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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number: 0-16961
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PRIDE PETROLEUM SERVICES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 76-0069030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 City West Blvd., Suite 400
Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 789-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at February 1, 1996, based on the closing price on the NASDAQ
National Market System on such date was $233,487,569. (The officers and
directors of the registrant are considered affiliates for the purposes of this
calculation.)
The number of shares of the registrant's common stock outstanding on
February 1, 1996 was 24,819,456.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on May 16, 1996 are incorporated by
reference into Part III of this report.
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PART I
ITEM 1. Business
GENERAL
Pride Petroleum Services, Inc. ("Pride" or the "Company") is a leading
domestic and international provider of well servicing, workover, contract
drilling, completion and plugging and abandonment services, both on land and
offshore. The Company's fleet of 518 rigs is the world's second largest,
consisting of 429 land rigs divided among three operating regions in the United
States, 64 land rigs deployed in international markets, 23 offshore platform
rigs located in the Gulf of Mexico and two drilling/workover barge rigs located
in Venezuela. The Company performs maintenance and workovers necessary to
operate producing oil and gas wells efficiently and provides contract drilling
of new wells in certain international and offshore markets. The Company also
provides services for the completion of newly drilled oil and gas wells, and
plugging and abandonment services at the end of a well's useful life.
Pride is a Louisiana corporation with its principal executive offices
located at 1500 City West Blvd., Suite 400, Houston, Texas 77042. Its
telephone number at such address is (713) 789-1400.
BUSINESS STRATEGY
The Company's goal is to achieve revenue and earnings growth through a
strategy of (i) acquisitions in both international and domestic markets, (ii)
redeployment of existing domestic land-based capacity to more profitable
international markets and (iii) upgrades to enhance the capabilities and
profitability of its existing rig fleet. International and offshore operations
generally have greater profit potential than domestic land-based operations
because of less competition, higher utilization rates and stronger demand
resulting from a general trend by major oil operators toward shifting
expenditures to exploration and development activities abroad. For these
reasons, the Company has actively sought to diversify beyond its domestic land-
based operations, which prior to mid-1993 accounted for substantially all of
the Company's revenues and earnings.
In implementing its strategy, since mid-1993, the Company has acquired
four businesses with 47 land-based rigs serving international markets and a
fleet of 22 rigs serving the domestic offshore market. The Company has further
expanded international operations by re-deploying 28 underutilized rigs from
its U.S. fleet to Argentina, Venezuela and Russia since entering those markets.
Additionally, in 1994 the Company constructed two drilling/workover barge rigs
now operating in Venezuela, and in 1995 constructed one new platform rig now
operating in the Gulf of Mexico.
The Company believes that providing high quality equipment, employees and
services and a safe work environment is critical to its strategy. The Company
has committed substantial capital to an ongoing rig refurbishment program to
provide technological enhancements and to maintain the Company's equipment in
high quality condition. Additionally, the Company has invested in quality,
safety and management training programs. The Company believes that many
smaller competitors have not undertaken comparable maintenance and upgrading of
equipment or training of personnel, and do not have the financial resources to
enable them to do so. The Company believes that certain of its customers give
significant consideration to safety records and quality management systems of
contractors in their screening and selecting processes, and that such factors
will gain further importance in the future.
INTERNATIONAL OPERATIONS
Since the beginning of 1993, the Company has expanded its international
operations through acquisitions and deployment of underutilized domestic assets
into Argentina, Venezuela, Colombia and Russia. The Company operates 45 rigs
in Argentina, 10 land-based and two barge rigs in Venezuela, six rigs in
Colombia and three rigs in Russia. In July 1993, the Company purchased
established well servicing and drilling operations in Argentina and Venezuela
and, in February 1994, acquired a four-rig competitor in Argentina. The
Company has also upgraded and deployed 25 rigs from its U.S. land-based fleet
to Argentina and Venezuela and plans to upgrade and deploy an additional four
drilling and seven workover rigs to international markets in early 1996. In
1994, the Company built two drilling/workover barge rigs, which were placed in
operation in Venezuela in 1995 under ten-year contracts. In October 1995, the
Company acquired a six-rig drilling operation in Colombia. During 1993, the
Company deployed three rigs from its U.S. land-based fleet to Western Siberia.
The Company continues to review opportunities to expand internationally through
redeployment of underutilized domestic assets, acquisitions and new rig
construction projects.
In Argentina, the Company's fleet currently consists of 45 rigs, seven of
which are drilling rigs and the balance of which are workover rigs. The
Argentine oil production market has improved in recent years as a result of
general economic reform, sales of certain state-owned oilfields to private
operators and privatization of the state-owned oil company, the predecessor of
YPF Sociedad Anonima ("YPF"). These improved conditions have resulted in
additional demand for rig services. The Company operates a fleet of oilfield
haul trucks and maintains camps to provide eating and sleeping accommodations
for its employees and for employees of certain of its customers. The Argentine
base camps are stocked with significant levels of spare parts and operating
supplies to avoid interruption of services. The Company believes that this
established infrastructure provides the Company with a competitive advantage in
the Argentine market.
The Company's fleet in Venezuela currently consists of 10 land rigs and
two drilling/workover barge rigs. In recent years, the Venezuelan national oil
company has entered into operating service agreements with a number of
international oil companies to rehabilitate and develop approximately 80
"marginal" fields. Development of these fields is providing additional demand
for rig services in Venezuela. In July 1995, the Venezuelan Congress enacted
legislation that, through production sharing contracts, creates a new mechanism
for private sector involvement in the oil and gas industry in that country.
Venezuelan government estimates indicate that more than $10 billion of new
investment will be made over the next ten years to develop the initial eight
projects which were awarded in early 1996 for private sector development
pursuant to production sharing contracts. The Company believes it is well
positioned to capitalize on resulting opportunities.
In January 1995, the Company's two drilling/workover barge rigs began
operations on Lake Maracaibo, Venezuela, pursuant to contracts with Lagoven,
S.A. ("Lagoven"), a subsidiary of the Venezuelan national oil company, which
run through 2004. The two barge rigs were completed for an aggregate total
cost of approximately $42 million, which was financed on a project basis by two
Japanese trading firms. Terms of the financing agreement limit the lenders'
recourse essentially to the barge rigs, related contract proceeds and the
assets of the Company's Venezuelan subsidiary. The Company also provided the
lenders a limited guaranty with respect to certain political risks. The
Company has obtained political risks insurance policies from the Overseas
Private Investment Corporation ("OPIC") to protect against political risks that
could result in potential payments under the terms of the Company's guaranty.
In October 1995, the Company purchased all of the capital stock of Marlin
Colombia Drilling Co. Inc. ("Marlin") from a member of the Royal Dutch/Shell
Group of Companies for approximately $6 million. For the twelve months ended
September 30, 1995, Marlin generated revenues of approximately $7 million.
In 1993, the Company formed a Russian company and deployed one
workover/drilling rig and two small well servicing rigs in Russia. These rigs
have been equipped for severe cold weather conditions and are supported by
heavy equipment, including oilfield trucks and a large capacity forklift with
earth moving capability. The Company believes that there will be significant
opportunities in Russia if, and when, the political situation in that country
stabilizes and allows a more meaningful flow of international investment
capital for rehabilitation and development of its oil fields.
DOMESTIC OFFSHORE OPERATIONS
In June 1994, the Company commenced operations in the Gulf of Mexico
through the acquisition of the largest fleet of offshore platform workover rigs
in that market. The Company operates 23 platform rigs, a fleet approximately
twice as large as that of its next largest competitor. The Company has made
substantial capital improvements in this fleet and believes it has one of the
most technologically advanced fleets in the industry.
The Company generally utilizes its offshore rigs to service wells located
on platforms in water depths of greater than 125 feet. Platform rigs consist
of well servicing equipment and machinery arranged in modular packages which
are transported to and assembled and installed on fixed offshore platforms
owned by the customer. Fixed offshore platforms are steel tower-like
structures that stand on the ocean floor, with the top portion, or platform,
above the water level and providing the foundation upon which the platform rig
is placed. Certain of the Company's heavy workover platform rigs are capable
of operating at well depths of up to 20,000 feet. In addition to providing
workover services offshore, the Company is performing an increasing amount of
drilling and horizontal re-entry services utilizing top drives, enhanced pumps
and solids control equipment for drilling fluids.
DOMESTIC LAND-BASED OPERATIONS
The Company's domestic land-based fleet consists of 429 rigs that operate
from 21 service locations in California, the Permian Basin areas of West Texas
and New Mexico, and the Texas and Louisiana Gulf Coast. Pride has enhanced the
profitability of its domestic land-based operations by increasing efficiency
and implementing cost-saving measures. The Company actively considers
acquisition opportunities in its three principal domestic markets when such
acquisitions may result in significant consolidation savings and operating
efficiencies. In March 1995, the Company acquired an operator of 35 well
servicing rigs in New Mexico.
During 1995, the Company's average utilization rate per working day (rig
hours worked divided by total available hours) for its domestic land rigs was
approximately 50%. The Company worked 337 of its 429 domestic land rigs at
some time during 1995, with most of the inactive rigs being maintained in
workable condition. The Company's inactive rigs generally can be mobilized
quickly, giving Pride substantial operating leverage to take advantage of new
market opportunities. As a result of international opportunities for Pride's
services and equipment, the Company has shipped 28 previously inactive rigs
from its U.S. fleet to international markets since mid-1993.
SERVICES PROVIDED
The Company provides oil field services to oil and gas exploration and
production companies, primarily through the use of mobile well servicing rigs,
together with crews of generally three to four persons. Additional equipment,
such as pumps, tanks, blowout preventers, power swivels, coiled tubing units,
and foam units, is also provided by the Company as may be required and
requested by the customer for a particular job. The Company also provides
trucking services for moving large equipment and hauling fluids to and from the
job sites of its customers.
Well servicing can be categorized as to the type of job performed:
maintenance, workover or completion.
MAINTENANCE SERVICES
Maintenance services are required on producing oil and natural gas wells
to ensure efficient, continuous operation. These services consist of routine
mechanical repairs necessary to maintain production from the well, such as
repairing parted sucker rods or replacing a defective downhole pump in an oil
well or replacing defective tubing in a gas well. The Company provides the
rigs, equipment and crews for these maintenance services, which are performed
on both oil and gas wells but which are more often required on oil wells. Many
of the Company's rigs also have pumps and tanks that can be used for
circulating fluids into and out of the well. Maintenance jobs are often
performed on a series of wells in geographic proximity to each other, typically
take less than 48 hours per well to complete and generally require little, if
any, revenue-generating equipment other than a rig.
Maintenance services are generally required throughout the life of a
well. The need for these services does not depend on the level of drilling
activity and is generally independent of short-term fluctuations in oil and gas
prices. Accordingly, the demand for maintenance services is generally more
stable than for other well servicing activities. The general level of
maintenance, however, is affected by changes in the total number of producing
oil and gas wells.
WORKOVER SERVICES
In addition to needing periodic maintenance, producing oil and natural
gas wells occasionally require major repairs or modifications, called
"workovers". Workover services include the opening of new producing zones in
an existing well, recompletion of a well in which production has declined,
drilling out plugs and packers and the conversion of a producing well to an
injection well during enhanced recovery operations. These extensive workover
operations are normally performed by a well servicing rig with additional
specialized accessory equipment, which may include rotary drilling equipment,
mud pumps, mud tanks and blowout preventers, depending upon the particular type
of workover operation. Most of the Company's rigs are designed and equipped to
handle the more complex workover operations. A workover may last anywhere from
a few days to several weeks and generally requires additional revenue-
generating equipment.
The level of workover services is sensitive to changes in oil and gas
prices. When oil and gas prices are low, there is less incentive to perform
workovers on wells to increase production, and operators of wells tend to defer
workover services. As oil and gas prices increase, the incentive to increase
production also improves and the number of workovers increases as operators
seek to increase production by enhancing the efficiency of their wells through
workovers.
COMPLETION SERVICES
Completion services prepare a newly drilled well for production. The
completion process may involve selectively perforating the well casing at the
depth of discrete producing zones, stimulating and testing these zones and
installing downhole equipment. Newly drilled wells are often completed by a
well servicing rig so that an operator can avoid using a higher-cost drilling
rig any longer than necessary. The completion process may require a few days
to several weeks, depending on the nature and type of the completion, and will
also generally require additional revenue-generating equipment.
The market for well completions is directly related to drilling activity
levels which are very sensitive to changes in oil and gas prices. During
periods of weak drilling demand, drilling contractors will frequently price the
well completion work competitively with a workover rig so that the drilling rig
stays on the job for a longer period of time. Thus, excess drilling capacity
will serve to reduce the amount of completion work available to the well
servicing industry.
DRILLING SERVICES
The Company provides contract drilling services to oil and gas operators
in certain international and offshore markets. Some of the Company's workover
rigs that are operating internationally can also be used for drilling, although
the Company has specialized drilling rigs and ancillary equipment in its
international locations.
ADDITIONAL SERVICES
The Company also provides packer sales and service, oil field trucking,
plugging and abandonment services and well bore cleaning and production
enhancement services. In addition, the Company sells oil field supplies on a
retail basis through a wholly owned subsidiary.
COMPETITION
Competition in the international markets in which the Company operates is
generally limited to substantially fewer companies than in the domestic land-
based market. These companies range from large multinational competitors
offering a wide range of well servicing and drilling services to smaller,
locally owned businesses. The Company believes that it is competitive in terms
of pricing, performance, equipment, safety, availability of equipment to meet
customer needs and availability of experienced, skilled personnel in those
international areas in which it operates. Currently, the Company has a strong
market position in Argentina and Venezuela, and believes it is well positioned
in Colombia and Russia.
The Company believes that in the Gulf of Mexico there are approximately
12,000 producing oil and gas wells and that such wells generally require
workovers about once every five years in order to maintain optimal production
levels. The market for offshore platform workover rig services is highly
competitive, with the Company's two most significant competitors having an
aggregate of approximately 19 rigs, as compared to 23 rigs for the Company.
The domestic land-based well servicing industry is highly fragmented and
is characterized by a few large companies and numerous smaller companies.
Competition is primarily on a local market basis, and the Company generally
competes with several well servicing contractors within a 50-mile radius of
each service location. Pride and its most significant competitor in this
market, Pool, are the largest companies serving the domestic land-based well
servicing market. Both Pride and Pool operate in multiple geographic regions
and each has in excess of 400 domestic land-based rigs. Pride competes with
Pool in all three of the Company's principal domestic regions. Two other
competitors, each having 100 to 200 rigs, compete with the Company in separate
domestic regions. There are several regional companies that have fleets of 30
to 60 rigs which operate from several service bases within each region.
Numerous other competitors have 10 or fewer rigs and operate in limited market
areas.
Excess capacity in the well servicing industry has resulted in severe
price competition throughout much of the past decade. In the well servicing
market, possibly the most important competitive factor in establishing and
maintaining long-term customer relationships is having an experienced, skilled
and well-trained work force. In recent years, customers have placed emphasis
not only on pricing, but also increasingly on safety and quality of service.
The Company believes that certain of its customers give significant
consideration to safety records and quality management systems of contractors
in their screening and selecting processes, and that such factors will gain
further importance in the future. In that regard, the Company has directed
substantial resources toward employee safety and quality management training
programs, as well as its employment review process. While the Company's
efforts in these areas are not unique, many competitors, particularly small
contractors, have not been able to undertake similar training programs for
their employees. One of the benefits of distinguishing itself in safety and
quality is that the Company has been able to establish strategic alliances with
certain major customers.
CUSTOMERS
In international markets, the Company works for government-owned oil
companies, large multinational oil companies and locally owned independent
operators. In Argentina, approximately 69% of the Company's business during
1995 was conducted for YPF, the successor to the operations of the former
state-owned oil company. Services provided to YPF accounted for approximately
17% of the Company's consolidated 1995 revenues. The remainder of the
Company's Argentine customers are large multinational oil companies and locally
owned independent operators. In Venezuela, the Company provides services for
three subsidiaries of Petroleos de Venezuela, S.A., the state-owned oil
company, as well as multinational oil companies. In Russia, the Company's
current contracts are with joint venture entities co-owned by large
multinational operators and Russian production associations.
In the United States, the Company's customers are predominantly major
integrated and large independent operators. One customer, Shell Oil Company,
accounted for approximately 54% of revenues from domestic offshore operations
in 1995. Revenues from Shell Oil Company and its affiliates from both land-
based and offshore operations accounted for approximately 13% of consolidated
revenues during such period. Approximately 60% of revenues from domestic land-
based operations were generated from the Company's 20 largest U.S. customers,
with no one customer accounting for more than 10% of such revenues in 1995.
CONTRACTS
Most of the Company's contracts provide for compensation on either an
hourly or daily basis. Under such contracts, the Company receives a fixed
amount per hour or per day for servicing or drilling the well. Such contracts
also generally provide that the customer pay for movement of the equipment to
the job site, assembly and dismantling.
In the United States, many jobs are performed on a "call-out" or "as
requested" basis and may involve one or multiple wells. Such work is performed
pursuant to the Company's published operating rates and general work terms and
conditions or according to the terms of service arrangements established with
the operators.
In international markets, contracts generally provide for longer terms.
Such contracts are often awarded to the successful bidder of the customer's
project tender. When contracting abroad, the Company is faced with the risks
of currency fluctuation and, in certain cases, exchange controls. Typically,
the Company limits these risks by obtaining contracts providing for payment in
freely convertible foreign currency or U.S. dollars. To the extent possible,
the Company seeks to limit its exposure to potentially devaluating currencies
by matching its acceptance thereof to its expense requirements in such local
currencies. There can be no assurance that the Company will be able to
continue to take such actions in the future, thereby exposing the Company to
foreign currency fluctuations which could have a material adverse effect upon
its results of operations and financial condition. Currently, foreign exchange
in Argentina and Colombia is carried out on a free-market basis. However,
there can be no assurances that the local monetary authorities in these
countries will not implement exchange controls in the future. In Venezuela,
the government has imposed exchange control policies and has established an
official exchange rate relative to the U.S. dollar. To date, contracts for the
Company's operations in Russia have provided for payment in U.S. dollars.
The Company's contracts with Lagoven for the operation of the two
drilling/workover barge rigs on Lake Maracaibo, Venezuela provide for a term
which runs through 2004. Rates under the contracts are subject to contractual
escalation and are denominated in part in U.S. dollars and in part in local
currency. The portion of the rate denominated in U.S. dollars may be paid in
local currency based on prevailing exchange rates provided that exchange into
U.S. dollars can be readily effected. Presently, the U.S. dollar portion of
the Company's contracts with Lagoven is being paid in U.S. dollars.
SEASONALITY
In general, the Company's business activities are not significantly
affected by seasonal fluctuations. In the United States, all of the Company's
rigs are located in geographical areas which are not subject to severe weather
that would halt operations for prolonged periods. The Company's rigs in Russia
have been winterized so that they may continue to operate during periods of
severe cold weather.
EMPLOYEES
The Company currently employs approximately 900 salaried employees and
approximately 3,200 hourly paid employees. Approximately 2,500 of the
employees are located in the United States and 1,600 are located abroad.
Hourly rig crew members comprise the vast majority of employees. Typically, a
land-based rig crew consists of an operator, a derrick man and two crewmen on
the rig floor. Offshore platform and barge rig crews also typically include a
crane operator, two roustabouts and an electrician. In most cases, a rig
supervisor oversees the rig crew, secures work orders from customers and
maintains contact with the customer throughout the job.
None of the Company's U.S. employees are represented by a collective
bargaining unit. Many of the Company's international employees are subject to
industry-wide labor contracts within their respective countries. Management
believes that the Company's employee relations are good.
SEGMENT INFORMATION
Information with respect to revenues, earnings from operations and
identifiable assets attributable to the Company's industry segments and
geographic areas of operations for the last three fiscal years is presented in
Note 12 of the Notes to Consolidated Financial Statements included in Part II
of this report.
OTHER CONSIDERATIONS
INDUSTRY CONDITIONS
The Company's current business and operations are substantially dependent
upon the conditions in the oil and gas industry and, specifically, the
exploration and production expenditures of oil and gas companies. The demand
for well servicing and workover activities is directly influenced by oil and
gas prices, expectations about future prices, the cost of producing and
delivering oil and gas, government regulations, local and international
political and economic conditions, including the ability of the Organization of
Petroleum Exporting Countries ("OPEC") to set and maintain production levels
and prices, the level of production by non-OPEC countries and the policies of
the various governments regarding exploration and development of their oil and
gas reserves. A substantial amount of the Company's land-based equipment is
currently in service in U.S. markets where, despite occasional upturns, the
demand for well servicing and related services has been severely depressed for
most of the last decade due in large part to prolonged weakness and uncertainty
in oil and gas prices. Diminished demand during this period has led to lower
day rates and lower utilization of available equipment.
OPERATING RISKS AND INSURANCE
The Company's operations are subject to the many hazards inherent in the
well servicing industry. Performance of the Company's services requires the
use of heavy equipment and exposure to hazardous conditions, which may subject
the Company to liability claims by employees, customers and third parties.
These hazards can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company's offshore platform rigs and its
Venezuelan barge rigs are also subject to hazards inherent in marine
operations, either while on site or during mobilization, such as capsizing,
sinking and damage from severe weather conditions. In certain instances,
contractual indemnification of customers or others is required of the Company.
The Company maintains workers' compensation insurance for its employees and
other insurance coverage for normal business risks, including general liability
insurance. Although the Company believes its insurance coverages to be
adequate and in accordance with industry practice against normal risks in its
operations, there can be no assurance that any insurance protection will be
sufficient or effective under all circumstances or against all hazards to which
the Company may be subject. The Company has elected not to insure most of its
domestic land-based rigs against property damage. Because the Company is able
to use its fleet of excess rigs to repair or replace damaged domestic rigs, the
Company believes such action is cost effective. The occurrence of a
significant event against which the Company is not fully insured, or of a
number of lesser events against which the Company is insured, but subject to
substantial deductibles, could materially and adversely affect the Company's
operations and financial condition. Moreover, no assurance can be given that
the Company will be able to maintain adequate insurance in the future at rates
or on terms it considers reasonable or acceptable.
INTERNATIONAL OPERATIONS
An increasingly significant portion of the Company's revenues are
attributable to international operations which provided approximately 38% of
the Company's revenues during the year ended December 31, 1995. Risks
associated with operating in international markets include foreign exchange
restrictions and currency fluctuations, foreign taxation, changing political
conditions and foreign and domestic monetary policies, expropriation,
nationalization, nullification, modification or renegotiation of contracts, war
and civil disturbances or other risks that may limit or disrupt markets.
Although the Company has obtained political risks insurance from OPIC with
respect to its Venezuelan operations, and from commercial insurers with respect
to its Colombian and Russian operations, such insurance cannot fully protect
the Company against all possible losses. Additionally, the ability of the
Company to compete in the international well servicing and drilling markets may
be adversely affected by foreign governmental regulations that favor or require
the awarding of such contracts to local contractors, or by regulations
requiring foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. No predictions can be made as to what foreign
governmental regulations may be enacted in the future that could be applicable
to the Company's operations.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous state, federal and
foreign governmental regulations that may relate directly or indirectly to the
well servicing industry. The Company's operations routinely involve the
handling of waste materials, some of which are classified as hazardous
substances. Consequently, the regulations applicable to the Company's
operations include those with respect to containment, disposal and controlling
the discharge of hazardous oilfield waste and other non-hazardous waste
materials into the environment, requiring removal and cleanup under certain
circumstances, or otherwise relating to the protection of the environment.
Laws and regulations protecting the environment have become more stringent in
recent years, and may in certain circumstances impose "strict liability,"
rendering a party liable for environmental damage without regard to negligence
or fault on the part of such party. 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
the adoption of new requirements could have a material adverse effect on the
Company. In addition, the modification of existing laws or regulations or the
adoption of new laws or regulations curtailing exploratory or development
drilling for oil and gas for economic, environmental or other reasons could
have a material adverse effect on the Company's operations by limiting future
well servicing opportunities.
The primary environmental statutory and regulatory programs that affect
the Company's operations include the following:
WASTE DISPOSAL. The Company's operations can involve the generation, use
or handling of materials that may be classified as hazardous waste, and that
are subject to the federal Resource Conservation and Recovery Act ("RCRA") and
comparable state and foreign statutes. The Environmental Protection Agency
("EPA") and various state agencies have limited the disposal options for
certain hazardous and non-hazardous wastes and is considering the adoption of
stricter handling and disposal standards for non-hazardous wastes.
Additionally, any hazardous wastes or materials transported by or on behalf of
the Company are also subject to regulation pursuant to the Hazardous Materials
Transportaton Act.
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 releases of hazardous
substances and oil spills into navigable waters. Federal law imposes strict,
joint and several liability on facility owners for containment and cleanup
costs and can impose liability for natural resource damages arising from a
spill or release. The CWA also requires that no discharge of pollutants may be
made into the navigable waters of the United States without a permit
authorizing such a discharge.
NORM. Oil and gas production activities have been identified as
generators of naturally-occuring radioactive materials ("NORM"). The
generation, handling and disposal of NORM due to oil and gas production
activities are currently regulated in certain states and in federal waters.
Compliance with such regulations is not expected to have a material effect on
the Company's future operations or financial condition.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT
("CERCLA"). The Company's operations are subject to CERCLA, which imposes
strict, joint and several liability for cleanup of releases of hazardous
substances into the environment. The Company's operations can involve releases
of hazardous substances into the environment with respect to both its onshore
and offshore activities.
ITEM 2. Property
The Company's property consists primarily of well servicing rigs,
drilling rigs and ancillary equipment, essentially all of which are owned by
the Company.
A well servicing rig consists of a mobile carrier, engine, drawworks and
derrick. The primary function of a well servicing rig is to act as a hoist so
that pipe, rods and down hole equipment can be run into and out of a well. A
single derrick rig is able to stand up single joints of tubing in the derrick
and hang double joints of rods. A double derrick rig is able to stand up
double joints of tubing in the derrick and hang triple joints of rods. A swab
unit is a specialized piece of equipment used solely for swabbing or cleaning
operations. It includes a short derrick and small drawworks mounted on a
truck. The majority of the Company's domestic land rigs are large capacity
double derrick type units. All of the Company's well servicing rigs can be
readily moved between well sites and between geographic areas of operations.
A drilling rig consists of engines, drawworks, a mast, pumps to circulate
the drilling fluid, blowout preventers, drill string and related equipment.
The engines power a rotary table that turns the drill string, causing the drill
bit to bore through the subsurface rock layers. Rock cuttings are carried to
the surface by the circulating drilling fluid. The intended well depth and the
drilling site conditions are the principal factors that determine the size and
type of rig most suitable for a particular drilling job.
The Company's drilling/workover barge rigs have crew quarters, storage
facilities, and related equipment mounted on floating barges with the drilling
equipment cantilevered from the stern of the barge. The barges are towed to
the drilling location and are held in place by anchors while drilling or
workover activities are conducted.
The Company owns and operates vacuum, transport and winch trucks;
plugging and cementing units; hyperclean and filtration units; and foam units,
pumps, generators, power swivels, coiled tubing units and similar ancillary
equipment. The Company owns approximately 730 vehicles and leases
approximately 600 others. The Company also owns 17 sets of accommodation
modules which may be leased to customers to provide temporary living quarters
for crews working on offshore platforms, as well as several cranes utilized for
lifting heavy equipment onto the platforms.
The corporate office in Houston, Texas occupies approximately 20,000
square feet of leased space under a lease that expires in April 1998. The
Company owns 19 and leases 13 of its office and yard locations in Texas,
Louisiana, Oklahoma, New Mexico and California, not all of which are currently
being used. In Argentina, the Company leases 4,500 square feet of office space
in Buenos Aires and owns five operating bases and leases three others. In
Venezuela, the Company leases two operating bases with an office facility at
one. In Colombia, the Company leases office space in Bogota and an operating
base in Neiva. Shore-based operations for the Company's offshore platform rig
operations are conducted from its owned facility in Houma, Louisiana. The
shore facility is located on the intracoastal waterway and provides direct
access to the Gulf of Mexico.<PAGE>
<PAGE>
The following table sets forth the type, number and location of the land
rigs owned by the Company and its subsidiaries as of February 1, 1996:
LAND RIG FLEET
Single Double Swab
Location Total Derrick Derrick Unit Drilling
-------- ----- ------- ------- ---- --------
United States:
Southern Area -
Alice, TX . . . . . . . . . . . 14 -- 14 -- --
McAllen, TX . . . . . . . . . . 10 -- 10 -- --
Freer, TX . . . . . . . . . . . 11 5 6 -- --
Liberty, TX . . . . . . . . . . 13 1 12 -- --
Winnsboro, TX . . . . . . . . . 7 -- 7 -- --
Corpus Christi, TX. . . . . . . 10 -- -- 10 --
Panola, TX. . . . . . . . . . . 12 1 7 4 --
Palestine, TX . . . . . . . . . 3 -- 3 -- --
LaGrange, TX. . . . . . . . . . 9 -- 9 -- --
El Campo, TX. . . . . . . . . . 15 -- 14 1 --
South Houston, TX . . . . . . . 9 -- 9 -- --
Lafayette, LA . . . . . . . . . 12 -- 12 -- --
Kilgore, TX . . . . . . . . . . 22 1 19 2 --
Central Area -
Midland, TX . . . . . . . . . . 28 -- 28 -- --
Crane, TX . . . . . . . . . . . 35 -- 35 -- --
Hobbs, NM . . . . . . . . . . . 49 -- 48 1 --
Snyder, TX. . . . . . . . . . . 17 -- 17 -- --
Artesia, NM . . . . . . . . . . 11 -- 11 -- --
Western Area -
Bakersfield, CA . . . . . . . . 61 24 37 -- --
Ventura, CA . . . . . . . . . . 13 1 12 -- --
Taft, CA. . . . . . . . . . . . 47 32 15 -- --
Elk City, OK (storage area) (1) 11 -- 11 -- --
Undergoing Refurbishment (2) . . . 10 -- 10 -- --
--- --- --- --- ---
Total United States. . . . . 429 65 346 18 --
--- --- --- --- ---
International:
Argentina -
Comodora Rivadavia. . . . . . . 24 -- 19 -- 5
Rincon de los Sauces/Neuquen. . 11 -- 9 -- 2
Mendoza . . . . . . . . . . . . 9 -- 9 -- --
Salta . . . . . . . . . . . . . 1 -- 1 -- --
Colombia . . . . . . . . . . . . . 6 -- -- -- 6
Venezuela. . . . . . . . . . . . . 10 -- 7 -- 3
Russia . . . . . . . . . . . . . . 3 -- 1 2 --
--- --- --- --- ---
Total International. . . . . 64 -- 46 2 16
--- --- --- --- ---
Total Company . . . . . . . . . . . . 493 65 392 20 16
=== === === === ===
- ---------
(1) No operations are conducted from this facility.
(2) These rigs are being refurbished for international deployment.
<PAGE>
<PAGE>
The following table sets forth, as of February 1, 1996, certain
information concerning the Company's offshore platform and Venezuelan barge rig
fleet:
OFFSHORE PLATFORM AND VENEZUELAN BARGE RIGS
Rig Drawworks Rated
No. Rig Type Make/Model Horsepower Depth Status
--- ----------------- ------------------- ---------- ------- ---------
Offshore Platform Rigs
6 Concentric Tubing Gardner Denver 3000 150 12,000' Available
10 Concentric Tubing Gardner Denver 3000 150 12,000' Stacked
11 Light Workover Gardner Denver 3000 350 10,000' Stacked
14 Light Workover Gardner Denver 3000 350 10,000' Active
15 Light Workover Gardner Denver 3000 350 10,000' Active
30 Standard Workover Gardner Denver 500S(1) 650 15,000' Active
80 Standard Workover Gardner Denver 500S 650 15,000' Stacked
100 Standard Workover Gardner Denver 500S 650 15,000' Available
110 Standard Workover Gardner Denver 500S 650 15,000' Available
130 Standard Workover Gardner Denver 500S 650 15,000' Active
170 Standard Workover Gardner Denver 500S 650 15,000' Active
200 Improved Workover Gardner Denver 500S 650 15,000' Active
210 Improved Workover Gardner Denver 500S 650 15,000' Available
220 Improved Workover Gardner Denver 500S 650 15,000' Available
650E Improved Electric Gardner Denver 500S(1) 650 15,000' Active
Workover
651E Improved Electric Gardner Denver 500S(1) 650 15,000' Active
Workover
653E Improved Electric Gardner Denver 500S 650 15,000' Available
Workover
750E Heavy Electric Dreco 750E(1) 750 16,500' Active
Workover
751E Heavy Electric OIME SL-5(1) 800 16,500' Active
Workover
951 Heavy Workover Gardner Denver 1000S 1,000 18,000' Active
952 Heavy Workover Gardner Denver 1000S 1,000 18,000' Active
1001E Heavy Electric OIME SL-7(1) 1,500 20,000' Active
Workover
1002E Heavy Electric OIME SL-7(1) 1,500 20,000' (2)
Workover
Venezuelan Barge Rigs
PRIDE I Drilling/Workover 110UBDE(1) 1,500 20,000' Active
PRIDE II Drilling/Workover 110UBDE 1,500 20,000' Active
- ---------
(1) Equipped with top-drive drilling system.
(2) Undergoing construction and initial rig up.
<PAGE>
<PAGE>
ITEM 3. Legal Proceedings
The Company is routinely involved in litigation incidental to its
business, which often involves claims for significant monetary amounts, some of
which would not be covered by insurance. In the opinion of management, none of
the existing litigation will have any material adverse effect on the Company's
financial position or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
Executive Officers of the Registrant
The following table and descriptions set forth certain information as of
February 1, 1996 with respect to the executive officers of the Company.
Officers are elected annually by the Board of Directors and serve until their
successors are chosen or until their resignation or removal.
Name Age Position
---- --- --------
Ray H. Tolson 60 Chairman of the Board, President and Chief
Executive Officer
Paul A. Bragg 39 Vice President and Chief Financial Officer
James W. Allen 52 Senior Vice President - Operations
Robert W. Randall 53 Vice President, General Counsel and Secretary
James J. Byerlotzer 49 Vice President - Domestic Operations
RAY H. TOLSON was elected Chairman of the Board in December 1993. He has
served as a director since August 1988 and as President and Chief Executive
Officer of the Company and its predecessor since 1975.
PAUL A. BRAGG joined the Company in July 1993 as its Vice President and
Chief Financial Officer. In 1990, Mr. Bragg became President of BRM Capital
Corporation, a private equity investment entity, of which he was co-founder.
From 1988 through 1989, Mr. Bragg was an independent business consultant and
managed private investments. He previously served as Vice President and Chief
Financial Officer of Energy Service Company, Inc. (now ENSCO International
Incorporated), an oilfield services company, from 1983 through 1987.
JAMES W. ALLEN was appointed Senior Vice President - Operations in
February 1996. He joined the Company in January 1993 and became Senior Vice
President - International Operations in May 1994. From 1988 through 1992, Mr.
Allen was an independent business consultant and managed private investments.
From 1984 to 1988, he was Vice President - Latin America for Energy Service
Company, Inc. Mr. Allen has 28 years of oilfield experience with several
different companies.
ROBERT W. RANDALL has been Vice President and General Counsel of the
Company since May 1991. He was elected Secretary of the Company in 1993.
Prior to 1991 he was Senior Vice President, General Counsel and Secretary for
Tejas Gas Corporation, a natural gas transmission company.
JAMES J. BYERLOTZER was appointed Vice President - Domestic Operations in
February 1996. Prior to this appointment, Mr. Byerlotzer was Vice President -
Central Area. He joined the Company in 1981 and has served in various other
operating positions.<PAGE>
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's common stock is traded on the NASDAQ National Market System
under the symbol "PRDE." The following table sets forth the high and low sale
prices of the Company's common stock for the periods indicated below as
reported by NASDAQ.
Price
------------------
High Low
------- -------
1994
First Quarter . . . . . . . . . . . . $ 6 1/4 $ 4 7/8
Second Quarter. . . . . . . . . . . . 5 7/8 4 3/4
Third Quarter . . . . . . . . . . . . 5 7/8 4 5/8
Fourth Quarter. . . . . . . . . . . . 5 1/2 4 5/8
1995
First Quarter . . . . . . . . . . . . 7 3/8 4 3/4
Second Quarter. . . . . . . . . . . . 8 3/4 6 1/2
Third Quarter . . . . . . . . . . . . 10 1/2 7 3/8
Fourth Quarter. . . . . . . . . . . . 11 8
As of February 1, 1996, there were 2,115 holders of record of the
Company's common stock.
The Company has not paid any cash dividends on its common stock since
becoming an independent publicly held corporation in September 1988. The Board
of Directors currently intends to retain any earnings for use in the Company's
business and does not anticipate paying dividends on the Company's common stock
at any time in the forseeable future. Furthermore, the Company may be
restricted from paying cash dividends on its common stock by the terms of
future borrowing agreements.
<PAGE>
<PAGE>
ITEM 6. Selected Financial Data
The following selected consolidated financial information as of December
31, 1995 and 1994, and for each of the three years in the period ended December
31, 1995 has been derived from the audited consolidated financial statements of
the Company included elsewhere herein. This information should be read in
conjunction with such consolidated financial statements and the notes thereto.
The selected consolidated financial information as of December 31, 1993, 1992
and 1991, and for each of the two years in the period ended December 31, 1992
has been derived from audited consolidated financial statements of the Company
which are not included herein. The pro forma information sets forth selected
balance sheet data as of December 31, 1995, adjusted to give effect to the
issuance and sale by the Company of $80,500,000 principal amount of 6 1/4%
convertible subordinated debentures in January 1996. See also "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues. . . . . . . . . . . . . . . $ 263,599 $ 182,336 $ 127,099 $ 101,382 $ 112,224
Operating costs . . . . . . . . . . . 188,252 139,653 100,305 83,829 87,700
Depreciation and amortization . . . . 16,657 9,550 6,407 5,649 5,861
Selling, general and administrative . 32,418 25,105 17,572 14,076 13,825
--------- --------- --------- --------- ---------
Earnings (loss) from operations . . . 26,272 8,028 2,815 (2,172) 4,838
Other income (expense). . . . . . . . (3,849) 106 504 813 880
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes
and cumulative effect of change
in accounting for income taxes. . . 22,423 8,134 3,319 (1,359) 5,718
Income tax provision (benefit). . . . 7,064 1,920 1,214 (517) 2,199
--------- --------- --------- --------- ---------
Net earnings (loss) before
cumulative effect of change in
accounting for income taxes . . . . 15,359 6,214 2,105 (842) 3,519
Cumulative effect of change in
accounting for income taxes . . . . -- -- 3,835 -- --
--------- --------- --------- --------- ---------
Net earnings (loss) . . . . . . . . . $ 15,359 $ 6,214 $ 5,940 $ (842) $ 3,519
========= ========= ========= ========= =========
Net earnings (loss) per share before
cumulative effect of change in
accounting for income taxes . . . . $ .60 $ .30 $ .13 $ (.05) $ .22
Cumulative effect of change in
accounting for income taxes . . . . -- -- .23 -- --
--------- --------- --------- --------- ---------
Net earnings (loss) per share . . . . $ .60 $ .30 $ .36 $ (.05) $ .22
========= ========= ========= ========= =========
Weighted average common shares
and equivalents outstanding . . . . 25,465 20,795 16,487 16,245 16,354
<PAGE>
<PAGE>
PRO FORMA
---------
BALANCE SHEET DATA:
Working capital. . . . . . $ 109,179 $ 31,302 $ 26,640 $ 21,758 $ 29,989 $ 25,983
Property and equipment . . 178,488 178,488 139,899 62,823 45,084 46,424
Total assets . . . . . . . 338,105 257,605 205,193 109,981 94,842 89,819
Long-term debt, net of
current portion. . . . . 141,636 61,136 42,096 200 3,648 4,908
Shareholders' equity . . . 131,239 131,239 111,385 69,126 61,774 62,376
</TABLE>
<PAGE>
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements as of December 31, 1995 and
1994, and for the years ended December 31, 1995, 1994, and 1993, included
elsewhere herein.
Increases and decreases in domestic well servicing activity historically
have had a significant correlation with changes in oil and natural gas prices.
International well servicing activity is also affected by fluctuations in oil
and natural gas prices, but historically to a lesser extent than domestic
activity. International well servicing contracts are typically for terms of
one year or more, while domestic contracts are typically entered into for one
or multiple wells. Accordingly, international well servicing activities
generally are not as sensitive to short-term changes in oil and gas prices as
domestic operations.
Since 1993, the Company has entered into a number of transactions that
have significantly expanded the Company's operations, including the following:
- In a series of transactions from mid-1993 through 1995, the Company
acquired established businesses in Argentina, Venezuela and Colombia
and deployed 28 rigs from its U.S. land-based fleet to Venezuela,
Argentina and Russia.
- In June 1994, the Company acquired the largest fleet of platform
workover rigs, consisting of 22 units, in the Gulf of Mexico. An
additional platform rig was constructed and added to the fleet in
September 1995.
- In January 1995, the Company commenced operation of two
drilling/workover barge rigs on Lake Maracaibo, Venezuela. The barge
rigs were constructed during 1994 pursuant to ten-year operating
contracts entered into with Lagoven, S.A. ("Lagoven"), a subsidiary of
the Venezuelan national oil company.
- In March 1995, the Company acquired X-Pert Enterprises, Inc.
("X-Pert"), which operates 35 well servicing rigs in New Mexico.
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial
information of the Company by segment for the periods indicated:
Year Ended December 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
Revenues:
Domestic land. . . . . $ 113,115 42.9% $ 95,860 52.6% $ 105,865 83.3%
Domestic offshore. . . 49,595 18.8 23,441 12.9 -- --
International. . . . . 100,889 38.3 63,035 34.5 21,234 16.7
--------- ----- --------- ----- --------- -----
Total revenues. . . $ 263,599 100.0% $ 182,336 100.0% $ 127,099 100.0%
========= ===== ========= ===== ========= =====
Earnings from operations:
Domestic land. . . . . $ 6,857 26.1% $ 1,184 14.7% $ 1,307 46.4%
Domestic offshore. . . 6,785 25.8 3,304 41.2 -- --
International. . . . . 12,630 48.1 3,540 44.1 1,508 53.6
--------- ----- --------- ----- --------- -----
Total earnings
from operations . $ 26,272 100.0% $ 8,028 100.0% $ 2,815 100.0%
========= ===== ========= ===== ========= =====
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES. Revenues for the year ended December 31, 1995 increased
$81,263,000, or 45%, as compared to the year ended December 31, 1994. Of this
increase, $37,854,000 was attributable to the Company's international
operations. The Company experienced increased activity levels in Argentina,
Venezuela and Russia, due primarily to the utilization of additional assets
deployed in those areas. The Company's offshore operations, which were
acquired in mid-1994, accounted for $26,154,000 of the increase, as those
operations were included for a full year in 1995. Revenues from the Company's
domestic land-based operations increased $17,255,000, due primarily to the
addition of X-Pert in March 1995.
OPERATING COSTS. Operating costs for the year ended December 31, 1995
increased $48,599,000, or 35%, as compared to the year ended December 31, 1994.
Of this increase, $21,957,000 was attributable to the Company's international
operations, due to expansion of those operations, as discussed above,
$17,285,000 was attributable to a full year of operations for the Company's
offshore operations, and $9,357,000 was attributable to the Company's domestic
land-based operations. The Company's domestic land-based operations
experienced improved operating margins, as a result of extensive cost cutting
efforts, improved safety performance and reduced insurance costs (attributable
to both reduced rates and improved claims experience).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
year ended December 31, 1995 increased $7,107,000, or 74%, as compared to the
year ended December 31, 1994, primarily as a result of expansion of the
Company's domestic offshore and international asset base.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1995 increased $7,313,000, or 29%, as
compared to the year ended December 31, 1994, primarily as a result of the
inclusion of such costs related to acquired businesses. As a percentage of
revenues, total selling, general and administrative expenses declined to
approximately 12% in 1995 from approximately 14% in 1994.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the year ended December 31, 1995 of $26,272,000. Of this amount,
$12,630,000 was generated from international operations, $6,785,000 was
generated from domestic offshore operations and $6,857,000 was generated from
domestic land-based operations. During 1994, international operations
generated earnings from operations of $3,540,000, domestic offshore operations
generated earnings from operations of $3,304,000, and domestic land-based
operations generated earnings from operations of $1,184,000.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended
December 31, 1995 included a gain of $1,049,000 from the insurance recovery
relating to a domestic land rig which was destroyed in an explosion and fire,
and other miscellaneous gains of $638,000 from asset sales, other insurance
recoveries, foreign exchange transactions and other sources. Interest income
increased to $740,000 for the year ended December 31, 1995 from $618,000 in
1994 due to an increase in cash available for investment. Interest expense for
the year ended December 31, 1995 increased by $6,069,000 from 1994, as a result
of borrowings related to the Company's two drilling/workover barge rigs,
acquisitions and other additions to property and equipment.
INCOME TAX PROVISION. The Company's consolidated effective income tax
rate for the year ended December 31, 1995 increased to approximately 32% from
approximately 24% for the year ended December 31, 1994, primarily as a result
of the recognition in 1994 of current tax benefits from the utilization of
approximately $3,000,000 of foreign net operating loss carryforwards. The
Company recognized no such tax benefits from the utilization of foreign net
operating loss carryforwards in 1995.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
REVENUES. Revenues for the year ended December 31, 1994 increased
$55,237,000, or 43%, as compared to the corresponding period in 1993. Of this
increase, $41,801,000 was attributable to the Company's international
operations. The Company's expansion into Argentina and Venezuela did not begin
until July 1993, while such operations generated revenues for all of 1994. The
addition of the Company's domestic offshore operations in mid-1994 accounted
for $23,441,000 of the increase. These increases were partially offset by a
$10,005,000 decline in revenues as a result of a reduction in hours worked due
to weaker demand for the Company's domestic land operations.
OPERATING COSTS. Operating costs for the year ended December 31, 1994
increased $39,348,000, or 39%, as compared to the corresponding period in 1993.
Of this increase, $31,636,000 was attributable to the Company's international
operations and $16,875,000 was a result of the addition of the Company's
offshore operations. These increases were partially offset by a $9,163,000
decline in operating costs as a result of reduced activity for the Company's
domestic land operations.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
year ended December 31, 1994 increased $3,143,000, or 49%, as compared to the
corresponding period in 1993, primarily as a result of provisions for recently
acquired domestic offshore and international assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1994 increased $7,533,000, or 43%, as
compared to the corresponding period in 1993, primarily as a result of the
inclusion of such costs for acquired domestic offshore and international
operations, offset somewhat by a decrease in such costs for domestic land
operations. As a percentage of revenues, total selling, general and admin-
istrative expenses remained constant from 1993 to 1994 at approximately 14%.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the year ended December 31, 1994 of $8,028,000. Of this amount,
$3,540,000 was generated from international operations (despite a loss from
operations in Russia of $1,172,000), $3,304,000 was generated from domestic
offshore operations and $1,184,000 was generated from domestic land-based
operations. For the corresponding period in 1993, domestic land operations
generated earnings from operations of $1,307,000 and international operations
generated earnings from operations of $1,508,000, including earnings of
$462,000 from Russian operations.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended
December 31, 1994 consisted principally of net foreign currency translation
losses of $362,000 resulting from the devaluation of the Venezuelan bolivar,
partially offset by other miscellaneous income items. Interest expense of
$207,000 for the twelve months ended December 31, 1994 resulted from debt
related to the Company's newly acquired domestic offshore operations and other
short-term working capital borrowings. During the year ended December 31,
1994, the Company capitalized $458,000 of interest expense in connection with
construction projects, primarily the construction of the two workover/drilling
barge rigs sent to Venezuela. During the corresponding period of 1993, the
Company had no such borrowings or interest expense.
INCOME TAX PROVISION. The Company's consolidated effective income tax
rate for the year ended December 31, 1994 declined to approximately 24% from
approximately 37%, before the cumulative effect of a change in accounting for
income taxes, for the corresponding period in 1993, primarily as a result of
the recognition of current tax benefits from the utilization of approximately
$3,000,000 of foreign net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $31,302,000 and $26,640,000 at
December 31, 1995 and 1994, respectively. The Company's current ratio was 1.7
to 1.0 at December 31, 1995 and 1.8 to 1.0 at December 31, 1994. In January
1996, the Company completed the public sale of $80,500,000 principal amount of
convertible subordinated debentures, which resulted in net proceeds to the
Company of approximately $77,585,000. On a pro forma basis, as adjusted to
give effect to the public sale of the convertible subordinated debentures and
receipt of the net proceeds therefrom, the Company had net working capital of
$109,179,000 and a current ratio of 3.6 to 1.0 at December 31, 1995.
Approximately $25,000,000 of such net proceeds will be used to fund various
capital projects and approximately $10,000,000 will be used to repay
outstanding indebtedness. Management believes that the Company's available
funds, including the net proceeds from the public offering of convertible
subordinated debentures, cash generated from operations and existing bank
credit lines, will be sufficient to fund its normal ongoing capital
expenditure, working capital and debt service requirements.
The Company is active in reviewing possible expansion and acquisition
opportunities relating to all of its business segments. From time to time, the
Company has one or more bids outstanding for contracts that could require
significant capital expenditures and mobilization costs. While the Company has
no definitive agreements to acquire additional equipment, suitable
opportunities may arise in the future. The timing, size or success of any
acquisition effort and the associated potential capital commitments are
unpredictable. The Company expects to fund project opportunities and
acquisitions primarily through a combination of working capital, cash flow from
operations and full or limited recourse debt or equity financing.
As of December 31, 1995, the Company had domestic bank commitments
providing for guidance lines of credit of $18,000,000, against which letters of
credit of $11,397,000 were outstanding. Substantially all of these letters of
credit have been issued in favor of the Company's insurance carriers to
guarantee payment of the Company's share of insured claims. As of December 31,
1995, the Company had accrued approximately $7,249,000 of claims liabilities,
of which $3,940,000 was included in current liabilities and $3,309,000 was
reflected as other long-term liabilities in the consolidated balance sheet.
The Company has estimated the amount and timing of payment of these liabilities
based on actuarial studies provided by the insurance carriers and past
experience. Due to the nature of the Company's business and the structure of
its insurance program, the occurrence of a significant event against which the
Company is not fully insured, or of a number of lesser events against which the
Company is insured, but subject to substantial deductibles, could significantly
impact the operating results of the Company for a given period.
During 1994, the Company entered into long-term financing arrangements
with two Japanese trading companies in connection with the construction and
operation of two drilling/workover barge rigs. The financing agreement
provides that the loans are to be collateralized by the barge rigs and related
charter contracts. The aggregate amount of the collateralized term loans was
initially $42,000,000. Pursuant to the terms of the loan agreements,
$2,503,000 of interest, which accrues at a rate of 9.61% per annum, was added
to the principal amount of the loans prior to the first scheduled payment in
July 1995. At December 31, 1995, the outstanding balance of these loans was
$42,320,000. The loans are being repaid from the proceeds of the related
charter contracts in equal monthly installments of principal and interest
through July 2004. In addition, a portion of the contract proceeds is being
held in trust to assure the timely payment of future debt service obligations.
At December 31, 1995, $2,435,000 of such contract proceeds are being held in
trust for the benefit of the lenders, and are not presently available for use
by the Company. The terms of the financing agreement limit the lenders'
recourse essentially to the barge rigs, contract proceeds and the assets of the
Company's Venezuelan subsidiary. The Company also provided the lenders a
limited guaranty with respect to certain political risks. The Company has
obtained political risks insurance policies from the Overseas Private
Investment Corporation to protect against political risks that could result in
potential payments under the terms of the Company's guaranty.
In June 1994, the Company completed the public sale of 6,918,000 shares
of common stock, which resulted in net cash proceeds to the Company of
approximately $32,000,000. The Company utilized $20,608,000 of such proceeds
toward the purchase of 22 offshore platform workover rigs that operate in the
Gulf of Mexico. The balance of the proceeds from the public offering were used
to fund the upgrading of certain of the acquired offshore assets as well as
other capital expenditures for the refurbishment and re-deployment of rigs from
its domestic fleet to Argentina.
In connection with the acquisition and planned upgrading and expansion of
its acquired offshore platform rig fleet in 1994, the Company established
credit facilities with a lending institution in the aggregate amount of
$14,400,000. In February 1995, this credit facility was amended to, among
other things, increase the aggregate borrowing availability to $30,000,000. As
of December 31, 1995, $8,200,000 of secured term loans, $8,850,000 of secured
revolving loans and $762,000 of working capital line of credit borrowings were
outstanding pursuant to this facility.
During the year ended December 31, 1995, the Company spent approximately
$15,100,000 on offshore assets, including: (i) construction of a new "flagship"
state-of-the-art diesel electric platform rig, (ii) major rig refurbishments
and (iii) auxiliary equipment such as top-drive drilling systems and larger
capacity pumps and generators, and improved living quarters. The Company plans
to continue the program to upgrade its offshore platform rig fleet throughout
1996.
In October 1995, the Company purchased all of the capital stock of Marlin
Colombia Drilling Co., Inc. ("Marlin") for cash consideration of approximately
$6,000,000. For the twelve months ended September 30, 1995, Marlin generated
revenues of approximately $7,000,000.
In September 1995, the Company entered into an agreement with a financial
institution for the sale and leaseback of up to $10,000,000 of equipment to be
used in the Company's business. As of December 31, 1995, the Company had
received proceeds of $5,500,000 pursuant to this facility. The Company has
annual purchase and lease renewal options at projected future fair market
values under the agreement. The lease has been classified as an operating
lease for financial statement purposes. Rentals on the initial transaction are
$1,167,000 annually. The net book value of the equipment has been removed from
the balance sheet and the excess of $483,000 realized on the transaction has
been deferred and is being amortized as a reduction of lease expense over the
maximum lease term of five years.
The Company spent approximately $3,800,000 during the year ended December
31, 1995 to complete construction of the two new drilling/workover barge rigs
deployed in Venezuela. Additionally, land-based rig refurbishment and
international deployment costs for the year ended December 31, 1995 and 1994
were approximately $14,600,000 and $9,952,000, respectively.
In March 1995, the Company acquired all of the outstanding capital stock
of X-Pert for consideration of approximately $10,000,000, consisting of
$3,000,000 cash, a note payable to the selling shareholders in the amount of
approximately $6,000,000, and 200,000 shares of the Company's common stock. At
such time, X-Pert had working capital and other monetary assets in excess of
liabilities of approximately $3,000,000.
Capital expenditures related to other domestic operations for the years
ended December 31, 1995 and 1994 were approximately $3,700,000 and $2,300,000,
respectively.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"). SFAS No. 121, which is effective for fiscal years beginning after
December 15, 1995, requires that long-lived assets and certain identifiable
intangibles to be held and used by the entity, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company does not expect that the
adoption of SFAS No. 121 will have any material effect on its financial
position or results of operations.
In October 1995, the Financial Acounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123, which is effective for fiscal years beginning after
December 15, 1995, encourages but does not require companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on new fair value accounting rules. The Company
has not yet decided if it will adopt this new fair value based method of
accounting for its stock-based incentive plans.
CURRENCY FLUCTUATIONS
Deterioration in economic conditions in Venezuela resulted in significant
devaluation of the country's currency during the first half of 1994. To a
large extent, the Company has been able to insulate its ongoing operations from
currency exchange losses by matching the local currency component of contracts
to the amount of operating costs transacted in local currency. The Company is
continuing its efforts to maximize the U.S. dollar component of its Venezuelan
contracts. During the first two quarters of 1994, the devaluation of the
Venezuelan bolivar resulted in currency translation losses for the Company.
These losses resulted principally from the translation of the net Venezuelan
monetary assets (that is, essentially accounts receivable in excess of trade
payables) at devaluing exchange rates from month to month.
In the latter part of June 1994, the Venezuelan government imposed
exchange control policies and established an official fixed exchange rate of
170 bolivars per U.S. dollar. This official rate was maintained for the
remainder of 1994 and during the first three quarters of 1995. Accordingly, no
currency translation losses resulted in those periods. In December 1995, the
Venezuelan government devalued its currency by revising the official exchange
rate to 290 Venezuelan bolivars per U.S. dollar. The December 1995 devaluation
did not result in the recognition of any material currency translation gain or
loss by the Company in its consolidated financial statements. If the official
rate is subsequently revised or a market exchange mechanism is re-implemented
so that the bolivar "floats" relative to the U.S. dollar, the Company could be
susceptible to future translation losses with respect to its Venezuelan
operations. The Company intends to continue to monitor developments in this
regard and to take such measures as may be practical to limit its exposure to
currency translation losses in future periods.
<PAGE>
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:
We have audited the consolidated balance sheet of Pride Petroleum
Services, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. 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 provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pride
Petroleum Services, Inc. and Subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 6 to the financial statements, the Company changed
its method of accounting for income taxes in 1993.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 26, 1996
<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
DECEMBER 31, 1995
--------------------DECEMBER 31,
PRO FORMA HISTORICAL 1994
--------- --------- ---------
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . $ 86,880 $ 9,295 $ 5,970
Short-term investments . . . . . . . . . . 2,612 2,612 3,001
Trade receivables, net of allowance
for doubtful accounts of $426,
$426 and $394, respectively. . . . . . . 43,767 43,767 38,334
Parts and supplies . . . . . . . . . . . . 9,473 9,473 4,468
Deferred income taxes. . . . . . . . . . . 1,518 1,518 2,388
Other current assets . . . . . . . . . . . 6,780 6,488 6,128
--------- --------- ---------
Total current assets. . . . . . . . . . 151,030 73,153 60,289
--------- --------- ---------
PROPERTY AND EQUIPMENT, AT COST . . . . . . . 296,939 296,939 246,365
ACCUMULATED DEPRECIATION. . . . . . . . . . . (118,451) (118,451) (106,466)
--------- --------- ---------
Net property and equipment. . . . . . . 178,488 178,488 139,899
--------- --------- ---------
GOODWILL AND OTHER INTANGIBLES, net . . . . . 3,699 3,699 3,580
OTHER ASSETS. . . . . . . . . . . . . . . . . 4,888 2,265 1,425
--------- --------- ---------
$ 338,105 $ 257,605 $ 205,193
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . $ 15,010 $ 15,010 $ 14,715
Accrued expenses . . . . . . . . . . . . . 16,550 16,550 15,332
Current portion of long-term debt. . . . . 10,291 10,291 3,602
--------- --------- ---------
Total current liabilities . . . . . . . 41,851 41,851 33,649
--------- --------- ---------
OTHER LONG-TERM LIABILITIES . . . . . . . . . 4,127 4,127 5,327
LONG-TERM DEBT, net of current portion. . . . 61,136 61,136 42,096
CONVERTIBLE SUBORDINATED DEBENTURES . . . . . 80,500 -- --
DEFERRED INCOME TAXES . . . . . . . . . . . . 19,252 19,252 12,736
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value; 40,000,000
shares authorized; 24,863,072,
24,863,072 and 24,081,872 shares issued
and 24,808,852, 24,808,852 and 24,027,652
shares outstanding, respectively . . . . 1 1 1
Paid-in capital. . . . . . . . . . . . . . 95,751 95,751 91,256
Treasury stock, at cost. . . . . . . . . . (191) (191) (191)
Retained earnings. . . . . . . . . . . . . 35,678 35,678 20,319
--------- --------- ---------
Total shareholders' equity. . . . . . . 131,239 131,239 111,385
--------- --------- ---------
$ 338,105 $ 257,605 $ 205,193
========= ========= =========
The accompanying notes are an integral part of
the consolidated financial statements.<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
REVENUES. . . . . . . . . . . . . . . . . . . $ 263,599 $ 182,336 $ 127,099
--------- --------- ---------
COSTS AND EXPENSES
Operating costs. . . . . . . . . . . . . . 188,252 139,653 100,305
Depreciation and amortization. . . . . . . 16,657 9,550 6,407
Selling, general and administrative. . . . 32,418 25,105 17,572
--------- --------- ---------
Total costs and expenses. . . . . . . . 237,327 174,308 124,284
--------- --------- ---------
Earnings from operations . . . . . . 26,272 8,028 2,815
OTHER INCOME (EXPENSE)
Other income (expense) . . . . . . . . . . 1,687 (305) (135)
Interest income. . . . . . . . . . . . . . 740 618 649
Interest expense . . . . . . . . . . . . . (6,276) (207) (10)
--------- --------- ---------
Total other income (expense), net. . (3,849) 106 504
--------- --------- ---------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES . . . . . . . . 22,423 8,134 3,319
INCOME TAX PROVISION. . . . . . . . . . . . . 7,064 1,920 1,214
--------- --------- ---------
NET EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . 15,359 6,214 2,105
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES . . . . . . . . -- -- 3,835
--------- --------- ---------
NET EARNINGS. . . . . . . . . . . . . . . . . $ 15,359 $ 6,214 $ 5,940
========= ========= =========
NET EARNINGS PER SHARE
Before cumulative effect of change
in accounting for income taxes . . . . . $ .60 $ .30 $ .13
Cumulative effect of change in
accounting for income taxes. . . . . . . -- -- .23
--------- --------- ---------
EARNINGS PER SHARE. . . . . . . . . . . . . . $ .60 $ .30 $ .36
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING. . . . 25,465 20,795 16,487
========= ========= =========
The accompanying notes are an integral part of
the consolidated financial statements.<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY TOTAL
-------------- PAID-IN STOCK RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL AT COST EARNINGS EQUITY
------ ------ -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1992. . . . . 16,034 $ 1 $ 53,915 $ (307) $ 8,165 $ 61,774
Net earnings. . . . . . . . . . . -- -- -- -- 5,940 5,940
Issuance of common stock in
connection with acquisition . . 270 -- 1,099 116 -- 1,215
Exercise of stock options . . . . 17 -- 129 -- -- 129
Tax benefit of non-qualified
stock options . . . . . . . . . -- -- 68 -- -- 68
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1993. . . . . 16,321 1 55,211 (191) 14,105 69,126
Net earnings. . . . . . . . . . . -- -- -- -- 6,214 6,214
Issuance of common stock in
public offering . . . . . . . . 6,918 -- 32,108 -- -- 32,108
Issuance of common stock in
connection with acquisition . . 785 -- 3,925 -- -- 3,925
Exercise of stock options . . . . 4 -- 8 -- -- 8
Tax benefit of non-qualified
stock options . . . . . . . . . -- -- 4 -- -- 4
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1994. . . . . 24,028 1 91,256 (191) 20,319 111,385
Net earnings. . . . . . . . . . . -- -- -- -- 15,359 15,359
Issuance of common stock in
connection with acquisitions. . 525 -- 3,279 -- -- 3,279
Exercise of stock options . . . . 256 -- 739 -- -- 739
Tax benefit of non-qualified
stock options . . . . . . . . . -- -- 477 -- -- 477
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1995. . . . . 24,809 $ 1 $ 95,751 $ (191) $ 35,678 $ 131,239
====== ====== ======== ======= ======== =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 15,359 $ 6,214 $ 5,940
Adjustments to reconcile net earnings to
net cash provided by operating activities -
Depreciation and amortization . . . . . . . . . . . . . 16,657 9,550 6,407
Gain on sale of assets. . . . . . . . . . . . . . . . . (1,544) (475) (241)
Effect of exchange rates. . . . . . . . . . . . . . . . (142) 362 167
Deferred tax provision (benefit). . . . . . . . . . . . 4,602 1,120 (103)
Effect of change in accounting for income taxes . . . . -- -- (3,835)
Changes in assets and liabilities, net of
effects of acquisitions -
Trade receivables. . . . . . . . . . . . . . . . . . (4,493) (10,106) (830)
Parts and supplies . . . . . . . . . . . . . . . . . (2,866) (1,128) (313)
Other current assets . . . . . . . . . . . . . . . . (1,914) (31) (395)
Accounts payable . . . . . . . . . . . . . . . . . . (358) 1,534 2,778
Accrued expenses and other . . . . . . . . . . . . . 1,391 1,331 (343)
--------- --------- ---------
Net cash provided by operating activities . . . . 26,692 8,371 9,232
--------- --------- ---------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities,
including acquisition costs, less cash acquired. . . . . (8,144) (22,217) (9,752)
Purchases of property and equipment. . . . . . . . . . . . (40,636) (59,171) (12,123)
Proceeds from sale of short-term investments . . . . . . . 1,250 1,004 2,852
Proceeds from sale of property and equipment . . . . . . . 6,862 908 285
Purchase of short-term investments . . . . . . . . . . . . (360) -- (2,000)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . (485) (6) 45
--------- --------- ---------
Net cash used in investing activities . . . . . . (41,513) (79,482) (20,693)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock . . . . . . . . . . 1,216 32,116 129
Proceeds from debt borrowings. . . . . . . . . . . . . . . 27,535 39,358 400
Reduction of debt. . . . . . . . . . . . . . . . . . . . . (10,410) (740) (1,797)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . (195) (1,162) --
--------- --------- ---------
Net cash provided (used) by financing activities. 18,146 69,572 (1,268)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . 3,325 (1,539) (12,729)
CASH AND CASH EQUIVALENTS, beginning of period. . . . . . . . 5,970 7,509 20,238
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period. . . . . . . . . . . $ 9,295 $ 5,970 $ 7,509
========= ========= =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Pride Petroleum Services, Inc. (the "Company") is a Louisiana corporation
which was organized in 1988 as the successor to a company originally
incorporated in 1968. The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
Certain reclassifications have been made to prior year amounts to conform with
the current year presentation.
The accompanying pro forma information sets forth the Company's
consolidated balance sheet as of December 31, 1995, as adjusted to give effect
to the issuance and sale by the Company of $80,500,000 principal amount of
6 1/4% convertible subordinated debentures in January 1996. Net proceeds to
the Company were $77,585,000, after deducting underwriting discounts and
commissions and estimated offering expenses totaling $2,915,000.
CASH EQUIVALENTS
For purposes of the consolidated balance sheet and consolidated statement
of cash flows, the Company considers highly liquid debt instruments having
maturities of three months or less at the date of purchase to be cash
equivalents.
SHORT-TERM INVESTMENTS
Short-term investments include marketable securities, which in the case
of debt instruments have maturities in excess of three months but less than
one year at the date of purchase, and are carried at the lower of cost or
market value. There were no material differences between cost and fair market
value at December 31, 1995.
PARTS AND SUPPLIES
Parts and supplies consist of spare rig parts and supplies held for use
in operations and are valued at the lower of weighted average cost or market
value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are
capitalized and depreciated over the respective asset's useful life.
Maintenance and repair costs are charged to expense as incurred. During the
years ended December 31, 1995, 1994 and 1993, maintenance and repair costs
included in operating costs were $20,776,000, $16,290,000 and $12,541,000,
respectively. When assets are sold or retired, the remaining costs and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is included in income.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
For financial reporting purposes, depreciation of property and equipment
is provided using primarily the straight line method based upon expected useful
lives of each class of assets. Estimated useful lives of the assets for
financial reporting purposes are as follows:
YEARS
-------
Rigs and rig equipment 5 - 17
Transportation equipment 3 - 7
Buildings and improvements 10 - 20
Furniture and fixtures 5
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. In 1995 and 1994, total
interest incurred was $6,526,000 and $665,000, respectively, of which $250,000
and $458,000, respectively, was capitalized. No interest was capitalized in
1993.
GOODWILL AND OTHER INTANGIBLES
Goodwill, totalling $2,650,000 and $2,846,000 at December 31, 1995 and
1994, respectively, represents the cost in excess of fair value of the net
assets of companies acquired and is being amortized over 15 years. Other
intangible assets, totalling $1,049,000 and $734,000 at December 31, 1995 and
1994, respectively, represent costs allocated to service contracts, employment
contracts, covenants not to compete and client lists acquired in business
acquisitions. Other intangible assets are being amortized over their estimated
useful lives, which range from three to ten years. Total amortization of
goodwill and other intangible assets for the years ended December 31, 1995,
1994 and 1993 amounted to $543,000, $475,000 and $453,000, respectively.
REVENUE RECOGNITION
The Company recognizes revenue from domestic land well servicing
operations as services are performed based upon actual rig hours worked.
Revenues from international and offshore well servicing and daywork drilling
operations are recognized as services are performed based upon contracted day
rates and the number of operating days during the period. Revenues from
related operations are recognized in the period in which such services are
performed.
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the asset is recovered or the liability is
settled.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
FOREIGN CURRENCY TRANSLATION
The Company accounts for translation of foreign currency in accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation". The Company's Venezuelan operations are in a "highly
inflationary" economy resulting in the use of the U.S. dollar as the functional
currency. Therefore, certain assets of this operation are translated at
historical exchange rates and all translation gains or losses are reflected in
the period's results of operations. In Argentina and Colombia, the local
currency is considered the functional currency. Translation of Argentine and
Colombian assets and liabilities is made at the prevailing exchange rate as of
the balance sheet date. Revenues and expenses are translated at the average
rate of exchange during the period. The resulting translation adjustments are
recorded as a component of shareholders' equity. In Russia, contracts to date
have called for payment and expenses to be in U.S. dollars; therefore, no
exchange gain or loss has been applicable.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share has been computed based on the weighted average
number of common shares outstanding during the applicable period. Common share
equivalents have been included in periods in which their effect is dilutive.
Common share equivalents include the number of shares issuable upon exercise of
warrants and stock options, less the number of shares that could have been
repurchased with the exercise proceeds, using the treasury stock method. Fully
diluted earnings per share have not been presented as the results are not
materially different.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in
U.S. Government securities and in other high quality financial instruments. By
policy, the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of major
integrated and government-owned international oil companies as well as smaller
independent oil and gas producers. Management believes the credit quality of
its customers is generally high. The Company has in place insurance to cover
certain exposure in its foreign operations and provides allowances for
potential credit losses when necessary.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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. While it is believed that such estimates are reasonable,
actual results could differ from those estimates.
CONDITIONS AFFECTING ONGOING OPERATIONS
Increases and decreases in domestic well servicing activity historically
have had a significant correlation with changes in oil and natural gas prices.
International well servicing activity is also affected by fluctuations in oil
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
and natural gas prices, but historically to a lesser extent than domestic
activity. International well servicing contracts are typically for terms of
one year or more, while domestic contracts are typically entered into for one
or multiple wells. Accordingly, international well servicing activities
generally are not as sensitive to short-term changes in oil and gas prices as
domestic operations.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consists of the
following:
DECEMBER 31,
--------------------
1995 1994
--------- ---------
(in thousands)
Land . . . . . . . . . . . . . . . . . . . . $ 2,458 $ 2,340
Equipment. . . . . . . . . . . . . . . . . . 274,378 191,248
Buildings. . . . . . . . . . . . . . . . . . 6,492 5,495
Other. . . . . . . . . . . . . . . . . . . . 471 251
Construction-in-progress . . . . . . . . . . 13,140 47,031
--------- ---------
296,939 246,365
Accumulated depreciation . . . . . . . . . . (118,451) (106,466)
--------- ---------
$ 178,488 $ 139,899
========= =========
Construction-in-progress as of December 31, 1995 included approximately
$5,700,000 of costs related to the acquisition, refurbishment, equipping and
deploying to international markets of seven land-based workover and four land-
based drilling rigs and approximately $2,500,000 of costs related to the
construction of an offshore platform workover rig. At December 31, 1994,
construction-in-progress included approximately $36,533,000 of costs related to
the construction of the two drilling/workover barge rigs which were placed in
service in January 1995, approximately $4,355,000 of costs related to
improvements to three offshore platform rigs, and $3,701,000 related to the
refurbishment, upgrading and deployment of four additional rigs to Argentina.
3. ACQUISITIONS
In March 1995, the Company acquired all of the outstanding capital stock
of X-Pert Enterprises, Inc. ("X-Pert") for aggregate consideration of
approximately $10,000,000, consisting of $3,000,000 cash, a note payable to the
selling shareholders in the amount of $5,964,000, and 200,000 shares of the
Company's common stock.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The assets acquired and liabilities assumed in the X-Pert acquisition
were as follows:
ASSETS (LIABILITIES)
--------------------
(in thousands)
Cash and cash equivalents. . . . . $ 1,719
Trade receivables. . . . . . . . . 2,254
Other current assets . . . . . . . 80
Property and equipment . . . . . . 10,000
Other assets . . . . . . . . . . . 725
Accounts payable . . . . . . . . . (648)
Accrued expenses . . . . . . . . . (761)
Long-term debt . . . . . . . . . . (569)
Deferred income taxes. . . . . . . (2,800)
-------
$ 10,000
========
Unaudited pro forma results of operations assuming the acquisition of X-
Pert had occurred on January 1, 1994, are as follows:
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
(in thousands, except
per share data)
Revenues . . . . . . . . . . . . . . . . . $ 265,592 $ 197,154
Net Earnings . . . . . . . . . . . . . . . $ 15,488 $ 7,112
Earnings per share . . . . . . . . . . . . $ .61 $ .34
The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Company that might have occurred
nor are they indicative of future results.
Also in March 1995, the Company acquired substantially all of the assets
of a fluids hauling business for total consideration of $400,000, consisting of
$350,000 cash and a note payable to the sellers in the amount of $50,000.
In October 1995, the Company purchased all of the outstanding capital
stock of Marlin Colombia Drilling Co., Inc. ("Marlin") for cash consideration
of approximately $6,000,000.
In June 1994, the Company acquired substantially all of the assets of
Offshore Rigs, L.L.C. ("Offshore Rigs") for consideration of $31,213,000,
consisting of $20,608,000 in cash, the issuance of 785,000 shares of the
Company's common stock with a market value of $3,925,000, and the assumption of
existing bank indebtedness of $6,680,000.
In February 1994, the Company acquired all of the outstanding capital
stock of Hydrodrill, S.A. ("Hydrodrill"). The principal assets of Hydrodrill
were four land-based workover rigs located in southern Argentina.
Each of the acquisitions discussed above was recorded using the purchase
method of accounting. The operating results of each acquisition have been
included in consolidated results of operations from the date of acquisition.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. DEBT
LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:
DECEMBER 31,
-------------------
1995 1994
-------- ---------
(in thousands)
Limited-recourse collateralized term loans. . $ 42,320 $ 33,311
Secured term loans. . . . . . . . . . . . . . 8,200 8,860
Secured revolver. . . . . . . . . . . . . . . 8,850 --
Notes payable . . . . . . . . . . . . . . . . 6,225 202
Acquisition note payable. . . . . . . . . . . 5,070 --
Revolving line of credit. . . . . . . . . . . 762 3,325
-------- --------
71,427 45,698
Less current portion. . . . . . . . . . . . . 10,291 3,602
-------- --------
$ 61,136 $ 42,096
======== ========
During 1994, the Company entered into long-term financing arrangements
with two Japanese trading companies in connection with the construction and
operation of two drilling/workover barge rigs. The term loans are
collateralized by the barge rigs and related charter contracts. The aggregate
amount of the collateralized term loans was initially $42,000,000. During 1994
and 1995, an aggregate of $2,503,000 of accrued interest was added to the
principal amount of the loans. Pursuant to the terms of the loan agreements,
interest, which accrues at a rate of 9.61% per annum, was added to the
principal amount of the loans prior to the first scheduled payment in July
1995. The loans are being repaid from the proceeds of the related charter
contracts in equal monthly installments of principal and interest through July
2004. In addition, a portion of the contract proceeds is being held in trust
to assure timely payment of future debt service obligations. At December 31,
1995, $2,435,000 of such contract proceeds are being held in trust for the
benefit of the lenders, and are not presently available for use by the Company.
The terms of the financing agreements limit the lenders' recourse essentially
to the barge rigs, contract proceeds and the assets of the Company's Venezuelan
subsidiary. The Company also provided the lenders a limited guaranty with
respect to certain political risks. The Company has obtained political risks
insurance policies from the Overseas Private Investment Corporation to protect
against political risks that could potentially result in payments under the
terms of the Company's guaranty.
In connection with the acquisition of the assets of Offshore Rigs in June
1994, the Company's new wholly-owned subsidiary, Pride Offshore, Inc. ("Pride
Offshore"), entered into a $14,400,000 credit facility with a financial
institution. The credit facility included $5,400,000 of secured term loans, a
$4,000,000 secured revolver that was scheduled to convert to a term loan in
January 1995 and a $5,000,000 revolving line of credit. The secured term loan
initially bore interest at a rate of 8% per annum, while the secured revolver
and the revolving line of credit each bore interest at a variable rate of prime
plus 1/2% per annum. At December 31, 1994, the Company had $4,860,000 of
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
borrowings outstanding under the secured term loans, $4,000,000 outstanding
under the secured revolver and $3,325,000 outstanding under the revolving line
of credit.
In February 1995, the credit facility was amended to, among other things,
increase the aggregate borrowing availability under the facility to
$30,000,000, reschedule maturities of the loans and to revise the interest
rates on a portion of the borrowings. Pursuant to the amended credit facility,
the amount of the secured term loan was increased to $10,000,000, with two
tranches. Tranche A had an initial principal amount of $4,680,000, is
repayable in 28 equal monthly principal payments of $90,000 plus interest and
one final principal payment of $2,160,000 in June 1997, and bears interest,
payable monthly, at a rate of 8% per annum. Tranche B had an initial principal
amount of $5,320,000, is repayable in 60 equal monthly principal payments of
$88,667 plus interest and bears interest, payable monthly, at a rate of 9.25%
per annum.
The proceeds of Tranche B of the amended secured term loan were used to
repay the outstanding balance of the original secured revolver and a portion of
the outstanding balance of the revolving line of credit. The secured term loan
is collateralized by certain of the Company's offshore property and equipment.
Pursuant to the amended loan agreements, the amount of borrowing
availability under the secured revolver is $15,000,000. The secured revolver
is to convert in July 1996 to a term loan which is repayable in 60 equal
monthly principal payments plus interest. The secured revolver is
collateralized by certain of the Company's property and equipment and bears
interest, payable monthly, at a variable rate of prime plus 1/2% per annum
(totalling 9% at December 31, 1995).
The $5,000,000 revolving line of credit was amended to extend the
maturity of such loan to April 30, 1996. The revolving line of credit bears
interest, payable monthly, at a variable rate of prime plus 1/2% per annum
(totalling 9% at December 31, 1995) and is collateralized by substantially all
of the accounts receivable of Pride Offshore.
The Company has unconditionally guaranteed the obligations of Pride
Offshore under each of the amended secured term loans, the secured revolver and
the revolving line of credit.
Notes payable include four notes payable to lending institutions totaling
an aggregate $6,175,000 which are collateralized by selected property and
equipment and a note payable in the amount of $50,000 issued to the sellers of
certain assets acquired by the Company during the first quarter of 1995.
In March 1995, the Company entered into a note payable to two individuals
in the amount of $5,964,000 as partial consideration for a business
acquisition. The note bears interest at the rate of 8.5% per annum and is
repayable in quarterly installments through March 2000. The acquistion note is
collateralized by certain of the property and equipment of the acquired
business.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Future maturities of long-term debt are as follows:
AMOUNT
--------
(in thousands)
1996 . . . . . . . . . . . . . . . . . . . . $ 10,291
1997 . . . . . . . . . . . . . . . . . . . . 12,158
1998 . . . . . . . . . . . . . . . . . . . . 9,675
1999 . . . . . . . . . . . . . . . . . . . . 9,583
2000 . . . . . . . . . . . . . . . . . . . . 7,195
Thereafter . . . . . . . . . . . . . . . . . 22,525
The Company has obtained bank commitments which provide for guidance
lines of credit of $18,000,000. As of December 31, 1995, letters of credit
totaling $11,397,000 were outstanding thereunder. Cash and cash equivalents
and a portion of accounts receivable have been pledged as collateral pursuant
to these credit facilities.
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
long-term debt approximates fair market value at December 31, 1995.
CONVERTIBLE SUBORDINATED DEBENTURES
In January 1996, the Company completed the public sale of $80,500,000
principal amount of 6 1/4% convertible subordinated debentures. The
debentures, which are due February 15, 2006, are convertible into common stock
of the Company at a price of $12.25 per share. The debentures are redeemable
at the option of the Company, in whole or in part, at any time on or after
March 1, 1999, at an initial redemption price of 103.125% of the principal
amount and declining to 100% of the principal amount by February 15, 2002.
Interest is payable semi-annually on February 15 and August 15 of each year,
commencing August 15, 1996.
5. LEASES
In September 1995, the Company entered into an agreement with a financial
institution for the sale and leaseback of up to $10,000,000 of equipment to be
used in the Company's business. As of December 31, 1995, the Company had
received proceeds of $5,500,000 pursuant to this facility attributable to a new
platform workover rig which was placed in service in September 1995. The
Company has purchase and lease renewal options at projected future fair market
values under the agreement. The lease has been classified as an operating
lease for financial statement purposes. Rentals relating to the initial
transaction are $1,167,000 annually. The net book value of the equipment has
been removed from the balance sheet and the excess of funding over such net
book value of $483,000 has been deferred and is being amortized as a reduction
of lease expense over the maximum lease term of five years.
6. INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS 109. During the
first quarter of 1993, the Company recorded a gain in the amount of $3,835,000,
or $.23 per share, which represents the reduction of the deferred tax liability
as of January 1, 1993. The gain has been recorded in the consolidated
statement of operations as "cumulative effect of change in accounting for
income taxes".
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The components of the provision for income taxes were as follows:
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
United States Federal:
Current . . . . . . . . . . . . . $ 1,650 $ 410 $ 832
Deferred. . . . . . . . . . . . . 3,616 1,526 (14)
-------- -------- --------
5,266 1,936 818
-------- -------- --------
State:
Current . . . . . . . . . . . . . 89 24 85
Deferred. . . . . . . . . . . . . 201 90 (89)
-------- -------- --------
290 114 (4)
-------- -------- --------
Foreign:
Current . . . . . . . . . . . . . 723 366 400
Deferred. . . . . . . . . . . . . 785 (496) --
-------- -------- --------
1,508 (130) 400
-------- -------- --------
Total income tax provision . . $ 7,064 $ 1,920 $ 1,214
======== ======== ========
The difference between the effective federal income tax rate reflected in
the income tax provision and the amounts which would be determined by applying
the statutory federal tax rate to earnings before income taxes is summarized as
follows:
YEAR ENDED DECEMBER 31,
----------------------
1995 1994 1993
------ ------ ------
U.S. statutory rate. . . . . . . . . . . . 34.0% 34.0% 34.0%
Foreign. . . . . . . . . . . . . . . . . . (7.1) (14.0) (1.1)
State and local taxes. . . . . . . . . . . 1.3 1.4 (0.1)
Other. . . . . . . . . . . . . . . . . . . 3.3 2.2 3.8
------ ------ ------
Effective tax rate. . . . . . . . . . . 31.5% 23.6% 36.6%
====== ====== ======
The Company's consolidated effective federal income tax rate for the year
ended December 31, 1995 increased to approximately 32% from approximately 24%
for the corresponding period in 1994, primarily as a result of the recognition
in 1994 of current tax benefits from the utilization of approximately
$3,000,000 of foreign net operating loss carryforwards. The Company had
recognized a valuation allowance for the tax benefits of such foreign net
operating loss carryforwards at the date the related foreign enterprise was
acquired, due to uncertainties then existing regarding the Company's ability to
utilize such tax benefits.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The domestic and foreign components of earnings before income taxes and
cumulative effect of change in accounting for income taxes were as follows:
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
Domestic . . . . . . . . . . . . . . $ 13,302 $ 5,178 $ 1,933
Foreign. . . . . . . . . . . . . . . 9,121 2,956 1,386
-------- -------- --------
$ 22,423 $ 8,134 $ 3,319
======== ======== ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1995 and 1994 were as follows:
DECEMBER 31,
------------------
1995 1994
-------- --------
(in thousands)
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . $ 19,850 $ 13,949
Other. . . . . . . . . . . . . . . . . . 1,133 983
-------- --------
Total deferred tax liabilities. . . . 20,983 14,932
-------- --------
Deferred tax assets:
Foreign net operating loss carryforwards (1,462) --
Insurance claims . . . . . . . . . . . . (2,236) (3,814)
Bad debts. . . . . . . . . . . . . . . . (153) (142)
Other. . . . . . . . . . . . . . . . . . (1,220) (628)
-------- --------
Total deferred tax assets . . . . . . (5,071) (4,584)
Valuation allowance for deferred tax assets 1,822 --
-------- --------
Net deferred tax assets . . . . . . . (3,249) (4,584)
-------- --------
Net deferred tax liability. . . . . . . . . $ 17,734 $ 10,348
======== ========
Applicable U.S. income taxes have not been provided on approximately
$10,300,000 of undistributed earnings of the Company's foreign subsidiaries.
The Company considers such earnings to be permanently invested outside the U.S.
These earnings could be subject to U.S. income tax if distributed to the
Company as dividends or otherwise. The Company anticipates that foreign tax
credits would substantially reduce the amount of U.S. income tax that would be
payable if these earnings were to be repatriated.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. EMPLOYEE BENEFITS
The Company has a salary deferral plan covering its employees whereby
employees may elect to contribute up to 15% of their annual compensation. The
Company may at its discretion make matching contributions with respect to an
employee's salary contribution of up to $1,000 or 6% of compensation, whichever
is less. The Company made matching contributions to the plan for the years
ended December 31, 1995, 1994 and 1993 totaling $229,000, $150,000 and
$105,000, respectively.
In 1993, the Company established a deferred compensation plan providing
officers and key employees with the opportunity to participate in an unfunded
deferred compensation program titled the "401(k) Restoration Plan". The 401(k)
Restoration Plan is a non-qualified plan which allows certain employees to
defer up to 100% of base compensation and bonuses earned.
8. SHAREHOLDERS' EQUITY
COMMON STOCK
In April 1995, the Company issued 87,000 shares of common stock pursuant
to the contractual earnout provisions of an acquisition agreement to an
individual who became a director of the Company in connection with such
acquisition. The value of such shares, estimated to be $435,000, has been
allocated to the acquired assets and is being amortized over the remaining
useful lives of such assets. In June 1995, the Company entered into an
agreement with the director pursuant to which it issued 203,000 additional
shares of common stock in exchange for the director's remaining contingent
right to receive up to 73,000 common shares and the exercise of warrants to
acquire an additional 500,000 shares of common stock on a net value basis. The
value of the additional shares issued, estimated to be $1,624,000, was also
allocated to the acquired assets.
Also in April 1995, the Company issued 35,200 shares of common stock,
having an estimated aggregate value of $220,000, to a related party as
consideration for the purchase of support assets.
In June 1994, the Company completed the sale of 6,918,000 shares of
common stock. The public offering resulted in net cash proceeds to the Company
of approximately $32,000,000. The Company utilized $20,608,000 of the proceeds
from the public offering toward the purchase of the assets of Offshore Rigs.
LONG-TERM INCENTIVE PLAN
The Company has a Long-Term Incentive Plan which provides for the
granting or awarding of stock options, restricted stock, stock appreciation
rights and stock indemnification rights to officers and other key employees.
The number of shares authorized and reserved for issuance under the Long-Term
Incentive Plan is limited to 13% of total issued and outstanding shares,
currently 2,775,550, subject to adjustment in the event of certain changes in
the Company's corporate structure or capital stock. Stock options may be
exercised in whole or in part beginning six months from the date of grant and
expire ten years from the date of grant. The stock options also expire 60 days
after termination of employment or one year after retirement, total disability
or death of an employee.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Transactions in stock options pursuant to the Long-Term Incentive Plan
for the last three years are summarized as follows:
NUMBER
OF SHARES
---------
Outstanding at December 31, 1992. . . . . . 833,350
Granted ($4.50 to $5.50 per share) . . . 325,500
Exercised ($2.25 per share). . . . . . . (2,000)
Forfeited ($2.25 per share). . . . . . . (2,000)
---------
Outstanding at December 31, 1993. . . . . . 1,154,850
Granted ($5.25 per share). . . . . . . . 775,000
Exercised ($2.25 per share). . . . . . . (3,500)
Forfeited. . . . . . . . . . . . . . . . --
---------
Outstanding at December 31, 1994. . . . . . 1,926,350
Granted ($6.875 per share) . . . . . . . 483,000
Exercised ($2.25 - $6.875 per share) . . (256,000)
Forfeited. . . . . . . . . . . . . . . . --
---------
Outstanding at December 31, 1995. . . . . . 2,153,350
=========
Exercisable at December 31, 1995. . . . . . 2,153,350
=========
DIRECTORS' STOCK OPTION PLAN
In 1993, the shareholders of the Company approved and ratified the 1993
Directors' Stock Option Plan. The purpose of the plan is to afford the
Company's directors who are not full-time employees of the Company or any
subsidiary of the Company an opportunity to acquire a greater proprietary
interest in the Company. A maximum of 200,000 shares of the Company's common
stock are to be available for purchase upon the exercise of options granted
pursuant to the 1993 Directors' Stock Option Plan. The exercise price of
options is the fair market value per share on the date the option is granted.
Directors' stock options vest over two years at the rate of 50% per year and
expire ten years from the date of grant.
<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Transactions in the 1993 Directors' Stock Option Plan since inception are
summarized as follows:
NUMBER
OF SHARES
---------
Outstanding at December 31, 1992. . . . . . --
Granted ($4.25 to $6.75 per share) . . . 50,000
Exercised. . . . . . . . . . . . . . . . --
Forfeited ($4.25 per share). . . . . . . (10,000)
---------
Outstanding at December 31, 1993. . . . . . 40,000
Granted ($5.00 per share). . . . . . . . 12,000
Exercised. . . . . . . . . . . . . . . . --
Forfeited ($4.25 to $5.00 per share) . . (13,000)
---------
Outstanding at December 31, 1994. . . . . . 39,000
Granted ($8.375 - $9.125 per share). . . 19,000
Exercised. . . . . . . . . . . . . . . . --
Forfeited. . . . . . . . . . . . . . . . --
---------
Outstanding at December 31, 1995. . . . . . 58,000
=========
Exercisable at December 31, 1995. . . . . . 34,500
=========
9. COMMITMENTS AND CONTINGENCIES
The Company is routinely involved in litigation incidental to its
business, which often involves claims for significant monetary amounts, some of
which would not be covered by insurance. In the opinion of management, none
of the existing litigation will have any material adverse effect on the
Company's financial position or results of operations.
The Company is self-insured with respect to physical damage or loss to
its domestic vehicles, land rigs, and equipment (except for thirteen of its
largest domestic rigs). Thirteen of the Company's largest domestic land rigs
and all of the Company's international land rigs are insured, with deductibles
of generally $25,000 per occurrence. The Company's offshore platform rigs and
barge rigs are insured with deductibles of $50,000 and $150,000, respectively.
Presently, the Company has insurance deductibles of $250,000 per occurrence for
domestic workers' compensation claims, $100,000 per occurrence for domestic
automobile liability claims, and $100,000 for general liability claims. The
Company further limits its exposure by maintaining an accident and health
insurance policy with respect to its domestic employees with a deductible of
$10,000 per occurrence. Coverages with respect to foreign operations for
workers' compensation and automobile claims are subject to deductibles of
$40,000 to $100,000 per occurrence.
In July 1995, one of the Company's domestic land rigs was destroyed in an
explosion and fire. The damaged rig was covered by insurance and the Company
received net insurance proceeds, after repurchasing the salvage, of $1,094,000.
The Company recognized a gain from the insurance recovery of $1,049,000 which
is included in other income in the accompanying consolidated statement of
operations.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
As of December 31, 1995 and 1994, the Company had accrued approximately
$7,249,000 and $11,111,000, respectively for estimated claims liabilities, of
which $3,940,000 and $6,047,000, respectively, was included in current
liabilities and $3,309,000 and $5,064,000, respectively, was reflected as other
long-term liabilities in the accompanying balance sheet.
As of December 31, 1995, the Company had letters of credit outstanding
totaling $11,397,000. These letters of credit guarantee principally the
funding of the Company's share of insured claims. Cash and cash equivalents
and a portion of accounts receivable have been pledged as security for these
letters of credit. The credit facility provides flexibility to reduce the
pledge of cash and cash equivalents by pledging additional accounts receivable.
Rental expense for equipment, vehicles and various facilities of the
Company for the years ended December 31, 1995, 1994 and 1993 was $9,503,000,
$7,987,000 and $4,505,000, respectively. As of December 31, 1995, future
minimum lease payments for operating leases having initial or remaining
noncancelable lease terms longer than one year are as follows: $218,000 in
1996; $218,000 in 1997; $74,000 in 1998; and none thereafter. The Company
leases vehicles used in its domestic operations under a revolving master lease.
Although any single lease is cancelable by the Company with 60 days notice, the
Company expects to incur this lease expense in increasing amounts for the
foreseeable future. Vehicle lease expense included in the above rental expense
for the years ended December 31, 1995, 1994 and 1993 was $2,218,000, $2,134,000
and $1,809,000, respectively.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 are as follows:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(in thousands, except per share amounts)
1995
Revenues. . . . . . . . . . . . . . $ 62,512 $ 68,856 $ 67,144 $ 65,087
Earnings from operations. . . . . . 5,721 7,081 6,637 6,833
Net earnings. . . . . . . . . . . . 3,012 3,582 4,633 4,132
Earnings per share. . . . . . . . . .12 .14 .18 .16
Weighted average common shares
and equivalents outstanding . . . 24,675 25,496 25,708 25,893
1994
Revenues. . . . . . . . . . . . . . $ 36,805 $ 40,257 $ 50,974 $ 54,300
Earnings from operations. . . . . . 1,264 1,991 1,770 3,003
Net earnings. . . . . . . . . . . . 929 979 1,928 2,378
Earnings per share. . . . . . . . . .06 .06 .08 .10
Weighted average common shares
and equivalents outstanding . . . 16,727 17,537 24,418 24,381
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. SUPPLEMENTAL FINANCIAL INFORMATION
OTHER CURRENT ASSETS
Other current assets at December 31, 1995 and 1994 consists of the
following:
DECEMBER 31,
------------------
1995 1994
-------- --------
(in thousands)
Pre-funded construction costs. . . . . . . . . $ -- $ 1,692
Other receivables. . . . . . . . . . . . . . . 1,937 1,382
Prepaid expenses . . . . . . . . . . . . . . . 4,551 3,054
-------- --------
$ 6,488 $ 6,128
======== ========
ACCRUED EXPENSES
Accrued expenses at December 31, 1995 and 1994 consists of the following:
DECEMBER 31,
------------------
1995 1994
-------- --------
(in thousands)
Insurance (excluding the long-term portion
of $3,309 and $5,064, respectively). . . . . $ 3,940 $ 6,047
Payroll. . . . . . . . . . . . . . . . . . . . 6,318 4,149
Taxes, other than income . . . . . . . . . . . 4,186 4,193
Other. . . . . . . . . . . . . . . . . . . . . 2,106 943
-------- --------
$ 16,550 $ 15,332
======== ========
CASH FLOW INFORMATION
Cash paid for interest and income taxes during the years ended December
31, 1995, 1994 and 1993 was as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Cash paid during the year for:
Interest. . . . . . . . . . . . . . . . $ 4,316 $ 623 $ 10
Income taxes - U.S. . . . . . . . . . . 500 1,893 2
Income taxes - foreign. . . . . . . . . 16 28 871
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
12. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
DOMESTIC DOMESTIC
LAND OFFSHORE INTERNATIONAL TOTAL
--------- --------- --------- ---------
(in thousands)
1995
------
Revenues. . . . . . . . . . . . $ 113,115 $ 49,595 $ 100,889 $ 263,599
Earnings from operations. . . . 6,857 6,785 12,630 26,272
Identifiable assets . . . . . . 77,243 50,978 129,384 257,605
Capital expenditures,
including acquisitions. . . . 14,502 15,066 28,940 58,508
Depreciation and amortization . 5,578 3,091 7,988 16,657
1994
------
Revenues. . . . . . . . . . . . $ 95,860 $ 23,441 $ 63,035 $ 182,336
Earnings from operations. . . . 1,184 3,304 3,540 8,028
Identifiable assets . . . . . . 64,740 46,693 93,760 205,193
Capital expenditures,
including acquisitions. . . . 3,062 34,617 48,987 86,666
Depreciation and amortization . 5,085 1,056 3,409 9,550
1993
------
Revenues. . . . . . . . . . . . $ 105,865 $ -- $ 21,234 $ 127,099
Earnings from operations. . . . 1,307 -- 1,508 2,815
Identifiable assets . . . . . . 78,607 -- 31,374 109,981
Capital expenditures,
including acquisitions. . . . 2,435 -- 21,408 23,843
Depreciation and amortization . 5,241 -- 1,166 6,407
<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table sets forth certain information with respect to the
Company and its subsidiaries by geographic area:
RUSSIA
NORTH SOUTH AND
AMERICA AMERICA OTHER TOTAL
--------- --------- --------- ---------
(in thousands)
1995
------
Revenues. . . . . . . . . . . . $ 162,710 $ 98,382 $ 2,507 $ 263,599
Earnings from operations. . . . 13,642 12,448 182 26,272
Identifiable assets . . . . . . 128,221 125,939 3,445 257,605
Capital expenditures. . . . . . 29,568 28,940 -- 58,508
Depreciation and amortization . 8,669 7,611 377 16,657
1994
------
Revenues. . . . . . . . . . . . $ 119,301 $ 62,430 $ 605 $ 182,336
Earnings (loss) from operations 4,488 4,712 (1,172) 8,028
Identifiable assets . . . . . . 111,433 90,195 3,565 205,193
Capital expenditures. . . . . . 37,679 48,922 65 86,666
Depreciation and amortization . 6,141 3,216 193 9,550
1993
------
Revenues. . . . . . . . . . . . $ 105,865 $ 18,625 $ 2,609 $ 127,099
Earnings from operations. . . . 1,307 1,046 462 2,815
Identifiable assets . . . . . . 78,607 28,461 2,913 109,981
Capital expenditures. . . . . . 2,435 20,953 455 23,843
Depreciation and amortization . 5,241 927 239 6,407
One customer accounted for approximately 17% and 18% of consolidated
revenues during 1995 and 1994, respectively, representing 69% and 67%,
respectively, of revenues from operations in Argentina during those years.
Another customer accounted for approximately 54% and 40%, respectively, of
revenues from domestic offshore operations during such periods. Revenues from
such customer and its affiliates from both land-based and offshore operations
accounted for approximately 13% and 18% of consolidated revenues during 1995
and 1994, respectively. During 1993, no customer accounted for more than 10%
of consolidated revenues.
<PAGE>
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no changes in or disagreements with the Company's
independent accountants regarding accounting and financial disclosure matters.
PART III
ITEM 10. Directors and Executive Officers
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
Certain information with respect to the executive officers of the Company
is set forth under the caption "Executive Officers of the Registrant" in Part I
of this report.
ITEM 11. Executive Compensation and Transactions
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
ITEM 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are included as part of this report:
(1) Financial Statements:
Page
----
Report of Independent Accountants . . . . . . . . . . . . . . . 23
Consolidated Balance Sheet -
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 24
Consolidated Statement of Operations -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . 25
Consolidated Statement of Changes in Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . 26
Consolidated Statement of Cash Flows -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . 27
Notes to Consolidated Financial Statements. . . . . . . . . . . 28
PAGE
----
(2) Financial Statement Schedules:
Report of Independent Accountants . . . . . . . . . . . . . . . 47
Schedule II - Valuation and Qualifying Accounts . . . . . . . 48
Financial statement schedules other than those listed have been omitted
as they are not applicable, or the information required thereby is included in
the consolidated financial statements or notes thereto included in this report.
(3) Exhibits:
Exhibit No. Description
- ----------- -----------
3.1 - Restated Articles of Incorporation of Pride Petroleum Services,
Inc. (incorporated by reference to Exhibit 3(a) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, File
No. 33-33233).
3.2 - Amendment to Restated Articles of Incorporation (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-3 dated June 13, 1994, File No. 33-76310).
3.3 - By-Laws of Pride Petroleum Services, Inc. (incorporated by
reference to Exhibit 3(b) to the Company's Registration Statement
on Form S-1 dated January 29, 1990, File No. 33-33233).
4.1 - Form of Common Stock Certificate (incorporated by reference to
Exhibit 4(b) to the Company's Registration Statement on Form S-1
dated January 29, 1990, File No.33-33233).
4.2 - Sale and Financing Contract for Lake Maracaibo Drilling Barge
dated November 30, 1994, by and between Perforaciones Western,
C.A., Nittetsu Shoji Co., Ltd. and Marubeni Corporation
(incorporated by reference to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, File
No. 0-16961).
4.3 - Supplemental, Amended and Restated Agented Multiple Lender Loan
Agreement dated February 9, 1995, by and between Pride Offshore,
Inc., Pride Petroleum Services, Inc. and First National Bank of
Commerce, The CIT Group/Equipment Financing, Inc., ArgentBank
(incorporated by reference to Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, File
No. 0-16961).
*4.4 - Indenture dated as of January 26, 1996 by and between Pride
Petroleum Services, Inc. and Marine Midland Bank, as Trustee,
relating to $80,500,000 principal amount of 6 1/4% Convertible
Subordinated Debentures due 2006.
The Company is a party to several debt instruments under which
the total amount of securites authorized does not exceed 10% of
the total assets of the Company and its subsidiaries on a
consolidated basis. Pursuant to paragraph 4(iii)(A) of Item
601(b) of Regulation S-K, the Company agrees to furnish a copy of
such instruments to the Commission upon request.
10.1+ - Form of Indemnity Agreement between Pride Petroleum Services,
Inc. and certain executive officers and directors (incorporated
by reference to Exhibit 10(g) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, File No. 33-33233).
10.2+ - Pride Petroleum Services, Inc Long-Term Incentive Plan
(incorporated by reference to Exhibit 10(h) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, File
No. 33-33233).
10.3+ - Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated
by reference to Exhibit 10(i) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, File No. 33-33233).
10.4+ - Summary of Pride Petroleum Services, Inc. Group Life Insurance
and Accidental Death and Dismemberment Insurance (incorporated by
reference to Exhibit 10(j) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, File No. 33-33233).
10.5+ - Pride Petroleum Services, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992,
File No. 0-16961).
10.6+ - Pride Petroleum Services, Inc. 401(k) Restoration Plan
(incorporated by reference to Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993,
File No. 0-16961).
10.7 - Asset Purchase Agreement for the Purchase and Sale of All the
Assets of Offshore Rigs, L.L.C. dated March 7, 1994 (incorporated
by reference to Exhibit 2 to the Company's Registration Statement
on Form S-3 dated March 10, 1994, File No. 33-76310).
10.8 - Well Drilling and/or Reconditioning Agreement dated May 1, 1994,
by and between Lagoven, S.A. and Perforaciones Western, C.A
(incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994,
File No. 0-16961).
10.9+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and Ray H.
Tolson (incorporated by reference to Exhibit No. 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.10+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and Paul A.
Bragg (incorporated by reference to Exhibit No. 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.11+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and James W.
Allen (incorporated by reference to Exhibit No. 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.12+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and Dexter R.
Polk (incorporated by reference to Exhibit No. 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.13 - Agreement dated as of June 13, 1995 between Pride Petroleum
Services, Inc. and Financial Overseas Management, S.A.
(incorporated by reference to Exhibit No. 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1995, File No. 0-16961).
10.14 - Stock Purchase Agreement dated March 22, 1995 by and among
Raymond H. Eaves and Billy B. Cooper and Pride Petroleum
Services, Inc. (incorporated by reference to Exhibit No. 2 to the
Company's Current Report on Form 8-K dated March 22, 1995, File
No. 0-16961).
*21 - Subsidiaries of Pride Petroleum Services, Inc.
*23 - Consent of Independent Accountants
- ------------
* Filed herewith.
+ Compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1995.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PRIDE PETROLEUM SERVICES, INC.
Date: February 26, 1996 By: RAY H. TOLSON
-----------------------------------
(Ray H. Tolson)
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
RAY H. TOLSON President, Chief Executive Officer February 26, 1996
- ------------------------ and Chairman of the Board
(Ray H. Tolson) (Principal Executive Officer)
PAUL A. BRAGG Vice President and February 26, 1996
- ------------------------ Chief Financial Officer
(Paul A. Bragg) (Principal Financial Officer)
EARL W. MCNIEL Chief Accounting Officer February 26, 1996
- ------------------------ (Principal Accounting Officer)
(Earl W. McNiel)
JAMES B. CLEMENT Director February 26, 1996
- ------------------------
(James B. Clement)
JORGE E. ESTRADA M. Director February 26, 1996
- ------------------------
(Jorge E. Estrada M.)
RALPH D. MCBRIDE Director February 26, 1996
- ------------------------
(Ralph D. McBride)
THOMAS H. ROBERTS, JR. Director February 26, 1996
- ------------------------
(Thomas H. Roberts, Jr.)
JAMES T. SNEED Director February 26, 1996
- ------------------------
(James T. Sneed)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Sevices,
Inc.:
Our report on the consolidated financial statements of Pride Petroleum
Services, Inc. is included on page 23 of this Form 10-K. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 44 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 26, 1996
<PAGE>
<PAGE>
SCHEDULE II
PRIDE PETROLEUM SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands)
==============================================================================
CHARGED
BALANCE AT TO COSTS BALANCE
BEGINNING AND AT END
OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------
Allowance for Doubtful Accounts:
1995. . . . . . . . . . . . . . $ 394 $ 174 $ 142 $ 426
===== ===== ===== =====
1994. . . . . . . . . . . . . . $ 811 $ -- $ 417 $ 394
===== ===== ===== =====
1993. . . . . . . . . . . . . . $ 992 $ 116 $ 297 $ 811
===== ===== ===== =====
<PAGE>
<PAGE>
<PAGE>
INDENTURE, dated as of January 26, 1996, between PRIDE
PETROLEUM SERVICES, INC., a Louisiana corporation (the "Company"), and MARINE
MIDLAND BANK, as Trustee.
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the
Company's 6 1/4% Convertible Subordinated Debentures due 2006:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"ACCELERATION NOTICE" shall have the meaning specified in
Section 6.2.
"AFFILIATE" of any person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For purposes of this definition, the term "control"
means the power to direct the management and policies of a person, directly or
through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-
Registrar.
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any
similar Federal, state or foreign law for the relief of
debtors.
"BENEFICIAL OWNER" for purposes of the definition of Change of
Control has the meaning attributed to it in Rules 13d-3 and 13d-5 under the
Exchange Act (as in effect on the Issue Date), whether or not applicable, except
that a "person" shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time or upon the occurrence of certain
events.
1
"BOARD OF DIRECTORS" means, with respect to any Person, the
Board of Directors of such Person or any committee of the Board of Directors of
such Person authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"BOARD RESOLUTION" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company 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 a day that is not a Legal
Holiday.
"CAPITAL STOCK" means, with respect to any corporation, any
and all shares, interests, rights to purchase (other than convertible or
exchangeable Indebtedness), warrants, options, participations or other
equivalents of or interests (however designated) in stock issued by that
corporation.
"CAPITALIZED LEASE OBLIGATION" means rental obligations under
a lease that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"CASH" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"CHANGE OF CONTROL" means (i) any merger or consolidation of
the Company with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange
2
Act, whether or not applicable) is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total voting power in the aggregate
normally entitled to vote in elections of directors of the Company, or (iii)
during any period of 12 consecutive months after the Issue Date, individuals who
at the beginning of any such 12-month period constituted the Board of Directors
of the Company (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMON STOCK" means the Company's common stock, no par value,
or such stock as it may be reconstituted from time to time.
"COMPANY" means the party named as such in this Indenture
until a successor replaces it pursuant to the Indenture, and thereafter means
such successor.
"CONVERSION PRICE" shall have the meaning speci-
fied in Section 13.5.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DATE OF CONVERSION" shall have the meaning speci-
fied in Section 13.2.
"DEBENTURES" means, collectively, the 6 1/4% Convertible
Subordinated Debentures due 2006 issued under this Indenture.
"DEFAULT" means any event or condition that is, or after
notice or passage of time or both would be, an Event of Default.
"DEFAULTED INTEREST" shall have the meaning speci-
fied in Section 2.12.
3
"DESIGNATED SENIOR INDEBTEDNESS" means any Senior Indebtedness
that (i) at the time of delivery of a Payment Notice, has an aggregate principal
amount outstanding of at least $12.5 million and (ii) in the instrument
evidencing the same or the assumption or guarantee thereof (or related documents
to which the Company is a party) is expressly designated as "Designated Senior
Indebtedness" for purposes of this Indenture (PROVIDED, that such instrument or
documents may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Indebtedness).
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in
(b), with respect to any person, Capital Stock of such person that, by its terms
or by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time would
be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such person or any of its Subsidiaries, in whole or in part,
on or prior to the Stated Maturity of the Debentures and (b) with respect to any
Subsidiary of such person (including with respect to any Subsidiary of the
Company), any Capital Stock other than any common stock with no preference,
privileges, or redemption or repayment provisions.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"EVENT OF DEFAULT" shall have the meaning speci-
fied in Section 6.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"GAAP" means United States generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board
("FASB") as in effect as of the Issue Date.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a
Debenture is registered on the Registrar's books.
4
"INDEBTEDNESS" of any Person means, without duplication, the
following (whether currently outstanding or hereafter incurred or created): (i)
all liabilities and obligations, contingent or otherwise, of any such Person (a)
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion thereof), (b)
evidenced by bonds, notes, debentures or similar instruments, (c) representing
the balance deferred and unpaid of the purchase price of any property or
services, except such as would constitute trade payables to trade creditors in
the ordinary course of business that are not more than 90 days past their
original due date, (d) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (e) for the payment of money relating to a
Capitalized Lease Obligation, or (f) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(ii) all net obligations of such person under Interest Swap and Hedging
Obligations; (iii) all liabilities of others of the kind described in the
preceding clause (i) or (ii) that such Person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or acquire
any Capital Stock; and (iv) any and all deferrals, renewals, extensions,
refinancings, refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (i), (ii) or (iii), or this clause (iv), whether or not
between or among the same parties.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"INTEREST PAYMENT DATE" means the stated due date
of an installment of interest on the Debentures.
"INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of
any person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
5
fixed or floating rate of interest on the same notional
amount.
"ISSUE DATE" means the date of first issuance of the
Debentures under this Indenture.
"JUNIOR SECURITY" of any Person means any Qualified Capital
Stock of such Person or any Indebtedness of such Person that is subordinated in
right of payment to the Debentures and has no scheduled installment of principal
due, by redemption, sinking fund payment or otherwise, on or prior to the Stated
Maturity of the Debentures.
"LAST SALE PRICE" shall have the meaning specified
in Section 13.3.
"LEGAL HOLIDAY" shall have the meaning specified
in Section 14.7.
"LIEN" means any mortgage, lien, pledge, charge, security
interest, or other encumbrance of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"LIMITED RECOURSE INDEBTEDNESS" means (i) Indebtedness with
respect to the two drilling/workover barge rigs owned by Pride International,
C.A. as in effect on the date of this Indenture (the "Venezuelan Barge
Financing") and (ii) Indebtedness incurred to finance the purchase, acquisition,
renovation or construction of capital assets and related items (including
interest added to principal), or refinancings thereof, (a) in respect of which
the recourse of the holder of such Indebtedness is effectively limited to
specified assets or (b) in which the recourse and security are similar to (or
more favorable to the Company and its Subsidiaries than) the Venezuelan Barge
Financing.
"NOTICE OF DEFAULT" shall mean the notice
specified in Section 6.1(3).
"OFFER" shall have the meaning specified in Sec-
tion 13.5(d).
"OFFICER" means, with respect to the Company, the
Chief Executive Officer, the President, any Vice President,
6
the Chief Financial Officer, the Treasurer, the Controller,
or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means, with respect to the Company, a
certificate signed by two Officers or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 14.4
and 14.5.
"OPINION OF COUNSEL" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee and which complies with the
requirements of Sections 14.4 and 14.5. Such counsel may be an employee of or
counsel to the Company.
"PAYING AGENT" shall have the meaning specified in
Section 2.3.
"PAYMENT DEFAULT" shall have the meaning specified
in Section 12.2.
"PAYMENT NOTICE" shall have the meaning specified
in Section 12.2.
"PERSON" or "PERSON" means any corporation, individual,
limited liability company, joint stock company, joint venture, partnership,
unincorporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust, municipality or other entity.
"PRINCIPAL" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, any applicable premium, if any, on such
Indebtedness.
"PROPERTY" means any right or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
"QUALIFIED CAPITAL STOCK" means any Capital Stock
of the Company that is not Disqualified Capital Stock.
"RECORD DATE" means a record date specified in the Debentures
whether or not such record date is a Business Day.
"REDEMPTION DATE," when used with respect to any
Debenture to be redeemed, means the date fixed for such re-
7
demption pursuant to Article III of this Indenture and Paragraph 5 in the form
of Debenture.
"REDEMPTION PRICE," when used with respect to any Debenture to
be redeemed, means the redemption price for such redemption pursuant to
Paragraph 5 in the form of Debenture, which shall include, without duplication,
in each case, accrued and unpaid interest to and including the Redemption Date.
"REGISTRAR" shall have the meaning specified in
Section 2.3.
"REPURCHASE EVENT" shall have the meaning speci-
fied in Section 11.1.
"REPURCHASE OFFER" shall have the meaning speci-
fied in Section 11.1.
"REPURCHASE PAYMENT" shall have the meaning speci-
fied in Section 11.1.
"REPURCHASE PAYMENT DATE" shall have the meaning
specified in Section 11.1.
"REPURCHASE PUT DATE" shall have the meaning
specified in Section 11.1.
"SEC" means the Securities and Exchange Commis-
sion.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"SENIOR INDEBTEDNESS" of the Company means (i) all
Indebtedness of the Company unless, by the terms of the instrument creating or
evidencing such Indebtedness, it is provided that such Indebtedness is not
superior in right of payment to the Debentures or to other Indebtedness which is
pari passu with, or subordinated to the Debentures, and (ii) any modifications,
refunding, deferrals, renewals or extensions of any such Indebtedness or
securities, notes or other evidences of Indebtedness issued in exchange for such
Indebtedness; PROVIDED that in no event shall Senior Indebtedness include (a)
Indebtedness of the Company owed or owing to any Subsidiary of the Company or
any officer, director or employee of the Company or any Subsidiary of the
8
Company, (b) Indebtedness to trade creditors, or (c) any liability for taxes
owed or owing by the Company.
"SIGNIFICANT SUBSIDIARY" shall have the meaning assigned to
that term under Regulation S-X of the Securities Act, as in effect on the Issue
Date.
"SPECIAL RECORD DATE" for payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 2.12.
"STATED MATURITY," when used with respect to any Debenture,
means February 15, 2006.
"SUBSIDIARY" with respect to any Person, means (i) a
corporation a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, (ii) a partnership in which such Person
or a Subsidiary of such Person is, at the time, a general partner or (iii) any
other person (other than a corporation) in which such person, one or more
Subsidiaries of such person, or such person and one or more Subsidiaries of such
person, directly or indirectly, at the date of determination thereof has at
least majority ownership interest.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) as in effect on the date of the execution of this
Indenture; provided, however, that in the event the Trust Indenture Act of 1939
is amended after such date, "TIA" means, to the extent required by such
amendment, the Trust Indenture Act as so amended.
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday
and Friday, other than any day on which securities are not traded on the NASDAQ
National Market System (or, if the Common Stock is not admitted to trading
thereon, on the principal national securities exchange on which the Common Stock
is listed or admitted to trading).
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture, and thereafter means such successor.
9
"TRUST OFFICER" means any officer within the corporate trust
department of the Trustee with direct responsibility for the administration of
this Indenture, and also means, with respect to a particular corporate trust
matter, any other officer of the Trustee to whom such trust matter is referred
because of his knowledge of and familiarity with the particular subject.
SECTION 1.2. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Debentures.
"INDENTURE SECURITYHOLDER" means a Holder or a
Securityholder.
"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 Debentures.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute, or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(l) 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) words in the singular include the plu-
ral, and words in the plural include the singular;
10
(5) provisions apply to successive events
and transactions;
(6) "herein," "hereof" and other words of
similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision; and
(7) references to Sections or Articles means
reference to such Section or Article in this Indenture,
unless stated otherwise.
ARTICLE II
THE DEBENTURES
SECTION 2.1. FORM AND DATING.
The Debentures and the Trustee's certificate of authentication
in respect thereof shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Debentures may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Debentures and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Debenture attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Debenture shall be dated the date of its authentication.
The terms and provisions contained in the forms of Debentures
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one
Officer shall attest to, the Debenture for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Debentures and may be in facsimile form.
If an Officer whose signature is on a Debenture was an Officer
at the time of such execution but no longer holds that office at the time the
Trustee authenticates the Debenture, the Debenture shall be valid nevertheless
and the
11
Company shall nevertheless be bound by the terms of the Debentures and this
Indenture.
A Debenture shall not be valid until an authorized signatory
of the Trustee manually signs the certificate of authentication on the Debenture
but such signature shall be conclusive evidence that the Debenture has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate the Debentures for original
issue in the aggregate principal amount of up to $80,500,00 upon a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Debentures to be authenticated and the
date on which the Debentures are to be authenticated. The aggregate principal
amount of Debentures outstanding at any time may not exceed $80,500,000 except
as provided in Section 2.7; PROVIDED, that Debentures in excess of $70,000,000
aggregate principal amount shall not be issued on the Issue Date other than
pursuant to the over-allotment option granted by the Company to the underwriters
thereof, but may be issued subsequent to the initial issuance of Debentures, and
the Trustee shall not authenticate in excess of $70,000,000 aggregate principal
amount of Debentures on the Issue Date unless the written order of the Company
in respect of such issuance certifies that such additional aggregate principal
amount of Debentures are being issued pursuant to such over-allotment option.
Upon the written order of the Company in the form of an Officers' Certificate,
the Trustee shall authenticate Debentures in substitution of Debentures
originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Debentures. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Debentures whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Debentures shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
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SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where Debentures may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Debentures may be presented for payment ("Paying Agent") and where notices
and demands to or upon the Company in respect of the Debentures may be served.
The Company may act as Registrar or Paying Agent, except that, for the purposes
of Articles III, VIII and XI and as otherwise specified in the Indenture,
neither the Company nor any Affiliate of the Company shall act as Paying Agent.
The Registrar shall keep a register of the Debentures and of their transfer and
exchange. The Company may have one or more co-Registrars and one or more
additional Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. The Company hereby initially appoints the Trustee as Registrar and Paying
Agent, and the Trustee hereby initially agrees so to act.
The Company shall enter into an appropriate written agency
agreement with any Agent not a party to this Indenture, which agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall promptly notify the Trustee in writing 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.
SECTION 2.4. PAYING AGENT TO HOLD ASSETS IN
TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Debentures
(whether such assets have been distributed to it by the Company or any other
obligor on the Debentures), and shall notify the Trustee in writing of any
Default in making any such payment. If either of the Company or a Subsidiary of
the Company acts as Paying Agent, it shall segregate such assets and hold them
as a separate trust fund for the benefit of the Holders or the Trustee. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any Default or Event of Default, upon written
request to a
13
Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent (if other than the Company or an Affiliate of the
Company) shall have no further liability for such assets.
SECTION 2.5. SECURITYHOLDER LIST.
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 ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee on or
before the fifth Business Day preceding each Interest Payment Date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee reasonably may require of the names and addresses of
Holders.
SECTION 2.6. TRANSFER AND EXCHANGE.
When Debentures are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Debentures or to
exchange such Debentures for an equal principal amount of Debentures of other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; PROVIDED, HOWEVER, that the Debentures surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the Registrar
or co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Debentures at the
Registrar's or co-Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith. The Registrar or co-Registrar shall not
be required to register the transfer of or exchange (a) any Debenture selected
for redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Debenture
14
being redeemed in part, or (b) any Debenture for a period beginning 15 Business
Days before the mailing of a notice of an offer to repurchase pursuant to
Article XI or of redemption of Debentures pursuant to Article III hereof and
ending at the close of business on the day of such mailing.
SECTION 2.7. REPLACEMENT DEBENTURES.
If a mutilated Debenture is surrendered to the Trustee or if
the Holder of a Debenture claims and submits an affidavit or other evidence,
satisfactory to the Trustee, to the Trustee to the effect that the Debenture has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Debenture if the Trustee's requirements
are met. If required by the Trustee or the Company, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Debenture is replaced. The Company
may charge such Holder for its reasonable, out-of-pocket expenses in replacing a
Debenture.
Every replacement Debenture is an additional obligation of the
Company.
SECTION 2.8. OUTSTANDING DEBENTURES.
Debentures outstanding at any time are all the Debentures that
have been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section 2.8 as not
outstanding. A Debenture does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Debenture, except as provided in Section
2.9.
If a Debenture is replaced pursuant to Section 2.7 (other than
a mutilated Debenture surrendered for replacement), it ceases to be outstanding
unless the Trustee and the Company receives proof satisfactory to it that the
replaced Debenture is held by a BONA FIDE purchaser. A mutilated Debenture
ceases to be outstanding upon surrender of such Debenture and replacement
thereof pursuant to Section 2.7.
15
SECTION 2.9. TREASURY DEBENTURES.
In determining whether the Holders of the required principal
amount of Debentures have concurred in any direction, amendment, supplement,
waiver or consent, Debentures owned by the Company or an Affiliate of the
Company shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
amendment, supplement, waiver or consent, only Debentures that a Trust Officer
of the Trustee knows are so owned shall be disregarded.
SECTION 2.10. TEMPORARY DEBENTURES.
Until definitive Debentures are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Debentures.
Temporary Debentures shall be substantially in the form of definitive Debentures
but may have variations that the Company reasonably and in good faith considers
appropriate for temporary Debentures. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Debentures in
exchange for temporary Debentures. Until so exchanged, the temporary Debentures
shall in all respects be entitled to the same benefits under this Indenture as
permanent Debentures authenticated and delivered hereunder.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Debentures to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Debentures surrendered to them for registration of transfer,
exchange or payment. The Trustee, or at the written direction of the Trustee,
the Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall cancel and, at the written direction of the
Company, shall dispose of all Debentures surrendered for registration of
transfer, exchange, payment or cancellation. Subject to Section 2.7, the Company
may not issue new Debentures to replace Debentures that have been paid or
delivered to the Trustee for cancellation. No Debentures shall be authenticated
in lieu of or in exchange for any Debentures canceled as provided in this
Section 2.11, except as expressly permitted in the form of Debentures and as
permitted by this Indenture.
16
SECTION 2.12. DEFAULTED INTEREST.
Interest on any Debenture 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 that Debenture (or one or more predecessor Debentures) is
registered at the close of business on the Record Date for such interest.
Any interest on any Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (hereinafter
called "Defaulted Interest") shall forthwith cease to be payable to the
registered holder on the relevant Record Date, and such Defaulted Interest may
be paid by the Company, at its election in each case, as provided in clause (1)
or (2) below:
(1) The Company may elect to make pay-
ment of any Defaulted Interest to the persons in whose names the
Debentures (or their respective predecessor Debentures) are registered
at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Debenture and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of Cash 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 Cash when deposited to be held in
trust for the benefit of the persons entitled to such Defaulted
Interest as provided in this clause (1). 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 mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Debenture
17
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
Debentures (or their respective predecessor Debentures) are registered
on such Special Record Date and shall no longer be payable pursuant to
the following clause (2).
(2) The Company may make payment of any
Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Debenture delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Debenture shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Debenture.
SECTION 2.13. PERSONS DEEMED OWNERS.
The Company, the Trustee, any Agent and any authenticating
agent may treat the person in whose name any Debenture is registered as the
owner of such Debenture for the purpose of receiving payments of principal of or
interest on such Debenture and for all other purposes. None of the Company, the
Trustee, any Agent or any authenticating agent shall be affected by any notice
to the contrary.
ARTICLE III
REDEMPTION
SECTION 3.1. RIGHT OF REDEMPTION.
Redemption of Debentures, as permitted by any provision of
this Indenture, shall be made in accordance with Paragraph 5 of the Debentures
and this Article III. The Company will not have the right to redeem any
Debentures prior to February 15, 1999. On or after February 15, 1999, the
Company will have the right to redeem all or any part of
18
the Debentures at the Redemption Prices specified in Paragraph 5 therein under
the caption "Redemption," in each case including accrued and unpaid interest to
the Redemption Date.
SECTION 3.2. NOTICES TO TRUSTEE.
If the Company elects to redeem Debentures pursuant to
Paragraph 5 of the Debentures, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Debentures to be redeemed and
whether it wants the Trustee to give notice of redemption to the Holders.
The Company shall give each notice to the Trustee provided for
in this Section 3.2 at least 45 days before the Redemption Date (unless a
shorter notice shall be satisfactory to the Trustee). Any such notice may be
canceled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
SECTION 3.3. SELECTION OF DEBENTURES TO BE RE-
DEEMED.
If less than all of the Debentures are to be redeemed pursuant
to Paragraph 5 thereof, the Trustee shall select the Debentures to be redeemed
on a pro rata basis, by lot or by such other method as the Trustee shall
determine to be fair and appropriate and in such manner as complies with any
applicable depositary, legal and stock exchange requirements.
The Trustee shall make the selection from the Debentures
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Debentures selected for redemption and, in the
case of any Debenture selected for partial redemption, the principal amount
thereof to be redeemed. Debentures in denominations of $1,000 may be redeemed
only in whole. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Debentures that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Debentures called for redemption also apply to portions of Debentures called for
redemption.
19
SECTION 3.4. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee and each Holder whose Debentures are to be redeemed. At
the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Debentures to be redeemed and shall state:
(1) the Redemption Date, and that the
Debentures called for redemption may not be converted
after the fifth Business Day prior to the Redemption
Date;
(2) the Redemption Price, including the
amount of accrued and unpaid interest to be paid upon
such redemption;
(3) the name, address and telephone
number of the Paying Agent;
(4) that Debentures called for redemp-
tion must be surrendered to the Paying Agent at the
address specified in such notice to collect the Redemp-
tion Price;
(5) that, unless (a) the Company de-
faults in its obligation to deposit Cash with the Paying Agent in
accordance with Section 3.6 hereof or (b) such redemption payment is
prohibited pursuant to Article XII hereof or otherwise, interest on
Debentures called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such
Debentures is to receive payment of the Redemption Price, including
accrued and unpaid interest to the Redemption Date, upon surrender to
the Paying Agent of the Debentures called for redemption and to be
redeemed;
(6) if any Debenture is being redeemed
in part, the portion of the principal amount, equal to $1,000 or any
integral multiple thereof, of such Debenture to be redeemed and that,
after the Redemption Date, and upon surrender of such Debenture, a new
Debenture or Debentures in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
20
(7) if less than all the Debentures are
to be redeemed, the identification of the particular Debentures (or
portion thereof) to be redeemed, as well as the aggregate principal
amount of such Debentures to be redeemed and the aggregate principal
amount of Debentures to be outstanding after such partial redemption;
(8) the CUSIP number of the Debentures
to be redeemed; and
(9) that the notice is being sent pur-
suant to this Section 3.4 and pursuant to the redemption provisions of
Paragraph 5 of the Debentures.
SECTION 3.5. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.4, Debentures called for redemption become due and payable on the Redemption
Date and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or Paying Agent, such Debentures
called for redemption shall be paid at the Redemption Price, including interest,
if any, accrued and unpaid to the Redemption Date; PROVIDED that if the
Redemption Date is after a regular Record Date and on or prior to the
corresponding Interest Payment Date, the accrued interest shall be payable to
the Holder of the redeemed Debentures registered on the relevant Record Date;
and PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such Redemption Date to such succeeding Business Day.
SECTION 3.6. DEPOSIT OF REDEMPTION PRICE.
On or prior to the Redemption Date, the Company shall deposit
with the Paying Agent (other than the Company or an Affiliate of the Company)
Cash sufficient to pay the Redemption Price of, including accrued and unpaid
interest on, all Debentures to be redeemed on such Redemption Date (other than
Debentures or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation). The Paying Agent
shall promptly return to the Company any Cash so deposited which is not required
for that purpose upon the written request of the Company.
21
If the Company complies with the preceding paragraph and the
other provisions of this Article III and payment of the Debentures called for
redemption is not prohibited under Article XII or otherwise, interest on the
Debentures to be redeemed will cease to accrue on the applicable Redemption
Date, whether or not such Debentures are presented for payment. Notwithstanding
anything herein to the contrary, if any Debenture surrendered for redemption in
the manner provided in the Debentures shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall continue to accrue and be paid from the Redemption
Date until such payment is made on the unpaid principal, and, to the extent
lawful, on any interest not paid on such unpaid principal, in each case at the
rate and in the manner provided in Section 4.1 hereof and the Debenture.
SECTION 3.7. DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is to be redeemed in part,
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Debenture or Debentures
equal in principal amount to the unredeemed portion of the Debenture
surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. PAYMENT OF DEBENTURES.
The Company shall pay the principal of and interest on the
Debentures on the dates and in the manner provided in the Debentures. An
installment of principal of or interest on the Debentures shall be considered
paid on the date it is due if the Trustee or Paying Agent (other than the
Company or an Affiliate of the Company) holds for the benefit of the Holders, on
or before 10:00 a.m. New York City time on that date, Cash deposited and
designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on
overdue installments of interest at the rate specified in the Debentures
compounded semi-annually, to the extent lawful.
22
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The
City of New York, an office or agency where Debentures may be presented or
surrendered for payment, where Debentures may be surrendered for registration of
transfer or exchange and for conversion and where notices and demands to or upon
the Company in respect of the Debentures and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 14.2.
The Company may also from time to time designate one or more
other offices or agencies where the Debentures may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency. The Company hereby initially designates the Corporate Trust Office of
the Trustee as such office.
SECTION 4.3. CORPORATE EXISTENCE.
Subject to Article V, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate or other existence of each of its Subsidiaries in
accordance with the respective organizational documents of each of them and the
rights (charter and statutory) and corporate franchises of the Company and each
of its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required
to preserve, with respect to itself, any right or franchise, and with respect to
any of its Subsidiaries, any such existence, right or franchise, if (a) the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of such entity and (b) the loss thereof is not
disadvantageous in any material respect to the Holders.
23
SECTION 4.4. PAYMENT OF TAXES AND OTHER CLAIMS.
Except with respect to immaterial items, the Company shall,
and shall cause each of its Subsidiaries to, pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Company
or any of its Subsidiaries or any of their respective properties and assets and
(ii) all lawful claims, whether for labor, materials, supplies, services or
anything else, which have become due and payable and which by law have or may
become a Lien upon the property and assets of the Company or any of its
Subsidiaries; PROVIDED, HOWEVER, that neither the Company nor any Subsidiary
shall 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 disputed
amounts adequate reserves have been established in accordance with GAAP.
SECTION 4.5. MAINTENANCE OF PROPERTIES.
The Company shall cause all material properties used or useful
to the conduct of its business and the business of each 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 their reasonable judgment may be necessary, so
that the business carried on in connection therewith may be properly conducted
at all times; PROVIDED, HOWEVER, that nothing in this Section 4.5 shall prevent
the Company or any Subsidiary from discontinuing any operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is (a), in the judgment of the Company, desirable in the conduct of the
business of such entity and (b) not disadvantageous in any material respect to
the Holders.
SECTION 4.6. COMPLIANCE CERTIFICATE; NOTICE OF
DEFAULT.
(a) The Company shall deliver to the Trustee
within 120 days after the end of its fiscal year a brief
certificate complying with Section 314(a)(4) of the TIA and
24
stating that a review of the Company's activities and the activities of its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled their obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
of the Company to comply with any conditions or covenants in this Indenture and,
if such signor does know of such a failure to comply, the certificate shall
describe such failure with particularity. The certificate shall also notify the
Trustee should the relevant fiscal year end on any date other than the current
fiscal year end date.
(b) The Company shall, so long as any of the
Debentures are outstanding, deliver to the Trustee, promptly upon becoming aware
of any Default, Event of Default or fact which would prohibit the making of any
payment to or by the Trustee in respect of the Debentures, an Officers'
Certificate specifying such Default, Event of Default or fact and what action
the Company is taking or proposes to take with respect thereto. The Trustee
shall not be deemed to have knowledge of any Default, any Event of Default or
any such fact unless one of its Trust Officers receives written notice thereof
from the Company or any of the Holders.
SECTION 4.7. REPORTS.
(a) The Company shall deliver to the Trust-
ee, within 15 days after it is required to file such with the SEC, copies of the
annual and quarterly reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that the Company is required
to file with the SEC pursuant to Section 13 or 15 (d) of the Exchange Act.
(b) If the Company is required to furnish
annual or quarterly reports to its stockholders pursuant to the Exchange Act,
the Company shall cause any annual report furnished to its stockholders
generally, and any quarterly or other financial reports furnished by it to its
stockholders generally, promptly to be filed with the Trustee and mailed to the
Holders at their addresses appearing in the register of Securities maintained by
the Registrar.
25
SECTION 4.8. LIMITATION ON STATUS AS INVESTMENT
COMPANY.
Neither the Company nor any of its Subsidiaries shall become
an "investment company" (as that term is defined in the Investment Company Act
of 1940, as amended), or otherwise become subject to regulation under the
Investment Company Act of 1940, as amended.
SECTION 4.9. WAIVER OF STAY, EXTENSION OR USURY
LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of, premium of, or interest on the
Debentures as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. LIMITATION ON MERGER, SALE OR CON-
SOLIDATION.
(a) The Company shall not, directly or
indirectly, consolidate with or merge with or into another Person or sell,
lease, convey or transfer all or substantially all of its assets (computed on a
consolidated basis), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons, unless (i)
either (a) in the case of a merger or consolidation, the Company is the
surviving entity or (b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the Debentures and this
26
Indenture; (ii) no Default or Event of Default shall exist or shall occur
immediately before or after giving effect on a PRO FORMA basis to such
transaction; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and, if a supplemental indenture is required, such
supplemental indenture comply with this Indenture and that all conditions
precedent relating to such transactions have been satisfied.
(b) For purposes of clause (a) of this
Section 5.1, the sale, lease, conveyance or transfer of all or substantially all
of the properties and assets of one or more Subsidiaries of the Company to a
person other than the Company or a Subsidiary of the Company, which properties
and assets, if held by the Company instead of such Subsidiaries, would
constitute all or substantially all of the properties and assets of the Company
on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any sale, lease,
conveyance or transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such sale, lease,
conveyance or transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and when a successor corporation duly assumes all of the obligations of
the Company pursuant hereto and pursuant to the Debentures, the predecessor
shall be released from such obligations (except with respect to any obligations
that arise from, or are related to, such transaction).
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be caused
voluntarily or involuntarily or effected, without limitation, by operation of
27
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest upon
the Debentures as and when the same becomes due and payable, or to
perform any conversion of the Debentures required under this Indenture,
and the continuance of such default for a period of 30 days, whether or
not such payment is prohibited by Article XII;
(2) failure to pay all or any part of the principal
of or premium, if any, on the Debentures when and as the same becomes
due and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, pursuant to any Repurchase Offer or
otherwise, whether or not such payment is prohibited by Article XII;
(3) failure by the Company to observe or perform any
covenant, agreement or warranty contained in the Debentures or this
Indenture (other than a default in the performance of any covenant,
agreement or warranty which is specifically dealt with elsewhere in
this Section 6.1), and continuance of such failure for a period of 60
days after there has been given, by registered or certified mail, to
the Company by the Trustee, or to the Company and the Trustee by
Holders of at least 25% in aggregate principal amount of the then
outstanding Debentures, a written notice specifying such default or
breach, requesting it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(4) a default in the payment of principal, premium or
interest when due which extends beyond any stated period of grace
applicable thereto or an acceleration for any other reason of the
maturity of any Indebtedness (other than Limited Recourse Indebtedness,
unless such default or acceleration results in any other Indebtedness
(other than Limited Recourse Indebtedness) with an aggregate principal
amount in excess of $10,000,000.00 being accelerated or otherwise
becoming due and payable) of the Company or any of its Subsidiaries
with an aggregate principal amount in excess of $10,000,000.00;
28
(5) the Company or any Significant
Subsidiary of the Company pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or
proceeding;
(B) consents to the entry of an order for
relief against it in an involuntary case or
proceeding;
(C) consents to the appointment of a
Custodian of it or for all or for a substantial
part of its property;
(D) makes a general assignment for the
benefit of its creditors; or
(E) fails to contest any involuntary case or
proceeding filed against it within the time period fixed by
any applicable rules, and any extensions granted by the court
where such involuntary case or proceeding is pending;
(6) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that remains unstayed and in effect
for 60 days and that:
(A) is for relief against the Company or any
Significant Subsidiary of the Company in an
involuntary case or proceeding;
(B) appoints a Custodian of the Company or any
Significant Subsidiary of the Company or a Custodian for all
or for a substantial part of the property of the Company or
any Significant Subsidiary of the Company; or
(C) orders the liquidation of the Company or
any Significant Subsidiary of the Company;
(7) final unsatisfied judgments not covered by
insurance for the payment of money, or the issuance of any warrant of
attachment against any portion of the property or assets of the Company
or any of its Subsidiaries, aggregating in excess of $10,000,000.00 at
any one time rendered against the Company or any of its Subsidiaries
and not stayed, bonded or discharged for a
29
period (during which execution shall not be effectively stayed) of 75
days (or, in the case of any such final judgment which provides for
payment over time, which shall so remain unstayed, unbonded or
undischarged beyond any applicable payment date provided therein).
Notwithstanding the 60-day period and notice requirement
contained in Section 6.1(3) above, with respect to a default under Article XI
the 60-day period referred to in Section 6.1(3) shall be deemed to have begun as
of the date the Repurchase Event notice is required to be sent in the event that
the Company has not complied with the provisions of Section 11.1 and the Trustee
or Holders of at least 25% in principal amount of the outstanding Debentures
thereafter give the Notice of Default referred to in Section 6.1(3) to the
Company and, if applicable, the Trustee; PROVIDED, HOWEVER, that if the breach
or default is a result of a default in the payment when due of the Repurchase
Payment on the Repurchase Payment Date, such Event of Default shall be deemed,
for purposes of this Section 6.1, to arise no later than on the Repurchase
Payment Date .
SECTION 6.2. ACCELERATION OF MATURITY DATE; RE-
SCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default
specified in Section 6.1(5) or (6) relating to the Company) occurs and is
continuing, then, and in every such case, unless the principal of all of the
Debentures shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Debentures, by a notice in writing to the Company (and to the Trustee if given
by Holders) (an "Acceleration Notice"), may declare all of the principal of the
Debentures (or the Repurchase Payment if the Event of Default includes failure
to pay the Repurchase Payment), including in each case accrued interest thereon,
to be due and payable immediately. In the event a declaration of acceleration
resulting from an Event of Default described in Section 6.1(4) above has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if such default is cured or waived or the holders of the
Indebtedness which is the subject of such default have rescinded their
declaration of acceleration in respect of such Indebtedness within 60 days
thereof and the Trustee has received written notice of such cure, waiver or
rescission and no other Event of Default described in Section 6.1(4) above has
occurred that has not been cured or
30
waived within 60 days of the declaration of such acceleration in respect of such
Indebtedness. If an Event of Default specified in Section 6.1(5) or (6) relating
to the Company occurs, all principal and accrued interest thereon will be
immediately due and payable on all outstanding Debentures without any
declaration or other act on the part of Trustee or the Holders.
At any time after such a declaration of acceleration is made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided in this Article VI, the Holders of a
majority in aggregate principal amount of then outstanding Debentures, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if all Events of Default, other
than the non-payment of the principal of, premium, if any, and interest on
Debentures which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 6.12 and all sums paid or
advanced by the Trustee and any other amounts due the Trustee under Section 7.7
have been paid to the Trustee. Notwithstanding the previous sentence of this
Section 6.2, no waiver shall be effective against any Holder for any Event of
Default or event which with notice or lapse of time or both would be an Event of
Default with respect to any covenant or provision which cannot be modified or
amended without the consent of the Holder of each outstanding Debenture affected
thereby, unless all such affected Holders agree, in writing, to waive such Event
of Default or other event. No such waiver shall cure or waive any subsequent
default or impair any right consequent thereon.
SECTION 6.3. COLLECTION OF INDEBTEDNESS AND SUITS
FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if an Event of Default in payment
of principal, premium, or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Debentures, the whole amount then due
and payable on such Debentures for principal, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Debentures, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
31
collection, including compensation to, and expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due to the Trustee
under Section 7.7.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust in favor
of the Holders, may institute a judicial proceeding for the collection of the
sums so due and unpaid, may prosecute such proceeding to judgment or final
decree and may enforce the same against the Company or any other obligor upon
the Debentures and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including
(1) to file and prove a claim for the whole
amount of principal (and premium, if any) and interest owing and unpaid in
respect of the Debentures and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agent and counsel,
32
and any other amounts due to the Trustee under Section 7.7)
and of the Holders allowed in such judicial proceeding, and
(2) to collect and receive any moneys or
other property payable or deliverable on any such claims and
to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment, or composition affecting
the Debentures or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF THE DEBENTURES.
All rights of action and claims under this Indenture or the
Debentures may be prosecuted and enforced by the Trustee without the possession
of any of the Debentures or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel,
be for the ratable benefit of the Holders of the Debentures in respect of which
such judgment has been recovered.
SECTION 6.6. PRIORITIES.
Any money collected by the Trustee pursuant to this Article VI
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium (if any) or interest, upon presentation of the Debentures
33
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts
due pursuant to Section 7.7;
SECOND: To the Holders of Senior Indebtedness of
the Company to the extent provided in Article XII;
THIRD: To the Holders in payment of the amounts then due and
unpaid for principal of, premium (if any) and interest on, the Debentures in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Debentures for principal, premium (if any) and interest,
respectively; and
FOURTH: To whomsoever may be lawfully entitled
thereto, the remainder, if any.
SECTION 6.7. LIMITATION ON SUITS.
No Holder of any Debenture shall have any right to order or
direct the Trustee to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(A) such Holder has previously given
written notice to the Trustee of a continuing Event of
Default;
(B) the Holders of not less than 25% in
principal amount of then outstanding Debentures shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(C) such Holder or Holders have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities to be incurred or reasonably probable to be
incurred in compliance with such request;
(D) the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity
has failed to institute any such proceeding; and
34
(E) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period
by the Holders of a majority in principal amount of the outstanding
Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. UNCONDITIONAL RIGHT OF HOLDERS TO
RECEIVE PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision of this Indenture, the
Holder of any Debenture shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
interest on, such Debenture when due (including, in the case of redemption, the
Redemption Price on the applicable Redemption Date, and in the case of the
Repurchase Payment, on the applicable Repurchase Payment Date) and to institute
suit for the enforcement of any such payment after such respective dates, and
such rights shall not be impaired without the consent of such Holder.
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures in Section 2.7, no
right or remedy herein conferred 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 6.10. DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any
Holder of any Debenture to exercise any right or remedy
35
arising upon any Event of Default shall impair the exercise of any such right or
remedy or constitute a waiver of any such Event of Default. Every right and
remedy given by this Article VI 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.
SECTION 6.11. CONTROL BY HOLDERS.
The Holder or Holders of a majority in aggregate principal
amount of then outstanding Debentures shall 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, PROVIDED,
that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture or involve the Trustee in any
personal liability,
(2) the Trustee shall not determine that the action
so directed would be unjustly prejudicial to the Holders not taking
part in such direction, and
(3) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction.
SECTION 6.12. WAIVER OF PAST DEFAULT.
Subject to Section 6.8, the Holder or Holders of not less than
a majority in aggregate principal amount of the outstanding Debentures may, on
behalf of all Holders, prior to the declaration of the maturity of the
Debentures, waive any past default hereunder and its consequences, except a
default
(A) in the payment of the principal of,
premium, if any, or interest on, any Debenture as
specified in clauses (1) and (2) of Section 6.01, or
(B) in respect of a covenant or provi-
sion hereof which, under Article IX, cannot be modified or amended
without the consent of the Holder of each outstanding Debenture
affected.
36
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair the exercise of any right arising
therefrom.
SECTION 6.13. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any
Debenture by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, 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, suffered or omitted to be taken by it as Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 6.13 shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in aggregate principal amount of the outstanding Debentures, or to any
suit instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Debenture on or after the respective
Maturity Date expressed in such Debenture (including, in the case of redemption,
on or after the Redemption Date).
SECTION 6.14. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder 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 case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
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 had been instituted.
37
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed.
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of a
Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or obligations shall be implied in or read into this
Indenture which are adverse to the Trustee.
(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, if required by the terms hereof,
conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions which by any provision
hereof are specifically required to be furnished to the Trustee 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 paragraph does not limit the effect of
paragraph (b) of this Section 7.1.
(2) The Trustee shall not be liable for any
error of judgment made in good faith by a Trust Offi-
38
cer, unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts.
(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 6.11.
(d) No provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or to take
or omit to take any action under this Indenture or at the request, order or
direction of the Holders or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(e) Every provision of this Indenture that
in any way relates to the Trustee is subject to paragraphs (a), (b), (c), (d)
and (f) of this Section 7.1.
(f) The Trustee shall not be liable for
interest on any assets received by it except as the Trustee may agree in writing
with the Company. Assets held in trust by the Trustee need not be segregated
from other assets except to the extent required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1:
(a) 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 consult with counsel and may require an Officers' Certificate or
an Opinion of Counsel, which shall conform to Sections 14.4 and 14.5. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or advice of counsel.
(c) The Trustee may act through its attor-
neys and agents and shall not be responsible for the misconduct or negligence of
any agent appointed with due care.
39
(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 conferred upon it by this Indenture.
(e) The Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request, direction,
consent, order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney.
(f) 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 reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
(g) Unless otherwise specifically provided
for in this Indenture, any demand, request, direction as notice from the Company
shall be sufficient if signed by an Officer of the Company.
(h) The Trustee shall have no duty to in-
quire as to the performance of the Company's covenants in Article IV hereof. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
6.1(1) or 6.1(2) or (ii) any Default or Event of Default of which the Trustee
shall have received written notification or a Trust Officer shall have obtained
actual knowledge.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Debentures and may otherwise deal with the Company, any
of its Subsidiaries, or their respective Affiliates with the same rights it
would have if it were not Trustee. Any Agent may do the same with
40
like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Debentures and it shall not be accountable for
the Company's use of the proceeds from the Debentures, and it shall not be
responsible for any statement in the Debentures, other than the Trustee's
certificate of authentication, or the use or application of any funds received
by a Paying Agent other than the Trustee.
SECTION 7.5. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the uncured Default or Event of Default within 90 days after such
Default or Event of Default occurs. Except in the case of a Default or an Event
of Default in payment of principal (or premium, if any) of, or interest on, any
Debenture (including the payment of the Repurchase Payment on the Repurchase
Payment Date, and the payment of the Redemption Price on the Redemption Date),
the Trustee may withhold the notice if and so long as a Trust Officer in good
faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.
On or about May 15 of each year, beginning with May 15, 1996,
the Trustee shall, if required by law, mail to each Securityholder a brief
report dated as of such date that complies with TIA ss. 313(a). The Trustee also
shall comply with TIA ss.ss. 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if
the Debentures become listed on any stock exchange or automated quotation
system.
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Debentures are listed.
41
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company agrees to pay to the Trustee from time to time
reasonable compensation for its services. 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 upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel.
The Company agrees to indemnify the Trustee and each of its
officers, directors, attorneys-in-fact and agents for, and hold it harmless
against, any claim, demand, expense (including but not limited to reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel),
loss or liability incurred by it without negligence or bad faith on its part,
arising out of or in connection with the administration of this trust and its
rights or duties hereunder including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company may defend the claim and the Trustee shall
provide reasonable cooperation at the Company's expense in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its written consent. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section
7.7, the Trustee shall have a lien prior to the Debentures on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal and premium, if any, of or interest on particular
Debentures.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
42
The Company's obligations under this Section 7.7 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article VIII of this
Indenture and any rejection or termination of this Indenture under any
Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in this
Section.
The Trustee may resign by so notifying the Company in writing.
The Holder or Holders of a majority in principal amount of the outstanding
Debentures may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section
7.10;
(b) the Trustee is adjudged bankrupt or
insolvent;
(c) a receiver, Custodian, or other public
officer takes charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holder or Holders of a majority in principal amount of the Debentures may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 7.7 have
been paid, the retiring Trustee shall transfer all property held by it as
trustee to the successor Trustee, subject to the lien provided in Section 7.7,
the resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of
43
the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holder or Holders of at least 10% in principal amount of the
outstanding Debentures may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA
ss. 310(a)(1), (2) and (5). The Trustee shall have a combined capital and
surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
44
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1. SATISFACTION AND DISCHARGE OF IN-
DENTURE.
The Company may terminate its obligations under this Indenture
(subject to the provisions of this Article VIII) when it shall have delivered to
the Trustee for cancellation all Debentures theretofore authenticated (other
than any Debentures which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as provided in Article II hereof) and the
following conditions shall be satisfied:
(1) The Company has paid all sums payable
under the Indenture; and
(2) The Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent have been complied with as contemplated by this Section
8.1.
SECTION 8.2. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, for the payment of the principal of, premium, if any,
or interest on any Debenture and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Debenture shall
thereafter look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the NEW YORK TIMES and THE WALL STREET
JOURNAL (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
45
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT
CONSENT OF HOLDERS.
Without the consent of any Holder, the Company, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or incon-
sistency, or to make any other provisions with respect to matters or questions
arising under this Indenture which shall not be inconsistent with the provisions
of this Indenture, PROVIDED, that the Company has delivered to the Trustee an
Opinion of Counsel stating that such action pursuant to this clause (1) does not
adversely affect the interests of any Holder in any respect;
(2) to create additional covenants of the
Company for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or to make any other change that does not
adversely affect the rights of any Holder, PROVIDED, that the Company has
delivered to the Trustee an Opinion of Counsel stating that such change pursuant
to this clause (2) does not adversely affect the rights of any Holder;
(3) to provide for collateral for or guaran-
tors of the Debentures;
(4) to evidence the succession of another
Person to the Company and the assumption by any such successor of the
obligations of the Company herein and in the Debentures in accordance with
Article V; or
(5) to comply with the TIA.
SECTION 9.2. AMENDMENTS, SUPPLEMENTAL INDENTURES
AND WAIVERS WITH CONSENT OF HOLDERS.
Subject to Section 6.8 and the last sentence of this
paragraph, with the consent of the Holders of not less than a majority in
aggregate principal amount of then outstanding Debentures, by written act of
said Holders deliv-
46
ered to the Company and the Trustee, the Company, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Debentures or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or the Debentures or of modifying in any
manner the rights of the Holders under this Indenture or the Debentures. Subject
to Section 6.8 and the last sentence of this paragraph, the Holder or Holders of
not less than a majority in aggregate principal amount of then outstanding
Debentures may, in writing, waive compliance by the Company with any provision
of this Indenture or the Debentures. Notwithstanding any of the above, however,
no such amendment, supplemental indenture or waiver shall, without the consent
of the Holder of each outstanding Debenture affected thereby:
(1) reduce the percentage of principal amount of Debentures
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Debentures;
(2) reduce the rate or extend the time for pay-
ment of interest on any Debenture;
(3) reduce the principal amount of any Debenture,
or reduce the Repurchase Payment or the Redemption Price;
(4) change the Stated Maturity of any Debenture;
(5) alter the redemption provisions of Article III, the
provisions of Article XI, Article XII or Article XIII, or the Conversion Price,
in any case in a manner adverse to any Holder;
(6) make any changes in the provisions concerning waivers by
Holders of the Debentures (including waivers of Defaults or Events of Default)
or the provisions of this third sentence of Section 9.2 (except to increase any
required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
outstanding Debenture affected thereby) or impair the rights of Holders to
institute suit for the enforcement of any payments due under this Indenture or
the conversion of any Debenture; or
47
(7) make the principal of, or the interest on, any Debenture
payable with anything or in any manner other than as provided for in this
Indenture (including changing the place of payment where, or the coin or
currency in which, any Debenture or any premium or the interest thereon is
payable) and the Debentures as in effect on the date hereof.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section
9.2 or Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under
this Article IX or under Section 6.12, the Company may, but shall not be
obligated to, offer to any Holder who consents to such amendment, supplement or
waiver, or (at the option of the Company) to all Holders, consideration for
consent to such amendment, supplement or waiver, and may offer to purchase or
exchange consideration for such Holder's Debenture in connection with obtaining
such consent.
SECTION 9.3. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Debentures shall comply with the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same
48
debt as the consenting Holder's Debenture, even if notation of the consent is
not made on any Debenture. However, any such Holder or subsequent Holder may
revoke the consent as to his Debenture or portion of his Debenture by written
notice to the Company or the Person designated by the Company as the Person to
whom consents should be sent if such revocation is received by the Company or
such Person before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Debentures have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be the date so fixed by
the Company notwithstanding the provisions of the TIA. If a record date is
fixed, then notwithstanding the last sentence of the immediately preceding
paragraph, those Persons who were Holders at such record date, and only those
Persons (or their duly designated proxies), shall be entitled to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (7) of Section 9.2.
SECTION 9.5. NOTATION ON OR EXCHANGE OF
DEBENTURES.
If an amendment, supplement or waiver changes the terms of a
Debenture, the Trustee may require the Holder of the Debenture to deliver it to
the Trustee or require the Holder to put an appropriate notation on the
Debenture. The Trustee may place an appropriate notation on the Debenture about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Debenture shall issue
and the Trustee shall authenticate a new Debenture that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Debenture
shall not affect the validity of such amendment, supplement or waiver.
49
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; PROVIDED, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, in addition to the documents required by Section
14.4, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver is authorized or permitted by this Indenture.
ARTICLE X
MEETINGS OF SECURITYHOLDERS
SECTION 10.1. PURPOSES FOR WHICH MEETINGS MAY BE
CALLED.
A meeting of Securityholders may be called at any time and
from time to time pursuant to the provisions of this Article X for any of the
following purposes:
(a) to give any notice to the Company or to
the Trustee, or to give any directions to the Trustee, or to waive or to consent
to the waiving of any Default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Securityholders pursuant to any of the provisions of Article VI;
(b) to remove the Trustee or appoint a
successor Trustee pursuant to the provisions of Article VII;
(c) to consent to an amendment, supplement
or waiver pursuant to the provisions of Section 9.2; or
(d) to take any other action (i) authorized
to be taken by or on behalf of the Holder or Holders of any specified aggregate
principal amount of the Debentures under any other provision of this Indenture,
or authorized or permitted by law or (ii) which the Trustee deems necessary or
appropriate in connection with the administration of this Indenture.
50
SECTION 10.2. MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of Securityholders
to take any action specified in Section 10.1, to be held at such time and at
such place in the City of New York, New York or elsewhere as the Trustee shall
determine. Notice of every meeting of Securityholders, setting forth the time
and place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be mailed by the Trustee, first-class postage prepaid, to
the Company and to the Holders at their last addresses as they shall appear on
the registration books of the Registrar, not less than 10 nor more than 60 days
prior to the date fixed for a meeting.
Any meeting of Securityholders shall be valid without notice
if the Holders of all Debentures then outstanding are present in Person or by
proxy, or if notice is waived before or after the meeting by the Holders of all
Debentures outstanding, and if the Company and the Trustee are either present by
duly authorized representatives or have, before or after the meeting, waived
notice.
SECTION 10.3. CALL OF MEETINGS BY THE COMPANY OR
HOLDERS.
In case at any time the Company or the Holders of not less
than 10% in aggregate principal amount of the Debentures then outstanding, shall
have requested the Trustee to call a meeting of Securityholders to take any
action specified in Section 10.1, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders of Debentures in the amount above
specified may determine the time and place in The City of New York, New York or
elsewhere for such meeting and may call such meeting for the purpose of taking
such action, by mailing or causing to be mailed notice thereof as provided in
Section 10.2, or by causing notice thereof to be published at least once in each
of two successive calendar weeks (on any Business Day during such week) in a
newspaper or newspapers printed in the English language, customarily published
at least five days a week of a general circulation in The City of New York,
State of New York, the first such publication to be not less than 10 nor more
than 60 days prior to the date fixed for the meeting.
51
SECTION 10.4. WHO MAY ATTEND AND VOTE AT MEET-
INGS.
To be entitled to vote at any meeting of Securityholders, a
Person shall (a) be a registered Holder of one or more Debentures, or (b) be a
Person appointed by an instrument in writing as proxy for the registered Holder
or Holders of Debentures. The only Persons who shall be entitled to be present
or to speak at any meeting of Securityholders shall be the Persons entitled to
vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company, and its counsel.
SECTION 10.5. REGULATIONS MAY BE MADE BY TRUSTEE;
CONDUCT OF THE MEETING; VOTING RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
action by or any meeting of Securityholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, and submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think appropriate.
Such regulations may fix a record date and time for determining the Holders of
record of Debentures entitled to vote at such meeting, in which case those and
only those Persons who are Holders of Debentures at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting whether or
not they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Securityholders as provided in Section 10.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders of a majority
in principal amount of the Debentures represented at the meeting and entitled to
vote.
At any meeting each Securityholder or proxy shall be entitled
to one vote for each $1,000 principal amount of Debentures held or represented
by him; PROVIDED, HOWEVER,
52
that no vote shall be cast or counted at any meeting in respect of any
Debentures challenged as not outstanding and ruled by the chairman of the
meeting to be not then outstanding. The chairman of the meeting shall have no
right to vote other than by virtue of Debentures held by him or instruments in
writing as aforesaid duly designating him as the proxy to vote on behalf of
other Securityholders. Any meeting of Securityholders duly called pursuant to
the provisions of Section 10.2 or Section 10.3 may be adjourned from time to
time by vote of the Holder or Holders of a majority in aggregate principal
amount of the Debentures represented at the meeting and entitled to vote, and
the meeting may be held as so adjourned without further notice.
SECTION 10.6. VOTING AT THE MEETING AND RECORD TO
BE KEPT.
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Debentures or of their representatives by proxy and
the principal amount of the Debentures voted by the ballot. The permanent
chairman of the meeting shall appoint two inspectors of votes, who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to such record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more Persons having knowledge of the facts, setting forth a
copy of the notice of the meeting and showing that such notice was mailed as
provided in Section 10.2 or published as provided in Section 10.3. The record
shall be signed and verified by the affidavits of the permanent chairman and the
secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
53
SECTION 10.7. EXERCISE OF RIGHTS OF TRUSTEE OR
SECURITYHOLDERS MAY NOT BE HINDERED OR DELAYED BY CALL OF
MEETING.
Nothing contained in this Article X shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Securityholders or any rights expressly or impliedly conferred hereunder to make
such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Securityholders under any of
the provisions of this Indenture or of the Debentures.
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. REPURCHASE OF DEBENTURES AT OPTION
OF THE HOLDER.
(a) In the event that a Repurchase Event oc-
curs, each Holder shall have the right, at such Holder's option, pursuant to an
irrevocable and unconditional offer by the Company and subject to the terms and
conditions of this Indenture, to require the Company to repurchase all or any
part of such Holder's Debentures (provided, that the principal amount of such
Debentures must be $1,000 or an integral multiple thereof) on the date
determined by the Company (the "Repurchase Payment Date") that is no later than
45 Business Days after the occurrence of such Repurchase Event, at a cash price
(the "Repurchase Payment") equal to 100% of the principal amount thereof, plus
accrued and unpaid interest to the Repurchase Payment Date.
A "Repurchase Event" will be deemed to have occurred at such
time as (i) there is a Change of Control, or (ii) the Common Stock is not listed
for trading on a United States national securities exchange or the NASDAQ
National Market System.
(b) In the event that, pursuant to this
Section 11.1, the Company shall be required to commence an offer to purchase
Debentures (a "Repurchase Offer"), the Company shall follow the procedures set
forth in this Section 11.1 as follows:
54
(1) the Repurchase Offer shall commence
within 15 Business Days following the Repurchase Event;
(2) the Repurchase Offer shall remain open for no
fewer than 10 nor more than 20 Business Days, except to the extent that
a longer period is required by applicable law (the "Repurchase Offer
Period");
(3) upon the expiration of a Repurchase Offer, the
Company shall purchase all of the properly tendered Debentures at the
Repurchase Payment, including accrued and unpaid interest to the
Repurchase Payment Date;
(4) if the Repurchase Payment Date is on or after an
interest payment record date and on or before the related Interest
Payment Date, any accrued interest will be paid to the Person in whose
name a Debenture is registered at the close of business on such record
date, and no additional interest will be payable to Securityholders who
tender Debentures pursuant to the Repurchase Offer;
(5) the Company shall provide the Trustee with notice
of the Repurchase Offer at least 5 Business Days before the
commencement of any Repurchase Offer; and
(6) on or before the commencement of any Repurchase
Offer, the Company or the Trustee (upon the request and at the expense
of the Company) shall send, by first-class mail, a notice prepared by
the Company to each of the Securityholders, which (to the extent
consistent with this Indenture) shall govern the terms of the
Repurchase Offer and shall state:
(i) that the Repurchase Offer is being
made pursuant to such notice and this Section 11.1 and that all
Debentures, or portions thereof, tendered will be accepted for payment;
(ii) the Repurchase Payment (including
the amount of accrued and unpaid interest), the Repur-
chase Payment Date and the Repurchase Put Date (as
defined below);
55
(iii) that any Debenture, or portion
thereof, not tendered or accepted for payment will
continue to accrue interest;
(iv) that, unless the Company defaults
in depositing Cash with the Paying Agent in accordance with the last
paragraph of this clause (b) or such payment is prevented pursuant to
Article XII, any Debenture, or portion thereof, accepted for payment
pursuant to the Repurchase Offer shall cease to accrue interest after
the Repurchase Payment Date;
(v) that Holders electing to have a
Debenture, or portion thereof, purchased pursuant to a Repurchase Offer
will be required to surrender the Debenture, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Debenture
completed, to the Paying Agent (which may not for purposes of this
Section 11.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) at the
address specified in the notice prior to the close of business on the
earlier of (a) the third Business Day prior to the Repurchase Payment
Date and (b) the third Business Day following the expiration of the
Repurchase Offer (such earlier date being the "Repurchase Put Date");
(vi) that Holders will be entitled to
withdraw their election, in whole or in part, if the Paying Agent
(which may not for purposes of this Section 11.1, notwithstanding
anything in this Indenture to the contrary, be the Company or any
Affiliate of the Company) receives, up to the close of business on the
Repurchase Put Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Debentures the Holder is withdrawing and a statement that such
Holder is withdrawing his election to have such principal amount of
Debentures purchased;
(vii) the Conversion Price as of the
date of the notice and the date on which Debentures delivered for
repurchase may no longer be converted as provided in Section 13.1 of
this Indenture; and
(viii) a brief description of the
events resulting in such Repurchase Event.
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Any such Repurchase Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws. The
Company shall publicly announce the results of any such Repurchase Offer on or
as soon as practicable after the Repurchase Payment date therefor.
On or before the Repurchase Payment Date, the Company shall
(i) accept for payment Debentures or portions thereof properly tendered pursuant
to the Repurchase Offer on or before the Repurchase Put Date, (ii) deposit with
the Paying Agent Cash sufficient to pay the Repurchase Payment (including
accrued and unpaid interest) for all Debentures or portions thereof so tendered
and (iii) deliver to the Trustee Debentures so accepted together with an
Officers' Certificate listing the Debentures or portions thereof being purchased
by the Company. The Paying Agent shall on the Repurchase Payment Date mail to
Holders of Debentures so accepted payment in an amount equal to the Repurchase
Payment for such Debentures, and the Trustee shall promptly authenticate and
mail or deliver to such Holders a new Debenture equal in principal amount to any
unpurchased portion of the Debenture surrendered. Any Debentures not so accepted
shall be promptly mailed or delivered by the Company to the Holder thereof.
ARTICLE XII
SUBORDINATION
SECTION 12.1. DEBENTURES SUBORDINATED TO SENIOR
INDEBTEDNESS.
The Company and each Holder, by its acceptance of Debentures,
agree that (a) the payment of the principal of, premium, if any, and interest on
the Debentures and (b) any other payment in respect of the Debentures, including
on account of the acquisition or redemption of the Debentures by the Company
(including, without limitation, pursuant to Article XI) is subordinated, to the
extent and in the manner provided in this Article XII, to the prior payment in
full of all Senior Indebtedness of the Company, whether outstanding at the date
of this Indenture or thereafter created, incurred, assumed or guaranteed, and
that these subordination provisions are for the benefit of the holders of Senior
Indebtedness.
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This Article XII shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder and
any one or more of them may enforce such provisions.
SECTION 12.2. NO PAYMENT ON DEBENTURES IN CERTAIN
CIRCUMSTANCES.
(a) No payment shall be made by the Company
on account of the principal of, premium, if any, or interest on the Debentures
or to acquire any of the Debentures (including any repurchases of Debentures at
the option of the Holder) for cash or property (other than Junior Securities of
the Company), or on account of the redemption provisions of the Debentures, in
the event of default in payment of any principal of, premium, if any, or
interest on any Senior Indebtedness of the Company when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise (a "Payment Default"), unless and until such Payment Default has
been cured or waived or otherwise has ceased to exist.
(b) No payment (by set-off or otherwise) may
be made by or on behalf of the Company on account of the principal of, premium,
if any, or interest on, the Debentures or to acquire any of the Debentures
(including any repurchases of the Debentures at the option of the Holder) for
cash or property (other than Junior Securities), or on account of the redemption
provisions of the Debentures, in the event of any event of default (other than a
Payment Default) with respect to any Designated Senior Indebtedness permitting
the holders of such Designated Senior Indebtedness (or a trustee or other
representative on behalf of the holders thereof) to declare such Designated
Senior Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable, upon written notice thereof to the
Company and the Trustee by any holders of Designated Senior Indebtedness (or a
trustee or other representative on behalf of the holders thereof) (the "Payment
Notice"), unless and until such event of default shall have been cured or waived
or otherwise has ceased to exist; PROVIDED, that such payments may not be
prevented pursuant to this Section 12.2(b) for more than 179 days after an
applicable Payment Notice has been received by the Trustee unless the Designated
Senior Indebtedness in respect
58
of which such event of default exists has been declared due and payable in its
entirety, in which case no such payment may be made until such acceleration has
been rescinded or annulled or such Designated Senior Indebtedness has been paid
in full. No event of default that existed or was continuing on the date of any
Payment Notice (whether or not such event of default is on the same issue of
Designated Senior Indebtedness) may be made the basis for the giving of a second
Payment Notice, and only one such Payment Notice may be given in any 365-day
period.
(c) In furtherance of the provisions of Sec-
tion 12.1, in the event that, notwithstanding the foregoing provisions of this
Section 12.2, any payment or distribution of assets of the Company (other than
Junior Securities of the Company) shall be received by the Trustee or the
Holders at a time when such payment or distribution was prohibited by the
provisions of this Section 12.2, then, unless such payment or distribution is no
longer prohibited by this Section 12.2, such payment or distribution (subject to
the provisions of Section 12.7) shall be received and held in trust by the
Trustee or such Holder or Paying Agent for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders or such Paying Agent, as the case may be, to the holders of Senior
Indebtedness of the Company remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
of the Company may have been issued, ratably, according to the aggregate amounts
remaining unpaid on account of such Senior Indebtedness of the Company held or
represented by each, for application to the payment of all Senior Indebtedness
in full after giving effect to all concurrent payments and distributions to or
for the holders of such Senior Indebtedness.
SECTION 12.3. DEBENTURES SUBORDINATED TO PRIOR
PAYMENT OF ALL SENIOR INDEBTEDNESS ON DISSOLUTION, LIQUI-
DATION OR REORGANIZATION.
Upon any distribution of assets of the Company or upon any
dissolution, winding up, total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or similar proceeding or upon assignment for the benefit of
creditors:
59
(a) the holders of all Senior Indebtedness
of the Company shall first be entitled to receive payments in full before the
Holders are entitled to receive any payment on account of the principal of,
premium, if any, and interest on the Debentures (other than Junior Securities of
the Company);
(b) any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities
(other than Junior Securities of the Company), to which the Holders or the
Trustee on behalf of the Holders would be entitled, except for the provisions of
this Article XII, shall be paid by the liquidating trustee or agent or other
Person making such a payment or distribution directly to the holders of such
Senior Indebtedness or their representative, ratably according to the respective
amounts of Senior Indebtedness held or represented by each, to the extent
necessary to make payment in full of all such Senior Indebtedness remaining
unpaid after giving effect to all concurrent payments and distributions to the
holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than Junior Securities
of the Company), shall be received by the Trustee or the Holders or any Paying
Agent (or, if the Company or any Affiliate of the Company is acting as its own
Paying Agent, money for any such payment or distribution shall be segregated or
held in trust) on account of the principal of or interest on the Debentures
before all Senior Indebtedness of the Company is paid in full, such payment or
distribution (subject to the provisions of Section 12.7) shall be received and
held in trust by the Trustee or such Holder or Paying Agent for the benefit of
the holders of such Senior Indebtedness, or their respective representatives,
ratably according to the respective amounts of such Senior Indebtedness held or
represented by each, to the extent necessary to make payment as provided herein
of all such Senior Indebtedness remaining unpaid after giving effect to all
concurrent payments and distributions and all provisions therefor to or for the
holders of such Senior Indebtedness, but only to the extent that as to any
holder of such Senior Indebtedness, as promptly as practical following notice
from the Trustee to the holders of such Senior Indebtedness that such prohibited
payment has been received by the Trustee, Holder(s) or Paying Agent (or has been
segregated as provided above), such holder (or a
60
representative therefor) notifies the Trustee of the amounts then due and owing
on such Senior Indebtedness, if any, held by such holder and only the amounts
specified in such notices to the Trustee shall be paid to the holders of such
Senior Indebtedness.
SECTION 12.4. SECURITYHOLDERS TO BE SUBROGATED TO
RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness of
the Company as provided herein, the Holders of Debentures shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Debentures shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
such Senior Indebtedness by the Company, or by or on behalf of the Holders by
virtue of this Article XII, which otherwise would have been made to the Holders
shall, as between the Company and the Holders, be deemed to be payment by the
Company or on account of such Senior Indebtedness, it being understood that the
provisions of this Article XII are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article XII shall
have been applied, pursuant to the provisions of this Article XII, to the
payment of amounts payable under Senior Indebtedness of the Company, then the
Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay all amounts payable under
or in respect of such Senior Indebtedness in full.
SECTION 12.5. OBLIGATIONS OF THE COMPANY UNCONDI-
TIONAL.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms,
61
or is intended to or shall affect the relative rights of the Holders and
creditors of the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article XII, of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Notwithstanding anything
to the contrary in this Article XII or elsewhere in this Indenture or in the
Debentures, upon any distribution of assets of the Company referred to in this
Article XII, the Trustee, subject to the provisions of Sections 7.1 and 7.2, and
the Holders shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other Person making any distribution to the Trustee or to
the Holders for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article XII so long as such court has been apprised of the provisions
of, or the order, decree or certificate makes reference to, the provisions of
this Article XII.
SECTION 12.6. TRUSTEE ENTITLED TO ASSUME PAYMENTS
NOT PROHIBITED IN ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee unless and until a Trust Officer of the Trustee or any Paying
Agent shall have received, no later than two Business Days prior to such
payment, written notice thereof from the Company or from one or more holders of
Senior Indebtedness or from any representative therefor and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, shall be entitled in all respects conclusively to assume
that no such fact exists.
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SECTION 12.7. APPLICATION BY TRUSTEE OF ASSETS
DEPOSITED WITH IT.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Securityholders
and, to the extent allocated for the payment of Debentures, shall not be subject
to the subordination provisions of this Article XII. Otherwise, any deposit of
assets with the Trustee or the Paying Agent (whether or not in trust) for the
payment of principal of or interest on any Debentures shall be subject to the
provisions of Sections 12.1, 12.2, 12.3 and 12.4; PROVIDED, THAT, if prior to
two Business Days preceding the date on which by the terms of this Indenture any
such assets may become distributable for any purpose (including without
limitation, the payment of either principal of or interest on any Debenture) the
Trustee or such Paying Agent shall not have received with respect to such assets
the written notice provided for in Section 12.6, then the Trustee or such Paying
Agent shall have full power and authority to receive such assets and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary which may be received by it on or after such date.
SECTION 12.8. SUBORDINATION RIGHTS NOT IMPAIRED
BY ACTS OR OMISSIONS OF THE COMPANY OR HOLDERS OF SENIOR
INDEBTEDNESS.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination provisions contained in this Article XII
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms of
this Indenture, regardless of any knowledge thereof which any such holder may
have or be otherwise charged with. The holders of Senior Indebtedness may
extend, renew, modify or amend the terms of the Senior Indebtedness or any
security therefor and release, sell or exchange such security and otherwise deal
freely with the Company, all without affecting the liabilities and obligations
of the parties to this Indenture or the Holders.
63
SECTION 12.9. SECURITYHOLDERS AUTHORIZE TRUSTEE
TO EFFECTUATE SUBORDINATION OF DEBENTURES.
Each Holder of the Debentures by his acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provisions
contained in this Article XII and to protect the rights of the Holders pursuant
to this Indenture, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the filing of a claim for the unpaid balance of his Debentures in the form
required in said proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims, then the holders of the Senior Indebtedness or their representative
are or is hereby authorized to have the right to file and are or is hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Debentures. Nothing herein contained shall be deemed to authorize the Trustee or
the holders of Senior Indebtedness or their representative to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Indebtedness or their representative to vote in respect of the claim
of any Securityholder in any such proceeding.
SECTION 12.10. RIGHT OF TRUSTEE TO HOLD SENIOR
INDEBTEDNESS.
The Trustee shall be entitled to all of the rights set forth
in this Article XII in respect of any Senior Indebtedness at any time held by it
to the same extent as any other holder of Senior Indebtedness, and nothing in
this Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.
SECTION 12.11. ARTICLE XII NOT TO PREVENT EVENTS
OF DEFAULT.
The failure to make a payment on account of prin-
cipal of, premium, if any, or interest on the Debentures by
64
reason of any provision of this Article XII shall not be construed as preventing
the occurrence of a Default or an Event of Default under Section 6.1 or in any
way prevent the Holders from exercising any right hereunder other than the right
to receive payment on the Debentures.
SECTION 12.12. NO FIDUCIARY DUTY OF TRUSTEE TO
HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Debentures or the Company or
any other Person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article XII or otherwise.
Nothing in this Section 12.12 shall affect the obligation of any other such
Person to hold such payment for the benefit of, and to pay such payment over to,
the holders of Senior Indebtedness or their representative.
ARTICLE XIII
CONVERSION OF DEBENTURES
SECTION 13.1. CONVERSION PRIVILEGE.
Subject to and upon compliance with the provisions of this
Article XIII, at the option of the Holder thereof, any Debenture may at any time
be converted, in whole, or in part in multiples of $1,000 principal amount, into
fully paid and non-assessable shares of Common Stock issuable upon conversion of
the Debentures, at the conversion price in effect at the Date of Conversion (as
hereinafter defined), until and including, but not after, the close of business
on the date of Stated Maturity, PROVIDED that if such Debenture or some portion
thereof shall have been called for redemption or delivered for repurchase prior
to such date and no default is made in making due provision for the payment of
the redemption price in accordance with the terms of this Indenture, then, with
respect to such Debenture or portion thereof as has been so called or delivered,
such Debenture or portion thereof may be so converted until and including, but
not after, the close of business on the fifth Business Day prior to the
Redemption Date or the second Business Day prior to the Repurchase Payment Date,
as applicable, for such Debenture.
65
SECTION 13.2. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of
any Debenture to be converted shall surrender such Debenture to the Company at
any time during usual business hours at its office or agency maintained for the
purpose as provided in this Indenture, accompanied by a fully executed written
notice, in substantially the form set forth on the reverse of the Debenture,
that the Holder elects to convert such Debenture or a stated portion thereof
constituting a multiple of $1,000 principal amount, and, if such Debenture is
surrendered for conversion during the period between the close of business on
any Record Date and the opening of business on the next following Interest
Payment Date and has not been called for redemption on a Redemption Date which
occurs within such period, accompanied also by payment of an amount equal to the
interest payable on such Interest Payment Date on the principal amount of the
Debenture being surrendered for conversion, notwithstanding such conversion.
Such notice of conversion shall also state the name or names (with address) in
which the certificate or certificates for shares of Common Stock shall be
issued. Debentures surrendered for conversion shall (if required by the Company
or the Trustee) be duly endorsed by, or be accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company duly executed by,
the Holder or his attorney duly authorized in writing. As promptly as
practicable after the receipt of such notice and the surrender of such Debenture
as aforesaid, the Company shall, subject to the provisions of Section 13.8
hereof, issue and deliver at such office or agency to such Holder, or on his
written order, a certificate or certificates for the number of full shares of
Common Stock issuable on such conversion of Debentures in accordance with the
provisions of this Article XIII and Cash, as provided in Section 13.3 hereof, in
respect of any fraction of a share of Common Stock otherwise issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the date (herein called the "Date of
Conversion") on which such Debenture shall have been surrendered as aforesaid,
and the Person or Persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become on the Date of Conversion the holder or holders of record
of the shares represented thereby; PROVIDED, HOWEVER, that any such surrender on
any date when the stock transfer books of the Company shall be closed shall
cause the Person or Persons in whose name or names the
66
certificate or certificates for such shares are to be issued to be deemed to
have become the recordholder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open but such conversion shall nevertheless be at the conversion price in effect
at the close of business on the date when such Debenture shall have been so
surrendered with the conversion notice. In the case of conversion of a portion,
but less than all, of a Debenture, the Company shall as promptly as practicable
execute, and the Trustee shall authenticate and deliver to the Holder thereof,
at the expense of the Company, a Debenture or Debentures in the aggregate
principal amount of the unconverted portion of the Debenture surrendered. Except
as otherwise expressly provided in this Indenture, no payment or adjustment
shall be made for interest accrued on any Debenture (or portion thereof)
converted or for dividends or distributions on any Common Stock issued upon
conversion of any Debenture.
SECTION 13.3. FRACTIONAL INTERESTS.
No fractions of shares or scrip representing fractions of
shares shall be issued upon conversion of Debentures. If more than one Debenture
shall be surrendered for conversion at one time by the same holder, the number
of full shares which shall be issuable upon conversion thereof shall be computed
on the basis of the aggregate principal amount of the Debentures so surrendered.
If any fraction of a share of Common Stock would, except for the foregoing
provisions of this Section 13.3, be issuable on the conversion of any Debenture
or Debentures, the Company shall make payment in lieu thereof in an amount of
Cash equal to the value of such fraction computed on the basis of the last sale
price of the Common Stock as reported on the NASDAQ National Market System (or
if not admitted to trading thereon, then on the principal national securities
exchange on which the Common Stock is listed or admitted to trading) on the last
Trading Day prior to the Date of Conversion or if no such sale takes place on
such day, the last sale price for such day shall be the average of the closing
bid and asked prices regular way on the NASDAQ National Market System (or if not
admitted to trading thereon, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading) for such day (any such
last sale price being hereinafter referred to as the "Last Sale Price"). If on
such Trading Day the Common Stock is not quoted by any such organization, the
fair value of such Common Stock on such day, as reasonably determined in good
67
faith by the Board of Directors of the Company, shall be
used.
SECTION 13.4. CONVERSION PRICE.
The conversion price per share of Common Stock issuable upon
conversion of the Debentures shall initially be $12.25.
SECTION 13.5. ADJUSTMENT OF CONVERSION PRICE.
The conversion price (herein called the "Conversion Price")
shall be subject to adjustment from time to time as follows:
(a) In case the Company shall (l) make or
pay a dividend or make a distribution in shares of Common Stock on any class of
Capital Stock of the Company, (2) subdivide its outstanding shares of Common
Stock into a greater number of shares or (3) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such action shall be adjusted so
that the holder of any Debenture thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock which he would have
owned immediately following such action had such Debenture been converted
immediately prior thereto. An adjustment made pursuant to this subsection (a)
shall become effective immediately, except as provided in subsection (h) below,
after the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination.
(b) In case the Company shall issue rights,
options or warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the then
current market price per share of the Common Stock (as determined pursuant to
subsection (f) below) on the record date mentioned below, the Conversion Price
shall be adjusted to a price so that the same shall equal the price determined
by multiplying:
(i) the Conversion Price in effect
immediately prior to the record date by a fraction, of
which
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(ii) the numerator shall be (A) the
number of shares of Common Stock outstanding on the record date plus
(B) the number of shares which the aggregate offering price of the
total number of shares so offered for subscription or purchase would
purchase at such current market price (determined by multiplying such
total number of shares by the exercise price of such rights, options or
warrants and dividing the product so obtained by such current market
price), and of which
(iii) the denominator shall be (A) the
number of shares of Common Stock outstanding on the record date plus
(B) the number of additional shares of Common Stock which are so
offered for subscription or purchase.
Such adjustment shall become effective immediately, except as
provided in subsection (h) below, after the record date for the determination of
holders entitled to receive such rights, options or warrants.
(c) In case the Company or any Subsidiary of
the Company shall distribute to all holders of Common Stock, any of its assets,
evidences of indebtedness, cash or securities other than Common Stock (other
than (x) dividends or distributions exclusively in cash or (y) any dividend or
distribution for which an adjustment is required to be made in accordance with
subsection (b) above) then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the record date of such
distribution by a fraction of which the numerator shall be the then current
market price per share of the Common Stock (determined as provided in subsection
(f) below) on the record date mentioned below less the then fair market value
(as reasonably determined in good faith by the Board of Directors of the
Company) of the portion of the assets, evidences of indebtedness, cash or
securities so distributed applicable to one share of Common Stock, and of which
the denominator shall be such current market price per share of the Common
Stock. Such adjustment shall become effective immediately, except as provided in
subsection (h) below, after the record date for the determination of
stockholders entitled to receive such distribution.
(d) In case the Company or any Subsidiary of
the Company shall make any distribution consisting exclu-
69
sively of cash (excluding any cash portion of distributions for which an
adjustment is required to be made in accordance with (c) above, or cash
distributed upon a merger or consolidation to which Section 13.6 applies) to all
holders of Common Stock in an aggregate amount that, combined together with (i)
all other such all-cash distributions made within the then preceding 12 months
in respect of which no adjustment has been made and (ii) any cash and the fair
market value of other consideration paid or payable in respect of any tender
offer by the Company or any of its Subsidiaries for Common Stock (any such
tender offer being referred to as an "Offer") concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 12.5% of the
Company's market capitalization (defined as being the product of the then
current market price of the Common Stock (determined as provided in subsection
(f) below) times the number of shares of Common Stock then outstanding) on the
record date of such distribution, in each such case the Conversion Price shall
be adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the record date of such
distribution by a fraction of which the numerator shall be the then current
market price per share of the Common Stock on such record date less the amount
of the cash and the fair market value (as reasonably determined in good faith by
the Board of Directors of the Company) of the other consideration so distributed
within such preceding 12 months applicable to one share of Common Stock, and of
which the denominator shall be such current market price per share of the Common
Stock. Such adjustment shall become effective immediately, except as provided in
subsection (h) below, after the record date for the determination of
stockholders entitled to receive such distribution.
(e) In case the Company or any Subsidiary of
the Company shall complete an Offer that involves an aggregate consideration
having a fair market value as of the expiration of such Offer (the "Expiration
Time") that, together with (i) any cash and other consideration paid or payable
in an Offer that expired within the 12 months preceding the expiration of such
Offer in respect of which no adjustment has been made and (ii) the aggregate
amount of all other all-cash distributions made within the 12 months preceding
the expiration of such Offer in respect of which no adjustment has been made
(other than all-cash distributions made upon a merger or consolidation to which
Section 13.6 applies), exceeds 12.5% of the Company's market capitalization
(defined as being the product of the then
70
current market price of the Common Stock (determined as provided in subsection
(f) below) times the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time), the Conversion Price shall be reduced
by multiplying such Conversion Price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be (i) the product of
the then current market price per share (determined as provided in subsection
(f) below) of the Common Stock on the Expiration Time times the number of shares
of Common Stock outstanding (including any tendered shares) on the Expiration
Time minus (ii) the fair market value (as reasonably determined in good faith by
the Board of Directors of the Company) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the Offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted being referred to as the
"Purchased Shares") and the denominator shall be the product of (i) such current
market price per share on the Expiration Time times (ii) such number of
outstanding shares on the Expiration Time less the number of Purchased Shares,
such reduction to become effective immediately prior to the opening of business
on the day following the Expiration Time.
(f) For the purpose of any computation under
subsections (b), (c), (d) and (e) above, the current market price per share of
Common Stock on any date shall be deemed to be the average of the Last Sale
Prices of a share of Common Stock for the five consecutive Trading Days selected
by the Company commencing not more than 20 Trading Days before, and ending not
later than, the earlier of the date in question and the date before the "`ex'
date", with respect to the issuance, distribution or Offer requiring such
computation. If on any such Trading Day the Common Stock is not quoted by any
organization referred to in the definition of Last Sale Price in Section 13.3
hereof, the fair value of the Common Stock on such day, as reasonably determined
in good faith by the Board of Directors of the Company, shall be used. For
purposes of this paragraph, the term "`ex' date," when used with respect to any
issuance, distribution or payments with respect to an Offer, means the first
date on which the Common Stock trades regular way on the NASDAQ National Market
System (or if not listed or admitted to trading thereon, then on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading) without the right to receive such issuance, distribution or Offer.
71
(g) In addition the foregoing adjustments in
subsections (a), (b), (c), (d) and (e) above, the Company will be permitted to
make such reductions in the Conversion Price as it considers to be advisable in
order that any event treated for Federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the holders of the shares of Common
Stock.
(h) In any case in which this Section 13.5
shall require that an adjustment be made immediately following a record date,
the Company may elect to defer the effectiveness of such adjustment (but in no
event until a date later than the effective time of the event giving rise to
such adjustment), in which case the Company shall, with respect to any Debenture
converted after such record date and on and before such adjustment shall have
become effective (i) defer paying any Cash payment pursuant to Section 13.3
hereof or issuing to the Holder of such Debenture the number of shares of Common
Stock and other capital stock of the Company (or other assets or securities)
issuable upon such conversion in excess of the number of shares of Common Stock
and other Capital Stock of the Company issuable thereupon only on the basis of
the Conversion Price prior to adjustment, and (ii) not later than five Business
Days after such adjustment shall have become effective, pay to such Holder the
appropriate Cash payment pursuant to Section 13.3 hereof and issue to such
Holder the additional shares of Common Stock and other Capital Stock of the
Company issuable on such conversion.
(i) No adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or decrease
of at least 1.0% of the Conversion Price; PROVIDED that the Company may make any
such adjustment at its election and PROVIDED FURTHER that any adjustments which
by reason of this subsection (i) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article XIII shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(j) Whenever the Conversion Price is adjust-
ed as herein provided, the Company shall promptly (i) file with the Trustee and
each conversion agent an Officers' Certificate setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment, and
72
(ii) mail or cause to be mailed a notice of such adjustment to each Holder of
Debentures at his address as the same appears on the registry books of the
Company.
SECTION 13.6. CONTINUATION OF CONVERSION PRIVI-
LEGE IN CASE OF RECLASSIFICATION, CHANGE, MERGER, CONSOLIDA-
TION OR SALE OF ASSETS.
If any of the following shall occur, namely: (a) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of the Debentures (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), (b) any consolidation or merger of the Company with
or into any other Person, or the merger of any other Person with or into the
Company (other than a merger which does not result in any reclassification,
change, conversion, exchange or cancellation of outstanding shares of Common
Stock) or (c) sale, transfer or conveyance of all or substantially all of the
assets of the Company (computed on a consolidated basis), then the Company, or
such successor or purchasing entity, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation, merger, sale or
conveyance, execute and deliver to the Trustee a supplemental indenture
providing that the Holder of each Debenture then outstanding shall have the
right to convert such Debenture only into the kind and amount of shares of stock
and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance by
a holder of the number of shares of Common Stock issuable upon conversion of
such Debenture immediately prior to such reclassification, change,
consolidation, merger, sale, transfer or conveyance assuming such holder of
Common Stock of the Company (i) is not a person party to such transaction and
(ii) failed to exercise his rights of an election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance
(PROVIDED that if the kind or amount of securities, cash, and other property
receivable upon such reclassification, change, consolidation, merger, sale,
transfer or conveyance is not the same for each share of Common Stock of the
Company held immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or conveyance in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for the purpose of
this Section 13.6 the kind and amount of securities, cash
73
and other property receivable upon such reclassification, change, consolidation,
merger, sale, transfer or conveyance by each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article XIII. If, in the case of any such consolidation,
merger, sale or conveyance, the stock or other securities and property
(including cash) receivable thereupon by a holder of shares of Common Stock
includes shares of stock or other securities and property (including cash) of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders of the
Debentures as the Board of Directors of the Company shall reasonably consider
necessary by reason of the foregoing. The provisions of this Section 13.6 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
Notice of the execution of each such supplemental indenture
shall be mailed to each Holder of Debentures at his address as the same appears
on the registry books of the Company.
Neither the Trustee nor any conversion agent shall be under
any responsibility to determine the correctness of any provisions contained in
any such supplemental indenture relating either to the kind or amount of shares
of stock or securities or property (including cash) receivable by Holders of
Debentures upon the conversion of their Debentures after any such
reclassification, change, consolidation, merger, sale or conveyance or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Article VII hereof, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the Officers'
Certificate (which the Company shall be obligated to file with the Trustee prior
to the execution of any such supplemental indenture) with respect thereto.
74
SECTION 13.7. NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall declare a dividend (or any other
distribution) payable to the holders of Common Stock (other than cash dividends
or dividends payable in Common Stock); or
(b) the Company shall authorize the granting to the holders of
Common Stock of rights, warrants, options or convertible or exchangeable
securities to subscribe for, purchase or otherwise acquire any shares of stock
of any class or of any other rights; or
(c) the Company shall authorize any reclassification or change
of the Common Stock (excluding a subdivision or combination of its outstanding
shares of Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or any consolidation or merger to
which the Company is a party and for which approval of any stockholders of the
Company is required, or the sale or conveyance of all or substantially all the
property or business of the Company; or
(d) there shall be proposed any voluntary or
involuntary dissolution, liquidation or winding-up of the
Company; or
(e) the Company or any of its Subsidiaries shall
complete an Offer;
then, the Company shall cause to be filed at the office or agency maintained for
the purpose of conversion of the Debentures as provided in Section 4.2 hereof,
and shall cause to be mailed to each Holder of Debentures, at his address as it
shall appear on the registry books of the Company, at least 20 days before the
date hereinafter specified (or the earlier of the dates hereinafter specified,
in the event that more than one date is specified), a notice stating the date on
which (1) a record is expected to be taken for the purpose of such dividend,
distribution, rights, warrants, options or convertible or exchangeable
securities or Offer, or if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights, warrants, options or convertible or exchangeable securities or to
participate in such Offer are to be determined, or (2) such
75
reclassification, change, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding-up is expected to become effective and the date, if any
is to be fixed, as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification, change, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding-up.
SECTION 13.8. TAXES ON CONVERSION.
The Company will pay any and all documentary, stamp or similar
taxes payable to the United States of America or any political subdivision or
taxing authority thereof or therein in respect of the issue or delivery of
shares of Common Stock on conversion of Debentures pursuant thereto; PROVIDED,
HOWEVER, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the Holder of the Debentures to be
converted and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Company the amount of
any such tax or has established, to the satisfaction of the Company, that such
tax has been paid. The Company extends no protection with respect to any other
taxes imposed in connection with conversion of Debentures.
SECTION 13.9. COMPANY TO PROVIDE STOCK.
The Company shall reserve, free from preemptive rights, out of
its authorized but unissued shares, sufficient shares to provide for the
conversion of the Debentures from time to time as such Debentures are presented
for conversion, PROVIDED, that nothing contained herein shall be construed to
preclude the Company from satisfying its obligations in respect of the
conversion of Debentures by delivery of repurchased shares of Common Stock which
are held in the treasury of the Company.
If any shares of Common Stock to be reserved for the purpose
of conversion of Debentures hereunder require registration with or approval of
any governmental authority under any Federal or state law before such shares may
be validly issued or delivered upon conversion, then the Company covenants that
it will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be, PROVIDED, HOWEVER, that nothing in
76
this Section 13.9 shall be deemed to limit in any way the obligations of the
Company provided in this Article XIII.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the Common
Stock, the Company will take all corporate action which may, in the opinion of
counsel, be necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock at such adjusted Conversion
Price.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Debentures will upon issue be fully paid and
non-assessable by the Company and free of preemptive rights.
SECTION 13.10. DISCLAIMER OF RESPONSIBILITY FOR
CERTAIN MATTERS.
Neither the Trustee nor any agent of the Trustee shall at any
time be under any duty or responsibility to any Holder of Debentures to
determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the Officers' Certificate referred to in
Section 13.5 hereof, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same. Neither
the Trustee nor any agent of the Trustee shall be accountable with respect to
the validity or value (or the kind or amount) of any shares of Common Stock, or
of any securities or property (including cash), which may at any time be issued
or delivered upon the conversion of any Debenture; and neither the Trustee nor
any conversion agent makes any representation with respect thereto. Neither the
Trustee nor any agent of the Trustee shall be responsible for any failure of the
Company to issue, register the transfer of or deliver any shares of Common Stock
or stock certificates or other securities or property (including cash) upon the
surrender of any Debenture for the purpose of conversion or, subject to Article
VII hereof, to comply with any of the covenants of the Company contained in this
Article XIII.
SECTION 13.11. RETURN OF FUNDS DEPOSITED FOR
REDEMPTION OF CONVERTED DEBENTURES.
Any funds which at any time shall have been deposited by the
Company or on its behalf with the Trustee or any
77
other Paying Agent for the purpose of paying the principal of and interest on
any of the Debentures and which shall not be required for such purposes because
of the conversion of such Debentures, as provided in this Article XIII, shall
after such conversion be repaid to the Company by the Trustee or such other
Paying Agent.
SECTION 13.12. CERTAIN DISTRIBUTIONS.
In the event that the Company distributes rights, options or
warrants (other than those referred to in Section 13.5(b) hereof) pro rata to
holders of Common Stock, so long as any such rights, options or warrants have
not expired or been redeemed by the Company, the Holder of any Debenture
surrendered for conversion will be entitled to receive upon such conversion, in
addition to the shares of Common Stock issuable upon such conversion (the
"Conversion Shares"), a number of rights, options or warrants to be determined
as follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of rights, options or warrants of separate
certificates evidencing such rights, options or warrants (the "Distribution
Date"), the same number of rights, options or warrants to which a holder of a
number of shares of Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the rights, options or warrants, and (ii) if
such conversion occurs after such Distribution Date, the same number of rights,
options or warrants to which a holder of the number of shares of Common Stock
into which such Debenture was convertible immediately prior to such Distribution
Date would have been entitled on such Distribution Date in accordance with the
terms and provisions of and applicable to the rights, options or warrants. The
conversion price of the Debentures will not be subject to adjustment on account
of any declaration, distribution or exercise of such rights, options or
warrants.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of
78
the TIA, the imposed duties, upon qualification of this Indenture under the TIA,
shall control.
SECTION 14.2. NOTICES.
Any notices or other communications to the Company or the
Trustee required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company:
Pride Petroleum Services, Inc.
1500 City West Blvd.
Houston, Texas 77042
Attention: Robert W. Randall, Vice
President and General Counsel
Telecopy: (713) 789-1430
if to the Trustee:
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Attention: Corporate Trust Department
Telecopy: (212) 658-6425
Any party by notice to each other party may designate
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party shall be deemed to have been
given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and five
Business Days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall
be mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
79
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
SECTION 14.3. COMMUNICATIONS BY HOLDERS WITH
OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss. 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Debentures. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA ss. 312(c).
SECTION 14.4. CERTIFICATE AND OPINION AS TO
CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, such Person shall furnish to the
Trustee:
(1) an Officers' Certificate (in form and
substance reasonably satisfactory to the Trustee) stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (in form and
substance reasonably satisfactory to the Trustee) stating that, in the opinion
of such counsel, all such conditions precedent have been complied with.
SECTION 14.5. STATEMENTS REQUIRED IN CERTIFI-
CATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
80
(1) a statement that the Person making
such certificate or opinion has read such covenant or
condition;
(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
such Person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in
the opinion of each such Person, such condition or covenant has been complied
with; PROVIDED, HOWEVER, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 14.6. RULES BY TRUSTEE, PAYING AGENT,
REGISTRAR.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 14.7. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions in New York, New York are authorized or obligated by law or
executive order to close. If a payment date is a Legal Holiday at such place,
payment may be made at such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 14.8. GOVERNING LAW.
THIS INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF
81
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS INDENTURE AND THE DEBENTURES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
SECTION 14.9. NO ADVERSE INTERPRETATION OF
OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 14.10. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or employee, as such, past,
present or future, of the Company or any successor corporation shall have any
personal liability in respect of the obligations of the Company under the
Debentures or this Indenture by reason of his or its status as such stockholder,
director, officer or employee. Each Securityholder by accepting a Debenture
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Debentures.
SECTION 14.11. SUCCESSORS.
All agreements of the Company in this Indenture and the
Debentures shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
82
SECTION 14.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of
this Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 14.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or
in the Debentures shall be held invalid, illegal or unenforceable, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 14.14. TABLE OF CONTENTS, HEADINGS,
ETC.
The Table of Contents, Cross-Reference Table and headings of
the Articles and the Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms or provisions hereof.
83
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
PRIDE PETROLEUM SERVICES, INC.,
a Louisiana corporation
[Seal]
By:
Paul A. Bragg
Vice President and
Chief Financial Officer
Attest:
Name:
Title:
MARINE MIDLAND BANK,
as Trustee
Corporate Trust Officer
EXHIBIT A
[FORM OF DEBENTURE]
PRIDE PETROLEUM SERVICES, INC.
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURE
DUE 2006
No. CUSIP No. 741541 AA 4
---------
$ -------
Pride Petroleum Services, Inc., a Louisiana corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to __________, or registered assigns, the principal sum of $_____ Dollars, on
February 15, 2006.
Interest Payment Dates: February 15 and August
15, commencing August 15, 1996.
Record Dates: February 1 and August 1.
Reference is made to the further provisions of this Debenture
on the reverse side, which will, for all purposes, have the same effect as if
set forth at this place.
A-1
IN WITNESS WHEREOF, the Company has caused this Instrument to
be duly executed under its corporate seal.
Dated: ____________
PRIDE PETROLEUM SERVICES, INC., a
Louisiana corporation
[Seal]
By:
Name:
Title:
Attest:
Secretary
A-2
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Debentures described in the
within-mentioned Indenture.
MARINE MIDLAND BANK,
as Trustee
By
Authorized Signatory
A-3
PRIDE PETROLEUM SERVICES, INC.
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURE
DUE 2006
1. INTEREST.
Pride Petroleum Services, Inc., a Louisiana corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Debenture at the rate of 6.25% per annum. To the extent it is
lawful, the Company promises to pay interest on any interest payment due but
unpaid on such principal amount at a rate of 6.25% per annum compounded
semi-annually.
The Company will pay interest semi-annually on February 15 and
August 15 of each year (each, an "Interest Payment Date"), commencing August 15,
1996. Interest on the Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid on the Debentures, from
January 26, 1996. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Debentures (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date (specified on the face hereof) immediately
preceding the Interest Payment Date. Holders must surrender Debentures to a
Paying Agent to collect principal payments. Any such interest not so punctually
paid, and defaulted interest relating thereto, may be paid to the Persons who
are registered Holders at the close of business on a Special Record Date for the
payment of such defaulted interest, as more fully provided in the Indenture
referred to below. Except as provided below, the Company shall pay principal and
interest in such coin or currency of the United States of America as at the time
of payment shall be legal tender for payment of public and private debts ("U.S.
Legal Tender"). However, the Company may pay principal and interest by wire
transfer of Federal funds or by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or the Company
may mail
A-4
any such interest payment to a Holder at the Holder's regis-
tered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Marine Midland Bank (the "Trustee," which term
includes any successor trustee under the Indenture referred to below) will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act as Paying Agent,
Registrar or coRegistrar.
4. INDENTURE.
The Company issued the Debentures under an Indenture, dated as
of January 26, 1996 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Debentures include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture, except as otherwise
provided thereby. The Debentures are subject to all such terms, and Holders of
Debentures are referred to the Indenture and said Act for a statement of them.
The Debentures are general unsecured obligations of the Company limited in
aggregate principal amount to $70,000,000 ($80,500,000 if the underwriters
exercise their over-allotment option in full).
5. REDEMPTION.
The Debentures may be redeemed in whole or from time to time
in part at any time on and after March 1, 1999, at the option of the Company, at
the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing February 15 of the
years indicated below, in each case together with any accrued but unpaid
interest thereon to the Redemption Date:
YEAR PERCENTAGE
1999 . . . . . . . . . . . . . . . . 103.125 %
2000 . . . . . . . . . . . . . . . . 102.083 %
2001 . . . . . . . . . . . . . . . . 101.042 %
2002 and thereafter. . . . . . . . . 100.000 %
A-5
The Debentures will not be subject to any sinking fund. Any
such redemption will comply with Article III of the Indenture.
6. NOTICE OF REDEMPTION.
Notice of redemption will be sent by first class mail, at
least 30 days and not more than 60 days prior to the Redemption Date to the
Holder of each Debenture to be redeemed at such Holder's last address as then
shown upon the registry books of the Registrar. Debentures may be redeemed in
part in multiples of $1,000 only.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Debentures called for
redemption shall have been deposited with the Paying Agent on such Redemption
Date and payment of the Debentures called for redemption is not prohibited under
Article XII of the Indenture, the Debentures called for redemption will cease to
bear interest and the only right of the Holders of such Debentures will be to
receive payment of the Redemption Price, plus any accrued and unpaid interest to
the Redemption Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Debentures are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Debentures in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Debentures selected for redemption.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Debenture may be treated as the
owner of it for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agent(s) will pay the money
back to the Company at its writ-
A-6
ten request. After that, all liability of the Trustee and such Paying Agent(s)
with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Debentures
may be amended or supplemented, and any existing Default or Event of Default or
compliance with any provision may be waived, with the written consent of the
Holders of a majority in aggregate principal amount of the Debentures then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Debentures to, among other things, cure
any ambiguity, defect or inconsistency, or make any other change that does not
adversely affect the rights of any Holder of a Debenture.
11. CONVERSION RIGHTS.
Subject to the provisions of the Indenture, the Holders have
the right to convert the principal amount of the Debentures into fully paid and
nonassessable shares of Common Stock of the Company at the initial conversion
price per share of Common Stock of $12.25 (equivalent to a conversion rate of
81.633 shares per $1000 principal amount of Debentures), or at the adjusted
conversion price then in effect, if adjustment has been made as provided in the
Indenture, upon surrender of the Debenture to the Company, together with a fully
executed notice in substantially the form attached hereto and, if required by
the Indenture, an amount equal to accrued interest payable on such Debenture.
12. RANKING.
Payment of principal, premium, if any, and interest on the
Debentures is subordinated, in the manner and to the extent set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness.
13. REPURCHASE AT OPTION OF HOLDER.
If there is a Repurchase Event, the Company shall be required
to offer to purchase on the Repurchase Payment Date all outstanding Debentures
at a purchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the Repurchase Payment Date. Holders of
Debentures will receive a Repurchase Offer from the Company prior to any related
Repurchase Payment Date and
A-7
may elect to have such Debentures purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
14. SUCCESSORS.
When a successor assumes all the obligations of its
predecessor under the Debentures and the Indenture, the predecessor will be
released from those obligations.
15. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing (other than an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
Debentures shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Debentures then outstanding may
declare all the Debentures to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Debentures may not enforce
the Indenture or the Debentures except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Debentures. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Debentures then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Debentures notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest), if it determines that withholding
notice is in their interest.
16. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates as if it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or employee, as such, past,
present or future, of the Company or any successor corporation shall have any
personal liability in respect of the obligations of the Company under the
Debentures or the Indenture by reason of his or its status as such stock-
A-8
holder, director, officer or employee. Each Holder of a Debenture by accepting a
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Debentures.
18. AUTHENTICATION.
This Debenture shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Debenture.
19. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Debenture or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Debenture Identification Procedures, the Company will cause CUSIP
numbers to be printed on the Debentures as a convenience to the Holders of the
Debentures. No representation is made as to the accuracy of such numbers as
printed on the Debentures, and reliance may be placed only on the other
identification numbers printed hereon.
A-9
[FORM OF] ASSIGNMENT
I or we assign this Debenture to
(Print or type name, address and zip code of assignee)
Please insert Social Security or other taxpayer
identifying number of assignee
and irrevocably appoint __________ agent to transfer this Debenture on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ______________________________
(Sign exactly as name appears on
the other side of this Debenture)
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the
Company pursuant to Article XI of the Indenture, check the box: / /
If you want to elect to have only part of this Debenture
purchased by the Company pursuant to Article XI of the Indenture, state the
amount you want to be purchased:
$--------
Dated:_____________ Signed:________________________________
(Sign exactly as your name
appears on the other side
of this Debenture)
A-11
[FORM OF] CONVERSION NOTICE
To: Pride Petroleum Services, Inc.
The undersigned owner of this Debenture hereby: (i)
irrevocably exercises the option to convert this Debenture, or the portion
hereof below designated, for shares of Common Stock of Pride Petroleum Services,
Inc. in accordance with the terms of the Indenture referred to in this Debenture
and (ii) directs that such shares of Common Stock deliverable upon the
conversion, together with any check in payment for fractional shares and any
Debenture(s) representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares are to be delivered registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto. Any amount required to be paid by the undersigned
on account of interest accompanies this Debenture.
Dated:___________________
Signed:____________________________
Fill in for registration of shares if to be delivered, and of
Debentures if to be issued, otherwise than to and in the name of the registered
holder.
Social Security or other
Taxpayer Identifying Number
(Name)
(Street Address)
(City, State and Zip Code)
(Please print name and ad-
dress)
Principal amount to be
converted: (if less than all)
A-12
PRIDE PETROLEUM SERVICES, INC.
ISSUER,
AND
MARINE MIDLAND BANK
TRUSTEE
-------------------
INDENTURE
Dated as of January 26, 1996
-------------------
$80,500,000
6 1/4% Convertible Subordinated Debentures due 2006
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE................................... 1
SECTION 1.1. Definitions.......................................... 1
SECTION 1.2. Incorporation by Reference of TIA.................... 9
SECTION 1.3. Rules of Construction................................ 10
ARTICLE II
THE DEBENTURES............................................................... 11
SECTION 2.1. Form and Dating...................................... 11
SECTION 2.2. Execution and Authentication......................... 11
SECTION 2.3. Registrar and Paying Agent........................... 13
SECTION 2.4. Paying Agent to Hold Assets in Trust................. 14
SECTION 2.5. Securityholder List.................................. 14
SECTION 2.6. Transfer and Exchange................................ 14
SECTION 2.7. Replacement Debentures............................... 15
SECTION 2.8. Outstanding Debentures............................... 15
SECTION 2.9. Treasury Debentures.................................. 16
SECTION 2.10. Temporary Debentures................................. 16
SECTION 2.11. Cancellation......................................... 16
SECTION 2.12. Defaulted Interest................................... 17
SECTION 2.13. Persons Deemed Owners................................ 18
ARTICLE III
REDEMPTION................................................................... 18
SECTION 3.1. Right of Redemption.................................. 18
SECTION 3.2. Notices to Trustee................................... 19
SECTION 3.3. Selection of Debentures to Be
Redeemed................................. 19
SECTION 3.4. Notice of Redemption................................. 20
SECTION 3.5. Effect of Notice of Redemption....................... 21
SECTION 3.6 Deposit of Redemption Price.............. 21
SECTION 3.7. Debentures Redeemed in Part.......................... 22
ARTICLE IV
COVENANTS.................................................................... 22
SECTION 4.1. Payment of Debentures................................ 22
SECTION 4.2. Maintenance of Office or Agency...................... 23
SECTION 4.3. Corporate Existence.................................. 23
i
SECTION 4.4. Payment of Taxes and Other Claims.................... 24
SECTION 4.5. Maintenance of Properties............................ 24
SECTION 4.6. Compliance Certificate; Notice of
Default.................................. 24
SECTION 4.7. Reports.............................................. 25
SECTION 4.8. Limitation on Status as Investment
Company.................................. 26
SECTION 4.9. Waiver of Stay, Extension or Usury
Laws..................................... 26
ARTICLE V
SUCCESSOR CORPORATION.........................................................26
SECTION 5.1. Limitation on Merger, Sale or
Consolidation............................ 26
SECTION 5.2. Successor Corporation Substituted.................... 27
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES................................................27
SECTION 6.1. Events of Default.................................... 27
SECTION 6.2. Acceleration of Maturity Date;
Rescission and Annulment................. 30
SECTION 6.3. Collection of Indebtedness and Suits
for Enforcement by Trustee............... 31
SECTION 6.4. Trustee May File Proofs of Claim..................... 32
SECTION 6.5. Trustee May Enforce Claims Without
Possession of the Debentures............. 33
SECTION 6.6. Priorities........................................... 33
SECTION 6.7. Limitation on Suits.................................. 34
SECTION 6.8. Unconditional Right of Holders to
Receive Principal, Premium and
Interest................................. 35
SECTION 6.9. Rights and Remedies Cumulative....................... 35
SECTION 6.10. Delay or Omission Not Waiver......................... 35
SECTION 6.11. Control by Holders................................... 36
SECTION 6.12. Waiver of Past Default............................... 36
SECTION 6.13. Undertaking for Costs................................ 37
SECTION 6.14. Restoration of Rights and Remedies................... 37
ARTICLE VII
TRUSTEE...................................................................... 38
SECTION 7.1. Duties of Trustee.................................... 38
SECTION 7.2. Rights of Trustee.................................... 39
SECTION 7.3. Individual Rights of Trustee......................... 40
ii
SECTION 7.4. Trustee's Disclaimer................................. 41
SECTION 7.5. Notice of Default.................................... 41
SECTION 7.6. Reports by Trustee to Holders........................ 41
SECTION 7.7. Compensation and Indemnity........................... 42
SECTION 7.8. Replacement of Trustee............................... 43
SECTION 7.9. Successor Trustee by Merger, Etc..................... 44
SECTION 7.10. Eligibility; Disqualification........................ 44
SECTION 7.11. Preferential Collection of Claims
Against Company.......................... 44
ARTICLE VIII
SATISFACTION AND DISCHARGE....................................................45
SECTION 8.1. Satisfaction and Discharge of
Indenture................................ 45
SECTION 8.2. Repayment to the Company............................. 45
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS...........................................46
SECTION 9.1. Supplemental Indentures Without
Consent of Holders....................... 46
SECTION 9.2. Amendments, Supplemental Indentures
and Waivers with Consent
of Holders............................... 46
SECTION 9.3. Compliance with TIA.................................. 48
SECTION 9.4. Revocation and Effect of Consents.................... 48
SECTION 9.5. Notation on or Exchange of
Debentures............................... 49
SECTION 9.6. Trustee to Sign Amendments, Etc...................... 50
ARTICLE X
MEETINGS OF SECURITYHOLDERS.................................................. 50
SECTION 10.1. Purposes for Which Meetings May
Be Called................................ 50
SECTION 10.2. Manner of Calling Meetings........................... 51
SECTION 10.3. Call of Meetings by the Company
or Holders............................... 51
SECTION 10.4. Who May Attend and Vote at Meetings.................. 52
SECTION 10.5. Regulations May Be Made by Trustee;
Conduct of the Meeting; Voting Rights;
Adjournment.............................. 52
SECTION 10.6. Voting at the Meeting and Record to
Be Kept.................................. 53
SECTION 10.7. Exercise of Rights of Trustee or
iii
Securityholders May Not Be Hindered or
Delayed by Call of Meeting............... 54
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE...................................................54
SECTION 11.1. Repurchase of Debentures at Option
of the Holder............................ 54
ARTICLE XII
SUBORDINATION.................................................................57
SECTION 12.1. Debentures Subordinated to Senior
Indebtedness............................. 57
SECTION 12.2. No Payment on Debentures in Certain
Circumstances............................ 58
SECTION 12.3. Debentures Subordinated to Prior
Payment of All Senior Indebtedness on
Dissolution, Liquidation or Reorgani-
zation................................... 59
SECTION 12.4. Securityholders to Be Subrogated to
Rights of Holders of Senior
Indebtedness............................. 61
SECTION 12.5. Obligations of the Company Uncondi-
tional................................... 61
SECTION 12.6. Trustee Entitled to Assume
Payments Not Prohibited in
Absence of Notice........................ 62
SECTION 12.7. Application by Trustee of Assets
Deposited with It........................ 63
SECTION 12.8. Subordination Rights Not Impaired by
Acts or Omissions of the Company or
Holders of Senior Indebtedness........... 63
SECTION 12.9. Securityholders Authorize Trustee
to Effectuate Subordination of
Debentures............................... 64
SECTION 12.10. Right of Trustee to Hold Senior
Indebtedness............................. 64
SECTION 12.11. Article XII Not to Prevent Events of
Default.................................. 64
SECTION 12.12. No Fiduciary Duty of Trustee to Holders
of Senior Indebtedness................... 65
ARTICLE XIII
CONVERSION OF DEBENTURES..................................................... 65
SECTION 13.1. Conversion Privilege................................. 65
iv
SECTION 13.2. Exercise of Conversion Privilege..................... 66
SECTION 13.3. Fractional Interests................................. 67
SECTION 13.4. Conversion Price..................................... 68
SECTION 13.5. Adjustment of Conversion Price....................... 68
SECTION 13.6. Continuation of Conversion Privilege
in Case of Reclassification, Change,
Merger, Consolidation or Sale of
Assets................................... 73
SECTION 13.7. Notice of Certain Events............................. 75
SECTION 13.8. Taxes on Conversion.................................. 76
SECTION 13.9. Company to Provide Stock............................. 76
SECTION 13.10. Disclaimer of Responsibility for
Certain Matters.......................... 77
SECTION 13.11. Return of Funds Deposited for
Redemption of Converted Debentures....... 77
SECTION 13.12. Certain Distributions................................ 78
ARTICLE XIV
MISCELLANEOUS.................................................................78
SECTION 14.1. TIA Controls......................................... 78
SECTION 14.2. Notices.............................................. 79
SECTION 14.3. Communications by Holders with Other
Holders.................................. 80
SECTION 14.4. Certificate and Opinion as to
Conditions Precedent..................... 80
SECTION 14.5. Statements Required in Certificate
or Opinion............................... 80
SECTION 14.6. Rules by Trustee, Paying Agent,
Registrar................................ 81
SECTION 14.7. Legal Holidays....................................... 81
SECTION 14.8. Governing Law........................................ 81
SECTION 14.9. No Adverse Interpretation of Other
Agreements............................... 82
SECTION 14.10. No Recourse Against Others........................... 82
SECTION 14.11. Successors........................................... 82
SECTION 14.12. Duplicate Originals.................................. 83
SECTION 14.13. Severability......................................... 83
SECTION 14.14. Table of Contents, Headings, Etc..................... 83
SIGNATURES.......................................................... 84
EXHIBIT A.......................................................... A-1
v
310(a)(1)...................................................... 7.10
(a)(2)....................................................... 7.10
(a)(3)....................................................... N.A.
(a)(4)...................................................... N.A.
(a)(5)...................................................... 7.10
(b)......................................................... 7.8;
7.10;
14.2
(c)......................................................... N.A.
311(a)......................................................... 7.11
(b)......................................................... 7.11
(c)......................................................... N.A.
312(a)......................................................... 2.5
(b)......................................................... 14.3
(c)......................................................... 14.3
313(a)......................................................... 7.6
(b)(1)...................................................... N.A.
(b)(2)...................................................... 7.6
(c)......................................................... 7.6;
14.2
(d)......................................................... 7.6
314(a)......................................................... 4.6;
4.7
(b)......................................................... N.A.
(c)(1)...................................................... 2.2;
7.2;
14.4
(c)(2)...................................................... 7.2;
14.4
(c)(3)...................................................... N.A.
(d) N.A.
(e) 14.5
(f) N.A.
315(a)......................................................... 7.1(b)
(b)......................................................... 7.5;
7.6;
14.2
(c)......................................................... 7.1(a)
(d)......................................................... 6.11;
7.1(b)(c)
(e)......................................................... 6.13
316(a)(last sentence).......................................... 2.9
(a)(1)(A)................................................... 6.11
vi
(a)(1)(B)................................................... 6.12
(a)(2)...................................................... N.A.
(b)......................................................... 6.12;
6.7
317(a)(1)...................................................... 6.3
(a)(2)...................................................... 6.4
(b)......................................................... 2.4
318(a)......................................................... 14.1
- ----------
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any pur-
pose, be deemed to be a part of the Indenture.
vii
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF PRIDE PETROLEUM SERVICES, INC.
STATE OR OTHER JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
- ---------- ------------------------------
Pride Petroleum Services Texas
of California, Inc.
Pride Petroleum Services Texas
of Louisiana, Inc.
Sierra Production Services, Inc. California
Petroleum Supply Company Texas
Larcom Insurance, Ltd. Bermuda
Pride International, Inc. Texas
Pride International, Ltd. British Virgin Islands
Pride [Limassol] Limited Cyprus
Pride [Cyprus] Limited Cyprus
Pride International JSC Russia
Pride Petrotech S.A.M.P.I.C. Argentina
Pride International, C.A. Venezuela
Pride South America Ltd. British Virgin Islands
Pride de Venezuela Venezuela
Pride Vulcan (Joint Venture) British Virgin Islands
Ranger Well Service Texas
Pride Offshore, Inc. Delaware
Xpert Enterprises, Inc. New Mexico
Xpert Well Service, Inc. New Mexico
B&M Service Co., Inc. New Mexico
Marlin Colombia Drilling Co., Inc. Cayman Islands
Pride Peru, S.A. Peru
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Pride Petroleum Services, Inc. on Form S-3 (File No. 33-62425)
and on Forms S-8 (File Nos: 33-26854 and 33-44823) of our report dated February
26, 1996, on our audits of the consolidated financial statements and financial
statement schedule of Pride Petroleum Services, Inc. as of December 31, 1995
and 1994, and for the years ended December 31, 1995, 1994, and 1993, which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 26, 1996
<PAGE>
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 9,295
<SECURITIES> 2,615
<RECEIVABLES> 44,193
<ALLOWANCES> 426
<INVENTORY> 9,473
<CURRENT-ASSETS> 73,153
<PP&E> 296,939
<DEPRECIATION> 118,451
<TOTAL-ASSETS> 257,605
<CURRENT-LIABILITIES> 41,851
<BONDS> 61,136
<COMMON> 1
0
0
<OTHER-SE> 131,239
<TOTAL-LIABILITY-AND-EQUITY> 257,605
<SALES> 263,599
<TOTAL-REVENUES> 263,599
<CGS> 237,327
<TOTAL-COSTS> 237,327
<OTHER-EXPENSES> (2,427)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,276
<INCOME-PRETAX> 22,423
<INCOME-TAX> 7,064
<INCOME-CONTINUING> 15,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,359
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
