the U.S.
Internal Revenue Service (the "IRS") will take a similar view of the purchase,
ownership or disposition of the Exchange Notes. This summary is based upon the
Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial
decisions now in effect, all of which are subject to change. It does not include
any discussion of the tax laws of any state, local or foreign governments or any
estate or gift tax considerations that may be applicable to the Exchange Notes
or holders thereof; nor does it discuss all aspects of U.S. federal income
taxation that may be relevant to a particular investor under his particular
circumstances or to investors subject to special treatment under the U.S.
federal income tax laws (for example, dealers in securities or currencies, S
corporations, life insurance companies, tax-exempt organizations, taxpayers
subject to the alternative minimum tax and non-U.S. persons) and also does not
discuss Exchange Notes held as a hedge against currency risks or as part of a
straddle with other investments or as part of a "synthetic security" or other
integrated investment (including a "conversion transaction") comprising an
Exchange Note and one or more other investments, or situations in which the
functional currency of the holders is not the U.S.
dollar.
Holders of Old Notes contemplating acceptance of the Exchange Offer
should consult their tax advisors with respect to their particular circumstances
and with respect to the effects of state, local or foreign tax laws to which
they may be subject.
EXCHANGE OF NOTES
The exchange of Old Notes for Exchange Notes should not be a taxable
event to holders for federal income tax purposes. The exchange of Old Notes for
the Exchange Notes pursuant to the Exchange Offer should not be treated as an
"exchange" for federal income tax purposes, because the Exchange Notes should
not be considered to differ materially in kind or extent from the Old Notes.
Accordingly, the Exchange Notes should have the same issue price as the Old
Notes, and a holder should have the same adjusted basis and holding period in
the Exchange Notes as it had in the Old Notes immediately before the exchange.
INTEREST ON EXCHANGE NOTES
For U.S. federal income tax purposes, a holder of an Exchange Note will
be required to report as ordinary income any interest earned on the Exchange
Note in accordance with the holder's method of tax accounting.
DISPOSITION OF EXCHANGE NOTES
A holder's tax basis in an Exchange Note generally will be the holder's
purchase price for the Old Note. Upon the sale, exchange, redemption, retirement
or other disposition of an Exchange Note, a holder will recognize gain or loss
equal to the difference (if any) between the amount realized and the holder's
tax basis in the Exchange Note. Such gain or loss will be long-term capital gain
or loss if the Exchange Note has been held for more than one year and otherwise
will be short-term capital gain or loss (with certain exceptions to the
characterization as capital gain if the Exchange Note was acquired at a market
discount).
BACKUP WITHHOLDING
A holder of an Exchange Note may be subject to backup withholding at the
rate of 31% with respect to interest paid on the Exchange Note and proceeds from
the sale, exchange, redemption or retirement of the Exchange Note,
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unless such holder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates that fact or (b) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A holder of an Exchange Note who does not provide the Company
with his correct taxpayer identification number may be subject to penalties
imposed by the IRS.
A holder of an Exchange Note who is not a U.S. person generally will be
exempt from backup withholding and information reporting requirements, but may
be required to comply with certification and identification procedures in order
to obtain an exemption from backup withholding and information reporting.
Any amount paid as backup withholding is not additional tax, but instead
will be creditable against the holder's U.S. federal income tax liability.
CERTAIN U.S. FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS
The following summary describes certain United States federal income and
estate tax consequences of the ownership of Notes as of the date hereof. It
deals only with Notes held as capital assets by Non-United States Holders. As
used herein, the term "Non-United States Holder" means any person or entity that
is, as to the United States, a foreign corporation, a nonresident alien
individual, a nonresident fiduciary of a foreign estate or trust or a foreign
partnership one or more of the members of which is, as to the United States, a
foreign corporation, a nonresident alien individual or a nonresident fiduciary
of a foreign estate or trust.
THE DISCUSSION SET FORTH BELOW IS BASED UPON THE PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND REGULATIONS, RULINGS
AND JUDICIAL DECISIONS THEREUNDER AS OF THE DATE HEREOF. SUCH AUTHORITIES MAY BE
REPEALED, REVOKED OR MODIFIED SO AS TO RESULT IN FEDERAL INCOME TAX CONSEQUENCES
DIFFERENT FROM THOSE DISCUSSED BELOW. FURTHERMORE, THIS SUMMARY DOES NOT DISCUSS
ANY ASPECT OF STATE, LOCAL OR FOREIGN TAXATION. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
INTEREST INCOME
Under present United States federal income tax law, and subject to the
discussion below concerning backup withholding, under the "portfolio interest"
exception no withholding of United States federal income tax will be required
with respect to the payment by the Company or any paying agent of principal or
interest on a Note owned by a Non-United States Holder, provided (i) that the
beneficial owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (ii) the beneficial owner is not a controlled foreign corporation that is
related to the Company through stock ownership, (iii) the beneficial owner is
not a bank whose receipt of interest on a Note is described in section 881(c)
(3) (A) of the Code and (iv) the beneficial owner satisfies the statement
requirement (described generally below) set forth in section 871(h) and section
881(c) of the Code and the regulations thereunder.
To satisfy the requirement referred to in (iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a United States person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an Internal Revenue Service ("IRS") Form W-8 (or successor form)) or (2)
a financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (iv) above may also be satisfied with other documentary evidence
for interest paid after December 31, 2000, with respect to an offshore account
or through certain foreign intermediaries.
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If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described above, payments of interest made to
such Non-United States Holder will be subject to a 30% withholding tax (or such
lower rate as may be provided by an applicable income tax treaty between the
United States and a foreign country) unless the beneficial owner of the Note
provides the Company or its paying agent, as the case may be, with a properly
executed (1) IRS Form 1001 (or successor form) claiming an exemption from
withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or successor
form) stating that interest paid on the Note is not subject to withholding tax
because it is effectively connected with the beneficial owner's conduct of a
trade or business in the United States. Under the Final Regulations, which are
to be effective after December 31, 2000, Non-United States Holders will
generally be required to provide IRS Form W-8 in lieu of IRS Form 1001 and IRS
Form 4224, although alternative documentation may be applicable in certain
situations.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest on the Note is effectively connected with the conduct
of such trade or business, the Non-United States Holder, although exempt from
the withholding tax discussed above (provided the Non-United States Holder files
the appropriate certification with the Company or its agent), will be subject to
United States federal income tax on such interest on a net income basis in the
same manner as if it were a United States person. In addition, if such holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, such premium, if any, and interest on a Note will
be included in such foreign corporation's earnings and profits.
DISPOSITION OF EXCHANGE NOTES
Non-U.S. Holders generally will not be subject to U.S. federal income
taxation on gain recognized on a disposition of Exchange Notes so long as (i)
the gain is not effectively connected with the conduct by the Non-U.S. Holder of
a trade or business within the United States and (ii) in the case of a Non- U.S.
Holder who is an individual, either such holder is not present in the United
States for 183 days or more in the taxable year of disposition or such holder
does not (a) have a "tax home" (within the meaning of section 911(d)(3) of the
Code) in the United States or (b) maintain an office or fixed place of business
in the United States to which the gain is attributable.
FEDERAL ESTATE TAXES
An Exchange Note held by an individual who, at the time of death, is not
a citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the U.S. federal estate tax as a
result of such individual's death if the individual does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote and if, at the time of the individual's
death, payments with respect to such Exchange Note would not have been
effectively connected with the conduct by such individual of a trade or business
in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
No information reporting or backup withholding tax (which is imposed at
the rate of 31% on certain payments to persons who fail to furnish the
information required under United States information reporting requirements)
will be required with respect to payments made by the Company or any paying
agent to Non-United States Holders if the statement described in (iv) under
"Interest Income" has been received and the payor does not have actual knowledge
that the beneficial owner is a United States person.
In addition, backup withholding and information reporting generally will
not apply if payments of the principal or interest on an Exchange Note are paid
or collected by a foreign office of a custodian, nominee or other foreign agent
on behalf of the beneficial owner of such Exchange Note, or if a foreign office
of a broker (as defined in applicable Treasury regulations) pays the proceeds of
the sale of an Exhange Note to the owner thereof. If, however, such nominee,
custodian, agent or broker is, for United States federal income tax purposes, a
United States person, or a foreign person with certain specified relationships
to the United States, such payments will not be subject to backup withholding
but will be subject to information reporting, unless (1) such custodian,
nominee, agent or broker has documentary evidence
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in its records that the beneficial owner is not a United States person and
certain other conditions are met or (2) the beneficial owner otherwise
establishes an exemption.
Payments of principal or interest on an Exchange Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment of the United States office of a broker of the proceeds of
sale of an Exchange Note, will be subject to both backup withholding and
information reporting unless the beneficial owner provides the statement
referred to in (iv) above and the payor does not have actual knowledge that the
beneficial owner is a United States person or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
DESCRIPTION OF CERTAIN INDEBTEDNESS
TERM LOAN
Bayard and its wholly owned subsidiary Trend, as co-borrowers, had
outstanding at March 31, 1998 $25.5 million of long term debt under the Term
Loan which was issued pursuant to a term loan agreement (the "Term Loan
Agreement") with CIT and Fleet (the "Term Loan Lenders"). The Term Loan was
incurred to finance the purchase of certain land drilling rigs, the
refurbishment of such rigs and equipment and for working capital purposes. On
May 14, 1998, in connection with the reorganization of its corporate structure,
(i) the Company prepaid $6.2 million of the Term Loan, obtained a release of all
collateral for the Term Loan, except 12 drilling rigs and related equipment, and
transferred to Bayard Drilling substantially all of its assets, subject to such
liens, and (ii) Bayard Drilling and Bayard LLC agreed to guarantee the Term
Loan. Prior to such prepayment and collateral release, the Term Loan was secured
by substantially all of the assets of Bayard and Trend. At June 15, 1998, $18.2
million of the Term Loan was outstanding. In connection with the issuance of
the Old Notes, the Company and the Term Loan Lenders further amended the Term
Loan and added Bonray as a guarantor of the Company's obligations.
The Term Loan Agreement requires the Company and its subsidiaries to
maintain collateral security for the Term Loan based on appraised fair market
value and orderly liquidation value of the Company's drilling rigs and
associated rig equipment equivalent to the balance of the Term Loan, and adhere
to specified cash flow, leverage and liquidity ratios and minimum net worth and
liquidity requirements. The Term Loan Agreement contains restrictions on, among
other things, the ability of the Company and its subsidiaries to pay dividends,
make investments, incur indebtedness and liens, and make capital expenditures
and requires the maintenance of liquidity of $3 million through December 31,
1998. The Term Loan Agreement also contains affirmative covenants typical of
secured loan arrangements with finance companies, such as requiring financial
reports, insurance maintenance, legal, environmental and permit compliance. The
Company is prohibited from prepaying the Term Loan until after December 31,
1999.
The Term Loan bears interest at the Company's choice of LIBOR plus 4.25%
per annum (10.00% at March 31, 1998) or the prime rate of The Chase Manhattan
Bank plus 2.00% per annum and requires equal monthly payments of principal,
together with accrued interest, in amounts sufficient to repay borrowings at
maturity on March 31, 2002.
REVOLVING LOAN
The Revolving Loan Agreement provides revolving credit loans, subject to
a borrowing base comprised of a portion of the co-borrowers' accounts
receivable, of up to $10 million ($2 million of which is available for letters
of credit) for general corporate purposes. The Company has not borrowed under
the Revolving Loan Agreement since November 1997 but has approximately $1.3
million of letters of credit outstanding thereunder. The Company believes that
it has adequate liquidity for its needs in the near term. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition and Liquidity."
Any borrowings under the Revolving Loan Agreement would bear interest at
Fleet National Bank's prime rate plus 1.5% per annum (approximately 10.5% at
March 31, 1998). The Company pays certain fees under the Revolving
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Loan Agreement, including a commitment fee equal to 0.5% of the unused portion
of the maximum commitment. Fleet's commitment to lend under the Revolving Loan
Agreement ends in April 2000. The Company may terminate the Revolving Loan
Agreement upon 60 days' prior written notice to Fleet and the payment of a
termination fee of 2% of the facility.
The Revolving Loan Agreement is secured by certain assets of Bayard and
Trend that were transferred to Bayard Drilling pursuant to the Company's
corporate reorganization, including accounts receivable, certain equipment and
inventory, the Company's El Reno, Oklahoma yard and the same 12 drilling rigs
that secure the Term Loan Agreement, together with equipment and drilling
contracts related to such rigs. The Revolving Loan Agreement is also secured by
the receivables and certain other assets of Bayard, Bayard Drilling, Bayard LLC,
Trend and Bonray. Until May 14, 1998, the Revolving Loan Agreement was also
secured by all drilling rigs of Bayard and Trend, upon which date Fleet released
all but such 12 rigs and related assets. Trend, Bonray, Bayard Drilling and
Bayard LLC have agreed to guarantee the obligations under the Revolving Loan
Agreement. The Revolving Loan Agreement contains customary restrictive covenants
that are substantially similar to the covenants contained in the Term Loan
Agreement.
OTHER INDEBTEDNESS
The Company also has issued the Top Drive Notes which consist of three
amortizing term notes totaling approximately $2.9 million outstanding at June
15, 1998. This debt bears interest of 9.5% per annum and is secured by certain
equipment (top drives) of the Company and letters of credit in amounts totaling
approximately $700,000. The debt represented by the Top Drive Notes matures in
July, October and November of 2000. The note agreement relating to the Top Drive
Notes does not contain any restrictive financial covenants but contains a cross
default to the Term Loan Agreement and the Revolving Loan Agreement.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000
shares of common stock, par value $0.01 per share, and 20,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"). As of May 28,
1998, 18,193,945 shares of Common Stock and no shares of Preferred Stock were
outstanding. The following summary is qualified in its entirety by reference to
the Restated Certificate of Incorporation of the Company (the "Certificate")and
the Amended and Restated Bylaws of the Company (the "Bylaws"), copies of which
are filed with the Commission as exhibits to the Registration Statement relating
to the Initial Public Offering.
COMMON STOCK
All outstanding shares of Common Stock are fully paid and nonassessable.
As of July 14, 1998, there were 18,193,945 shares of Common Stock outstanding
held of record by approximately 88 stockholders. The holders of Common Stock are
entitled to one vote for each share held on all matters submitted to a vote of
common stockholders of the Company. The Common Stock does not have cumulative
voting rights in the election of directors. Shares of Common Stock have no
preemptive rights, conversion rights, redemption rights or sinking fund
provisions. The Common Stock is not subject to redemption by the Company.
Subject to the rights of the holders of any class of capital stock of the
Company having any preference or priority over the Common Stock, the holders of
Common Stock are entitled to dividends in such amounts as may be declared by the
Board from time to time out of funds legally available for such payments and, in
the event of liquidation, to share ratably in any assets of the Company
remaining after payment in full of all creditors and provision for any
liquidation preferences on any outstanding preferred stock ranking prior to the
Common Stock.
PREFERRED STOCK
The Certificate authorizes the Board, subject to limitations prescribed
by law, to provide for the issuance of up to 20,000,000 shares of Preferred
Stock in one or more series. The Board is authorized to establish the number of
shares to be included in any such series and to fix the designations, powers,
preferences and rights of the shares of each such series, and any
qualifications, limitations or restrictions thereof.
The Company believes that the ability of the Board to issue one or more
series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise from time to time. The authorized shares of
Preferred Stock, as well as shares of Common Stock, will be available for
issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. If the approval of the Company's stockholders is not required for the
issuance of shares of Preferred Stock or Common Stock, the Board may determine
not to seek stockholder approval.
Although the Board has no intention at the present time of doing so, it
could issue a series of Preferred Stock that may, depending on the terms of such
series, hinder, delay or prevent the completion of a merger, tender offer or
other takeover attempt. Among other things, the Board could issue a series of
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquiror may be able to change the composition of the Board,
including a tender offer or other transaction that some, or a majority, of the
Company's stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
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CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Board consists of directors who are elected for one-year terms at
each annual meeting of stockholders. Stockholders may remove a director only for
cause. In general, the Board, not the stockholders, has the right to appoint
persons to fill vacancies on the Board.
The Certificate contains a "fair price" provision that requires the
affirmative vote of the holders of at least 80% of the Company's voting stock
and the affirmative vote of at least 66 2/3% of the Company's voting stock not
owned, directly or indirectly, by a Company Related Person (as hereinafter
defined) to approve any merger, consolidation, sale or lease of all or
substantially all of the Company's assets, or certain other transactions
involving a Company Related Person. For purposes of this fair price provision, a
"Company Related Person" is any person beneficially owning 10% or more of the
voting power of the outstanding capital stock of the Company who is a party to
the transaction at issue. The voting requirement is not applicable to certain
transactions, including those that are approved by the Company's Continuing
Directors (as defined in the Certificate) or that meet certain "fair price"
criteria contained in the Certificate.
The Certificate further provides that stockholders may act only at annual
or special meetings of stockholders and not by written consent, that special
meetings of stockholders may be called only by the Board, and that only business
proposed by the Board may be considered at special meetings of stockholders.
The Certificate also provides that the only business (including election
of directors) that may be considered at an annual meeting of stockholders, in
addition to business proposed (or persons nominated to be directors) by the
directors of the Company, is business proposed (or persons nominated to be
directors) by stockholders who comply with the notice and disclosure
requirements set forth in the Certificate. In general, the Certificate requires
that a stockholder give the Company notice of proposed business or nominations
no later than 60 days before the annual meeting of stockholders (meaning the
date on which the meeting is first scheduled and not postponements or
adjournments thereof) or (if later) ten days after the first public notice of
the annual meeting is sent to common stockholders. In general, the notice must
also contain information about the stockholder proposing the business or
nomination, his interest in the business, and (with respect to nominations for
director) information about the nominee of the nature ordinarily required to be
disclosed in public proxy solicitations. The stockholder also must submit a
notarized letter from each of his nominees stating the nominee's acceptance of
the nominations and indicating the nominee's intention to serve as director if
elected.
The Certificate also restricts the ability of stockholders to interfere
with the powers of the Board in certain specified ways, including the
constitution and composition of committees and the election and removal of
officers.
The Certificate provides that approval by the holders of at least 66 2/3%
of the outstanding voting stock of the Company is required to amend the
provisions of the Certificate discussed above and certain other provisions,
except that (i) approval by the holders of at least 80% of the outstanding
voting stock of the Company, together with approval by the holders of at least
66 2/3% of the outstanding voting stock not owned, directly or indirectly, by
the Company Related Person, is required to amend the fair price provisions and
(ii) approval of the holders of at least 80% of the outstanding voting stock is
required to amend the provisions prohibiting stockholders from acting by written
consent.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is a Delaware corporation and is subject to Section 203 of
the Delaware General Corporation Law (the "DGCL"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of the outstanding voting stock of the Company) from engaging in a
"business combination" (as defined in Section 203) with the Company for three
years following the date that person becomes an interested stockholder unless
(i) before that person became an interested stockholder, the Board approved the
transaction in which the interested stockholder became an interested stockholder
or approved the business combination, (ii) upon completion of the transaction
that resulted in the interested stockholder's becoming an interested
stockholder, the interested stockholder owns at least 85% of the Company's
voting stock outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the Company and by employee stock
plans that do not
115
<PAGE> 122
provide employees with the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer), or (iii)
following the transaction in which that person became an interested stockholder,
the business combination is approved by the Board and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the Company not owned by the interested
stockholder.
Under Section 203, these restrictions also do not apply to certain
business combinations proposed by an interested stockholder following the
announcement or notification of one of certain extraordinary transactions
involving the Company and a person who was not an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of a majority of the Company's directors, if that extraordinary
transaction is approved or not opposed by a majority of the directors who were
directors before any person became an interested stockholder in the previous
three years or who were recommended for election or elected to succeed such
directors by a majority of such directors then in office.
LIABILITY OF DIRECTORS; INDEMNIFICATION
The Certificate provides, as authorized by Section 102(b)(7) of the DGCL,
that a director of the Company will not be personally liable to the Company or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director involving any act or omission of any such director, except that such
provisions do not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
as it now exists or hereafter may be amended, or (iv) for any transaction from
which the director derived an improper personal benefit. The Certificate also
provides that if the DGCL is amended after the date of filing of the Certificate
to authorize corporate action further limiting or eliminating the personal
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability provided for already, shall be
limited to the fullest extent permitted by the DGCL as so amended. Any repeal or
modification of such provision in the Certificate by the stockholders of the
Company will be effective prospective only, and will not adversely affect any
limitation on the personal liability of a director of the Company existing at
the time of such repeal or modification.
The Certificate also provides for indemnification of directors to the
fullest extent permitted by the DGCL. Such indemnification may be available for
liabilities arising in connection with the Exchange Offer. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. Pursuant to its Certificate, the
Company may indemnify its officers, employees, agents and other persons to the
fullest extent permitted by the DGCL. The Company's Bylaws obligate the Company,
under certain circumstances, to advance expenses to its directors and officers
in defending an action, suit or proceeding for which indemnification may be
sought. The Company has entered into Indemnification Agreements with certain of
its directors and officers. See "Management--Indemnification Agreements."
The Company's Bylaws also provide that the Company shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or who, while a director,
officer, employee or agent, is or was serving as a director, officer, trustee,
general partner, employee or agent of one of the Company's subsidiaries or, at
the request of the Company, of any other organization, against any liability
asserted against such person or incurred by such person in any such capacity,
where the Company would have the power to indemnify such person against such
liability under the DGCL.
116
<PAGE> 123
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities (other than a resale of an unsold allotment from the original sale of
Old Notes). The Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such Exchange Notes for a period ending 180 days from
the Expiration Date. However, a Participating Broker- Dealer who intends to use
this Prospectus in connection with the resale of Exchange Notes received in
exchange for Old Notes pursuant to the Exchange Offer must notify the Company,
or cause the Company to be notified, on or prior to the Expiration Date, that it
is a Participating Broker-Dealer. Such notice may be given in the space provided
for that purpose in the Letter of Transmittal or may be delivered to the
Exchange Agent at one of the addresses set forth in the Letter of Transmittal.
See "The Exchange Offer -- Resales of Exchange Notes."
The Company will not receive any proceeds from the issuance of the
Exchange Notes offered hereby. Exchange Notes received by Participating
Broker-Dealers for their own accounts in connection with the Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any Participating Broker-Dealer that
resells Exchange Notes that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act, and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Baker & Botts, L.L.P., Dallas, Texas.
EXPERTS
The financial statements of the Company as of December 31, 1996 and for
each of the two years in the period ended December 31, 1996 included in this
Prospectus have been audited by Grant Thornton LLP, independent public
accountants, as stated in their reports thereon appearing elsewhere herein, and
are so included in reliance on such reports given upon the authority of that
firm as experts in auditing and accounting. The financial statements of the
Company as of December 31, 1997 and for the fiscal year then ended, included in
this Prospectus have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent public accountants, given upon the
authority of that firm as experts in auditing and accounting.
In preparation for its initial public offering, the Board appointed
PricewaterhouseCoopers LLP as auditors for the Company's financial statements
for the six months ended June 30, 1997, and for the year ending December 31,
1997. During the period Grant Thornton LLP was engaged by the Company and up to
and including March 7, 1997, the date of the PricewaterhouseCoopers LLP
engagement, there were no disagreements with Grant Thornton LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure and there were no "reportable events" as the term is defined
under the Securities Act. The audit reports previously issued by Grant
117
<PAGE> 124
Thornton LLP with respect to the Company's financial statements did not contain
an adverse opinion or a disclaimer of opinion, nor were such reports qualified
or modified as to uncertainty, audit scope or accounting principles.
118
<PAGE> 125
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF BAYARD DRILLING TECHNOLOGIES, INC.
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . F-2
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Balance Sheets as of December 31, 1996 and 1997, and March 31, 1998 . . . . . . . . . . . . . . . . F-4
Statements of Operations for the years ended December 31, 1995, 1996 and 1997, and three months
ended March 31, 1997 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Equity (Deficit) for the years ended December 31, 1995, 1996 and 1997 and three
months ended March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997, and three months
ended March 31, 1997 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
PRO FORMA CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23
Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 1997 . . . . . F-24
Unaudited Pro Forma Combined Statement of Operations for the three months ended March 31, 1998 . . F-25
Unaudited Pro Forma Combined Balance Sheet as of March 31, 1998 . . . . . . . . . . . . . . . . . . F-26
Notes to Unaudited Pro Forma Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . F-27
</TABLE>
F-1
<PAGE> 126
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Bayard Drilling Technologies, Inc.
We have audited the accompanying balance sheet of Bayard Drilling
Technologies, Inc. (Note A), as of December 31, 1996, and the related statements
of operations, equity (deficit), and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bayard Drilling
Technologies, Inc., as of December 31, 1996, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
January 20, 1997
F-2
<PAGE> 127
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bayard Drilling Technologies, Inc.
We have audited the accompanying balance sheet of Bayard Drilling
Technologies, Inc., as of December 31, 1997, and the related statements of
operations, equity, and cash flows for the year ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bayard Drilling
Technologies, Inc., as of December 31, 1997 and the results of its operations
and its cash flows for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
February 19, 1998
F-3
<PAGE> 128
BAYARD DRILLING TECHNOLOGIES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- ---------
1996 1997 1998
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash ....................................................... $ 4,963 $ 49,302 $ 27,738
Restricted investments ..................................... -- 880 524
Accounts receivable ........................................ 286 19,491 23,112
Accounts receivable--affiliate ............................. 798 -- --
Other current assets ....................................... 1 538 1,065
--------- --------- ---------
Total current assets ............................... 6,048 70,211 52,439
Property, plant and equipment, net ......................... 26,973 155,673 179,807
Goodwill, net of accumulated amortization of $375 at
December 31, 1997 and $593 at March 31, 1998 ............ -- 12,704 12,487
Other assets ............................................... 1,652 1,900 1,861
--------- --------- ---------
Total assets ....................................... $ 34,673 $ 240,488 $ 246,594
========= ========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................... $ 409 $ 8,246 $ 14,028
Accounts payable--affiliate ................................ 412 494 --
Accrued liabilities ........................................ 253 5,067 4,749
Current portion of long-term debt .......................... 947 7,450 7,450
--------- --------- ---------
Total current liabilities .......................... 2,021 21,257 26,227
--------- --------- ---------
Deferred income tax liabilities ............................ 348 13,554 14,848
--------- --------- ---------
Other long term liabilities ................................ -- 2,055 2,039
--------- --------- ---------
Long-term debt, less current maturities .................... 6,053 23,069 21,137
--------- --------- ---------
Subordinated notes, net of debt discount of $429 at
December 31, 1997 and $409 at March 31, 1998 ............ -- 2,091 2,111
--------- --------- ---------
Commitments and Contingencies--Note G, H & K
STOCKHOLDERS EQUITY:
Preferred stock, $0.01 par value, 20,000,000 shares
authorized; none issued or outstanding .................. -- -- --
Common stock, $0.01 par value, 100,000,000 shares
authorized; 5,600,000 shares issued and outstanding
at December 31, 1996; 18,183,945 at December 31,
1997; and at March 31, 1998 ............................. 56 182 182
Additional paid-in capital (net of deferred compensation
of $258 at December 31, 1997 and $245 at March 31,
1998) ................................................... 26,229 180,400 180,413
Accumulated deficit ........................................ (34) (2,120) (363)
--------- --------- ---------
Total equity ....................................... 26,251 178,462 180,232
--------- --------- ---------
Total liabilities and equity ....................... $ 34,673 $ 240,488 $ 246,594
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 129
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- -------------------------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Drilling ............................................. $ 5,491 $ 8,995 $ 39,165 $ 4,111 $ 23,962
Drilling--affiliate .................................. 1,914 798 16,582 -- --
Other ................................................ 303 60 -- -- --
--------- --------- --------- --------- ---------
Total revenues ............................... 7,708 9,853 55,747 4,111 23,962
--------- --------- --------- --------- ---------
COSTS AND EXPENSES:
Drilling ............................................. 6,075 7,653 40,705 3,047 17,221
General and administrative ........................... 880 658 1,868 195 755
Depreciation and amortization ........................ 791 1,126 7,943 876 3,169
Other ................................................ 47 46 -- -- --
--------- --------- --------- --------- ---------
Total costs and expenses ..................... 7,793 9,483 50,516 4,118 21,145
--------- --------- --------- --------- ---------
Operating income (loss) ...................... (85) 370 5,231 (7) 2,817
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense ..................................... (3) (11) (3,065) (145) (367)
Interest income ...................................... -- -- 597 17 496
Gain (loss) on sale of assets ........................ (131) 54 544 -- 52
Other ................................................ (3) 17 37 -- 34
--------- --------- --------- --------- ---------
Total other income (expense) ................. (137) 60 (1,887) (128) 215
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes and extraordinary
item ................................................. (222) 430 3,344 (135) 3,032
Income tax provision--deferred ......................... -- 17 1,428 51 1,275
--------- --------- --------- --------- ---------
Net income (loss) before extraordinary item ............ (222) 413 1,916 (84) 1,757
Extraordinary loss ..................................... -- -- (4,002) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) .................................... $ (222) $ 413 $ (2,086) $ (84) $ 1,757
========= ========= ========= ========= =========
EARNINGS (LOSS) PER SHARE:
Basic:
Before extraordinary item ......................... $ .21 $ (.01) $ .10
========= ========= =========
Extraordinary item ................................ $ (.44) -- --
========= ========= =========
Net earnings (loss) ............................... $ (.23) $ (.01) $ .10
========= ========= =========
Diluted: ............................................. --
=========
Before extraordinary item ......................... $ .17 $ (.01) $ .10
========= ========= =========
Extraordinary item ................................ $ (.35) -- --
========= ========= =========
Net earnings (loss) ............................... $ (.18) $ (.01) $ .10
========= ========= =========
Weighted average common shares outstanding, basic ...... 5,600 5,600 9,064 5,700 18,184
========= ========= ========= ========= =========
Weighted average common shares outstanding,
diluted .............................................. 5,600 5,749 11,500 8,191 18,488
========= ========= ========= ========= =========
PRO FORMA INFORMATION:
Additional income tax expense ........................ -- 146
--------- ---------
Pro forma net earnings (loss) ........................ $ (222) $ 267
--------- ---------
Pro forma earnings (loss) per share, basic and
diluted ........................................... $ (.04) $ .05
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 130
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
---------------------------------------------------------------
PARTNERS ADDITIONAL
CAPITAL COMMON PAID-IN DEFERRED RETAINED
(DEFICIT) STOCK CAPITAL COST EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 .............. $ (276) $ -- $ -- $ -- $ -- $ --
Net earnings through date of corporate
capitalization ....................... 447 -- -- -- -- --
Net increase in equity arising from
affiliate transactions ............... 5,285 -- -- -- -- --
Issuance of stock in corporate
capitalization ....................... (5,456) 20 5,436 -- -- 5,456
Sale of stock ........................... -- 20 9,980 -- -- 10,000
Issuance of stock options and warrants
for drilling agreements and debt ..... -- -- 1,319 -- -- 1,319
Issuance of stock and options for
property and equipment ............... -- 16 9,494 -- -- 9,510
Net loss from date of corporate
capitalization to December 31,
1996 ................................. -- -- -- -- (34) (34)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1996 .............. -- 56 26,229 -- (34) 26,251
Net loss ................................ -- -- -- -- (2,086) (2,086)
Issuance of stock options to
employees ............................ -- -- 60 (53) -- 7
Sale of stock ........................... -- 89 107,020 -- -- 107,109
Issuance of stock options and
warrants ............................. -- -- 5,068 -- -- 5,068
Executive compensation agreements ....... -- -- 250 (205) -- 45
Issuance of stock for acquisitions ...... -- 37 42,031 -- -- 42,068
--------- --------- --------- --------- --------- ---------
Balance at December 31, 1997 .............. -- 182 180,658 (258) (2,120) 178,462
Net income (unaudited) .................. -- -- -- -- 1,757 1,757
Executive compensation agreements
(unaudited) .......................... -- -- -- 13 -- 13
--------- --------- --------- --------- --------- ---------
Balance at March 31, 1998 (unaudited)...... $ -- $ 182 $ 180,658 $ (245) $ (363) $ 180,232
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 131
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- -----------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) .......................... $ (222) $ 413 $ (2,086) $ (84) $ 1,757
Adjustments to reconcile net earnings
(loss) to net cash (used in) provided by
operating activities-- .................... 791 1,126 7,943 876 3,169
Depreciation and amortization
(Gain) loss on sale of assets ............. 131 (54) (544) -- (52)
Extraordinary loss ........................ -- -- 4,002 -- --
Compensation expense ...................... -- -- 52 -- 13
Deferred income taxes ..................... -- 17 1,428 (51) 1,275
Change in assets and liabilities, net of
effects of affiliate transactions --
Decrease (increase) in accounts .............. 242 (2,059) (18,407) (2,157) (3,621)
receivable
Increase in prepaid expenses ................. -- -- (537) -- --
Decrease (increase) in other assets .......... (6) (185) 513 (733) (520)
Increase (decrease) in accrued
liabilities ............................... (237) 251 4,814 1,398 (318)
Increase (decrease) in accounts payable ...... (389) (383) 1,432 3,794 5,288
Increase (decrease) in other liabilities ..... -- -- -- -- (16)
Increase (decrease) in payable to
affiliate ................................. -- 412 82 -- --
--------- --------- --------- --------- ---------
Net cash (used in) provided by operating
activities ................................ 310 (462) (1,308) 3,043 6,975
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ........ (2,088) (10,578) (60,924) (13,711) (27,094)
Acquisition of businesses .................... -- -- (26,056) -- --
Proceeds from sale of assets ................. 378 137 1,390 -- 63
(Purchase) proceeds of investments ........... -- -- (880) (730) 355
--------- --------- --------- --------- ---------
Net cash used in investing
activities ......................... (1,710) (10,441) (86,470) (14,441) (26,676)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made to affiliates .................. (8,828) (19,719) -- -- --
Advances received from affiliates ............ 10,228 18,791 -- -- --
Proceeds from borrowings ..................... -- 7,000 49,780 8,700 --
Net proceeds from issuance of stock .......... -- 10,000 107,109 250 --
Debt issuance costs .......................... -- (206) (761) -- --
Payments on long-term debt ................... -- -- (24,011) (474) (1,863)
Payments under line of credit ................ -- -- (8,701) -- --
Borrowings under line of credit .............. -- -- 8,701 -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities .............................. 1,400 15,866 132,117 8,476 (1,863)
--------- --------- --------- --------- ---------
Net change in cash ........................... -- 4,963 44,339 (2,922) (21,564)
Cash at beginning of period .................. -- -- 4,963 4,963 49,302
--------- --------- --------- --------- ---------
Cash at end of period ........................ $ -- $ 4,963 $ 49,302 $ 2,041 $ 27,738
========= ========= ========= ========= =========
Cash paid during the period for interest ..... $ -- $ -- $ 2,854 $ -- $ 844
Cash paid during the period for income
taxes ..................................... $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= =========
</TABLE>
Continued
F-7
<PAGE> 132
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Continued
Supplemental noncash activity:
During 1995 an affiliate transferred drilling equipment to the Company at
the affiliate's basis totaling $173, net of accumulated depreciation of $1,306,
which has been reflected as an increase in payable to affiliate. Additionally,
the Company acquired property and equipment through trade payables totaling
$1,180.
During 1996 the Company acquired property and equipment totaling $9,841
through the issuance of stock and options and assumed a net deferred income tax
liability of $331. The Company acquired property and equipment through trade
payables and payables to affiliates totaling $1,390. The Company transferred
property and equipment totaling $29, net of accumulated depreciation of $1,254
to an affiliate which has been reflected as a decrease in payables to
affiliates. The Company issued stock options and warrants in exchange for
certain drilling agreements and debt. The stock options were valued at $1,100
and the warrants associated with the debt were valued at $219.
Additionally in 1996, the Company transferred the following assets and
liabilities to affiliates which resulted in a net increase in equity at the time
of corporate capitalization, effective December 1, 1996.
<TABLE>
<S> <C>
Accounts receivable ......................................... $ 2,667
Other assets ................................................ 17
Cash ........................................................ 9,252
Accounts payable and accrued liabilities .................... (1,799)
Payable to affiliates........................................ (15,422)
--------
$ (5,285)
========
</TABLE>
During 1997 the Company acquired property and equipment through the
issuance of stock and options for $41,510 and through the issuance of trade
payables of $6,405. See--Note "C" for further detail on such activity.
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 133
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR THE PERIODS ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED
NOTE A--NATURE OF OPERATIONS
Bayard Drilling Technologies, Inc. together with its predecessor, (the
"Company"), a Delaware corporation, is the successor to the drilling operations
of Anadarko Drilling Company ("Anadarko"), which began drilling operations in
1980. The Company provides land-based contract drilling services to major and
independent oil and gas companies in the Mid-Continent and Gulf Coast regions of
the United States.
Beginning in October 1996, AnSon Partners Limited Partnership ("APLP")
initiated a series of transactions among its wholly owned affiliates, Anadarko,
a partnership, and Bayard Drilling Company ("BDC"), a corporation, and the
Company. These series of transactions resulted in the corporate capitalization
of the Company in December 1996 with net assets, primarily drilling rigs,
previously owned by Anadarko. Such transactions were accounted for as a
reorganization of entities under common control.
NOTE B--SUMMARY OF ACCOUNTING POLICIES
The summary of significant accounting policies applied in the preparation
of the accompanying financial statements follows.
1. BASIS OF PRESENTATION AND CONSOLIDATION
The financial statements and information for periods prior to December 1,
1996 represent those of the predecessor. The consolidated financial statements
for periods after December 31, 1996 include the accounts of the Company and its
wholly owned subsidiaries, Trend Drilling Company ("Trend") and WD Equipment,
L.L.C. and Bonray Drilling Corporation. All significant intercompany accounts
and transactions have been eliminated.
2. CASH
The Company considers all cash and investments with an original maturity
of 90 days or less to be cash equivalents. The Company maintains its cash in a
bank deposit account which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. At December 31, 1997
and March 31, 1998, the Company had cash and cash equivalents in or at four
financial institutions, where the balance exceeded federally insured limits, in
total by approximately $48.9 and $27.3 million, respectively.
3. RESTRICTED INVESTMENTS
Restricted investments consist of certificates of deposits pledged to
state insurance departments and insurance companies to support payment of
workers compensation claims.
4. CONCENTRATION OF CREDIT RISK
The primary market for the Company's services are independent oil and gas
companies whose level of activities are related to, among other things, oil and
gas prices. The Company performs ongoing credit evaluations of its customers and
provides for potential credit losses when necessary. No allowance was required
at December 31, 1997, 1996 or 1995. At December 31, 1997 and March 31, 1998,
approximately 53% and 44%, respectively, of the Company's trade receivables and
over 63% and 52%, respectively, of total revenues were derived from the
Company's five largest customers in terms of total revenues.
F-9
<PAGE> 134
5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, reduced by provisions to
recognize economic impairment in value when management determines that such
impairment has occurred. Drilling equipment is depreciated using the declining
balance method (which approximates straight line) over the estimated useful
lives from five to fifteen years. Other property and equipment are depreciated
on the same basis over estimated useful lives from three to ten years.
Refurbishments and upgrades of drilling equipment are capitalized if such
expenditures are significant and extend the lives of the equipment. Maintenance
and repairs are expensed as incurred. When assets are sold, retired or disposed
of, the cost and related accumulated depreciation are eliminated from the
accounts and the gain or loss is recognized.
It is the Company's policy to capitalize interest on construction costs
for rig refurbishments during the period in which those costs are incurred. The
Company incurred interest costs of approximately $3.6 million during 1997 and
$859,000 for the three months ended March 31, 1998 of which approximately
$565,000 and $492,000, respectively, was capitalized in property and equipment
for rig construction. No interest costs were capitalized in 1996 or 1995.
6. REVENUE RECOGNITION
Revenues generated from the Company's dayrate drilling contracts are
recognized as services are performed and revenues generated from the Company's
footage drilling contracts are recognized as a percentage of completion. For all
drilling contracts under which the Company bears the risk of completion (such as
turnkey contracts) revenues and expenses are recognized using the completed
contracts method. When estimates of projected revenues and expenses indicate a
loss, the total estimated loss is accrued.
7. NET EARNINGS (LOSS) PER SHARE
Earnings per share are computed based on the weighted average number of
basic and diluted shares outstanding during the period pursuant to SFAS No. 128.
SFAS No. 128 simplifies the standards for computing earnings per share by
replacing the presentation of primary earnings per share with a presentation of
basic earnings per share and by simplifying the calculation of diluted earnings
per share. A reconciliation of the numerator and denominator used in the
calculation of earnings per share is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
-------------------------------------- ----------------------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Income before
extraordinary item ......... $ 1,916 $ 1,757
---------- ----------
Basic earnings per
share ...................... 1,916 9,064 $ .21 1,757 18,184 $ .10
---------- ---------- ----------
Effect of dilutive
securities; Warrants and
options .................... 2,436 304
---------- ----------
Diluted earnings per
share ...................... $ 1,916 11,500 $ .17 $ 1,757 18,488 $ .10
========== ========== ========== ========== ========== ==========
</TABLE>
Pro forma net earnings (loss) per share are presented to reflect the
provision for income taxes for periods Anadarko was a partnership.
Options to purchase 397,000 shares of common stock at $23 per share were
granted in November 1997 but were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares. The options, which expire on November
4, 2003, were still outstanding at December 31, 1997.
F-10
<PAGE> 135
8. INCOME TAXES
Historical income taxes were not provided in the financial statements for
earnings attributable to Anadarko since the partners would pay income taxes or
receive as a deduction their distributive share of Anadarko's taxable income or
loss. The proforma income tax expense for 1996 was calculated using an effective
tax rate of 38%.
The Company uses the liability method of accounting for deferred income
taxes under SFAS No. 109, whereby deferred tax assets and liabilities are
recognized based upon differences between the financial statement and tax bases
of assets and liabilities using presently enacted tax rates. If it is more
likely than not that some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized.
9. GOODWILL AND OTHER ASSETS
Goodwill related to the acquisition of Trend and Bonray is being
amortized over fifteen years. Amortization expense of goodwill of $375,062 and
$217,992, respectively, has been recognized as of December 31, 1997 and March
31, 1998.
Other assets consist of (i) organizational costs incurred for the
organization of Bayard and (ii) debt issuance costs incurred on the term loan.
Amortization expense for organization costs is recognized over five years and
debt issuance costs over the life of the loan, which approximates five years,
both on a straight-line basis. Amortization expense of $1.4 million, $63,000 and
$114,000 has been recognized for the years ended December 31, 1997 and 1996 and
for the three months ended March 31, 1998, respectively.
On an ongoing basis, management reviews the valuation and amortization of
goodwill and other intangibles to determine possible impairment. The
recoverability of these assets is assessed by determining whether the carrying
value can be recovered from undiscounted future cash flows.
10. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period; accordingly actual results could differ from those estimates.
The Company has significant estimates for workers compensation liability due to
the retention of $500,000 per occurrence. At December 31, 1997 and 1996 and for
the three months ended March 31, 1998, estimates for this retention were $1.7
million, $20,000 and $1.9 million, respectively.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and investments which
approximate fair value because of the short maturity of those instruments, a
payable to an affiliate which approximates fair value due to the demand nature
of this obligation, a floating rate term loan which approximates fair value
because the interest rate adjusts to the market rate, and notes payable which
approximate fair value because the interest rates on these notes reflects the
borrowing terms currently available to the Company.
12. INTERIM FINANCIAL STATEMENTS AND DISCLOSURES
In the opinion of management of Bayard Drilling Technologies, Inc.
("Bayard" or the "Company"), the unaudited interim financial statements for the
three months ended March 31, 1998 and 1997 include all adjustments, consisting
of normal recurring accruals, necessary to present fairly the Company's
financial position as of March 31, 1998 and results of operations and cash flows
for the three months ended March 31, 1998 and 1997. Results for the period ended
March 31, 1998 are not necessarily indicative of the results to be expected for
the entire fiscal year. For
F-11
<PAGE> 136
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
13. STOCK BASED COMPENSATION
The Company applies APB Opinion 25 in accounting for its stock option
plans. Under this standard, compensation expense is only recognized for grants
of options which include an exercise price less than the market price of the
stock on the date of grant. Accordingly, based on the Company's grants for 1996,
for the year ended December 31, 1997 and for the three months ended March 31,
1998, the Company recognized $0 and approximately $310,000 and $0, respectively,
of deferred compensation and $0 and approximately $52,000 and $13,000,
respectively, of compensation expense. For grants of options which include an
exercise price equal to or greater than the market price of the stock on the
date of grant, the Company has disclosed the pro forma effects of recording
compensation based on fair value in Note N to the financial statements as
allowed by Financial Accounting Standard No. 123 "Accounting for Stock-Based
Compensation."
NOTE C--ACQUISITIONS
On May 1, 1997, the Company completed the acquisition of the common stock
of Trend ("Trend Acquisition") for $18 million in cash and 250,000 shares of
common stock which equates to $10.64 per share based on the appraisals of the
fair market value of the property and equipment acquired of $21,532,000. The
Company incurred costs of approximately $307,000 in connection with this
acquisition.
The Trend Acquisition was accounted for as a purchase. The following is
an analysis of the allocation of the purchase price:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Current assets . . . . . . . . . . . . . . . . . . . . . . $ 2,734
Property and equipment . . . . . . . . . . . . . . . . . . 21,532
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . 6,330
Current liabilities . . . . . . . . . . . . . . . . . . . . (2,265)
Long-term liabilities . . . . . . . . . . . . . . . . . . . (1,340)
Deferred income tax liability . . . . . . . . . . . . . . . (6,330)
---------
Purchase price . . . . . . . . . . . . . . . . . . . . . . $ 20,661
=========
</TABLE>
On May 30, 1997, the Company acquired WD Equipment, L.L.C. (which owned
six drilling rigs, but had no operations) from Ward Drilling Company, Inc.
("Ward Acquisition") for approximately $8 million in cash and 400,000 shares of
common stock which equates to $8.95 per share based on the appraisal of the fair
market value of the assets acquired of $11,931,000. The Company also issued
warrants to purchase 200,000 shares of common stock at $10.00 per share. The
warrant had an estimated fair market value of $294,000 at the agreement closing
date and was recorded as an increase in property and equipment and additional
paid in capital.
On October 16, 1997, the Company completed the acquisition of Bonray
("Bonray Acquisition"), subject to certain working capital adjustments, for
3,015,000 shares of Common Stock, which equates to $11.86 per share based on the
appraisals of the fair market value of the property and equipment acquired of
$34,976,000.
The Bonray Acquisition was accounted for as a purchase. The following is
a preliminary analysis of the allocation of the purchase price:
F-12
<PAGE> 137
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Current assets . . . . . . . . . . . . . . . . . . . $ 4,020
Property and equipment . . . . . . . . . . . . . . . 34,976
Goodwill . . . . . . . . . . . . . . . . . . . . . . 6,750
Current liabilities . . . . . . . . . . . . . . . . . (3,162)
Long-term liabilities . . . . . . . . . . . . . . . . (74)
Deferred income tax liability . . . . . . . . . . . . (6,750)
--------
Purchase price . . . . . . . . . . . . . . . . . . . $ 35,760
========
</TABLE>
The following is the unaudited pro forma combined results of operations
as if Trend, Ward and Bonray had been acquired January 1, 1996 and 1997,
respectively (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997
<S> <C> <C>
Revenues .................................................. $ 47,952 $ 81,373
========== ==========
Net income (loss) ......................................... $ (1,848) $ 3,174
========== ==========
Net income (loss) per common share, basic ................. $ (.33) $ .35
========== ==========
Net income (loss) per common share, diluted ............... $ (.32) $ .28
========== ==========
</TABLE>
NOTE D--PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS
DECEMBER 31, ENDED
---------------------- MARCH 31,
1996 1997 1998
(IN THOUSANDS)
<S> <C> <C> <C>
Drilling rigs and components .................. $ 42,303 $ 173,674 $ 199,884
Automobiles, trucks, and trailers ............. 431 2,041 2,101
Buildings and property ........................ -- 461 523
Furniture, fixtures, and other ................ 7 532 674
--------- --------- ---------
42,741 176,708 203,182
Less accumulated depreciation ............... 15,768 21,035 23,375
--------- --------- ---------
$ 26,973 $ 155,673 $ 179,807
========= ========= =========
</TABLE>
NOTE E--CHANGE IN ESTIMATED LIVES
Effective January 1, 1995, the Company changed the estimated remaining
lives of its drilling rigs and other related drilling equipment to 84 months
from remaining lives which ranged from 31 months to 113 months. The Company also
changed the estimated remaining life of drill collars from 20 months to 36
months. These changes were made to more closely approximate the remaining useful
lives of such assets. The effect of this change was to decrease the historical
net loss by approximately $539,000 and to reduce the pro forma net loss by
approximately $539,000 or $.05 per share (Note B(7)) for the year ended December
31, 1995.
Effective January 1, 1996, the Company changed the estimated remaining
lives of certain drilling component equipment from 84 months to 120 months and
changed the estimated remaining life of drill collars and pipe from 36 months to
60 months. After review and study by the Company, the useful lives of drilling
rigs acquired after January 1, 1996 were changed from 84 months to 144 months.
These changes were made to more closely approximate the remaining useful lives
of such assets. The effect of these changes was to increase the historical net
earnings by approximately $405,000 and to increase pro forma net earnings by
approximately $251,000, net of pro forma income taxes of $154,000, or $.02 per
share for the year ended December 31, 1996.
F-13
<PAGE> 138
Effective July 1, 1997, the Company changed the estimated remaining lives
of its drilling rigs and other related drilling equipment to 180 months from
remaining lives of 144 months. These changes were made to more closely
approximate the remaining useful lives of such assets. The effect of these
changes was to increase earnings for the year ended December 31, 1997 by
approximately $505,000, net of income taxes of $310,000, or $.04 per share, on a
diluted basis.
NOTE F--INCOME TAXES
On October 28, 1996, Anadarko conveyed its operating assets to its
wholly-owned subsidiary, BDC, which caused a change in tax status of the
drilling operations from a partnership to a taxable corporation. A deferred tax
asset was recognized for the temporary differences which existed at the date of
conveyance together with a related valuation allowance. At December 31, 1997,
the Company has net operating loss carry forwards of approximately $2 million,
of which $418,000 and $1,582,000 will expire in 2011 and 2012, respectively, if
unused.
Income tax expense for the years ended December 31, 1995, 1996 and 1997
is summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Current ......................................................... $ -- $ -- $ --
Deferred ........................................................ -- 17 1,428
--------- --------- ---------
$ -- $ 17 $ 1,428
========= ========= =========
</TABLE>
Components of net deferred income tax liabilities are as follows:
<TABLE>
<CAPTION>
OCTOBER 28, DECEMBER 31, DECEMBER 31,
1996 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets (liabilities)
Operating loss carryforwards ................. $ -- $ 167 $ 760
Property and equipment ....................... 1,818 (515) (14,314)
Total valuation allowance .................... (1,818) -- --
---------- ---------- ----------
Net deferred tax liabilities ......... $ -- $ (348) $ (13,554)
========== ========== ==========
</TABLE>
The Company's actual income tax expense, before extraordinary item,
differed from the federal statutory expense (based on a federal statutory rate
of 34%) for the years ended December 31, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory rate .... $ (75) $ 146 $ 1,069
State income taxes ........................................ -- -- 201
Amortization of goodwill .................................. -- -- 142
Other items ............................................... -- -- 16
Exclusion of partnership income taxes ..................... 75 (129) --
--------- --------- ---------
$ -- $ 17 $ 1,428
========= ========= =========
</TABLE>
The Company's valuation allowance on tax assets was established October
28, 1996 due to a change in taxable status and decreased $1,818,000 during the
period from October 28, 1996 to December 31, 1996. The Company was not a taxable
entity in 1995. Effective December 1, 1996, the Company acquired assets with
deferred tax liabilities of approximately $2 million in which the purchase price
allocation resulted in the reduction of the Company's tax asset valuation
allowance of approximately $1,724,000. In 1997 the Company acquired assets with
deferred tax liabilities of approximately $13,080,000, which eliminated the
Company's tax asset valuation.
F-14
<PAGE> 139
NOTE G--LONG-TERM DEBT AND SUBORDINATED NOTES
Long-term debt at December 31, 1996 consisted of borrowings under loan
agreements (the "Loan Agreements") which provide for a term loan (the "Term
Loan") and a revolving loan (the "Revolving Loan"). The Term Loan of $7,000,000
bore interest at the Company's choice of LIBOR plus 4.25% (9.65% at December 31,
1996) or the prime rate of Chase Manhattan Bank, N.A. and requires monthly
payments of principal and interest in amounts sufficient to repay borrowings at
maturity on March 31, 2002. The Loan Agreements permit borrowings to a maximum
of $20 million under the Term Loan if defined collateral provisions are met. The
loan was collateralized by drilling equipment. The Loan Agreements also permit
borrowings up to $4 million under the Revolving Loan through December 31, 1998
subject to a $2 million limitation if the borrowings under the Term Loan exceed
$17 million.
Starting in 1997, the Loan Agreements require the maintenance of defined
collateral values, cash flow and liquidity ratios, financial reporting
requirements, and the maintenance of total liabilities to tangible net worth not
greater than 1.25 and imposes certain limitations on capital expenditures and
incurrence of additional debt.
In May 1997, the Company amended and increased the availability under the
Loan Agreements. The Term Loan provides the Company up to $30.5 million for the
purchase of additional land drilling rigs, the refurbishment of such rigs and
equipment and for working capital purposes. The Revolving Loan provides the
revolving credit loans of up to $10 million ($2 million of which is available
for the issuance of letters of credit) for general corporate purposes. Amounts
outstanding under the Revolving Loan (none at December 31, 1997) bear interest
based on Fleet National Bank's prime rate plus 1.5% (approximately 10% at
December 31) and mature in April 2000. Amounts outstanding under the Term Loan
of approximately $27.1 million at December 31, 1997, bear interest, at the
election of the Company, at floating rates equal to Chase Manhattan Bank's prime
rate plus 2.0% or LIBOR plus 4.25% (approximately 10% at December 31) and mature
in March 2002. The Loan Agreements are collateralized by substantially all of
the assets of the Company, including drilling rigs, equipment and drilling
contracts, and contain customary restrictive covenants (including covenants
restricting the ability of the Company to pay dividends or encumber assets) and
an affirmative covenant to maintain Total Available Liquidity (as defined in the
Loan Agreements) of at least $4.5 million through December 31, 1997 and $3
million through December 31, 1998. Pursuant to the Loan Agreements, the Company
must maintain certain financial ratios, including a Cash Flow Coverage ratio (as
defined in the Loan Agreements) of at least 1.25 to 1 until December 1997, 1.5
to 1 in 1998 and 1.75 to 1 thereafter, and a ratio of Total Liabilities (as
defined in the Loan Agreements) to Tangible Net Worth no greater than 1.25 to 1
in 1997 and 1 to 1 in 1998. Under the Loan Agreements the Company is obligated
to pay certain fees, including an annual commitment fee in an amount equal to
0.5% of the unused portion of the commitment.
Additionally, the Company issued Subordinated Notes due May 1, 2003 in
the original principal amounts of $18 million and $2.52 million (the
"Subordinated Notes") to Chesapeake Energy Corporation ("Chesapeake") and Energy
Spectrum Partners LP ("Energy Spectrum"), respectively. The Subordinated Notes
bear interest at either (i) 11% per annum, payable in cash or (ii) 12.875% per
annum, payable in the form of additional Subordinated Notes, which interest is
payable quarterly in arrears. On each quarterly interest payment date, the
Company may make an election as to the interest rate to be applied for the
previous quarter. The Subordinated Notes are redeemable, solely at the option of
the Company, in whole or in part, at any time after May 31, 1998 at varying
redemption prices. The Company must offer to redeem the Subordinated Notes upon
the occurrence of certain events constituting a "Change of Control" (as defined
in the Subordinated Notes) at a redemption price equal to 100% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of redemption. The Subordinated Notes are convertible into Common Stock at the
option of the Company, in whole or in part, in conjunction with a "Convertible
Event" (as defined in the Subordinated Notes), which includes certain
underwritten public offerings (including the Initial Public Offering), mergers,
consolidations and other business combination transactions. The Subordinated
Notes are general unsecured subordinated obligations of the Company that are
subordinated in rights of payment to all existing and future senior indebtedness
of the Company, pari passu with all existing and future subordinated
indebtedness of the Company and senior in right of payment to all future junior
subordinated indebtedness of the Company. At December 31, 1997, the amount of
Subordinated Notes outstanding was approximately $2.5 million as the $18 million
Subordinated Note to Chesapeake was extinguished in November 1997 with proceeds
from the Initial Public Offering. See Note "J" for further discussion on the
discount that was recorded related to this subordinate debt.
F-15
<PAGE> 140
The Company also has three notes totaling approximately $3.4 million at
December 31, 1997, with a capital financing corporation. The debt bears interest
at December 31, 1997 of 9.5% and is collateralized by certain equipment (top
drives) of the Company. The debt matures in July, October and November of 2000.
The note agreement does not specify any restrictive financial covenants that
must be met but contains a cross default provision that states any default on
the Company's Term or Revolving Notes constitutes a default on this note as
well.
The Company recorded an extraordinary loss of $4.0 million (net of income
tax effect of $1.3 million) in the fourth quarter relating to the early
extinguishment of certain subordinate debt in the amount of approximately $2.1
million and other payments in the amount of approximately $3.2 million by
utilizing proceeds from the Company's Initial Public Offering completed in
November 1997.
At December 31, 1997, the aggregate yearly maturities on long-term
obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
- ----------------------------------------------------------------
<S> <C>
1998X .......................................................... $ 7,450,000
1999X .......................................................... 7,647,000
2000X .......................................................... 7,331,000
2001X .......................................................... 6,385,000
2002X .......................................................... 1,706,000
Thereafter ..................................................... 2,520,000
-----------
$33,039,000
===========
</TABLE>
NOTE H--RELATED PARTY TRANSACTIONS
Before the corporate capitalization, AnSon Gas Corporation a wholly owned
affiliate of APLP served as the managing general partner responsible for all
management and operational functions of the Company and charged the Company for
such expenses. The Company expensed approximately $198,000 and $390,000 for such
services received in 1996 and 1995, respectively.
Prior to December 31, 1996, the Company and its affiliates made advances
to each other from time to time which generally had no specific repayment terms.
In December 1996, Anadarko granted the Company a transferable option,
exercisable at any time prior to June 30, 1998, to either purchase from Anadarko
a storage yard located in Weatherford, Oklahoma (the "Weatherford Storage Yard")
for a price of $1,000 in cash or lease from Anadarko, for any period specified
by the Company through a date not later than December 31, 1999, the Weatherford
Storage Yard for a lease price of $100 per year. In August 1997, the Company
acquired from Anadarko approximately 5 acres of land also in Weatherford,
Oklahoma, in consideration for the relinquishment by the Company of the option
to acquire or lease the Weatherford Storage Yard.
In May 1997, the Company paid Energy Spectrum a fee in the amount of
$220,000 for financial advisory and other services rendered to the Company in
connection with the completion of the Trend Acquisition, including the
evaluation and negotiation of the Trend Acquisition and for assistance in the
arrangement of alternative financial sources and structuring, negotiating and
closing the amended financing arrangements with CIT and Fleet. The Company also
reimbursed Energy Spectrum for expenses incurred in connection with the
rendering of such services.
The Company purchased drilling equipment and supplies from an affiliate
totaling $2,862,000 and $779,000 in 1996 and 1995, respectively. The Company
also transferred drilling equipment to an affiliate at the Company's basis
totaling $29,000, net of accumulated depreciation, which resulted in a decrease
in payable to affiliate. The Company has in the past purchased rigs and related
equipment from U.S. Rig & Equipment, Inc., an affiliate of Roy T. Oliver, who
served as a director of the Company until his resignation on August 13, 1997.
During 1997, the Company purchased approximately $5.0 million from U.S. Rig &
Equipment, Inc. Additionally, in August 1997, the Company sold one of its rigs
to an affiliate of Mr. Oliver for $500,000. Additionally, in November 1997, the
Company agreed
F-16
<PAGE> 141
to acquire six rigs and related drilling equipment for $14 million and such rigs
will require additional refurbishment prior to placement into service. In
connection therewith, the Company made a cash down payment of $3.5 million and
closed the transaction in January 1998.
The Company has engaged affiliates of APLP and other related affiliates
for trucking services related to the movement of the Company's rigs on numerous
occasions. During 1997 and the three months ended March 31, 1998, the Company
utilized these affiliates in consideration for such trucking services of
approximately $1.7 million.
From December 13, 1996 through December 31, 1997, APLP made available to
the Company certain of APLP's employees, office space and administrative
equipment, such as computer and telephone systems. In consideration for such
assistance, the Company has reimbursed APLP an aggregate of approximately
$236,000.
Interest expense incurred during the year ended December 31, 1997 and for
the three months ended March 31, 1998 included approximately $680,000 and
$71,000, respectively, to current or former affiliates.
NOTE I--SIGNIFICANT CUSTOMERS
During the year ended December 31, 1997, approximately 30% of revenues
were generated from current or former affiliated customers. Except for six rigs
under long term contracts with Chesapeake, dayrates billed to affiliated
customers approximated those billed to nonaffiliated customers. During 1996,
sales to two customers were, respectively, 75% (inclusive of $798,000
attributable to Chesapeake, which became an affiliate in December 1996) and 18%
of drilling revenues. During 1995, sales to one customer totaled 36% of drilling
revenue.
NOTE J--STOCKHOLDER'S EQUITY AND OPTIONS
In December 1996, the Company issued 2,000,000 shares of Common Stock to
Anadarko for the operating assets of BDC, Anadarko's subsidiary. Further, the
Company issued 2,000,000 shares of Common Stock to Energy Spectrum for $10
million cash. The Company also acquired six drilling rigs and related equipment
by the issuance of 1,600,000 shares of Common Stock and put options on the
Company's common stock. The drilling rigs were recorded in accordance with
appraisals of the estimated fair value of the assets acquired ($9.5 million) and
the net deferred income tax liability assumed. The estimated fair value of the
put options are recorded as additional contributed capital to the Company.
The Company executed in December 1996 certain drilling agreements to
supply six drilling rigs to Chesapeake at rates equal to defined comparable
market rates but not less than $5,000 per day per rig. The Company granted the
operator an option to purchase 2,000,000 shares of Common Stock at $6 per share,
subject to performance of the operator under the drilling agreement. The
estimated fair value of the options of $1,100,000 was recorded as additional
paid-in capital and a deferred charge to be amortized over a twelve month period
consistent with the annual negotiations of contract terms. At December 31, 1997,
the deferred charge was fully amortized, and the Company and Chesapeake were
unable to agree on an appropriate rate adjustment related to these drilling
agreements, therefore the Company exercised its option to terminate the
Chesapeake Drilling Agreements.
In February 1997, the Company sold 100,000 shares of Common Stock at
$2.50 per share to the President of the Company, which are subject to the terms
of a Restricted Stock Award Agreement. Deferred compensation in the amount of
$250,000 was recorded related to this stock grant as the purchase price was
below the fair market value of the Company's Common Stock at the date of grant.
See--Note "N".
On December 10, 1996, the Company granted the issuer of the Term Loan
(Note G) warrants to immediately purchase up to 290,000 shares of the Company's
Common Stock at $8 per share or up to 300,000 shares at $8 per share when total
outstanding Common Stock exceeds 6,000,000 shares. The warrants expire at the
earlier of December 13, 2001 or eighteen months after completion of the initial
public stock offering by the Company. The warrant holder can also elect to
receive in stock the excess of the stock market value over the warrant exercise
price. These warrants have
F-17
<PAGE> 142
an estimated fair value of $219,000, which has been recorded as debt issue costs
and is being amortized over the term of the loan.
The Company purchased during May 1997, two drilling rigs from U.S. Rig &
Equipment, Inc. for cash and granted options to purchase 100,000 shares of
Common Stock at $8 per share.
In connection with the issuance of Subordinated Notes executed in May
1997, the Company issued 1,140,000 shares of Common Stock at $7 per share.
Additionally, the Company issued two series of detachable Warrants, designated
as Series A Warrants and Series B Warrants. The Series A Warrants are
exercisable at a price of $.01 per share and the Series B Warrants are
exercisable at $7.50 per share. Both Warrants expire 72 months from issuance.
The Company issued Series A Warrants and Series B Warrants representing the
right to purchase 798,000 shares and 912,000 shares of Common Stock,
respectively. The fair market value of these warrants at the agreement closing
date was $6 million, $4,024,000 of which was attributable to the Subordinated
Notes. The warrant value applicable to the Subordinated Notes was allocated
between the Subordinated Notes and warrants and recorded as a discount to the
Subordinated Notes and additional paid in capital. The remaining discount to be
amortized at December 31, 1997 is approximately $429,000. The amortization of
this discount has been included in interest expense.
In June 1997, the Company granted options to employees to purchase 59,600
shares of Common Stock at $8 per share. Deferred compensation in the amount of
$59,600 was recorded related to these stock options as the exercise price was
below the fair market value of the Company's Common Stock at the date of grant.
See--Note "N". In November 1997, the Company granted options to employees and
executive officers to purchase 397,000 shares of Common Stock at $23 per share.
During 1996 and 1997, the Company issued stock options to three executive
officers pursuant to the 1997 Stock Option and Stock Award Plan to purchase
200,000, 50,000 and 50,000 shares of Common Stock, respectively, at an exercise
price of $5, $5 and $10 per share, respectively. Except for 10,000 options
exercised in April 1998, at an exercise price of $5 per share none of such
options has been exercised, and all of such options remain outstanding.
In October 1997, the Company consummated the Chesapeake Transactions,
resulting in the cancellation of the Chesapeake Option, the payment to the
Company of $9 million in cash by Chesapeake, the redemption of the $18 million
principal amount of Subordinated Notes held by Chesapeake for an aggregate cash
payment by the Company of $18.2 million and the issuance of 3,194,000 shares of
Common Stock to Chesapeake.
At the August 19, 1997 Board of Directors meeting, the number of
authorized shares of Common Stock was increased from 10,000,000 to 100,000,000
and the number of authorized shares of preferred stock was increased from
2,000,000 to 20,000,000. Additionally, a two-for-one stock split effected as a
stock dividend on August 22, 1997 was approved. All stock option data, per share
earnings and references to common stock have been restated to give effect to the
stock split.
On July 31, 1997, Energy Spectrum exercised in full its Series A
Warrants, at a price of $0.01 per share, for 98,000 shares of Common Stock.
In April 1998, the Company redeemed in full the $2.52 million principal
amount of Subordinated Notes issued to Energy Spectrum together with accrued
interest of $47,740. In connection therewith, Energy Spectrum waived its rights
to require the Company to redeem the Subordinated Notes at 110% of par value.
This redemption coupled with the redemption of $18 million principal amount of
Subordinated Notes from Chesapeake at the time of the Initial Public Offering,
leaves no Subordinated Notes outstanding.
NOTE K--COMMITMENTS AND CONTINGENCIES
The Company has entered into two year employment agreements with three
executive officers, which provide for the payment of the remaining term of each
agreement upon a change of control. As of March 31, 1998, benefits under such
agreements, assuming a change of control, would aggregate approximately
$322,000.
F-18
<PAGE> 143
As of March 31, 1998, the Company had construction commitments totaling
approximately $10 million for rigs in various stages of refurbishment.
A shortage of drill pipe exists in the contract drilling industry in the
United States. This shortage has caused the price of drill pipe to increase
significantly over the past 30 months and has required orders for new drill pipe
to be placed at least one year in advance of expected use. The price increase
and the delay in delivery has caused the Company to substantially increase
capital expenditures for drill pipe in recent months. In the event the shortage
continues, the Company may be unable to obtain the drill pipe required to expand
its contract drilling operations. The Company has committed approximately $9.0
million for drill pipe ordered which is subject to cancellation without penalty
90 days prior to the scheduled delivery date.
NOTE L--SUBSEQUENT EVENTS
A purported class action lawsuit is pending against the Company, certain
directors and officers of the Company, the managing underwriters of the Initial
Public Offering, and certain current and former stockholders of the Company,
alleging violations of federal securities laws in connection with the Initial
Public Offering. The lawsuit, Yuan v. Bayard Drilling Technologies, Inc., et al.
("Yuan"), was filed on February 3, 1998 in the United States District Court for
the Western District of Oklahoma. The principal plaintiff in Yuan is Tom Yuan.
The defendants in this case include the Company, Chesapeake, Energy Spectrum
LLC, James E. Brown, David E. Grose, Carl B. Anderson, III, Merrill A. Miller,
Jr., Sidney L. Tassin, Lew O. Ward, Mike Mullen, Roy T. Oliver, Donaldson,
Lufkin & Jenrette Securities Corporation, Lehman Brothers, Inc., Prudential
Securities, Inc., Rauscher Pierce Refsnes, Inc. (a predecessor to Dain Rauscher
Incorporated) and Raymond James & Associates, Inc.
The plaintiffs in this lawsuit purport to sue on their own behalf and on
behalf of all persons who purchased shares of Common Stock on or traceable to
the Initial Public Offering. In the lawsuit, plaintiffs allege claims against
all defendants under the Securities Act. The plaintiffs allege that the
registration statement and prospectus for the Initial Public Offering contained
materially false and misleading information and omitted to disclose material
facts. In particular, the plaintiffs allege that such registration statement and
prospectus failed to disclose financial difficulties of Chesapeake, the
Company's largest customer, and the effects of such difficulties on Chesapeake's
ability to continue to provide the Company with substantial drilling contracts.
The petitions further allege that the Company failed to disclose pre-offering
negotiations with R.T. Oliver Drilling, Inc., whom the plaintiffs allege was a
related party, for the purchase of drilling rigs. In addition, the petitions
allege that the Company failed to disclose that its growth strategy required
costly refurbishment of older drilling rigs that would dramatically increase the
Company's costs, which could not be sustained by internally generated cash
flows. In each of these lawsuits, the plaintiffs are seeking rescission and
damages.
Two other suits, Khan v. Bayard Drilling Technologies, Inc., et al.
("Khan") and Burkett v. Bayard Drilling Technologies, Inc., et al. ("Burkett"),
which were filed in District Court in and for Oklahoma County, State of Oklahoma
on January 14, 1998 and February 2, 1998, respectively, and alleged essentially
the same claims as Yuan, were dismissed without prejudice in May 1998 on a joint
application filed by all parties. The plaintiffs in Khan and Burkett, along with
others, have joined in Yuan's motion to be appointed as lead plaintiffs in the
Yuan federal court suit.
The Company is also involved in other litigation arising from time to
time in the ordinary course of its business, including workers' compensation
claims and disputes arising out of its drilling activities. Such disputes
include a claim filed against Bayard and Sperry-Sun Drilling Services, Inc. on
May 29, 1998 in the District Court of Oklahoma County in the State of Oklahoma.
R.C. Taylor Companies, Inc., the plaintiff in that lawsuit, seeks actual and
punitive damages for costs allegedly incurred in connection with a directional
drilling project that utilized one of the Company's rigs.
The Company believes the allegations in the lawsuits referenced above are
without merit and is defending vigorously the claims brought against it. The
Company is unable, however, to predict the outcome of these lawsuits or the
costs to be incurred in connection with their defense and there can be no
assurance that this litigation will be resolved in the Company's favor. An
adverse result or prolonged litigation could have a material adverse effect on
the Company's financial position or results of operations.
F-19
<PAGE> 144
Since the Consolidation Transactions and the Initial Public Offering of
11,040,000 shares of Common Stock, par value $0.01 per share of the Company,
which was completed in November 1997, and prior to December 31, 1997, the
Company agreed to purchase six additional rigs from R. T. Oliver for
approximately $14 million in cash. The Oliver Acquisition was completed on
January 9, 1998. The Company expects to refurbish and purchase complementary
equipment, including drill pipe, for these rigs at an aggregate cost of
approximately $28 million.
NOTE M--EMPLOYEE BENEFIT PLAN
The Company has a profit sharing plan for certain eligible employees who
have attained the age of 21 and completed at least one year of service.
Participants may contribute up to 15% (20% prior to October 1997) of
compensation for any plan year. The Company's discretionary contribution is
based on the participants' total years of service. The Company has made
contributions of approximately $82,000 through March 31, 1998.
NOTE N--BENEFIT AND COMPENSATION PLAN
In April 1997, the Board of Directors approved the adoption of an
Employee Stock Plan ("the Plan") whereby 1,600,000 shares of Common Stock are
authorized for issuance under the Plan to officers and employees. The Plan
permits the issuance of qualified or nonqualified stock options, as well as
granting of certain other awards, including shares of restricted stock. Options
granted become vested at the rate of 20% per year one year after being granted,
with the options expiring six years from the original grant date. The exercise
price for options granted through December 31, 1997 was based on the Company's
estimate of the fair market value on the date of the grant. Through December 31,
1997, 756,600 options and 100,000 shares of restricted stock (denoted below)
were issued under the Plan, 40,000 of which were exercisable at December 31,
1997 at a weighted average exercise price of $5.
Activity pertaining to the Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Outstanding at December 10, 1996 ...................................... -- --
Granted ............................................................. 200,000 $ 5.00
Exercised ........................................................... -- --
---------
Outstanding at January 1, 1997 ........................................ 200,000 $ 5.00
Granted ............................................................. 656,600 $ 16.16
Exercised ........................................................... -- --
---------
December 31, 1997 ................................................... 856,600 $ 13.55
=========
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED AVERAGE FAIR MARKET
WEIGHTED AVERAGE FAIR VALUE OF VALUE OF DEFERRED
EXERCISE NUMBER OF REMAINING WEIGHTED AVERAGE STOCK OPTIONS ON COMMON STOCK COMPENSATION
PRICE RANGE SHARES CONTRACTUAL LIFE EXERCISE PRICE DATE OF GRANT AT DATE OF GRANT COST
<S> <C> <C> <C> <C> <C> <C>
$ 2.50 100,000(1) -- $ 2.50 $ 5.00 $ 5.00 $205,000
5.00 250,000 4.95 5.00 2.09 5.00 --
8.00 59,600 5.46 8.00 4.18 9.00 53,000
10.00 50,000 5.54 10.00 3.59 9.00 --
23.00 397,000 5.84 23.00 10.12 23.00 --
</TABLE>
- -----------------
(1) Unvested restricted stock.
The Company applies APB Opinion 25 in accounting for the Plan. Had
compensation been determined on the basis of fair value pursuant to FASB
Statement No. 123, net income and earnings per share would have been reduced as
follows:
F-20
<PAGE> 145
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income (loss) (in thousands):
As reported .............................. $ 267 $ (2,086)
Pro forma (net of effective tax of 38%) .. 261 (2,677)
Earnings per share, basic and fully diluted:
As reported, basic ....................... .05 (.23)
Pro forma, basic ......................... .05 (.30)
As reported, diluted ..................... .05 (.18)
Pro forma, diluted ....................... .05 (.23)
</TABLE>
The fair value of each option granted is estimated using the Black-
Scholes model. This model includes, among others, a variable of stock
volatility. As the Company has not established a significant trading history,
the volatility used in the model was .40 for options granted through June 30,
1997 and .43 for options granted since July 1, 1997 based on volatility of the
stock price of a similar entity that has been publicly traded for several years.
Dividend yield was estimated to remain at zero with risk free interest rates
ranging between 5.72 and 6.31 percent. As there is no prior experience available
to use in estimating an expected life for the options, an average of the time
between the vesting and expiration dates of the options was used in determining
the expected lives of the options ranging from 3.5 to 5.5 years. Fair value of
options granted during 1997 and 1996 under the Plan were $4.6 million and
$416,000, respectively.
F-21
<PAGE> 146
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma financial statements are derived from
the historical financial statements of the Company included elsewhere in this
Prospectus. The Pro Forma Combined Statements of Operations for the year ended
December 31, 1997 gives effect to (i) the Trend Acquisition, the Ward
Acquisition and the Bonray Acquisition (each defined herein), all of which
occurred at various dates in 1997, as if such acquisitions occurred on January
1, 1997 and (ii) interest expense adjustment to reflect the retirement of
certain Subordinated Notes from proceeds of the Initial Public Offering (iii)
interest expense adjustments to reflect the prepayment of 25% ($6.2 million) of
the outstanding principal amount of the Term Loan and (iv) the retirement of the
outstanding principal amount of the Revolving Loan. There is no pro forma effect
for the TransTexas Acquisition because the rigs were utilized solely by
TransTexas for internal purposes and had no internal or external revenues. The
Pro Forma Statement of Operations for the period ended March 31, 1998 reflect
adjustments for the transactions in (iii) above and the retirement of the $2.52
million principal of Subordinated Notes. The Pro Forma Balance Sheet at March
31, 1998 reflects the repayment by the Company of 25% of the outstanding
principal amount of the Term Loan, the retirement of the Subordinated Notes and,
the sale of the Notes and the application of net proceeds to fund the purchase
price of the TransTexas Acquisition, as if they had occurred on March 31, 1998.
The unaudited pro forma combined financial information should be read in
conjunction with the notes thereto and the historical financial statements of
the Company including the notes thereto, which are included elsewhere in this
Prospectus.
The unaudited pro forma combined financial statements do not purport to
be indicative of the results of operations that would actually have occurred if
the transactions described had occurred as presented in such statements or that
may occur in the future. In addition, future results may vary significantly from
the results reflected in such statements due to general economic conditions, oil
and gas commodity prices, the demand and prices for contract drilling services,
changes in the number of rigs available for service, the Company's ability to
successfully integrate the operations of the TransTexas Acquisition with its
current business and several other factors, many of which are beyond the
Company's control. See "Risk Factors."
F-22
<PAGE> 147
BAYARD DRILLING TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------
TREND(a) WARD(a) BONRAY(a)
FOUR MONTHS FIVE MONTHS NINE MONTHS
ENDED ENDED ENDED
APRIL 30, MAY 31, SEPTEMBER 30,
BAYARD 1997 1997 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ..................... $ 55,747 $ 6,390 $ 4,957 $ 14,279
COSTS AND EXPENSES:
Drilling costs ............. 40,705 4,845 3,914 10,240
Depreciation and
amortization ............. 7,943 627 413 1,707
General and
administrative ........... 1,868 515 197 860
------------ ------------ ------------ ------------
Total costs and
expenses ............... 50,516 5,987 4,524 12,807
------------ ------------ ------------ ------------
Operating income ......... 5,231 403 433 1,472
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income ............ 597 -- 16 420
Interest expense and
financing
costs .................... (3,065) (47) (27) (471)
Gain (loss) on sale of
assets ................... 544 -- -- (57)
Other ...................... 37 -- 31 (41)
------------ ------------ ------------ ------------
Total other income
(expense) .............. (1,887) (47) 20 (149)
------------ ------------ ------------ ------------
Income (loss) before
taxes .................... 3,344 356 453 1,323
------------ ------------ ------------ ------------
Income tax expense
(benefit) ................ 1,428 135 -- 563
------------ ------------ ------------ ------------
Net income (loss) before
extraordinary loss: ...... $ 1,916 $ 221 $ 453 $ 760
============ ============ ============ ============
Earning (loss) per share,
before extraordinary
loss:
basic .................... $ .21
============
diluted .................. $ .17
============
Weighted average shares
outstanding:
basic .................... 9,064
============
diluted .................. 11,500
============
<CAPTION>
PRO FORMA
------------------------------------------------------------------
ACQUISITION
AND OTHER AS
ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ..................... $ -- $ 81,373 $ -- $ 81,373
COSTS AND EXPENSES:
Drilling costs ............. -- 59,704 -- 59,704
Depreciation and
amortization ............. 386(b) 11,576 -- 11,576
500(c)
General and
administrative ........... -- 3,440 -- 3,440
------------ ------------ ------------ ------------
Total costs and
expenses ............... 886 74,720 -- 74,720
------------ ------------ ------------ ------------
Operating income ......... (886) 6,653 -- 6,653
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income ............ -- 1,033 (726)(f) 307
Interest expense and
financing
costs .................... 1,172(d) (2,438) 779(g) (1,659)
Gain (loss) on sale of
assets ................... -- 487 -- 487
Other ...................... -- 27 -- 27
------------ ------------ ------------ ------------
Total other income
(expense) .............. 1,172 (891) 53 (838)
------------ ------------ ------------ ------------
Income (loss) before
taxes .................... 286 5,762 53 5,815
------------ ------------ ------------ ------------
Income tax expense
(benefit) ................ 239(e) 2,365 20(h) 2,385
------------ ------------ ------------ ------------
Net income (loss) before
extraordinary loss: ...... $ 47 $ 3,397 $ 33 $ 3,430
============ ============ ============ ============
Earning (loss) per share,
before extraordinary
loss:
basic .................... $ .37 $ .38
============ ============
diluted .................. $ .30 $ .30
============ ============
Weighted average shares
outstanding:
basic .................... 9,064 9,064
============ ============
diluted .................. 11,500 11,500
============ ============
</TABLE>
The accompanying notes are an integral part of these pro
forma financial statements.
F-23
<PAGE> 148
BAYARD DRILLING TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ----------------------------
BAYARD ADJUSTMENTS AS ADJUSTED
<S> <C> <C> <C>
Revenues ................................ $ 23,962 $ -- $ 23,962
COSTS AND EXPENSES:
Drilling costs ........................ 17,221 -- 17,221
Depreciation and amortization ......... 3,169 -- 3,169
General and administrative ............ 755 -- 755
---------- ---------- ----------
Total costs and expenses ...... 21,145 -- 21,145
---------- ---------- ----------
Operating income .............. 2,817 -- 2,817
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income ....................... 496 (100)(f) 396
Interest expense and financing costs .. (367) 114(j) (253)
Gain (loss) on sale of assets ......... 52 -- 52
Other ................................. 34 -- 34
---------- ---------- ----------
Total other income (expense) .. 215 14 229
---------- ---------- ----------
Income (loss) before taxes .............. 3,032 14 3,046
Income tax expense (benefit) ............ 1,275 (25)(k) 1,250
---------- ---------- ----------
Net income (loss) ....................... $ 1,757 $ 39 $ 1,796
========== ========== ==========
Earning (loss) per share:
basic ................................. $ .10 $ .10
========== ==========
diluted ............................... $ .10 $ .10
========== ==========
Weighted average shares outstanding:
basic ................................. 18,184 18,184
========== ==========
diluted ............................... 18,488 18,488
========== ==========
</TABLE>
The accompanying notes are an integral part of
these pro forma financial statements.
F-24
<PAGE> 149
BAYARD DRILLING TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------- --------------------------------
BAYARD(L) ADJUSTMENTS AS ADJUSTED
<S> <C> <C> <C>
Current Assets:
Cash and investments ......................... $ 28,262 $ 13,439(i)(j) $ 41,701
Accounts receivable .......................... 23,112 -- 23,112
Other ........................................ 1,065 -- 1,065
----------- ----------- -----------
Total current assets ................. 52,439 12,939 65,878
Property & Equipment, net .................... 179,807 75,000(i) 254,807
Goodwill, net ................................ 12,487 -- 12,487
Other ........................................ 1,861 3,250(i) 5,111
----------- ----------- -----------
Total assets ......................... $ 246,594 $ 91,689 $ 338,283
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................. $ 14,028 $ -- $ 14,028
Accrued liabilities .......................... 4,749 -- 4,749
Current portion of long-term debt ............ 7,450 -- 7,450
----------- -----------
Total current liabilities ............ 26,227 -- 26,227
----------- -----------
Long-term debt ................................. 21,137 (6,200)(j) 14,937
----------- ----------- -----------
Subordinated Notes ............................. 2,111 (2,111)(j) --
----------- ----------- -----------
Senior Notes ................................... -- 100,000(i) 100,000
----------- ----------- -----------
Other long term liabilities .................... 2,039 -- 2,039
----------- -----------
Deferred income tax liabilities ................ 14,848 -- 14,848
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock ................................. 182 -- 182
Additional paid-in capital ................... 180,413 -- 180,413
Accumulated deficit .......................... (363) -- (363)
----------- -----------
Total stockholders' equity ........... 180,232 -- 180,232
----------- ----------- -----------
Total liabilities and stockholders'
equity ............................. $ 246,594 $ 91,689 $ 338,283
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these pro forma financial statements.
F-25
<PAGE> 150
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(TABLES IN THOUSANDS)
(a) Represents the results of operations for Trend, Ward and Bonray prior to
their acquisition by Bayard. Operations subsequent to the date of
purchase of each of Trend, Ward and Bonray, May 1, May 30 and October
16, 1997, respectively, are included in the Bayard historical results.
(b) To adjust depreciation expense on assets acquired in the Trend, Ward and
Bonray Acquisitions using allocated purchase prices and based on
estimated useful lives of 15 years calculated on a straight-line basis.
(c) To record amortization of goodwill attributable to the Trend and Bonray
Acquisitions over 15 years on a straight-line basis.
(d) To eliminate interest expense on (i) an aggregate principal amount of
$18 million of Subordinated Notes issued in the May Financing and (ii)
the outstanding amount of the Revolving Loan, both paid off from
proceeds of the Initial Public Offering.
(e) To adjust income tax expense recognized by Bayard, Trend and Bonray to
conform to the Company's pro forma income tax position.
(f) To adjust interest income for interest earned on Initial Public Offering
proceeds used for the repayment of debt.
(g) To adjust historical interest expense for the repayment of debt on Notes
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
INCURRED PRO FORMA
<S> <C> <C>
Term Loan............................................... $2,163 $ 541
Subordinated Notes (Energy Spectrum).................... 238 238
------ -----
$2,401 $ 779
====== =====
</TABLE>
(h) To record a provision for federal and state income tax at the rate of
41%.
(i) To record (i) the issuance of $100 million of Notes generating net
proceeds of approximately $96.75 million (net of $3.25 million of
discount and associated costs of the Initial Offering) and (ii) the
application of $75 million of the net proceeds to the Company from the
Initial Offering to fund the purchase price of the TransTexas
Acquisition.
(j) To record (i) the repayment by the Company of 25% ($6.2 million) of
the outstanding principal amount of the Term Loan and (ii) the
repayment and retirement of the principal amount ($2.1 million, net of
discount) of Subordinated Notes previously held by Energy Spectrum,
both of which were paid with proceeds from the Initial Public Offering.
(k) To adjust income tax expense recognized by Bayard to conform to
the Company's pro forma income tax position.
F-26
<PAGE> 151
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Disclosure Regarding Forward-Looking
Statements ............................................................ iv
Available Information ................................................... v
Prospectus Summary ...................................................... 1
Risk Factors ............................................................ 15
The Company ............................................................. 25
The TransTexas Acquisition .............................................. 27
Use of Proceeds ......................................................... 28
Capitalization .......................................................... 29
Selected Consolidated Financial and
Operating Data ........................................................ 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................................ 32
Business ................................................................ 39
Management .............................................................. 50
Principal Stockholders .................................................. 61
Certain Relationships and Related
Transactions .......................................................... 64
The Exchange Offer ...................................................... 71
Description of Exchange Notes ........................................... 81
Certain U.S. Federal Tax Consequences to
U.S. Holders .......................................................... 109
Certain U.S. Federal Tax Consequences to Non-
U.S. Holders .......................................................... 110
Description of Certain Indebtedness ..................................... 112
Description of Capital Stock ............................................ 114
Plan of Distribution .................................................... 117
Legal Matters ........................................................... 117
Experts ................................................................. 117
Index to Financial Statements ........................................... F-1
</TABLE>
================================================================================
================================================================================
BAYARD DRILLING TECHNOLOGIES, INC.
BAYARD DRILLING, L.L.C.
BAYARD DRILLING, L.P.
BONRAY DRILLING CORPORATION
TREND DRILLING CO.
-------------------------------------------
PROSPECTUS
-------------------------------------------
OFFER TO EXCHANGE
BAYARD DRILLING TECHNOLOGIES, INC.
11% SENIOR NOTES DUE 2005, SERIES B
FOR ANY AND ALL OF ITS OUTSTANDING
11% SENIOR NOTE DUE 2005, SERIES A
, 1998
================================================================================
<PAGE> 152
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
All capitalized terms used and not defined in Part II of this
Registration Statement shall have the meanings assigned to them in the
Prospectus which forms a part of this Registration Statement.
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL provides that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of Section 145. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
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<PAGE> 153
Section 145(f) of the DGCL provides that the indemnification and
advancement of expenses provided by, or granted pursuant to, Section 145 shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 145(g) of the DGCL provides that a corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his capacity as such, whether or not the corporation
would have the power to indemnify him against such liability under Section 145.
RESTATED CERTIFICATE OF INCORPORATION
Article Thirteenth of the Restated Certificate of Incorporation of the
Company (the "Certificate"), a copy of which is filed as Exhibit 3.1 to the
Registration Statement, provides as follows:
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (3) under Section 174 of the Delaware General Corporation Law,
as the same exists or as such provision may hereafter be amended, supplemented
or replaced, or (4) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article Thirteenth by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article Thirteenth, a director shall not be liable to the Corporation or
its stockholders to such further extent as permitted by any law hereafter
enacted, including without limitation any subsequent amendment to the Delaware
General Corporation Law. Notwithstanding any other provisions of this
Certificate of Incorporation or any provision of law that might otherwise permit
a lesser or no vote, but in addition to any affirmative vote of the holders of
any particular class or series of the capital stock of the Corporation required
by law or by this Restated Certificate, the affirmative vote of the holders of
not less than 66 2/3% in voting power of the shares of the Corporation then
entitled to be voted in an election of directors, voting together as a single
class, shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article Thirteenth.
Article Twelfth of the Certificate provides as follows:
The Corporation shall indemnify any person who was, is, or is threatened
to be made a party to a proceeding (as hereinafter defined) by reason of the
fact that he or she (1) is or was a director or officer of the Corporation or
(2) while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, limited liability company, association, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, entity or organization to the fullest extent permitted under the
Delaware General Corporation Law, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article Twelfth is in effect.
Any repeal or amendment of this Article Twelfth shall be prospective only and
shall not limit the rights of any such director or officer or the obligations of
the Corporation with respect to any claim arising from or related to the
services of such director or officer in any of the foregoing capacities prior to
any such repeal or amendment to this Article Twelfth. Such right shall include
the right to be paid by the Corporation expenses (including attorneys' fees)
incurred in defending any such proceeding in advance of its final disposition to
the maximum extent permitted under the Delaware General Corporation Law, as the
same exists or may hereafter be amended. If a claim for indemnification or
advancement of expenses hereunder is not paid in full by the Corporation within
60 days after a written claim has been received by the
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<PAGE> 154
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and, if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification is not permitted under the Delaware General Corporation Law, but
the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors or any committee
thereof or independent legal counsel, or stockholders) to have made its
determination prior to the commencement of such action that indemnification of
the claimant is permissible in the circumstances nor an actual determination by
the Corporation (including its board of directors or any committee thereof,
independent legal counsel or stockholders) that such indemnification is not
permissible shall be a defense to the action or create a presumption that such
indemnification is not permissible. In the event of the death of any person
having a right of indemnification under the foregoing provisions, such right
shall inure to the benefit of his or her heirs, executors, administrators and
personal representatives. The rights conferred above shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, bylaw, resolution of stockholders or directors, agreement or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding.
BYLAWS
Article Eight of the Amended and Restated Bylaws of the Company (the
"Bylaws"), a copy of which is filed as Exhibit 3.2 to the Registration Statement
provides as follows:
Each person who at any time shall serve or shall have served as a
director, officer, employee or agent of the Corporation (including any
predecessor of the Corporation), or any person who is or was serving at the
written request of the Corporation (in accordance with written procedures
adopted from time to time by the Board of Directors) as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, shall be
entitled to (a) indemnification and (b) the advancement of expenses incurred by
such person from the Corporation as, and to the fullest extent, permitted by
Section 145 of the Delaware General Corporation Law or any successor statutory
provision, as from time to time amended. The foregoing right of indemnification
and to the advancement of expenses shall not be deemed exclusive of any other
rights to which those to be indemnified may be entitled as a matter of law or
under any agreement, vote of stockholders or disinterested directors of the
Corporation, or other arrangement.
The Corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or who is or was serving at the written request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any liability asserted against and
incurred by such person in such capacity or arising out of such person's status
in such capacity, whether or not the Corporation would have the power to
indemnify such person against that liability under this Article Eight or the
Delaware General Corporation Law.
INDEMNIFICATION AGREEMENTS
The Company has entered into Indemnification Agreements (the
"Indemnification Agreements") with its directors and certain of its officers
(the "Indemnitees"), a form of which is filed as Exhibit 10.20 to the
Registration Statement. Under the terms of the Indemnification Agreements, the
Company has generally agreed to indemnify, and advance expenses to, each
Indemnitee to the fullest extent permitted by applicable law on the date of such
agreements and to such greater extent as applicable law may thereafter permit.
In addition, the Indemnification Agreements contain
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<PAGE> 155
specific provisions pursuant to which the Company has agreed to indemnify each
Indemnitee (i) if such person is, by reason of his or her status as a director,
nominee for director, officer, agent or fiduciary of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise with which such person was serving at the request of the Company (any
such status being hereinafter referred to as a "Corporate Status"), made or
threatened to be made a party to any threatened, pending or completed action,
suit, arbitration, alternative dispute resolution mechanism, investigation or
other proceeding (each, a "Proceeding"), other than a Proceeding by or in the
right of the Company, (ii) if such person is, by reason of his or her Corporate
Status, made or threatened to be made a party to any Proceeding brought by or in
the right of the Company to procure a judgment in its favor, except that no
indemnification shall be made in respect of any claim, issue or matter in such
Proceeding as to which such Indemnitee shall have been adjudged to be liable to
the Company if applicable law prohibits such indemnification (unless and only to
the extent that a court shall otherwise determine), (iii) against expenses
actually and reasonably incurred by such person or on his or her behalf in
connection with any Proceeding to which such Indemnitee was or is a party by
reason of his or her Corporate Status and in which such Indemnitee is
successful, on the merits or otherwise, (iv) against expenses actually and
reasonably incurred by such person or on his or her behalf in connection with a
Proceeding to the extent that such Indemnitee is, by reason of his or her
Corporate Status, a witness or otherwise participates in any Proceeding at a
time when such person is not a party in the Proceeding, and (v) against expenses
actually and reasonably incurred by such person in any judicial adjudication of
or any award in arbitration to enforce his or her rights under the
Indemnification Agreements.
Furthermore, under the terms of the Indemnification Agreements, the
Company has agreed to pay all reasonable expenses incurred by or on behalf of an
Indemnitee in connection with any Proceeding, whether brought by or in the right
of the Company or otherwise, in advance of any determination with respect to
entitlement to indemnification and within 15 days after the receipt by the
Company of a written request from such Indemnitee for such payment. In the
Indemnification Agreements, each Indemnitee has agreed that he or she will
reimburse and repay the Company for any expenses so advanced to the extent that
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company against such expenses.
The Indemnification Agreements also include provisions that specify the
procedures and presumptions which are to be employed to determine whether an
Indemnitee is entitled to indemnification thereunder. In some cases, the nature
of the procedures specified in the Indemnification Agreements varies depending
on whether there has occurred a "Change of Control" (as defined in the
Indemnification Agreements) of the Company.
STOCKHOLDERS AND VOTING AGREEMENT
The Stockholders and Voting Agreement, a copy of which is filed as
Exhibit 9.1 to the Registration Statement, provides that the Certificate, Bylaws
and other organizational documents of the Company and each of its subsidiaries
shall at all times, to the fullest extent permitted by law, provide for
indemnification of, advancement of expenses to, and limitation of the personal
liability of, the members of the Board of Directors of the Company and the
members of the boards or similar managing bodies of subsidiaries of the Company.
Additionally, such agreement provides that any Energy Spectrum NonVoting
Observer (as defined in the Stockholders and Voting Agreement) shall be entitled
to indemnification from the Company to the maximum extent permitted by law, as
though such person were a director of the Company or any of its subsidiaries.
Any amendment, repeal or modification of this provision may not be adverse to
any member of the Board of Directors of the Company, any Energy Spectrum
Non-Voting Observer or any member of the boards of directors or other similar
managing bodies of any subsidiary of the Company, without the consent of a
majority of the members of the Board of Directors.
The above discussion of the Certificate, Bylaws, Stockholders and Voting
Agreement and Section 145 of the DGCL is not intended to be exhaustive and is
respectively qualified in its entirety by the Certificate, Bylaws, Stockholders
and Voting Agreement, Underwriting Agreement and such statute.
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<PAGE> 156
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
3.2 -- Amended and Restated Bylaws of the Company, as adopted August
19, 1997 (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333-34451).
4.1 -- Specimen Stock Certificate for the Common Stock, par value
$0.01 per share, of the Company (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form
S-1 dated November 4, 1997, Registration No. 333-34451).
4.2 -- Indenture, dated as of June 26, 1998, by and among the Company
and Bayard Drilling, L.L.C., Bayard Drilling, L.P., Bonray
Drilling Corporation and Trend Drilling Co., as guarantors,
and U.S. Trust Company of Texas, N.A., as trustee.*
4.3 -- Registration Rights Agreement, dated as of June 26, 1998, by
and among the Company, Bayard Drilling, L.L.C., Bayard
Drilling, L.P., Bonray Drilling Corporation, Trend Drilling
Co., Donaldson, Lufkin & Jenrette Securities Corporation, BT
Alex. Brown, Dain Rauscher Wessels and Lehman Brothers Inc.*
5.1 -- Opinion of Baker & Botts, L.L.P. regarding the validity of the
securities being registered.*
9.1 -- Second Amended and Restated Stockholders and Voting Agreement,
dated as of October 16, 1997, by and among the Company and the
several stockholders that are signatories thereto
(incorporated by reference to Exhibit 9.1 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
9.2 -- First Amendment to Second Amended and Restated Stockholders
and Voting Agreement, dated as of November 3, 1997, by and
among the Company and the several stockholders that are
signatories hereto.
10.1 -- 1997 Stock Option and Stock Award Plan of the Company
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.2 -- Forms of Non-Qualified Stock Option Agreements under the 1997
Stock Option and Stock Award Plan (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on
Form S-1 dated November 4, 1997, Registration No. 333-34451).
10.3 -- Master Agreement, dated as of November 26, 1996, by and among
the Company and the stockholders of the Company that are
signatories thereto (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement on Form S-1 dated
November 4, 1997, Registration No. 333-34451).
10.4 -- Master Drilling Agreement, dated as of December 10, 1996, by
and among the Company, Chesapeake Energy Corporation and
Chesapeake Operating, Inc. (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form
S-1 dated November 4, 1997, Registration No. 333-34451).
10.5 -- Form of Chesapeake Drilling Agreement, by and between
Chesapeake Operating, Inc., as Operator, and the Company, as
Contractor (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333- 34451).
10.6 -- Securities Purchase Agreement, dated as of April 30, 1997, by
and among the Company, Energy Spectrum Partners LP and
Chesapeake Energy Corporation (the "May Securities Purchase
Agreement") (incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333-34451).
10.7 -- Form of Subordinated Note of the Company issued pursuant to
the May Securities Purchase Agreement (incorporated by
reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.8 -- Form of Series B Warrant to Purchase Common Stock of the
Company issued pursuant to the May Securities Purchase
Agreement (incorporated by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333-34451).
10.9 -- Ward Drilling Company, Inc. Warrant to Purchase Common Stock
of the Company, dated May 30, 1997 (incorporated by reference
to Exhibit 10.14 to the Company's Registration Statement on
Form S-1 dated November 4, 1997, Registration No. 333-34451).
10.10 -- Preferential Right to Transport Agreement, dated as of May 30,
1997, by and between the Company and Geronimo Trucking Company
(incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333- 34451).
10.11 -- RR&T, Inc. Warrant to Purchase Common Stock of the Company,
dated May 1, 1997 (incorporated by reference to Exhibit 10.16
to the Company's Registration Statement on Form S-1 dated
November 4, 1997, Registration No. 333-34451).
10.12 -- Mike Mullen Warrant to Purchase Common Stock of the Company,
dated May 1, 1997 (incorporated by reference to Exhibit 10.17
to the Company's Registration Statement on Form S-1 dated
November 4, 1997, Registration No. 333-34451).
10.13 -- Amended and Restated Loan and Security Agreement, dated as of
June 18, 1998 by and among Fleet Capital Corporation, the
Company and Bayard Drilling, L.P.*
II-5
<PAGE> 157
10.14 -- Second Amended and Restated Loan Agreement, dated as of June
18, 1998, by and among The CIT Group/Equipment Financing, Inc.
and Fleet Capital Corporation, as Lenders, and the Company,
as Borrower.*
10.15 -- Employment Agreement, dated as of December 10, 1996, by and
between the Company and James E. Brown (incorporated by
reference to Exhibit 10.21 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.16 -- Restricted Stock Award Agreement, dated as of December 10,
1996, by and between the Company and James E. Brown
(incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.17 -- Employment Agreement, dated as of January 1, 1997, by and
between the Company and Ed Jacob (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement on Form
S-1 dated November 4, 1997, Registration No. 333-34451).
10.18 -- Employment Agreement, dated as of July 16, 1997, by and
between the Company and David E. Grose (incorporated by
reference to Exhibit 10.24 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.19 -- Letter Agreement, dated as of August 20, 1997, by and between
the Company and Chesapeake Energy Corporation (incorporated by
reference to Exhibit 10.25 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.20 -- Form of Indemnification Agreement entered into by the Company
and each of the directors and certain officers of the Company
in connection with the Initial Public Offering (incorporated
by reference to Exhibit 10.26 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.21 -- Agreement and Plan of Merger, dated as of October 9, 1997, by
and among DLB Oil & Gas, Inc., the Company, Bonray Acquisition
Corp. and Bonray Drilling Corporation (incorporated by
reference to Exhibit 10.27 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.22 -- 1997 Non-Employee Directors' Stock Option Plan of the Company
(incorporated by reference to Exhibit 10.28 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.23 -- Form of Nonqualified Option Agreement under the 1997
Non-Employee Directors' Option Plan of the Company
(incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.24 -- Registration Rights Agreement, dated as of October 16, 1997,
by and among the Company, DLB Oil & Gas, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation (incorporated by
reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.25 -- Letter Agreement, dated as of October 3, 1997, by and between
the Company and The CIT Group/Equipment Financing, Inc.
(incorporated by reference to Exhibit 10.31 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333- 34451).
10.26 -- Second Amended and Restated Registration Rights Agreement,
dated as of October 30, 1997, by and among the Company and the
stockholders of the Company that are signatories thereto
(incorporated by reference to Exhibit 10.32 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.27 -- Stock Transfer Restriction Agreement, dated as of November 3,
1997, by and between the Company and Donaldson, Lufkin &
Jenrette Securities Corporation.
10.28 -- Asset Purchase Agreement, dated as of November 25, 1997, by
and between the Company and R.T. Oliver Drilling, Inc.
10.29 -- Asset Purchase Agreement, dated as of May 26, 1998, by and
among Bayard Drilling, L.P., Bayard Drilling Technologies,
Inc. and TransTexas Gas Corporation (incorporated by reference
to Exhibit 10.29 to the Company's Current Report on Form 8-K
filed on June 2, 1998).
10.30 -- Drilling Alliance Agreement, dated as of June 26, 1998, by and
between Bayard Drilling, L.P. and TransTexas Gas Corporation
(incorporated by reference to Exhibit 10.30 to the Company's
Current Report on Form 8-K filed on July 9, 1998).
10.31 -- Purchase Agreement, dated as of June 19, 1998, by and among
the Company, Bayard Drilling, L.L.C., Bayard Drilling, L.P.,
Bonray Drilling Corporation, Trend Drilling Co., Donaldson,
Lufkin & Jenrette Securities Corporation, BT Alex. Brown, Dain
Rauscher Wessels and Lehman Brothers Inc.*
10.32 -- Waiver of Certain Rights Under Second Amended and Restated
Stockholders and Voting Agreement, dated June 2, 1998, by
Charles E. Davidson, Mark Liddell and Mike Liddell.*
16.1 -- Letter re: Change in certifying Accountant (incorporated by
reference to Exhibit 16.1 to the Company's Form 10-K
for the year ended December 31, 1997).
21.1 -- Subsidiaries of the Company.*
23.1 -- Consent of PricewaterhouseCoopers LLP.*
23.2 -- Consent of Grant Thornton LLP.*
23.3 -- Consent of Baker & Botts, L.L.P. (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).*
24.1 -- Powers of Attorney (included in the signature page of the
Registration Statement).*
25.1 -- Statement of Eligibility of Trustee on Form T-1.*
99.1 -- Form of Letter of Transmittal.*
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<PAGE> 158
99.2 -- Form of Notice of Guaranteed Delivery.*
99.3 -- Form of Tender Instructions.*
* Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
the requirements for a registration statement under the Securities Act of
1933 on Form S-4, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(2) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the provisions described under Item 20 of the requirements for a
registration statement under the Securities Act of 1933 on Form S-4 or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of
such issue.
(4) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule
424(b) of the Securities Act if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
II-7
<PAGE> 159
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
(5) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(6) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
II-8
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma
City, State of Oklahoma, on July 22, 1998.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ James E. Brown
---------------------------
James E. Brown
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and officers of Bayard Drilling Technologies, Inc., a Delaware corporation,
which is filing a Registration Statement on Form S-1 with the Securities and
Exchange Commission under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), hereby constitutes and appoints James E. Brown
and David E. Grose, III, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, and in any and all capacities, to sign and file (i)
any and all amendments (including post-effective amendments) to this
Registration Statement, with all exhibits thereto, and other documents in
connection therewith, and (ii) a registration statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act, with the Securities and Exchange
Commission, it being understood that said attorneys-in-fact and agents, and each
of them, shall have full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and that
each of the undersigned hereby ratifies and confirms all that said
attorneys-in-fact as agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ James E. Brown Chairman of the Board, President and Chief July 22, 1998
-------------------------------------- Executive Officer (Principal Executive
James E. Brown Officer)
/s/ David E. Grose, III Vice President and Chief Financial Officer July 22, 1998
-------------------------------------- (Principal Financial and Accounting
David E. Grose, III Officer)
/s/ Carl B. Anderson, III Director July 22, 1998
--------------------------------------
Carl B. Anderson, III
/s/ Mark Liddell Director July 22, 1998
--------------------------------------
Mark Liddell
</TABLE>
II-9
<PAGE> 161
<TABLE>
<S> <C> <C>
/s/ Sidney L. Tassin Director July 22, 1998
--------------------------------------
Sidney L. Tassin
/s/ Lew O. Ward Director July 22, 1998
--------------------------------------
Lew O. Ward
/s/ Merrill A. Miller, Jr. Director July 22, 1998
--------------------------------------
Merrill A. Miller, Jr.
</TABLE>
II-10
<PAGE> 162
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
3.2 -- Amended and Restated Bylaws of the Company, as adopted August
19, 1997 (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333-34451).
4.1 -- Specimen Stock Certificate for the Common Stock, par value
$0.01 per share, of the Company (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form
S-1 dated November 4, 1997, Registration No. 333-34451).
4.2 -- Indenture, dated as of June 26, 1998, by and among the Company
and Bayard Drilling, L.L.C., Bayard Drilling, L.P., Bonray
Drilling Corporation and Trend Drilling Co., as guarantors,
and U.S. Trust Company of Texas, N.A., as trustee.*
4.3 -- Registration Rights Agreement, dated as of June 26, 1998, by
and among the Company, Bayard Drilling, L.L.C., Bayard
Drilling, L.P., Bonray Drilling Corporation, Trend Drilling
Co., Donaldson, Lufkin & Jenrette Securities Corporation, BT
Alex. Brown, Dain Rauscher Wessels and Lehman Brothers Inc.*
5.1 -- Opinion of Baker & Botts, L.L.P. regarding the validity of the
securities being registered.*
9.1 -- Second Amended and Restated Stockholders and Voting Agreement,
dated as of October 16, 1997, by and among the Company and the
several stockholders that are signatories thereto
(incorporated by reference to Exhibit 9.1 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
9.2 -- First Amendment to Second Amended and Restated Stockholders
and Voting Agreement, dated as of November 3, 1997, by and
among the Company and the several stockholders that are
signatories hereto.
10.1 -- 1997 Stock Option and Stock Award Plan of the Company
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.2 -- Forms of Non-Qualified Stock Option Agreements under the 1997
Stock Option and Stock Award Plan (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on
Form S-1 dated November 4, 1997, Registration No. 333-34451).
10.3 -- Master Agreement, dated as of November 26, 1996, by and among
the Company and the stockholders of the Company that are
signatories thereto (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement on Form S-1 dated
November 4, 1997, Registration No. 333-34451).
10.4 -- Master Drilling Agreement, dated as of December 10, 1996, by
and among the Company, Chesapeake Energy Corporation and
Chesapeake Operating, Inc. (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form
S-1 dated November 4, 1997, Registration No. 333-34451).
10.5 -- Form of Chesapeake Drilling Agreement, by and between
Chesapeake Operating, Inc., as Operator, and the Company, as
Contractor (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333- 34451).
10.6 -- Securities Purchase Agreement, dated as of April 30, 1997, by
and among the Company, Energy Spectrum Partners LP and
Chesapeake Energy Corporation (the "May Securities Purchase
Agreement") (incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333-34451).
10.7 -- Form of Subordinated Note of the Company issued pursuant to
the May Securities Purchase Agreement (incorporated by
reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.8 -- Form of Series B Warrant to Purchase Common Stock of the
Company issued pursuant to the May Securities Purchase
Agreement (incorporated by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1 dated November 4,
1997, Registration No. 333-34451).
10.9 -- Ward Drilling Company, Inc. Warrant to Purchase Common Stock
of the Company, dated May 30, 1997 (incorporated by reference
to Exhibit 10.14 to the Company's Registration Statement on
Form S-1 dated November 4, 1997, Registration No. 333-34451).
10.10 -- Preferential Right to Transport Agreement, dated as of May 30,
1997, by and between the Company and Geronimo Trucking Company
(incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333- 34451).
10.11 -- RR&T, Inc. Warrant to Purchase Common Stock of the Company,
dated May 1, 1997 (incorporated by reference to Exhibit 10.16
to the Company's Registration Statement on Form S-1 dated
November 4, 1997, Registration No. 333-34451).
10.12 -- Mike Mullen Warrant to Purchase Common Stock of the Company,
dated May 1, 1997 (incorporated by reference to Exhibit 10.17
to the Company's Registration Statement on Form S-1 dated
November 4, 1997, Registration No. 333-34451).
10.13 -- Amended and Restated Loan and Security Agreement, dated as of
June 18, 1998 by and among Fleet Capital Corporation, the
Company and Bayard Drilling, L.P.*
10.14 -- Second Amended and Restated Loan Agreement, dated as of June
18, 1998, by and among The CIT Group/Equipment Financing, Inc.
and Fleet Capital Corporation, as Lenders, and the Company,
as Borrower.*
10.15 -- Employment Agreement, dated as of December 10, 1996, by and
between the Company and James E. Brown (incorporated by
reference to Exhibit 10.21 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
</TABLE>
<PAGE> 163
<TABLE>
<S> <C> <C>
10.16 -- Restricted Stock Award Agreement, dated as of December 10,
1996, by and between the Company and James E. Brown
(incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.17 -- Employment Agreement, dated as of January 1, 1997, by and
between the Company and Ed Jacob (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement on Form
S-1 dated November 4, 1997, Registration No. 333-34451).
10.18 -- Employment Agreement, dated as of July 16, 1997, by and
between the Company and David E. Grose (incorporated by
reference to Exhibit 10.24 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.19 -- Letter Agreement, dated as of August 20, 1997, by and between
the Company and Chesapeake Energy Corporation (incorporated by
reference to Exhibit 10.25 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.20 -- Form of Indemnification Agreement entered into by the Company
and each of the directors and certain officers of the Company
in connection with the Initial Public Offering (incorporated
by reference to Exhibit 10.26 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.21 -- Agreement and Plan of Merger, dated as of October 9, 1997, by
and among DLB Oil & Gas, Inc., the Company, Bonray Acquisition
Corp. and Bonray Drilling Corporation (incorporated by
reference to Exhibit 10.27 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.22 -- 1997 Non-Employee Directors' Stock Option Plan of the Company
(incorporated by reference to Exhibit 10.28 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.23 -- Form of Nonqualified Option Agreement under the 1997
Non-Employee Directors' Option Plan of the Company
(incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.24 -- Registration Rights Agreement, dated as of October 16, 1997,
by and among the Company, DLB Oil & Gas, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation (incorporated by
reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-1 dated November 4, 1997, Registration No.
333-34451).
10.25 -- Letter Agreement, dated as of October 3, 1997, by and between
the Company and The CIT Group/Equipment Financing, Inc.
(incorporated by reference to Exhibit 10.31 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333- 34451).
10.26 -- Second Amended and Restated Registration Rights Agreement,
dated as of October 30, 1997, by and among the Company and the
stockholders of the Company that are signatories thereto
(incorporated by reference to Exhibit 10.32 to the Company's
Registration Statement on Form S-1 dated November 4, 1997,
Registration No. 333-34451).
10.27 -- Stock Transfer Restriction Agreement, dated as of November 3,
1997, by and between the Company and Donaldson, Lufkin &
Jenrette Securities Corporation.
10.28 -- Asset Purchase Agreement, dated as of November 25, 1997, by
and between the Company and R.T. Oliver Drilling, Inc.
10.29 -- Asset Purchase Agreement, dated as of May 26, 1998, by and
among Bayard Drilling, L.P., Bayard Drilling Technologies,
Inc. and TransTexas Gas Corporation (incorporated by reference
to Exhibit 10.29 to the Company's Current Report on Form 8-K
filed on June 2, 1998).
10.30 -- Drilling Alliance Agreement, dated as of June 26, 1998, by and
between Bayard Drilling, L.P. and TransTexas Gas Corporation
(incorporated by reference to Exhibit 10.30 to the Company's
Current Report on Form 8-K filed on July 9, 1998).
10.31 -- Purchase Agreement, dated as of June 19, 1998, by and among
the Company, Bayard Drilling, L.L.C., Bayard Drilling, L.P.,
Bonray Drilling Corporation, Trend Drilling Co., Donaldson,
Lufkin & Jenrette Securities Corporation, BT Alex. Brown, Dain
Rauscher Wessels and Lehman Brothers Inc.*
10.32 -- Waiver of Certain Rights Under Second Amended and Restated
Stockholders and Voting Agreement, dated June 2, 1998, by
Charles E. Davidson, Mark Liddell and Mike Liddell.*
16.1 -- Letter re: Change in certifying Accountant (incorporated by
reference to Exhibit 16.1 to the Company's Form 10-K
for the year ended December 31, 1997).
21.1 -- Subsidiaries of the Company.*
23.1 -- Consent of PricewaterhouseCoopers LLP.*
23.2 -- Consent of Grant Thornton LLP.*
23.3 -- Consent of Baker & Botts, L.L.P. (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).*
24.1 -- Powers of Attorney (included in the signature page of the
Registration Statement).*
25.1 -- Statement of Eligibility of Trustee on Form T-1.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Notice of Guaranteed Delivery.*
99.3 -- Form of Tender Instructions.*
</TABLE>
- --------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 4.2
BAYARD DRILLING TECHNOLOGIES, INC.
AND
GUARANTORS
$100,000,000
11% Senior Notes due 2005
-------------------------
INDENTURE
Dated as of June 26, 1998
-------------------------
U. S. TRUST COMPANY OF TEXAS, N.A.
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE
Reconciliation and fee between The Trust Indenture Act, as amended,
and the Indenture dated as of June 26, 1998.
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- -------
<S> <C>
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; 12.08
(b) . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . 12.01, 12.02
(c)(2) . . . . . . . . . . . . . . . . . . . 12.01; 12.02
(c)(3) . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . 12.02
(f) . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(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
N.A. Means Not Applicable.
</TABLE>
- ---------------
Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Definitions and Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . 17
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2 - The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.05. Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.07. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.09. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.12. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . 29
SECTION 2.13. Authorized Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.14. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.15. Persons Deemed Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 3 - Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 4 - Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.02. Commission Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.04. Limitation on Subsidiary Indebtedness and Preferred Stock . . . . . . . . . . . . . 33
SECTION 4.05. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.06. Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.07. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.08. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.09. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.10. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.11. Limitation on Guarantees by Guarantors . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.12. Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.13. Limitation on Sale and Lease-Back Transactions . . . . . . . . . . . . . . . . . . 42
SECTION 4.14. Limitation on Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.15. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.16. Money for the Security Payments to be Held in Trust . . . . . . . . . . . . . . . . 42
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.17. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.18. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.19. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.20 Certificate; Notice of Default or Event of Default . . . . . . . . . . . . . . . . 43
SECTION 4.21. Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.22. Prohibition on Company and Guarantors Becoming Investment Companies . . . . . . . . 43
SECTION 4.23. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 5 - Consolidation, Merger, Conveyance, Lease or Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.01. Consolidation, Merger, Conveyance, Lease or Transfer . . . . . . . . . . . . . . . 44
SECTION 5.02. Officers' Certificate and Opinion of Counsel . . . . . . . . . . . . . . . . . . . 44
SECTION 5.03. Substitution of Surviving Entity . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6 - Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.13. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.14. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 7 - Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . 55
ARTICLE 8 - Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.01. Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.02. Application of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8.03. Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8.04. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 9 - Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.01. Company's Option to Effect Defeasance or Covenant Defeasance. . . . . . . . . . . . 57
SECTION 9.02. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.04. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . 57
SECTION 9.05. Deposited Money and U.S. Government Obligations to be Held
in Trust; Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<TABLE>
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<S> <C>
SECTION 9.06. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 9.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 10 - Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10.03. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.04. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.05. Revocation and Effect of Consents and Waivers . . . . . . . . . . . . . . . . . . . 61
SECTION 10.06. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.07. Trustee To Execute Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.08. Payment for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 11 - Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.01. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.02. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.03. Execution and Delivery of Guarantees . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.04. When a Guarantor May Merge, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.05. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.06. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.07. Release of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.08. Execution of Supplemental Indenture for Future Guarantors . . . . . . . . . . . . . 65
ARTICLE 12 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.01. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.02. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.03. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.04. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.06. Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar . . . . . . . . . . . . . . . . . . . 69
SECTION 12.08. Payments on Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 12.09. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 12.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 12.11. Submission to Jurisdiction; Appointment of Agent for Service of Process;
Waiver Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 12.12. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.13. Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.14. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.15. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . 70
</TABLE>
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<PAGE> 6
EXHIBIT A Form of Global Security
EXHIBIT B-1 Form of Certificate For Exchange or Registration of Transfer
From U.S. Global Note To Reg S Global Note
EXHIBIT B-2 Form of Certificate For Exchange or Registration of Transfer
From Reg S Global Note To U.S. Global Note
EXHIBIT B-3 Form of Certificate For Exchange or Registration of Transfer
of Certificated Security
EXHIBIT B-4 Form of Certificate For Exchange or Registration of Transfer
From U.S. Global Note or Reg S Permanent Global Note To
Certificated Security
EXHIBIT B-5 Form of Certificated Security
EXHIBIT C Form of Supplemental Indenture
-iv-
<PAGE> 7
INDENTURE dated as of June 26, 1998, among Bayard Drilling
Technologies, Inc., a Delaware corporation (the "Company"), certain of the
Company's subsidiaries signatory hereto (each, a "Guarantor," collectively, the
"Guarantors") and U. S. Trust Company of Texas, N.A., as trustee (the
"Trustee").
RECITALS:
The Company has duly authorized the creation and issuance of
its 11% Senior Notes due 2005, Series A (the "Series A Notes") of substantially
the tenor and amount hereinafter set forth; and to provide therefor and for, if
and when issued as further evidence of the Company's indebtedness and in
substitution for the Series A Notes pursuant to this Indenture and the
Registration Rights Agreement (as defined herein), the Company's 11% Senior
Notes due 2005, Series B (the "Series B Notes," and together with the Series A
Notes, the "Securities"), the Company has duly authorized the execution and
delivery of this Indenture.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid instrument of the Company and the Guarantors, in accordance
with their respective terms, have been done.
NOW, THEREFORE, 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 Securities:
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any specified Person
(a) 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, and (b) Indebtedness existing and secured by an asset
acquired by such specified Person but not incurred in contemplation of such
acquisition.
"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 properties and assets 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.
"Agent Member" has the meaning specified in Section 2.05(a).
"Applicable Procedures" means, with respect to any transfer or
exchange of beneficial interests in a Global Security, the rules and procedures
of the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
<PAGE> 8
"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
Subsidiary, in one transaction, or a series of related transactions, of (i) any
Capital Stock of any Subsidiary (except for directors' qualifying shares or
minority interests sold to other Persons solely due to local law requirements
that there be more than one stockholder or local ownership, 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, (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 sale, lease, 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 having a Fair Market Value in excess of $10.0
million 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 and (G)
any transfer of assets pursuant to a Permitted Investment. 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 (other than amounts required to
be paid on account of property taxes, maintenance, repairs, insurance,
assessments, utilities, operating and labor costs and other items which do not
constitute payments for property rights) during the remaining term of the lease
(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 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.
"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 Resolutions" 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 the City of Dallas, Texas and, with respect to any payment of cash or
delivery of securities, the place of such payment or delivery.
-2-
<PAGE> 9
"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,
membership 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).
"Cedel" means Cedel Bank, societe anonyme.
"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 lesser of the
aggregate amount of EBITDA of the Company and its consolidated Subsidiaries for
either (a) the four fiscal quarters immediately prior to the applicable
Transaction Date for which financial information in respect thereof is
available or (b) the immediately preceding fiscal quarter for which financial
information in respect thereof is available multiplied by four
-3-
<PAGE> 10
(the period yielding such lesser amount shall be 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, 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 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 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
one 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
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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, (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) and (ix) the
cumulative effect of any changes in accounting principles.
"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) on a consolidated basis at such date less amounts
attributable to Redeemable Stock of such Person or any of its subsidiaries with
each item determined in accordance with GAAP.
"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 2001 Ross Avenue, Suite 2700, Dallas, Texas 75201-2936.
"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.
"DTC" has the meaning specified in Section 2.03 hereof.
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"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 sum of,
without duplication, the amounts for such period, taken as a single accounting
period, of 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 and (vi) any other non-cash charges minus, to the extent
reflected in such income statement, any non-cash credits that had the effect of
increasing Consolidated Net Income of such Person for such period.
"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.
"Exchange Offer" means the registration by the Company under the
Securities Act of all the Series B Notes pursuant to a registration statement
under which the Company offers each Holder of Series A Notes the opportunity to
exchange all Series A Notes held by such Holder for Series B Notes in an
aggregate principal amount equal to the aggregate principal amount of Series A
Notes held by such Holder, all in accordance with the terms and conditions of
the Registration Rights Agreement.
"Euroclear" means the Euroclear System for which Morgan Guaranty Trust
Company of New York, Brussels office, is the operator and depositary.
"Exchange Global Security" means one or more Global Securities that do
not and are not required to bear the Private Placement Legend.
"Fair Market Value" means, with respect to consideration or other
amount received or to be received pursuant to any transaction by any Person,
the fair market value of such consideration or other amount 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 the Indenture shall
utilize GAAP in effect at the Issue Date.
"Global Security" means, individually and collectively, the Reg S
Global Notes, the U.S. Global Notes and the Exchange Global Security.
"Guarantee" means an unconditional guaranty of the Securities given by
any Subsidiary pursuant to the provisions of Article 11 of this Indenture.
"Guarantor" means each Subsidiary of the Company that is required 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
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Obligations under the Securities and this Indenture; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the
terms thereof.
"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, 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, excluding accounts payable and
accrued liabilities arising made in the ordinary course of business; (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 and accrued liabilities arising
in respect of Property and services purchased in the ordinary course of
business; (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; (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 described in clauses (i)
through (viii); (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 amount of any Interest Swap Obligation or Currency
Hedge Obligation of such Person at the time of determination; and (xii) any
obligation under a bond, note, payment guarantee or similar instrument 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 Supplement; 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.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Security through a Participant.
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"interest" means interest payable on the Securities pursuant to
paragraph 1 of the Securities, including additional interest payable under the
circumstances described in the Registration Rights Agreement and interest
payable, if any, under Section 2.12 of this Indenture.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities, which date shall be June 30 and December 31 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 or indirect
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 paid by such Person, and minus
the amount of any portion of such Investment repaid or loaned to such Person 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.
"Initial Purchasers" means, collectively, Donaldson, Lufkin & Jenrette
Securities Corporation, Lehman Brothers Inc., BT Alex. Brown and Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated.
"Joint Venture" means any Person (other than a Guarantor) designated
as such by a resolution of the Board of Directors 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).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
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"Loan Agreements" means the Term Loan, the Revolving Loan and three
notes totaling approximately $2.9 million outstanding at May 15, 1998 secured
by certain of the Company's equipment.
"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 Investors 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 agency (other than S&P) that rates the specified
debt securities selected by the Trustee.
"Net Available Proceeds" means, as to any Asset Sale, the Cash
Proceeds therefrom, net of all legal and title expenses, commissions and other
fees and expenses incurred (including, without limitation, fees and expenses of
legal counsel and accountants and fees, expenses, discounts or commissions of
underwriters, placement agents and investment bankers), and all Federal, state,
foreign, recording and local taxes payable or provided for 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 net of appropriate amounts to be provided by the
Company or any Subsidiary of the Company, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Company or any Subsidiary of the Company, as the
case may be, after such Asset Sale including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"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 constituting 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.
"Offering Memorandum" means the Confidential Offering Memorandum,
dated June 19, 1998, relating to the Company's offering and placement of the
Series A Notes.
"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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"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.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with
respect to DTC, shall include Euroclear and Cedel).
"Paying Agent" has the meaning specified in Section 2.03.
"Permitted Holders" means the parties to the Stockholders and Voting
Agreement by and among Energy Spectrum Partners LP, AnSon Partners Limited
Partnership, Carl B. Anderson, III, Charles E. Davidson, Mark Liddell and Mike
Liddell.
"Permitted Indebtedness" means (a) Indebtedness of the Company under
the Securities; (b) Indebtedness under the Loan Agreements; (c) Indebtedness
(and any guarantee thereof) under one or more credit or revolving Loan
Agreements with a bank or syndicate of banks or financial institutions or other
lenders, as such may be amended, modified, revised, extended, replaced, or
refunded from time to time, provided that at the date such Indebtedness is
incurred and after giving effect to the incurrence of such Indebtedness, the
aggregate amount of all Indebtedness outstanding at such time under this clause
(c) shall not exceed $50,000,000, 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 Loan Agreement) under such Loan
Agreements as contemplated by the provisions of Section 4.07 of this Indenture;
(d) 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; (e) 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; (f) Indebtedness of the Company or any
Subsidiary outstanding on the Issue Date; (g) the Guarantees of the Securities
(and any assumption of the Obligations guaranteed thereby); (h) 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; (i)
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 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; (j) Subordinated Indebtedness of the Company to an
Unrestricted Subsidiary; (k) 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; (l) Permitted Refinancing
Indebtedness; (m) Permitted Subsidiary Refinancing Indebtedness; and (n)
additional Indebtedness in an aggregate principal amount not in excess of
$5,000,000 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. For
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purposes of determining compliance with Sections 4.03 and 4.04, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness or is entitled to be incurred pursuant to
Sections 4.03 and 4.04, the Company shall, in its sole discretion, classify
such item of Indebtedness in any manner that complies with Sections 4.03 and
4.04 and such item of Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to Sections 4.03 and 4.04.
"Permitted Investments" means (a) certificates of deposit, bankers
acceptances, time deposits, Eurocurrency deposits and similar types of
Investments routinely offered by commercial banks 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
$100,000,000 (or being a member or subsidiary of a bank holding system with
aggregate combined capital and surplus of at least $100,000,000); (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 or 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 pursuant to 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 or otherwise in the Company's reasonable credit judgment; (k)
certificates of deposit, bankers acceptances, time deposits, Eurocurrency
deposits and similar types of Investments routinely offered by commercial banks
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 in
excess of $75,000,000; (l) Interest Swap Obligations with respect to any
floating rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding; (m) Currency Hedge Obligations, provided that such Currency
Hedge Obligations constitute Permitted Indebtedness permitted by clause (d) of
the definition thereof; (n) 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
(o) Investments pursuant to any agreement or obligation of the Company or any
Subsidiary in effect on the Issue Date.
"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 or
tender bonds or leases 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
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<PAGE> 18
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 (1) 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 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 180 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 (1) the outstanding secured Indebtedness of the Company and its
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; (q) liens
in favor of the Company; (r) other deposits made to secure liability to
insurance carriers under insurance or self insurance arrangements; (s) Liens
securing reimbursement obligations under letters of credit, provided in each
case that such Liens cover only the title documents and related goods (and any
proceeds thereof) covered by the related letter of Credit and (t) Liens or
equitable encumbrances deemed to exist by reason of a negative pledge or other
arrangements to refrain from permitting Liens.
"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 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
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<PAGE> 19
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, limited liability company,
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.
"Private Placement Legend" has the meaning set forth in Section
2.06(e)(i) hereto.
"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 (other than on Form
S-8) or any private placement of Capital Stock (other than Redeemable Stock) of
the Company which offering or placement is consummated after the Issue Date.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A 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.
"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.
"Reg S Global Note" means a permanent global senior note that contains
the text referred to in footnotes 1 and 3 and the additional schedule referred
to in footnote 4 to the form of the Security attached hereto as Exhibit A, and
that is deposited with the Security Custodian and registered in the name of the
Depositary or its nominee, representing the Series A Notes sold in reliance on
Regulation S.
"Regulation S" means Regulation S under the Securities Act (including
any successor regulation thereto), as it may be amended from time to time.
"Registrar" has the meaning specified in Section 2.03.
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<PAGE> 20
"Registration Rights Agreement" means the A/B Exchange Registration
Rights Agreement, dated as June 26, 1998, by and among the Company, the
Guarantors and each of the purchasers named on the signature pages thereto, as
such agreement may be amended, modified or supplemented from time to time.
"Related Business" means the contract drilling business and activities
incidental thereto and any business related, complementary 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.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"S&P" 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 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 by the
Trustee.
"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.
"Securities" means the Series A Notes and Series B Notes issued
pursuant to this Indenture, as the same may be amended and supplemented from
time to time.
"Securities Custodian" means the Trustee, as custodian for the
Depositary with respect to the Securities in global form, or any successor
entity thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning specified in Section 2.03.
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<PAGE> 21
"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.
"Series A Notes" means the Company's 11% Series A Senior Notes due
2005, as the same may be amended or supplemented from time to time in
accordance with the terms thereof, that are issued pursuant to this Indenture.
"Series B Notes" means the Company's 11% Series B Senior Notes due
2005, as the same may be amended or supplemented from time to time in
accordance with the terms thereof, that are issued pursuant to this Indenture
in exchange for the Series A Notes in the Exchange Offer.
"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 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 of such
Person, or by such Person and one or more other subsidiaries of such Person,
(ii) any general partnership, limited liability company, joint venture or
similar entity, more than 50% of the outstanding partnership, membership 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 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. For
purposes of this definition, any directors' qualifying shares or investments by
foreign nationals mandated by applicable law shall be disregarded in
determining the ownership of a Subsidiary.
"Subsidiary" means a subsidiary of the Company other than an
Unrestricted Subsidiary.
"Surviving Entity" has the meaning specified in Section 5.01.
"Transaction Date" has the meaning specified within the definition of
"Consolidated Interest Coverage Ratio."
"Transfer Restricted Security" means a Security bearing a Private
Placement Legend.
"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,
except as provided in Section 10.04.
"Trust Officer" means any officer or assistant officer within the
corporate trust department of the Trustee assigned by the Trustee to administer
its corporate trust matters.
"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.
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<PAGE> 22
"U.S. Global Note" means a permanent Global Security that contains the
text referred to in footnotes 1 and 3 and the additional schedule referred to
in footnote 4 to the form of the Security attached hereto as Exhibit A, and
that is deposited with the Security Custodian and registered in the name of the
Depositary or its nominee, representing Securities sold in reliance on Rule
144A or in reliance on another exemption from the registration requirements of
the Securities Act.
"U.S. Government Obligations" means 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.
"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.
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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;
(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;
(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;
and
(10) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the Commission from time to time.
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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 form of Exhibit A and Exhibit B-5, each 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 and
provisions contained in the Securities and the Guarantee set forth in Exhibit A
and Exhibit B-5 shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Guarantors, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
(b) Series A Notes, with the notations of the Guarantees endorsed
thereon, shall be issued in the form of one or more permanent Global Securities
in definitive fully registered form without coupons. Securities offered and
sold to QIBs in reliance on Rule 144A shall be issued initially in the form of
the U.S. Global Notes, which shall be deposited on behalf of the purchasers of
the Securities represented thereby with the Securities Custodian, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided. Series A
Notes offered and sold in reliance on Regulation S shall be issued initially in
the form of the Reg S Global Note, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Securities Custodian,
and registered in the name of the Depositary or the nominee of the Depositary
for the accounts of designated agents holding on behalf of Euroclear or Cedel,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. During the "40-day distribution compliance period" (as defined in
Regulation S) (the "40-day Distribution Compliance Period") beneficial
interests in the Reg S Global Note shall be held only through Euroclear or
Cedel, and, pursuant to the Depositary's procedures, Indirect Participants that
hold a beneficial interest in the Reg S Global Note shall not be able to
transfer such interest to a person that takes delivery thereof in the form of
an interest in the U.S. Global Notes. Following the termination of the 40-day
Distribution Compliance Period, beneficial interests in the Reg S Global Notes
shall be exchanged for beneficial interests in U.S. Global Notes and beneficial
interests in the U.S. Global Notes shall be exchanged for beneficial interests
in the Reg S Global Notes, pursuant to the Applicable Procedures. The aggregate
principal amount of the Reg S Global Notes may from time to time be increased
or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed on Schedule A thereto and that the aggregate amount of outstanding
Securities represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges, redemptions and transfers of interests.
Any endorsement of Schedule A of a Global Security to reflect the amount of any
increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee or the Securities Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the
"Management Regulations" and "Instructions to Participants" of Cedel shall be
applicable to interests in the Reg S Global Notes that are held by Participants
through Euroclear or Cedel. The Trustee shall have no obligation to notify
Holders of any such procedures or to monitor or enforce compliance with the
same.
Except as set forth in Section 2.06 hereof, the Global
Securities may be transferred, in whole and not in part, only to another
nominee of the Depositary or to a successor of the Depositary or its nominee.
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<PAGE> 25
(c) This paragraph 2.01(c) shall apply only to Global Securities
deposited with or on behalf of the Depositary. The Company shall execute and
the Trustee shall, in accordance with this paragraph, authenticate and deliver
the Global Securities that (i) shall be registered in the name of the
Depositary or the nominee of the Depositary and (ii) shall be delivered by the
Trustee to the Depositary or pursuant to the Depositary's instructions or held
by the Securities Custodian. Participants shall have no rights either under
this Indenture with respect to any Global Securities held on their behalf by
the Depositary or by the Securities Custodian as custodian for the Depositary
or under such Global Security, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Security.
(d) Any certificated Security that may be issued pursuant to
Section 2.06(b) or (c) 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-5 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.
SECTION 2.02. Execution and Authentication. The aggregate
principal amount at Stated Maturity of Securities outstanding at any time shall
not exceed $100,000,000 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 Securities only upon receipt by the Trustee of an
Officers' Certificate and Opinion of Counsel complying with Sections 12.01 and
12.02 hereof 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 $100,000,000 in the form of the Global
Security. Such Order shall specify 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.
Series B Notes may be issued only in exchange for a like principal
amount of Series A Notes pursuant to an Exchange Offer.
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.
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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.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
If the Securities are to be issued in the form of one or more Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Global Securities that shall represent and shall be in
minimum denominations of $1,000.
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 (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 U. S.
Trust Company of Texas, N.A. 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 12 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.
The Company initially appoints the Depository Trust Company ("DTC") to
act as the Depositary with respect to the Global Securities. Cede & Co. has
been appointed as the nominee of DTC.
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
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shall notify the Trustee of any default by the Company in making any such
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 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 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 Securities is entitled to take under this Indenture or
the Securities.
(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 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) Transfer and Exchange of Global Securities. The transfer and
exchange of beneficial interests in Global Securities shall be effected through
the Depositary, in accordance with this Indenture and the Applicable
Procedures, which shall include restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Security may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Security in
accordance with the transfer restrictions set forth in the legend in subsection
(e) of this Section 2.06. Transfers of beneficial interests in the Global
Securities to Persons required to take delivery thereof in the form of an
interest in another Global Security shall be permitted as follows:
(i) U.S. Global Note to Reg S Global Note. Prior to the
expiration of the 40-day Distribution Compliance
Period, an owner of a beneficial interest in a U.S.
Global Note deposited with the Depositary (or the
Securities Custodian) will not be permitted to
transfer its interest to a Person who wishes to
take delivery thereof in the form of an interest in
the Reg S Global Note. If, at any time after the
expiration of the 40-day Distribution Compliance
Period, an owner of a beneficial interest in a U.S.
Global Note deposited with the Depositary (or the
Securities Custodian) wishes to transfer its
beneficial interest in such U.S. Global Note to a
Person who is required or permitted to take
delivery thereof in the form of an interest in a
Reg S Global Note, such owner shall, subject to the
Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent
beneficial interest in a Reg S Global Note as
provided in this Section 2.06(a)(i). Upon receipt
by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from a
Participant directing the Trustee to credit or
cause to be credited a beneficial interest in the
Reg S Global Note in an amount equal to the
beneficial interest in the U.S. Global Note to be
exchanged, (2) a written order given in accordance
with the Applicable Procedures
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containing information regarding the Participant
account of the Depositary and the Euroclear or Cedel
account to be credited with such increase, and (3) a
certificate in the form of Exhibit B-1 hereto given
by the owner of such beneficial interest stating
that the transfer of such interest has been made in
compliance with the transfer restrictions applicable
to the Global Securities and pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation
S, then the Trustee, as Registrar, shall instruct
the Depositary to reduce or cause to be reduced the
aggregate principal amount at Maturity of the
applicable U.S. Global Note and to increase or cause
to be increased the aggregate principal amount at
Maturity of the applicable Reg S Global Note by the
principal amount at Maturity of the beneficial
interest in the U.S. Global Note to be exchanged or
transferred, to credit or cause to be credited to
the account of the Person specified in such
instructions, a beneficial interest in the Reg S
Global Note equal to the reduction in the aggregate
principal amount at Maturity of the U.S. Global
Note, and to debit, or cause to be debited, from the
account of the Person making such exchange or
transfer the beneficial interest in the U.S. Global
Note that is being exchanged or transferred.
(ii) Reg S Global Note to U.S. Global Note. Prior to
the expiration of the 40-day Distribution
Compliance Period, an owner of a beneficial
interest in a Reg S Global Note deposited with the
Depositary (or the Securities Custodian) will not
be permitted to transfer its interest to a Person
who wishes to take delivery thereof in the form of
an interest in a U.S. Global Note. If, at any
time, after the expiration of the 40-day
Distribution Compliance Period, an owner of a
beneficial interest in a Reg S Global Note
deposited with the Depositary or with the
Securities Custodian wishes to transfer its
beneficial interest in such Reg S Global Note to a
Person who is required or permitted to take
delivery thereof in the form of an interest in a
U.S. Global Note, such owner shall, subject to the
Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent
beneficial interest in a U.S. Global Note as
provided in this Section 2.06(a)(ii). Upon receipt
by the Trustee of (1) instructions from Euroclear
or Cedel, if applicable, and the Depositary,
directing the Trustee, as Registrar, to credit or
cause to be credited a beneficial interest in the
U.S. Global Note equal to the beneficial interest
in the Reg S Global Note to be exchanged, such
instructions to contain information regarding the
Participant account with the Depositary to be
credited with such increase, (2) a written order
given in accordance with the Applicable Procedures
containing information regarding the participant
account of the Depositary and (3) a certificate in
the form of Exhibit B-2 attached hereto given by
the owner of such beneficial interest stating (A)
if the transfer is pursuant to Rule 144A, that the
Person transferring such interest in a Reg S Global
Note reasonably believes that the Person acquiring
such interest in a U.S. Global Note is a QIB and is
obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any
applicable blue sky or securities laws of any state
of the United States, (B) that the transfer
complies with the requirements of Rule 144 under
the Securities Act or (C) if the transfer is
pursuant to any other exemption from the
registration requirements of the Securities Act,
that the transfer of such interest has been made in
compliance with the transfer restrictions
applicable to the Global Securities and pursuant to
and in accordance with the requirements of the
exemption claimed, such statement to be supported
by an Opinion of Counsel from the transferee or the
transferor in form and substance reasonably
acceptable to the Company and to the Registrar and,
in each case, in accordance with any applicable
securities laws of any state of the United States
or any other applicable jurisdiction, then the
Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of such Reg
S Global Note and to increase or cause to be
increased the aggregate principal amount at
maturity of the applicable U.S. Global Note by the
principal amount at maturity of the beneficial
interest in the Reg S Global Note to be exchanged
or transferred, and the Trustee, as Registrar,
shall instruct the Depositary, concurrently with
such redemption, to credit or cause to be credited
to the account of the Person specified in such
instructions a beneficial interest in the
applicable U.S. Global
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<PAGE> 29
Note equal to the reduction in the aggregate
principal amount at maturity of such Reg S Global
Note and to debit or cause to be debited from the
account of the Person making such transfer the
beneficial interest in the Reg S Global Note that is
being exchanged or transferred.
(b) Transfer and Exchange of Certificated Securities.
When Certificated Securities are presented by a Holder to the Registrar with a
request to register the transfer of the Certificated Securities or to exchange
such Certificated Securities for an equal principal amount of Certificated
Securities of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested only if the Certificated Securities
are presented or surrendered for registration of transfer or exchange, are
endorsed and contain a signature guarantee or are accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney and contains a signature guarantee, duly
authorized in writing and the Registrar received the following documentation
(all of which may be submitted by facsimile):
in the case of Certificated Securities that are
Transfer Restricted Securities, such request shall
be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for
registration in the name of such Holder,
without transfer, or such Transfer Restricted
Security is being transferred to the Company,
a certification to that effect from such
Holder (in substantially the form of Exhibit
B-3 hereto); or
(B) if such Transfer Restricted Security is being
transferred to a QIB in accordance with Rule
144A under the Securities Act or pursuant to
an exemption from registration in accordance
with Rule 144 under the Securities Act or in
an offshore transaction pursuant to and in
compliance with Rule 904 under the Securities
Act or pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from such Holder
(in substantially the form of Exhibit B-3
hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on any other
exemption from the registration requirements
of the Securities Act, a certification to
that effect from such Holder (in
substantially the form of Exhibit B-3 hereto)
and an Opinion of Counsel from such Holder or
the transferee reasonably acceptable to the
Company and to the Registrar to the effect
that such transfer is in compliance with the
Securities Act.
(c) Transfer of a Beneficial Interests in Global Securities for
Certificated Securities.
(i) The Global Securities that are Transfer Restricted Securities
or the Exchange Global Securities, as the case may be, shall
be exchanged by the Company for one or more Certificated
Securities representing Series A Notes or Series B Notes, as
the case may be, if (x) the Depositary (i) has notified the
Company that it is unwilling or unable to continue as, or
ceases to be, a "Clearing Agency" registered under Section 17A
of the Exchange Act and (ii) a successor to the Depositary
registered as a "Clearing Agency" under Section 17A of the
Exchange Act is not able to be appointed by the Company within
90 calendar days or (y) the Depositary is at any time
unwilling or unable to continue as Depositary and a successor
to the Depositary is not able to be appointed by the Company
within 90 calendar days or (iii) the Company, at its option,
delivers a notice in the form of an Officers' Certificate that
it elects to cause the issuance of Certificated Securities.
If an Event of Default occurs and is continuing, the Company
shall, at the request of the Holder thereof, exchange all or
part of a Global Security that is a Transfer Restricted
Security or an Exchange Global Security, as the case may be,
for one or more Certificated Securities representing Series A
Notes or Series B Notes, as the case may be; provided that the
principal amount of each of such Certificated Securities, and
such Global Security, after such exchange, shall be $1,000 or
an integral multiple thereof. Whenever a Global Security is
exchanged
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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 2.01 hereof. All Certificated
Securities or Series B Notes, as the case may be, 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. Any Certificated Securities issued
pursuant to this Section 2.06(c)(i) shall include the Private
Placement Legend, except as otherwise provided for by Section
2.06 hereof. Interests in a Global Security may not be
exchanged for Certificated Securities other than as provided in
this Section 2.06. If a beneficial interest in a Transfer
Restricted Security is being transferred, the following
additional documents and information must be submitted
(including by facsimile):
(A) if such beneficial interest is being transferred to
the Person designated by the Depositary as being
the beneficial owner, a certification to that
effect from such Person (in substantially the form
of Exhibit B-4 hereto);
(B) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or in an offshore transaction
pursuant to and in compliance with Rule 904 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from the transferor
(in substantially the form of Exhibit B-4 hereto);
and
(C) if such beneficial interest is being transferred in
reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferor
(in substantially the form of Exhibit B-4 hereto)
and an Opinion of Counsel from the transferee or
the transferor reasonably acceptable to the Company
and to the Registrar to the effect that such
transfer is in compliance with the Securities Act,
in which case the Trustee or the Securities
Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and
procedures existing between the Depositary and the
Securities Custodian, cause the aggregate principal
amount of U.S. Global Notes or Reg S Global Notes,
as applicable, to be reduced accordingly and,
following such reduction, the Company shall execute
and, the Trustee shall authenticate and deliver to
the transferee a Certificated Security in the
appropriate principal amount.
(ii) Certificated Securities issued in exchange for a beneficial
interest in a U.S. Global Note or Reg S Global Note, as
applicable, pursuant to this Section 2.06(c) shall be
registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its
Participants or Indirect Participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such
Certificated Securities to the Persons in whose names such
Securities are so registered. Following any such issuance of
Certificated Securities, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable
Global Security to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (e) of this Section 2.06), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Any Holder of
a beneficial interest in a Global 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. Interests of beneficial owners in a Global Security may be
transferred in accordance with the rules and procedures of the Depositary (or
its successors).
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<PAGE> 31
(e) Legends.
(i) Except as permitted by the following paragraphs
(ii), (iii) and (iv), each Security certificate
evidencing Global Securities and Certificated
Securities (and all Securities issued in exchange
therefor or substitution thereof) shall bear a
legend (the "Private Placement Legend") in
substantially the following form:
THIS NOTE (OR ITS PREDECESSOR) AND ANY GUARANTEE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND
SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) (A "QIB"), OR (B)
IT IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO
THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B)
TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF
REGULATION S UNDER THE SECURITIES ACT, (D) IN
A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY, IF REQUESTED BY
THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING.
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted
Security represented by a Global Security) pursuant
to Rule 144 under the Securities Act or pursuant to
an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Certificated Security, the
Registrar shall permit the Holder thereof to
exchange such Transfer Restricted
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<PAGE> 32
Security for a Certificated Security that
does not bear the legend set forth in (i)
above and rescind any restriction on the
transfer of such Transfer Restricted Security
upon receipt of a certification from the
transferring Holder substantially in the form
of Exhibit B-4 hereto; and
(B) in the case of any Transfer Restricted
Security represented by a Global Security,
such Transfer Restricted Security shall not
be required to bear the legend set forth in
(i) above, but shall continue to be subject
to the provisions of Section 2.06(a) and (b)
hereof; provided, however, that with respect
to any request for an exchange of a Transfer
Restricted Security that is represented by a
Global Security for a Certificated Security
that does not bear the legend set forth in
(i) above, which request is made in reliance
upon Rule 144, the Holder thereof shall
certify in writing to the Registrar that such
request is being made pursuant to Rule 144
(such certification to be substantially in
the form of Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Security) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to
Rule 144A or Rule 144 under the Securities Act) in
which the Holder or the transferee provides an
Opinion of Counsel to the Company and the Registrar
in form and substance reasonably acceptable to the
Company and the Registrar (which Opinion of Counsel
shall also state that the transfer restrictions
contained in the legend are no longer applicable):
(A) in the case of any Transfer
Restricted Security that is a
Certificated Security, the Registrar
shall permit the Holder thereof to
exchange such Transfer Restricted
Security for a Certificated Security
that does not bear the legend set
forth in (i) above and rescind any
restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer
Restricted Security represented by a
Global Security, such Transfer
Restricted Security shall not be
required to bear the legend set
forth in (i) above, but shall
continue to be subject to the
provisions of Section 2.06(a) and
(b) hereof.
(iv) By its acceptance of any Initial Security
represented by a certificate bearing the Private
Placement Legend, each Holder of, and beneficial
owner of an interest in, such Initial Security
acknowledges the restrictions on transfer of such
Initial Security set forth in the Private Placement
Legend and under the heading "Notice to Investors"
in the Offering Memorandum and agrees that it will
transfer such Initial Security only in accordance
with the Private Placement Legend and the
restrictions set forth under the heading "Notice to
Investors" in the Offering Memorandum.
(v) Notwithstanding the foregoing, upon the occurrence
of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall
issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee
shall authenticate (i) one or more unrestricted
Global Securities in aggregate principal amount
equal to the principal amount of the restricted
beneficial interests validly tendered and not
properly withdrawn by Persons that certify in the
letter of transmittal delivered in the Exchange
Offer that they are not (x) broker-dealers, (y)
Persons participating in the distribution of the
Series B Notes or (z) Persons who are affiliates
(as defined in Rule 144 under the Securities Act)
of the Company and accepted for exchange in the
Exchange Offer and (ii) Certificated Securities
that do not bear the Private Placement Legend in an
aggregate principal amount equal to the principal
amount of the Certificated Securities that are
Transfer Restricted Securities accepted for
exchange in the Exchange Offer. Concurrently
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with the issuance of such Securities, the Trustee
shall cause the aggregate principal amount of the
applicable Global Securities to be reduced
accordingly and the Company shall execute and the
Trustee shall authenticate and deliver to the
Persons designated by the Holders of Certificated
Securities so accepted Certificated Securities in
the appropriate principal amount.
(f) Cancellation and/or Adjustment of Global Securities. At such
time as all beneficial interests in Global Securities have been exchanged for
Certificated Securities, redeemed, repurchased or canceled, all Global
Securities shall be returned to or retained and canceled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for Certificated
Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced accordingly and
an endorsement shall be made on such Global Security, by the Trustee or the
Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(g) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall
authenticate Global Securities and Certificated
Securities at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the
Company may require payment of a sum sufficient to
cover any stamp or transfer tax or similar
governmental charge payable in connection therewith
(other than any such stamp or transfer taxes or
similar governmental charge payable upon exchange
or transfer pursuant to Sections 2.10, 3.06, 4.07,
4.09 and 10.06 hereto).
(iii) All Global Securities and Certificated Securities
issued upon any registration of transfer or
exchange of Global Securities or Certificated
Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the
Global Securities or Certificated Securities
surrendered upon such registration of transfer or
exchange.
(iv) The Registrar shall not be required: (A) to issue,
to register the transfer of or to exchange
Securities during a period beginning at the opening
of fifteen (15) Business Days before the day of any
selection of Securities for redemption under
Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register
the transfer of or to exchange any Security so
selected for redemption in whole or in part, except
the unredeemed portion of any Security being
redeemed in part, or (C) to register the transfer
of or to exchange a Security between a Record Date
and the next succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a
transfer of any Security, the Trustee, any Agent
and the Company may deem and treat the Person in
whose name any Security is registered as the
absolute owner of such Security for the purpose of
receiving payment of principal of and interest on
such Securities and for all other purposes, and
neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
(iv) The Trustee shall authenticate Global Securities
and Certificated Securities in accordance with the
provisions of Section 2.02 hereof.
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 and shall otherwise comply with TIA
Section 312(a). 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 (which may be
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conclusively relied upon by the Trustee) in such form and as of such date as
the Trustee may reasonably require of the names and addresses of Holders and
the Company shall otherwise comply with TIA Section 312(a).
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
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 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 actually 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. The Trustee may require an Officers'
Certificate listing Securities owned by the Company, or a Guarantor or an
Affiliate of the Company or a Guarantor or by any agents of the foregoing.
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<PAGE> 35
SECTION 2.10. Temporary Securities. Until definitive Securities
are ready for delivery, the Company may prepare and upon Order 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 upon Order 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. Upon Order, 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.
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 Defaulted 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.
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<PAGE> 36
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" 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.
SECTION 2.15. Persons Deemed Holders. The Company, the Trustee,
any Paying Agent and any authenticating agent may treat the Person in whose
name any Security is registered as the owner of such Security for the purpose
of receiving payments of principal of, premium, if any, or interest on such
Security and for all other purposes. None of the Company, the Trustee, any
Paying Agent or any authenticating agent shall be affected by any notice to the
contrary.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to Section 3.07, 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 Securities 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.
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 at its registered address.
The notice shall identify the Securities (including CUSIP numbers) to
be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
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<PAGE> 37
(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 Trustee with the information required by this
Section at least 45 days before the Redemption Date.
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 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. No later than 10:00
a.m. (New York City time) on 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 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
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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 Security,
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 June 30, 2003. 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 Prices
(expressed as percentages of principal amount at Stated Maturity), if redeemed
during the 12-month period beginning June 30 of the years indicated below, in
each case, together with any interest accrued and unpaid to the Redemption Date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date):
<TABLE>
<CAPTION>
<S> <C>
Year Percentage
---- ----------
2003 105.5000%
2004 and thereafter 100.0000%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or before June
30, 2001, the Company may, at its option, redeem up to a maximum of 35% 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 111% of the principal amount thereof, plus accrued and unpaid interest
thereon to the Redemption Date; provided that at least $65,000,000 of the
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.
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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., New York City 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 New York, New York 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 (including post-petition interest in
any proceeding under any applicable bankruptcy law) on overdue principal and
premium, if any, at the rate borne by the Securities to the extent lawful; and
it shall pay interest (including post-petition interest in any proceeding under
any applicable bankruptcy law 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
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 preceding the Transaction Date is
at least 2.5 to 1.0. Notwithstanding the foregoing, the Company or any
Subsidiary (subject to the provisions of Section 4.04) 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. Subject to the provisions of Section 4.03, 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;
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(iv) Indebtedness described in clauses (b), (c), (d), (e), (f),
(g), (h), (k) and (n) under the definition of "Permitted Indebtedness";
(v) Permitted Subsidiary Refinancing Indebtedness of such
Subsidiary;
(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;
(viii) Non-Recourse Indebtedness incurred by a foreign Subsidiary not
constituting a Guarantor; and
(ix) Indebtedness incurred to finance all or a part of the purchase
price or construction, repair or improvement cost of Property acquired,
constructed, repaired or improved after the Issue Date.
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 immediately 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 for which internal financial
statements are available 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,
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, plus $10,000,000.
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<PAGE> 41
(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 and foreign Subsidiaries not constituting Guarantors in an aggregate
amount not to exceed $5,000,000; (v) the payment of any dividend or
distribution by a Subsidiary of the Company or any of its Wholly Owned
Subsidiaries; (vi) so long as no Default or Event of Default shall have
occurred and be continuing or should occur as a consequence thereof, the
repurchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company held by any employee of the Company or any of its
Subsidiaries, provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Capital Stock pursuant to the terms of an
employee benefit plan or employment or similar agreement shall not exceed
$500,000 in any calendar year; and (vii) the acquisition of Capital Stock by
the Company in connection with the exercise of stock options or stock
appreciation rights by way of cashless exercise or in connection with the
satisfaction of withholding tax obligations. 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 clauses (i), (iv), (v) (but only to the extent paid to someone
other than the Company or any of its Wholly Owned Subsidiaries) and (vi) will
be included in calculating the amount of Restricted Payments thereafter.
(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;
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(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;
(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; or
(viii) existing under or by reason of applicable law, rules or
regulations, or any order or ruling by any governmental authority;
(ix) constituting customary restrictions on cash or other deposits
imposed by customers under contracts entered into in the ordinary course of
business;
(x) constituting restrictions with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the capital stock or assets of such Subsidiary pending the
closing of such sale or disposition; or
(xi) constituting provisions contained in agreements or
instruments relating to Indebtedness which prohibit the transfer of all or
substantially all of the assets of the obligor thereunder unless the transferee
shall assume the obligations of the obligor under such agreement or instrument.
SECTION 4.07. Limitation on Asset Sales.
(a) 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 an
Asset Sale resulting from the requisition of title to, seizure or forfeiture of
any Property or assets or any actual or constructive total loss or an agreed or
compromised total loss, 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; and (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); and (c) the Company delivers to the Trustee
an Officers' Certificate certifying that such Asset Sale complies with clauses
(a) and (b); provided, however that any Asset Sale pursuant to a condemnation,
appropriation or other similar taking, including by deed in lieu of
condemnation, or pursuant to the foreclosure or other enforcement of a
Permitted Lien or exercise by the related lienholder of rights with respect
thereto, including by deed or assignment in lieu of foreclosure, shall not be
required to satisfy the conditions set forth in clauses (a) and (b) of this
sentence. 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; provided, further, however, that the amount of (A) any liabilities (as
shown on the Company's or such Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Subsidiary that are assumed by the
transferee of any such assets and (B) any notes or other obligations received
by the Company or any such Subsidiary from such transferee that are converted
by the Company or such Subsidiary into cash (to the extent of the case
received) within 90 days of such Asset Sale, shall be deemed to be cash for
purposes of this
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provision. 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
$10,000,000, the Company shall within 30 days thereafter be required to make an
offer to all Holders of Securities and other Indebtedness that ranks by its
terms pari passu in right of payment with the Securities and the terms of which
contain substantially similar requirements with respect to the application of
net proceeds from asset sales as are contained in this Indenture (an "Asset
Sale Offer") to purchase on a pro rata basis the maximum principal amount of
Securities, that is an integral multiple of $1,000, that may be purchased out
of the Excess Proceeds, at an offer price in cash (the "Asset Sale Offer
Purchase Price") in an amount equal to 100% of the principal amount at Stated
Maturity thereof plus accrued and unpaid interest thereon, if any, to the Asset
Sale Offer 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 $10,000,000, 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;
(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 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
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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 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) Pending the final application of any such Net Available
Proceeds, the Company may temporarily reduce Indebtedness under any Credit
Facility or otherwise invest such Net Available Proceeds in any manner that is
not prohibited under this Indenture.
(i) 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.
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(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 transactions (including, but limited
to, the purchase, sale or exchange of Property, the making of any Investment,
the giving of any guarantee to, or the rendering of any service with, any
Affiliate of the Company, other than transactions among the Company and any
Guarantor 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 of the Company and
(ii) (A) with respect to a transaction or series of related transactions that
has a Fair Market Value in excess of $5,000,000 but less than $10,000,000, 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 $10,000,000, 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 as well as stock option agreements, restricted stock agreements and
consulting or similar agreements), (ii) the making of any Restricted Payment
otherwise permitted by this Indenture, (iii) any existing employment agreement,
stock option agreement, restricted stock agreement, consulting agreement or
similar agreement, (iv) any agreement in effect on the Issue Date or any
amendment thereto (so long as such amendment is, taken as a whole, no less
favorable to the holders of the Securities than the original agreement as in
effect on the Issue Date) and any transactions contemplated thereby, or (v) any
transaction described in the section entitled "Certain Relationships and
Related Transactions" of the Offering Memorandum.
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;
(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
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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 that is being tendered for purchase, which principal
amount must be $1,000 at Stated Maturity 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 Security with a
notation on Schedule A thereof adjusting the principal amount 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 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 Security
equal in principal amount at Stated Maturity to the unpurchased portion of such
surrendered Certificated Security; 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 Security to an
amount equal to the unpurchased portion of such Global Security, as provided in
Section 2.05 hereof.
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(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 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.
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(a) 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 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(a)
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 such
Subsidiary would have been permitted to enter into such transaction under the
provisions of Sections 4.03, 4.04 and 4.10.
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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. 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 designated
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 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,
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might by law become a Lien upon the property 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) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants or its successor, 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
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 any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default, describing its status with particularity, 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
Person),
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or continue in any new 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
Person or (B) the Person (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 Person, the
"Surviving Entity"), shall be a Person 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 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 or a Wholly Owned Subsidiary.
SECTION 5.02. Officers' Certificate and Opinion of Counsel. In
connection with any consolidation, merger, continuation, transfer of assets or
other transactions contemplated by this provision, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, continuation, 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, upon Order 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
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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, 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.
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 60 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 (other than
Non-Recourse Indebtedness) 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 $10,000,000 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
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(ii) a decree or order adjudging the Company or any Significant Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any Significant Subsidiary under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or foreign
bankruptcy, insolvency, or similar law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Significant Subsidiary or of any substantial part of the
Property or assets of the Company or any Significant Subsidiary, or ordering
the winding up or liquidation of the affairs of the Company or any Significant
Subsidiary, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days;
(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 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, and 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
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(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 (except
nonpayment of principal, interest or Liquidated Damages that has
become due solely because of the acceleration).
(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
(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. Subject to Section 6.07,
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, or premium, if any, on a Security or (ii) a
Default in respect of a provision that under Section 10.02 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. The Company shall deliver to the
Trustee an Officers' Certificate stating that the required percentage of
Holders have consented to such waiver and attaching copies of such consents.
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.
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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;
(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 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,
(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
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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 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
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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:
(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, and the Trustee
shall be entitled from time to time to request and receive such a
direction.
(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.
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(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.
(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.
(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 reasonable 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.
(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
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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, without any duty to make any investigation with regard thereto.
(k) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee satisfactory security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(l) Subject to Section 9.02 hereof, the Trustee may (but shall not
be obligated to), without the consent of the Holders, give any consent, waiver
or approval required by the terms hereof. The Trustee shall be entitled to
request and conclusively rely on an Opinion of Counsel with respect to whether
any consent, waiver, approval, amendment or modification shall have a material
adverse effect on the interests or rights of any Holder.
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. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue as trustee or resign.
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 actually known to the Trustee, the Trustee shall mail
to each Holder notice of the Default within 90 days after it occurs but in no
event sooner than five days after the Trustee becomes actually aware of the
Default. 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.
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 and any
taxes or other expenses incurred by a trust created pursuant to Article 9
hereof. The Company shall indemnify the Trustee and hold it harmless 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 as
Trustee, Registrar, Paying Agent, Securities Custodian and/or otherwise. 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
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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 reasonable
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. The Trustee shall
comply with the provisions of TIA Section 313(b)(2) to the extent applicable.
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 Trustee's 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 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, (a) the Company by a Board Resolution may remove the
Trustee with respect to the Securities, or (b) subject to Section 6.11 hereof,
any Holder who has been a bona fide Holder of a Security 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.
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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, after written request by any Holder of a Security who
has been a Holder of a Security for at least six months, fails to comply with
Section 7.10 hereof, such Holder may, at the expense of the Company, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee. Any successor trustee shall comply with
TIA Section 310(a)(5).
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 (or be a member or
subsidiary of a bank holding system with an aggregate 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. The provisions of TIA Section 310 shall apply to the
Company as obligor of the Securities.
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
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(a) either
(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 Trust 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 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)
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.
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. 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.
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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 such payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
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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 and the Guarantors shall be
deemed to have been discharged from their 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 and 4.16 hereof,
(c) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture, and
(d) 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.
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 Article 5, 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(c) or (d), 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 9.02 or
Section 9.03 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
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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 day after 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.
(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
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to 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
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to Section 9.04 hereof or the principal and interest received in respect
thereof other than such 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 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
Securities 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.
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;
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(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 the 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.
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 Maturity thereof; or
(b) reduce the percentage in principal amount 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 the
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.
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
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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. Upon
the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Securities as aforesaid, and upon
receipt by a Responsible Officer of the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture affects the Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture. 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
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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.
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees.
(a) For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, subject to Section 11.07, 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 reasonable 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 a senior unsecured obligation of each respective
Guarantor and is intended to be superior to or pari passu in right of payment
with all indebtedness and liabilities of such Guarantor that are not
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subordinated by their terms to other Indebtedness of such Guarantor, and senior
in right of payment to all Subordinated Indebtedness of such Guarantor. 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. To the extent
permitted by law, 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 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) To the extent permitted by law, 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, to
the extent permitted by law, 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, 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, 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 the right to exercise 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 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 Securities, 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 Securities and all other amounts payable under this
Guarantee, whether
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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 reasonable 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, voidable 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 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
Security 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.
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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.
SECTION 11.07. Release of Guarantor. Upon the sale or other
disposition (by merger or otherwise) of a Guarantor (or all or substantially
all of its Property and assets) to a Person other than the Company or another
Guarantor and pursuant to a transaction that is otherwise in compliance with
this Indenture (including, without limitation, Section 4.07 hereof), such
Guarantor (unless it otherwise remains a Subsidiary) shall be deemed released
from its Guarantee and the related Obligations set forth in the Indenture;
provided that any such termination shall occur only to the extent that all
Obligations of such Guarantor under all of its guarantees of and under all of
its pledges of assets or other security interests which secure, other
Indebtedness of the Company shall also terminate or be released upon such sale
or other disposition. Each Guarantor that is designated as an Unrestricted
Subsidiary in accordance with this Indenture shall be released from its
Guarantee and the related Obligations set forth in the Indenture so long as it
remains an Unrestricted Subsidiary. The Trustee shall deliver 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 Indenture for Future
Guarantors. Any Wholly Owned Subsidiary that is a domestic Subsidiary or any
other Subsidiary that is not a Guarantor that guarantees any Indebtedness of
the Company 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.
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
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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 and to the
best knowledge and belief after due investigation 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 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.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm is
independent.
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
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<PAGE> 73
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 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:
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<PAGE> 74
if to the Company or any Guarantor:
Bayard Drilling Technologies, Inc.
4005 Northwest Expressway
Suite 550 E
Oklahoma City, Oklahoma 73116
Attn: Chief Financial Officer
Phone: (405) 840-9550
Fax: (405) 840-9553
if to the Trustee:
U. S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Phone: (214) 754-1254
Fax: (214) 754-1303
with a copy to:
Arter & Hadden LLP
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attention: Joseph A. Hoffmann, Esq.
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.
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.
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<PAGE> 75
SECTION 12.10. No Recourse Against Others. No director, officer,
employee, incorporator or stockholder of the Company, the Subsidiaries or the
Unrestricted Subsidiaries, as such, shall have any liability for any
obligations of the Company 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. Each Holder of Securities by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities. Such waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
SECTION 12.11. Submission to Jurisdiction; Appointment of Agent
for Service of Process; Waiver 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 compliant 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 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 11.05 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.
-69-
<PAGE> 76
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.
SECTION 12.15. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or debt
agreement of the Company or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first above written.
COMPANY:
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ DAVID E. GROSE
-------------------------------------
Name: DAVID E. GROSE
------------------------------
Title: Vice President and Chief
Financial Officer
-----------------------------
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<PAGE> 77
GUARANTORS:
BAYARD DRILLING, L.L.C.
By: /s/ DAVID E. GROSE
-------------------------------------
Name: DAVID E. GROSE
------------------------------
Title: Vice President and Chief
Financial Officer
-----------------------------
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C., its
general partner
By: /s/ DAVID E. GROSE
-------------------------------------
Name: DAVID E. GROSE
------------------------------
Title: Vice President and Chief
Financial Officer
-----------------------------
BONRAY DRILLING CORPORATION
By: /s/ DAVID E. GROSE
-------------------------------------
Name: DAVID E. GROSE
------------------------------
Title: Vice President and Chief
Financial Officer
-----------------------------
TREND DRILLING CO.
By: /s/ DAVID E. GROSE
-------------------------------------
Name: DAVID E. GROSE
------------------------------
Title: Vice President and Chief
Financial Officer
-----------------------------
TRUSTEE:
U. S. TRUST COMPANY OF TEXAS, N.A.
By: /s/ JOHN C. STOHLMANN
-------------------------------------
Name: John C. Stohlmann
------------------------------
Title: Vice President
-----------------------------
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<PAGE> 78
EXHIBIT A
[FORM OF FACE OF GLOBAL SECURITY]
BAYARD DRILLING TECHNOLOGIES, INC.
No._____ 11% SENIOR NOTE DUE 2005, Series A
CUSIP No. 072 700 AA5
[THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
REFERRED TO ON THE REVERSE THEREOF
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO BAYARD DRILLING TECHNOLOGIES, 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, (B) THE COMPANY
EXECUTES AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS GLOBAL SECURITY SHALL
BE TRANSFERABLE, REGISTRABLE AND EXCHANGEABLE, AND SUCH TRANSFER SHALL BE
REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED
AND IS CONTINUING WITH RESPECT TO THE SECURITIES.(1)]
[THIS NOTE (OR ITS PREDECESSOR) AND ANY GUARANTEE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT,
- ------------------
(1) These four paragraphs should be included only if the Security is
issued in global form.
A-1
<PAGE> 79
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES
ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, IF REQUESTED BY THE
COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR
AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.(2)]
- ----------------
(2) This paragraph should be removed upon the exchange of the Series
A Notes for Series B Notes in the Exchange Offer or upon the registration of
the Series A Notes pursuant to the terms of the Registration Rights Agreement.
A-2
<PAGE> 80
BAYARD DRILLING TECHNOLOGIES, INC., a Delaware corporation, hereby
promises to pay to CEDE & CO., or registered assigns, [the principal sum of
One-Hundred Million United States Dollars, or such greater or lesser amount as
may from time to time be endorsed on Schedule A hereto],(3) on June 30, 2005.
Interest Payment Dates: June 30 and December 31, commencing December
31, 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.
- ---------------
(3) This phrase should be included only if the Security is issued in
global form.
A-3
<PAGE> 81
IN WITNESS WHEREOF, BAYARD DRILLING TECHNOLOGIES, INC. has caused
this instrument to be duly executed under its corporate seal.
Dated: June 26, 1998
BAYARD DRILLING TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
U. S. TRUST COMPANY OF TEXAS, N.A.
as Trustee, certifies that this
is one of the Securities referred
to in the Indenture.
By:
-------------------------------------
Authorized Signatory
A-4
<PAGE> 82
[FORM OF REVERSE SIDE OF SECURITY]
11% Senior Note Due 2005
1. Interest
Bayard Drilling Technologies, Inc., a Delaware 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 June 30 and December 31 of each year
(an "Interest Payment Date") commencing on December 31, 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. The Company will
also pay additional interest under the circumstances and in the amounts as
described in the Registration Rights Agreement. 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, U.S. Trust Company of Texas, N.A., 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
26, 1998 (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 U.S. Trust Company of Texas, N.A., 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. Sections
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 $100,000,000 aggregate principal amount
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
A-5
<PAGE> 83
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 June 30, 2003. At any time on or after June 30, 2003, 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 June 30 of the years indicated below,
plus accrued and unpaid interest (if any) thereon to the Redemption Date:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 105.5000%
2004 and thereafter 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time during the first 36 months
after the Issue Date, the Company may redeem up to 35% of the aggregate
principal amount of the Securities originally outstanding at a redemption price
of 111% of the principal amount 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 $65,000,000
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.
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 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 Require 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.
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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 $10,000,000,
the Company shall, within 30 calendar days thereafter make an offer to purchase
from all Holders of Securities and other Indebtedness that ranks by its terms
pari passu in right of payment with the Securities and the terms of which
contain substantially similar requirements with respect to the application of
net proceeds from an Asset Sale Offer, on a pro rata basis, the maximum
principal amount of the Securities that is an integral multiple of $1,000 that
may be purchased out of the Excess Proceeds and the maximum principal amount of
such other pari passu Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount at Stated Maturity thereof, plus accrued and unpaid interest thereon, 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 years of the date the amount of Excess Proceeds
exceeds $10,000,000, 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 Require 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 Security 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 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.
A-7
<PAGE> 85
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.
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
A-8
<PAGE> 86
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 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
60 days after written notice as provided in the Indenture; (v) Indebtedness
(other than Non-Recourse 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 $10,000,000 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
No director, officer, employee, incorporator or stockholder of the
Company, the Subsidiaries or the Unrestricted Subsidiaries, as such, shall have
any liability for any obligations of the Company 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. Each holder of Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
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
A-9
<PAGE> 87
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 and/or the Registration
Rights Agreement.
A-10
<PAGE> 88
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 Securities 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 lesser of (a) an
amount equal to such Guarantor's Adjusted Net Assets as of the date of the
Guarantee and (b) the maximum amount as well, 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 the 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 Guarantors upon
the terms and subject to the conditions provided in the Indenture.
A-11
<PAGE> 89
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, 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.
BAYARD DRILLING, L.L.C.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C., its
general partner
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
BONRAY DRILLING CORPORATION
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
TREND DRILLING CO.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
A-12
<PAGE> 90
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.
A-13
<PAGE> 91
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.
A-14
<PAGE> 92
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN PRINCIPAL AMOUNT (4)
The initial principal amount at Maturity of this Global Security shall
be $100,000,000. The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
Date of Global Security
Increase/ Amount of Decrease in Amount of Increase in Principal Amount Total Principal
Decrease Amount at Maturity Amount at Maturity Decrease/Increase Amount
- --------- --------------------- --------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
- --------- --------------------- --------------------- ----------------- ---------------
</TABLE>
Signature of authorized signatory of following such Trustee or Securities
Custodian.
--------------------------------
- ---------------------
(4) This should be included only if the Security is issued in global
form.
A-15
<PAGE> 93
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL NOTE TO REG S GLOBAL NOTE
(Pursuant to Section 2.06(a)(i) of the Indenture)
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Re: 11% Senior Notes due 2005, Series A of Bayard Drilling Technologies, Inc.
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Bayard Drilling Technologies, Inc. (the
"Company"), the Persons acting as guarantors and named therein (the
"Guarantors") and U.S. Trust Company of Texas, N. A., as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
This letter relates to U.S.$___________ principal amount of
Securities which are evidenced by one or more U.S. Global Notes and held with
the Depositary in the name of _____________ (the "Transferor"). The Transferor
has requested a transfer of such beneficial interest in the Securities to a
Person who will take delivery thereof in the form of an equal principal amount
of Securities evidenced by one or more Reg S Global Notes, which amount,
immediately after such transfer, is to be held with the Depositary through
Euroclear or Cedel or both.
In connection with such request and in respect of such
Securities, the Transferor hereby certifies that such transfer has been
effected in compliance with the transfer restrictions applicable to the Global
Securities and pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S under the United States Securities Act of 1933, as amended (the
"Securities Act"), and accordingly the Transferor hereby further certifies
that:
(1) The offer of the Securities was not made to a person
in the United States and, if the 40-day Distribution
Compliance Period has not yet expired and the
Transferor is a dealer (as defined in Section 2(12)
of the Securities Act), or a person receiving a
selling concession, fee or other remuneration in
respect of the Securities being sold (collectively,
"Dealers"), (i) neither the Transferor or any person
acting on its behalf knows that the transferee is a
U.S. person and (ii) if the Transferor or any person
acting on its behalf knows that the transferee is a
Dealer, the Transferor or person acting on its behalf
has sent a confirmation or other notice to the
transferee stating that the Securities may be offered
or sold during the 40-day Distribution Compliance
Period only in accordance with the provisions of
Regulation S, pursuant to registration under the
Securities Act or pursuant to an available exemption
from the registration requirements of the Securities
Act;
(2) either:
(a) at the time the buy order was originated, the
transferee was outside the United States or
the Transferor and any person acting on its
behalf reasonably believed and believes that
the transferee was outside the United States;
or
(b) the transaction was executed in, on or
through the facilities of a designated
offshore securities market and neither the
Transferor nor any person acting on its
behalf knows that the transaction was
prearranged with a buyer in the United
States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of
Regulation S;
B-1-1
<PAGE> 94
(4) the transaction is not part of a plan or scheme to
evade the registration provisions of the Securities
Act; and
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to
be held with the Depositary through Euroclear or
Cedel or both.
Upon giving effect to this request to exchange a beneficial
interest in a U.S. Global Note for a beneficial interest in a Reg S Global
Note, the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Reg S Global Notes pursuant to the Indenture and the
Securities Act and, if such transfer occurs prior to the end of the 40-day
Distribution Compliance Period associated with the initial offering of Series A
Notes, the additional restrictions applicable to transfers of interest in the
Reg S Global Note.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Lehman Brothers Inc., BT Alex. Brown and Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated (collectively, the
Initial Purchasers"), the Initial Purchasers of such Securities being
transferred. We acknowledge that you, the Company and the Initial Purchasers
will rely upon our confirmations, acknowledgments and agreements set forth
herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------------
cc: Bayard Drilling Technologies, Inc.
Initial Purchasers
B-1-2
<PAGE> 95
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REG S GLOBAL NOTE TO U.S. GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Re: 11% Senior Notes due 2005, Series A of Bayard Drilling Technologies, Inc.
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Bayard Drilling Technologies, Inc. (the
"Company"), the Persons acting as guarantors and named therein (the
"Guarantors") and U.S. Trust Company of Texas, N. A., as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
This letter relates to $____________ principal amount of
Securities which are evidenced by one or more Reg S Global Notes and held with
the Depositary through Euroclear or Cedel in the name of _________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a Person who will take delivery thereof in the
form of an equal principal amount of Securities evidenced by one or more U.S.
Global Notes, to be held with the Depositary.
In connection with such request and in respect of such
Securities, the Transferor hereby certifies that:
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act") and, accordingly, the Transferor hereby further
certifies that the Securities are being transferred to a Person that
the Transferor reasonably believes is purchasing the Securities for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A;
or
such transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act;
or
[ ] such transfer is being effected in an offshore transaction pursuant to
and in accordance with Rule 904 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
B-2-1
<PAGE> 96
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that
the Securities are being transferred in compliance with the transfer
restrictions applicable to the Global Securities and in accordance
with the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and such Securities are being transferred in compliance with any applicable
blue sky or securities laws of any state of the United States or any other
applicable jurisdiction.
Upon giving effect to this request to exchange a beneficial
interest in Reg S Global Notes for a beneficial interest in U.S. Global Notes,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to U.S. Global Notes pursuant to the Indenture and the
Securities Act.
B-2-2
<PAGE> 97
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and Donaldson, Lufkin &
Jenrette Securities Corporations, Lehman Brothers Inc., BT Alex. Brown and Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated (collectively, the
"Initial Purchasers"), the Initial Purchasers of such Securities being
transferred. We acknowledge that you, the Company and the Initial Purchasers
will rely upon our confirmations, acknowledgments and agreements set forth
herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------------
cc: Bayard Drilling Technologies, Inc.
Initial Purchasers
B-2-3
<PAGE> 98
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED SECURITIES
(Pursuant to Section 2.06(b) of the Indenture)
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Re: 11% Senior Notes due 2005, Series A of Bayard Drilling Technologies, Inc.
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Bayard Drilling Technologies, Inc. (the
"Company"), the Persons acting as guarantors and named therein (the
"Guarantors") and U.S. Trust Company of Texas, N. A., as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
This relates to $_________ principal amount of Securities
which are evidenced by one or more Certificated Securities in the name of
______________ (the "Transferor"). The Transferor has requested an exchange or
transfer of such Certificated Security(ies) in the form of an equal principal
amount of Securities evidenced by one or more Certificated Securities, to be
delivered to the Transferor or, in the case of a transfer of such Securities,
to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the
Securities surrendered to the Trustee herewith for exchange (the "Surrendered
Securities"), the Holder of such Surrendered Securities hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Securities are being acquired for the Transferor's own
account, without transfer;
or
[ ] the Surrendered Securities are being transferred to the Company;
or
[ ] the Surrendered Securities are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Securities
are being transferred to a Person that the Transferor reasonably
believes is purchasing the Surrendered Securities for its own account,
or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such
account is a "qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A;
or
[ ] the Surrendered Securities are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
B-3-1
<PAGE> 99
or
[ ] the Surrendered Securities are being transferred in an offshore
transaction pursuant to and in accordance with Rule 904 under the
Securities Act;
or
[ ] the Surrendered Securities are being transferred pursuant to an
effective registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than those
contemplated above, and the Transferor hereby further certifies that
the Securities are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Securities are being transferred in compliance with any
applicable blue sky or securities laws of any state of the United States or any
other applicable jurisdiction.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Lehman Brothers Inc., BT Alex. Brown and Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated (collectively, the
"Initial Purchasers"), the Initial Purchasers of such Securities being
transferred. We acknowledge that you, the Company and the Initial Purchasers
will rely upon our confirmations, acknowledgments and agreements set forth
herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------------
cc: Bayard Drilling Technologies, Inc.
Initial Purchasers
B-3-2
<PAGE> 100
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM U.S. GLOBAL NOTE OR REG S
PERMANENT GLOBAL SECURITY
TO CERTIFICATED SECURITY
(Pursuant to Section 2.06(c) of the Indenture)
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attention: Corporate Trust Department
Re: 11% Senior Notes due 2005, Series A of Bayard Drilling Technologies, Inc.
Reference is hereby made to the Indenture, dated as of June
26, 1998 (the "Indenture"), between Bayard Drilling Technologies, Inc. (the
"Company"), the Persons acting as guarantors and named therein (the
"Guarantors") and U.S. Trust Company of Texas, N. A., as trustee (the
"Trustee"). Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
This letter relates to $_____________ principal amount of
Securities which are evidenced by a beneficial interest in one or more U.S.
Global Notes or Reg S Global Notes in the name of __________________ (the
"Transferor"). The Transferor has requested an exchange or transfer of such
beneficial interest in the form of an equal principal amount of Securities
evidenced by one or more Certificated Securities, to be delivered to the
Transferor or, in the case of a transfer of such Securities, to such Person as
the Transferor instructs the Trustee.
In connection with such request and in respect of the
Securities surrendered to the Trustee herewith for exchange (the "Surrendered
Securities"), the Holder of such surrendered Securities hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Securities are being transferred to the beneficial
owner of such Securities;
or
[ ] the Surrendered Securities are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Securities
are being transferred to a Person that the Transferor reasonably
believes is purchasing the Surrendered Securities for its own account,
or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such
account is a "qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A;
or
[ ] the Surrendered Securities are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
B-4-1
<PAGE> 101
[ ] such transfer is being effected in an offshore transaction pursuant to
and in accordance with Rule 904 under the Securities Act;
or
[ ] the Surrendered Securities are being transferred pursuant to an
effective registration statement under the Securities Act;
or
[ ] the Surrendered Securities are being transferred pursuant to an
exemption from the registration requirements of the Securities Act
other than those contemplated above, and the Transferor hereby further
certifies that the Securities are being transferred in compliance with
the transfer restrictions applicable to the Global Securities and in
accordance with the requirements of the exemption claimed, which
certification is supported by an Opinion of Counsel, provided by the
transferor or the transferee (a copy of which the Transferor has
attached to this certification) in form reasonably acceptable to the
Company and to the Registrar, to the effect that such transfer is in
compliance with the Securities Act;
and the Surrendered Securities are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and Donaldson, Lufkin &
Jenrette Securities Corporation, Lehman Brothers Inc., BT Alex. Brown and Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated (collectively, the
"Initial Purchasers"), the Initial Purchasers of such Securities being
transferred. We acknowledge that you, the Company and the Initial Purchasers
will rely upon our confirmations, acknowledgments and agreements set forth
herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
-----------------------------------
cc: Bayard Drilling Technologies, Inc.
Initial Purchasers
B-4-2
<PAGE> 102
EXHIBIT B-5
[FORM OF FACE OF CERTIFICATED SECURITY]
BAYARD DRILLING TECHNOLOGIES, INC.
No._________ 11% SENIOR NOTE DUE 2005
CUSIP No.__________
BAYARD DRILLING TECHNOLOGIES, INC., a Delaware corporation, hereby
promises to pay to _________________, or registered assigns, the principal sum
of _______________ on June 30, 2005.
Interest Payment Dates: June 30 and December 31, commencing December
31, 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.
IN WITNESS WHEREOF, BAYARD DRILLING TECHNOLOGIES, INC. has caused
this instrument to be duly executed under its corporate seal.
Dated:
--------------------
BAYARD DRILLING TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
U. S. TRUST COMPANY OF TEXAS, N.A.
as Trustee, certifies that this is
one of the Securities referred to
in the Indenture.
By:
-------------------------------------
Authorized Signatory
B-5-1
<PAGE> 103
[FORM OF REVERSE SIDE OF SECURITY]
11% Senior Note Due 2005
1. Interest
Bayard Drilling Technologies, Inc., a Delaware 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 June 30 and December 31 of each year
(an "Interest Payment Date") commencing on December 31, 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. The Company will
also pay additional interest under the circumstances and in the amounts as
described in the Registration Rights Agreement. 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, U.S. Trust Company of Texas, N.A., 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
26, 1998 (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 U.S. Trust Company of Texas, N.A., 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. Sections
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.
B-5-2
<PAGE> 104
The Securities are limited to $100,000,000 aggregate principal amount
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 June 30, 2003. At any time on or after June 30, 2003, 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 June 30 of the years indicated below,
plus accrued and unpaid interest (if any) thereon to the Redemption Date:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 105.5000%
2004 and thereafter 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time during the first 36 months
after the Issue Date, the Company may redeem up to 35% of the aggregate
principal amount of the Securities originally outstanding at a redemption price
of 111% of the principal amount 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 $65,000,000
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.
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
B-5-3
<PAGE> 105
to 101% of the principal amount 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 Require 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 $10,000,000,
the Company shall, within 30 calendar days thereafter make an offer to purchase
from all Holders of Securities and other Indebtedness that ranks by its terms
pari passu in right of payment with the Securities and the terms of which
contain substantially similar requirements with respect to the application of
net proceeds from an Asset Sale Offer, on a pro rata basis, the maximum
principal amount of the Securities that is an integral multiple of $1,000 that
may be purchased out of the Excess Proceeds and the maximum principal amount of
such other pari passu Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount at Stated Maturity thereof, plus accrued and unpaid interest thereon, 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 years of the date the amount of Excess Proceeds
exceeds $10,000,000, 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 Require 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 Security through Agent Members, to take any action
which a Holder of Securities is entitled to take under the Indenture or the
Securities.
B-5-4
<PAGE> 106
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 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.
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
B-5-5
<PAGE> 107
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 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
60 days after written notice as provided in the Indenture; (v) Indebtedness
(other than Non-Recourse 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 $10,000,000 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.
B-5-6
<PAGE> 108
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
No director, officer, employee, incorporator or stockholder of the
Company, the Subsidiaries or the Unrestricted Subsidiaries, as such, shall have
any liability for any obligations of the Company 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. Each holder of Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
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 and/or the Registration
Rights Agreement.
B-5-7
<PAGE> 109
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 Securities 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 lesser of (a) an
amount equal to such Guarantor's Adjusted Net Assets as of the date of the
Guarantee and (b) the maximum amount as well, 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 the 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 Guarantors upon
the terms and subject to the conditions provided in the Indenture.
B-5-8
<PAGE> 110
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, 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.
BAYARD DRILLING, L.L.C.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
BAYARD DRILLING, L.P.
By: BAYARD DRILLING, L.L.C., its
general partner
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
BONRAY DRILLING CORPORATION
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
TREND DRILLING CO.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
B-5-9
<PAGE> 111
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.
B-5-10
<PAGE> 112
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.
the other
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.
Notice: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.
B-5-
<PAGE> 113
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among [GUARANTOR] (the "New Guarantor"), a subsidiary of
Bayard Drilling Technologies, Inc. (or its successor), a Delaware corporation
(the "Company"), BAYARD DRILLING TECHNOLOGIES, INC., the Guarantors (the
"Existing Guarantors") under the Indenture referred to below, and U.S. TRUST
COMPANY OF TEXAS, N.A., 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 26, 1998, providing for the issuance of an
aggregate principal amount of $100,000,000 of 11% Senior Notes due 2005 (the
"Securities");
WHEREAS Section 11.07 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 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.
C-1
<PAGE> 114
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:
-----------------------------
BAYARD DRILLING TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
[ALL EXISTING GUARANTORS]
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
U. S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
C-2
<PAGE> 1
EXHIBIT 4.3
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of June 26, 1998
by and among
Bayard Drilling Technologies, Inc.
Bayard Drilling, L.L.C.
Bayard Drilling, L.P.
Bonray Drilling Corporation
Trend Drilling Co.
and
Donaldson, Lufkin & Jenrette Securities Corporation
BT Alex. Brown
Dain Rauscher Wessels
Lehman Brothers Inc.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of June 26, 1998, by and among Bayard Drilling Technologies,
Inc., an Oklahoma corporation (the "COMPANY"), the Guarantors named on the
signature page hereto (the "GUARANTORS"), and Donaldson, Lufkin & Jenrette
Securities Corporation, BT Alex. Brown, Dain Rauscher Wessels and Lehman
Brothers Inc. (each an "INITIAL PURCHASER" and, collectively, the "INITIAL
PURCHASERS"), each of whom has agreed to purchase the Company's 11% Series A
Senior Notes due 2005 (the "SERIES A NOTES") pursuant to the Purchase Agreement
(as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated June
19, 1998, (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Series A Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchasers set forth
in Section 2 of the Purchase Agreement. Capitalized terms used herein and not
otherwise defined shall have the meaning assigned to them the Indenture, dated
June 26, 1998, between the Company and U.S. Trust Company of Texas, N.A., as
Trustee, relating to the Series A Notes and the Series B Notes (the
"INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the
City of New York on which banks are authorized to close.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the
Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less than
the period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Trustee under the Indenture of Series B Notes in the same
aggregate principal amount as the aggregate principal amount of Series A Notes
that were validly tendered by Holders thereof pursuant to the Exchange Offer.
-1-
<PAGE> 3
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof,
as applicable.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Notes (and by the Guarantors of the related guarantees) pursuant to
the Exchange Offer Registration Statement pursuant to which the Company offers
the Holders of all outstanding Transfer Restricted Securities the opportunity
to exchange all such outstanding Transfer Restricted Securities held by such
Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of Transfer Restricted Securities validly tendered
in such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and to persons permitted to
purchase the Series A Notes in offshore transactions pursuant to Regulation S
under the Act.
FILING DEADLINE: As defined in Sections 3(a) or 4(a) hereof, as
applicable.
HOLDER RESALE NOTICE: As defined in Section 4 hereof.
HOLDERS: As defined in Section 2 hereof.
LIQUIDATED DAMAGES: As defined in Section 5 hereof.
PERSON: Any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company (and
with respect to the Guarantees, the Guarantors) relating to (a) an offering of
Series B Notes pursuant to an Exchange Offer or (b) the registration for resale
of Transfer Restricted Securities pursuant to the Shelf Registration Statement,
in each case, (i) that is filed pursuant to the provisions of this Agreement
and (ii) including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.
-2-
<PAGE> 4
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SERIES B NOTES: The Company's 11% Series B Senior Notes due 2005 to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 6(b) hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: The following securities: (i) each
Series A Note, until the earliest to occur of (a) the date on which such Series
A Note is exchanged in the Exchange Offer for a Series B Note which is entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Series
A Note has been disposed of in accordance with a Shelf Registration Statement
(and the purchasers thereof have been issued Series B Notes), (c) the date on
which such Series A Note is distributed to the public pursuant to Rule 144
under the Act (and purchasers thereof have been issued Series B Notes), or (d)
the date on which such Series A Note is eligible for distribution to the public
pursuant to paragraph (k) of Rule 144 under the Act and (ii) each Series B Note
issued to a Broker-Dealer in the Exchange Offer until the date on which such
Series B Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with) or Commission policy, each of the Company (and, to the extent of
the Guarantees, the Guarantors) shall (i) cause the Exchange Offer Registration
Statement to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 60 days after the Closing Date (such
60th day being the "FILING DEADLINE"), (ii) use its reasonable best efforts to
cause such Exchange Offer Registration Statement to be declared effective by
the Commission at the earliest possible time, but in no event later than 180
days after the Closing Date (such 180th day being the "EFFECTIVENESS
DEADLINE"), (iii) in connection with the foregoing, (A) file all pre-effective
amendments to such Exchange Offer Registration Statement as may be necessary in
order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
-3-
<PAGE> 5
Offer. The Exchange Offer shall be on the appropriate form permitting (i)
registration of the Series B Notes to be offered in exchange for the Series A
Notes that are Transfer Restricted Securities and (ii) resales of Series B
Notes by Broker-Dealers that are validly tendered into the Exchange Offer
Series A Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below, if permissible under applicable law or
Commission policy.
(b) The Company (and, to the extent of the Guarantees, the
Guarantors) shall use their respective reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company (and, to the extent of the Guarantees, the
Guarantors) shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Series B Notes
shall be included in the Exchange Offer Registration Statement. The Company
(and, to the extent of the Guarantees, the Guarantors) shall use their
respective reasonable best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter (such 30th day being the "CONSUMMATION DEADLINE");
provided, however, that the Consummation Deadline shall be subject to extension
for up to an additional 10 Business Days with the written consent of the
Initial Purchasers.
(c) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted
Securities that were acquired for the account of such Broker-Dealer as a result
of market-making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales
of Series B Notes by Broker-Dealers, the Company and the Guarantors agree to
use their respective reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(a) and (c)
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of 180 calendar days from the Consummation Deadline or such
shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Company and the Guarantors shall provide sufficient copies of the latest
version of such Prospectus to such Broker-Dealers, promptly upon request, at
any time during such period in order to facilitate such resales.
-4-
<PAGE> 6
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not
permitted by applicable law or Commission policy (after the Company and the
Guarantors have complied with the procedures set forth in Section 6(a)(i)
below) or (ii) any Holder of Transfer Restricted Securities shall give written
notice (a "Holder Resale Notice") to the Company on or prior to the 20th
Business Day following the Consummation Deadline that (A) such Holder was
prohibited by applicable law or Commission policy from participating in the
Exchange Offer, (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is
a Broker-Dealer and holds Series A Notes acquired directly from the Company or
any of its Affiliates, then the Company (and, to the extent of the Guarantees,
the Guarantors) shall:
(x) cause to be filed, on or prior to the 45th day after the earlier
of (i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above and
(ii) the date on which the Company receives the Holder Resale Notice (such 45th
day being the "FILING DEADLINE"), a shelf registration statement pursuant to
Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement) (in either event, the "SHELF REGISTRATION STATEMENT"),
relating to all Transfer Restricted Securities the Holders of which shall have
previously provided the information required pursuant to Section 4(b) hereof,
and
(y) shall use their respective reasonable best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission on or
prior to the 180th day after the Filing Deadline for the Shelf Registration
Statement (such 180th day being the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable law or Commission
policy (i.e., clause (a)(i) above), then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause
(x) above; provided that, in such event, the Company shall remain obligated to
meet the Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company (and, to the extent of the Guarantees, the Guarantors)
shall use their respective reasonable best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Sections 6(b) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, until the earliest of: (i) the date that is two
years (as extended pursuant to Section 6(d)) following the Closing Date, (ii)
the Consummation of the Exchange Offer with respect to all Transfer Restricted
Securities and the expiration of 20 Business Days after the Consummation
thereof if during such 20 Business Day period no Holder Resale Notice shall
have been received by the Company or (iii) the date when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
-5-
<PAGE> 7
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
(c) Black Out Period. During any consecutive 365 day period, the
Company may suspend the effectiveness of the Shelf Registration Statement on up
to two occasions for a period of not more than 45 consecutive days (whereafter
a Registration Default shall occur) if there is a possible acquisition or
business combination or other transaction, business development or event
involving the Company that may require disclosure in the Shelf Registration
Statement and the Board of Directors of the Company determines in the exercise
of its reasonable judgment that such disclosure is not in the best interests of
the Company and its stockholders or obtaining any financial statements relating
to a possible acquisition or business combination required to be included in
the Shelf Registration Statement would be impracticable. In such a case, the
Company shall promptly notify the Holders of the suspension of the Shelf
Registration Statement's effectiveness, provided that such notice shall not
require the Company to disclose the possible acquisition or business
combination or other transaction, business development or event if the Board of
Directors of the Company determines in good faith that such acquisition or
business combination or other transaction, business development or event should
remain confidential. Upon the abandonment, consummation, or termination of the
possible acquisition or business combination, the suspension of the use of the
Shelf Registration Statement pursuant to this Section 4(c) shall cease and the
Company shall promptly comply with Section 6(c)(ii) hereof and notify the
Holders that disposition of Transfer Restricted Securities may be resumed. The
Company shall extend the relevant period set forth in Section 4(a) during which
it is required to keep the Shelf Registration Statement effective by the number
of days the use of the Shelf Registration Statement is suspended pursuant to
this Section 4(c).
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation
Deadline or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 5 days by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within 10 days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company and the Guarantors hereby jointly and severally agree to pay to each
Holder of Transfer Restricted Securities affected thereby liquidated damages
("Liquidated Damages") in an amount equal to $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration Default continues for the first
90-day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$.05 per week per $1,000 in principal
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<PAGE> 8
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.20 per week per $1,000 in principal amount of
Transfer Restricted Securities; provided that the Company and the Guarantors
shall in no event be required to pay Liquidated Damages for more than one
Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the
case of (i) above, (2) upon the effectiveness of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the Liquidated Damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the record Holders
entitled thereto, in the manner provided for the payment of interest in the
Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. Notwithstanding the fact that any securities for
which Liquidated Damages are due cease to be Transfer Restricted Securities,
all obligations of the Company and the Guarantors to pay Liquidated Damages
with respect to securities shall survive until such time as such obligations
with respect to such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company (and, to the extent of the Guarantees, the
Guarantors) shall (x) comply with all applicable provisions of Section 6(c)
below, (y) use their respective reasonable best efforts to effect such exchange
and to permit the resale of Series B Notes by Broker- Dealers that tendered in
the Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been
announced a change in Commission policy with respect to exchange
offers such as the Exchange Offer, that in the reasonable opinion of
counsel to the Company raises a question as to whether the Exchange
Offer is permitted by applicable federal law, the Company and the
Guarantors hereby agree to seek a no-action letter or other favorable
decision from the Commission, including oral advice from the staff of
the Commission, allowing the Company and the Guarantors to Consummate
an Exchange Offer for such Transfer Restricted Securities. The
Company and the Guarantors hereby agree to pursue the issuance of such
a decision to the Commission staff level but shall not be required to
take commercially unreasonable action to effect a change of Commission
policy. In connection with the foregoing, the Company and the
Guarantors hereby agree to take all such other actions (other than
such actions as may be commercially unreasonable) as may be requested
by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon
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<PAGE> 9
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of
the Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. As a
condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the Series B
Notes shall acknowledge and agree that, if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired
directly from the Company or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley
and Co.,Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of the Act
in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-
action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered
into any arrangement or understanding with any Person to distribute
the Series B Notes to be received in the Exchange Offer and that, to
the best of the Company's and each Guarantor's information and belief,
each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and
(C) any other undertaking (other than such undertakings as would be
commercially unreasonable to perform) or representation required by
the Commission as set forth in any no-action letter obtained pursuant
to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company (and, to the extent of the Guarantees, the
Guarantors) shall:
(i) comply with all the provisions of Section 6(c) below and
use their respective reasonable best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in
the information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company (and, to the
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<PAGE> 10
extent of the Guarantees, the Guarantors) will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(ii) issue, upon the request of any Holder or purchaser of
Series A Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on the Shelf Registration Statement for
this purpose and issue the Series B Notes to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without
limitation, any Registration Statement and the related Prospectus required to
permit resales by Broker-Dealers), the Company (and, to the extent of the
Guarantees, the Guarantors) shall:
(i) use their respective reasonable best efforts to keep
such Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 3
or 4 of this Agreement, as applicable. Upon the occurrence of any
event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain an untrue statement of
material fact or omit to state any material fact necessary to make the
statements therein not misleading or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company (and, to the extent of the
Guarantees, the Guarantors) shall file promptly an appropriate
amendment to such Registration Statement curing such defect, and, if
Commission review is required, use their respective reasonable best
efforts to cause such amendment to be declared effective as soon as
reasonably practicable;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the applicable Registration Statement
as may be necessary to keep such Registration Statement effective for
the applicable period set forth in Section 3 or 4 hereof, as the case
may be, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
exchanged or sold or until such securities no longer constitute
Transfer Restricted Securities or are no longer outstanding; cause,
subject to Section 4(c), the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act, and to comply fully with Rules
424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance by
the Commission of any stop order
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<PAGE> 11
suspending the effectiveness of the Registration Statement under the
Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any
of the preceding purposes, and (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact
made in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky
laws, the Company (and, to the extent of the Guarantees, the
Guarantors) shall use their respective reasonable best efforts to
obtain the withdrawal or lifting of such order at the earliest
practicable time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the managing underwriters, if any, or any
Holder who is required to deliver a Prospectus in connection with an
Exchange Offer or who is otherwise named in a Prospectus in connection
with such exchange or sale (the "Specified Holders"), if any, before
filing with the Commission, copies of any Registration Statement or
any Prospectus included therein or any amendments or supplements to
any such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review
and comment of such Specified Holders in connection with such sale, if
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which such Holders shall reasonably object within five Business Days
after the receipt thereof. A Specified Holder shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains an untrue statement of a material fact or omits to
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the
Act;
(vi) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, if requested by any Holders within five Business Days
after receipt of notification thereof from the Company, provide copies
of such document to each Holder in connection with such exchange or
sale, if any, make the Company's and the Guarantors' representatives
available for discussion of such document and other customary due
diligence matters, and include such information in such document prior
to the filing thereof as such Holders may reasonably request;
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<PAGE> 12
(vii) make available, at reasonable times, for inspection
by each Holder and any attorney or accountant retained by such
Holders, all financial and other records, pertinent corporate
documents of the Company and the Guarantors and cause the Company's
and the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, attorney or
accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness;
(viii) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after
the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such
exchange or sale, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(x) deliver to each Holder without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may
request; the Company (and, to the extent of the Guarantees, the
Guarantors) hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling
Holder in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) upon the request of any Specified Holder or the
managing underwriters, if any, enter into such agreements (including
underwriting agreements) and make such representations and warranties
and take all such other customary or appropriate actions as are
reasonably requested in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to the applicable Registration Statement contemplated by this
Agreement as may be reasonably requested by any Specified Holder in
connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, the Company (and, to the
extent of the Guarantees, the Guarantors) shall:
(A) upon request of any Specified Holder, furnish
(or in the case of paragraphs (2) and (3), use its best
reasonable efforts to cause to be furnished) to each Specified
Holder, upon Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the case
may be:
(1) a certificate, dated such date,
signed on behalf of the Company and each Guarantor by
(x) the President or any Vice President and (y) a
principal financial or accounting officer of the
Company and such Guarantor, confirming, as of the
date thereof, the matters set forth in Sections 6(y),
9(a) and 9(b) of the Purchase Agreement and such
other similar matters as such Specified Holders may
reasonably request;
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<PAGE> 13
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company and the
Guarantors covering matters similar to those set
forth in paragraph (e) of Section 9 of the Purchase
Agreement and such other matters as such Specified
Holder may reasonably request, and in any event
including a statement to the effect that such counsel
has participated in conferences with officers and
other representatives of the Company and the
Guarantors, representatives of the independent public
accountants for the Company and the Guarantors and
have considered the matters required to be stated
therein and the statements contained therein,
although such counsel has not investigated or
independently verified, and does not assume any
responsibility for, the accuracy, completeness or
fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying
as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and
without independent check or verification), no facts
came to such counsel's attention that caused such
counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein, in light of the circumstances
under which they were made, not misleading, or that
the Prospectus contained in such Registration
Statement as of its date and, in the case of the
opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation,
contained an untrue statement of a material fact or
omitted to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not
misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes
no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of
the financial statements, notes and schedules and
other financial or statistical data included in any
Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated
the date of Consummation of the Exchange Offer, or as
of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the
Company's independent accountants, in the customary
form and covering matters of the type customarily
covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming
the matters set forth in the comfort letters
delivered pursuant to Section 9(g) of the Purchase
Agreement; and
(B) deliver such other documents and certificates
as may be reasonably requested by the Specified Holders to
evidence compliance with the matters covered in clause (A)
above and with any customary conditions contained in any
agreement entered into by the Company and the Guarantors
pursuant to this clause (xi);
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<PAGE> 14
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
the Company nor any Guarantor shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates,
including global certificates, representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and, in
the case of certificated Transfer Restricted Securities, to register
such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days
prior to such sale of Transfer Restricted Securities;
(xiv) use their respective reasonable best efforts to cause
the disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xii) above and except as may be required solely as a
consequence of such Seller's business (in which case the Company and
the Guarantors will cooperate in all reasonable respects);
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with
The Depository Trust Company;
(xvi) otherwise use their respective reasonable best
efforts to comply with all applicable rules and regulations of the
Commission, and to mail or otherwise make generally available to its
security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 under the Act (which need not be audited)
covering a twelve-month period beginning after the effective date of
the Registration Statement (as such term is defined in paragraph (c)
of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate
with the Trustee and the Holders to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its
reasonable best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
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<PAGE> 15
(xviii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of (a) the notice referred to
in Section 4(c), (b) the notice referred to in Section 6(c)(iii)(C) or (c) any
notice from the Company of the existence of any fact of the kind described in
Section 6(c)(iii)(D) hereof (in each case, a "SUSPENSION NOTICE"), such Holder
will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until (i) such Holder has
received copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder
receiving a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's
possession which have been replaced by the Company with more recently dated
Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors, in
accordance with Section 7(b) below, and the Holders of Transfer Restricted
Securities; (v) all application and filing fees in connection with listing the
Series B Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of the Company and the Guarantors
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Notes in the Exchange Offer and/or
selling or reselling Series A Notes or Series B Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Andrews & Kurth
L.L.P., unless another firm shall be chosen by
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<PAGE> 16
the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
Such Holders shall be responsible for any of their other expenses incurred in
connection with the registration of the sale of their Transfer Restricted
Securities.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally,
to indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all
losses, claims, damages, liabilities and judgments (including without
limitation, any legal or other expenses reasonably incurred in connection with
investigating or defending any matter, including any action that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, preliminary prospectus or Prospectus (or any
amendment or supplement thereto) provided by the Company to any Holder or any
prospective purchaser of Series B Notes or registered Series A Notes, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company and the
Guarantors, and their respective directors, managers and officers, and each
Person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Company or any of the Guarantors, to the
same extent as the foregoing indemnity from the Company and the Guarantors to
such Holder set forth in Section 8(a) above, but only with reference to
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use in any Registration Statement, preliminary prospectus,
Prospectus or any amendment or supplement thereto). In no event shall any
Holder, its directors, officers or any Person who controls such Holder be
liable or responsible for any amount in excess of the dollar amount of the
price at which the Series A Notes purchased by it hereunder and resold to
Eligible Purchasers were offered to the Eligible Purchasers.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing
by the indemnifying party, (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses
-15-
<PAGE> 17
available to it which are different from or additional to those available to
the indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all indemnified parties and all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by a majority of the Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any
and all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action effected with the indemnifying party's written
consent, which consent will not be unreasonably withheld. Notwithstanding the
immediately preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the indemnifying party and an indemnified party
shall have requested the indemnifying party to reimburse the indemnified party
for such fees and expenses of counsel actually incurred by it, such
indemnifying party agrees that it shall be liable for any settlement of any
action effected without its written consent if (i) such settlement is entered
into more than 60 days after the receipt by such indemnifying party of the
aforesaid request (ii) such indemnifying party shall have received notice of
the proposed settlement being entered into at least 20 days prior to such
settlement being entered into and (iii) prior to the date of such settlement
such indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement (or, if within 30 days of the
receipt of the aforesaid request, the indemnifying party shall have made a good
faith written challenge to the reasonableness of the amount of the
reimbursement requested or the sufficiency of the documentation supporting the
reimbursement requested (which challenge shall specifically set forth the
amount of the requested reimbursement which the indemnifying party in good
faith believes to be unreasonable or the basis for the good faith claim as to
the insufficiency of any supporting documentation), this sentence shall only
apply if 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 that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Holders, on the other
hand, from their sale of Transfer Restricted Securities or (ii) if the
allocation provided by clause 8(d)(i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company
and the Guarantors, on the one hand, and of the Holders, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Guarantors, on the one hand and the Holders, on the other hand, shall be
deemed to be in
-16-
<PAGE> 18
the same proportion as the total net proceeds from the offering of the Series A
Notes (after discounts and commissions, but before deducting expenses) received
by the Company, and the total proceeds received by the Holders from the sale of
Transfer Restricted Securities pursuant to a Registration Statement bear to the
total price to investors of the Series A Notes. The relative fault of the
Company and the Guarantors, on the one hand, and of the Holders, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or such Guarantor, on the one hand, or by the Holders, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8: (i) no Holder (other than the Initial Purchasers), its directors,
its officers or any Person, if any, who controls such Holder shall be required
to contribute, in the aggregate, any amount in excess of the dollar amount by
which the total proceeds received by such Holder from the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (A) the
amount paid by such Holder for such Transfer Restricted Securities and (B) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission and (ii) no Initial Purchaser shall be required to contribute any
amount in excess of the amount by which the total price at which the Series A
Notes purchased by it hereunder and resold pursuant to the Shelf Registration
Statement were offered to the public exceeds the amount of any damages which
such Initial Purchaser has otherwise been required to pay by reason of such
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant
to this Section 8(d) are several in proportion to the respective principal
amount of Transfer Restricted Securities held by each Holder hereunder and not
joint.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period in
which the Company or such Guarantor (i) is not subject to Section 13 or 15(d)
of the Exchange Act, to make available, upon request of any Holder, to such
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act,
-17-
<PAGE> 19
to make all filings required thereby in a timely manner in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and
agree that any failure by the Company and the Guarantors to comply with their
respective obligations under Sections 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantor's obligations under
Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any
Guarantor will, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Neither the Company nor any Guarantor has previously
entered into any agreement granting any registration rights with respect to its
securities to any Person, except as disclosed in the Offering Memorandum dated
June 19, 1998 with respect to the offering and sale of the Series A Notes. The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case
of Section 5 hereof and this Section 10(c)(i), the Company has obtained the
written consent of Holders of all outstanding Transfer Restricted Securities
and (ii) in the case of all other provisions hereof, the Company has obtained
the written consent of Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities (excluding Transfer Restricted
Securities held by the Company or its Affiliates). Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose Transfer Restricted
Securities are being tendered pursuant to the Exchange Offer, and that does not
affect directly or indirectly the rights of other Holders whose Transfer
Restricted Securities are not being tendered pursuant to such Exchange Offer,
may be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities being tendered in to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
-18-
<PAGE> 20
(ii) if to the Company or the Guarantors:
Bayard Drilling Technologies, Inc.
4005 Northwest Expressway, Suite 550E
Oklahoma City, Oklahoma 73116
Telephone No.: (405) 840-9550
Telecopier No.: (405) 879-9553
Attention: David Grose
With a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Telephone No.: (214) 953-6500
Telecopier No.: (214) 953-6503
Attention: Geoffrey Newton
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next Business Day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided, that nothing herein shall be deemed
to permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of
this Agreement, and by taking and holding such Transfer Restricted Securities
such Person shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement, including the
restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
-19-
<PAGE> 21
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BAYARD DRILLING TECHNOLOGIES, INC.
/s/ DAVID E. GROSE, III
------------------------------------
By:
Name: David E. Grose, III
Title: Vice President
BAYARD DRILLING, L.L.C.
/s/ DAVID E. GROSE, III
------------------------------------
By:
Name: David E. Grose, III
Title: Vice President
BAYARD DRILLING, L.P.
By: Bayard Drilling, L.L.C., its
general partner
/s/ DAVID E. GROSE, III
------------------------------------
By:
Name: David E. Grose, III
Title: Vice President
BONRAY DRILLING CORPORATION
/s/ DAVID E. GROSE, III
------------------------------------
By:
Name: David E. Grose, III
Title: Vice President
TREND DRILLING CO.
/s/ DAVID E. GROSE, III
------------------------------------
By:
Name: David E. Grose, III
Title: Vice President
-21-
<PAGE> 23
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN
DAIN RAUSCHER WESSELS
LEHMAN BROTHERS INC.
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ DWIGHT SCOTT
-----------------------
Name: Dwight Scott
Title: Senior Vice President
-22-
<PAGE> 1
EXHIBIT 5.1
[BAKER & BOTTS LETTERHEAD]
July 21, 1998
Bayard Drilling Technologies, Inc.
Bayard Drilling, L.L.C.
Bayard Drilling, L.P.
Bonray Drilling Corporation
Trend Drilling Co.
4005 Northwest Expressway
Suite 550E
Oklahoma City, Oklahoma 73116
Ladies and Gentlemen:
As set forth in the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Bayard Drilling Technologies, Inc., a
Delaware corporation (the "Company"), with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the offering by the Company of an aggregate of $100,000,000
principal amount of 11% Senior Notes due June 30, 2005, Series B (the "Exchange
Notes"), together with the related guarantees (the "Guarantees") of the payment
of the principal of, premium, if any, and interest on the Exchange Notes by
Bayard Drilling, L.L.C., a Delaware limited liability company ("BDLC"), Bayard
Drilling, L.P., a Delaware limited partnership ("BDLP"), Bonray Drilling
Corporation, a Delaware corporation ("Bonray"), and Trend Drilling Co., an
Oklahoma corporation ("Trend," and together with BDLC, BDLP and Bonray, the
"Guarantors"), in exchange for the Company's 11% Senior Notes due June 30, 2005,
Series A (the "Old Notes"), together with related guarantees by the Guarantors,
issued in a private placement pursuant to Rule 144A under the Securities Act,
certain legal matters in connection with the Exchange Notes are being passed
upon for the Company by us. At your request, this opinion is being furnished to
you for filing as Exhibit 5.1 to the Registration Statement.
In our capacity as counsel to the Company and the Guarantors
in connection with the registration and proposed exchange by the Company of the
Exchange Notes as described in the Registration Statement, we have examined the
Certificate of Incorporation, Certificate of
<PAGE> 2
Bayard Drilling Technologies, Inc., et al. -2- July 21, 1998
Formation and Certificate of Limited Partnership, as appropriate, of the Company
and each of the Guarantors, the Bylaws, Limited Liability Company Agreement and
Limited Partnership Agreement, as appropriate, of the Company and each of the
Guarantors, each as amended to date, the minutes or records of the corporate,
partnership or limited liability company proceedings as furnished to us by the
Company and the Guarantors with respect to the issuance of the Exchange Notes
and the execution of the Indenture dated as of June 26, 1998 (the "Indenture"),
among the Company, the Guarantors and U.S. Trust Company of Texas, N.A., as
Trustee, pursuant to which the Exchange Notes are to be issued, the Indenture,
the proposed form of Exchange Note, and the Registration Statement. We have also
examined the originals, or copies certified or otherwise identified, of
corporate, partnership or limited liability company records of the Company and
the Guarantors, certificates of public officials and of representatives of the
Company and the Guarantors, statutes and other records, instruments and
documents as a basis for the opinions hereinafter expressed.
In such examination, we have assumed that all signatures on
all documents examined by us are genuine, that all documents submitted to us as
originals are authentic, that all documents submitted to us as copies are true
and correct copies of the originals thereof and that all information submitted
to us was accurate and complete. As to various questions of fact material to
this opinion, we have relied upon the accuracy of certificates and oral
statements of officers and representatives of the Company and the Guarantors and
of public officials.
Based upon our examination as aforesaid, and subject to the
assumptions, qualifications, limitations and exceptions herein set forth, we are
of the opinion that:
1. The Company and Bonray are both corporations, duly
incorporated and validly existing in good standing under the laws of
the State of Delaware.
2. BDLC is a limited liability company, duly formed and
validly existing in good standing under the laws of the State of
Delaware.
3. BDLP is a limited partnership, duly formed and validly
existing in good standing under the laws of the State of Delaware.
4. Trend is a corporation, duly incorporated and validly
existing in good standing under the laws of the State of Oklahoma.
5. The Exchange Notes and the Guarantees have been duly
authorized by all necessary corporate action on the part of the Company
and the Guarantors, respectively.
<PAGE> 3
Bayard Drilling Technologies, Inc., et al. -3- July 21, 1998
6. Subject to the Registration Statement becoming effective
under the Securities Act, to the Indenture being qualified under the
Trust Indenture Act of 1939, as amended, to compliance with any
applicable state securities laws, and to the Exchange Notes being
executed by the Company and authenticated by the Trustee in accordance
with the terms of the Indenture, the Exchange Notes and the Guarantees
proposed to be exchanged by the Company and the Guarantors for the Old
Notes and the related guarantees pursuant to the terms of the exchange
offer described in the Registration Statement have been duly authorized
for issuance and, when issued and delivered in exchange for the Old
Notes and the related guarantees in accordance with the terms and
provisions of the exchange offer as described in the Registration
Statement and the Indenture, will be entitled to the benefits of the
Indenture and will be valid and legally binding obligations of the
Company and the Guarantors, respectively, enforceable against the
Company and the Guarantors, respectively, in accordance with their
terms, except (a) as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws relating to or affecting creditors'
rights generally and (b) by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
Our opinion is subject to the qualification that certain of
the waivers and remedies in the Indenture and the Exchange Notes may
be unenforceable under, or may be limited by, the laws (including judicial
decisions) of the State of New York and the United States. However, the
unenforceability or limitation of such covenants, waivers and remedies will not,
in our opinion, prevent the realization by the holders thereof of the practical
benefits intended to be provided by the Indenture, the Exchange Notes and the
Guarantees, except for the economic consequences of any delay that may result
from such enforceability or limitation.
We express no opinion with respect to any laws other than
those of the State of Texas, the State of New York, the Federal laws of the
United States and the General Corporation Law of the State of Delaware.
In rendering the opinions set forth in paragraphs 1, 2 and 3
above with respect to the existence and good standing of the Company and the
Guarantors (other than Trend), this firm has relied solely on the certificate(s)
of authorities in the state of the Company's and each such Guarantor's
formation.
In rendering the opinions set forth in paragraphs 4, 5 and 6
above regarding Trend and the Guarantee proposed to be issued by it, and with
respect to all matters relating to or based upon Oklahoma law, this firm has
relied, with your permission, solely on the opinion letter of
<PAGE> 4
Bayard Drilling Technologies, Inc., et al. -4- July 21, 1998
McAfee & Taft A Professional Corporation, special Oklahoma counsel for Trend,
dated July 21, 1998 and attached hereto as Exhibit A.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under "Legal Matters" in the
Prospectus forming a part of the Registration Statement. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
This opinion is furnished to you in connection with the filing
of the Registration Statement, and is not to be used, circulated, quoted or
otherwise relied upon for any other purpose.
Very truly yours,
/s/ Baker & Botts, L.L.P.
<PAGE> 5
EXHIBIT A
[MCAFEE & TAFT LETTERHEAD]
July 21, 1998
Trend Drilling Co.
4005 Northwest Expressway
Suite 550E
Oklahoma City, OK 73116
Ladies and Gentlemen:
You have requested our opinion on certain legal matters in
connection with the offering by Bayard Drilling Technologies, Inc. (the
"Company") of an aggregate of $100,000,000 principal amount of 11% Senior Notes
due June 30, 2005, Series B (the "Exchange Notes"), together with the related
guarantee (the "Guarantee") of the payment of the principal of, premium, if any,
and interest on the Exchange Notes by Trend Drilling Co., an Oklahoma
corporation ("Trend"), in exchange for the Company's 11% Senior Notes due June
30, 2005, Series A (the "Old Notes"), together with related guarantee by Trend.
In our capacity as counsel to Trend, we have examined the
Certificate of Incorporation and the Bylaws, as amended to date, and minutes of
Trend as furnished to us by Trend with respect to the Guarantee. We have also
examined the originals, or copies certified or otherwise identified, of
certificates of public officials and of representatives of Trend, and we have
made such other investigations as we deemed appropriate in order to express the
opinions set forth herein.
We have assumed that all signatures on all documents examined
by us are genuine, that all documents submitted to us as originals are
authentic, that all documents submitted to us as copies are true and correct
copies of the originals thereof and that all information submitted to us was
accurate and complete. As to various questions of fact material to this opinion,
we have relied upon the accuracy of certificates and oral statements of officers
and representatives of Trend and of public officials.
<PAGE> 6
-2-
Based upon our examination as aforesaid, and subject to the
assumptions, qualifications, limitations and exceptions herein set forth, we are
of the opinion that:
1. Trend is a corporation, duly incorporated and validly
existing in good standing under the laws of the State of Oklahoma.
2. The Guarantee has been duly authorized by all necessary
corporate action on the part of Trend.
3. Subject to the Registration Statement to be filed by the
Company in connection with the exchange offer becoming effective under the
Securities Act of 1933, to the Indenture being qualified under the Trust
Indenture Act of 1939, as amended, to compliance with any applicable state
securities laws, and to the Exchange Notes being executed by the Company and
authenticated by the Trustee in accordance with the terms of the Indenture, the
Guarantee proposed to be exchanged by Trend pursuant to the terms of the
exchange offer has been duly authorized for issuance and, when issued and
delivered in exchange for the guarantee related to the Old Notes in accordance
with the terms and provisions of the exchange offer as described in the
Registration Statement and the Indenture, will be a valid and legally binding
obligation of Trend enforceable in accordance with its terms, except (a) as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws relating to or affecting
creditors' rights generally and (b) by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
We express no opinion with respect to any laws other than
those of the State of Oklahoma and the Federal laws of the United States.
In rendering the opinions set forth in paragraphs 1 above with
respect to the existence and good standing of Trend, this firm has relied solely
on an oral representation from the Secretary of State of the State of Oklahoma.
We are expressing no opinion as to the enforceability of
provisions that purport to (i) establish any evidentiary standard, (ii) specify
any interpretation or standard of interpretation, (iii) specify the scope or
effect of any waiver or any omission or delay of enforcement of any remedy, (iv)
waive any defense to specific performance, (v) agree to forego any benefits of
usuary laws, (vi) dictate severance or reformation of contractual remedies, or
(viii) confer or restrict equitable remedies.
We hereby consent to the reliance on this opinion by Baker &
Botts, L.L.P., for the purpose of rendering that firm's opinion to be filed as
Exhibit 5.1 to the Registration Statement and to inclusion of this opinion as an
Exhibit thereto. This opinion is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
<PAGE> 7
-3-
Very truly yours,
/s/ McAfee & Taft, P.C.
<PAGE> 1
EXHIBIT 10.13
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
FLEET CAPITAL CORPORATION
AND
BAYARD DRILLING TECHNOLOGY, INC.
DATED: JUNE 18, 1998
$10,000,000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. CREDIT FACILITY 1
1.1 REVOLVING CREDIT LOANS. 1
1.2 LETTERS OF CREDIT; LC GUARANTIES 2
1.3 ALL LOANS TO CONSTITUTE ONE OBLIGATION 2
1.4 RELEASE OF TREND 2
SECTION 2. INTEREST, FEES AND CHARGES 2
2.1 INTEREST 2
2.2 COMPUTATION OF INTEREST AND FEES 4
2.3 AMENDMENT FEE 4
2.4 LETTER OF CREDIT AND LC GUARANTY FEES 4
2.5 COMMITMENT FEE 4
2.6 SERVICING FEE 4
2.7 AUDIT AND APPRAISAL FEES 4
2.8 REIMBURSEMENT OF EXPENSES 4
2.9 BANK CHARGES 5
2.10 LINE DEBIT FOR CHARGES 5
SECTION 3. LOAN ADMINISTRATION 5
3.1 MANNER OF BORROWING REVOLVING CREDIT LOANS 5
3.2 PAYMENTS 6
3.3 APPLICATION OF PAYMENTS AND COLLECTIONS 7
3.4 LOAN ACCOUNT 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.5 STATEMENTS OF ACCOUNT 7
SECTION 4. TERM AND TERMINATION 8
4.1 TERM OF AGREEMENT 8
4.2 TERMINATION 8
SECTION 5. SECURITY INTERESTS 9
5.1 SECURITY INTEREST IN COLLATERAL 9
5.2 INTENTIONALLY OMITTED 9
5.3 LIEN PERFECTION; FURTHER ASSURANCES 9
5.4 LIEN ON REALTY 10
SECTION 6. COLLATERAL ADMINISTRATION 10
6.1 GENERAL 10
6.2 ADMINISTRATION OF ACCOUNTS 11
6.3 INTENTIONALLY OMITTED 12
6.4 ADMINISTRATION OF DRILLING RIGS 13
6.5 PAYMENT OF CHARGES 13
SECTION 7. REPRESENTATIONS AND WARRANTIES 14
7.1 GENERAL REPRESENTATIONS AND WARRANTIES 14
7.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 19
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS 19
8.1 AFFIRMATIVE COVENANTS 19
8.2 NEGATIVE COVENANTS 22
8.3 SPECIFIC FINANCIAL COVENANTS 29
</TABLE>
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<TABLE>
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SECTION 9. CONDITIONS PRECEDENT 29
9.1 DOCUMENTATION 29
9.2 NO DEFAULT 29
9.3 OTHER LOAN DOCUMENTS 29
9.4 CERTIFICATE OF LIMITED PARTNERSHIP 29
9.5 PARTNERSHIP AGREEMENT 29
9.6 ARTICLES OF INCORPORATION; OPERATING AGREEMENT 30
9.7 GOOD STANDING CERTIFICATES 30
9.8 OPINION LETTERS 30
9.9 INSURANCE 30
9.10 DOMINION ACCOUNT 30
9.11 REPRESENTATIONS 30
9.12 NO LITIGATION 30
9.13 EVIDENCE OF PERFECTION AND PRIORITY OF LIENS IN COLLATERAL 30
9.14 CIT INTERCREDITOR AGREEMENT 30
9.15 NO MATERIAL ADVERSE CHANGE 31
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT 31
10.1 EVENTS OF DEFAULT 31
10.2 ACCELERATION OF THE OBLIGATIONS 33
10.3 OTHER REMEDIES 33
10.4 REMEDIES CUMULATIVE; NO WAIVER 35
SECTION 11. MISCELLANEOUS 35
11.1 POWER OF ATTORNEY 35
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<TABLE>
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11.2 INDEMNITY 36
11.3 MODIFICATION OF AGREEMENT; SALE OF INTEREST 37
11.4 SEVERABILITY 37
11.5 SUCCESSORS AND ASSIGNS 38
11.6 CUMULATIVE EFFECT; CONFLICT OF TERMS 38
11.7 EXECUTION IN COUNTERPARTS 38
11.8 NOTICE 38
11.9 LENDER'S CONSENT 39
11.10 CREDIT INQUIRIES 39
11.11 TIME OF ESSENCE 39
11.12 ENTIRE AGREEMENT; APPENDIX A AND EXHIBITS AND SCHEDULES 39
11.13 INTERPRETATION 40
11.14 GOVERNING LAW; CONSENT TO FORUM 40
11.15 WAIVERS BY BORROWER 41
11.16 ORAL AGREEMENTS INEFFECTIVE 41
11.17 NONAPPLICABILITY OF CHAPTER 346 OF THE TEXAS FINANCE CODE 41
11.18 CERTAIN MATTERS OF CONSTRUCTION 42
11.19 RELEASE 42
11.20 AMENDMENT AND RESTATEMENT 42
11.21 JOINDER 42
</TABLE>
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Exhibit 10.13
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made this
18th day of June, 1998, by and between FLEET CAPITAL CORPORATION ("Lender"), a
Rhode Island corporation with an office at 2711 North Haskell Avenue, Suite
2100, LB 21, Dallas, Texas 75204, and Bayard Drilling Technologies, Inc., a
Delaware corporation ("Bayard" or "Borrower"), with its chief executive office
and principal place of business at 4005 N.W. Expressway, Oklahoma City,
Oklahoma 73116 and joined in by Bayard Drilling, L.P., a Delaware limited
partnership ("Drilling LP") for the purposes described in Section 11.21 below
(the "Agreement"). Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions. Accounting terms not
otherwise specifically defined herein shall be construed in accordance with
GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to $10,000,000
available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, during the term
of this Agreement and for so long as no Default or Event of Default exists, to
make Revolving Credit Loans to Borrower from time to time, as requested by
Borrower in the manner set forth in Section 3.1.1 hereof, up to a maximum
principal amount at any time outstanding equal to the Borrowing Base. Lender
shall have the right to establish reserves in such amounts, and with respect to
such matters, as Lender shall deem necessary or appropriate, against the amount
of Revolving Credit Loans which Borrower may otherwise request under this
Section 1.1.1, including, without limitation, with respect to (i) any sums
chargeable against Borrower's Loan Account as Revolving Credit Loans under any
section of this Agreement; (ii) amounts owing by Borrower and/or Drilling LP to
any Person to the extent secured by a Lien on, or trust over, any Property of
Borrower and/or Drilling LP other than the CIT Debt; (iii) all amounts of past
due rent or other charges owing at such time by Borrower and/or Drilling LP to
any landlord of any premises where any of the Collateral is located; and (iv)
such other matters, events, conditions or contingencies as to which Lender, in
its reasonable judgment, determines reserves should be established from time to
time hereunder.
1.1.2 Use of Proceeds. The Revolving Credit Loans shall be
used solely for general corporate purposes and capital needs of the Borrower
and its Subsidiaries, in a manner consistent with the provisions of this
Agreement and Applicable Law. In no event shall any proceeds of any Revolving
Credit Loans be used to purchase or to carry, reduce, retire or refinance any
Indebtedness incurred to purchase or carry any margin stock (within the meaning
of Regulations G or U of the Federal Reserve Board).
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1.2 Letters of Credit; LC Guaranties. Lender agrees, for so long
as no Default or Event of Default exists and if requested by Borrower, to (i)
issue its, or cause to be issued by its Affiliates, standby Letters of Credit
for the account of Borrower or (ii) execute LC Guaranties by which Lender or
its Affiliates shall guaranty the payment or performance by Borrower of its
reimbursement obligations with respect to standby Letters of Credit, provided
that the LC Amount at any time shall not exceed $2,000,000. No Letter of
Credit or LC Guaranty may have an expiration date that is after the last day of
the Original Term. Any amounts paid by Lender under any LC Guaranty or in
connection with any Letter of Credit shall be treated as Revolving Credit
Loans, shall be secured by all of the Collateral and shall bear interest and be
payable at the same rate and in the same manner as Revolving Credit Loans.
1.3 All Loans to Constitute One Obligation. All Loans shall
constitute one general obligation of Borrower, and shall be secured by Lender's
security interest in and Lien upon all of the Collateral, and by all other
security interests and Liens heretofore, now or at any time or times hereafter
granted by Borrower or any Subsidiary to Lender.
1.4 Release of Trend. Trend is hereby released from its
obligations under the Original Loan Agreement. Such release shall not affect
Trend's obligations as Guarantor or party to a Security Agreement.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. The outstanding principal amount
of the Loans shall bear interest at a fluctuating rate per annum equal to the
lesser of (a) one and one-half percent (1.5 %) above the Base Rate (the
"Applicable Annual Rate") and (b) the Maximum Legal Rate. The rate of interest
applicable to all Loans shall increase or decrease by an amount equal to any
increase or decrease in the Base Rate, effective as of the opening of business
on the day that any such change in the Base Rate occurs.
2.1.2 Default Rate of Interest. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, the
principal amount of all Loans shall bear interest at a rate per annum equal to
the lesser of (a) two percent (2.00%) above the Applicable Annual Rate and (b)
the Maximum Legal Rate.
2.1.3 Maximum Interest. (A) Notwithstanding anything to
the contrary in this Agreement or otherwise, (i) if at any time the amount of
interest computed on the basis of an Applicable Annual Rate or a Default Rate
would exceed the amount of such interest computed upon the basis of the maximum
rate of interest permitted by applicable state or federal law in effect from
time to time hereafter (the "Maximum Legal Rate"), the interest payable under
this Agreement shall be computed upon the basis of the Maximum Legal Rate, but
any subsequent reduction in such Applicable Annual Rate or Default Rate, as
applicable, shall not reduce such interest thereafter payable hereunder below
the amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Agreement
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equals the total amount of interest which would have accrued if such interest
had been at all times computed solely on the basis of an Applicable Annual Rate
or Default Rate, as applicable; and (ii) unless preempted by federal law, an
Applicable Annual Rate or Default Rate, as applicable, from time to time in
effect hereunder may not exceed the applicable "annual ceiling" as defined in
Chapter 303, Optional Interest Rate Ceilings of the Texas Finance Code. If the
applicable state or federal law is amended in the future to allow a greater
rate of interest to be charged under this Agreement than is presently allowed
by applicable state or federal law, then the limitation of interest hereunder
shall be increased to the maximum rate of interest allowed by applicable state
or federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable in accordance with Section 3.2.2 hereof.
(B) Excess Interest. No agreements, conditions,
provisions or stipulations contained in this Agreement or any other instrument,
document or agreement between Borrower and Lender or default of Borrower, or
the exercise by Lender of the right to accelerate the payment of the maturity
of principal and interest, or to exercise any option whatsoever contained in
this Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle Lender to contract for, charge, or receive, in any
event, interest exceeding the Maximum Legal Rate. In no event shall Borrower
be obligated to pay interest exceeding such Maximum Legal Rate and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate. In the event any interest is contracted
for, charged or received in excess of the Maximum Legal Rate ("Excess
Interest"), Borrower acknowledges and stipulates that any such contract,
charge, or receipt shall be the result of an accident and bona fide error, and
that any Excess received by Lender shall be applied, first, to reduce the
principal then unpaid hereunder; second, to reduce the other Obligations; and
third, returned to Borrower, it being the intention of the parties hereto not
to enter at any time into a usurious or otherwise illegal relationship.
Borrower recognizes that, with fluctuations in the Base Rate and the Maximum
Legal Rate, such a result could inadvertently occur. By the execution of this
Agreement, Borrower covenants that (i) the credit or return of any Excess
Interest shall constitute the acceptance by Borrower of such Excess Interest,
and (ii) to the extent permitted by law, Borrower shall not seek or pursue any
other remedy, legal or equitable, against Lender, based in whole or in part
upon contracting for, charging or receiving of any interest in excess of the
maximum authorized by applicable law. For the purpose of determining whether
or not any Excess Interest has been contracted for, charged or received by
Lender, all interest at any time contracted for, charged or received by Lender
in connection with this Agreement shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
(C) Incorporation by this Reference. The
provisions of Section 2.1.3(B) shall be deemed to be incorporated into every
document or communication relating to the Obligations which sets forth or
prescribes any account, right or claim or alleged account, right or claim of
Lender with respect to Borrower (or any other obligor in respect of Obligations
including, without limitation, Drilling LP), whether or not any provision of
Section 2.1.3(B) is
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referred to therein. All such documents and communications and all figures set
forth therein shall, for the sole purpose of computing the extent of the
Obligations of Borrower (or any other obligor) asserted by Lender thereunder,
be automatically re-computed by Borrower or any such obligor, and by any court
considering the same, to give effect to the adjustments or credits required by
Section 2.1.3(B).
2.2 Computation of Interest and Fees. Interest, Letter of Credit
and LC Guaranty fees and commitment fees hereunder shall be calculated daily
and shall be computed on the actual number of days elapsed over a year of 360
days. For the purpose of computing interest hereunder, all items of payment
received by Lender shall be deemed applied by Lender on account of the
Obligations (subject to final payment of such items) one (1) Business Day after
receipt by Lender of such items in Lender's account located in Atlanta,
Georgia, and Lender shall be deemed to have received such items of payment on
the date specified in Section 3.3 hereof.
2.3 Amendment Fee. Borrower shall pay to Lender, on the Amendment
Date, an amendment fee in the amount of $20,000.
2.4 Letter of Credit and LC Guaranty Fees. Borrower shall pay to
Lender for standby Letters of Credit and LC Guaranties of standby Letters of
Credit, two percent (2.00%) per annum of the aggregate face amount of such
Letters of Credit and LC Guaranties outstanding from time to time during the
term of this Agreement, plus all normal and customary charges associated with
the issuance thereof, which fees and charges shall be deemed fully earned upon
issuance of each such Letter of Credit or LC Guaranty, shall be due and payable
on the first Business Day of each month and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
2.5 Commitment Fee. Borrower shall pay to Lender a commitment fee
equal to one-half of one percent (.5%) per annum of the amount by which the
Average Monthly Revolving Credit Loan Balance is less than the Total Credit
Facility. The commitment fee shall be payable monthly, in arrears, on the last
day of each calendar month hereafter.
2.6 Servicing Fee. Borrower shall pay to Lender an annual
servicing fee of $20,000. This servicing fee shall be paid in equal
installments of $5,000, payable on the first day of each April, July, October,
and January thereafter.
2.7 Audit and Appraisal Fees. Borrower shall reimburse Lender for
all actual out-of-pocket costs and expenses incurred by Lender in connection
with audits and appraisals of Borrower and/or any Subsidiary's books and
records and such other matters as Lender shall deem appropriate. All such
out-of-pocket expenses shall be payable on demand.
2.8 Reimbursement of Expenses. If, at any time or times
regardless of whether or not an Event of Default then exists, Lender incurs
reasonable legal expenses or any accounting expenses or any other costs or
out-of-pocket expenses in connection with (i) the negotiation and preparation
of this Agreement or any of the other Loan Documents, any amendment of or
modification of this Agreement or any of the other Loan Documents, or any sale
or attempted
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sale of any interest herein to any other Person; (ii) the administration of
this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (iii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, Borrower or any other
Person) in any way relating to the Collateral, this Agreement or any of the
other Loan Documents or Borrower's or any Loan Party's affairs; (iv) any
attempt to enforce any rights of Lender against Borrower or any other Person
which may be obligated to Lender by virtue of this Agreement or any of the
other Loan Documents, including the Account Debtors; or (v) any attempt to
inspect, verify, protect, preserve, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Collateral; then all such legal and
accounting expenses, other costs and out of pocket expenses of Lender shall be
charged to Borrower. All amounts chargeable to Borrower under this Section 2.8
shall be Obligations secured by all of the Collateral, shall be payable on
demand to Lender and shall bear interest from the date such demand is made
until paid in full at the rate applicable to Revolving Credit Loans from time
to time. Borrower shall also reimburse Lender for expenses incurred by Lender
in its administration of the Collateral to the extent and in the manner
provided in Section 6 hereof.
2.9 Bank Charges. Borrower shall pay to Lender, on demand, any
and all normal and customary fees, costs or expenses which Lender pays to a
bank or other similar institution arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by Lender, of
proceeds of loans made by Lender to Borrower pursuant to this Agreement and
(ii) the depositing for collection, by Lender, of any check or item of payment
received or delivered to Lender on account of the Obligations.
2.10 Line Debit for Charges. Lender may, at its option, make a
Revolving Credit Loan to reimburse itself for any and all amounts payable by
Borrower to Lender hereunder. Alternatively, Lender may invoice Borrower for
any such amounts and, in such case and notwithstanding anything contained
herein to the contrary, interest shall not begin to accrue on such amounts
until five (5) days after the delivery by Lender of such invoice.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under
the credit facility established pursuant to Section 1 hereof shall be as
follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan
shall be made, or shall be deemed to be made, in the following manner: (i)
Borrower shall give Lender notice of its intention to borrow, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date, no later than 11:00 a.m. Dallas, Texas time on the proposed
borrowing date; provided, however, Lender shall have the right to refuse to
accept such a request or make a Revolving Credit Loan if at such time there
exists a Default or an Event of Default; and (ii) the becoming due of any
amount required to be paid under this Agreement or under any of the other Loan
Documents, whether as principal, accrued interest, fees or other charges, shall
be deemed irrevocably to be a request by Borrower from Lender for a Revolving
Credit Loan on the due date of, and in an aggregate amount required to pay,
such principal, accrued interest, fees or other charges, and the proceeds of
any such Revolving Credit Loan may
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be disbursed by Lender by way of direct payment of the relevant Obligation
(whether or not any Default, Event of Default or Out-of-Formula Condition
exists at the time of or would result from such Revolving Credit Loan) and
shall bear interest at the rate of interest applicable to Revolving Credit
Loans. As an accommodation to Borrower, Lender may permit telephonic requests
for loans and electronic transmittal of instructions, authorizations,
agreements or reports to Lender by Borrower. Unless Borrower specifically
directs Lender in writing not to accept or act upon telephonic or electronic
communications from Borrower, Lender shall have no liability to Borrower for
any loss or damage suffered by Borrower as a result of Lender's honoring of any
requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to Lender telephonically or electronically
and purporting to have been sent to Lender by any individual from time to time
designated by Borrower as an authorized officer and Lender shall have no duty
to verify the origin or authenticity of any such communication.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes
Lender to disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this Section 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under Section 3.1.1(i) shall
be disbursed by Lender in lawful money of the United States of America in
immediately available funds, by wire transfer to such bank account as may be
agreed upon by Borrower and Lender from time to time or elsewhere if pursuant
to a written direction from Borrower; and (ii) the proceeds of each Revolving
Credit Loan requested under Section 3.1.1(ii) shall be disbursed by Lender by
way of direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably
authorizes Lender, in Lender's sole discretion, to advance to Borrower, and to
charge to Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum
sufficient to pay all interest accrued on the Obligations during the
immediately preceding month and to pay all costs, fees and expenses at any time
owed by Borrower to Lender hereunder.
3.2 Payments. All payments with respect to any of the Obligations
shall be made to Lender on the date when due, in Dollars and in immediately
available funds, without any offset or counterclaim. Except where evidenced by
notes or other instruments issued or made by Borrower to Lender specifically
containing payment provisions which are in conflict with this Section 3.2 (in
which event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the receipt by Lender, Borrower or any other Loan Party of any
proceeds of any of the Collateral, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement pursuant to Section 4 hereof; provided, however, that if an
Out-of-Formula Condition shall exist at any time, Borrower shall, on demand,
repay the Obligations to the extent necessary to eliminate the Out-of-Formula
Condition.
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3.2.2 Interest. Interest accrued on the Revolving Credit
Loans shall be due on the earliest of (i) the first calendar day of each month
(for the immediately preceding month), computed through the last calendar day
of the preceding month, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of
the Obligations or (iii) termination of this Agreement pursuant to Section 4
hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges
payable pursuant to this Agreement shall be payable by Borrower as and when
provided in Section 2 hereof, to Lender or to any other Person designated by
Lender in writing.
3.2.4 Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to Lender
as and when provided in this Agreement, the Other Agreements or the Security
Documents, or, if no date of payment is otherwise specified in the Loan
Documents, on demand.
3.3 Application of Payments and Collections. All items of payment
received by Lender by 12:00 noon, Dallas, Texas time, on any Business Day shall
be deemed received on that Business Day. All items of payment received after
12:00 noon, Dallas, Texas time, on any Business Day shall be deemed received on
the following Business Day. Borrower irrevocably waives the right to direct
the application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Lender upon
any of its books and records. If as the result of collections of Accounts as
authorized by Section 6.2.6 hereof a credit balance exists in the Loan Account,
such credit balance shall not accrue interest in favor of Borrower, but shall
be available to Borrower at any time or times for so long as no Default or
Event of Default exists. Lender may, at its option, offset such credit balance
against any of the Obligations upon and after the occurrence of an Event of
Default.
3.4 Loan Account. Lender shall establish an account on its books
(the "Loan Account") and shall enter all Loans as debits to the Loan Account
and shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to Lender,
and may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
3.5 Statements of Account. Lender will account to Borrower
monthly with a statement of Loans, charges and payments made pursuant to this
Agreement supported, if requested by Borrower, by appropriate documentation,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless Lender is notified by Borrower in writing to
the contrary within sixty (60) days after the date each accounting is deemed to
have been sent pursuant to Section 11.8 hereof. Such notice shall only be
deemed an objection to those items specifically objected to therein.
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SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Section 4.2 hereof and Lender's
right to cease making Loans to Borrower upon or after the occurrence of any
Default or Event of Default, this Agreement shall terminate on April 30, 2000
(the "Original Term").
4.2 Termination.
4.2.1 Termination by Lender. After the occurrence and
during the continuation of an Event of Default, Lender may terminate this
Agreement without notice.
4.2.2 Termination by Borrower. Upon at least sixty (60)
days prior written notice to Lender, Borrower may, at its option, terminate
this Agreement; provided, however, no such termination shall be effective until
Borrower has paid all of the Obligations in immediately available funds and all
Letters of Credit and LC Guaranties have expired or have been cash
collateralized to Lender's satisfaction. Any notice of termination given by
Borrower shall be irrevocable unless Lender otherwise agrees in writing, and
Lender shall have no obligation to make any Loans or issue or procure any
Letters of Credit or LC Guaranties on or after the termination date stated in
such notice. Borrower may elect to terminate this Agreement in its entirety
only. No section of this Agreement or type of Loan available hereunder may be
terminated singly.
4.2.3 Termination Charges. On the effective date of
termination of this Agreement for any reason, Borrower shall pay to Lender (in
addition to the then outstanding principal, accrued interest and other charges
owing under the terms of this Agreement and any of the other Loan Documents) as
liquidated damages for the loss of the bargain and not as a penalty, an amount
equal to two percent (2%) of the Total Credit Facility if termination occurs
during the second twelve-month period of the Original Term (May 1, 1998,
through April 30, 1999); and one percent (1%) of the Total Credit Facility if
termination occurs during the third twelve-month period of the Original Term
(May 1, 1999, through April 30, 2000). If termination occurs on the last day
of the Original Term, no termination charge shall be payable.
4.2.4 Effect of Termination. All of the Obligations shall
be immediately due and payable upon the termination date stated in any notice
of termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests
in the Collateral unless, with respect to any loss or damage Lender may incur
as a result of dishonored checks or other items of payment received by Lender
from Borrower, or any other Loan Party or any Account Debtor and applied to the
Obligations, Lender shall, at its option (i) have received a written agreement,
executed by Borrower, Drilling LP and by any Person whose loans or other
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advances to Borrower are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained such
monetary reserves and Liens on the Collateral for such period of time as
Lender, in its reasonable discretion, may deem necessary to protect Lender from
any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment
and performance to Lender of all of the Obligations, Borrower hereby grants to
Lender a continuing security interest in and Lien upon all of Borrower's right,
title and interest in and to the following Property and interests in Property
of Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) All accounts (as defined in Section 9.106 of the
Code);
(ii) All Inventory;
(iii) All General Intangibles (excluding, to the extent
included, drilling contracts other than the Drilling Contracts);
(iv) All investment property (as defined in Section 9.115
of the Code);
(v) the El Reno Property;
(vi) the Drilling Rigs;
(vii) the Drilling Contracts;
(viii) All monies and other Property of any kind now or at
any time or times hereafter in the possession or under the control of Lender or
a bailee or Affiliate of Lender;
(ix) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (viii)
above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(x) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (ix) above.
5.2 Intentionally Omitted.
5.3 Lien Perfection; Further Assurances. Borrower shall execute
such UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral (other than motor vehicles and investment property)
and shall take such other action as may be required to
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perfect or to continue the perfection of Lender's Lien upon such Collateral.
Unless prohibited by Applicable Law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The
parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof. At Lender's reasonable request, Borrower
shall also promptly execute or cause to be executed and shall deliver to Lender
any and all documents, instruments and agreements deemed necessary by Lender to
give effect to or carry out the terms or intent of the Loan Documents.
5.4 Lien on Realty. The due and punctual payment and performance
of the Obligations shall also be secured by a Lien upon the El Reno Property
owned by Drilling LP.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All tangible items of
Collateral, other than Inventory in transit and Drilling Rigs, the locations of
which are reported to Lender pursuant to Section 6.4.4 hereof, motor vehicles
and investment property held in an account with a securities intermediary,
shall at all times be kept by Borrower and its Subsidiaries at one or more of
the business locations set forth in Exhibit A hereto and shall not, without the
prior written approval of Lender, be moved therefrom except, prior to an Event
of Default and Lender's acceleration of the maturity of the Obligations in
consequence thereof, for (i) sales and other movement of Inventory in the
ordinary course of business, and (ii) removals in connection with dispositions
of Drilling Rigs that are authorized by Section 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and
pay, and cause each Subsidiary to maintain and pay, for insurance upon all
Collateral wherever located and with respect to Borrower's and its
Subsidiaries' business, covering casualty, hazard, public liability and such
other risks in such amounts and with such insurance companies as is carried by
prudent owners of similar assets engaged in similar operations (at the time of
issue of the policies in question) and approved by Lender. Borrower or such
Subsidiary shall deliver the originals or certified copies of such policies to
Lender with satisfactory lender's loss payable endorsements, which policies
shall name Lender as a loss payee, assignee or additional insured, as
appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than thirty (30) days prior written
notice to Lender in the event of cancellation of the policy for any reason
whatsoever, unless such cancellation is a result of non-payment of premiums in
which case 10 days prior written notice shall be given to Lender, and a clause
specifying that the interest of Lender shall not be impaired or invalidated
regardless of any breach of or violation by Borrower or a Subsidiary of any
warranties, declarations or conditions contained in said policy. If Borrower
or a Subsidiary fails to provide and pay for such insurance, Lender may, at its
option, but shall not be required to, procure the same and charge Borrower
therefor. Borrower agrees, and shall cause each Subsidiary as applicable, to
deliver to Lender, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies.
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6.1.3 Protection of Collateral. All expenses of
protecting, storing, warehousing, insuring, handling, maintaining and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any Applicable Law on any of the Collateral or in respect of the sale thereof,
and all other payments required to be made by Lender to any Person to realize
upon any Collateral shall be borne and paid by Borrower. If Borrower fails to
promptly pay any portion thereof when due, Lender may, at its option, but shall
not be required to, pay the same and charge Borrower therefor. Lender shall
not be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except for reasonable care in the
custody thereof while any Collateral is in Lender's actual possession) or for
any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency, or other Person whomsoever, but the
same shall be at Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts.
Drilling LP shall keep accurate and complete records of the Accounts and all
payments and collections thereon and shall submit to Lender on such periodic
basis as Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. On or before the fifteenth day of each
month from and after the date hereof, Drilling LP shall deliver to Lender, in
form acceptable to Lender, a detailed aged trial balance of all Accounts
existing as of the last day of the preceding month, specifying the names,
addresses, face value, dates of invoices and due dates for each Account Debtor
obligated on an Account so listed ("Schedule of Accounts"), and, upon Lender's
request therefor, copies of proof of delivery and the original copy of all
documents, including, without limitation, repayment histories and present
status reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Lender shall
reasonably request. In addition, if Accounts in an aggregate face amount in
excess of $350,000 become ineligible because they fall within one of the
specified categories of ineligibility set forth in the definition of Eligible
Accounts or otherwise established by Lender, Drilling LP shall notify Lender of
such occurrence on the first Business Day following the day such occurrence
becomes known to Drilling LP and the Borrowing Base shall thereupon be adjusted
to reflect such occurrence. If requested by Lender, Drilling LP shall execute
and deliver to Lender agings and formal written assignments of all of the
Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of invoices
or invoice registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Drilling LP
grants any discounts, allowances or credits that are not shown on the face of
the invoice for the Account involved, Drilling LP shall report such discounts,
allowances or credits, as the case may be, to Lender as part of the next
required Schedule of Accounts. If any amounts due and owing in excess of
$350,000 are in dispute between Drilling LP and any Account Debtor, Drilling LP
shall provide Lender with written notice thereof at the time of submission of
the next Schedule of Accounts, explaining in detail the reason for the dispute,
all claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default, Lender shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as
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Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney's fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax
payable to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Drilling LP and to charge Borrower therefor; provided, however, that
Lender shall not be liable for any such taxes to any governmental taxing
authority that may be due by Drilling LP or Borrower.
6.2.4 Account Verification. Whether or not a Default or an
Event of Default has occurred, any of Lender's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Lender,
any designee of Lender, Borrower or Drilling LP, to verify the validity, amount
or any other matter relating to any Accounts by mail, telephone, facsimile
transmission or otherwise. Borrower and Drilling LP shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such verification
process.
6.2.5 Maintenance of Dominion Account. Drilling LP shall
maintain a Dominion Account pursuant to a lockbox arrangement acceptable to
Lender with such banks as may be selected by Drilling LP and be acceptable to
Lender. Drilling LP shall issue to any such banks an irrevocable letter of
instruction directing such banks to deposit all payments or other remittances
received in the lockbox to the Dominion Account for application on account of
the Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Lender and Drilling LP shall obtain the agreement by
such banks in favor of Lender to waive any offset rights against the funds so
deposited.
6.2.6 Collection of Accounts, Proceeds of Collateral. To
expedite collection, Drilling LP shall endeavor in the first instance to make
collection of the Accounts for Lender. All remittances received by Borrower
and/or Drilling LP in respect of the Accounts, together with the proceeds of
any other Collateral, shall be held as Lender's property by Borrower or
Drilling LP, as the case may be, as trustee of an express trust for Lender's
benefit and Borrower or Drilling LP, as the case may be, shall immediately
deposit, or cause to be deposited, same in kind in the Dominion Account. Lender
retains the right at all times after the occurrence of an Event of Default to
notify Account Debtors (and account debtors of Borrower with respect to
Borrower's accounts) that Accounts, or accounts, the case may be, have been
assigned to Lender and to collect Accounts, or accounts, as the case may be,
directly in its own name and to charge the collection costs and expenses,
including reasonable attorneys' fees to Borrower.
6.3 Intentionally Omitted.
6.4 Administration of Drilling Rigs.
6.4.1 Records and Schedules of Drilling Rigs. Borrower,
Drilling LP, and each other Subsidiary shall keep accurate records itemizing
and describing the kind, type, quality, quantity and value of the Drilling Rigs
and related equipment respectively owned by any of them, and all dispositions
made in accordance with Section 6.4.2 hereof, and shall furnish Lender
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with a current schedule containing the foregoing information on at least an
annual basis and more often if requested by Lender. Immediately on request
therefor by Lender, Borrower, Drilling LP, and each other Subsidiary shall
deliver to Lender any and all evidence of ownership, if any, of any of the
Drilling Rigs and related equipment respectively owned by any of them.
6.4.2 Dispositions of Drilling Rigs. Borrower will not,
and shall cause Drilling LP and each other Subsidiary to not, sell, lease or
otherwise dispose of or transfer any of the Drilling Rigs or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Drilling Rigs and related equipment
which, in the aggregate during any fiscal year of Borrower, has a fair market
value or book value, whichever is less, of $1,000,000 or less, (ii)
replacements of Drilling Rigs and related equipment that are substantially
worn, damaged or obsolete with Drilling Rigs and related equipment of like
kind, function and value, provided that the replacement equipment or Drilling
Rigs shall be acquired prior to or concurrently with any disposition of the
Drilling Rigs and related equipment that is to be replaced, the replacement
Drilling Rigs and related equipment or Drilling Rigs shall be free and clear of
Liens other than Permitted Liens, or (iii) dispositions of Drilling Rigs
permitted under Section 8.2.9 hereof.
6.4.3 Condition of Drilling Rigs. Borrower, Drilling LP,
each other Subsidiary represent and warrant to Lender that the Drilling Rigs
are in good operating condition and repair according to customary oil and gas
industry practice, and all necessary replacements of and repairs thereto shall
be made so that the value and operating efficiency of the Drilling Rigs shall
be maintained and preserved in accordance with such practice, reasonable wear
and tear excepted. Borrower, Drilling LP, and each other Subsidiary will not
permit any of the and Drilling Rigs to become affixed to any real Property
leased to Borrower or any Subsidiary so that an interest arises therein under
the real estate laws of the applicable jurisdiction unless the landlord of such
real Property has executed a landlord waiver or leasehold mortgage in favor of
and in form acceptable to Lender, and Borrower, Drilling LP, and each other
Subsidiary will not permit any of the Drilling Rigs to become an accession to
any personal Property that is subject to a Lien unless the Lien is a Permitted
Lien.
6.4.4 Location of Drilling Rigs. Not later than fifteen
(15) days after the end of each month hereafter, Borrower and Drilling LP shall
cause to be prepared and furnish to Lender a schedule indicating the precise
location of each Drilling Rig as of the end of such month.
6.5 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand and shall bear interest from the date such advance was
made until paid in full at the rate applicable to Revolving Credit Loans from
time to time.
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SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to
enter into this Agreement and to make advances hereunder, Borrower and as the
case may be, Drilling LP, warrants and represents to Lender and covenants with
Lender that:
7.1.1. Organization and Qualification. Borrower and each of
its Subsidiaries is duly organized or formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation.
Borrower and its Subsidiaries are duly qualified and authorized to do business
and in good standing in each state or jurisdiction listed on Exhibit B hereto
and in all other states and jurisdictions where the character of its Properties
or the nature of its activities make such qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect.
7.1.2. Corporate Power and Authority. Each of Borrower and
its Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this Agreement
and each of the other Loan Documents have been duly authorized by all necessary
corporate, membership or partnership action, as the case may be, and do not and
will not (i) require any consent or approval of the shareholders of Borrower or
its corporate Subsidiaries, partners of Drilling LP or members of Drilling LLC;
(ii) contravene Borrower's or its corporate Subsidiaries charter, articles or
certificate of incorporation or by-laws, Drilling LP's certificate of limited
partnership or its partnership agreement; or Drilling LLC's operating
agreement; (iii) violate, or cause Borrower or its Subsidiaries to be in
default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to Borrower or its Subsidiaries, as the case may be; (iv) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower or its
Subsidiaries is a party or by which any one of which or any of their respective
Properties may be bound or affected; or (v) result in, or require, the creation
or imposition of any Lien (other than Permitted Liens) upon or with respect to
any of the Properties now owned or hereafter acquired by Borrower its
Subsidiaries.
7.1.3. Legally Enforceable Agreement. This Agreement is,
and each of the other Loan Documents when delivered under this Agreement will
be, a legal, valid and binding obligation of Borrower and its Subsidiaries, as
the case may be, enforceable against it in accordance with its respective
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by principles of equity pertaining to the availability of equitable remedies.
7.1.4. Capital Structure on the Amendment Date. Exhibit C
hereto states (i) the correct name of each of the Subsidiaries of Borrower, its
jurisdiction of incorporation, formation or organization, as the case may be,
and the percentage of its Voting Stock owned by Borrower, and, in the case of
Drilling LP, the respective partnership units and percentage interest,
including the general or limited nature thereof, held by each of Trend, Bonray
and Drilling LLC, (ii) the
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name of each of Borrower's corporate or joint venture Affiliates and the nature
of the affiliation, (iii) the number, nature and holder (if such holder owns or
controls five percent (5%) or more of the outstanding securities) of all
outstanding Securities (including partnership interests) of Borrower and each
Subsidiary of Borrower, and (iv) the number of authorized, issued and treasury
shares of Borrower and each Subsidiary of Borrower. Borrower has good title to
all of the shares it purports to own of the stock of each of its Subsidiaries,
free and clear in each case of any Lien. All such shares have been duly issued
and are fully paid and non-assessable. Trend, Bonray and Drilling LLC have
good title to all partnership interests they purport to own in Drilling LP,
free and clear in each case of any Lien. Except as set forth on Exhibit C
there are no outstanding options to purchase, or any rights or warrants to
subscribe for, or any commitments or agreements to issue or sell, or any
Securities or obligations convertible into, or any powers of attorney relating
to, shares of the capital stock,. membership interest or partnership interest
of any Subsidiary.
7.1.5. Corporate Names. Neither Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit D hereto. Except as set forth on Exhibit D
neither Borrower nor any of its Subsidiaries has been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person.
7.1.6. Business Locations; Agent for Process. Borrower's
and its Subsidiaries' chief executive office and other places of business are
as listed on Exhibit A hereto. During the preceding five-year period, neither
Borrower nor any of its Subsidiaries has had an office or place of business
other than as listed on Exhibit A. Except as shown on Exhibit A no Inventory
of Borrower is stored with a bailee, warehouseman or similar Person, nor is any
Inventory consigned to any Person.
7.1.7. Title to Properties; Priority of Liens. To the best
of Borrower's and Drilling LP's knowledge, Borrower and its Subsidiaries have
good and marketable title to and fee simple ownership of, or valid and
subsisting leasehold interests in, all of their real Property, and good title
to all of the Collateral and all of their other Property, in each case, free
and clear of all Liens except Permitted Liens. Borrower, Drilling LP, and each
Subsidiary have paid or discharged all lawful claims (other than accounts
payable permitted to be outstanding under Section 8.2.3(iv)) which, if unpaid,
might become a Lien against any of such Borrower's, Drilling LP's, or such
other Subsidiary's Properties that is not a Permitted Lien. The Liens granted
to Lender under Section 5 hereof are first priority Liens, subject only to
Permitted Liens. All of the Drilling Rigs are mobile equipment which are not
designed to be permanently used for any one location and none of the Drilling
Rigs are certificated as motor vehicles under the laws of any jurisdiction.
7.1.8 Accounts. Lender may rely, in determining which
Accounts of Drilling LP are Eligible Accounts, on all statements and
representations made by Borrower and/or Drilling LP with respect to any Account
or Accounts. Unless otherwise indicated in writing to Lender, with respect to
each Account:
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(i) It is genuine and in all respects what it
purports to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale
and delivery of goods or rendition of services by Drilling LP in the ordinary
course of its business and in accordance with the terms and conditions of all
purchase orders, contracts or other documents relating thereto and forming a
part of the contract between Drilling LP and the Account Debtor;
(iii) It is for a liquidated amount maturing as
stated in the duplicate invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest
therein, is not subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition, except for disputes resulting in
disputes in service where the amount in controversy is deemed by Lender to be
immaterial, and each such Account is absolutely owing to Drilling LP and is not
contingent in any respect or for any reason;
(v) Drilling LP has made no agreement with any
Account Debtor thereunder for any extension, compromise, settlement or
modification of any such Account or any deduction therefrom, except discounts
or allowances which are granted by Drilling LP in the ordinary course of its
business for prompt payment and which are reflected in the calculation of the
net amount of each respective invoice related thereto and are reflected in the
Schedules of Accounts submitted to Lender pursuant to Section 6.2.1 hereof;
(vi) There are no facts, events or occurrences
known to Borrower and/or Drilling LP which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable thereunder
from the face amount of the invoice and statements delivered to Lender with
respect thereto;
(vii) To the best of Drilling LP's knowledge, the
Account Debtor thereunder (a) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and (b) such
Account Debtor is Solvent; and
(viii) To the best of Drilling LP's knowledge, there
are no proceedings or actions which are threatened or pending against any
Account Debtor thereunder which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such
Account.
7.1.9 Financial Statements; Fiscal Year. The Consolidated
balance sheet of Borrower as of December 31, 1997, and the related statements
of income, changes in stockholder's equity, and cash flow statement for the
periods ended on such dates, have been prepared in accordance with GAAP, and
present fairly in all material respects the Consolidated financial position of
Borrower at such date and the results of Borrower's operations for such periods
in accordance with GAAP. Since February 28, 1997, there has been no material
adverse
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change in the condition, financial or otherwise, of Borrower or its
Subsidiaries and since such date there has been no material and adverse change
in the aggregate value of Drilling Rigs and real Property owned by Borrower,
except changes in the ordinary course of business, none of which individually
or in the aggregate has been materially adverse, and the corporate
restructuring of Borrower and its Subsidiaries occurring immediately prior to
the Amendment Date. The fiscal year of each Borrower and each of its
respective Subsidiaries ends on December 31 of each year.
7.1.10 Full Disclosure. The financial statements referred
to in Section 7.1.9 hereof do not, nor does this Agreement or any other written
statement of Borrower or any Loan Party to Lender, contain any untrue statement
of a material fact or omit a material fact, in either case known to Borrower,
necessary to make the statements contained therein or herein not misleading in
light of the circumstances under which such statement was made. There is no
fact or circumstance known to Borrower which Borrower or its Subsidiaries has
failed to disclose to Lender in writing which could reasonably be expected to
have a Material Adverse Effect.
7.1.11. Intentionally Omitted.
7.1.12. Intentionally Omitted.
7.1.13. Taxes. Borrower's federal tax identification number
is 73-1508021. Drilling LP's federal tax identification number is 73-1532348
Borrower and each of its Subsidiaries has filed all federal, state and local
tax returns and other reports it is required by law to file and has paid, or
made provision for the payment of, all Taxes upon it, its income and Properties
as and when such Taxes are due and payable, except to the extent being Properly
Contested. The provision for Taxes on the books of Borrower and its
Subsidiaries are adequate for all years not closed by applicable statutes, and
for its current fiscal year.
7.1.14. Intentionally Omitted.
7.1.15. Patents, Trademarks, Copyrights and Licenses.
Borrower and each of its Subsidiaries own or possess all the material patents,
trademarks, service marks, trade names, copyrights and licenses necessary for
the present and planned future conduct of their business without any material
conflict with the rights of others and the failure to have such ownership or
possession would result in a Material Adverse Effect. All patents, trademarks,
service marks, trade names, copyrights, licenses and other similar rights are
listed on Exhibit F hereto.
7.1.16. Governmental Consents. Borrower and each of its
Subsidiaries have, and are in good standing with respect to, the failure of
which, in any either case, would result in a Material Adverse Effect, all
material governmental consents, approvals, licenses, authorizations, permits,
certificates, inspections and franchises necessary to continue to conduct their
business as heretofore or proposed to be conducted by them and to own or lease
and operate their Properties as now owned or leased by them.
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7.1.17. Compliance with Laws. Borrower and each of its
Subsidiaries have duly complied with, and their Properties, business operations
and leaseholds are in compliance in all material respects with, the provisions
of all material Applicable Law and there have been no citations, notices or
orders of material noncompliance issued to Borrower or any of its Subsidiaries
under any such law, rule or regulation the failure to comply with which would
result in a Material Adverse Effect. Borrower and each of its Subsidiaries has
established and maintains an adequate monitoring system to insure that it
remains in compliance with all federal, state and local laws, rules and
regulations applicable to it.
7.1.18. Restrictions. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which has or could be reasonably expected to have
a Material Adverse Effect. Except as set forth on Exhibit G, neither Borrower
nor any of its Subsidiaries is a party or otherwise subject to any contract or
agreement which restricts the right or ability of Borrower or such
Subsidiaries, as the case may be, to incur Indebtedness upon terms which are
more restrictive than the terms of this Agreement. No contracts or agreements
to which Borrower or any of its Subsidiaries is a party or by which any of
their respective properties are bound prohibits the execution of or compliance
with this Agreement or the other Loan Documents by Borrower or any of its
Subsidiaries, as applicable.
7.1.19. Litigation. Except as set forth on Exhibit H hereto,
there are no actions, suits, proceedings or investigations pending, or to the
knowledge of Borrower, threatened, against or affecting Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of Borrower or any of its Subsidiaries in which the amount in
controversy exceeds $1,000,000. Neither Borrower nor any of its Subsidiaries
is in default with respect to any order, writ, injunction, judgment, decree or
rule of any court, governmental authority or arbitration board or tribunal.
7.1.20. No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or any Borrower's or its Subsidiaries' performance hereunder, constitute a
Default or an Event of Default that may reasonably be expected to result in
costs to Borrower in excess of $1,000,000. Neither Borrower nor any of its
Subsidiaries is in default, and no event has occurred and no condition exists
which constitutes, or which with the passage of time or the giving of notice or
both would constitute, a default in the payment of any Indebtedness to any
Person for Money Borrowed that may reasonably be expected to result in costs to
Borrower in excess of $1,000,000.
7.1.21. Intentionally Omitted.
7.1.22. Pension Plans. Except as disclosed on Exhibit K
hereto, neither Borrower nor any of its Subsidiaries has any Plan. Borrower
and each of its Subsidiaries is in full compliance with the requirements of
ERISA and the regulations promulgated thereunder with respect to each Plan. No
fact or situation that could result in a material adverse change in the
financial condition of Borrower or any of its Subsidiaries exists in connection
with any Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal
liability in connection with a Multiemployer Plan.
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7.1.23. Trade Relations. There exists no actual or
threatened termination, cancellation or limitation of, or any adverse
modification or change in, the business relationship between Borrower or any of
its Subsidiaries and any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of Borrower or
any of its Subsidiaries, or with any material supplier, and there exists no
condition or state of facts or circumstances which would materially adversely
affect any Borrower and its Subsidiaries taken as a whole or prevent Borrower
and its Subsidiaries from conducting such business after the consummation of
the transaction contemplated by this Agreement in substantially the same manner
in which it has heretofore been conducted.
7.1.24. Labor Relations. Except as described on Exhibit L
hereto, neither Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization
which could result in a Material Adverse Effect.
7.2. Survival of Representations and Warranties. All
representations and warranties of Borrower, Drilling LP, and the other
Subsidiaries contained in this Agreement or any of the other Loan Documents
shall survive the execution, delivery and acceptance thereof by Lender and the
parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1. Visits and Inspections. Permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to (i) visit and inspect its Properties and the
Properties of each of its Subsidiaries, and (ii) inspect, audit and make
extracts from its and its Subsidiaries books and records (including, without
limitation, all maintenance records for Drilling Rigs) and discuss with its
officers, employees and independent accountants, its business, assets,
liabilities, financial condition, business prospects and results of operations.
8.1.2. Notices. Notify Lender in writing (i) of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading in any material respect; (ii) promptly
after Borrower's learning thereof, of the commencement of any litigation
affecting Borrower, any Subsidiary or any of their respective Properties,
whether or not the claim is considered by Borrower to be covered by insurance,
and of the institution of any administrative proceeding which if determined
adversely to Borrower or any Subsidiary, would have a Material Adverse Effect;
(iii) at least thirty (30) days prior thereto, of Borrower's or any
Subsidiary's
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opening of any new office or place of business or Borrower's or any
Subsidiary's closing of their respective principal place of business; (iv)
promptly after Borrower's learning thereof, of any material labor dispute to
which Borrower or any Subsidiary may become a party, any strikes or walkouts
relating to any of their respective plants or other facilities, and the
expiration of any material labor contract to which it or any Subsidiary is a
party or by which either is bound which, with respect to any of the foregoing,
could result in a Material Adverse Effect; (v) promptly after Borrower's
learning thereof, of any material default by any Loan Party under any note,
indenture, loan agreement, mortgage, lease, deed, guaranty or other similar
agreement relating to any Indebtedness of Borrower or any Subsidiary exceeding
$1,000,000; (vi) promptly after the occurrence thereof, of any Default or Event
of Default; (vii) promptly after the occurrence thereof, of any default by any
obligor under any note or other evidence of Indebtedness payable to Borrower or
any Subsidiary in an amount exceeding $1,000,000; and (viii) promptly after the
rendition thereof, of any judgment rendered against any Loan Party in an amount
exceeding $1,000,000.
8.1.3 Financial Statements. Keep, and cause each
Subsidiary to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP
applied on a consistent basis, unless Borrower's certified public accountants
concur in any change therein and such change is disclosed to Lender and is
consistent with GAAP):
(i) not later than one hundred and twenty (120)
days after the close of each fiscal year of Borrower, unqualified audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a Consolidated basis, certified by a firm of independent certified
public accountants of recognized standing selected by Borrower but acceptable
to Lender (except for a qualification for a change in accounting principles
with which the accountant concurs);
(ii) not later than forty-five (45) days after the
end of any month during which a Form 10-Q must be filed by Borrower with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, and thirty (30) days after the end of all other months,
unaudited interim financial statements of Borrower and its Subsidiaries as of
the end of such month and of the portion of Borrower's financial year then
elapsed, on a Consolidated and, upon the request of Lender, consolidating
basis, certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting in all material respects the
Consolidated financial position and results of operations of Borrower and its
Subsidiaries for such month and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
(iii) promptly after the sending or filing thereof,
as the case may be, copies of any proxy statements, financial statements or
reports which Borrower and/or its Subsidiaries has generally made available to
its shareholders and copies of any regular, periodic and special reports or
registration statements which Borrower and/or its Subsidiaries files with
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the Securities and Exchange Commission or any governmental authority which may
be substituted therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of
any annual report to be filed in accordance with ERISA in connection with each
Plan;
(v) such other data and information (financial
and otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's and each of its Subsidiaries'
financial condition or results of operations; and
Concurrently with the delivery of the financial statements
described in clause (i) of this Section 8.1.3, Borrower shall forward to Lender
a copy of the accountants' letter to Borrower's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to Lender a certificate of the aforesaid certified public
accountants certifying to Lender that, based upon their examination of the
financial statements of Borrower and its Subsidiaries performed in connection
with their examination of said financial statements, they are not aware of any
Default or Event of Default, or, if they are aware of such Default or Event of
Default, specifying the nature thereof. Concurrently with the delivery of the
financial statements described in clauses (i) and (ii) of this Section 8.1.3,
or more frequently if requested by Lender, Borrower shall cause to be prepared
and furnished to Lender a Compliance Certificate in the form of Exhibit M
hereto executed by the chief financial officer of Borrower.
8.1.4 Landlord and Storage Agreements. Upon the occurrence
and during the continuance of an Event of Default, provide Lender with copies
of all agreements between Borrower or any of its Subsidiaries and any landlord
or warehouseman which owns any premises at which any Inventory and Drilling
Rigs may, from time to time, be kept.
8.1.5 Projections. No later than thirty (30) days prior to
the end of each fiscal year of Borrower, deliver to Lender projections of
Borrower's (consisting of Consolidated (and, if available, consolidating)
balance sheets, income statements and cash flow statements, together with
appropriate supporting details and underlying assumptions) for the forthcoming
fiscal year, month by month.
8.1.6 Taxes. Pay and discharge, and cause each Subsidiary
to pay and discharge, all Taxes prior to the date on which such Taxes become
delinquent or penalties attach thereto, except and to the extent only that such
Taxes are being Properly Contested.
8.1.7 Compliance with Laws. Comply and cause each
Subsidiary to comply, with all Applicable Laws, including all laws, statutes,
regulations and ordinances regarding the collection, payment and deposit of all
Taxes, and all ERISA and Environmental Laws, and obtain and keep in force any
and all licenses, permits, franchises, or other governmental authorizations
necessary to the ownership of its Properties or to the conduct of its business,
which violation or failure to obtain could reasonably be expected to have a
Material Adverse Effect.
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8.1.8 Insurance. In addition to the insurance required
herein with respect to the Collateral, Borrower shall maintain and cause each
Subsidiary to maintain, with financially sound and reputable insurers,
insurance with respect to its Properties and business against such casualties
and contingencies of such type (including product liability, business
interruption, larceny, embezzlement, or other criminal misappropriation
insurance) as is customary in its business and in such amounts as is acceptable
to Lender.
8.2 Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 Mergers; Consolidations; Acquisitions. In any
transaction or series of transactions, consolidate with or merge into any other
Person (other than a merger of a Subsidiary into the Borrower in which the
Borrower is the continuing corporation), or continue in a new jurisdiction or
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Property and assets of the Borrower and the
Subsidiaries, taken as a whole, or any Person, unless:
(i) either (a) the Borrower shall be the
continuing corporation or (b) the corporation (if other than the Borrower)
formed by such consolidation or into which the Borrower 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
Borrower 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, the due and punctual payment of the principal of (and premium, if any)
and interest on all the Obligations and the performance of the Borrower's
covenants and obligations under this Agreement and the other Loan Documents.
(ii) 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),
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 Borrower (or the Surviving Entity if the Borrower is not continuing) shall
have a Tangible Net Worth equal to or greater than the Tangible Net Worth of
the Borrower immediately prior to such transactions;
(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 Borrower (or the Surviving Entity if the Borrower
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is not continuing) would be permitted to incur $1.00 of additional Indebtedness
pursuant to the test described in Section 8.2.3;
(v) the provision of clause (iv) 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 Borrower and the
Subsidiaries taken as a whole into, the Borrower or a Wholly Owned Subsidiary.
(vi) in connection with any consolidation, merger,
transfer of assets or other transactions contemplated by this provision, the
Borrower shall deliver, or cause to be delivered, to the Lender, in form and
substance reasonably satisfactory to the Lender, an Officers' Certificate and
an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, conveyance or transfer and the assumption of obligations in
connection therewith in respect thereto comply with the provisions of this
Agreement and that all conditions precedent in this Agreement relating to such
transactions have been complied with.
8.2.2 Loans. Except as provided in Sections 8.2.12 and
8.2.10 hereof and any intercompany loans between Drilling LP and Borrower, make
or permit any of its Subsidiaries to make, any loans or other advances of money
to any Person, except for travel advances, advances against commissions and
other similar advances in the ordinary course of business and Permitted
Investments (as defined in the Indenture).
8.2.3 Total Indebtedness. (a) Create, incur, assume, or
suffer to exist, or permit any of its Subsidiaries to create, incur or suffer
to exist, 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 preceding the
Transaction Date is at least 2.5 to 1.0. Notwithstanding the foregoing, the
Borrower or any Subsidiary (subject to the following paragraph) may incur
Permitted Indebtedness. Any Indebtedness of a Person existing at time at which
such Person becomes a Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be incurred by such Subsidiary at the time at
which it becomes a Subsidiary.
(b) Subject to Section 8.2.3(a), the Borrower 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 Borrower, a Guarantor or a Wholly Owned Subsidiary, so long as any
transfer of such Indebtedness or Preferred Stock to a Person other than the
Borrower, 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 Borrower (other than Indebtedness or Preferred Stock issued
in connection with or in anticipation of such acquisition);
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(iii) Indebtedness or Preferred Stock outstanding
on the Issue Date and listed in a schedule attached to the Indenture;
(iv) Indebtedness described in clauses (b), (c),
(d), (e), (f), (g), (h), (k) and (n) under the definition of "Permitted
Indebtedness" contained in the Indenture;
(v) Permitted Subsidiary Refinancing Indebtedness
of such Subsidiary;
(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 clause (i) of this
paragraph (the "Retired Indebtedness or Stock"), provided that the Indebtedness
or the Preferred Stock so issued has (i) 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, (ii) a final redemption date later than the stated maturity or
final redemption date (if any) of the Retired Indebtedness or Stock and (iii)
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 Amendment Date shall
assume or otherwise become responsible for any indebtedness of an entity which
is not a Subsidiary on the Amendment Date, except to the extent that a
Subsidiary would be permitted to incur such Indebtedness under this paragraph;
(viii) Non-Recourse Indebtedness incurred by a
foreign Subsidiary not constituting a Guarantor; and
(ix) Indebtedness incurred to finance all or a
part of the purchase price or construction, repair or improvement cost of
Property acquired, constructed, repaired or improved after the Amendment Date.
8.2.4 Affiliate Transactions. Enter into or be a party to,
or permit any of its Subsidiaries to enter into or be a party to, any
transaction or series of related transactions with any Affiliate or stockholder
(excluding transactions between Borrower and Drilling LP), unless (i) such
transaction or series of related transactions is in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms at the time entered into which are
fully disclosed to Lender and are no less favorable than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower or such Subsidiary and (ii) (a) with respect to a
transaction or series of related transactions that has a Fair Market Value in
excess of $5 million but less than $10 million, the Borrower delivers an
Officers' Certificate to the Lender 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
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$10 million, the transaction or series of related transactions is approved by a
majority of the Board of Directors of the Borrower (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. 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 Borrower 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 as well
as stock option agreements, restricted stock agreements and consulting or
similar agreements), (ii) the making of any Restricted Payment otherwise
permitted by the Indenture, (iii) any existing employment agreement, stock
option agreement, restricted stock agreement, consulting agreement or similar
agreement, (iv) any agreement in effect on the Issue Date or any amendment
thereto (so long a such amendment is, taken as a whole, no less favorable to
the Lender than the original agreement as in effect on the Issue Date) and any
transactions contemplated thereby, or (v) any transaction described in "Certain
Relationships and Related Transactions" in the Indenture.
8.2.5 Limitation on Liens. Create or suffer to exist, or
permit any its Subsidiaries to create or suffer to exist, any Lien upon any of
the Collateral, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due or being Properly
Contested;
(iii) Liens arising in the ordinary course of its
business by operation of law or regulation, but only if (a) payment in respect
of any such Lien is not at the time required or (b) the Indebtedness secured by
such Lien is being Properly Contested and such Lien does not materially detract
from the value of the Property or materially impair the use thereof in the
operation of its business;
(iv) security interests on top drives to the
extent that such security interests secure the financing by third parties of at
least 80% of the purchase price of top drives; provided, however, that the
aggregate purchase price of top drives shall not exceed $6,000,000; and
provided, further, that the financing for the purchase of top drives shall be
repaid from the proceeds of contracts for the use of the top drives of equal or
longer duration to the amortization schedules of such financings;
(v) liens securing performance and bid bonds
obtained by Borrower in the ordinary course of their business up to an
aggregate amount of $1,000,000 at any time;
(vi) liens securing the Indebtedness described in
Section 8.2.3(ix) above;
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(vii) such other Liens as appear on Exhibit O
hereto (including, without limitation, the liens securing the CIT Debt); and
(viii) liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety, stay, customs and appeal
bonds, bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money).]
8.2.6 Subordinated Debt. Make, or permit any of its
Subsidiaries to make, any payment of all or any part of any Subordinated Debt
or take any other action or omit to take any other action in respect of any
Subordinated Debt, except in accordance with the subordination agreement
relative thereto.
8.2.7 Restricted Payments. Make, nor permit any Subsidiary
to make, any Restricted Payment, unless at the time of and after giving effect
to the proposed Restricted Payment, (a) no Default shall have occurred and be
continuing (or would immediately result therefrom), (b) the Borrower could
incur at least $1.00 of additional Indebtedness under the tests described in
Section 8.23 above, and (c) the aggregate amount of all Restricted Payments
declared or made on or after the Amendment Date by the Borrower or any
Subsidiary shall not exceed the sum of (i) 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 Amendment Date falls and ending on the last day
of the fiscal quarter for which internal financial statements are available
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 (ii) an amount equal to the aggregate net cash proceeds
received by the Borrower, subsequent to the Amendment 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 Borrower) 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 Borrower 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 Borrower, subsequent to the Amendment Date, plus (iii) 100% of
the net reduction in Restricted Investments, subsequent to the Amendment Date,
in any Person, resulting from payments of interest on Indebtedness, dividends,
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 Borrower, 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
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previously made by the Borrower or any Subsidiary in such Person and in each
such case which was treated as a Restricted Payment, plus (iv) $10,000,000.
The foregoing provisions will not prevent (A) 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 the Indenture; (B) any repurchase or redemption of Capital Stock
or Subordinated Indebtedness of the Borrower or a Subsidiary made by exchange
for Capital Stock of the Borrower (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 Borrower (other than Redeemable
Stock), provided that the net cash proceeds from such sale are excluded from
computations under clause (c) (ii) above to the extent that such proceeds are
applied to purchase or redeem such Capital Stock or Subordinated Indebtedness;
(C) 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 Borrower 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 Borrower or a Subsidiary, so long as such
Subordinated Indebtedness is permitted under the covenant described under
"Limitation on Indebtedness" in the Indenture and (x) is subordinated to the
Notes at least to the same extent as the Subordinated Indebtedness so
exchanged, purchased or redeemed, (y) has a stated maturity later than the
stated maturity of the Subordinated Indebtedness so exchanged, purchased or
redeemed and (z) 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; (D) Investments in any Joint Ventures and foreign
Subsidiaries not constituting Guarantors (as defined in the Indenture) in an
aggregate amount not to exceed $5 million; (E) the payment of any dividend or
distribution by a Subsidiary of the Borrower or any of its Wholly Owned
Subsidiaries; (F) so long as no Default or Event of Default shall have occurred
and be continuing or should occur as a consequence thereof, the repurchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Borrower held by any employee of the Borrower or any of its Subsidiaries,
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Capital Stock pursuant to the terms of an employee benefit
plan or employment or similar agreement shall not exceed $500,000 in any
calendar year, and (G) the acquisition of Capital Stock by the Borrower in
connection with the exercise of stock options or stock appreciation rights by
way of cashless exercise or in connection with the satisfaction of withholding
tax obligations. Notwithstanding the foregoing, the amount available for
Investments in Joint Ventures and foreign Subsidiaries pursuant to clause (D)
of the preceding sentence may be increased by the aggregate amount received by
the Borrower 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 paragraph will be
excluded in calculating the amount of Restricted Payments thereafter, except
that any such Restricted Payments permitted to be made pursuant to clauses (A),
(D), (E) (but only to the extent paid to someone other than the Borrower or any
of its
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Wholly Owned Subsidiaries) and (F) will be included in calculating the amount
of Restricted Payments thereafter.
For purposes of this covenant, 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 such non-cash portion of such Restricted Payment.
8.2.8 Intentionally Omitted.
8.2.9 Disposition of Assets. Sell, lease or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease or otherwise
dispose of the whole or, in the opinion of the Lender, any substantial part of
the Borrower's, or any Subsidiary's, business, property or other assets,
whether by a single transaction or by a series of transactions (related or not)
except (i) dispositions permitted under Section 6.4.2, or (ii) (a) (except for
Asset Sales resulting from the requisition of title to, seizure or forfeiture
of any Property or assets or any actual or constructive total loss or an agreed
or compromised total loss) the Borrower 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 Borrower 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 Borrower or
such Subsidiary from such Indebtedness); and (c) the Borrower delivers to
Lender an Officers' Certificate certifying that such Asset Sale complies with
clauses (a) and (b) provided, however that any Asset Sale pursuant to a
condemnation, appropriation or other similar taking, including by deed in lieu
of condemnation, or pursuant to the foreclosure or other enforcement of a
Permitted Lien or exercise by the related lienholder of rights with respect
thereto, including by deed or assignment in lieu of foreclosure shall not be
required to satisfy the conditions set forth in clauses (a) and (b) of this
sentence.
8.2.10 Stock and/or Partnership Interests of Subsidiaries.
Permit any of its Subsidiaries to issue any additional shares of its capital
stock or partnership interests, as the case may be, to any Person other than
Borrower or any existing Subsidiary and as permitted by Sections 8.2.7 or
8.2.12.
8.2.11 Business Activity. Without the prior written consent
of Lender (which consent shall not be unreasonably withheld) conduct or manage,
or permit any Subsidiary to conduct or manage, any business activity other than
a Related Business (as defined in the Indenture).
8.2.12 Restricted Payments. Make or have, or permit any of
its Subsidiaries to make or have, any Restricted Payment (as defined in the
Indenture) other than those permitted hereunder.
8.2.13 Intentionally Omitted.
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8.2.14 Tax Consolidation. File or consent to the filing of
any consolidated income tax return with any Person other than its Subsidiaries.
8.3 Specific Financial Covenants. During the term of this
Agreement, and thereafter for so long as there are any Obligations to Lender,
Borrower covenants that, unless otherwise consented to by Lender in writing, it
shall:
(i) maintain, on a quarterly basis, a Cash Flow Coverage
Ratio of at least 1.50:1.0 in 1998 and 1.75:1.0 thereafter;
(ii) maintain at all times a Consolidated Interest
Coverage Ratio (as defined on Exhibit "R") of at least 1.5 to 1.0.
(iii) maintain, on a consolidated basis, a ratio of Total
Liabilities to Tangible Net Worth not greater than 1.0:1.0 in 1998 and
thereafter (excluding for purposes of this test the Total Liabilities and
Tangible Net Worth of any Unrestricted Subsidiary).
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other Sections of this Agreement, Lender shall not be required to
make any Loan under this Agreement unless and until each of the following
conditions has been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and
substance satisfactory to Lender and its counsel, a duly executed copy of this
Agreement and the other Loan Documents, together with such additional
documents, instruments and certificates as Lender and its counsel shall require
in connection therewith from time to time, all in form and substance
satisfactory to Lender and its counsel.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set
forth in the other Loan Documents shall have been satisfied.
9.4 Certificate of Limited Partnership. Lender shall have
received a copy of the Certificate of Limited Partnership of Drilling LP and
all amendments thereto, certified by the Secretary of State or other applicable
official of the jurisdiction of Drilling LP's incorporation.
9.5 Partnership Agreement. Lender shall have received a copy of
the partnership agreement which is in full force and effect as of the date
hereof of Drilling LP and all amendments thereto.
9.6 Articles of Incorporation; Operating Agreement. Lender shall
have received a copy of the Articles or Certificate of Incorporation or
Operating Agreement of Borrower and
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each of its Subsidiaries, and all amendments thereto, certified by the
Secretary of State or other appropriate official of the jurisdiction of
Borrower's and each Subsidiary's incorporation.
9.7 Good Standing Certificates. Lender shall have received good
standing certificates for Borrower and each of its Subsidiaries (including,
without limitation, Drilling LP), issued by the Secretary of State or other
appropriate official of Borrower's and each Subsidiary's jurisdiction of
incorporation and each jurisdiction where the conduct of Borrower's or any of
its Subsidiary's business activities or ownership of its Property necessitates
qualification.
9.8 Opinion Letters. Lender shall have received a favorable,
written opinion of counsel to Borrower, as to the transactions contemplated by
this Agreement, to be in form and substance satisfactory to Lender and Lender's
counsel, in their sole discretion.
9.9 Insurance. Lender shall have received copies of the casualty
insurance policies of Borrower and each of its Subsidiaries, together with loss
payable endorsements on Lender's standard form of loss payee endorsement naming
Lender as loss payee and copies of Borrowers' and each such Subsidiary's
liability insurance policies, together with endorsements naming Lender as a
co-insured.
9.10 Dominion Account. Lender shall have received the duly
executed agreement establishing the Dominion Account with a financial
institution acceptable to Lender for the collection or servicing of the
Accounts.
9.11 Representations. Each representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or any other Loan Party in this Agreement, any of the
other Loan Documents or any instrument, certificate or financial statement
furnished in compliance with or in reference thereto shall be true and correct
in all material respects.
9.12 No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain
or prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or the consummation of the transactions
contemplated hereby.
9.13 Evidence of Perfection and Priority of Liens in Collateral.
Lender shall have received copies of all filing receipts or acknowledgments
issued by any governmental authority to evidence any filing or recordation
necessary to perfect the Liens of Lender in the Collateral and evidence in form
satisfactory to Lender that such Liens constitute valid and perfected security
interests and Liens, and that there are no other Liens upon any Collateral
except for Permitted Liens.
9.14 CIT Intercreditor Agreement. CIT and Lender shall have
executed an intercreditor agreement in form and substance satisfactory to
Lender.
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9.15 No Material Adverse Change. There shall have been no material
adverse change in any of Borrower's financial condition between December 31,
1997, and the Amendment Date other than as an immediate result of the corporate
restructuring of Borrower and its Subsidiaries occurring immediately prior to
the Amendment Date.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the
following events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrower shall fail to pay
any of the Obligations on the due date thereof (whether due at stated maturity,
on demand, upon acceleration or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or
other statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or any other Loan Party in this Agreement, any of the
other Loan Documents or any instrument, certificate or financial statement
furnished in compliance with or in reference thereto proves to have been false
or misleading in any material respect when made or furnished or when reaffirmed
pursuant to Section 9.11 hereof.
10.1.3 Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2,
5.3, 6.1.2, 6.2, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
10.1 hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within twenty (20) days after the sooner to occur of Borrower's
receipt of notice of such breach from Lender or the date on which such failure
or neglect first becomes known to any officer of Borrower.
10.1.5 Default Under Security Documents/Other Agreements.
Any event of default shall occur under, or any Loan Party shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the Security Documents or the Other Agreements and such
default shall continue beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or
event of default on the part of Borrower or any of the Guarantors under any
agreement, document or instrument to which Borrower or any such Guarantor is a
party or by which Borrower or any of the Guarantors or any of their respective
Property is bound, creating or relating to any Indebtedness (other than the
Obligations) in excess of $7,500,000, if the payment or maturity of such
Indebtedness is or may be accelerated in consequence of such event of default
or demand for payment of such Indebtedness is made.
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10.1.7 Uninsured Losses. Any material loss, theft, damage
or destruction of any of the tangible Collateral not fully covered (subject to
such deductibles as Lender shall have permitted) by insurance.
10.1.8 Adverse Changes. There shall occur any material
adverse change in the financial condition or business prospects of Borrower and
the Subsidiaries taken as a whole.
10.1.9 Insolvency and Related Proceedings. Any Loan Party
shall cease to be Solvent or shall suffer the appointment of a receiver,
trustee, custodian or similar fiduciary, or shall make an assignment for the
benefit of creditors, or any petition for an order for relief shall be filed by
or against a Loan Party under the Bankruptcy Code (and if, with respect to any
petition filed against any Loan Party, such proceeding shall continue for more
than thirty (30) days), or any Loan Party shall make any offer of settlement,
extension or compromise to such Loan Party's unsecured creditors generally.
10.1.10 Business Disruption; Condemnation. There shall occur
a cessation of a substantial part of the business of Borrower, any Subsidiary
of Borrower for a period which significantly affects Borrower's or such
Subsidiary's capacity to continue its business, on a profitable basis; or
Borrower or any Subsidiary of Borrower shall suffer the loss or revocation of
any license or permit now held or hereafter acquired by such Borrower or such
Subsidiary which is necessary to the continued or lawful operation of its
business; or Borrower or any Subsidiary of Borrower shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which Borrower or any Subsidiary of
Borrower leases, uses or occupies any Property shall be canceled or terminated
prior to the expiration of its stated term; or any part of the Collateral shall
be taken through condemnation or the value of such Property shall be impaired
through condemnation.
10.1.11 Change of Control. (i) a "Change of Control," as
that term is defined in the Indenture, occurs, (ii) subject to Section 8.2.1,
Borrower shall cease to own and control beneficially and of record one hundred
percent (100%) of each class of the issued and outstanding capital stock, or
membership units, as the case may be, in each of Trend, Drilling LLC, and
Bonray, or (iii) subject to Section 8.2.1, Trend, Drilling LLC, and Bonray
shall cease to collectively own and control, beneficially and of record, one
hundred percent (100%) of the outstanding partnership interests of Drilling LP.
10.1.12 ERISA. A Reportable Event shall occur which Lender,
in its sole discretion, shall determine in good faith constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee
for any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if Borrower or any Subsidiary of Borrower is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's or such Subsidiary's complete
or partial withdrawal from such Plan and, with respect to any of the foregoing,
could result in a Material Adverse Effect.
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10.1.13 Challenge to Agreement. Borrower, any Subsidiary of
Borrower or any other Loan Party, or any Affiliate of any of them, shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement, or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
10.1.14 Criminal Forfeiture. Borrower or any Subsidiary of
Borrower shall be criminally indicted or convicted under any law that could
lead to a forfeiture of any Property of Borrower or any Subsidiary of Borrower.
10.1.15 Judgments. Any (i) money judgment for the payment of
money in excess of $7,500,000 is filed against Borrower or any Subsidiary of
Borrower or any of its respective Property, and such judgment shall remain
unpaid, unsatisfied by insurance, and unstayed for more than thirty (30) days,
whether or not consecutive, or (ii) writ of attachment or similar process is
filed against Borrower or any Subsidiary of Borrower, or any of its respective
Property, and such writ of attachment or similar process is not bonded or
secured in an amount and manner reasonably satisfactory to lender.
10.1.16 Dominion Account. Drilling LP shall fail to maintain
a Dominion Account or shall notify Lender that it intends to terminate its
existing Dominion Account.
10.1.17 Indenture and CIT Loan Agreement. An Event of
Default occurs under the Indenture or the CIT Loan Agreement.
10.2 Acceleration of the Obligations. Without in any way limiting
the right of Lender to demand payment of any portion of the Obligations payable
on demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations
shall, at the option of Lender and without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration, or any other further notice by
Lender, become at once due and payable and Borrower shall forthwith pay to
Lender, the full amount of such Obligations; provided, however, that upon the
occurrence of an Event of Default specified in Section 10.1.9 hereof, all of
the Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
10.3 Other Remedies. Upon the occurrence and during the
continuance of an Event of Default, Lender shall have and may exercise from
time to time the following rights and remedies:
10.3.1 All of the rights and remedies of a secured party
under the Code or under other Applicable Law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies
contained in this Agreement or any of the other Loan Documents, and none of
which shall be exclusive.
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10.3.2 The right to take immediate possession of the
Collateral, and to (i) require Borrower to assemble the Collateral, at
Borrower's expense, and make it available to Lender at a place designated by
Lender which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
Borrower, Borrower agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender,
in its sole discretion, may deem advisable. Borrower agrees that any
requirement of notice to Borrower of any proposed public or private sale or
other disposition of Collateral by Lender shall be deemed reasonable notice
thereof if given at least ten (10) days prior thereto, and any such sale may be
held at such locations as Lender may designate in said notice. Lender shall
have the right to conduct such sales on Borrower's premises, without charge
therefor, and such sales may be adjourned from time to time in accordance with
Applicable Law. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of the Collateral
at public or, if permitted by law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the
Obligations. The proceeds realized from the sale of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
costs, expenses and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising
for sale, selling and delivering any Collateral; second to the interest due
upon any of the Obligations; and third, to the principal of the Obligations.
If any deficiency shall arise, Borrower shall remain liable to Lender therefor.
10.3.4 The right to exercise all of Lender's rights and
remedies under any mortgage/deed of trust with respect to any real Property
forming a part of the Collateral.
10.3.5 Lender is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit.
10.3.6 Lender may, at its option, require Borrower to
deposit with Lender funds equal to the LC Amount and, if Borrower fails to
promptly make such deposit, Lender may advance such amount as a Revolving
Credit Loan (whether or not an Out of Formula Condition is created thereby).
Any such deposit or advance shall be held by Lender as a reserve to fund future
payments on such LC Guaranties and future drawings against such Letters of
Credit. At such time as all LC Guaranties have been paid or terminated and all
Letters of Credit have been drawn upon or expired, any amounts remaining in
such reserve shall be applied against any outstanding Obligations, or, if all
Obligations have been indefeasibly paid in full, returned to Borrower.
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10.4 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or in any Guaranty Agreement given to Lender or contained in
any other agreement between Lender and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies,
but all such requirements, Liens, rights, powers, and remedies shall continue
in full force and effect until all Loans and all other Obligations owing or to
become owing from Borrower to Lender shall have been fully satisfied. None of
the undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other Loan Documents and no
Event of Default by Borrower under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender)
as Borrower's true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to Borrower and in either Borrower's or
Lender's name, but at the cost and expense of Borrower:
11.1.1 At such time or times as Lender or said agent, in its
sole discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
11.1.2 At such time or times upon the occurrence and during
the continuance of an Event of Default as Lender or its agent in its sole
discretion may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Drilling LP's rights and remedies with respect to the
collection of the Accounts; (ii) settle, adjust, compromise, discharge or
release any of the Accounts or other Collateral or any legal proceedings
brought to collect any of the Accounts or other Collateral; (iii) sell or
assign any of the Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Lender deems advisable; (iv) take control,
in any manner, of any item of payment or proceeds relating to any Collateral;
(v) prepare, file and sign Borrower's name to a proof of claim in bankruptcy or
similar document against any Account Debtor or to any notice of lien,
assignment or satisfaction of lien or similar document in connection with any
of the Collateral; (vi) receive, open and dispose of all mail
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addressed to Borrower and to notify postal authorities to change the address
for delivery thereof to such address as Lender may designate; (vii) endorse
the name of Borrower upon any of the items of payment or proceeds relating to
any Collateral and deposit the same to the account of Lender on account of the
Obligations; (viii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Accounts, Inventory and any other Collateral; (ix)
use Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory and any other Collateral; (xi)
make and adjust claims under policies of insurance; and (xii) do all other acts
and things necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement.
11.2 Indemnity. BORROWER HEREBY INDEMNIFIES, HOLDS HARMLESS, AND
SHALL DEFEND LENDER AND ITS DIRECTORS, OFFICERS, AGENTS, COUNSEL AND EMPLOYEES
("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES,
DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS ("LOSSES") EVER
SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE OF ANY SUCH INDEMNIFIED PERSON,
BUT NOT INCLUDING ANY LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH INDEMNIFIED PERSON, AND BORROWER SHALL REIMBURSE LENDER
AND EACH OTHER INDEMNIFIED PERSON FOR ANY EXPENSES (INCLUDING IN CONNECTION
WITH THE INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL OR
THREATENED CLAIM, ACTION OR PROCEEDING ARISING THEREFROM, INCLUDING ANY SUCH
COSTS OF RESPONDING TO DISCOVERY REQUESTS OR SUBPOENAS, REGARDLESS OF WHETHER
LENDER OR SUCH OTHER INDEMNIFIED PERSON IS A PARTY THERETO). WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THIS INDEMNITY SHALL EXTEND TO ANY CLAIMS
ASSERTED AGAINST LENDER OR ANY OTHER INDEMNIFIED PERSON BY ANY PERSON UNDER ANY
ENVIRONMENTAL LAWS OR SIMILAR LAWS BY REASON OF BORROWER'S OR ANY OTHER
PERSON'S FAILURE TO COMPLY WITH LAWS APPLICABLE TO SOLID OR HAZARDOUS WASTE
MATERIALS OR OTHER TOXIC SUBSTANCES. BORROWER MAY SELECT COUNSEL WITH RESPECT
TO ANY LOSSES; PROVIDED, HOWEVER, EACH INDEMNIFIED PERSON SHALL HAVE THE RIGHT
TO MONITOR THE PROGRESS OF ANY CLAIMS, SUITS AND ADMINISTRATIVE PROCEEDINGS
DEFENDED BY BORROWER HEREUNDER WITH COUNSEL OF SUCH INDEMNIFIED PERSON'S
CHOICE, OR CONDUCT ITS DEFENSE THROUGH COUNSEL OF SUCH INDEMNIFIED PERSON'S
CHOICE, IN THE EVENT THAT (I) SUCH INDEMNIFIED PERSON DETERMINES IN GOOD FAITH
THAT THE CONDUCT OF ITS DEFENSE BY BORROWER COULD BE MATERIALLY PREJUDICIAL TO
SUCH INDEMNIFIED PERSON'S INTERESTS OR THAT OTHER REASONABLE GROUNDS EXIST
WHICH DEMONSTRATE A LACK OF EFFECTIVENESS OR HIGH LEVEL OF QUALITY IN THE
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CONDUCT OF SUCH DEFENSE BY BORROWER, AND (II) PRIOR TO RETAINING SUCH COUNSEL
FOR SUCH PURPOSE, SUCH INDEMNIFIED PERSON SHALL CONSULT WITH BORROWER AND SHALL
ATTEMPT IN GOOD FAITH TO AGREE UPON COUNSEL TO CONDUCT THE DEFENSE ON BEHALF OF
BORROWER AND SUCH INDEMNIFIED PERSON, AND IN EACH CASE THE FEES AND
DISBURSEMENTS OF SUCH COUNSEL SHALL BE PAID BY BORROWER; PROVIDED, HOWEVER,
THAT IF SUCH MUTUAL AGREEMENT IS NOT REACHED WITHIN A REASONABLE TIME ON
SELECTING COUNSEL, THEN SUCH INDEMNIFIED PERSON MAY RETAIN ITS OWN COUNSEL AT
BORROWER'S EXPENSE. NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS AGREEMENT,
THE OBLIGATION OF BORROWER UNDER THIS SECTION 11.2 SHALL SURVIVE THE PAYMENT IN
FULL OF THE OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
11.3 Modification of Agreement; Sale of Interest. This Agreement
may not be modified, altered or amended, except by an agreement in writing
signed by Borrower and Lender. Borrower may not sell, assign or transfer any
interest in this Agreement, any of the other Loan Documents, or any of the
Obligations, or any portion thereof, including Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower
hereby consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including Lender's
rights, title, interests, remedies, powers, and duties hereunder or thereunder
to any Affiliate of Lender or any Person that purchases all or substantially
all of the assets of Lender. Any other participation, sale, assignment,
transfer or other disposition, at any time or times hereafter, of this
Agreement and any of the other Loan Documents shall be subject to Borrower's
prior consent, such consent not to be unreasonably withheld. If Lender
requests such consent in writing and Borrower does not respond in writing
within five (5) Business Days from the date of delivery of such request, the
consent of Borrower shall be deemed to have been given. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were "Lender" hereunder and
Lender shall be relieved of all obligations hereunder upon any such assignment.
Borrower agrees that it will use its best efforts to assist and cooperate with
Lender in any manner reasonably requested by Lender to effect the sale of
participations in or assignments of any of the Loan Documents or any portion
thereof or interest therein, including assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower and its Subsidiaries to any
potential Participant or assignee.
11.4 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements
and the Security Documents shall be binding upon and inure to the benefit of
the successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
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11.6 Cumulative Effect; Conflict of Terms. The provisions of the
Other Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2
hereof and except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
11.8 Notice. All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, by personal delivery against receipt, by overnight
courier or by facsimile transmissions and shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt or three
(3) Business Days after deposit in the mail, postage prepaid, or with an
overnight courier or, in the case of facsimile transmission, when sent,
answerback received, in each case addressed as follows:
If to Lender: Fleet Capital Corporation
2711 North Haskell Avenue
Suite 2100, LB 21
Dallas, Texas 75204
Attention: Loan Administration
Manager
Facsimile No.: (214) 828-6530
With a copy to: Patton Boggs, LLP
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Larry A. Makel, Esq.
Facsimile No.: (214) 871-2688
If to Borrower: Bayard Drilling, L.P.
4005 N.W. Expressway
Oklahoma City, OK 73126
Attention: Mr. David E. Grose, III
Facsimile No.: (405) 879-3847
With a copy to: Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Mr. Stephen Krebs
Facsimile No.: (713) 229-1522
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If to Drilling LP: 4005 N.W. Expressway
Oklahoma City, OK 73126
Attention: Mr. David E. Grose, III
Facsimile No.: (405) 879-3847
With a copy to: Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Mr. Stephen Krebs
Facsimile No.: (713) 229-1522
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to Section 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender. Any written notice or demand
that is not sent in conformity with the provisions hereof shall nevertheless be
effective on the date that such notice is actually received by the noticed
party.
11.9 Lender's Consent. Unless otherwise provided herein, whenever
Lender's consent is required to be obtained under this Agreement, any of the
Other Agreements or any of the Security Documents as a condition to any action,
inaction, condition or event, Lender shall be authorized to give or withhold
such consent in its sole and absolute discretion.
11.10 Credit Inquiries. Borrower hereby authorizes and permits
Lender (but Lender shall have no obligation) to respond to usual and customary
credit inquiries from third parties concerning Borrower or any of its
Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement,
the Other Agreements and the Security Documents.
11.12 Entire Agreement; Appendix A and Exhibits and Schedules.
This Agreement and the other Loan Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings
and inducements, whether express or implied, oral or written. Appendix A and
each of the Exhibits and Schedules attached hereto are incorporated into this
Agreement and by this reference made a part hereof.
11.13 Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by
39
<PAGE> 45
any court or other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, DALLAS COUNTY, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS: PROVIDED,
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN TEXAS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER
AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED,
AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS
OF BORROWER OR LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE DISTRICT
COURT OF DALLAS COUNTY, TEXAS, OR, AT LENDER'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION
OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.
40
<PAGE> 46
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL
BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (II) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON- PAYMENT, INTENT TO
ACCELERATE, ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION
OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER LENDER MAY DO IN THIS REGARD; (III) TO THE EXTENT PERMITTED BY LAW,
NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO
EXERCISE ANY OF LENDER'S REMEDIES; (IV) TO THE EXTENT PERMITTED BY LAW, THE
BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (V) NOTICE OF
ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER.
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.16 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
11.17 Nonapplicability of Chapter 346 of the Texas Finance Code.
Borrower and Lender hereby agree that, except for Section 15.10(b) thereof, the
provisions of Chapter 346 (other than Section 346.004 thereof) of the Texas
Finance Code (as amended from time to time, the "Texas Finance Code")
(regulating certain revolving credit loans and revolving tri-party accounts)
shall not apply to this Agreement or any of the other Loan Documents.
11.18 Certain Matters of Construction.
(A) References to Other Documents. All references to
statutes and related regulations in this Agreement, the Other Agreements and
the Security Agreements shall include
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<PAGE> 47
any amendments of same and any successor statutes and regulations. All
references in this Agreement, the Other Agreements and the Security Agreements
to any of the Loan Documents shall include any and all amendments and
modifications thereto and any and all extensions or renewals thereof.
(B) Reference to Agreement; Obligations. Each of the
Loan Documents, including this Agreement and any and all other agreements,
documents or instruments now or hereafter executed and delivered pursuant to
the terms hereof or pursuant to the terms of this Agreement as amended hereby,
are hereby amended so that any reference in such Loan Documents to this
Agreement shall mean a reference to the Agreement as amended and restated
hereby. Borrower acknowledges and agrees that its obligations hereunder shall
constitute "Obligations" as defined in the Agreement and as used in the Loan
Documents.
11.19 Release. EACH OF BORROWER AND DRILLING LP ACKNOWLEDGES AND
AGREES THAT (A) IT HAS NO CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES
TO THE ORIGINAL LOAN DOCUMENTS AND THE PERFORMANCE OF ITS OBLIGATIONS
THEREUNDER, OR (B) IF IT HAS ANY SUCH CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS
OR DEFENSES TO THE ORIGINAL LOAN DOCUMENTS AND/OR ANY TRANSACTION RELATED TO
THE ORIGINAL LOAN DOCUMENTS, SAME ARE HEREBY WAIVED, RELINQUISHED AND RELEASED
IN CONSIDERATION OF LENDER'S EXECUTION AND DELIVERY OF THIS AGREEMENT.
11.20 Amendment and Restatement. This Agreement is given in
amendment, restatement, renewal and extension (and not in extinguishment or
satisfaction) of the Original Loan Agreement and, to the extent applicable, the
Original Loan Documents. With respect to matters relating to the period prior
to the date hereof, all the provisions of the Original Loan Agreement and, to
the extent applicable, the Original Loan Documents are hereby ratified and
confirmed and shall remain in full force and effect.
11.21 Joinder. Drilling LP hereby agrees to join in this Agreement
for the limited purposes of making the representations and warranties, and
complying with the covenants, contained in Sections 6 and 7 hereof and agrees
to be bound by the terms and provisions thereof. Nothing contained herein
shall in anyway limit or impair the obligations of Drilling LP with respect to
any Loan Document to which it is a party.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas,
Texas, on the day and year specified at the beginning of this Agreement.
BORROWER:
BAYARD DRILLING TECHNOLOGIES,
INC.
By: /s/ David E. Grose, III
--------------------------------
Name: David E. Grose, III
Title: Chief Financial Officer
Accepted in Dallas, Dallas County, Texas:
LENDER:
FLEET CAPITAL CORPORATION
By: /s/ Bruce Clark
--------------------------------
Name: Bruce Clark
Title: Vice President
Joined in for the purposes
stated in Section 11.21.
BAYARD DRILLING, L.P.
By: Bayard Drilling, L.L.C.,
its general partner
By: /s/ David E. Grose, III
--------------------------------
Name: David E. Grose, III
Title: Chief Financial Officer
Amended and Restated L&S
<PAGE> 49
APPENDIX A
GENERAL DEFINITIONS
When used in the Amended and Restated Loan and Security Agreement
dated as of June 18, 1998, by and between Fleet Capital Corporation, Bayard
Drilling Technologies, Inc., and joined in by Bayard Drilling, L.P., the
following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Accounts - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or
acquired by Drilling LP or in which Drilling LP now has or hereafter
acquires any interest.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, a Person; (ii)
which beneficially owns or holds 10% or more of any class of the
Voting Stock of a Person; or (iii) 10% or more of the Voting Stock (or
in the case of a Person which is not a corporation, 10% or more of
the equity interest) of which is beneficially owned or held by a
Person or a Subsidiary of a Person.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits and Schedules thereto
and this Appendix A, as amended, renewed, extended and restated from
time to time.
Allowed Affiliate Accounts - each Account receivable from Ward
or AnSon Company which arises in the ordinary course of Drilling LP's
business from the sale of goods or rendition of services to such
Persons and which is payable in Dollars. Without limiting the
generality of the foregoing, no Account shall be an Allowed Affiliate
Account if: (i) it is due or unpaid more than 90 days after the
original invoice date; (ii) 20% or more of the Accounts from the
Account Debtor are due and unpaid more than 60 days from invoice date
or otherwise are not deemed Allowed Affiliate Accounts hereunder
(subject, however, to redeterminations by Lender if Drilling LP's
provides written evidence to Lender reflecting that sufficient
payments have been made on such Accounts between the date of
determination of eligibility and the date the Schedule of Accounts was
delivered to Lender to merit their inclusion in a Borrowing Base
determination); (iii) any covenant, representation or warranty
contained in the Agreement with respect to such Account has been
breached; (iv) the Account Debtor has disputed liability with respect
to such Account, or the Account Debtor has made any claim with respect
to any other Account due from such Account Debtor to Drilling LP, or
the Account otherwise is or may become subject to any right of setoff,
counterclaim, reserve or chargeback, provided that, in any event, the
Accounts of such Account Debtor shall be ineligible only to the extent
of the amount owing by Drilling LP to such creditor or
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supplier or to the extent of such offset, counterclaim, disputed
amount, reserve or chargeback; (v) the Account Debtor has commenced a
voluntary case under the federal bankruptcy laws or made an assignment
for the benefit of creditors, or a decree or order for relief has been
entered by a court having jurisdiction in the proceedings in respect
of the Account Debtor in an involuntary case under the federal
bankruptcy laws or any other petition or other application for relief
under the federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended business,
ceased to be Solvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs; (vi) it arises from a
sale to an Account Debtor with its principal office, assets or place
of business outside the United States, unless the sale is backed by an
irrevocable letter of credit issued or confirmed by Bank and is in
form and substance acceptable to Lender, payable in the full amount of
the Account in freely convertible Dollars at a place of payment within
the United States; (vii) it arises from a sale to the Account Debtor
on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; (viii) the
Account Debtor has relocated to New Jersey, Minnesota, Indiana, West
Virginia or any other state imposing similar conditions on the right
of a creditor to collect accounts receivable unless Drilling LP has
either qualified to transact business in such state as a foreign
corporation or filed a Notice of Business Activities Report or other
required report with the appropriate officials in those states for the
then current year; (ix) the Account is subject to a Lien other than a
Permitted Lien; (x) the goods giving rise to such Account have not
been delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by Drilling LP and
accepted by the Account Debtor or the Account otherwise does not
represent a final sale; (xi) the Account is evidenced by chattel paper
or an instrument of any kind, or has been reduced to judgment; (xii)
Drilling LP has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances which are made
in the ordinary course of business for prompt payment and which
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or (xiii) Drilling LP
has made an agreement with the Account Debtor to extend the time of
payment thereof.
Amendment Date - the date first written hereinabove.
AnSon Company - AnSon Company, an Oklahoma general
partnership.
Applicable Annual Rate - as defined in Section 2.1.1 of the
Agreement.
Applicable Law - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Loan Documents in
question, including all applicable common law and equitable
principles; all provisions of all applicable state and federal
constitutions, statutes, rules, regulations and orders of governmental
bodies; and orders, judgments and decrees of all courts and
arbitrators.
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Availability - the amount of money which Borrower is entitled
to borrow from time to time as Revolving Credit Loans, such amount
being the difference derived when the sum of the principal amount of
Revolving Credit Loans then outstanding (including any amounts which
Lender may have paid for the account of Borrower pursuant to any of
the Loan Documents and which have not been reimbursed by Borrower) and
the LC Amount is subtracted from the Borrowing Base. If the amount
outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
Average Monthly Revolving Credit Balance - the amount obtained
by adding the aggregate unpaid principal amount of Revolving Credit
Loans plus the LC Amount at the end of each day during the month in
question and by dividing such sum by the number of days in such month.
Bank - Fleet National Bank, and its successors or assigns.
Base Rate - the rate of interest announced or quoted by Bank
from time to time as its prime rate for commercial loans, whether or
not such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such prime rate for commercial loans is
discontinued by Bank as a standard, a comparable reference rate
designated by Bank as a substitute therefor shall be the Base Rate.
Bonray - Bonray Drilling Corporation, a Delaware Corporation.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(a) Total Credit Facility; or
(b) an amount equal to:
(i) 80% of the net amount of Eligible
Accounts outstanding at such date;
PLUS
(ii) 50% of the net amount of Turnkey
Accounts;
PLUS
(iii) the lesser of (x) 80% of the net
amount of Allowed Affiliate Accounts and (y)
$5,000,000; or
(c) the Maximum Guaranteed Amount as such term is
defined in the Guaranty Agreement of Drilling LP
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<PAGE> 52
MINUS (subtract from the amount of clauses (a), (b)
or (c) above) the sum of (i) the LC Amount, plus (ii) the
amount of any reserves established by Lender pursuant to
Section 1.1.1 at such date.
For purposes of clauses (b)(i), (b)(ii) and (b)(iii) hereof,
the net amount of Eligible Accounts, Turnkey Accounts, and Allowed
Affiliate Accounts, as the case may be, at any time shall be the face
amount of such Accounts less any and all returns, rebates, discounts
(which may, at Lender's option, be calculated on shortest terms),
credits, allowances or sales, excise or withholding taxes of any
nature at any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with such Accounts at such time.
Business Day - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the state of Texas or is a
day on which banking institutions located in such state are closed.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
Cash Flow - means, for any period, the sum of Borrower's and
all Subsidiaries consolidated net income plus depreciation, depletion
and amortization less dividends paid and extraordinary items of income
or loss (as determined in accordance with GAAP) in the prior four
quarters. Cash Flow shall exclude the Cash Flow attributable to any
Unrestricted Subsidiary.
Cash Flow will be calculated as as of June 30, 1998 and for
all subsequent periods as the sum of the actual Cash Flow for the then
preceding twelve months.
Cash Flow Coverage Ratio - means the ratio of Cash Flow to
Projected Debt Service.
CIT - The CIT Group/Equipment Financing, Inc., a New York
corporation.
CIT Debt - means any and all indebtedness, claims, debts,
liabilities, or obligations of Borrower owing to CIT, individually and
as agent for CIT and Lender, and Lender, of whatever nature,
character, or description, arising solely as a result of the loans
made pursuant to the CIT Loan Agreement, as amended, but in no event
shall such CIT Debt exceed $19,000,000 plus accrued interest in the
aggregate.
CIT Loan Agreement - means that certain Loan Agreement, dated
as of December 10, 1996, by and between CIT and Borrower, as amended
and restated as of May 1, 1997 and as of June 18, 1998, by and between
CIT, Lender, CIT as agent for CIT and Lender, and Borrower, and any
and all other agreements, documents and instruments currently or
hereafter entered into by and between Borrower, CIT, Lender, and CIT
as agent for CIT
A-1-4
<PAGE> 53
and Lender, or executed by Borrower in favor of, or to the order of,
CIT, Lender, and CIT as agent for CIT and Lender, in connection with
such Loan Agreement.
Closing Date - the date on which all of the conditions
precedent in Section 9 of the Agreement are satisfied and the initial
Loan is made or the initial Letter of Credit or LC Guaranty is issued
under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in
the state of Texas, as from time to time in effect.
Collateral - all of the Property and interests in Property
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations, including, without limitation,
the "Collateral" as defined in the Security Agreements.
Consolidated - the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
Current Assets - at any date means the amount at which all of
the current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date in accordance with GAAP.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an
Event of Default.
Default Rate - as defined in Section 2.1.2 of the Agreement.
Dollars and the sign "$" - lawful money of the United States
of America.
Dominion Account - a special account of Lender established by
Drilling LP pursuant to the Agreement at a bank selected by Borrower
and Drilling LP, but acceptable to Lender in its reasonable
discretion, and over which Lender shall have sole and exclusive access
and control for withdrawal purposes.
Drilling Contracts - any and all drilling contracts and any
and all rights thereunder, including but not limited to the right to
receive payments due or to become due, as associated with or to the
Drilling Rigs.
Drilling LLC - Bayard Drilling, L.L.C. a Delaware limited
liability company.
Drilling LP - Bayard Drilling, L.P., a Delaware limited
partnership.
Drilling Rigs - the land drilling rigs and drilling equipment
identified on Exhibit P to the Agreement, the ownership of which has
been assigned from Borrower to Drilling LP, and all metal products,
machinery, equipment, materials or other goods of any
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<PAGE> 54
description whatsoever, used or acquired for use by Borrower and all
pumps, drilling equipment, drill pipe, machinery, equipment, supplies,
parts and other goods of any description whatsoever installed in or
affixed to or to be used in connection with any Drilling Rig or
acquired for installation on, affixation to, or use in connection with
any Drilling Rig.
Eligible Account - an Account (other than a Turnkey Account)
arising in the ordinary course of Drilling LP's business from the sale
of goods or rendition of services which is payable in Dollars and
which Lender, in its sole credit judgment, deems to be an Eligible
Account. Without limiting the generality of the foregoing, no Account
shall be an Eligible Account if: (i) it arises out of a sale made by
Drilling LP to a Subsidiary or an Affiliate of Drilling LP or to a
Person controlled by an Affiliate of Drilling LP, including, without
limitation, any Allowed Affiliate Account; (ii) it is due or unpaid
more than 90 days after the original invoice date; (iii) 20% or more
of the Accounts from the Account Debtor are due and unpaid more than
60 days from invoice date or otherwise are not deemed Eligible
Accounts hereunder; (iv) the total unpaid Accounts of the Account
Debtor exceed 20% of the net amount of all Eligible Accounts
(excluding Accounts receivable from Chesapeake, Union Pacific Resource
Corporation and Sonat Exploration Company, to the extent of such
excess; (v) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; (vi) the
Account Debtor, other than Chesapeake, is also Drilling LP's creditor
or supplier, or the Account Debtor has disputed liability with respect
to such Account, or the Account Debtor has made any claim with respect
to any other Account due from such Account Debtor to Drilling LP, or
the Account otherwise is or may become subject to any right of setoff,
counterclaim, reserve or chargeback, provided that, in any event, the
Accounts of such Account Debtor shall be ineligible only to the extent
of the amount owing by Drilling LP to such creditor or supplier or to
the extent of such offset, counterclaim, disputed amount, reserve or
chargeback; (vii) the Account Debtor has commenced a voluntary case
under the federal bankruptcy laws or made an assignment for the
benefit of creditors, or a decree or order for relief has been entered
by a court having jurisdiction in the proceedings in respect of the
Account Debtor in an involuntary case under the federal bankruptcy
laws or any other petition or other application for relief under the
federal bankruptcy laws has been filed against the Account Debtor, or
if the Account Debtor has failed, suspended business, ceased to be
Solvent, or consented to or suffered a receiver, trustee, liquidator
or custodian to be appointed for it or for all or a significant
portion of its assets or affairs; (viii) it arises from a sale to an
Account Debtor with its principal office, assets or place of business
outside the United States, unless the sale is backed by an irrevocable
letter of credit issued or confirmed by Bank and is in form and
substance acceptable to Lender, payable in the full amount of the
Account in freely convertible Dollars at a place of payment within the
United States; (ix) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; (x) (a) the
Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless Drilling LP assigns its
right to payment of such Account to Lender, in a manner satisfactory
to Lender, so as to comply with the Assignment of Claims Act of 1940
(31
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<PAGE> 55
U.S.C. Section 203 et seq.) or (b) the Account Debtor is a state,
county or municipality, or a political subdivision or agency thereof,
which is subject to any Applicable Law that would disallow an
assignment of Accounts on which it is the Account Debtor; (xi) the
Account Debtor is located in New Jersey, Minnesota, Indiana, West
Virginia or any other state imposing similar conditions on the right
of a creditor to collect accounts receivable unless Drilling LP has
either qualified to transact business in such state as a foreign
corporation or filed a Notice of Business Activities Report or other
required report with the appropriate officials in those states for the
then current year; (xii) the Account is subject to a Lien other than a
Permitted Lien; (xiii) the goods giving rise to such Account have not
been delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by Drilling LP and
accepted by the Account Debtor or the Account otherwise does not
represent a final sale; (xiv) the Account is evidenced by chattel
paper or an instrument of any kind, or has been reduced to judgment;
(xv) Drilling LP has made any agreement with the Account Debtor for
any deduction therefrom, except for discounts or allowances which are
made in the ordinary course of business for prompt payment and which
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or (xvi) Drilling LP
has made an agreement with the Account Debtor to extend the time of
payment thereof.
El Reno Property - That certain parcel of real property
located in El Reno, Canadian County, Oklahoma and upon which Trend
granted to Lender a mortgage in connection with the Original Loan
Agreement.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to health, safety or environmental matters.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended, and all rules and regulations from time to time
promulgated thereunder.
Event of Default - as defined in Section 10.1 of the
Agreement.
Excess Interest - as defined in Section 2.1.3(B) of the
Agreement.
GAAP - generally accepted account principles in the United
States of America in effect from time to time.
General Intangibles - all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower,
including all choices in action, causes of action, corporate or other
business records, deposit accounts, inventions, blueprints, designs,
patents, patent applications, trademarks, trademark applications,
trade names, trade secrets, service marks, goodwill, brand names,
copyrights, registrations, licenses, franchises, customer lists, tax
refund claims, computer programs, operational manuals, all claims
under guaranties, security interests or other security held by or
granted to
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Borrower to secure payment of any of the Accounts by an Account
Debtor, all rights to indemnification and all other intangible
property of every kind and nature (other than Accounts), and excluding
drilling contracts other than the Drilling Contracts.
Guarantors - collectively, Drilling LP, Drilling LLC, Trend
and Bonray and any other or future guarantor of the Obligations.
Guaranty Agreements - collectively, the Continuing Guaranty
Agreements executed by each of Drilling LP, Drilling LLC, Trend and
Bonray.
Indebtedness - shall have the meaning ascribed thereto in the
Indenture; and in the case of Borrower (without duplication), shall
include the Obligations.
Indemnified Persons - as defined in Section 11.2 of the
Agreement.
Inventory - all of Borrower's inventory, whether now owned or
hereafter acquired, including, but not limited to, all goods intended
for sale or lease by Borrower, or for display or demonstration; all
work in process; all raw materials and other materials and supplies of
every nature and description used or consumed in Borrower's business;
and all documents evidencing and General Intangibles relating to any
of the foregoing, whether now owned or hereafter acquired by Borrower,
excluding, however, all Inventory associated with any drilling rig
other than the Drilling Rigs.
LC Amount - at any time, the aggregate undrawn face amount of
all Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Lender or any
Affiliate of Lender shall guaranty the payment or performance by
Borrower of its reimbursement obligation under any letter of credit.
Letter of Credit - any letter of credit issued by Lender or
any of Lender's Affiliates for the account of Borrower.
Lien - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on common law, statute or contract.
The term "Lien" shall also include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, Borrower shall
be deemed to be the owner of any Property which it has acquired or
holds subject to a conditional sale agreement or other arrangement
pursuant to which title to the Property has been retained by or vested
in some other Person for security purposes.
Loan Account - the loan account established on the books of
Lender pursuant to Section 3.4 of the Agreement.
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<PAGE> 57
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loan Party - Borrower and each other Person (other than
Lender) who is at any time a party to any Loan Document.
Loans - all loans and advances of any kind made by Lender
pursuant to the Agreement.
Losses - as defined in Section 11.2 of the Agreement.
Material Adverse Effect - the effect of any event or condition
which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, (a) has a material
adverse effect upon the business, operations, Properties, condition
(financial or otherwise) or business prospects of Borrower and its
Subsidiaries, including without limitation, Drilling LP, taken as a
whole; (b) has any material adverse effect whatsoever upon the
validity or enforceability of any material provisions of the Agreement
or any of the other Loan Documents; (c) has or may be reasonably
expected to have any material adverse effect upon the value of the
whole or any material part of the Collateral, the Liens of Lender with
respect to the Collateral or any material part thereof or the priority
of such Liens; (d) materially impairs the ability of Borrower and the
other Loan Parties, taken as a whole, to perform their material
obligations under this Agreement or any of the other Loan Documents,
including repayment of the Obligations when due; or (e) materially
impairs the ability of Lender to enforce or collect the Obligations or
realize upon any of the Collateral in accordance with the Loan
Documents and Applicable Law.
Maximum Legal Rate - as defined in Section 2.1.3(A) of the
Agreement.
Money Borrowed - means (i) Indebtedness arising from the
lending of money by any Person to Borrower or any Subsidiary; (ii)
Indebtedness, whether or not in any such case arising from the lending
by any Person of money to Borrower or any Subsidiary, (A) which is
represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which
interest charges are customarily paid (other than accounts payable) or
that was issued or assumed as full or partial payment for Property,
other than accounts payable; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and
(v) Indebtedness of Borrower or any Subsidiary under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof, if owed directly by Borrower.
Mortgage - the mortgage or deed of trust to be executed by
Borrower in favor of Lender by which Borrower shall grant and convey
to Lender, as security for the
A-1-9
<PAGE> 58
Obligations, a Lien upon the real Property owned in fee by Borrower,
located at El Reno, Oklahoma.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Obligations - all Loans, and all other advances, debts,
liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or
payable from Borrower to Lender of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other
instrument, whether arising under the Agreement or any of the other
Loan Documents or otherwise, and whether direct or indirect (including
those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and
however acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Original Loan Agreement - that certain Loan and Security
Agreement dated as of May 1, 1997 between Trend, Borrower and Lender.
Original Loan Documents - the Loan Documents as defined in the
Original Loan Agreement.
Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower, any Subsidiary of
Borrower or any other third party and delivered to Lender in respect
of the transactions contemplated by the Agreement.
Out-of-Formula Condition - at any date of determination
thereof, a condition such that the outstanding principal amount of
Revolving Credit Loans plus the LC Amount on such date exceeds the
Borrowing Base on such date.
Participant - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement
and who shall have entered into a participation agreement in form and
substance satisfactory to Lender.
Permitted Indebtedness - shall have the meaning ascribed
thereto in the Indenture.
Permitted Lien - a Lien of a kind specified in Section 8.2.5
of the Agreement.
Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.
A-1-10
<PAGE> 59
Projected Debt Service - means the sum of the current portion
of Borrower's and each Subsidiaries' long term debt and capitalized
lease obligations coming due in the following four quarters, including
any maturities of the Loans associated with this Agreement. Projected
Debt Service shall exclude the Projected Debt Service attributable to
any Unrestricted Subsidiary.
Properly Contested - in the case of any Indebtedness of a Loan
Party (including any Taxes) that is not paid as and when due or
payable by reason of such Loan Party's bona fide dispute concerning
its liability to pay same or concerning the amount thereof, that (i)
such Indebtedness and any Liens securing same are being properly
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted, (ii) such Loan Party has established
appropriate reserves as shall be required in conformity with GAAP,
(iii) the non-payment of such Indebtedness will not have a Material
Adverse Effect and will not result in a forfeiture of any assets of
such Loan Party; (iv) no Lien is imposed upon any of such Loan Party's
assets with respect to such Indebtedness unless such Lien is at all
times junior and subordinate in priority to the Liens in favor of
Lender (except only with respect to property taxes that have priority
as a matter of applicable state law); (v) if the Indebtedness results
from the entry, rendition or issuance against a Loan Party or any of
its assets of a judgment, writ, order or decree, such judgment, writ,
order or decree is stayed or bonded pending a timely appeal or other
judicial review; and (vi) if such contest is abandoned, settled or
determined adversely to such Loan Party, such Loan Party forthwith
pays such Indebtedness and all penalties and interest in connection
therewith.
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Rentals - as defined in Section 8.2.13 of the Agreement.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
Revolving Credit Loan - a Loan made by Lender as provided in
Section 1.1 of the Agreement.
Schedule of Accounts - as defined in Section 6.2.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
Security Agreements - collectively, the Security Agreements
executed by each of Drilling LLP, Drilling LLC, Trend and Bonray.
A-1-11
<PAGE> 60
Security Documents - the Guaranty Agreements, Security
Agreements, and all other instruments and agreements now or at any
time hereafter securing the whole or any part of the Obligations.
Senior Debt - means all Money Borrowed, excluding Subordinated
Debt.
Solvent - as to any Person, such Person (i) owns Property
whose fair salable value is greater than the amount required to pay
all of such Person's Indebtedness (including contingent debts), (ii)
is able to pay all of its Indebtedness as such Indebtedness matures
and (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to
engage.
Subordinated Debt - Indebtedness of Borrower or any Subsidiary
that is subordinated to the Obligations in a manner satisfactory to
Lender.
Subsidiary - any corporation of which a Person owns, directly
or indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination or any association or other
business entity of which more than fifty percent (50%) of the total
voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or
trustees thereof, or to vote in matters relating to the partnership if
a partnership, is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other subsidiaries of
that Person or a combination thereof. Notwithstanding the foregoing,
the term Subsidiary shall include all Guarantors whether or not
included within the foregoing and shall exclude any Unrestricted
Subsidiary.
Tangible Net Worth - means, at a particular date, the sum of
the Borrowers' capital stock (excluding treasury stock), warrants,
surplus (including earned surplus, capital surplus and the balance of
the current profit and loss account not transferred to surplus) and
debt that is specifically subordinated to the Obligations on the terms
acceptable to the Lender accounted on a consolidated basis appearing
on a consolidated balance sheet prepared in accordance with GAAP as of
the date of determination, and after deducting therefrom the net book
value of all assets (after deducting any reserves applicable thereto)
which would be treated as intangibles under GAAP (including, without
limitation, such items as goodwill, trademarks, trade names, patents
and licenses, franchises and operating rights) and excluding the
amount of the Borrowers' equity investment in any Unrestricted
Subsidiary.
Taxes - any present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other charges of
whatever nature, including, without limitation, income, receipts,
excise, property, sales, transfer, license, payroll, withholding,
social security and franchise taxes now or hereafter imposed or levied
by the United States, or any state, local or foreign government or by
any department, agency or other
A-1-12
<PAGE> 61
political subdivision or taxing authority thereof or therein and all
interest, penalties, additions to tax and similar liabilities with
respect thereto.
Total Credit Facility - $10,000,000.
Total Liabilities - means indebtedness of the Borrower and its
Subsidiaries on a consolidated basis which would in accordance with
GAAP be classified as current and long term liabilities of a
corporation conducting a business the same as or similar to the
Borrower and its Subsidiaries, but excluding debt that is specifically
subordinated to the Obligations on terms acceptable to the Lender and
total liabilities of any Unrestricted Subsidiary.
Trend - Trend Drilling Co., and Oklahoma corporation.
Turnkey Accounts - Accounts arising from oil or gas drilling
contracts between Drilling LP and owners or operators of oil or gas
wells pursuant to which Drilling LP assumes primary control over
drilling activity, and is responsible for subcontracting related
services.
Unrestricted Subsidiary - Any Subsidiary of the Borrower that
the Borrower has clarified as an Unrestricted Subsidiary under the
Indenture and that has not been reclassified as a Subsidiary pursuant
to the terms of the Indenture.
Voting Stock - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
Ward - Ward Drilling Company.
TERMS DEFINED IN INDENTURE. Capitalized terms used in this Agreement
but not otherwise defined herein, or specifically referenced to the Indenture
for their meaning, shall have the meaning given them in that certain Offering
Memorandum dated June 19, 1998, pursuant to which Borrower is offering senior
notes in an aggregate principal amount not to exceed $100,000,000, without
giving any effect to any amendments or modifications thereto after the date
thereof ("Indenture"), a copy of which is attached hereto as Exhibit Q.
OTHER TERMS. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time
from a specified date to a later specified date, the word "from"
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<PAGE> 62
means "from and including" and the words "to" and "until" each means "to but
excluding." The section titles, table of contents and list of Exhibits appear
as a matter of convenience only and shall not affect the interpretation of the
Agreement. All references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations. All
references to any of the Loan Documents shall include any and all modifications
thereto and any and all extensions or renewals thereof. Wherever the phrase
"including" shall appear in the Agreement, such word shall be understood to
mean "including, without limitation."
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
A-1-14
<PAGE> 1
EXHIBIT 10.14
SECOND AMENDED AND RESTATED LOAN AGREEMENT
AMONG
THE CIT GROUP/EQUIPMENT FINANCING, INC.
AND
FLEET CAPITAL CORPORATION
AS LENDERS,
AND
BAYARD DRILLING TECHNOLOGIES, INC.,
AS BORROWER.
DATED AS OF JUNE 18, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. - THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.1 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.2 Pro-Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.3 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.5 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Total Loss or Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ii) "Total Loss" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iii) Collateral Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iv) Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.6 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.7 Amendment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.8 Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.9 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.10 Release of Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II. - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.1 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.2 Waiver of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III. - REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Representations of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2 Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV. - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V. - THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.1 Appointment and Duties of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.2 Discretion and Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.3 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.4 Consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.5 Communications to and from Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.6 Limitations of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.7 No Representations or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.8 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.9 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.11 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.12 Limitation of Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 5.13 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI. - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.2 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.3 Applicable Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.6 Assignment and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.7 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.10 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
Exhibit A-1 - CIT Note
Exhibit A-2 - Fleet Note
<PAGE> 4
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT dated as of June 18,
1998, among BAYARD DRILLING TECHNOLOGIES, INC., a Delaware corporation (the
"Borrower"), THE CIT GROUP/EQUIPMENT FINANCING, INC., a New York corporation
("CIT"), and FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Fleet";
collectively with CIT, the "Lenders") and CIT as Agent for the Lenders (the
"Agent"). Capitalized terms used herein and not otherwise defined herein are
used with the meanings ascribed thereto in the Definitions Section of this
Agreement.
R E C I T A L S:
1. The Borrower and its subsidiaries are in the business of
owning and operating land drilling rigs.
2. Pursuant to the Amended and Restated Loan Agreement dated as
of May 1, 1997 among the Lenders, the Agent, the Borrower and Trend Drilling
Co. ("Trend") (the "Restated Loan Agreement"), the Lenders agreed to make a
loan to the Borrower and Trend in the principal amount of USD 30,577,131.15
(the "Restated Loan") in order to (i) facilitate the purchase of additional
drilling rigs by the Borrower and Trend, (ii) upgrade existing and new drilling
rigs, and (iii) provide working capital for the Borrower and Trend.
3. The Restated Loan was evidenced by the secured promissory
notes made by the Borrower and Trend to CIT and Fleet.
4. The principal amount outstanding as of the date hereof under
the Restated Loan is USD 18,219,458.32 (the "Loan").
5. The Borrower and the Lenders wish to restate the Restated Loan
Agreement in order to release Trend as a Borrower, add newly created
subsidiaries of the Borrower as guarantors and amend certain other terms and
covenants of the Restated Loan Agreement.
NOW, THEREFORE, in consideration of the above recitals, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend and restate the Restated Loan
Agreement as follows:
DEFINITIONS:
The following terms shall have the following meanings for all purposes
of this Agreement and shall be equally applicable to both the singular and the
plural forms of the terms herein defined.
<PAGE> 5
"Agreement", "this Agreement", "herein", "hereunder"' or other like
words mean this Loan Agreement as originally executed or as modified, amended
or supplemented from time to time pursuant to the provisions hereof.
"Amendment Date" means the date on which the conditions precedent
contained in Section 2.1 of this Agreement are fulfilled or waived and the
modifications to the Restated Loan Agreement contemplated by this Agreement
become effective.
"Borrower" means Bayard Drilling Technologies, Inc. and its successors
and permitted assigns.
"Business Day" means a day other than a Saturday or a Sunday or a day
on which commercial banks are authorized to be closed in the State of New York
or the State of Texas.
"Cash Flow" means, for any period, the sum of the Borrower's
consolidated net income plus depreciation, depletion and amortization, less
dividends paid and extraordinary items of income or loss (as determined in
accordance with generally accepted United States accounting principles) in the
prior four quarters.
"Cash Flow Coverage Ratio" means the ratio of Cash Flow to Projected
Debt Service.
"Collateral Value" has the meaning set forth in Section 1.5(a)(iii)
hereof.
"Dollars" or "USD" means lawful currency of the United States of
America.
"Event of Default" has the meaning set forth in Article IV hereof.
"Excluded Income Taxes" has the meaning set forth in Section 1.5(a)
hereof.
"Fair Market Value" has the meaning set forth in Section 1.5(a)(iv)
hereof.
"Governmental Agencies" means any government or any state, department
or other political subdivision thereof or governmental body, agency, authority,
department or commission having jurisdiction over either Borrower or their
properties (including without limitation any court or tribunal) exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation, partnership or other entity
directly or indirectly owned by the foregoing.
"Guaranties" means the guaranties of the Guarantors in favor of the
Agent, in form and substance reasonably acceptable to the Lenders.
2
<PAGE> 6
"Guarantors" means Bayard Drilling, L.P. a Delaware limited
partnership, Bayard Drilling, LLC, a Delaware limited liability company, Bonray
Drilling Corporation, a Delaware corporation, and Trend.
"Hazardous Substances" means petroleum and used oil, or any other
pollutant or contaminant, hazardous, dangerous or toxic waste, substance or
material as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
(hereinafter called "CERCLA"); the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901, et seq. (hereinafter called "RCRA"); the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601, et seq.
(hereinafter called "TSCA"); the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 1801, et seq. (hereinafter called "HMTA"); the Oil
Pollution Act of 1990, Pub.L. No. 101-380, 104 Stat. 484 (1990) (hereinafter
called "OPA"); or any other statute, law, ordinance, code or regulation of any
Governmental Agency relating to or imposing liability or standards of conduct
concerning the use, production, generation, treatment, storage, recycling,
handling, transportation, release, threatened release or disposal of any
hazardous, dangerous or toxic waste, substance or material, currently in effect
or at any time hereafter adopted.
"Intercreditor Agreement" means the Amended and Restated Intercreditor
Agreement dated as of June 18, 1998 among the Lenders and the Agent in form and
substance satisfactory to the Lenders, as amended, from time to time.
"Interest Period" has the meaning set forth in Section 1.3(d) hereof.
"Interest Rate" has the meaning set forth in Section 1.3(b) hereof.
"LIBOR Rate" means the one-month rate of interest per annum at which
deposits in Dollars are offered to major banks in the London interbank market
at approximately 11:00 a.m. (London time), as reported and published in the
Wall Street Journal for the 15th day of each month, or, if the 15th day of the
month is not a day for which the Wall Street Journal reports LIBOR, then on the
first preceding day on which the Wall Street Journal reports the LIBOR and
shall become effective as of the first day of the succeeding calendar month and
shall continue in effect to, and including, the last day of such Month.
"Loan" means the current principal amount and unpaid interest
outstanding under the Restated Loan Agreement as amended and restated by this
Agreement.
"Loan Documents" means the Notes, this Agreement, the Security
Agreement and the Amendment No. 1 to Intercreditor Agreement.
"Material adverse effect" means having a material adverse effect on
the business, properties or condition (financial or otherwise) of the Borrower
and its subsidiaries taken as a whole.
"Maturity Date" means March 31, 2002.
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"Notes" means the amended and restated promissory notes of the
Borrower in favor of the Lenders, substantially in the form of Exhibits A-1 and
A-2 attached hereto and made a part hereof.
"Orderly Liquidation Value" has the meaning set forth in Section
1.5(a)(iv) hereof.
"Payment Date" has the meaning set forth in Section 1.3(a) hereof.
"Prepayment Premium" means the prepayment premiums required by Section
1.5 hereof.
"Prime Rate" means with respect to any Interest Period, the rate
publicly announced in New York, New York from time to time as the prime rate of
The Chase Manhattan Bank (or any successor thereof) ("Chase"). The Prime Rate
shall be determined by the Lender at the close of business two (2) Business
Days before a Payment Date, and shall be effective to but not including the
next applicable Payment Date. The Prime Rate is not intended to be the lowest
rate of interest charged by Chase or the Lenders in connection with extensions
of credit to debtors.
"Projected Debt Service" means the sum of the current portion of the
Borrower's long term debt and capitalized lease obligations coming due in the
following four quarters, including any maturities associated with the Fleet
Credit Facility. Both Cash Flow and Projected Debt Service shall exclude the
Cash Flow and Projected Debt Service attributable to any Unrestricted
Subsidiary.
"Responsible Officer" means the Borrower's chief executive officer,
the Borrower's chief financial officer or any other officer having principal
responsibility for the financial affairs of the Borrower.
"Rigs" means the twelve (12) land drilling rigs owned by Bayard
Drilling, L.P. and described on Schedule 1 attached hereto, and all metal
products, machinery, equipment, materials or other goods of any description
whatsoever, used or acquired for use by Bayard Drilling, L.P. and all pumps,
drilling equipment, drill pipe, machinery, equipment, supplies, parts and other
goods of any description whatsoever installed in or affixed to or to be used in
connection with any Rig, or acquired for installation on, affixation to, or use
in connection with any Rig, other than the top drives referred to in Section
3.2(k)(i) below.
"Security Agreement" means the amended and restated security agreement
between CIT and Bayard Drilling, L.P. dated as of the date hereof in form and
substance satisfactory to the Agent.
"Tangible Net Worth" means, at a particular date, the sum of the
Borrower's capital stock (excluding treasury stock), warrants, surplus
(including earned surplus, capital surplus and the balance of the current
profit and loss account not transferred to surplus), and debt that is
specifically subordinated to the Loan on the terms reasonably acceptable to the
Lenders accounted on a consolidated basis appearing on a consolidated balance
sheet prepared in accordance with generally accepted United States accounting
principles as of the date of determination after deducting therefrom the net
book value of all assets (after deducting any reserves applicable thereto)
which
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<PAGE> 8
would be treated as intangibles under generally accepted United States
accounting principles (including, without limitation, such items as goodwill,
trademarks, trade names, patents and licenses, franchises and operating rights)
and excluding the amount of the Borrower's equity investment in any
Unrestricted Subsidiary.
"Taxes" has the meaning set forth in Section 1.4(a) of this Agreement.
"Term Loan" has the meaning set forth in Section 1.1 of this
Agreement.
"Total Liabilities" means indebtedness of the Borrower on a
consolidated basis which would in accordance with generally accepted United
States accounting principles be classified as current and long term liabilities
of a corporation conducting a business the same as or similar to the Borrower,
but excluding other debt that is specifically subordinated to the Loan on terms
reasonably acceptable to the Agent and total liabilities of any Unrestricted
Subsidiary.
"Total Loss" has the meaning set forth in Section 1.5(a) of this
Agreement.
"Unrestricted Subsidiary" means any subsidiary of the Borrower that
the Borrower has classified as an Unrestricted Subsidiary under the Indenture
and that has not been reclassified as a Subsidiary pursuant to the terms of the
Indenture.
Capitalized terms used in this Agreement but not otherwise defined
herein shall have the meaning given them in the Indenture, among the Borrower,
the Guarantors and U.S. Trust Company of Texas, N.A., as Trustee (the
"Indenture").
ARTICLE I.
THE LOAN
Section 1.1 Repayment. Pursuant to the Restated Loan Agreement,
the Lenders have made the Loan available to the Borrower and Trend. Pursuant
to Section 1.10, below, Trend is released from all obligations as a Borrower
under the Restated Loan Agreement to repay the Loan. The Borrower shall repay
the principal amount of the Loan in 46 equal consecutive monthly installments,
each such installment to be paid by the Borrower to the Lenders on a Payment
Date with the first Payment Date being June 30, 1998 and ending on the Maturity
Date. The amount of principal to be repaid on each Payment Date shall be USD
341,311.20 to CIT and USD 55,980.95 to Fleet; provided, however, that the final
installment shall be in an amount sufficient to discharge all outstanding
amounts due hereunder. No amount of the Loan, once repaid or prepaid, may be
reborrowed hereunder.
Section 1.2 Pro-Rata Treatment. Except to the extent otherwise
provided herein: (a) each payment of fees other than those referred to in
Sections 1.7 and 1.8 below shall be made and applied for the account of the
Lenders pro rata, according to each Lender's portion of the Loan as of the date
of payment; and (b) each payment or prepayment by the Borrower of principal of
or interest on the
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<PAGE> 9
Loan shall be made for the account of the Lenders pro rata in accordance with
such Lender's portion of the Commitment as of the date of such payment or
prepayment.
Section 1.3 Interest.
(a) The Borrower shall pay interest, in arrears, on the
unpaid principal amount of the Loan from the Amendment Date until the
principal amount of the Loan is paid in full on the last day of each
calendar month, commencing June 30, 1998 up to and including the
Maturity Date (each such date a "Payment Date") at a rate of interest
per annum (computed on the basis of a 365-day year and actual days
elapsed) equal to the applicable Interest Rate; provided, however,
that all interest accrued on the Loan and unpaid on the Maturity Date
shall be paid on the Maturity Date.
(b) The term "Interest Rate" shall mean, for an Interest
Period (as hereinafter defined), an interest rate per annum at either
the rate certified by the Lender to be (i) the LIBOR Rate, plus four
and one quarter percent (4.25%) or (ii) the Prime Rate plus two
percent (2%) per annum, at the Borrower's option.
(c) (i) The Borrower may elect to pay interest on
that portion of the Loan made by CIT hereunder at either the
LIBOR Rate or the Prime Rate on the following terms:
A. If no election is received by Agent,
the Borrower shall pay interest on that portion of
the Loan made by CIT at the LIBOR Rate.
B. Any interest rate election of the
Borrower must be made by written notice three (3)
Business days in advance of a Payment Date and may be
made once in any twelve (12) month period.
C. Each interest rate election made by
the Borrower shall be effective as to all amounts
outstanding under this Agreement for a twelve (12)
month period.
(ii) The Borrower may elect to pay interest on
that portion of the Loan made by Fleet hereunder at either the
LIBOR Rate or the Prime Rate in accordance with the terms of
the promissory note of the Borrower issued in favor of Fleet,
the form of which is attached to this Agreement as Exhibit
A-2.
(d) If at any time that the Borrower has elected the
LIBOR Rate, the Agent shall determine that by reason of circumstances
affecting the London interbank market adequate and reasonable means do
not exist for ascertaining the Interest Rate based on the LIBOR Rate
for the succeeding Interest Period or the making or continuance of the
Loan at an Interest Rate based on the LIBOR Rate has become
impracticable as a result of a contingency
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<PAGE> 10
occurring after the date of this Agreement which materially and
adversely affects the London interbank market, the Agent shall notify
the Borrower that the Interest Rate shall be the Prime Rate, plus two
percent (2%) per annum. As used in this Agreement, "Interest Period"
shall mean each respective and successive calendar month commencing on
the last day of the month in which the Amendment Date occurs;
provided, however, that no Interest Period shall commence or extend
past the Maturity Date.
(e) Any amount of principal or any other amount due
hereunder which is not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest from the date when due
until such amount is paid in full, payable on demand, at a rate per
annum equal at all times to two percent (2%) per annum above the
Interest Rate.
(f) In no event shall any interest rate provided for in
this Agreement or the Notes exceed the maximum rate permitted by the
then applicable law. It is the intention of the parties hereto to
strictly comply with applicable usury laws; accordingly, it is agreed
that, notwithstanding any provision to the contrary in this Agreement,
in the Notes, or in the other Loan Documents, in no event shall this
Agreement, the Notes, or the other Loan Documents be construed to
charge, contract for or require the payment or permit the collection
of interest in excess of the maximum amount permitted by applicable
law. If any such excess interest is contracted for, charged or
received under this Agreement, the Notes or the other Loan Documents,
or in the event that all of the principal balance shall be prepaid, so
that under any of such circumstances the amount of interest contracted
for, charged or received on the principal balance shall exceed the
maximum amount of interest permitted by applicable law, then in such
event (i) the provisions of this Section 1.3(f) shall govern and
control, (ii) neither the Borrower nor any other person or entity now
or hereafter liable for the payment thereof shall be obligated to pay
the amount of such interest to the extent that it is in excess of the
maximum amount of interest permitted by applicable law, (iii) any such
excess which may have been collected shall be either applied as a
credit against the then unpaid principal balance or refunded to the
Borrower, at the option of the Lenders, and (iv) the effective rate of
interest shall be automatically reduced to the maximum lawful contract
rate allowed under applicable law as now or hereafter construed by the
courts having jurisdiction thereof. It is further agreed that without
limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received under this Agreement, the Notes
and the other Loan Documents which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating and spreading in equal parts during
the period of the full stated term of the indebtedness evidenced
hereby, all interest at any time contracted for, charged or received
from the Borrower or otherwise by the Lenders in connection with such
indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any
applicable state law, so that it becomes lawful for the Lenders to
receive a greater simple interest per annum rate than is presently
allowed, the Borrower agrees that, on the effective date of such
amendment or preemption as the case may be, the lawful maximum
hereunder shall be increased to the maximum simple interest
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<PAGE> 11
per annum rate allowed by the higher of the amended state law or the
law of the United States of America.
Section 1.4 Payments.
(a) The payment obligations of the Borrower under the
Notes and all other amounts payable under this Agreement shall be paid
to the Lenders in proportion to their percentage of the Loan at the
time of such payment at such address as the Lenders may designate (not
less than one (1) Business Day prior to the due date therefor), not
later than the close of business on the due date thereof, in lawful
money of the United States. All payments shall be made (i) without
set-off, counterclaim or condition and (ii) free and clear of, and
without deduction for or on account of, any present or future taxes,
levies, duties, imposts, charges, fees, deductions or withholdings of
any nature ("Taxes"), unless the Borrower is required by law or
regulation to make payment subject to any Taxes. In the event that
the Borrower is required by law or regulation to make any deduction or
withholding on account of any Taxes from any payment due under this
Agreement, then: (a) the Borrower shall notify the Lenders promptly as
soon as it becomes aware of such requirement and shall remit promptly
the amount of such Taxes to the appropriate taxation authority, and in
any event prior to the date on which penalties attach thereto; and (b)
such payment shall be increased by such amount as may be necessary to
ensure that the Lenders receive a net amount, free and clear of all
Taxes, equal to the full amount which the Lenders would have received
had such payment not been subject to such Taxes (other than Excluded
Income Taxes as such term is defined below). Notwithstanding the
foregoing, the Borrower shall not be liable for, or required to pay,
any Taxes which are overall income or franchise taxes imposed at any
time on either Lender in the United States of America or any
Governmental Agency ("Excluded Income Taxes"). Each such payment or
reimbursement by the Borrower shall be net of any credit or the value
of any deduction received by the Lenders thereon to the extent that
the same can be determined by the Lenders (as certified by the Agent
to the Borrower, such certificate to be conclusive absent manifest
error). The Borrower shall indemnify the Lenders against any
liability of the Lenders in respect of such Taxes (other than Excluded
Income Taxes) and shall supply copies of applicable tax receipts.
(b) If any payment to be made by the Borrower shall
become due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day.
(c) Each payment to be made on a Payment Date and all
prepayments, Prepayment Premiums, and other payments (other than the
fees referred to in Sections 1.7 and 1.8 below) shall be allocated to
the Lenders in proportion to their percentage of the Loan at the time
of payment and shall be applied first to the payment of accrued and
unpaid interest on the Loan, then to the payment of all other amounts
due under this Agreement and the other Loan Documents, and the balance
shall be applied to the payment of principal due under the Notes.
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<PAGE> 12
(d) The Borrower shall indemnify the Lenders and the
Agent on demand against all costs, expenses, liabilities and losses
(including funding losses) actually incurred by the Lenders and the
Agent sustained or incurred by the Lenders and the Agent as a result
of or in connection with: (a) the occurrence and/or continuance of any
Event of Default (or event which, with the giving of notice and/or
lapse of time or other applicable condition might constitute an Event
of Default); and/or (b) any judgment or order which relates to any sum
due hereunder being expressed in a currency other than the currency
expressed to be due hereunder and as a result of a variation in rates
of exchange between the rate at which such amount is converted into
such other currency for the purposes of such judgment or order and the
rate prevailing on the date of actual payment of such amount pursuant
thereto; and/or (c) any postponement of the Amendment Date occurring
because of one or more of the conditions precedent set forth in
Article II shall not have been satisfied or waived; and/or (d) any
payment of principal of or interest on the Notes made on a date which
is not a Payment Date. The above indemnities are separate and
independent obligations of the Borrower and apply irrespective of any
indulgence granted by the Lenders or the Agent.
Section 1.5 Prepayment.
(a) Mandatory Prepayment.
(i) Total Loss or Sale. If there shall have
occurred a Total Loss as herein defined or the sale of a Rig,
the value of which is included in the calculation of
Collateral Value set forth in Section 1.5(a)(iii), on the
earlier of (x) the date insurance or sale proceeds are
received or (y) seventy five (75) days after the date of
occurrence of the Total Loss or sale, the Borrower shall
either insure that Bayard Drilling, L.P. provides as
collateral a replacement rig, or other drilling equipment
acceptable to the Agent which is, as determined by the
appraiser referred to in Section 1.5(a)(iii) below, of
comparable or greater value to the lost or sold Rig, which
replacement rig will be added to the lien of the Security
Agreement or, if after giving effect to the release of such
lost or sold Rig from the lien of the Security Agreement, as
applicable, the amount outstanding under the Loan is greater
than the Collateral Value, (A) prepay the outstanding
principal balance under the Notes in an amount equal to the
amount by which the outstanding principal amount of the Loan
on the date of prepayment exceeds the Collateral Value on such
date, and (B) pay accrued interest thereon to the date of such
prepayment together with any other amount due hereunder or
under any Loan Document. The Lenders shall apply payments
received pursuant to this Section 1.5(a)(i) in accordance with
Section 1.4(c) hereof, provided, however, that the principal
repayments shall be applied so that the remaining installments
of principal of the Loan are reduced on a pro rata basis, such
reduction to be confirmed by the Agent in a certificate
delivered to the Borrower which certificate shall be
conclusive absent manifest error. Mandatory Prepayments made
by the Borrower pursuant to this Section 1.5(a) shall include
a Prepayment Premium as follows:
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(1) If made on or before December 31,
1998 - two percent (2%) of the aggregate principal
amount prepaid;
(2) If made between January 1, 1999 and
December 31, 1999 - one percent (1%) of the aggregate
principal amount prepaid; or
(3) If made after December 31, 1999 - no
Prepayment Premium.
(ii) "Total Loss" means in respect of a Rig (i)
the actual or constructive or compromised or arranged total
loss of such Rig; or (ii) the requisition for title or other
compulsory acquisition of such Rig otherwise than by
requisition for rental; or (iii) the seizure, attachment,
detention or confiscation of such Rig by any government or by
persons acting or purporting to act on behalf of any
government unless such Rig is released from such seizure,
attachment, detention or confiscation within thirty (30) days
of the occurrence thereof. A Total Loss shall be deemed to
have occurred (a) in the event of an actual total loss of a
Rig, on the date of such loss, (b) in the event of damage to a
Rig which results in a constructive or compromised or arranged
total loss of such Rig, on the date of the occurrence of the
event giving rise to such damage, or (c) in the case of any
event referred to in clauses (ii) or (iii) above, on the date
of the occurrence of such event. In the event of any Total
Loss of a Rig, the Borrower shall give written or telegraphic
notice to the Agent not later than ten (10) days after a
Responsible Officer of the Borrower has actual knowledge of
such occurrence.
(iii) Collateral Value. On dates as may be
requested by either Lender, but not more than once in any
twelve (12) month period, the Agent shall arrange to have the
Fair Market Value and the Orderly Liquidation Value of each of
the Rigs determined at the Borrower's expense by an
independent appraisal firm chosen by the Agent and reasonably
acceptable to the Borrower. Each such valuation shall be
based on the Fair Market Value of each Rig and the oil field
tubular or drill pipe attributable to such Rig. The most
recent determination of the lesser of (A) 50% of the aggregate
Fair Market Values of all of the Rigs that are working or
available for work (a "Working Rig") or (B)75% of the
aggregate Orderly Liquidation Values of all of the Working
Rigs is hereinafter referred to as the "Collateral Value". If
the outstanding principal amount of the Loan shall exceed the
Collateral Value, then the Borrower shall either prepay within
five days of the Agent's demand the amount of the Loan
necessary to restore the ratio referred to herein together
with payment of accrued interest thereon or provide additional
security for the Loan which shall be acceptable in the sole
opinion of the Lenders for these purposes. The Lenders shall
apply payments received under this Section 1.5(a)(iii) in
accordance with Section 1.4(c) hereof, provided, however, that
the principal repayments shall be applied so that the
remaining installments of principal of the Loan shall be
reduced on a pro rata basis, such reduction to be confirmed by
the Agent in a certificate delivered to the
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Borrower which certificate shall be conclusive absent manifest
error. No Prepayment Premium shall bepayable with respect to
any prepayment required by this Section 1.5(a)(iii).
(iv) Fair Market Value. The "Fair Market Value"
of any Rig shall be the value determined by an independent
appraisal firm chosen by the Agent in accordance with clause
(ii) above on the basis of an arms-length purchase by a
willing buyer from a willing seller and without consideration
of any selling expenses, drilling contract, or other rig
employment contract. The "Orderly Liquidation Value" of any
Rig shall have the meaning customarily attributed to it in the
equipment appraisal industry at the time of the valuation,
less the estimated marshalling, stacking, reconditioning and
sale expenses designed to maximize the resale value of such
Rig (as determined by the appraisal firm referred to above).
The appraisal firm's valuation shall be made with or without
physical inspection at the Agent's discretion; provided
however, that no more than one physical inspection shall be
permitted in any one twelve (12) month period.
(b) Voluntary Prepayment.
(i) Subject to Section 3.2(z) below, after
December 31, 1999, the Borrower may prepay from the proceeds
of a loan, made without the participation of CIT, in full or
in part in amounts of not less than USD 500,000.00, its
indebtedness under the Notes on the next Payment Date after
giving at least thirty (30) Business Days prior notice of such
prepayment. Prepayments made between January 1, 2000 and
December 31, 2000 shall include a premium (the "Prepayment
Premium") in an amount equal to three percent (3%) of the
aggregate principal amount prepaid. Prepayments made between
January 1, 2001 and the Maturity Date shall include a
Prepayment Premium in an amount equal to two percent (2%) of
the aggregate principal amount prepaid. If following a
prepayment under this Section 1.5(b)(i), the amount
outstanding under the Loan is less than Collateral Value, the
Agent agrees to release from the lien of the Restated Security
Agreement, as applicable, such Rig or Rigs as will result in
Collateral Value equalling the amount outstanding under the
Loan.
(ii) Subject to 3.2(m) below, at any time during
the term of this Agreement if all or substantially all of the
stock or assets of the Borrower are sold to another entity or
the Borrower merges with another entity and is not the
surviving entity, the Borrower may prepay in full or in part
in amounts of not less than USD 500,000.00, its indebtedness
under the Notes on the next Payment Date after giving at least
thirty (30) days prior notice of such prepayment. Prepayments
made under this Section 1.5(b)(ii) shall include a Prepayment
Premium as follows:
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A. If made on or before December 31,
1998 - four percent (4%) of the aggregate principal
amount prepaid;
B. If made between January 1, 1999 and
December 31, 1999 - three percent (3%) of the
aggregate principal amount prepaid;
C. If made between January 1, 2000 and
December 31, 2000 - two percent (2%) of the aggregate
principal amount prepaid; or
D. If made after January 1, 2001 - one
percent (1%) of the aggregate principal amount
prepaid.
(iii) The Lenders shall apply payments received
pursuant to this Section 1.5(b) in accordance with Section
1.4(c) hereof, provided, however, that the principal
repayments shall be applied so that the remaining installments
of principal of the Loan shall be reduced on a pro rata basis,
such reduction to be confirmed by the Agent in a certificate
delivered to the Borrower which certificate shall be
conclusive absent manifest error.
Section 1.6 Security. All amounts due hereunder and under the
Notes shall be secured by the Guaranties and the Security Agreement. As
further security for the repayment of all amounts due under this Agreement and
the Notes, the Lenders and the Agent will execute and deliver the Intercreditor
Agreement and the Borrower will consent to its terms.
Section 1.7 Amendment Fee. The Borrower shall pay to CIT an
amendment fee in an amount of USD 30,000.00 to be paid on the Amendment Date.
Section 1.8 Agency Fee. The Borrower agrees to pay the Agent an
annual agency fee of USD 25,000.00 for each of the two (2) years commencing
January 1, 1999, payable in advance on the first Business Day in each such
year.
Section 1.9 Sharing of Payments, Etc. The Borrower agrees that,
in addition to (and without limitation of) any right of set-off, bankers' lien
or counterclaim a Lender may otherwise have, each Lender shall be entitled, at
its option after an Event of Default has occurred and is continuing to offset
balances held by it for the account of Borrower at any of its offices against
any principal of or interest on any portion of Loan attributable to such Lender
hereunder or any other obligation of the Borrower hereunder which is not paid
(regardless of whether such balances are then due to the Borrower), in which
case it shall promptly notify the Borrower and the Agent thereof, provided that
such Lender's failure to give such notice shall not affect the validity
thereof. If a Lender shall obtain payment of any principal of or interest on
any portion of the Loan attributable to it under this Agreement or other
obligation then due to such Lender hereunder, through the exercise of any right
of set-off or lien granted under Section 5.13 below), bankers' lien,
counterclaim or similar right, or otherwise, it shall promptly purchase from
the other Lenders participations in the
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<PAGE> 16
Loan attributable to it, or the other obligations of the Borrower hereunder of,
the other Lenders in such amounts, and make such other adjustments from time
to time as shall be equitable to the end that all the Lenders shall share the
benefit of such payment (net of any expenses which may be incurred by such
Lender in obtaining or preserving such benefit) pro-rata in accordance with
their respective portions of the Loan. To such end all the Lenders shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. The
Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any Lender so purchasing a participation in the Loan may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of the Loan or other obligations in the amount of such participation.
Nothing contained herein shall require any Lender to exercise any such right or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or
obligations of the Borrower to such Lender.
Section 1.10 Release of Trend. Trend is hereby released from its
obligations as a Borrower under the Restated Loan Agreement and the Notes.
Such release shall not affect Trend's obligations as a Guarantor.
ARTICLE II.
CONDITIONS PRECEDENT
Section 2.1 Conditions Precedent. The effectiveness of the
modifications to the Restated Loan Agreement contemplated by this Agreement are
subject to the following conditions having been satisfied in the reasonable
opinion of the Lenders on or prior to the Amendment Date:
(a) Each of this Agreement and the other Loan Documents
shall have been duly authorized and executed with original
counterparts thereof delivered to the Lenders.
(b) The Borrower and the Guarantors shall have delivered
to the Lenders evidence of good standing, certificates of incumbency
and duly certified resolutions of their Boards of Directors and all
such other corporate documentation authorizing them to enter into the
transactions contemplated by this Agreement and the other Loan
Documents.
(c) The Lenders shall have received opinions from Baker &
Botts, L.L.P., counsel to the Borrower and the Guarantors and an
opinion of CIT's counsel, Gardere Wynne Sewell & Riggs, L.L.P., each
in form and substance satisfactory to the Lenders.
(d) The representations and warranties contained in
Article III of this Agreement and in each other Loan Document shall be
true on the Amendment Date with the same effect as though such
representations and warranties had been made on and as of such date,
and no Event of Default specified in Article IV hereof and no event
which, with the lapse of time or the notice and lapse of time
specified in Article IV hereof, would become such an Event of Default,
shall have occurred and be continuing or shall have occurred at the
completion
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of the making of the Loan, and the Lenders shall have received
satisfactory certificates signed by Responsible Officers of the
Borrower and the Guarantors, as to all questions of fact involved in
this condition.
(e) There shall have been no material adverse change in
the business, financial condition or operations of the Borrower and of
its subsidiaries taken as a whole since March 31, 1998.
(f) The Lenders shall have received evidence that the
person specified to act as agent for service of process for the
Borrower, pursuant to Section 6.3 has agreed to so act.
(g) The Lenders shall have received certificates of the
Borrower and the Guarantors signed by an officer in charge of
environmental affairs and safety as to compliance by the Borrower and
Guarantors with all environmental, safety and public health laws and
regulations applicable to the Borrower and Guarantors, without
limitation of the foregoing, all other laws and regulations affecting
or relating to the Rigs, in each case the non-compliance with which
would have a material adverse effect.
(h) The Borrower shall have provided evidence of
insurance maintained by the Borrower or Bayard Drilling, L.P. and
approved by Agent on the Rigs as required by Article 5 of the Security
Agreement.
(i) The Security Agreement shall have been duly executed
and delivered and shall create a valid and perfected lien on the
collateral described therein.
(j) Financing statements or other documents necessary to
continue the perfection of the Security Agreement or to perfect the
Agent's security interests shall have been filed.
(k) The Rigs shall not have been the subject of a Total
Loss and shall not have sustained any material damage to their
condition since the date of the appraisal reports therefor delivered
to CIT pursuant to Section 2.1(m) of the Restated Loan Agreement, or
materially decreased in value from the value attributed thereto as set
forth in the appraisal report therefor delivered to CIT pursuant to
Section 2.1(m) of the Restated Loan Agreement.
(l) The Agent shall have received evidence of the
amendment to the Fleet Credit Facility.
(m) The Lenders shall have received such other documents
and instruments it may reasonably request necessary to consummate the
transactions described in this Agreement, in each case in form and
substance reasonably satisfactory to it.
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Section 2.2 Waiver of Conditions Precedent. All of the conditions
precedent contained in this Article II are for the sole benefit of the Lenders
and the Lenders may waive any or all of them in their absolute discretion.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.1 Representations of the Borrower. The Borrower
represents and warrants that:
(a) The Borrower and each Guarantor is a corporation,
limited partnership or a limited liability company, as the case may
be, duly organized and validly existing, in good standing under the
laws of the state of its incorporation and has the requisite power and
authority (i) to carry on its business as presently conducted, (ii) to
enter into and perform its obligations under each Loan Document to
which it is a party, and (iii) to borrow moneys and guarantee the
debts of others.
(b) The execution, delivery and performance by the
Borrower and each Guarantor of each Loan Document to which it is a
party, and any other instrument or agreement provided for by this
Agreement, have been duly authorized by all necessary corporate or
partnership action, do not require stockholder, partner or member
approval other than such as has been duly obtained or given, do not or
will not contravene any of the terms of its articles of incorporation
or by-laws, partnership agreement, certificate of formation, operating
agreement or similar such document, and will not violate any provision
of law or of any order of any court or governmental agency if such
violation would result in a material adverse effect, or constitute
(with or without notice or lapse of time or both) a default under, or
result (except as contemplated by this Agreement) in the creation of
any security interest, lien, charge or encumbrance upon any of its
properties or assets pursuant to, any agreement, indenture or other
instrument to which it is a party or by which it may be bound; this
Agreement and each Loan Document to which it is a party has been duly
executed and delivered by the Borrower and each Guarantor and
constitutes its legal, valid and binding agreement or instrument,
enforceable in accordance with the respective terms thereof.
(c) Other than class action suits previously disclosed to
the Lenders, there are no suits or proceedings pending or to its
knowledge threatened against or affecting the Borrower or any
Guarantor which if adversely determined would have a material adverse
effect.
(d) The principal place of business of the Borrower and
the Guarantors and the place where all records relating to the
transactions contemplated hereby, including records relating to the
operations of the Rigs are kept is 4005 Northwest Expressway, Suite
400E, Oklahoma City, Oklahoma 73116.
(e) Other than such as have been obtained, no license,
consent, approval of or filing or registration with any Governmental
Agency or other regulatory authority is required
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<PAGE> 19
for the execution, delivery and performance of this Agreement or any
Loan Document or any instrument contemplated herein or therein. The
Borrower and each Guarantor is the holder of all certificates and
authorizations of governmental authorities required by law to enable
it to engage in the business transacted by it.
(f) No part of the proceeds of the Loan will be used for
any purpose that violates the provisions of any of Regulation T, U or
X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board of Governors. The Borrower is not engaged in
the business of extending credit to others for the purpose of
purchasing or carrying margin stock within the meaning of Regulations
T, U and X of the Board of Governors of the Federal Reserve System.
If requested by the Agent, the Borrower will furnish to the Lenders in
connection with the Loan hereunder a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in said
Regulation U. The Borrower is not an "investment company" or a
company "controlled" by an "investment company" (as each of such terms
is defined or used in the Investment Company Act of 1940, as amended).
No proceeds of the Loan will be used to acquire any security in any
transaction which is subject to Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended.
(g) The Rigs are and will be on the Amendment Date owned
by Bayard Drilling, L.P., free and clear of all liens, charges and
rights of others except as provided in the Security Agreement or as
permitted by Section 3.2(k) below. All of the Rigs are mobile
equipment which are not designed to be permanently used in any one
location and none of the Rigs are certificated as motor vehicles under
the laws of any jurisdiction.
(h) Each of the Borrower and the Guarantors has filed or
caused to be filed all tax returns required by the United States of
America, the state of its principal place of business and the states
where its business or operations require such filings which are
required to be filed and has paid or caused to be paid all taxes as
shown on such returns or on any assessment received by it to the
extent that such taxes have become due and except as to such taxes
being contested in good faith by appropriate proceedings for which
adequate reserves are being maintained. Each of the Borrower and the
Guarantors has established reserves to the extent believed by it to be
adequate for the payment of additional taxes for years which have not
been audited by the respective tax authorities.
(i) The Borrower is the sole shareholder, is the sole
general partner, or is a member of each of the Guarantors, as the case
may be.
(j) (i) Each of the Borrower and the Guarantors has
duly complied with, and the Rigs and its other properties and
operations are in compliance with, the provisions of all
applicable environmental, health and safety laws, codes and
ordinances and all rules and regulations promulgated
thereunder of all Governmental Agencies, the non-compliance
with which would have a material adverse effect,
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<PAGE> 20
unless such compliance would violate the laws or regulations
of the jurisdiction in which the Rigs are operating.
(ii) As of the date of this Agreement, neither the
Borrower nor any Guarantor has received notice from any
Governmental Agency, and has no knowledge, of any fact(s)
which constitute a violation of any applicable environmental,
health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder of all Governmental
Agencies, which relate to the use or ownership of the Rigs or
properties owned or operated by the Borrower or any Guarantor.
(iii) Each of the Borrower and the Guarantors has
been issued all required permits, licenses, certificates and
approvals of all Governmental Agencies the failure to have
issued which would result in a material adverse effect
relating to (a) air emissions, (b) discharges to surface water
or ground water, (c) noise emissions, (d) solid or liquid
waste disposal, (e) the use, generation, storage,
transportation, treatment, recycling or disposal of Hazardous
Substances or (f) other environmental, health or safety
matters which are material and necessary for the ownership or
operation of the Rigs or other properties owned or operated by
the Borrower or any Guarantor and such permits, licenses,
certificates and approvals are in full force and effect on the
date of this Agreement.
(iv) Except as disclosed to the Agent in writing,
to the best of the Borrower's knowledge, except in accordance
with a valid governmental permit, license, certificate or
approval, there has been no spill or unauthorized discharge or
release of any Hazardous Substance to the environment at,
from, or as a result of any operations on the Rigs or other
properties and operations owned or operated by the Borrower or
any Guarantor required to be reported to any Governmental
Agency by the Borrower or any Guarantor.
(v) Except as disclosed to the Agent in writing,
there has been no material complaint, compliance order,
compliance schedule, notice letter, notice of citation or
other similar notice from any applicable environmental agency
delivered to the Borrower or any Guarantor which concerns the
operations of the Rigs or other properties owned or operated
by the Borrower or any Guarantor and which would result in a
material adverse effect.
(k) All representations and warranties made by the
Borrower herein or by the Borrower or any Guarantor pursuant to any
Loan Document or made in any certificate or written statement
delivered pursuant hereto or thereto (i) do not contain any untrue
statement of or omit to state a material fact necessary to make the
statements contained herein or therein not misleading and (ii) shall
survive the making of the Loan hereunder and the execution and
delivery to the Lenders of the Notes and any other Loan Document.
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Section 3.2 Covenants of the Borrower. After the date of
execution of this Agreement and until payment in full of the Notes and the
termination of this Agreement and the other Loan Documents, the Borrower agrees
that it will:
(a) promptly inform the Lenders of any event which
constitutes or will constitute, by giving of notice or lapse of time,
or both, an Event of Default or materially and adversely affect its
ability to fully perform its obligations under this Agreement and the
Loan Documents to which it is a party;
(b) pay and discharge, or cause to be paid and
discharged, any taxes, assessments and governmental charges or levies
that may be imposed upon the Borrower or upon its income or profits or
upon any of its properties prior to the date on which penalties attach
thereto and all lawful claims which, if unpaid, when due, might become
a lien or charge upon its properties; provided, however, that this
provision shall not be deemed to require payment of any taxes,
assessments, governmental charges, levies or claims while the Borrower
contests the validity thereof by appropriate proceedings in good faith
and so long as it shall have set aside on its books adequate reserves
with respect thereto;
(c) preserve and maintain, or cause to be preserved or
maintained, its existence in good standing in the state of its
incorporation and in all other jurisdictions where it is currently
conducting business and is required to be authorized to so conduct its
business.
(d) file or cause to be filed in such offices as shall be
required or appropriate under any applicable Uniform Commercial Code
of any State or any other statute of any other jurisdiction, and in
such manner and form as the Agent may require or as may be reasonably
necessary or appropriate under applicable law, any financing statement
or statements or other instruments that may be reasonably necessary or
desirable or that the Agent may request in order to create, perfect,
preserve, continue, validate or satisfy the Agent's liens on and
security interests and rights in collateral arising out of or related
to this Agreement and any Loan Document;
(e) promptly notify the Agent of any proposed change in
its name or its assumed name, location of its registered place of
business or the office where its records are kept or any principal
place of business stated in Section 3.1(d) hereof;
(f) promptly obtain and upon the reasonable request,
deliver to the Agent all authorizations, approvals, consents and
licenses and renewals thereof required under any applicable law or
regulation with respect to this Agreement, the Loan Documents, and the
ownership or operation of the Rigs which are the responsibility of the
Borrower and it shall comply with the terms of the same except where
non-compliance would not result in a material adverse effect;
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<PAGE> 22
(g) promptly notify the Lenders of any suit or proceedings
brought against the Borrower or any Guarantor or, to the knowledge of
the Borrower, threatened against or affecting it or any Guarantor
which, if adversely determined, would reasonably be expected to have
a material adverse effect;
(h) upon the request of the Agent give the Lenders or the
Agent or any representative of the Lenders or the Agent access during
normal business hours to, and permit the Lenders or the Agent or such
representative to inspect, all properties belonging to the Borrower or
any Guarantor (including, but not limited to, the Rigs) and permit
such representative to examine, copy and make extracts from such
books, records and documents in the possession of the Borrower,
relating to the affairs of the Borrower, as such representative may
reasonably request. If requested by the Borrower, the Lenders and the
Agent will enter into their standard confidentiality agreement
respecting the affairs of the Borrower;
(i) comply with and use its best efforts to cause its
Subsidiaries, and its and their agents, contractors and
sub-contractors (while such persons are acting within the scope of
their contractual relationship with the Borrower or any Subsidiary) to
so comply with all material, applicable environmental, health and
safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder of all Governmental Agencies the non-compliance
with which would result in a material adverse effect; and with the
terms and conditions of all applicable permits, licenses, certificates
and approvals of all Governmental Agencies now or hereafter granted or
obtained with respect to the Rigs or other properties owned or
operated by the Borrower or any Guarantor the non-compliance with
which would result in a material adverse effect; unless such
compliance would violate the laws or regulations of the jurisdictions
in which the Rigs are operating.
(i) The Borrower will use its best efforts and
safety practices to prevent the unauthorized release,
discharge, disposal, escape or spill of Hazardous Substances
on or about the Rigs or other properties owned or operated by
the Borrower or any Guarantor.
(ii) The Borrower shall notify the Lenders in
writing, within five (5) Business Days of any of the following
events occurring after the date of this Agreement:
A. Any written notification made by the
Borrower or any Guarantor to any federal, state or
local environmental agency required under any
federal, state or local environmental statute,
regulation or ordinance relating to a spill or
unauthorized discharge or release of any Hazardous
Substance to the environment at, from, or as a result
of any operations on, the Rigs or other properties
and operations owned or operated by the Borrower
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or any Guarantor if such spill, discharge or release
would result in a material adverse effect.
B. Knowledge by a Responsible Officer
of the Borrower or any Guarantor of receipt of
service by the Borrower or any Guarantor of any
complaint, compliance order, compliance schedule,
notice letter, notice of violation, citation or other
similar notice or any judicial demand by any court,
federal, state or local environmental agency,
alleging (i) any spill, unauthorized discharge or
release of any Hazardous Substance to the environment
from, or as a result of the operations on, the Rigs
or other properties owned or operated by the Borrower
or any Guarantor or (ii) violations of applicable
laws, regulations or permits regarding the
generation, storage, handling, treatment,
transportation, recycling, release or disposal of
Hazardous Substances on or as a result of operations
on the Rigs or other properties and operations owned
or operated by the Borrower or any Guarantor if such
violation would result in a material adverse effect.
C. It is understood by the parties
hereto that the aforementioned notices are solely for
the Agent's and the Lenders' information, may not
otherwise be required by any federal, state or local
environmental laws, regulations or ordinances, and
are to be considered confidential information by the
Agent and the Lenders.
D. The term "environmental agency" as
used herein shall include, but not be limited to, the
United States Environmental Protection Agency, the
Texas Railroad Commission, the United States Minerals
Management Service, the United States Department of
Transportation (in its administration of the
Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq.) and other analogous or
similar Governmental Agencies regulating or
administering statutes, regulations or ordinances
relating to or imposing liability or standards of
conduct concerning the generation, storage, use,
production, transportation, handling, treatment,
recycling, release or disposal of any Hazardous
Substance.
(iii) The Borrower hereby agrees to indemnify and
hold the Agent and the Lenders harmless from and against any
and all claims, losses, liability, damages and injuries of any
kind whatsoever asserted against the Agent and the Lenders
with respect to or as a direct result of the presence, escape,
seepage, spillage, release, leaking, discharge or migration
from any Rig or other properties owned or operated by the
Borrower or any Guarantor of any Hazardous Substance,
including without limitation, any claims asserted or arising
under any applicable environmental, health and safety laws,
codes and ordinances, and all rules and regulations
promulgated
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thereunder of all Governmental Agencies, regardless of whether
or not caused by or within the control of the Borrower or any
Guarantor subject to the following:
A. It is the parties' understanding
that the Agent and the Lenders do not now, have never
and do not intend in the future to exercise any
operational control or maintenance over the Rigs or
any other properties and operations owned or operated
by the Borrower or any Guarantor, nor have they in
the past, presently, or intend in the future to,
maintain an ownership interest in the Rigs or any
other properties owned or operated by either Borrower
except as may arise upon enforcement of the Agent's
rights under the Security Agreements and except as
arising under the Lease.
B. Should, however, the Agent or the
Lenders hereafter exercise any ownership interest in
or operational control over the Rigs or any other
properties owned or operated by the Borrower or any
Guarantor, other than pursuant to the Lease, but
including but not limited to, through foreclosure,
then the above stated indemnity and hold harmless
shall be limited with respect to any actions or
failures to act by the Agent or the Lenders
subsequent to exercising such interest or operational
control, to the extent such action or inaction by the
Agent or the Lenders is found by a court or
Governmental Agency with competent jurisdiction to
have caused or made worse any condition for which
liability is asserted, including but not limited to,
the presence, escape, seepage, spillage, leaking,
discharge or migration on or from the Rigs or other
properties owned or operated by the Borrower or any
Guarantor of any Hazardous Substance.
C. The indemnity and hold harmless
contained in this Subsection (i) shall not extend to
the Agent or CIT in their capacity as an equity
investor in the Borrower or as an owner of any
property or interest as to which the Borrower is also
owner but only to their capacity as a lender, a
financial lessor, a holder of security interests, or
a beneficiary of security interests.
(j) not, without the prior written consent of the
Lenders, (1) permit Bayard Drilling, L.P. to sell, transfer, lend,
lease for a period longer than one hundred eighty (180) days or
otherwise dispose of any of the Rigs, or (2) sell, transfer or
otherwise dispose, or permit any Guarantor to sell, transfer or
otherwise dispose, the whole or, in the reasonable opinion of the
Lenders any substantial part of the business, property or other assets
of the Borrower and the Guarantors, taken as a whole, whether by a
single transaction or by a series of transactions, (related or not);
provided, however, that the sale of any Rig with a Fair Market Value
or for a price (whichever is less) of up to USD 1,000,000.00 in
aggregate in any fiscal year shall not require the consent of the
Lenders and the Agent agrees to release such assets from the lien of
the Security Agreement; and provided further that the restriction
contained in this Section 3.2(j) shall not apply to an Asset Sale
other than a Rig if (a) such
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Asset Sale results from the requisition of title to, seizure or
forfeiture of any Property or assets or any actual or constructive
total loss or an agreed or compromised total loss the Borrower or such
Guarantor, 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 Borrower or such
Guarantor relating to the Capital Stock or Property or asset that was
the subject of such Asset Sale and the unconditional release of the
Borrower or such Guarantor from such Indebtedness); and the Borrower
delivers to the Agent an Officers' Certificate certifying that such
Asset Sale complies with clauses (a) and (b); provided, however that
any Asset Sale pursuant to a condemnation, appropriation or other
similar taking, including by deed in lieu of condemnation, or pursuant
to the foreclosure or other enforcement of a Permitted Lien or
exercise by the related lienholder of rights with respect thereto,
including by deed or assignment in lieu of foreclosure shall not be
required to satisfy the conditions and set forth in clauses (a) and
(b) of this sentence.
(k) not, other than pursuant to or permitted by the Loan
Documents create, assume or permit to exist any encumbrance upon (i)
the Rigs except:
A. security interests on top drives to
the extent that such security interests secure the
financing by third parties of at least 80% of the
purchase price of top drives; provided, however, that
the aggregate purchase price of top drives shall not
exceed USD 6,000,000.00; and provided further, that
the financings for the purchase of top drives shall
be repaid from the proceeds of contracts for the use
of the top drives of equal or longer duration to the
amortization schedules of such financings;
B. liens for taxes, assessments or
other governmental charges not yet due and payable
or, if due and payable, which are being contested in
good faith and for which adequate reserves have been
established in accordance with generally accepted
accounting principles in the U.S. but only if such
liens have not been filed or recorded;
C. statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen and
other similar liens imposed by law, which are
incurred in the ordinary course of business for sums
not more than thirty (30) days delinquent or which
are being contested in good faith; provided that a
reserve or other appropriate provision, if any, as
shall be required by generally accepted accounting
principles in the U.S., shall have been made
therefor;
D. liens incurred or deposits made in
the ordinary course of business in connection with
workers' compensation, unemployment insurance and
other types of social security, or to secure the
performance of tenders,
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statutory obligations, surety, stay, customs and
appeal bonds, bids, leases, government contracts,
trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
E. deposits or other advances made in
the ordinary course of business to secure liability
for (A) insurance premiums and other liability to
insurance carriers provided such deposits and other
advances do not, in an aggregate amount, exceed USD
250,000.00 in any calendar year, or (B) worker's
compensation claims or premiums or other liability to
worker's compensation insurance carriers or
administrators;
F. a security interest on the Rigs and
related drilling equipment in favor of Fleet to
secure the Fleet Credit Facility; and
or
(ii) on Borrower's or any Guarantor's other assets
except for Permitted Liens.
(l) not, without the prior written consent of the Lenders
(which consent shall not be unreasonably withheld) conduct or manage
any business or activity other than a Related Business;
(m) Borrower 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 Borrower in which Borrower is the
continuing Person), or continue in a new jurisdiction or sell, convey,
assign, transfer, lease or otherwise dispose of all or substantially
all of the property and assets of Borrower and the Subsidiaries, taken
as a whole, to any Person, unless
(i) either (a) Borrower shall be the continuing
Person or (b) the Person (if other than Borrower) formed by
such consolidation or into which Borrower 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 Borrower and the Subsidiaries,
taken as a whole (such corporation or Person, the "Surviving
Entity"), shall be a Person 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, the due and punctual
payment of the principal of (and premium, if any) and interest
on all the Notes and the performance of Borrower's covenants
and obligations under this Agreement;
(ii) 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
23
<PAGE> 27
transaction or series of transactions), no Event of 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 Borrower (or
the Surviving Entity if the Borrower is not continuing) shall
have a Tangible Net Worth equal to or greater than the
Tangible Net Worth of Borrower 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 Borrower (or
the Surviving Entity if the Borrower is not continuing) would
be permitted to incur USD 1.00 of additional Indebtedness
pursuant to the test described in Section 3.2(aa) hereof.
(v) The provision of clause (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 Borrower and the Subsidiaries taken as a whole
into, the Borrower.
(n) The Borrower will not, and will not permit any
Subsidiary to, make any Restricted Payment, unless at the time of and
after giving effect to the proposed Restricted Payment, (a) no Event
of Default shall have occurred and be continuing (or would result
therefrom), (b) Borrower could incur at least USD 1.00 of additional
Indebtedness under the tests described in Section 3.2(z) below, and
(c) the aggregate amount of all Restricted Payments declared or made
on or after the Amendment Date by the Borrower or any Subsidiary shall
not exceed the sum of (i) 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 Amendment 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 write downs, write-offs and other negative extraordinary
charges not otherwise reflected in Consolidated Net Income during such
period, plus (ii) an amount equal to the aggregate net cash proceeds
received by the Borrower, subsequent to the Amendment 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 Borrower) 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
Borrower 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 Borrower, subsequent to the Amendment Date,
plus (iii) 100% of the net reduction in Restricted
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Investments, subsequent to the Amendment Date, in any Person,
resulting from payments of interest on Indebtedness, dividends,
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 Borrower or any
Subsidiary from any Person (including, without limitation, from
Unrestricted Subsidiaries) or from predesignations 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 Borrower
or any Subsidiary in such Person and in each such case which was
treated as a Restricted Payment, plus (iv) USD 10,000,000.00.
The foregoing provisions will not prevent (A) the payment of any
dividend on Capital Stock of any class within sixty (60) days after the date of
its declaration if at the date of declaration such payment would be permitted
by the Indenture; (B) any repurchase or redemption of Capital Stock or
Subordinated Indebtedness of the Borrower or a Subsidiary made by exchange for
Capital Stock of the Borrower (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 Borrower (other than Redeemable Stock),
provided that the next cash proceeds from such sale are excluded from
computations under clause (c) (ii) above to the extent that such proceeds are
applied to purchase or redeem such Capital Stock or Subordinated Indebtedness;
(C) so long as no Event of Default shall have occurred and be continuing or
should occur as a consequence thereof, any repurchase or redemption of
Subordinated Indebtedness of the Borrower 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 3.2(z) and (x) is
subordinated to the Notes at least to the same extent as the Subordinated
Indebtedness so exchanged, purchased or redeemed, (y) has a stated maturity
later than the stated maturity of the Subordinated Indebtedness so exchanged,
purchased or redeemed and (z) 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; (D) Investments in any Joint Ventures and
foreign Subsidiaries not constituting Guarantors in an aggregate amount not to
exceed USD 5,000,000.00; (E) the payment of any dividend or distribution by a
Subsidiary of the Borrower or any of its Wholly Owned Subsidiaries; (F) so long
as no Event of Default shall have occurred and be continuing or should occur
as a consequence thereof, the repurchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Borrower held by any employee
of the Borrower or any of its Subsidiaries, provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Capital Stock
pursuant to the terms of an employee benefit plan or employment or similar
agreement shall not exceed USD 500,000.00 in any calendar year; and (G) the
acquisition of Capital Stock by the Borrower in connection with the exercise of
stock options or stock appreciation rights by way of cashless exercise or in
connection with the satisfaction of withholding tax obligations.
Notwithstanding the foregoing, the amount available for Investments in Joint
Ventures and foreign Subsidiaries pursuant to clause (D) of the preceding
sentence may be increased by the aggregate amount received by the Borrower and
its Subsidiaries from a Joint Venture or a foreign Subsidiary on or before such
date resulting
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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 paragraph will be excluded in calculating the amount of
Restricted Payments thereafter, except that any such Restricted Payments
permitted to be made pursuant to clauses (A), (D), (E) (but only to the extent
paid to someone other than the Borrower or any of its Wholly Owned
Subsidiaries) and (F) will be included in calculating the amount of Restricted
Payments thereafter.
For purposes of this covenant, 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.
(o) forthwith upon demand by the Agent and at the
Borrower's sole cost and expense, execute and provide all such
assurances and do all acts and things as the Agent or any receiver may
reasonably require for: (i) perfecting or protecting the security
created (or intended to be created) by any of the Loan Documents,
including, without limitation, granting in favor of the Agent a
security interest covering the security created (or intended to be
created) by any of the Loan Documents with respect to any obligations
of the Borrower hereafter owing to the Lenders; or (ii) preserving or
protecting any of the rights of the Agent under any of the Loan
Documents; or (iii) facilitating the appropriation or realization of
any of the collateral assigned or granted to the Agent under any of
the Loan Documents and enforcing the security constituted by any of
the Loan Documents on or at any time after the same shall have become
enforceable; or (iv) the exercise of any power, authority or
discretion vested in the Agent under any of the Loan Documents;
(p) deliver to the Lenders such financial or other
information relating to it, any of the transactions contemplated by
this Agreement or any of the Loan Documents, as may be reasonably
requested by the Lenders and if requested by the Borrower, the Lenders
and the Agent will enter into their standard confidentiality agreement
respecting the affairs of the Borrower;
(q) upon the request of the Agent, give the Lenders or
the Agent or any representative of the Lenders or the Agent at any
reasonable time, access to the Rigs and permit the Lenders or the
Agent or such representative to inspect the Rigs and any part thereof,
as the Lenders or the Agent or such representative may reasonably
request and if requested by the Borrower, the Lenders and the Agent
will enter into their standard confidentiality agreement respecting
the affairs of the Borrower;
(r) maintain all permits and certificates which are
material and necessary to the operation of the Borrower's and the
Guarantors' business under all applicable environmental, safety and
public health laws and regulations applicable to the Borrower, the
Guarantors and
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<PAGE> 30
the Rigs, and all other laws and regulations affecting or relating to
the Rigs the failure to maintain which would have a material adverse
effect;
(s) deliver, or shall cause to be delivered, to each
Lender at least two copies and as many additional copies as each
Lender may reasonably require from time to time of, (i) the Borrower's
audited annual consolidated financial statements (including the
balance sheet and income statement of the Borrower) in a form
consistent with generally accepted United States accounting principles
and practices consistently applied, as soon as is practicable after
the same have been issued but in any case within one hundred and
twenty (120) days of the end of its fiscal year certified by Coopers &
Lybrand or other auditors as may be acceptable to the Lenders that the
consolidated financial statements present fairly, in all material
respects, the financial position of the Borrower as of the date
thereof, (ii) its quarterly consolidated and consolidating financial
statements (including the balance sheet and income statement of the
Borrower) in a form consistent with generally accepted United States
accounting principles and practices consistently applied, as soon as
is practicable after the end of each financial quarter but in any case
within sixty (60) days of the end of its financial quarter certified
by one of its Responsible Officers that the consolidated financial
statements present fairly, in all material respects, the financial
position of the Borrower as of the date thereof, (iii) such financial
or other information relating to it, any of the transactions
contemplated by this Agreement or any of the other Loan Documents, as
may reasonably be requested by the Agent and generally made available
to its other creditors, its shareholders and to any governmental
authorities;
(t) maintain, on a quarterly basis, a Cash Flow Coverage
Ratio of at least 1.50:1.0 in 1998 and 1.75:1.0 thereafter;
(u) maintain Total Available Liquidity of USD
3,000,000.00 in 1998; "Total Available Liquidity" shall be the sum of
the Borrower's and Guarantor's (i) cash and cash equivalents
(excluding cash or cash equivalents pledged to secure letters of
credit, but only to the extent of accrued liabilities for workers
compensation claims) and (ii) unused capacity available under the
Fleet Credit Facility.
(v) maintain, on a consolidated basis, a ratio of Total
Liabilities to Tangible Net Worth not greater than 1.0:1.0 in 1998 and
thereafter (excluding for purposes of this test the Total Liabilities
and Tangible Net Worth of any Unrestricted Subsidiary);
(w) maintain all permits and certificates which are
material and necessary to the operation of the Borrower's and any
Guarantor's business under all applicable environmental, safety and
public health laws and regulations applicable to the Borrower, the
Guarantors and the Rigs, and all other laws and regulations affecting
or relating to the Rigs the failure to maintain which would have a
material adverse effect; and
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(x) deliver to each Lender, contemporaneously with the
delivery to each Lender of the annual and quarterly financial
statements specified in Section 3.3(g) above, its certificate (in form
and substance satisfactory to the Lenders), signed by one of its
Responsible Officers, (i) stating that such officer has reviewed the
relevant terms of this Agreement, the other Loan Documents and all
other agreements of the Borrower which evidence indebtedness for
borrowed money and leases (the "Financial Obligation Agreements") and
has made or caused to be made under his supervision, a review of the
transactions and condition of the Borrower during the relevant fiscal
quarter or year, as the case may be, and that such review has not
disclosed the existence during such period, nor does such Responsible
Officer have knowledge of the existence as at the date of such
certificate, of any condition or event which constitutes an event of
default under any of the Loan Documents or Financial Obligation
Agreements, or which, after notice or lapse of time or both would
constitute an event of default under any of the Loan Documents or
Financial Obligation Agreements, or if any such condition or event
existed or exists, specifying the nature and period of existence
thereof and what action the Borrower has taken or proposes to take
with respect thereto, (ii) setting forth in form and detail
satisfactory to the Lenders, the calculations respecting compliance
with the financial covenants of this Agreement and (iii) for purposes
of the annual certificate only, attaching and certifying as true and
correct a certificate evidencing the insurance in place with respect
to the Rigs and their operation.
(y) deliver to each Lender on each anniversary of the
Amendment Date a certification from a Responsible Officer that the
Rigs and their related equipment are being maintained according to
customary oil and gas drilling industry practice confirmed, if
reasonably requested by the Lenders by an appraiser selected in
accordance with Section 1.5(a)(iii) above.
(z) not and will not permit any Guarantor 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 preceding the Transaction Date is at least 2.25
to 1.0. Notwithstanding the foregoing, the Borrower or any Guarantor
(subject to the following paragraph) may incur Permitted Indebtedness.
Any Indebtedness of a Person existing at time at which such Person
becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be incurred by such Subsidiary at the
time at which it becomes a Subsidiary.
(aa) subject to Section 3.2(z) above, the Borrower will
not permit any Guarantor to, directly or indirectly, incur any
Indebtedness or issue any Preferred Stock except:
(i) Indebtedness or Preferred Stock issued to and
held by the Borrower so long as any transfer of such
Indebtedness or Preferred Stock to a Person other than the
Borrower will be deemed to constitute an incurrence of such
Indebtedness or Preferred Stock by the issuer thereof as of
the date of such transfer;
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(ii) Acquired Indebtedness or Preferred Stock of a
Subsidiary issued and outstanding prior to the date on which
such Subsidiary was acquired by the Borrower (other than
Indebtedness or Preferred Stock issued in connection with or
in anticipation of such acquisition);
(iii) Three (3) term notes issued by the Company in
favor of General Electric Capital Corp., secured by certain of
the Company's top drives, upon which approximately $2.9
million was outstanding at May 15, 1998.
(iv) Indebtedness described in clauses (b), (c),
(d), (e), (f), (g), (h), (k) and (h) under the definition of
Permitted Indebtedness contained in the Indenture;
(v) Permitted Subsidiary Refinancing Indebtedness
of such Subsidiary;
(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 paragraph (the
"Retired Indebtedness or Stock"), provided that the
Indebtedness or the Preferred Stock so issued has (i) 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, (ii) a final redemption date later
than the stated maturity or final redemption date (if any) of
the Retired Indebtedness or Stock and (iii) 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 Subsidiary,
thereto existing on the Amendment 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 paragraph;
(viii) Non-Recourse Indebtedness incurred by a
foreign Subsidiary not constituting a Guarantor; and
(ix) Indebtedness incurred to finance all or a
part of the purchase price or construction repair or
improvement cost of property acquired, constructed, repaired
or improved after the Amendment Date.
(bb) Not later than fifteen (15) days after the end of
each month after the Amendment Date furnish to the Agent a schedule
showing the precise location of each Rig and its contract status.
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ARTICLE IV.
EVENTS OF DEFAULT
If any of the following events shall occur and be continuing, (each an
"Event of Default"):
(a) the Borrower shall fail to pay any principal of or
interest on either Note, which failure shall continue for five (5)
days after the date when due;
(b) any representation or warranty made by the Borrower
herein or made in any certificate or financial statement furnished to
the Lenders or the Agent hereunder or under any of the Loan Documents
shall prove to have been incorrect in any material respect when made;
(c) default in the performance of any agreement,
covenant, term or condition contained herein or in any Loan Document
to be performed by the Borrower other than (a). above, if such default
has continued for twenty (20) days after notice thereof by the Agent
to the Borrower;
(d) an event of default under any loan agreement, credit
agreement, security agreement, guaranty agreement or lease agreement
now existing or hereafter entered into by the Borrower or any
Guarantor shall not have been remedied within any stated grace periods
during such time as USD 7,500,000.00 or more is outstanding under such
agreement;
(e) Any of the following Events of Default shall occur:
(i) the entry by a court of competent
jurisdiction of one or more final judgments against the
Borrower or any Guarantor in an uninsured or unindemnified
aggregate amount in excess of USD 7,500,000.00 which is not
discharged, waived, appealed, stayed, bonded or satisfied for
a period of sixty (60) consecutive days;
(ii) the entry by a court having jurisdiction in
the premises of (A) a decree or order for relief in respect of
the Borrower or any Guarantor 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 (B) a
decree or order adjudging the Borrower or any Guarantor a
bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Borrower or any Guarantor
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 Borrower or any Guarantor or of any
substantial part of the property or assets of the Borrower or
any Guarantor, or ordering the winding up or liquidation of
the affairs of the Borrower or any Guarantor, and the
continuance of
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<PAGE> 34
any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of sixty (60)
consecutive days;
(iii) (A) the commencement by the Borrower or any
Guarantor 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 (B) the consent by the
Borrower or any Guarantor to the entry of a decree or order
for relief in respect of the Borrower or any Guarantor 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 Borrower or any Guarantor; or (C) the
filing by the Borrower or any Guarantor 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 (D) the consent by the Borrower or any
Guarantor 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
Borrower or any Guarantor or of any substantial part of the
Property or assets of the Borrower or any Guarantor or of any
substantial part of the Property or assets of the Borrower or
any Guarantor, or the making by the Borrower or any Guarantor
of an assignment for the benefit of creditors; or (E) the
admission by the Borrower or any Guarantor in writing of its
inability to pay its debts generally as they become due; or
(F) the taking of corporate action by the Borrower or any
Guarantor in furtherance of any such action; or
(iv) an Event of Default occurs under the
Indenture or the Fleet Credit Facility; or
(v) any Guaranty shall for any reason cease to
be, or be asserted by the Borrower or any Guarantor, as
applicable, not to be, in full force and effect (except
pursuant to the release of any such Guaranty in accordance
herewith),
then the Agent, subject to Section 5.1(b) below, may by written notice
to the Borrower (1) immediately terminate the commitment of the
Lenders hereunder; (2)declare the principal of, and interest accrued
to the date of such declaration on, the Notes together with all other
amounts due hereunder or under any of the Loan Documents, to be
forthwith due and payable, whereupon the same shall become forthwith
due and payable (provided, however, no notice or declaration shall be
required and such amounts shall be immediately due and payable upon
the occurrence of an event described in Article IV(e)(iii) or (iv)
hereof) and (3) exercise any remedies to which it may be entitled by
any Loan Document or by applicable law.
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ARTICLE V.
THE AGENT
Section 5.1 Appointment and Duties of Agent.
(a) The parties hereto agree that The CIT Group/Equipment
Financing, Inc. shall act, subject to the terms and conditions of this
Article V, as the Agent for the Lenders in connection with the Loan,
and to the extent set forth herein each Lender hereby irrevocably
appoints, authorizes, empowers and directs the Agent to take such
action on its behalf and to exercise such powers as are specifically
delegated to the Agent herein or are reasonably incidental thereto in
connection with the administration of and the enforcement of any
rights or remedies with respect to this Agreement, the Notes and the
other Loan Documents. It is expressly understood and agreed that the
obligations of the Agent under the Loan Documents are only those
expressly set forth in this Agreement. The Agent shall use reasonable
diligence to examine the face of each document received by it
hereunder to determine whether such documents, on its face, appears to
be what it purports to be. However, the Agent shall not under any
duty to examine into and pass upon the validity or genuineness of any
documents received by it hereunder and the Agent shall be entitled to
assume that any of the same which appears regular on its face is
genuine and valid and what it purports to be.
(b) The Agent shall:
(i) as to matters not specifically referred to in
Section 5.1(b)(ii) below, act pursuant to the instructions of
the Lenders in all matters relating to the Loan Documents
including but not limited to, all collateral for the Loan and
waivers or amendments of the Loan Documents; and
(ii) act pursuant to the instructions of The CIT
Group/Equipment Financing, Inc. as to the Events of Default
(and any waivers or remedies arising because of such defaults)
referred to in Article IV. A. and E, above.
Section 5.2 Discretion and Liability of Agent. Subject to
Sections 5.1(b) above and 5.3 and 5.5 below, the Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights which may be vested in it under any of the Loan Documents or otherwise,
or with respect to taking or refraining from taking any action or actions which
it may be able to take under any of the Loan Documents. Neither the Agent nor
any of its directors, officers, employees, agents or representatives shall be
liable for any action taken or omitted by it hereunder or in connection
herewith, except for its own gross negligence or wilful misconduct. The Agent
shall incur no liability under, or in respect of this Agreement or the other
Loan Agreements by acting upon a notice, certificate, warranty or other paper
or instrument reasonably believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything which it may
do or refrain from doing in the reasonable exercise of its judgment, or which
may seem to it to be necessary or desirable in the premises.
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Section 5.3 Event of Default.
(a) The Agent shall be entitled to assume that no Event
of Default or event which would constitute an Event of Default after
notice or lapse of time, or both, has occurred and is continuing,
unless the Agent has actual knowledge of such facts or has received
notice from a Lender in writing that such Lender considers that an
Event of Default or event which would constitute an Event of Default
after notice or lapse of time, or both, has occurred and is continuing
and which specifies the nature thereof.
(b) In the event that the Agent shall acquire actual
knowledge of any Event of Default or event which would constitute an
Event of Default after notice or lapse of time, or both, the Agent
shall promptly notify (either orally, confirmed in writing, or in
writing) the Lenders of such Event of Default or event and (i) in the
case of default under Article IV(a) or (e) above may, or if instructed
in writing by The CIT Group/Equipment Financing, Inc. shall, take such
action and assert such rights as are contemplated under this Agreement
and (ii) in the case of any other default under Article IV above may
in an emergency, or if requested in writing by the Lenders shall, take
such action and assert such rights as are contemplated under this
Agreement. The Agent shall be indemnified pro rata by the Lenders
against any liability or expenses, including, but not limited to,
travel expenses and internal and external counsel fees and expenses,
incurred in connection with taking such action. The Agent may refrain
from acting in accordance with any instructions from the Lenders until
it shall have been indemnified to its satisfaction against any and all
costs and expenses which it will or may expend or incur in complying
with such instructions.
Section 5.4 Consultation. When acting in connection with this
Agreement, or the other Loan Documents, the Agent may engage and pay for the
advice and services of any lawyers, accountants, surveyors, appraisers or other
experts whose advice or services may to it appear necessary, expedient or
desirable and the Agent shall be entitled to fully rely upon any opinion or
such advice so obtained.
Section 5.5 Communications to and from Agent. When any notice,
approval, consent, waiver or other communication or action is required or may
be delivered by the Lenders hereunder or the other Loan Documents, action by
the Agent shall be effective for all purposes hereunder; provided, that upon
any occasion requiring or permitting an approval, consent, waiver, election or
other action on the part of the Lenders, unless action by the Agent alone, or
only upon instruction of all of the Lenders, is expressly permitted or required
hereunder, action shall be taken by the Agent for and on behalf of or for the
benefit of all the Lenders as provided in Section 5.3 above. The Borrower may
rely on any communication from the Agent hereunder or the other Loan Documents,
and need not inquire into the propriety of or authorization for such
communication. Upon receipt by the Agent from the Borrower or any Lender of
any communication it will, in turn, promptly forward such communication to the
Lenders; provided, however, that the Agent shall not be liable for any costs,
expenses or losses arising from any failure to so forward any such
communication.
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Section 5.6 Limitations of Agency. Notwithstanding anything in
the Loan Documents, expressed or implied, it is agreed by the parties hereto,
that the Agent will act under the Loan Documents as Agent solely for the Lenders
and only to the extent specifically set forth herein, and will, under no
circumstances, be considered to be an agent or fiduciary of any nature
whatsoever in respect to any other person. The Agent may generally engage in
any business with the Borrower or any of their affiliates as if it was not the
Agent.
Section 5.7 No Representations or Warranty.
(a) No Lender (including the Agent) makes to any other
Lender any representation or any warranty, expressed or implied, or
assumes any responsibility with respect to the Loan or the execution,
construction or enforceability of the Loan Documents or any instrument
or agreement executed by the Borrower or any other person in
connection therewith.
(b) The Agent takes no responsibility for the accuracy or
completeness of any information concerning the Borrower distributed by
the Agent in connection with the Loan nor for the truth of any
representation or warranty given or made herein, nor for the validity,
effectiveness, adequacy or enforceability of this Agreement or any of
the other Loan Documents.
Section 5.8 Lender Credit Decision. Each Lender acknowledges
that it has independent of and without reliance upon any other Lender
(including the Agent) or any information provided by any other Lender
(including the Agent) and based on the financial statements of the Borrower and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independent of and without reliance upon any other
Lender (including the Agent) and based on such documents and information as it
shall deem appropriate at that time, continue to make its own credit decisions
in taking or not taking action under this Agreement and any other documents
relating thereto.
Section 5.9 Indemnity. Notwithstanding any of the provisions
hereof, to the extent the Agent has not been so indemnified by the Borrower,
the Lenders shall severally indemnify the Agent against any and all losses,
costs, liabilities, damages or expenses, including but not limited to,
reasonable travel expenses and internal and external counsel's reasonable fees
and expenses, arising from, or in connection with, its performance as Agent
hereunder and not caused by its gross negligence or willful misconduct.
Section 5.10 Resignation. The Agent may resign as such at any
time upon at least 30 days' prior notice to the Borrower and the Lenders,
provided that such resignation shall not take effect until a successor agent
has been appointed. In the event of a resignation by the Agent, the Lenders
shall promptly appoint a successor agent from among the Lenders.
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Section 5.11 Distribution. The Agent shall be responsible for
promptly distributing each Lender's pro rata share of all net amounts received
by the Agent under any of the Loan Documents. Each Lender shall be responsible
for designating by written notice to the Agent the account to which such
distribution shall be deposited.
Section 5.12 Limitation of Suits. All rights of action and claims
under this Agreement and the Security Agreements of the Lenders shall be
prosecuted and enforced only by the Agent. The Lenders agree that they shall
not independently institute any proceedings, judicial or otherwise, to enforce
their rights against the Borrower under this Agreement or the Security
Agreements. However, notwithstanding anything contained in this Section 5.12,
the Lenders shall always retain their ability to retain independent counsel and
to protect their rights under this Agreement and the other Loan Documents.
Section 5.13 Right of Setoff. Upon the occurrence and during the
continuation of any Event of Default, the Lenders each are hereby authorized at
any time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to setoff and apply any and all
deposits (general or special, time or demand, provisional or final, whether or
not such setoff results in any loss of interest or other penalty, and including
without limitation all certificates of deposit) at any time held by the Lenders
and all of the indebtedness arising in connection with this Agreement
irrespective of whether or not such Lender will have made any demand under this
Agreement, the Notes or any other Loan Document. The Borrower also hereby
grant to each of the Lenders a security interest in and hereby transfer,
assign, set over and convey to each of the Lenders, as security for payment of
the Loan, all such deposits, funds or property of the Borrower or indebtedness
of any Lender to the Borrower. Should the right of any Lender to realize funds
in any manner set forth hereinabove be challenged and any application of such
funds be reversed, whether by court order or otherwise, the Lenders shall make
restitution or refund to the Borrower pro rata in accordance with their
respective portions of the Loan. Each Lender agrees to promptly notify the
Borrower and the Agent after any such setoff and application, provided that the
failure to give such notice will not affect the validity of such setoff and
application. The rights of the Agent and the Lenders under this Section 5.13
are in addition to other rights and remedies (including without limitation
other rights of setoff) which the Agent or the Lenders may have. Nothing
contained herein shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower to such Lender. This Section is
subject to the terms and provision of Section 1.3 hereof.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Notices. All notices, requests and demands shall be
in writing (including telecopier transmission) given to or made upon the
respective parties hereto as follows:
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In the case of the Borrower, at Bayard Drilling Technologies, Inc.
4005 Northwest Expressway, Suite 400E
Oklahoma City, Oklahoma 73116
Attention: Mr. James Brown
Telecopier: (405) 879-3847
In the case of the Lenders, at The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: (a) Senior Vice President -
Credit
Telecopier: (212) 536-1385
(b) Legal Department
Telecopier: (212) 536-1388
with a copy to The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Mr. Bruce Halstead
Telecopier: (212) 536-1385
and
Fleet Capital Corporation
2711 North Haskell
Suite 2100, LB21
Dallas, Texas 75204
Attention: Loan Administration
Manager Telecopier: (214) 828-6530
In the case of the Agent, at The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: (a) Senior Vice President -
Credit
Telecopier: (212) 536-1385
(b) Legal Department
Telecopier: (212) 536-1388
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with a copy to The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Mr. Bruce Halstead
Telecopier: (212) 536-1385
or in such other manner as any party hereto shall designate by written notice
to the other parties hereto. All such notices shall be effective upon delivery
or three (3) days after being deposited in the United States mail with postage
prepaid certified, return receipt requested in a correctly addressed wrapper,
or upon receipt if delivered to Federal Express or similar courier company or
transmitted by telefax during normal business hours. All notices, demands,
requests, communications and other documents delivered hereunder or under the
Loan Documents, unless submitted in the English language, shall be accompanied
by certified English translation thereof.
Section 6.2 No Waiver. No failure on the part of the Lenders or
the Agent to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Lenders or the Agent of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
Section 6.3 Applicable Law and Jurisdiction.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS PROVIDED FOR
HEREIN (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY
HEREOF AND THEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, OTHER THAN CONFLICT OF LAWS
RULES THEREOF. Any legal action or proceeding against the Borrower
with respect to this Agreement or any Loan Document may be brought in
the courts of the State of New York, the U.S. Federal Courts in such
state, sitting in the County of New York, or in the courts of any
other jurisdiction where such action or proceeding may be properly
brought, and the Borrower hereby irrevocably accept the jurisdiction
of such courts for the purpose of any action or proceeding. The
Borrower hereby designates and irrevocably appoints and empowers C T
Corporation System (the "Process Agent"), currently located at 1633
Broadway, New York, New York 10019 in each case as its authorized
agent to accept, receive and acknowledge for and on behalf of each and
its property service of any and all process which may be served but
only in any action, suit or proceeding of the nature referred to above
in the State of New York and further agree that failure of such firm
to give the Borrower any notice of any such service shall not impair
or affect the validity of such service or of any judgment rendered in
any action or proceeding based thereon. The Borrower hereby
irrevocably authorizes and directs the Process Agent to accept such
service on its behalf. The Borrower further irrevocably consents to
the service of process out of said courts by the mailing thereof by
the Agent by U.S. registered or certified mail postage prepaid to the
party to be served at its address designated in Section
37
<PAGE> 41
6.1. The Borrower agrees that a final judgment in any action or
proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided
by law. Nothing in this Section 6.3 shall affect the right of the
Lenders or the Agent to serve legal process in any other manner
permitted by law or affect the right of the Lenders or the Agent to
bring any action or proceeding against the Borrower or its properties
in the courts of any other jurisdiction. To the extent that the
Borrower has or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to either itself or its property,
the Borrower hereby irrevocably waives such immunity in respect of
their obligations under this Agreement and the other Loan Documents.
The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any Loan
Document brought in the Supreme Court of the State of New York, County
of New York or the U.S. District Court for the Southern District of
New York, and hereby further irrevocably waive any claim that any such
suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
(b) THE LENDERS, THE AGENT AND THE BORROWER IRREVOCABLY
WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
Section 6.4 Severability. In the event that any provision of
this Agreement is held to be void or unenforceable in any jurisdiction, all
other provisions shall remain unaffected and be enforceable in accordance with
their terms in such jurisdiction, and all provisions of this Agreement shall
remain unaffected and shall be enforceable in accordance with their terms in
all other jurisdictions.
Section 6.5 Amendment. Neither this Agreement nor any provision
hereof, including without limitation this Section 6.5, may be amended,
modified, waived, discharged or terminated orally, but only by an instrument in
writing signed by the Agent, the Lenders and the Borrower. This Agreement
shall be binding upon and inure to the benefit of the Borrower, the Agent and
the Lenders, and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Agent.
Section 6.6 Assignment and Participation. The Lenders shall have
the right, provided they comply with all applicable state and federal
securities laws, to assign or grant participation in all or any portion of the
Loan outstanding under this Agreement or the Notes to any affiliate of the
Lenders or to any foreign, federal or state banking institution, savings and
loan institution or finance company upon thirty (30) days written notice to the
Borrower of such assignment or participation;
38
<PAGE> 42
provided, however, that CIT agrees that it will always retain a portion of the
Loan and a percentage of the Loan outstanding under this Agreement equal to or
greater than Fleet's.
Section 6.7 Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all reasonable fees, costs and expenses in connection (i) with
the preparation, execution, delivery, administration, amendment and enforcement
of this Agreement, the Notes, the other Loan Documents and any other documents
to be delivered hereunder and thereunder (including, without limitation, the
appraisal and inspection reports required hereunder) and any amendment,
modification or supplement hereto or thereto, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Lenders and
the Agent, and any special counsel associated with them, and with respect
thereto and the filing of any document or instrument in connection with any of
the foregoing, (ii) with respect to reasonable fees and out of pocket expenses
of counsel for advising the Lenders and the Agent as to their rights and
responsibilities under this Agreement and the transactions contemplated thereby
after an Event of Default or an event which, with the giving of notice or lapse
of time, or both, shall have occurred, and (iii) with any filing or recording
of any document or instrument. In addition, the Borrower shall pay any and all
stamp and other taxes (including, without limitation penalties and interest
assessed thereon) other than Excluded Income Taxes payable or determined to be
payable in connection with the execution, delivery or performance of this
Agreement and the Loan Documents and any other documents to be delivered
hereunder and thereunder and agrees to save the Agent and Lenders harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes.
Section 6.8 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument.
Section 6.9 Section Headings. The headings of the various
Sections and subsections of this Agreement are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof.
Section 6.10 Merger. THIS AGREEMENT AND THE LOAN DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AMONG THE BORROWER, THE AGENT AND THE LENDERS AND
SUPERSEDE ALL PRIOR AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, IF ANY,
RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF.
39
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ DAVD E. GROSE, III
-----------------------------------
Name: David E. Grose, III
-----------------------------------
Title: Chief Financial Officer
-----------------------------------
THE CIT GROUP/EQUIPMENT FINANCING,
INC.
By: /s/ BRUCE A. HALSTEAD
-----------------------------------
Name: Bruce A. Halstead
-----------------------------------
Title: Credit Officer
-----------------------------------
FLEET CAPITAL CORPORATION
By: /s/ BRUCE CLARK
-----------------------------------
Name: Bruce Clark
-----------------------------------
Title: Vice President
-----------------------------------
THE CIT GROUP/EQUIPMENT FINANCING,
INC., AS AGENT
By: /s/ BRUCE A. HALSTEAD
-----------------------------------
Name: Bruce A. Halstead
-----------------------------------
Title: Credit Officer
-----------------------------------
40
<PAGE> 1
EXHIBIT 10.31
$100,000,000
11% Series A Senior Notes Due 2005
of Bayard Drilling Technologies, Inc.
PURCHASE AGREEMENT
JUNE 19, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
BT ALEX. BROWN
DAIN RAUSCHER WESSELS
<PAGE> 2
$100,000,000
11% Series A Senior Notes Due 2005
of Bayard Drilling Technologies, Inc.
PURCHASE AGREEMENT
JUNE 19, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
BT ALEX. BROWN
DAIN RAUSCHER WESSELS
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Bayard Drilling Technologies, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Lehman Brothers Inc., BT Alex. Brown and Dain
Rauscher Wessels (each, an "INITIAL PURCHASER" and collectively, the "INITIAL
PURCHASERS") an aggregate of $100,000,000 in principal amount of its 11% Series
A Senior Notes Due 2005 (the "SERIES A NOTES"), subject to the terms and
conditions set forth herein. The Series A Notes are to be issued pursuant to the
provisions of an indenture (the "INDENTURE"), dated as of June 26, 1998, among
the Company, the Guarantors (as defined below) and U.S. Trust Company of Texas,
N.A., as trustee (the "TRUSTEE"). The Series A Notes and the Series B Notes (as
defined below) issuable in exchange therefor are collectively referred to herein
as the "NOTES." The Notes will be guaranteed (the "GUARANTEES") by each of the
entities listed on Schedule A hereto (each, a "GUARANTOR" and collectively, the
"GUARANTORS"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and sold to
the Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "SECURITIES
ACT"). The Company and the Guarantors have prepared a preliminary offering
memorandum, dated June 5, 1998 (the "PRELIMINARY OFFERING
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<PAGE> 3
MEMORANDUM") and a final offering memorandum, dated June 19, 1998 (the "OFFERING
MEMORANDUM"), relating to the Series A Notes and the Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes shall bear the
following legend:
"THIS NOTE (OR ITS PREDECESSOR) AND ANY GUARANTEE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR I THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE
HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER:
(1) REPRESENTS THAT (i) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (a "QIB"), OR (ii) IT
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (ii) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (iii) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (iv) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (v) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
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<PAGE> 4
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and each Initial Purchaser agrees
severally and not jointly, to purchase from the Company the principal amounts of
Series A Notes set forth opposite the name of such Initial Purchaser on Schedule
B hereto at a purchase price equal to 97.25% of the principal amount thereof
(the "PURCHASE PRICE").
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "EXEMPT RESALES") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely (i) to persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Securities Act ("QIBS") and (ii) persons permitted to
purchase the Series A Notes in offshore transactions in reliance upon Regulation
S under the Securities Act (each, a "REGULATION S PURCHASER") (such persons
specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE
PURCHASERS"). The Initial Purchasers will offer the Series A Notes to Eligible
Purchasers initially at a price equal to 100% of the principal amount thereof.
Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
(the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the "COMMISSION") under the circumstances set forth therein, (i) a
registration statement under the Securities Act (the "EXCHANGE OFFER
REGISTRATION STATEMENT") relating to the Company's 11% Series B Senior Notes Due
2005 (the "SERIES B NOTES"), to be offered in exchange for the Series A Notes
(such offer to exchange being referred to as the "EXCHANGE OFFER") and the
Guarantees thereof and (ii) a shelf registration statement pursuant to Rule 415
under the Securities Act (the "SHELF REGISTRATION STATEMENT" and, together with
the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS")
relating to the resale by certain holders of the Series A Notes and to use their
reasonable efforts to cause such Registration Statements to be declared and
remain effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes, the Guarantees and the Registration Rights Agreement are hereinafter
sometimes referred to collectively as the "OPERATIVE DOCUMENTS."
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<PAGE> 5
4. DELIVERY AND PAYMENT.
(a) DeliveRy of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Baker & Botts, L.L.P., 1 Shell
Plaza, 910 Louisiana, Houston, Texas 77002, or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m., New
York City time, on June 26, 1998, or at such other time on the same date or such
other date as shall be agreed upon by the Initial Purchasers and the Company.
The time and date of such delivery and the payment for the Series A Notes are
herein called the "CLOSING DATE."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Series A Notes (collectively, the "GLOBAL NOTE"), shall
be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct) in each case with any transfer taxes thereon duly paid by the
Company against payment by the Initial Purchasers of the Purchase Price therefor
by wire transfer in same day funds to the order of the Company. The Global Note
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
5 AGREEMENTS OF THE COMPANY AND THE GUARANTORS. Each of the
Company and the Guarantors hereby agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested
by the Initial Purchasers, confirm such advice in writing, (i) of the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Series A Notes for offering
or sale in any jurisdiction designated by the Initial Purchasers pursuant to
Section 5(e) hereof, or the initiation of any proceeding for such purposes and
(ii) of the happening of any event during the period referred to in Section 5(c)
below which makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading. If at any
time any state securities commission or other federal or state regulatory
authority shall issue an order suspending the qualification or exemption of any
Series A Notes under any state securities or Blue Sky laws, the Company and the
Guarantors will use their reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchasers'
compliance with their representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering
-5-
<PAGE> 6
Memorandum, and any amendments and supplements thereto required pursuant hereto,
by the Initial Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchasers for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised unless the Company shall have determined based on the advice of
counsel that such amendment or supplement is required by law; and (ii) to
prepare promptly upon the Initial Purchasers' reasonable request, any amendment
or supplement to the Offering Memorandum which in the opinion of counsel for the
Initial Purchasers is necessary in connection with such Exempt Resales or such
market-making activities.
(d) If during the period referred to in Section 5(c) above any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel for the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel for the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may specify such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchasers and
counsel for the Initial Purchasers in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchasers
and pursuant to Exempt Resales under the state securities or Blue Sky laws of
such jurisdictions as the Initial Purchasers may request, to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that neither the Company nor any Guarantor shall be required in
connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) So long as any of the Series A Notes are outstanding prior to
the consummation of the Exchange Offer, to furnish to the Initial Purchasers as
soon as available copies of all reports or other communications furnished by the
Company or any of the Guarantors to its
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<PAGE> 7
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 of
the Guarantors is listed and such other publicly available information
concerning the Company and/or its subsidiaries as the Initial Purchasers may
reasonably request.
(g) So long as any of the Series A Notes remain outstanding prior
to the consummation of the Exchange Offer and during any period in which the
Company and the Guarantors are not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the
Securities Act.
(h) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
and the Guarantors under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Company and the Guarantors and accountants of the
Company and the Guarantors in connection with the sale and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees and expenses in connection with the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements) prior to or during the period specified in Section 5(c), including
the mailing and delivering of copies thereof to the Initial Purchasers and
persons designated by them in the quantities specified herein, (ii) all costs
and expenses related to the transfer and delivery of the Series A Notes to the
Initial Purchasers and pursuant to Exempt Resales, including any transfer or
other taxes payable thereon, (iii) all costs of printing or producing this
Agreement, the other Operative Documents and any other agreements or documents
in connection with the offering, purchase, sale or delivery of the Series A
Notes, (iv) all expenses in connection with the registration or qualification of
the Series A Notes and the Guarantees for offer and sale under the securities or
Blue Sky laws of the several states and all costs of printing or producing any
preliminary and supplemental Blue Sky memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for the Initial
Purchasers in connection with such registration or qualification and memoranda
relating thereto), (v) the cost of printing certificates representing the Series
A Notes and the Guarantees, (vi) all expenses and listing fees in connection
with the application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System -
PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's
counsel in connection with the Indenture, the Notes and the Guarantees, (viii)
the costs and charges of any transfer agent, registrar and/or depositary
(including DTC), (ix) any fees charged by rating agencies for the rating of the
Notes, (x) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, and (xi) 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.
-7-
<PAGE> 8
(i) To use its reasonable best efforts to effect the inclusion of
the Series A Notes in PORTAL and to maintain the listing of the Series A Notes
on PORTAL for so long as the Series A Notes are outstanding.
(j) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply in all material respects with all of its agreements set
forth in the representation letters of the Company and the Guarantors to DTC
relating to the approval of the Notes by DTC for "book-entry" transfer.
(h) 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
Notes and the Guarantees (other than (i) the Notes and the Guarantees and (ii)
commercial paper issued in the ordinary course of business), without the prior
written consent of the Initial Purchasers.
(l) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Series A Notes to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Series A Notes under the Securities Act.
(m) Not to voluntarily claim, and to actively resist any attempts
to claim, the benefit of any usury laws against the holders of any Notes and the
related Guarantees.
(n) To cause the Exchange Offer to be made in the appropriate
form to permit Series B Notes and guarantees thereof by the Guarantors
registered pursuant to the Securities Act to be offered in exchange for the
Series A Notes and the Guarantees and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(o) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(p) To use its reasonable best efforts to do and perform all
things required or necessary to be done and performed under this Agreement by it
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Series A Notes and the Guarantees.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND
THE GUARANTORS. As of the date hereof, each of the Company and the Guarantors
represents and warrants to, and agrees with, each Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them 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
-8-
<PAGE> 9
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 (a) do not apply to statements in or omissions from the Preliminary
Offering Memorandum or the Offering Memorandum (or any supplement or amendment
thereto) based upon information relating to any Initial Purchaser furnished to
the Company in writing by such Initial Purchaser expressly for use therein. No
stop order preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Securities Act, has been issued.
(b) Each of the Company and its subsidiaries set forth on
Schedule C hereto (the "MATERIAL SUBSIDIARIES") has been duly incorporated or
formed, is validly existing as a corporation, limited liability company or
limited partnership in good standing under the laws of its jurisdiction of
incorporation or formation and has the corporate or limited liability company
power and authority (or the requisite authority under its limited partnership
agreement and the partnership laws of its jurisdiction of formation) to carry on
its business as described in the Preliminary Offering Memorandum and the
Offering Memorandum and to own, lease and operate its properties, and each is
duly qualified and is in good standing as a foreign corporation or limited
liability company authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not reasonably
be expected to have a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
(c) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights.
(d) All of the outstanding shares of capital stock or other
evidences of ownership of each of the Company's Material Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature (each, a "LIEN").
(e) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and
each of the Guarantors and, on the Closing Date, will have been validly executed
and delivered by the Company and each of the Guarantors. When the Indenture has
been duly executed and delivered by the Company, each of the Guarantors and the
Trustee, the Indenture will be a valid and binding agreement of the Company and
each Guarantor, enforceable against the Company and each Guarantor in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting creditors' rights generally
and subject to general
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<PAGE> 10
principles of equity regardless of whether such enforcement is sought in a
proceeding at law or in equity (the "Enforceability Exceptions"). On the Closing
Date, the Indenture will conform in all material respects to the requirements of
the Trust Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE
ACT"), and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Series A Notes have been issued, executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the Series A
Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to the Enforceability Exceptions. On the
Closing Date, the Series A Notes will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to the
Enforceability Exceptions.
(i) The Guarantee to be endorsed on the Series A Notes by each
Guarantor has been duly authorized by such Guarantor and, on the Closing Date,
will have been duly executed and delivered by each such Guarantor. When the
Series A Notes have been issued, executed and authenticated in accordance with
the Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, the Guarantee of each Guarantor
endorsed thereon will be entitled to the benefits of the Indenture and will be
the valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms, subject to the Enforceability
Exceptions. On the Closing Date, the Guarantees to be endorsed on the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Memorandum.
(j) The Guarantee to be endorsed on the Series B Notes by each
Guarantor has been duly authorized by such Guarantor and, when issued, will have
been duly executed and delivered by each such Guarantor. When the Series B Notes
have been issued, executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the Guarantee of each Guarantor endorsed
thereon will be entitled to the benefits of the Indenture and will be the valid
and binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, subject to the Enforceability Exceptions. When the
Series B Notes are issued, authenticated and delivered, the Guarantees to be
endorsed on the Series B Notes will conform as to legal matters to the
description thereof in the Offering Memorandum.
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<PAGE> 11
(k) The Registration Rights Agreement has been duly authorized by
the Company and each of the Guarantors and, on the Closing Date, will have been
duly executed and delivered by the Company and each of the Guarantors. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and each of the Guarantors, enforceable against the Company and each
Guarantor in accordance with its terms, subject to the Enforceability
Exceptions. On the Closing Date, the Registration Rights Agreement will conform
as to legal matters to the description thereof in the Offering Memorandum.
(l) Neither the Company nor any of its Material Subsidiaries is
(i) in violation of its respective charter or bylaws or other organizational
documents or (ii) 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 to which the Company or any of its
Material Subsidiaries is a party or by which the Company or any of its Material
Subsidiaries or their respective property is bound, except with respect to item
(ii) for such defaults that would not reasonably be expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.
(m) The execution, delivery and performance of this Agreement and
the other Operative Documents by the Company and each of the Guarantors, the
compliance by the Company and each of the Guarantors with all the provisions
hereof and thereof and the consummation of the transactions contemplated hereby
and thereby will not (i) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky laws of the
various states), (ii) conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the charter or bylaws or other
organizational documents of the Company or any of its Material Subsidiaries,
(iii) conflict with or constitute a breach of any of the terms or provisions of,
or a default under, any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or any of its Material Subsidiaries
is a party or by which the Company or any of its Material Subsidiaries or their
respective property is bound, (iv) 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, any of its
subsidiaries or their respective property, or (v) result in the suspension,
termination or revocation of any Authorization (as defined below) of the Company
or any of its Material Subsidiaries or any other impairment of the rights of the
holder of any such Authorization; except with respect to items (i), (iii), (iv)
and (v) for such consents, approvals, authorizations, orders or qualifications
which if not made or obtained, or conflicts, breaches, violations or defaults
which if existing, or suspensions, terminations or revocations which if
existing, would not reasonably be expected to have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(n) There are no legal or governmental proceedings pending or, to
the Company's knowledge, threatened to which the Company or any of its Material
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
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<PAGE> 12
described in the Preliminary Offering Memorandum or the Offering Memorandum and
are not so described; nor are there any statutes, regulations, contracts or
other documents that are required to be described in the Preliminary Offering
Memorandum or the Offering Memorandum that are not so described as required.
(o) Neither the Company nor any of its Material 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
("ERISA") or the rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not reasonably be expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.
(p) Except as disclosed in the Offering Memorandum, 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 Authorization granted
thereunder, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole.
(q) Each of the Company and its Material Subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. Each such Authorization is valid and in full
force and effect and each of the Company and its Material Subsidiaries is in
substantial compliance with all the terms and conditions thereof and with the
rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and, to the knowledge of the Company, no
event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other material impairment of the rights of the holder of any such
Authorization; and, except as disclosed in the Offering Memorandum, such
Authorizations contain no restrictions that are burdensome to the Company or any
of its Material Subsidiaries; and, except as disclosed in the Offering
Memorandum; except where such failure to be valid and in full force and effect
or to be in compliance, the occurrence of any such event or the presence of any
such restriction would not, singly or in the
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<PAGE> 13
aggregate, reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
(r) Coopers & Lybrand L.L.P. are independent public accountants
with respect to the Company and the Guarantors, as required by the Securities
Act.
(s) The consolidated financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum (and any amendment
or supplement thereto), together with related notes, present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated therein at the
respective dates or for the respective periods to which they apply; such
statements and related notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other historical financial and
statistical information and data set forth in the Preliminary Offering
Memorandum and the Offering Memorandum (and any amendment or supplement thereto)
are, in all material respects, accurately presented and, except as otherwise
stated therein, prepared on a basis consistent with such financial statements
and the books and records of the Company.
(t) The Company is not and, after giving effect to the offering
and sale of the Series A Notes and the application of the proceeds thereof as
described in the Offering Memorandum, will not be, an "investment company," as
such term is defined in the Investment Company Act of 1940, as amended.
(u) Except as described in the Offering Memorandum, there are no
contracts, agreements or understandings between the Company or any Guarantor and
any person granting such person the right to require the Company or such
Guarantor to file a registration statement under the Securities Act with respect
to any securities of the Company or such Guarantor or to require the Company or
such Guarantor to include such securities with the Notes and Guarantees
registered pursuant to any registration statement.
(V) Neither the Company nor any of its subsidiaries nor any agent
thereof acting on behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Series A
Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System.
(w) No "nationally recognized statistical rating organization,"
as such term is defined for purposes of Rule 436(g)(2) under the Securities Act
(i) has imposed (or has informed the Company or any Guarantor that it is
considering imposing) any condition (financial or otherwise) on the Company's or
any Guarantor's retaining any rating assigned to the Company or any Guarantor,
or any securities of the Company or any Guarantor or (ii) has indicated to the
Company or any Guarantor that is considering (A) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating
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<PAGE> 14
so assigned or (B) any change in the outlook for any rating of the Company or
any Guarantor, or any securities of the Company or any Guarantor.
(x) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and its subsidiaries, taken as a whole, (ii) there has not been any
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 or
any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent, except for trade payables and other similar liabilities incurred in
the ordinary course of business.
(y) Each certificate signed by any officer of the Company and
delivered at the Closing to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the Company to
the Initial Purchasers as to the matters covered thereby.
(z) The Company and its subsidiaries have good and indefeasible
title to all real property and good and marketable title to all personal
property owned by them and which is material to the business of the Company and
its subsidiaries, taken as a whole, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering Memorandum
or such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries and which are material to the
business of the Company and its subsidiaries, taken as a whole, are held by them
under valid, subsisting and enforceable leases.
(aa) The Company and each of its Material Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses in
which they are engaged; and neither the Company nor any of its Material
Subsidiaries has received notice from any insurer which indicates that the
Company or such Material Subsidiary will not be able to renew its existing
insurance coverage as and when such coverage expires.
(bb) No relationship, direct or indirect, exists between or among
the Company or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which is required by the Securities Act to be
described in the Preliminary Offering Memorandum or the Offering Memorandum
which is not so described.
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<PAGE> 15
(cc) The pro forma financial statements of the Company and its
subsidiaries and the related notes thereto set forth in the Preliminary Offering
Memorandum and the Offering Memorandum (and any supplement or amendment thereto)
have been prepared on a basis consistent with the historical financial
statements of the Company and its subsidiaries, give effect to the assumptions
used in the preparation thereof on a reasonable basis and in good faith and
present fairly the historical and proposed transactions contemplated by the
Preliminary Offering Memorandum and the Offering Memorandum. The other pro forma
financial and statistical information and data set forth in the Preliminary
Offering Memorandum and the Offering Memorandum (and any supplement or amendment
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with the historical or pro forma financial statements of the
Company.
(dd) The Company and each of its Material Subsidiaries maintains
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(ee) All material tax returns required to be filed by the Company
and each of its subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(ff) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
(gg) When the Series A Notes and the Guarantees are issued and
delivered pursuant to this Agreement, neither the Series A Notes nor the
Guarantees will be of the same class (within the meaning of Rule 144A under the
Securities Act) as any security of the Company or the Guarantors that is listed
on a national securities exchange registered under Section 6 of the Exchange Act
or that is quoted in a United States automated inter-dealer quotation system.
(hh) No form of general solicitation or general advertising (as
defined in Regulation D under the Securities Act) was used by the Company, the
Guarantors or any of their respective representatives (other than the Initial
Purchasers, as to whom the Company and the Guarantors make no representation) in
connection with the offer and sale of the Series A Notes contemplated hereby,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or
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<PAGE> 16
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as the
Series A Notes have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(ii) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(jj) None of the Company, the Guarantors nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Company and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Securities Act ("REGULATION S")
with respect to the Series A Notes or the Guarantees.
(kk) The Series A Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(ll) The sale of the Series A Notes pursuant to Regulation S is
not part of a plan or scheme to evade the registration provisions of the
Securities Act.
(mm) No registration under the Securities Act of the Series A
Notes or the Guarantees is required for the sale of the Series A Notes and the
Guarantees to the Initial Purchasers as contemplated hereby or for the Exempt
Resales, assuming the accuracy of the Initial Purchasers' representations and
warranties and agreements set forth in Section 7 hereof.
The Company and the Guarantors acknowledge that the Initial
Purchasers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and hereby consents to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of
the Initial Purchasers, severally and not jointly, represents and warrants to
the Company and the Guarantors, and agrees that:
(a) Such Initial Purchaser is a QIB with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Securities Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering and
reselling the Series A Notes only (x) to QIBs in reliance on the exemption from
the registration requirements of the Securities
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<PAGE> 17
Act provided by Rule 144A and (y) in offshore transactions in reliance upon
Regulation S of the Securities Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) has been or will be used by such Initial Purchaser or any of
its representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from, (A) Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs and (B) Regulation S Purchasers, in each case, that agree that (x) the
Series A Notes purchased by them may be resold, pledged or otherwise transferred
within the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Securities Act, if applicable) under the
Securities Act, as in effect on the date of the transfer of such Series A Notes,
only (I) to the Company or any of its subsidiaries, (II) to a person whom the
seller reasonably believes is a QIB purchasing for its own account or for the
account of a QIB in a transaction meeting the requirements of Rule 144A under
the Securities Act, (III) in an offshore transaction (as defined in Rule 902
under the Securities Act) meeting the requirements of Rule 904 of the Securities
Act, (IV) in a transaction meeting the requirements of Rule 144 under the
Securities Act, (V) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
acceptable to the Company) or (VI) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities laws
of any state of the United States or any other applicable jurisdiction and (y)
they will deliver to each person to whom such Series A Notes or an interest
therein is transferred a notice substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged and will not engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Series A Notes or the Guarantees.
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(G) The sale of the Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Securities Act.
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<PAGE> 18
Such Initial Purchaser acknowledges that the Company and the
Guarantors and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and such Initial Purchaser hereby
consents to such reliance.
8. INDEMNIFICATION.
(a) The Company and each Guarantor agree, jointly and severally,
to indemnify and hold harmless each Initial Purchaser, its directors, its
officers and each person, if any, who controls such Initial Purchaser within the
meaning of Section 15 of the Securities 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 investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or any Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Initial Purchaser furnished in
writing to the Company by such Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser in connection
with any losses, claims, damages and liabilities and judgments if a copy of the
Offering Memorandum (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given to the
person asserting such losses, claims, damages, liabilities or judgments at or
prior to the written confirmation of the sale of the Series A Notes to such
person, and if the Offering Memorandum (as so amended and supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
judgment, unless such failure to deliver such amended or supplemented Offering
Memorandum was a result of noncompliance by the Company with its delivery
obligations under Section 5 hereof.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Guarantors, and their respective
directors, managers and officers and each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) the Company or the Guarantors, to the same extent as the foregoing
indemnity from the Company and the Guarantors to such Initial Purchaser but only
with reference to information relating to such Initial Purchaser furnished in
writing to the Company by such Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or
supplement thereto).
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<PAGE> 19
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Initial Purchaser). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for (i) the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all Initial Purchasers, their officers
and directors and all persons, if any, who control any Initial Purchaser within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act and (ii) the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for the Company and the Guarantors,
their respective directors, managers, officers and all persons, if any, who
control the Company and the Guarantors within the meaning of either such
Section, and all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Initial Purchasers,
their officers and directors and such control persons of any Initial Purchasers,
such firm shall be designated in writing by DLJ. In the case of any such
separate firm for the Company and the Guarantors and such directors, officers
and control persons of the Company and the Guarantors, such firm shall be
designated in writing by the Company. 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
effected with the indemnifying party's written consent, which consent will not
be unreasonably withheld. Notwithstanding the immediately preceding sentence, if
in any case where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and expenses
of counsel actually incurred by it, such indemnifying party agrees that it shall
be liable for any settlement of any action effected without its written consent
if (i) such settlement is entered into more than 60 days after the receipt by
such indemnifying party of the aforesaid request (ii) such indemnifying party
shall have received notice
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of the proposed settlement being entered into at least 20 days prior to such
settlement being entered into and (iii) prior to the date of such settlement
such indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement (or, if within 30 days of the
receipt of the aforesaid request, the indemnifying party shall have made a good
faith written challenge to the reasonableness of the amount of the reimbursement
requested or the sufficiency of the documentation supporting the reimbursement
requested (which challenge shall specifically set forth the amount of the
requested reimbursement which the indemnifying party in good faith believes to
be unreasonable or the basis for the good faith claim as to the insufficiency of
any supporting documentation), this sentence shall only apply if 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 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers on the
other hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (after discounts and commissions, but before
deducting expenses) received by the Company, and the total discounts and
commissions received by the Initial Purchasers, bear to the total price to
investors of the Series A Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
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<PAGE> 21
The Company, the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Initial Purchasers 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, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Series A Notes
purchased by it hereunder and resold to Eligible Purchasers were offered to the
Eligible Purchasers exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes purchased by each of the Initial Purchasers
hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The several
obligations of the Initial Purchasers to purchase the Series A Notes 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 (in the case of
representations and warranties that are qualified as to materiality) or true and
correct in all material respects (in the case of representations and warranties
that are not so qualified) on the Closing Date with the same force and effect as
if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of the Company or any Guarantor or any securities of the Company or any
Guarantor (including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act,
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<PAGE> 22
(ii) there shall not have occurred any change, nor shall any notice have been
given of any potential or intended change, in the outlook for any rating of the
Company or any Guarantor or any securities of the Company or any Guarantor by
any such rating organization and (iii) no such rating organization shall have
given notice that it has assigned (or is considering assigning) a lower rating
to the Series A Notes than that on which the Series A Notes were marketed.
(c) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by James E. Brown and David E. Grose, in their
respective capacities as the Chief Executive Officer and Chief Financial Officer
of the Company, confirming the matters set forth in Sections 6(y), 9(a) and 9(b)
and stating that the Company and each of the Guarantors has complied with all of
the agreements and satisfied all of the conditions herein contained and required
to be complied with or satisfied by the Company or such Guarantor on or prior to
the Closing Date.
(d) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there shall not have been any change or any
development involving a prospective change in the capital stock or in the
long-term debt of the Company or any of its subsidiaries and (iii) neither the
Company nor 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 9(d)(i), 9(d)(ii) or 9(d)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(e) You shall have received on the Closing Date an opinion (in a
form reasonably satisfactory to you and counsel for the Initial Purchasers)
dated the Closing Date, of Baker & Botts, L.L.P., counsel for the Company and
the Guarantors, or McAfee & Taft A Professional Corporation, Oklahoma counsel
for the Company and the Guarantors, with respect to the portions of the opinions
rendered below involving questions of Oklahoma law, to the effect that:
(i) Each of the Company and its Material Subsidiaries which are
corporations has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to
own, lease and operate its property and to conduct its business as
described in the Offering Memorandum; Bayard Drilling, L.L.C. has been
duly formed and is validly existing as a limited liability company in
good standing under the Delaware Limited Liability Company Act and has
all requisite power and
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<PAGE> 23
authority under its limited liability company agreement and the
Delaware Limited Liability Company Act to own, lease and operate its
property and to conduct its business as described in the Offering
Memorandum; and Bayard Drilling, L.P. has been duly formed and is
validly existing as a limited partnership in good standing under the
Delaware Revised Uniform Limited Partnership Act and has all
requisite power and authority under its agreement of limited
partnership and the Delaware Revised Uniform Limited Partnership Act
to own, lease and operate its property and to conduct its business as
described in the Offering Memorandum;
(ii) Each of the Company and its Material Subsidiaries is duly
qualified and is in good standing as a foreign corporation or foreign
limited liability company or foreign limited partnership (as the case
may be) authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole; provided
however that (i) in rendering such opinion as to the jurisdictions in
which the Company and its Material Subsidiaries do business or own or
lease property, such counsel may rely solely upon certificates of
officers of the Company and (ii) in rendering such opinion as to
whether each of the Company and its Material Subsidiaries is duly
qualified and in good standing in such jurisdictions, such counsel may
rely solely upon certificates of governmental officials of such
jurisdictions;
(iii) All of the outstanding shares of capital stock of each of
the Material Subsidiaries which are corporations have been duly
authorized and validly issued and are fully paid and non-assessable;
all of the outstanding limited liability company interests in Bayard
Drilling L.L.C. have been duly authorized and validly issued in
accordance with the limited liability company agreement of Bayard
Drilling L.L.C. in exchange for the capital contributions specified
therein; all of the outstanding limited partnership interests in
Bayard Drilling, L.P. have been duly authorized and validly issued in
accordance with the limited partnership agreement of Bayard Drilling,
L.P. in exchange for the capital contributions specified therein; and,
to the Company's knowledge, all of the outstanding shares of capital
stock or limited liability company interests, as the case may be, of
the Material Subsidiaries are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any
perfected security interest;
(iv) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and each Guarantor and has
been executed and delivered by the Company and each Guarantor;
(v) The Series A Notes have been duly authorized by all necessary
corporate action on the part of the Company and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement and the Indenture, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their
terms, subject to the Enforceability Exceptions;
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<PAGE> 24
(vi) The Guarantees have been duly authorized by all necessary
corporate action on the part of each Guarantor and, when the Series A
Notes are executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the
Guarantees endorsed thereon will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Guarantors,
enforceable against the Guarantors in accordance with their terms,
subject to the Enforceability Exceptions;
(vii) The Indenture has been duly authorized by all necessary
corporate action on the part of the Company and each Guarantor, has
been executed and delivered by the Company and each Guarantor and is a
valid and binding agreement of the Company and each Guarantor,
enforceable against the Company and each Guarantor in accordance with
its terms, subject to the Enforceability Exceptions and subject to any
limitations on the enforceability thereof imposed by the applicable
provisions of federal or state securities laws or principles of public
policy underlying such laws; provided, however, that such counsel
shall not be required to opine upon the enforceability of the
indemnification and contribution provisions contained in the
Indenture;
(viii) The Registration Rights Agreement has been duly authorized
by all necessary corporate action on the part of the Company and each
Guarantor, has been executed and delivered by the Company and each
Guarantor and is a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in
accordance with its terms, subject to the Enforceability Exceptions
and subject to any limitations on the enforceability thereof imposed
by the applicable provisions of federal or state securities laws or
principles of public policy underlying such laws; provided, however,
that such counsel shall not be required to opine upon the
enforceability of the indemnification and contribution provisions
contained in the Registration Rights Agreement;
(ix) The Series B Notes have been duly authorized by all
necessary corporate action on the part of the Company;
(x) The statements under the captions, "Management" (solely with
respect to the terms of the employment agreements and indemnification
agreements discussed therein, and under the captions "1997 Stock
Option and Stock Award Plan" and "1997 Non-Employee Directors' Stock
Option Plan" and the agreements relating to existing awards granted
under such stock plans), "Certain Relationships and Related
Transactions" (solely with respect to (i) the terms of the
registration rights agreements and the stockholders and voting
agreement discussed therein, (ii) the matters described under the
captions "--Certain Arrangements Related to the Consolidation
Transactions--The Formation Transactions--Chesapeake Option,"
"--Chesapeake Drilling Agreements" and "--Oliver Companies' Put
Rights," (iii) the matters described under the captions "--Certain
Arrangements Related to the Consolidation Transactions--The Ward
Acquisition," and "--The Bonray Acquisition," and (iv) the matters
described under the captions "--Certain Financing Arrangements,"
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<PAGE> 25
"--Chesapeake Transactions" and "--Other Related Party Transactions
and Arrangements--Fees Paid to Energy Spectrum Advisors"),
"Description of Notes" and "Plan of Distribution" in the Offering
Memorandum, insofar as such statements constitute a summary of the
legal matters or documents referred to therein, are accurate and
fairly present the information set forth therein, in each case in all
material respects;
(xi) No consent, approval, authorization or order of, or
qualification with, any Applicable Governmental Authority (as
hereinafter defined) is required pursuant to any Applicable Laws (as
hereinafter defined) for the execution and delivery of this Agreement
and the other Operative Documents by the Company and each Guarantor,
the performance by the Company and each Guarantor of its respective
obligations hereunder and thereunder or the consummation by the
Company and each Guarantor of the transactions contemplated hereby and
thereby, except for (i) the filing and effectiveness of a registration
statement by the Company and the Guarantors with the Commission
pursuant to the Securities Act and qualification of the Indenture
under the Trust Indenture Act and (ii) any such consent, approval,
authorization, order or qualification which (A) has been made or
obtained prior to the Closing Date or (B) may be required under
applicable state or foreign securities or Blue Sky laws (as to which
such counsel need not express an opinion) or (C) if not made or
obtained would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(xii) The execution and delivery of this Agreement and the other
Operative Documents by the Company and each Guarantor, the performance
by the Company and each Guarantor of its obligations hereunder and
thereunder and the consummation by the Company and each Guarantor of
the transactions contemplated hereby and thereby will not (i) result
in a violation of the terms of the certificate of incorporation,
bylaws, certificate of formation, limited liability company agreement
or agreement of limited partnership (in each case, as applicable) of
the Company or the Material Subsidiaries, (ii) result in a breach or
violation of or constitute (either alone or with notice or the passage
of time, or both) a default under, any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other
instrument to which the Company or its Material Subsidiaries is a
party or by which the Company, the Material Subsidiaries or their
properties are bound that is included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, or (iii) result in
a violation of any Applicable Laws to which the Company, the Material
Subsidiaries or their properties are subject or any judgment, decree
or order of any Applicable Governmental Authority that specifically
names the Company, the Material Subsidiaries or is directed at their
property (provided, however, that such counsel need not express an
opinion with respect to compliance with any federal or state
securities or antifraud law, rule or regulation except as otherwise
specifically stated in the opinion of such counsel); except for any
such violation, breach or default referred to in clause (i), (ii) or
(iii) above which would not have a material adverse effect on the
Company and its subsidiaries taken as a whole;
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<PAGE> 26
(xiii) To the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or
any of the Material Subsidiaries or by which any of their respective
property is or could be subject that are required to be described in
the Preliminary Offering Memorandum or the Offering Memorandum and are
not so described;
(xiv) The Company is not and, after giving effect to the offering
and sale of the Series A Notes and the application of the proceeds
thereof as described in the Offering Memorandum, will not be, an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended;
(xvi) The Indenture complies as to form in all material respects
with the requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
It is not necessary in connection with the offer, sale and delivery of
the Series A Notes to the Initial Purchasers in the manner
contemplated by this Agreement or in connection with the Exempt
Resales to qualify the Indenture under the TIA; and
(xvi) No registration under the Securities Act of the Series A
Notes is required for the sale of the Series A Notes to the Initial
Purchasers as contemplated by this Agreement or for the Exempt Resales
assuming (i) each Initial Purchaser is a QIB or a Regulation S
Purchaser, (ii) the purchasers who buy the Series A Notes in the
Exempt Resales are Eligible Purchasers, (iii) the accuracy of, and
compliance with, the Initial Purchaser's representations and
agreements contained in Section 7 of this Agreement, (iv) the accuracy
of the representations of the Company and the Guarantors set forth in
Sections 6(jj), (kk) and (ll) of this Agreement, (v) receipt by the
purchasers to whom the Initial Purchasers initially resell the Series
A Notes of a copy of the Offering Memorandum at or prior to the
delivery of confirmation of sale and (vi) the certificates
representing the Series A Notes bear the legends contemplated by the
Indenture.
As used herein, (i) the term "APPLICABLE LAWS" means the General
Corporation Law of the State of Delaware, the contract laws of the
State of New York, the laws of the State of Texas and the laws of the
United States of America that, in the experience of such counsel, are
normally applicable to transactions of the type contemplated by this
Agreement and (ii) the term "APPLICABLE GOVERNMENTAL AUTHORITY" means
any governmental authority or body of the United States of America or
the State of Texas or the State of New York or (solely with respect to
the General Corporation Law of the State of Delaware) the State of
Delaware.
Such opinion shall also include a statement to the effect that
although such counsel did not independently verify, are not passing
upon and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Offering
Memorandum (except to the extent stated in paragraph (e)(x) above),
they advise you that
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<PAGE> 27
no facts have come to their attention which lead them to believe that
the Offering Memorandum (other than (i) the financial statements
(including the notes thereto and the auditors' report thereon)
included therein, and (ii) the other financial and statistical
information included therein, as to which such counsel need express no
opinion), as of its date and as of the Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits
to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
The opinion of Baker & Botts, L.L.P. or such other counsel as described
in Section 9(e) above shall be rendered to you at the request of the Company and
the Guarantors, and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Andrews & Kurth L.L.P., counsel for the Initial
Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
In giving such opinions with respect to the matters covered by
the last paragraph of Section 9(e), Baker & Botts, L.L.P. and Andrews & Kurth
L.L.P. may state that their opinion and belief are based upon their
participation in the preparation of the Offering Memorandum and any amendments
or supplements thereto and review and discussion of the contents thereof, but
are without independent check or verification except as specified.
(g) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from Coopers & Lybrand L.L.P. and Grant Thornton L.L.P.,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(h) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
(i) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company, the Guarantors and the Trustee.
(j) The Company and the Guarantors shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have received an
original copy thereof, duly executed by the Company and the Guarantors.
(k) The Company shall have consummated the TransTexas Acquisition,
as defined in the Offering Memorandum.
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<PAGE> 28
(l) Neither the Company nor the Guarantors shall 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 the
Guarantors, as the case may be, at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor 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, financial condition or results of operations of the Company and its
subsidiaries, taken 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.
If on the Closing Date any one or more of the Initial Purchasers shall
fail or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased on such
date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be
obligated severally, in the proportion which the principal amount of the Series
A Notes set forth opposite its name in Schedule B bears to the aggregate
principal amount of the Series A Notes which all the non-defaulting Initial
Purchasers, 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 the
Series A Notes which any Initial Purchaser 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 the Series A Notes without the written
consent of such Initial Purchaser. If on the Closing Date any Initial Purchaser
or Initial Purchasers shall fail or refuse to purchase Series A Notes and the
aggregate principal amount of the Series A Notes with
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<PAGE> 29
respect to which such default or defaults occur is more than one-tenth of the
aggregate principal amount of the Series A Notes to be purchased by all Initial
Purchasers and arrangements satisfactory to the Initial Purchasers and the
Company for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser, the Company or the Guarantors. In any
such case which does not result in termination of this Agreement, either the
Initial Purchasers 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 Offering Memorandum or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of any such Initial Purchaser under this Agreement.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or any Guarantor,
to Bayard Drilling Technologies, Inc., 4005 N.W. Expressway, Suite 550E,
Oklahoma City, OK 73116, and (ii) if to any Initial Purchaser, to it c/o
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
12. The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantors
and the Initial Purchasers 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 Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Company, any Guarantor, the officers,
managers or directors of the Company or any Guarantor, or any person controlling
the Company or any Guarantor, (ii) acceptance of the Series A Notes and payment
for them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10 or a breach on the part of
the Initial Purchasers), the Company and each Guarantor, jointly and
severally, agree to reimburse the several Initial Purchasers for all
out-of-pocket expenses (including, without limitation, the fees and
disbursements of counsel) reasonably incurred by them in connection with the
proposed offering of the Series A Notes. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(i) hereof. The Company and each Guarantor
also agree, jointly and severally, to reimburse the several Initial Purchasers,
their directors and officers and any persons controlling any of the Initial
Purchasers within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act for any and all fees and expenses (including, without
limitation, the fees and disbursements of counsel) reasonably incurred by them
in connection with enforcing their rights hereunder (including, without
limitation, pursuant to Section 8 hereof). The Initial Purchasers also agree,
jointly and severally, to reimburse the Company and the Guarantors for any and
all fees and expenses (including, without limitation, the fees and
disbursements of counsel) reasonably incurred
-29-
<PAGE> 30
by them in connection with enforcing their rights hereunder (including, without
limitation, pursuant to Section 8 hereof).
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 Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors, officers and managers of
the Company and the Guarantors 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 Series A
Notes from the Initial Purchasers merely because of such purchase.
This Agreement shall be governed by 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.
-30-
<PAGE> 31
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
-----------------------------------
James E. Brown
President
BAYARD DRILLING, L.L.C.
By: /s/ JAMES E. BROWN
-----------------------------------
James E. Brown
President
BAYARD DRILLING, L.P.
By: Bayard Drilling, L.L.C., its general partner
By: /s/ JAMES E. BROWN
-----------------------------------
James E. Brown
President
BONRAY DRILLING CORPORATION
By: /s/ JAMES E. BROWN
-----------------------------------
James E. Brown
President
TREND DRILLING CO.
By: /s/ JAMES E. BROWN
-----------------------------------
James E. Brown
President
-31-
<PAGE> 32
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS INC.
BT ALEX. BROWN
DAIN RAUSCHER WESSELS
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
on its own behalf and on behalf of
the Initial Purchasers
By: /s/ DWIGHT SCOTT
-----------------------------------
Name: Dwight Scott
Title: Senior Vice President
-32-
<PAGE> 33
SCHEDULE A
GUARANTORS
Bayard Drilling, L.L.C.
Bayard Drilling, L.P.
Bonray Drilling Corporation
Trend Drilling Co.
-33-
<PAGE> 34
<TABLE>
<CAPTION>
SCHEDULE B
Principal Amount
Initial Purchaser of Notes of Notes
-------------------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation............................ $ 60,000,000
Lehman Brothers...................................... $ 20,000,000
BT Alex. Brown....................................... $ 15,000,000
Dain Rauscher........................................ $ 5,000,000
------------
Total................................................ $100,000,000
------------
</TABLE>
-34-
<PAGE> 35
SCHEDULE C
MATERIAL SUBSIDIARIES OF THE COMPANY
Bayard Drilling, L.L.C.
Bayard Drilling, L.P.
Bonray Drilling Corporation
Trend Drilling Co.
-35-
<PAGE> 1
Exhibit 10.32
WAIVER OF CERTAIN RIGHTS UNDER
SECOND AMENDED AND RESTATED
STOCKHOLDERS AND VOTING AGREEMENT
THIS WAIVER OF CERTAIN RIGHTS UNDER SECOND AMENDED AND RESTATED
STOCKHOLDERS AND VOTING AGREEMENT is dated June 2, 1998. Capitalized terms
used herein but not defined herein have the meanings assigned to such terms in
the Stockholders Agreement.
WHEREAS, as a result of the consummation of the DLB Distribution (as
defined in the Stockholders Agreement), on or about April 28, 1998, the Persons
comprising the DLB Group (consisting of Charles E. Davidson, Mark Liddell and
Mike Liddell), acquired certain shares of common stock, par value $0.01 per
share ("Common Stock"), of the Company previously held by Bonray Holding,
L.L.C., a Delaware limited liability company and subsidiary of DLB Oil & Gas,
Inc., an Oklahoma corporation;
WHEREAS, pursuant to the terms of the Stockholders Agreement, as of May
11, 1998, each member of the DLB Group entered into a Supplemental Agreement
(as defined in the Stockholders Agreement), whereby each such person agreed
that (i) his ownership of Stock (as defined in the Stockholders Agreement)
shall be subject to, and that he shall comply with, all of the terms and
conditions of the Stockholders Agreement; (ii) he shall not effect any Transfer
(as defined in the Stockholders Agreement) of such Stock except in compliance
with the provisions thereof;
WHEREAS, Section 3.1 of the Stockholders Agreement generally provides,
among other things, that in connection with any election for members of the
Board of Directors, the Company shall, at the request of the DLB Designator
(as defined in the Stockholders Agreement), include in the slate of directors
recommended by the Board of Directors to the stockholders of the Company for
election as directors one representative designated by the DLB Designator so
long as the DLB Group holds 5% or more of the outstanding Common Stock, and that
vacancies in the DLB Director position will be filled by another Person
designated by the DLB Designator;
WHEREAS, in order to more clearly establish that the members of the DLB
Group are not controlling persons or affiliates of the Company, each of them
seeks to waive certain rights and to release the Company and the other
Continuing Stockholder Parties from certain obligations, under the Stockholders
Agreement;
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and accepted each of the undersigned hereby irrevocably waives all
rights granted to him under Section 3.1 of the
<PAGE> 2
Stockholders Agreement including the right to designate a DLB Designee under
the Stockholders Agreement or to designate any Person to fill any vacancy in
the DLB Director position.
IN WITNESS WHEREOF, this document has been executed as the date first
written above.
/s/ Charles E. Davidson
---------------------------------------
CHARLES E. DAVIDSON
/s/ Mark Liddell
---------------------------------------
MARK LIDDELL
/s/ Mike Liddell
---------------------------------------
MIKE LIDDELL
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF BAYARD DRILLING TECHNOLOGIES, INC.
Bayard Drilling, L.L.C.
Bayard Drilling, L.P.
Bonray Drilling Corporation
Trend Drilling Co.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4, to be
filed on or about July 21, 1998, of our report dated February 19, 1998, on our
audit of the financial statements and financial statement schedules of Bayard
Drilling Technologies, Inc. We also consent to the reference to our firm under
the caption "Experts".
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------------
PricewaterhouseCoopers LLP
Oklahoma City, Oklahoma
July 20, 1998
2
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our report dated January 20, 1997, accompanying the
financial statements of Bayard Drilling Technologies, Inc. contained in the Form
S-4 Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts".
/s/ GRANT THORNTON LLP
------------------------------------
Grant Thornton LLP
Oklahoma City, Oklahoma
July 20, 1998
3
<PAGE> 1
EXHIBIT 25.1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_________
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Ave, Suite 2700 75201
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Ave, Suite 2700
Dallas, Texas 75201
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Bayard Drilling Technologies, Inc.
(Exact name of obligor as specified in its charter)
Delaware 73-1508021
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4005 Northwest Expressway, Suite 550E
Oklahoma City, Oklahoma 73116
(Address of principal executive offices) (Zip Code)
---------------
11% Senior Notes Due 2005, Series B
(Title of the indenture securities)
- -------------------------------------------------------------------------------
<PAGE> 2
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of Dallas (11th District), Dallas, Texas
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting securities of
the Trustee:
As of May 6, 1998
- -------------------------------------------------------------------------------
Col A. Col B.
- -------------------------------------------------------------------------------
Title of Class Amount Outstanding
- -------------------------------------------------------------------------------
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust
Company of Texas, N.A.; incorporated herein by reference
to Exhibit T-1.1 filed with Form T-1 Statement,
Registration No. 22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to
Exhibit T-1.2 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference
to Exhibit T-1.3 filed with Form T-1 Statement,
Registration No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of
Texas, N.A., as amended to date; incorporated herein by
reference to Exhibit T-1.4 filed with Form T-1 Statement,
Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b)of
the Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of May 6, 1998, the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of May 6, 1998, U.S. T.L.P.O.
Corp. had 35 shares of Capital Stock outstanding, all of which are owned by U.S.
Trust Corporation. U.S. Trust Corporation had outstanding 19,142,000.00 shares
of $5 par value Common Stock as of February 24, 1998.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
In as much as this Form T-1 is filed prior to the ascertainment by the Trustee
of all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the Trustee
disclaims responsibility for the accuracy or completeness of such information.
---------------
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S
Trust Company of Texas, N.A., a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
20th day of July, 1998.
U.S. Trust Company
of Texas, N.A., Trustee
By: /s/ MELISSA SCOTT
---------------------------
Melissa Scott
Vice President
<PAGE> 6
EXHIBIT T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Bayard Drilling
Technologies, Inc. 11% Senior Notes Due 2005, Series B, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/ MELISSA SCOTT
---------------------------------
Melissa Scott
Vice President
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11% SENIOR NOTES DUE 2005, SERIES A
OF
BAYARD DRILLING TECHNOLOGIES, INC.
PURSUANT TO THE PROSPECTUS DATED JULY ____, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P. M., NEW YORK
CITY TIME, ON _____________________, 1998, UNLESS EXTENDED (THE "EXPIRATION
DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed, and submitted to the Exchange Agent:
<TABLE>
<CAPTION>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
<S> <C> <C>
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
770 Broadway 111 Broadway P.O. Box 841
13th Floor-Corporate Trust Operations Lower Level Cooper Station
New York, New York 10003-9598 New York, New York 10006-1906 New York, New York 10276-0841
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
(800) 225-2398.
The undersigned hereby acknowledges receipt of the Prospectus dated July
____, 1998 (the "Prospectus") of Bayard Drilling Technologies, Inc., a Delaware
corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuer's offer (the "Exchange
offer") to exchange $1,000 in principal amount of its 11% Senior Notes due
2005, Series B (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement, for each $1,000 in principal amount of its outstanding
11% Senior Notes due 2005, Series A (the "Old Notes"), of which $100,000,000
aggregate principal amount is outstanding. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Old Notes described in Box 1 below
(the "Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instructions to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
<PAGE> 2
Subject to, and effective upon, the acceptance for exchange of the
Tendered Notes, the undersigned hereby exchanges, assigns, and transfers to, or
upon the order of, the Issuer, all right, title, and interest in, to, and under
the Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions" below (Box 3), please send or cause to be sent
the certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Old Notes and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Issuer upon receipt by
the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which
the undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer," in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer-Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Beneficial Owner(s),
and every obligation of the undersigned or any Beneficial Owners hereunder
shall be binding upon the heirs, representatives, successors, and assigns of
the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Notes are acquired by the Issuer as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Issuer or the
Exchange Agent as necessary or desirable to complete and give effect to the
transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Issuer, and (iv) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), in connection with a secondary resale of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission (the "Commission") set forth in
the no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer." In addition, by accepting the Exchange Offer,
the undersigned hereby (i) represents and warrants that, if the undersigned or
any Beneficial Owner of the Old Notes is a Participating Broker-Dealer, such
Participating Broker-Dealer acquired the Old Notes for its own account as a
result of market-making activities or other trading activities and has not
entered into any arrangement or understanding with the Company or any affiliate
of the Company (within the meaning of Rule 405 under the Securities Act) to
distribute the Exchange Notes to be received in the
2
<PAGE> 3
Exchange Offer, and (ii) acknowledges that, by receiving Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired as a
result of market-making activities or other trading activities, such
Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes
(provided that, by so acknowledging and by delivering a prospectus such
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act).
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last date to which interest has been paid or duly provided for on such Old
Notes prior to the original issue date of the Exchange Notes or, if no such
interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after the last date to which
interest has been paid or duly provided for on such Old Notes or, if no such
interest has been paid or duly provided for, from and after June 26, 1998.
[__] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[__] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (BOX 4).
[__] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (BOX 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
========================================================================================================================
BOX 1
DESCRIPTION OF OLD NOTES TENDERED (Attach additional signed pages, if necessary)
AGGREGATE
PRINCIPAL AGGREGATE
NAME(S) AND ADDRESS(ES) OF REGISTERED OLD CERTIFICATE AMOUNT PRINCIPAL
NOTE HOLDER(S), EXACTLY AS NAME(S) APPEAR(S) NUMBER(S) OF REPRESENTED BY AMOUNT
ON NOTE CERTIFICATE(S) OLD NOTES* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL
========================================================================================================================
</TABLE>
* Need not be completed by persons tendering by book-entry
transfer.
** The minimum permitted tender is $1,000 in principal amount of
Old Notes. All other tenders must be in integral multiples of
$1,000 of principal amount. Unless otherwise indicated in this
column, the principal amount of all Old Note Certificates
identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
3
<PAGE> 4
<TABLE>
<CAPTION>
========================================================================================================================
BOX 2
BENEFICIAL OWNER(S)
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
<S> <C>
- ----------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------- -------------------------------------------------------------
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
BOX 3
- ------------------------------------------------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7)
- ------------------------------------------------------------------------------------------------------------------------
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR OLD NOTES AND UNTENDERED NOTES ARE TO BE SENT TO
SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
<S> <C>
Mail Exchange Note(s) and any untendered Old Notes to:
Name(s):
-----------------------------------------------------------------------------------------------------------------------
(please print)
Address:
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
(include Zip Code)
Tax Identification or Social Security No.:
========================================================================================================================
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
========================================================================================================================
BOX 4
- ------------------------------------------------------------------------------------------------------------------------
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
<S> <C>
TO BE COMPLETED ONLY IF OLD NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------------------------------------------------
Date Of Execution of Notice of Guaranteed Delivery:
-------------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
------------------------------------------------------------------------
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
<S> <C>
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY TRANSFER.
Name of Tendering Institution:
-----------------------------------------------------------------------------------------
Account Number:
-------------------------------------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------------------------
========================================================================================================================
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
========================================================================================================================
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
<S> <C>
X Signature Guarantee
------------------------------------------------
X (If required by Instruction 5)
------------------------------------------------
(Signature of Registered Authorized Signature
Holder(s) or Authorized Signatory)
X
---------------------------------------------------
Note: The above lines must be signed by the
registered holder(s) of Old Notes as their name(s) Name:
appear(s) on the Old Notes or by persons(s) -----------------------------------------------
authorized to become registered holder(s) (evidence (please print)
of which authorization must be transmitted with this
Letter of Transmittal). If signature is by a Title:
trustee, executor, administrator, guardian, ----------------------------------------------
attorney-in-fact, officer, or other person acting in
a fiduciary or representative capacity, such person Name of Firm:
must set forth his or her full title below. See ---------------------------------------
Instruction 5.
(Must be an Eligible Institution as
defined in Instruction 2)
Address:
--------------------------------------------
Name(s):
-------------------------------------------- ----------------------------------------------
----------------------------------------------
Capacity: (include Zip Code)
---------------------------------------------
Street Address: Area Code and Telephone Number:
---------------------------------------
---------------------------------------------- ----------------------------------------------
----------------------------------------------
(include Zip Code)
Dated:
----------------------------------------------
Area Code and Telephone Number:
----------------------------------
Tax Identification or Social
Security Number:
----------------------------------
========================================================================================================================
</TABLE>
<TABLE>
========================================================================================================================
BOX 7
BROKER-DEALER STATUS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
[__] Check this box if the Beneficial Owner of the Old Notes is a Participating Broker-Dealer and such
Participating Broker-Dealer acquired the Old Notes for its own account as a result of market-making
activities or other trading activities. In such case, you will be sent extra copies of the
Prospectus.
========================================================================================================================
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
PAYOR'S NAME: BAYARD DRILLING TECHNOLOGIES, INC.
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name (if joint names, list first and circle the name of the person or entity whose number you enter in
Part 1 below. See instructions if your name has changed.)
---------------------------------------------------------------------------------------------------------
Address
---------------------------------------------------------------------------------------------------------
City, State and ZIP Code
SUBSTITUTE
---------------------------------------------------------------------------------------------------------
FORM W-9
Department List account number(s) here (optional)
of the Treasury
---------------------------------------------------------------------------------------------------------
Internal Revenue Service
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social
IDENTIFICATION NUMBER ("TIN") IN THE BOX Security
AT RIGHT AND CERTIFY BY SIGNING AND Number or
DATING BELOW TIN
---------------------------------------------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject
to backup withholding as a result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no longer subject to backup withholding.
[__]
- -------------------------------------------------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION PART 3--
PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
Awaiting
SIGNATURE DATE TIN [ ]
------------------------ ---------------------- --
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU
PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
</TABLE>
7
<PAGE> 8
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. A
properly completed and duly executed copy of this Letter of Transmittal,
including Substitute Form W-9, and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for Tendered Notes must be received by the
Exchange Agent at its address set forth herein or such Tendered Notes must be
transferred pursuant to the procedures for book-entry transfer described in the
Prospectus under the caption "Exchange Offer-Procedures for Tendering" (and a
confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 p.m., New York time, on the Expiration Date. The method of
delivery of certificates for Tendered Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the Holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Old Notes should be sent to the
Company. Neither the Issuer nor the registrar is under any obligation to
notify any tendering holder of the Issuer's acceptance of Tendered Notes prior
to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender
their Old Notes but whose Old Notes are not immediately available, and who
cannot deliver their Old Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date
must tender their Old Notes according to the guaranteed delivery procedures set
forth below, including completion of Box 4. Pursuant to such procedures: (i)
such tender must be made by or through a firm which is a member of a recognized
Medallion Program approved by the Securities Transfer Association Inc. (an
"Eligible Institution") and the Notice of Guaranteed Delivery must be signed by
the holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of the
Tendered Notes and the principal amount of Tendered Notes, stating that the
tender is being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal
together with the certificates representing the Old Notes and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal, as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all Tendered Notes in proper
form for transfer, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date. Any holder who wishes
to tender Old Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery relating to such Old Notes prior to 5:00 p.m., New York time, on the
Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by an
Eligible Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a
holder in whose name Tendered Notes are registered on the books of the
registrar (or the legal representative or attorney-in-fact of such registered
holder) may execute and deliver this Letter of Transmittal. Any Beneficial
Owner of Tendered Notes who is not the registered holder must arrange promptly
with the registered holder to execute and deliver this Letter of Transmittal on
his or her behalf through the execution and delivery to the registered holder
of the Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Old Notes held by the holder is tendered, the tendering
holder should fill in the principal amount tendered in the column labeled
"Aggregate Principal Amount Tendered" of the box entitled "Description of Old
Notes Tendered" (Box 1) above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes held by
the holder is not tendered, then Old Notes for the principal amount of Old
Notes not
8
<PAGE> 9
tendered and Exchange Notes issued in exchange for any Old Notes tendered and
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Tendered Notes, the signature must
correspond with the name(s) as written on the face of the Tendered Notes
without alteration, enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Old Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In
any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signature(s) on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as the
name(s) of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Issuer, evidence satisfactory to the Issuer of their authority to so act
must be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Tendered Notes are tendered (i) by a registered
holder who has not completed the box set forth herein entitled "Special
Delivery Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box (Box 3), the name and address to which the
Exchange Notes and/or substitute Old Notes for principal amounts not tendered
or not accepted for exchange are to be sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if
any, applicable to the exchange of Tendered Notes pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the
transfer and exchange of Tendered Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or on any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
9
<PAGE> 10
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires
that the holder(s) of any Tendered Notes which are accepted for exchange must
provide the Issuer (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Issuer is not provided with the correct TIN,
the Holder may be subject to backup withholding and a $50 penalty imposed by
the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements.
To prevent backup withholding, each holder of Tendered Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN), and that (i) the holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the holder that such holder is no longer subject
to backup withholding. If the Tendered Notes are registered in more than one
name or are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to
reject any and all Old Notes not validly tendered or any Old Notes the Issuer's
acceptance of which would, in the opinion of the Issuer or their counsel, be
unlawful. The Issuer also reserves the right to waive any conditions of the
Exchange Offer or defects or irregularities in tenders of Old Notes as to any
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer. The interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) by the
Issuer shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes must be cured within
such time as the Issuer shall determine. Neither the Issuer, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right
to amend, waive or modify any of the conditions in the Exchange Offer in the
case of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular,
or contingent tender of Old Notes or transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus or
this Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF OLD NOTES. Subject to the terms and conditions of the Exchange
Offer, the Issuer will accept for exchange all validly tendered Old Notes as
soon as practicable after the Expiration Date and will issue Exchange Notes
therefor as soon as practicable thereafter. For purposes of the Exchange
Offer, the Issuer shall be deemed to have accepted tendered Old
10
<PAGE> 11
Notes when, as and if the Issuer has given written or oral notice (immediately
followed in writing) thereof to the Exchange Agent. If any Tendered Notes are
not exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Old Notes will be returned, without expense, to the undersigned at the address
shown in Box 1 or at a different address as may be indicated herein under
"Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange Offer."
11
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
11% SENIOR NOTES DUE 2005, SERIES A
OF
BAYARD DRILLING TECHNOLOGIES, INC.
PURSUANT TO THE PROSPECTUS DATED JULY ____, 1998
This form must be used by a holder of 11% Senior Notes due 2005,
Series A (the "Old Notes") of Bayard Drilling Technologies, Inc., a Delaware
corporation (the "Company"), who wishes to tender Old Notes to the Exchange
Agent pursuant to the guaranteed delivery procedures described in "The Exchange
Offer - Guaranteed Delivery Procedures" of the Company's Prospectus, dated July
____, 1998 (the "Prospectus") and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Old Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
TIME, ON _____________________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
U.S. TRUST COMPANY OF TEXAS, N.A.
(the "Exchange Agent")
<TABLE>
<CAPTION>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
<S> <C> <C>
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
770 Broadway 111 Broadway P.O. Box 841
13th Floor-Corporate Trust Operations Lower Level Cooper Station
New York, New York 10003-9598 New York, New York 10006-1906 New York, New York 10276-0841
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
This form is not to be used to guarantee signatures. If a signature
on a Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN)
OF OLD NOTES OR ACCOUNT NUMBER AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signature of Registered Holder(s)
or Authorized Signatory:
Date: , 1998
- ---------------------------------- -----------------
Address:
- ---------------------------------- -------------------------------
Names(s) of Registered Holder(s):
-------------------------------
Area Code
and Telephone No.
- ---------------------------------- ---------------------
- ----------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
- -------------------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Old Notes tendered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
described in the prospectus under the caption "The Exchange Offer - Guaranteed
Delivery Procedures" and in the Letter of Transmittal) and any other required
documents, all by 5:00 p.m., New York time, on the fifth New York Stock
Exchange trading day following the Expiration Date.
Name of Firm
-------------------------- ---------------------------------
(Authorized Signature)
Address:
-------------------------------
Name
------------------------------- -----------------------------
(Include Zip Code) (Please Print)
Area Code and Tel. No. Title
---------------- ---------------------------
Dated ,1998
-----------------
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this
Notice of Guaranteed Delivery is signed by the registered holder(s) of the Old
Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Old Notes without alteration, enlargement, or any
change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the Old Notes, the signature must
correspond with the name shown on the security position listing as the owner of
the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
BAYARD DRILLING TECHNOLOGIES, INC.
11% SENIOR NOTES DUE 2005, SERIES A
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
July ____, 1998 (the "Prospectus") of Bayard Drilling Technologies, Inc., a
Delaware corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer"). Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to action to be taken by you relating to the
Exchange Offer with respect to the 11% Senior Notes due 2005, Series A (the
"Old Notes") held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT) :
$ ___________________ of the 11% Series A Senior Notes due 2005
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Old Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $
[ ] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representation and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations that (i) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (ii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iii)
the undersigned acknowledges that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale transaction
of the Exchange Notes acquired by such person and cannot rely on the position
of the Staff of the Securities and Exchange Commission set forth in no-action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer - Resale of the Exchange Notes," and (iv) the undersigned is not
an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Old Notes.
<PAGE> 2
SIGN HERE
Name of Beneficial Owner(s):
---------------------------------------------------
Signature(s):
-----------------------------------------------------------------
Names (please print):
---------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Telephone Number:
--------------------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
-------------------------------------------------------------------------
2
