AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1996
REGISTRATION NO. 333-00027
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1500 CITY WEST BLVD., SUITE 400
HOUSTON, TEXAS 77042
(713) 789-1400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT W. RANDALL
VICE PRESIDENT AND GENERAL COUNSEL
PRIDE PETROLEUM SERVICES, INC.
1500 CITY WEST BLVD., SUITE 400
HOUSTON, TEXAS 77042
(713) 789-1400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
L. PROCTOR THOMAS THOMAS A. ROBERTS
BAKER & BOTTS, L.L.P. DAVID A. BRYSON
3000 ONE SHELL PLAZA WEIL, GOTSHAL & MANGES LLP
HOUSTON, TEXAS 77002 100 CRESCENT COURT, SUITE 1300
(713) 229-1234 DALLAS, TEXAS 75201-6950
(214) 746-7700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Convertible Subordinated
Debentures $80,500,000 100% $80,500,000 $27,759(3)
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Common Stock, no par value (4) None None None
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</TABLE>
(1) Includes $10,500,000 principal amount of Debentures subject to the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Of this amount, $23,794 has been previously paid.
(4) The Common Stock (plus an indeterminate number of shares of Common Stock
to cover any adjustment in thenumber of shares issuable as a result of the
antidilution provisions of the Debentures) is issuable upon conversion of
the Debentures. Pursuant to Rule 457(i), no registration fee is required
for the Common Stock because it will be issued for no additional
consideration.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
*****************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
*****************************************************************************
SUBJECT TO COMPLETION, DATED JANUARY 22, 1996
PROSPECTUS
, 1996
$70,000,000
[PRIDE NAME/LOGO]
% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
The Debentures are convertible into Common Stock of the Company at any
time prior to maturity at a conversion price of $ per share (equivalent to
a conversion rate of shares per $1,000 principal amount of Debentures),
subject to adjustment under certain circumstances. Interest on the Debentures
is payable semi-annually on February 15 and August 15, commencing August 15,
1996. On January 19, 1996, the last reported sale price of the Common Stock on
the NASDAQ National Market System (where it is traded under the symbol "PRDE")
was $10 1/8 per share. The Company has applied for listing of the Debentures
on the NASDAQ SmallCap Market.
The Debentures are redeemable, in whole or in part, at the option of the
Company, for cash at any time on or after February 15, 1999 at the redemption
prices set forth herein, plus accrued and unpaid interest to the date of
redemption. The Company will be required to offer to purchase the Debentures
in the event of a Change of Control (as defined) or if the Company's Common
Stock ceases to be listed on the NASDAQ National Market System or a national
securities exchange, at 100% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. The Debentures will mature on
February 15, 2006. See "Description of Debentures."
The Debentures are unsecured general obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company. In addition, the Debentures are
effectively subordinated to all of the creditors of the Company's
subsidiaries, including trade creditors. The Indenture does not restrict the
incurrence of Senior Indebtedness or other indebtedness by the Company or its
subsidiaries. At September 30, 1995, as adjusted to give effect to this
offering and the anticipated use of the net proceeds therefrom, the Company
and its subsidiaries would have had an aggregate of $105.4 million of
consolidated indebtedness and other obligations effectively ranking senior to
the Debentures. See "Use of Proceeds" and "Description of Debentures."
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE DEBENTURES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO THE
THE PUBLIC (1) AND COMMISSIONS (2) COMPANY(3)
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<S> <C> <C> <C>
Per Debenture........................ % % %
Total (4)............................ $ $ $
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</TABLE>
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES ESTIMATED AT $500,000 PAYABLE BY THE COMPANY.
(4) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP
TO AN ADDITIONAL $10,500,000 AGGREGATE PRINCIPAL AMOUNT OF DEBENTURES, ON
THE SAME TERMS AND CONDITIONS AS SET FORTH ABOVE, TO COVER
OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE TOTAL
PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS
TO THE COMPANY WILL BE $ , $ , AND $ , RESPECTIVELY. SEE
"UNDERWRITING."
The Debentures are offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the Debentures will be made in New York, New York on
or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERT W. BAIRD & CO.
INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
<PAGE>
[PHOTOS]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AND
THE COMMON STOCK AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEM BERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON THE NASDAQ NATIONAL MARKET SYSTEM IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE
EXERCISED. AS USED IN THIS PROSPECTUS, THE "COMPANY" OR "PRIDE" REFERS TO
PRIDE PETROLEUM SERVICES, INC. AND ITS SUBSIDIARIES.
THE COMPANY
Pride Petroleum Services, Inc. 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 519 owned rigs is the world's second largest, consisting of 429 land-
based rigs divided among three operating regions in the United States, 65
land-based 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.
Through the implementation of an aggressive growth and diversification
strategy, which commenced in mid-1993, the Company has increased its total
assets approximately two and one-half times, from $94.0 million as of June 30,
1993 to $256.8 million as of September 30, 1995. Revenues have increased
approximately two-fold, from $127.1 million for the year ended December 31,
1993 to $252.8 million for the twelve months ended September 30, 1995, and
EBITDA (earnings before interest, taxes, depreciation and amortization) has
increased approximately four-fold, from $9.1 million to $38.9 million for the
same periods. For the nine months ended September 30, 1995, revenues increased
55% to $198.5 million from $128.0 million during the same period in 1994 and
EBITDA increased 189% to $33.2 million from $11.5 million during the same
period in 1994.
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)
deployment of its excess domestic rig 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 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. For the nine months ended September 30, 1995, the
Company's international and offshore operations accounted for approximately
57% of the Company's total revenue and 77% of the Company's total earnings
from operations.
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 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 platform rig now
operating in the Gulf of Mexico. Because the Company believes that providing
high quality equipment, employees and services in a safe work environment is
critical to its strategy, the Company has committed substantial capital to an
ongoing rig refurbishment program and to quality, safety and management
training programs.
3
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 currently
operates 45 rigs in Argentina, 11 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 use a portion of the proceeds of
this offering to upgrade and deploy 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
January 1995 under ten-year contracts. In October 1995, the Company acquired a
six-rig drilling operation in Colombia. During the first half of 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 deployment of underutilized domestic assets, acquisitions and new rig
construction projects. International operations accounted for approximately
38% of the Company's operating revenues in the first nine months of 1995,
while generating 50% of earnings from operations.
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 (approximately 45%
of available market capacity), 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, which the Company believes has led to higher
day rates and increased utilization of its rigs. Domestic offshore operations
accounted for approximately 19% of the Company's operating revenues for the
first nine months of 1995, while generating 26% of earnings from operations.
DOMESTIC LAND-BASED OPERATIONS
The Company's domestic land-based fleet consists of 429 rigs that operate
from 21 service locations concentrated primarily 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. The Company has
increased earnings from such operations from $1.3 million for the year ended
December 31, 1993 to $4.4 million for the twelve months ended September 30,
1995. Domestic land-based operations accounted for approximately 43% of the
Company's operating revenues for the first nine months of 1995, while
generating 24% of earnings from operations.
4
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................... $70,000,000 principal amount of % Convertible Subordinated
Debentures due 2006 (the "Debentures").
Payment of Interest.................. February 15 and August 15, commencing August 15, 1996.
Conversion Rights.................... The Debentures are convertible, at the holder's option, into
shares of Common Stock of the Company at any time at or prior to
maturity at a conversion price of $ per share, subject to
adjustment under certain circumstances as described herein (the
"Conversion Price"). Accordingly, each $1,000 principal amount of
Debentures is convertible into shares of Common Stock,
subject to adjustment, for an aggregate of shares for all
the Debentures. See "Capitalization."
Optional Redemption.................. The Debentures are redeemable, in whole or in part, at the option
of the Company at any time on or after February 15, 1999 at the
redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption.
Change of Control/Failure to Maintain
Listing............................ If a Change of Control (as defined) occurs, or if the Common Stock
ceases to be listed on the NASDAQ
National Market System or a national securities exchange, each
holder of Debentures will have the right to require the Company to
purchase all or any part of such holder's Debentures at 100% of
the principal amount thereof, plus accrued and unpaid interest to
the date of purchase.
Subordination........................ The Debentures are general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company. In addition, the
Debentures are effectively subordinated to all of the creditors of
the Company's subsidiaries, including trade creditors. The
indenture governing the Debentures will not include any covenants
limiting or restricting the ability of the Company or its
subsidiaries to incur any indebtedness.
Maturity............................. February 15, 2006.
Use of Proceeds...................... The net proceeds from the sale of the Debentures will be used to
fund capital expenditures, primarily for rig fleet expansion in
international and offshore markets, to repay indebtedness and for
general corporate purposes. See "Use of Proceeds."
Trading.............................. The Company has applied for listing of the Debentures on the
NASDAQ SmallCap Market. The Company's Common Stock is traded on
the NASDAQ National Market System (symbol: PRDE).
</TABLE>
5
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
(IN THOUSANDS, EXCEPT RATIOS, RIGS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 101,654 $ 112,224 $ 101,382 $ 127,099 $ 182,336 $ 128,036 $ 198,512
Operating costs...................... 78,980 87,700 83,829 100,305 139,653 99,402 143,376
Depreciation and amortization........ 4,641 5,861 5,649 6,407 9,550 6,807 12,077
Selling, general and
administrative..................... 11,208 13,825 14,076 17,572 25,105 16,802 23,620
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from operations...... $ 6,825 $ 4,838 $ (2,172) $ 2,815 $ 8,028 $ 5,025 $ 19,439
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss)(1)............... $ 4,666 $ 3,519 $ (842) $ 5,940 $ 6,214 $ 3,836 $ 11,227
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) per share(1)..... $ .29 $ .22 $ (.05) $ .36 $ .30 $ .20 $ .44
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER OPERATING DATA:
EBITDA(2)............................ $ 11,507 $ 10,800 $ 3,482 $ 9,087 $ 17,273 $ 11,512 $ 33,156
Capital and acquisition
expenditures......................... 13,756 5,918 4,094 21,875 81,388 55,869 36,425
Ratio of earnings to fixed charges(3)
Historical....................... 33.6x 14.3x (1.3)x 5.8x 6.2x 5.8x 4.1x
Pro forma(4)..................... 1.7x 1.5x 2.7x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital...................... $ 20,884 $ 25,983 $ 29,989 $ 21,758 $ 26,640 $ 31,218 $ 28,914
Property and equipment, net.......... 46,359 46,424 45,084 62,823 139,899 97,508 173,264
Total assets......................... 85,600 89,819 94,842 109,981 205,193 172,910 256,818
Long-term debt, net of current
portion............................ 5,944 4,908 3,648 200 42,096 6,488 58,817
Shareholders' equity................. 58,946 62,376 61,774 69,126 111,385 108,960 126,546
NUMBER OF RIGS (AT END OF PERIOD):
International........................ -- -- -- 51 60 54 67
Domestic -- offshore................. -- -- -- -- 22 22 23
Domestic -- land-based............... 409 437 430 410 400 404 429
--------- --------- --------- --------- --------- --------- ---------
Total number of rigs............. 409 437 430 461 482 480 519
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------
(1) Net earnings for the year ended December 31, 1993 include $3,835,000 ($.23
per share), representing the cumulative effect of a change in accounting
for income taxes. See Note 5 of Notes to Consolidated Financial
Statements.
(2) EBITDA (earnings before interest, taxes, depreciation, and amortization)
is presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows as a better measure of liquidity.
(3) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of operating lease
rental expense that represents the interest factor).
(4) Assumes the Debentures bear interest at an annual rate of 6%, but does not
give effect to interest earned on proceeds of this offering prior to
application thereof.
6
INVESTMENT CONSIDERATIONS
THE FOLLOWING SHOULD BE CONSIDERED CAREFULLY WITH THE INFORMATION
PROVIDED ELSEWHERE IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, INCLUDING THE FINANCIAL STATEMENTS AND THE NOTES THERETO, IN
REACHING A DECISION REGARDING AN INVESTMENT IN THE DEBENTURES OFFERED HEREBY.
DEPENDENCE ON OIL AND GAS INDUSTRY; 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; 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 Gulf of Mexico fleet and the
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 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.
COMPETITION
Competition is intense in all markets in which the Company operates, and
with respect to certain services or operating regions, a few competitors may
have greater access to financial or other resources than the Company. The
domestic land-based well servicing industry is highly fragmented and is
characterized by a few large companies and numerous smaller companies. In the
international markets in which the Company operates, the Company believes that
it has fewer competitors and a greater opportunity to operate under long-term
contracts. Similarly, while competition in the Gulf of Mexico for platform
workover services is intense, the Company has fewer competitors in that
market. In recent
7
years, customers have placed emphasis not only on pricing, but also
increasingly on safety and quality of service. See "Business -- Competition."
CERTAIN CUSTOMERS
In Argentina, approximately 68% of the Company's business for the nine
months ended September 30, 1995 was conducted for YPF Sociedad Anonima
("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 revenues for the nine months ended September 30, 1995.
One customer, Shell Oil Company, accounted for approximately 59% of revenues
from domestic offshore operations for the nine months ended September 30,
1995. Revenues from Shell Oil Company and its affiliates from both land-based
and offshore operations accounted for approximately 15% of consolidated
revenues for the nine months ended September 30, 1995. The loss of YPF or
Shell Oil Company and its affiliates as customers could have a material
adverse effect on the Company's operations and financial condition. See
"Business -- Customers."
INTERNATIONAL OPERATIONS
An increasingly significant portion of the Company's revenues are
attributable to international operations, which provided approximately 35% of
the Company's revenues during the year ended December 31, 1994 and
approximately 38% of the Company's revenues for the nine months ended
September 30, 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 and
tax 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 risk
insurance from the Overseas Private Investment Corporation ("OPIC"), a U.S.
government entity, with respect to its Venezuelan 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. See "Business --
International Operations" and "-- Contracts."
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
material 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.
8
The President of the United States has recently proposed the enactment of
tax legislation that would, if enacted, disallow the interest deduction for
certain issuances of convertible debentures on or after December 7, 1995 when
it is substantially certain at the time of issuance that the conversion right
will be exercised. The Company believes, based upon the conversion premium of
the Debentures and the information that has been publicly released to date,
that such legislation is not intended to apply to the Debentures. However,
there can be no assurance regarding what form such legislative proposal might
ultimately take, if enacted into law, including whether such legislation might
adversely affect the Company's deduction of interest with respect to the
Debentures.
SUBORDINATION; COMPANY STRUCTURE; SUBSIDIARY CASH FLOW
The Debentures are general, unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. Under the Indenture, generally, the Company will
not be permitted to pay the principal of, or premium, if any, or interest on
the Debentures or repurchase, redeem or otherwise retire any Debentures in the
event of a default in the payment of any principal of, premium, if any, or
interest on any Senior Indebtedness of the Company when it becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise, unless and until such payment default has been cured
or waived, or in the event of certain other defaults with respect to Senior
Indebtedness. In addition, the Debentures are effectively subordinated to all
of the creditors of the Company's subsidiaries, including trade creditors. As
of September 30, 1995, as adjusted to give effect to this offering and the
anticipated use of the net proceeds therefrom, the Company and its
subsidiaries would have had an aggregate of $105.4 million of consolidated
indebtedness and other obligations effectively ranking senior to the
Debentures. The Indenture will not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company or any of its subsidiaries.
See "Description of Debentures -- Subordination."
The Company conducts a significant portion of its operations through both
U.S. and foreign subsidiaries. Accordingly, the Company may be dependent, from
time to time, in whole or in part, on its ability to obtain funds from its
subsidiaries in order to service its indebtedness, including the Debentures.
Certain financing arrangements that the Company's subsidiaries are party to
impose restrictions on the ability of the Company to gain access to the cash
flow or assets of its subsidiaries. In addition, the Company's foreign
subsidiaries may face governmentally imposed restrictions, from time to time,
on their ability to transfer funds to the Company. See "Business."
LACK OF LIQUIDITY
Although application has been made to list the Debentures on the NASDAQ
SmallCap Market, there can be no assurance that such listing will be approved.
In addition, even if the Debentures are so approved for listing, there can be
no assurance as to the liquidity of the trading market for the Debentures or
that an active trading market for the Debentures will develop.
CERTAIN ANTI-TAKEOVER MEASURES
Certain provisions of the Company's Articles of Incorporation and Bylaws,
as well as certain provisions of Louisiana law, may serve to discourage
takeover attempts that a shareholder might consider to be in its best
interest. See "Description of Capital Stock -- Certain Provisions of the
Articles, Bylaws and Louisiana Law." In addition, the Company has entered into
employment agreements with certain key members of management providing for the
payment of certain severance benefits to such persons in the event of their
termination following a change in control of the Company.
9
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
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 Common Stock for the periods indicated below as reported by
NASDAQ.
PRICE
---------------
HIGH LOW
1993
First Quarter...................... $5 $3 1/2
Second Quarter..................... 5 1/2 4 3/8
Third Quarter...................... 6 1/8 4 1/2
Fourth Quarter..................... 7 1/2 4 7/8
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
1996
First Quarter (through January 19). 11 1/2 10
On January 19, 1996, the last reported sale price of the Common Stock on
the NASDAQ National Market System was $10 1/8 per share. As of December 15,
1995, there were 2,155 holders of record of Common Stock.
The Company has not paid any cash dividends on the 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 Common Stock at any
time in the foreseeable future. Furthermore, the Company may be restricted
from paying cash dividends on the Common Stock by the terms of future
borrowing agreements.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Debentures offered
hereby will be approximately $ million ($ million if the
Underwriters' over-allotment option is exercised in full). Approximately $25
million of the net proceeds will be used to fund various capital projects,
including the refurbishment, equipping and deployment to international markets
of seven workover and four drilling rigs, the purchase and outfitting of a
specially designed rig for land-based operations, the conversion of three
conventional platform well-servicing rigs to modular, diesel-electric powered
units and the purchase of auxiliary equipment to enhance the operating
capability of the offshore fleet. Approximately $5 million of the net proceeds
will be used to repay outstanding indebtedness under the Company's working
capital facility, which provides for interest at the lender's prime rate plus
1% (currently 9.5%) and matures in April 1996, and another $5 million will be
used to repay other outstanding indebtedness, which accrues interest at rates
ranging from 8.0% to 9.5% with maturities ranging from less than one year to
approximately four years. The balance of the proceeds will be available for
general corporate purposes, including the replenishment of $6 million in
working capital used to fund the acquisition of Marlin Colombia Drilling Co.
Inc. in October 1995 and $2 million in working capital used during the second
half of 1995 to acquire the four drilling rigs being refurbished as described
above. Pending such uses, the Company will invest the net proceeds in
short-term, investment grade securities. The Company intends to use any excess
proceeds and available borrowing
10
capacity to pursue its business strategy, including acquisitions and capital
projects primarily in the offshore and international markets.
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company and its subsidiaries as of September 30, 1995
(i) on a historical basis and (ii) as adjusted to give effect to the issuance
and sale of the Debentures offered hereby by the Company (assuming the
Underwriters' over-allotment option is not exercised) and application of the
proceeds therefrom.
SEPTEMBER 30, 1995
-----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
CASH AND CASH EQUIVALENTS(1)......... $ 11,139 $ 43,539
-------- -----------
-------- -----------
SHORT-TERM DEBT AND CURRENT
MATURITIES OF LONG-TERM DEBT....... $ 12,756 $ 3,022
-------- -----------
-------- -----------
LONG-TERM DEBT
% Convertible Subordinated
Debentures due 2006........... $ -- $ 70,000
Limited-recourse secured term
loans......................... 39,413 39,413
Secured term loans.............. 10,430 10,430
Notes payable................... 8,974 8,708
-------- -----------
Total long-term debt, net
of current maturities... 58,817 128,551
-------- -----------
SHAREHOLDERS' EQUITY
Preferred Stock, no par value,
5,000,000 shares authorized;
no shares
issued or outstanding........ -- --
Common Stock, no par value;
40,000,000 shares authorized;
24,849,572 shares issued and
24,795,352 shares
outstanding(2)................ 1 1
Paid-in capital................. 95,190 95,190
Treasury stock.................. (191) (191)
Retained earnings............... 31,546 31,546
-------- -----------
Total shareholders'
equity.................. 126,546 126,546
-------- -----------
Total
capitalization.... $185,363 $ 255,097
-------- -----------
-------- -----------
- ------------
(1) After giving effect to $25 million of capital expenditures and $10 million
used to repay indebtedness as described in "Use of Proceeds."
(2) Does not include 2,153,350 shares reserved for issuance upon exercise of
outstanding stock options, 622,200 shares available for future grants
under the Company's stock option plans, 15,000 shares purchasable upon
exercise of warrants or shares initially issuable upon conversion
of the Debentures.
11
SELECTED FINANCIAL DATA
The following selected consolidated financial information as of December
31, 1993 and 1994, and for each of the three years in the period ended
December 31, 1994 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 income statement and balance sheet data for the
nine-month periods ended or as of September 30, 1994 and 1995 have been
derived from the unaudited consolidated financial statements of the Company,
which include all adjustments, consisting of normal recurring accruals, that
the Company considers necessary for a fair presentation of its financial
position and results of operations for these periods. Operating results from
the nine-month period ended September 30, 1995 are not necessarily indicative
of the results that may be expected for the entire year. The selected
consolidated financial information as of December 31, 1990, 1991 and 1992, and
for each of the two years in the period ended December 31, 1991 has been
derived from audited consolidated financial statements of the Company which
are not included herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 101,654 $ 112,224 $ 101,382 $ 127,099 $ 182,336 $ 128,036 $ 198,512
Operating costs...................... 78,980 87,700 83,829 100,305 139,653 99,402 143,376
Depreciation and amortization........ 4,641 5,861 5,649 6,407 9,550 6,807 12,077
Selling, general and
administrative..................... 11,208 13,825 14,076 17,572 25,105 16,802 23,620
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from operations...... 6,825 4,838 (2,172) 2,815 8,028 5,025 19,439
Other income (expense)............... 766 880 813 504 106 (19) (2,472)
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before income taxes
and cumulative effect of change in
accounting for income taxes........ 7,591 5,718 (1,359) 3,319 8,134 5,006 16,967
Income tax provision (benefit)....... 2,925 2,199 (517) 1,214 1,920 1,170 5,740
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) before cumulative
effect of change in accounting for
income taxes....................... 4,666 3,519 (842) 2,105 6,214 3,836 11,227
Cumulative effect of change in
accounting for income taxes........ -- -- -- 3,835 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss).................. $ 4,666 $ 3,519 $ (842) $ 5,940 $ 6,214 $ 3,836 $ 11,227
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) per share before
cumulative effect of change in
accounting for income taxes........ $ .29 $ .22 $ (.05) $ .13 $ .30 $ .20 $ .44
Cumulative effect of change in
accounting for income taxes -- -- -- .23 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) per share........ $ .29 $ .22 $ (.05) $ .36 $ .30 $ .20 $ .44
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common shares and
equivalents outstanding 16,305 16,354 16,245 16,487 20,795 19,590 25,280
OTHER OPERATING DATA:
EBITDA(1)............................ $ 11,507 $ 10,800 $ 3,482 $ 9,087 $ 17,273 $ 11,512 $ 33,156
Capital and acquisition
expenditures....................... 13,756 5,918 4,094 21,875 81,388 55,869 36,425
Ratio of earnings to fixed
charges(2)......................... 33.6x 14.3x (1.3)x 5.8x 6.2x 5.8x 4.1x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital...................... $ 20,884 $ 25,983 $ 29,989 $ 21,758 $ 26,640 $ 31,218 $ 28,914
Property and equipment, net.......... 46,359 46,424 45,084 62,823 139,899 97,508 173,264
Total assets......................... 85,600 89,819 94,842 109,981 205,193 172,910 256,818
Long-term debt, net of current
portion............................ 5,944 4,908 3,648 200 42,096 6,488 58,817
Shareholders' equity................. 58,946 62,376 61,774 69,126 111,385 108,960 126,546
</TABLE>
- ------------
(1) EBITDA (earnings before interest, taxes, depreciation, and amortization)
is presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows as a better measure of liquidity.
(2) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of operating lease
rental expense that represents the interest factor).
12
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 and the notes thereto 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 March 1995, the Company acquired X-Pert Enterprises, Inc.
("X-Pert"), which operates 35 well servicing rigs in New Mexico.
In January 1995, the Company commenced operation of two
drilling/workover barge rigs on Lake Maracaibo, Venezuela. The barges
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 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 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.
RESULTS OF OPERATIONS
The following tables set forth selected consolidated financial
information of the Company by segment for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1992 1993 1994 1994 1995
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Domestic land................... $ 101,382 $ 105,865 $ 95,860 $ 72,545 $ 85,990
Domestic offshore............... -- -- 23,441 11,229 37,564
International................... -- 21,234 63,035 44,262 74,958
----------- ----------- ----------- ----------- -----------
Total revenues............ $ 101,382 $ 127,099 $ 182,336 $ 128,036 $ 198,512
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings (loss) from operations:
Domestic land................... $ (2,172) $ 1,307 $ 1,184 $ 1,367 $ 4,574
Domestic offshore............... -- -- 3,304 1,172 5,074
International................... -- 1,508 3,540 2,486 9,791
----------- ----------- ----------- ----------- -----------
Total earnings (loss) from
operations.............. $ (2,172) $ 2,815 $ 8,028 $ 5,025 $ 19,439
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C>
Revenues:
Domestic land................... 100.0% 83.3% 52.6% 56.6% 43.3%
Domestic offshore............... -- -- 12.9 8.8 18.9
International................... -- 16.7 34.5 34.6 37.8
--------- --------- --------- --------- ---------
Total revenues............ 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings (loss) from operations:
Domestic land................... 100.0% 46.5% 14.7% 27.2% 23.5%
Domestic offshore............... -- -- 41.2 23.3 26.1
International................... -- 53.5 44.1 49.5 50.4
--------- --------- --------- --------- ---------
Total earnings (loss) from
operations.............. 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1994
REVENUES. Revenues for the nine months ended September 30, 1995
increased $70,476,000, or 55%, as compared to the corresponding period in
1994. Of this increase, $26,335,000 was attributable to domestic offshore
operations, which the Company acquired in June 1994, and $30,696,000 was a
result of expansion of the Company's international operations, primarily in
Venezuela and Argentina. Revenues from Venezuelan operations increased
primarily as a result of the commencement of operations of the Company's two
drilling/workover barge rigs. Revenues from domestic land operations increased
$13,445,000, primarily as a result of the acquisition of X-Pert in March 1995,
as well as some improvement in pricing for the Company's services.
OPERATING COSTS. Operating costs for the nine months ended September 30,
1995 increased $43,974,000, or 44%, as compared to the corresponding period in
1994. Of this increase, $17,687,000 was attributable to the Company's recently
acquired domestic offshore operations, and $18,294,000 was a result of
expansion of the Company's international operations, as discussed above.
Operating costs related to domestic land operations increased $7,993,000,
corresponding to the addition of X-Pert.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
nine months ended September 30, 1995 increased $5,270,000, or 77%, as compared
to the corresponding period in 1994, 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 nine months ended September 30, 1995 increased $6,818,000, or
41%, as compared to the corresponding period in 1994, primarily as a result of
the inclusion of such costs for acquired domestic offshore, land and
international operations. As a percentage of revenues, however, total selling,
general and administrative costs declined to 12% for the first nine months of
1995 from 13% for the first nine months of 1994, as such costs have been
spread over a larger revenue base.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the nine months ended September 30, 1995 of $19,439,000. Of this amount,
$9,791,000 was generated by international operations, $5,074,000 was generated
by domestic offshore operations and $4,574,000 was generated by domestic land
operations. For the corresponding nine month period of 1994, international
operations generated earnings from operations of $2,486,000, domestic offshore
operations generated earnings from operations of $1,172,000 and domestic land
operations generated earnings from operations of $1,367,000.
OTHER INCOME (EXPENSE). Other income (expense) for the nine months ended
September 30, 1995 included a gain of $1,049,000 from the insurance recovery
relating to a domestic land rig which
14
was destroyed in an explosion and fire, and other miscellaneous gains of
$591,000 from asset sales, other insurance recoveries, foreign exchange
transactions and other sources. Other income (expense) for the corresponding
1994 period consisted principally of net foreign currency translation losses
of $363,000 resulting from the devaluation of the Venezuelan bolivar. Interest
income increased to $577,000 for the nine months ended September 30, 1995 from
$471,000 for the corresponding 1994 period, due to an increase in excess cash
available for investment. Interest expense for the nine months ended September
30, 1995 increased to $4,689,000 from $170,000 for the corresponding 1994
period, primarily as a result of borrowings related to the 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 nine months ended September 30, 1995 increased to approximately
34% from approximately 23% for the corresponding period in 1994. The Company
has estimated that approximately $600,000 of the insurance gain discussed
above will not be subject to income tax. During the third quarter of 1994, the
Company recognized the current tax benefits from the expected utilization of
approximately $2,255,000 of foreign net operating loss carryforwards which
were obtained in connection with the acquisition of a foreign enterprise. The
Company had recognized a valuation allowance for the tax benefits of such
foreign net operating loss carryforwards at the date the foreign enterprise
was acquired.
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
administrative 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
15
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 borrowing.
During the year 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 borrowing 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. The Company does not
expect to recognize additional tax benefits from the utilization of foreign
net operating loss carryforwards in 1995.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
REVENUES. Revenues for the year ended December 31, 1993 increased
$25,717,000, or 25%, as compared to the corresponding period in 1992, with
international revenues accounting for $21,234,000 of the increase. Domestic
revenues increased $4,483,000 when compared to 1992. The domestic revenue
increase resulted from increased rig hours worked and improved rates for
services. The Company had no international revenues in 1992.
OPERATING COSTS. Operating costs for the year ended December 31, 1993,
increased $16,476,000, or 20%, as compared to the corresponding period in
1992, primarily due to the addition of international operations. Domestic
operating costs decreased as a percentage of domestic revenues to 81% from
83%, primarily due to reduced insurance cost, which was partially offset by
increased labor, repair, and supply costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
year ended December 31, 1993 increased $758,000, or 13%, as compared to the
corresponding period in 1992, primarily as a result of additional depreciation
expense on newly acquired assets of international operations. Domestic
depreciation expense for 1993 decreased from that of 1992 as the Company
replaced previously owned vehicles with leased vehicles.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1993 increased $3,496,000, or 25%, as
compared to the corresponding period in 1992, primarily due to the increase in
international operations expenses of $3,768,000, which was partially offset by
a decrease in domestic selling, general and administrative expenses. As a
percentage of revenues, total selling, general and administrative expenses
remained constant from 1992 to 1993 at approximately 14%.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
during 1993 of $1,508,000 from international operations and $1,307,000 from
domestic land operations. During 1992, when the Company's operations consisted
entirely of domestic land operations, the Company generated a loss from
operations of $2,172,000.
OTHER INCOME (EXPENSE). Other income (expense) for 1993 included
$167,000 of foreign exchange loss which was primarily the result of the
Company's operations in Venezuela. Net interest income (interest income less
interest expense) for 1993 was $169,000 lower than 1992, primarily as a result
of a lower average cash balance following the consummation of Pride's
international acquisitions.
INCOME TAX PROVISION (BENEFIT). The Company's consolidated income tax
rate for the years ended December 31, 1993 and 1992 was 37%, before the
cumulative effect of a change in accounting for income taxes, and 38%,
respectively. During 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," and recorded a
gain in the amount of $3,835,000 as the cumulative effect of a change in
accounting for income taxes.
16
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $28,914,000, $26,640,000 and
$21,758,000 at September 30, 1995 and December 31, 1994 and 1993,
respectively. In October 1995, the Company used approximately $6 million of
its working capital to fund the acquisition of Marlin, which operates six
drilling rigs in Colombia. The Company's current ratio was 1.6, 1.8 and 1.9 at
September 30, 1995 and December 31, 1994 and 1993, respectively. In June 1994,
the Company completed the public issuance 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 deployment of rigs from its
domestic fleet to Argentina. The Company believes that its available funds,
together with the proceeds from this offering and cash generated from
operations, will be sufficient to fund its capital expenditures, working
capital and debt service requirements.
As of September 30, 1995, the Company had domestic bank commitments
providing for guidance lines of credit of $18,000,000, against which letters
of credit totaling $11,048,000 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
September 30, 1995, the Company had accrued approximately $9,846,000 of claims
liabilities, of which $5,626,000 was included in current liabilities and
$4,220,000 was reflected as other long-term liabilities in the accompanying
unaudited consolidated balance sheets. 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 aggregate amount of the
collateralized term loans was initially $42,000,000. As of September 30, 1995,
$2,503,000 of accrued interest has been 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
until the first scheduled payment in July 1995. At September 30, 1995, the
outstanding balance of these loans was $43,117,000. The total amount of the
loans is being paid from the proceeds of the related charter contracts in 109
equal monthly installments of principal and interest. In addition, a portion
of contract proceeds is being held in trust to assure the timely payment of
future debt service obligations. At September 30, 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 risk insurance policies from OPIC to
protect against political risks that could result in potential payments under
the terms of the Company's guaranty.
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 September 30, 1995, $12,590,000 of secured term loans and $2,773,000 of
working capital line of credit borrowings were outstanding pursuant to this
facility. The Company plans to continue a program to upgrade its offshore
platform rig fleet throughout 1995. During the nine months ended September 30,
1995, the Company spent approximately $12,800,000 on offshore assets,
including: (i) construction of a new "flagship"
17
state-of-the-art diesel electric platform rig, (ii) major rig refurbishments
and (iii) auxiliary equipment such as top-drive drilling systems, larger
capacity pumps and generators and improved living quarters.
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 September 30, 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 $587,000 realized on the transaction has
been deferred and will be amortized as a reduction of lease expense over the
maximum lease term of five years.
The Company spent approximately $3,800,000 during the nine months ended
September 30, 1995 to complete construction of the two new drilling/workover
barge rigs deployed in Venezuela. Rig refurbishment and international
deployment costs for the nine months ended September 30, 1995 and 1994 were
approximately $14,600,000 and $6,200,000, 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 nine
months ended September 30, 1995 and 1994 were approximately $3,200,000 and
$3,000,000, respectively. Capital expenditures (excluding acquisitions,
international rig deployment and drilling/workover barge costs) for the years
ended December 31, 1994 and 1993 were $10,994,000 and $2,200,000,
respectively. International rig refurbishment and deployment costs for the
twelve months ended December 31, 1994 and 1993 were $9,952,000 and $9,900,000,
respectively.
The Company expects to continue to review opportunities to pursue its
international and offshore equipment and technology expansion. 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 other 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.
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.
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.
Further, 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
18
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. On December 11, 1995,
the Venezuelan government devalued its currency by revising the official
exchange rate to 290 Venezuelan bolivars per U.S. dollar. The Company believes
that the December 1995 devaluation will not result in any material currency
translation loss to be recognized in its financial statements. If the official
rate is subsequently revised or a market exchange mechanism is reimplemented
so that the Venezuelan 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. However, there is
no assurance that translation losses will not occur in the future.
19
BUSINESS
GENERAL
Pride Petroleum Services, Inc. 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 519 owned rigs is the world's second largest, consisting of 429 land-
based rigs divided among three operating regions in the United States, 65
land-based 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)
deployment 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 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 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, 11 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 use a portion of the proceeds of this
offering to
20
upgrade and deploy 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 the first half of 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 experienced improved conditions 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. 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 11 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 $10 billion or more in
new investment will be needed over the next ten years to develop the initial
ten projects selected for development pursuant to production sharing
contracts. The Company believes it is well positioned to capitalize on any
resulting opportunities.
In January 1995, the Company's two drilling/workover barge rigs began
operations on Lake Maracaibo, Venezuela, pursuant to contracts with Lagoven
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 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 risk insurance policies from 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
Columbia 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. The
Colombian government has recently enacted policies to encourge oil and gas
exploration and production activities, and the Company believes it will be
able to compete effectively for any resulting business opportunities.
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.
21
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 (approximately 45%
of available market capacity), 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, which the Company believes has led to higher
day rates and increased utilization of its rigs.
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 18,000 feet. In addition to providing
workover services offshore, the Company is performing an increasing amount of
drilling and horizontal re-entry services utilizing portable 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 concentrated primarily 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. The Company has
increased earnings from such operations from $1.3 million for the year ended
December 31, 1993 to $4.4 million for the twelve months ended September 30,
1995.
The Company worked 293 of its domestic land-based rigs at some time
during 1994, 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
22
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 little 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 frequently 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.
23
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 being Nabors
Industries with 11 rigs and Pool Energy Services Co. ("Pool") with eight rigs,
as compared to 23 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 68% of the Company's business for the
nine months ended September 30, 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 revenues for the
nine months ended September 30, 1995. 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 contract is with
a joint venture entity co-owned by a large multinational operator and a
Russian production association. The Company's U.S. customers
24
are predominantly major integrated and large independent operators. One
customer, Shell Oil Company, accounted for approximately 59% of revenues from
domestic offshore operations for the nine months ended September 30, 1995.
Revenues from Shell Oil Company and its affiliates from both land-based and
offshore operations accounted for approximately 15% of consolidated revenues
for the nine months ended September 30, 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 a term of one
to two years. 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 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. Lagoven can terminate a
contract with respect to a barge upon payment of a "make-whole" termination
fee, in which event it will be required to purchase the barge.
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.
PROPERTY
The Company's property consists primarily of well servicing rigs,
drilling rigs and ancillary equipment, 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 downhole equipment can be
25
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 rigs are
large double capacity derrick 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. The 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 600 vehicles and leases
approximately 525 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 18,000
square feet of leased space under a lease that expires in April 1998. The
Company owns 18 and leases 16 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.
26
The following table sets forth the type, number and location of the land
rigs owned by the Company and its subsidiaries as of December 15, 1995:
LAND-BASED RIG FLEET
<TABLE>
<CAPTION>
SINGLE DOUBLE SWAB
LOCATION TOTAL DERRICK DERRICK UNIT DRILLING
UNITED STATES:
Southern Area --
<S> <C> <C> <C> <C> <C>
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.......................... 11 -- 8 -- 3
Russia............................. 3 -- 1 2 --
----- ---- ------- ---- -----
Total International................ 65 -- 47 2 16
----- ---- ------- ---- -----
TOTAL COMPANY........................ 494 65 393 20 16
----- ---- ------- ---- -----
----- ---- ------- ---- -----
</TABLE>
- ------------
(1) No operations are conducted from this facility.
(2) These rigs are being refurbished for international deployment.
27
The following table sets forth, as of December 15, 1995, certain
information concerning the Company's offshore platform and Venezuelan barge
rig fleet:
OFFSHORE PLATFORM AND VENEZUELAN BARGE RIGS
<TABLE>
<CAPTION>
RIG DRAWWORKS RATED
NO. RIG TYPE MAKE/MODEL HORSEPOWER DEPTH STATUS
OFFSHORE PLATFORM RIGS
<S> <C> <C> <C> <C> <C>
6 Concentric Tubing Gardner Denver 3000 150 12,000 Active
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 Available
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 Available
170 Standard Workover Gardner Denver 500S 650 15,000 Available
200 Improved Workover Gardner Denver 500S 650 15,000 Available
210 Improved Workover Gardner Denver 500S 650 15,000 Available
220 Improved Workover Gardner Denver 500S 650 15,000 Available
650E Improved Electric Workover Gardner Denver 500S(1) 650 15,000 Active
651E Improved Electric Workover Gardner Denver 500S(1) 650 15,000 Active
653E Improved Electric Workover Gardner Denver 500S 650 15,000 Active
750E Heavy Electric Workover Dreco 750E(1) 750 16,500 Active
751E Heavy Electric Workover OIME SL-5(1) 800 16,500 Active
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 Workover OIME SL-7(1) 1,500 18,000 Active
1002E Heavy Electric Workover OIME SL-7(1) 1,500 18,000 (2)
VENEZUELAN BARGE RIGS
PRIDE I Drilling/Workover National 110UBDE(1) 1,500 20,000 Active
PRIDE II Drilling/Workover National 110UBDE 1,500 20,000 Active
</TABLE>
- ------------
(1) Equipped with top drive drilling system.
(2) Undergoing upgrading and major refurbishment.
28
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.
EMPLOYEES
The Company currently employs approximately 750 salaried employees and
approximately 3,600 hourly paid employees. Approximately 2,600 of the
employees are located in the United States and 1,750 are located abroad.
Hourly rig crew members comprise the vast majority of employees. Typically, a
rig crew consists of an operator, a derrick man and two crewmen on the rig
floor. 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 11 of the Notes to Consolidated Financial Statements and Note 8 of Notes
to Unaudited Consolidated Financial Statements.
29
MANAGEMENT
The following table and descriptions set forth information regarding the
directors and executive officers of the Company. Directors are elected at the
Company's annual meeting of shareholders and serve for five-year terms or
until their successors are elected and qualified or until their earlier
resignation or removal in accordance with the Company's bylaws. 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(1).................... 60 Chairman of the Board, President and
Chief Executive Officer
Paul A. Bragg....................... 39 Vice President, Chief Financial
Officer and Treasurer
Dexter R. Polk...................... 64 Senior Vice President -- Domestic
Operations
James W. Allen...................... 52 Senior Vice President of Pride
International, Ltd.
Robert W. Randall................... 53 Vice President -- General Counsel
and Secretary
James T. Sneed(1)(2)(3)............. 64 Director
Thomas H. Roberts, Jr.(2)(3)........ 71 Director
Ralph D. McBride.................... 49 Director
Jorge E. Estrada M.................. 48 Director
James B. Clement(1)(2)(3)........... 50 Director
- ------------
* As of December 15, 1995
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
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., an oilfield services
company, from 1983 through 1987.
Dexter R. Polk has been Senior Vice President -- Domestic Operations of
the Company since April 1992. Prior thereto, he served as Senior Vice
President -- Area Manager of the Company since 1985. He has been an officer of
the Company since 1977. Mr. Polk will retire effective January 31, 1996.
James W. Allen joined the Company in January 1993. He became Senior Vice
President of Pride International, Ltd. in May 1994, responsible for
international operations. 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. Upon the
retirement of Mr. Polk on January 31, 1996, Mr. Allen will oversee all of the
Company's operations.
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 of Tejas
Gas Corporation, a natural gas company.
James T. Sneed has been a director of the Company since October 1992. In
1991 he retired after 37 years of employment with Mobil Oil Corporation where
he was Production Manager USA.
30
Thomas H. Roberts, Jr. has been a director of the Company since 1988. He
has also been Vice Chairman of the Executive Committee of DEKALB Energy
Company for more than the past five years and is a director of IMC Fertilizer
Group, Inc.
Ralph D. McBride became a director of the Company in September 1995. Mr.
McBride has been a partner with the law firm of Bracewell & Patterson, L.L.P.,
Houston, Texas, since 1980.
Jorge E. Estrada M. has been a director of the Company since October
1993. For more than five years, Mr. Estrada has been President and Chief
Executive Officer of JEMPSA Media and Entertainment, a company specializing in
the Spanish and Latin American entertainment industry. Previously Mr. Estrada
served as President -- Worldwide Drilling Division of Geosource and Vice
President of Geosource Exploration Division -- Latin America. Mr. Estrada is a
director of Production Operators Inc. and Wood Group USA Inc.
James B. Clement has been a director of the Company since November 1993.
Since 1977, he has been an executive officer of Offshore Logistics, Inc. and
has served as its President, Chief Executive Officer and a director since
1988.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following sets forth as of December 15, 1995 the beneficial ownership
of Common Stock by (i) each director of the Company, (ii) each executive
officer of the Company, (iii) all directors and officers as a group and (iv)
the persons known to the Company to be the beneficial owners (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of more than five percent of the outstanding shares of Common
Stock.
COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------------
NUMBER PERCENT
NAME OF SHARES(2) OF CLASS
Ray H. Tolson........................ 815,200 3.2%
Paul A. Bragg........................ 346,000 1.4%
Dexter R. Polk....................... 176,000 *
James W. Allen....................... 300,000 1.2%
Robert W. Randall.................... 110,000 *
James T. Sneed....................... 14,500 *
Thomas H. Roberts, Jr................ 354,313 1.4%
Ralph D. McBride..................... -- *
Jorge E. Estrada M................... 410,000 1.7%
James B. Clement..................... 11,500 *
All directors and executive officers
as a group (10 persons)............ 2,537,513 9.6%
The Travelers, Inc................... 2,108,700(3) 8.5%
65 East 55th Street
New York, New York 10022
George D. Bjurman & Associates....... 2,176,615(3) 8.8%
10100 Santa Monica Blvd.
Suite 1200
Los Angeles, California 90067
- ------------
* Less than 1%.
(1) Unless otherwise indicated, the beneficial owner has sole voting and
investment power with respect to all shares listed.
(2) Includes shares issuable upon exercise of options vesting within 60 days
of December 15, 1995.
(3) Such information is based upon filings made with the Securities and
Exchange Commission.
31
DESCRIPTION OF DEBENTURES
The Debentures will be issued pursuant to an indenture (the "Indenture"),
dated as of , 1996, by and between the Company and Marine
Midland Bank, as trustee (the "Trustee"). The following summary of the
Debentures and the Indenture does not purport to be complete and is subject
to, and is qualified in its entirety by, reference to all of the provisions of
the Debentures and the Indenture, copies of which have been filed as exhibits
to the Registration Statement of which this Prospectus constitutes a part. The
terms of the Indenture are also governed by certain provisions contained in
the Trust Indenture Act of 1939, as amended. Capitalized terms used herein
without definition have the meanings ascribed to them in the Indenture. As
used in this section, "the Company" refers to Pride Petroleum Services, Inc.,
exclusive of its Subsidiaries. Wherever particular provisions of the Indenture
are referred to in this summary, such provisions are incorporated by reference
as a part of the statements made and such statements are qualified in their
entirety by such reference.
GENERAL
The Debentures will be unsecured, subordinated, general obligations of
the Company, limited in aggregate principal amount to $70,000,000 ($80,500,000
if the Underwriters' over-allotment option is exercised in full). The
Debentures will be subordinated in right of payment to all Senior Indebtedness
of the Company, as described under "Subordination" below. The Debentures will
be issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof.
The Debentures will mature on February 15, 2006. The Debentures will bear
interest at the rate per annum stated on the cover page hereof from the date
of issuance or from the most recent Interest Payment Date to which interest
has been paid or provided for, payable semi-annually on February 15 and August
15 of each year, commencing August 15, 1996, to the persons in whose names
such Debentures are registered at the close of business on the February 1 or
August 1 immediately preceding such Interest Payment Date. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Principal or premium, if any, and interest on the Debentures will be
payable, the Debentures will be convertible and the Debentures may be
presented for registration of transfer or exchange, at the office or agency of
the Company maintained for such purpose. At the option of the Company, payment
of interest may be made by check mailed to the holders of the Debentures
(individually a "Holder" and collectively the "Holders") at the addresses set
forth upon the registry books of the Company. No service charge will be made
on any registration of transfer or exchange of the Debentures, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Until otherwise designated by the
Company, the Company's office or agency will be the corporate trust office of
the Trustee presently located in New York City.
The covenants and provisions contained in the Indenture and the
Debentures would not necessarily afford the Holders protection in the event of
a highly leveraged transaction involving the Company, including a leveraged
transaction initiated or supported by the Company, the management of the
Company or any affiliate of either party.
CONVERSION RIGHTS
The Holder of any Debentures will have the right, at the Holder's option,
to convert any portion of the principal amount thereof that is an integral
multiple of $1,000 into shares of Common Stock at any time prior to maturity
(unless earlier redeemed or repurchased) at the Conversion Price set forth on
the cover page hereof (subject to adjustment as described below). The right to
convert a Debenture called for redemption or delivered for repurchase will
terminate at the close of business on the fifth or second Business Day,
respectively, prior to the Redemption Date or Repurchase Date for such
Debenture, unless the Company subsequently fails to pay the applicable
Redemption Price.
In the case of any Debenture which has been converted after any Record
Date, but on or before the next Interest Payment Date, interest the stated due
date of which is on such Interest Payment Date shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest
32
shall be paid to the Holder of such Indenture who is a Holder on such Record
Date. Any Debenture so converted must be accompanied by payment of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount of Debentures being surrendered for conversion. No fractional shares
will be issued upon conversion but, in lieu thereof, an appropriate amount
will be paid in cash by the Company based on the market price of Common Stock
(as determined in accordance with the Indenture) at the close of business on
the day of conversion.
The Conversion Price will be subject to adjustment upon the occurrence of
certain events, including: (a) any dividend (and other distributions) payable
in Common Stock on any class of Capital Stock of the Company, (b) any issuance
of rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase Common Stock at a price per share less than the
then current market price (as determined in accordance with the Indenture) of
Common Stock, (c) any subdivision, combination or reclassification of Common
Stock, (d) any distribution to all holders of Common Stock of assets,
evidences of indebtedness, shares of Capital Stock, cash or securities other
than Common Stock (other than dividends or distributions exclusively in cash
or any dividend or distribution for which an adjustment is required to be made
under (b) above), (e) any distribution consisting exclusively of cash
(excluding any cash portion of distributions for which an adjustment is
required to be made in accordance with (d) above, or cash distributed upon a
merger or consolidation to which the second succeeding paragraph 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 times the number of shares
of Common Stock then outstanding) on the record date of such distribution, and
(f) the completion of an Offer that involves an aggregate consideration having
a fair market value as of the expiration time of such Offer 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 adjustments have been made
(other than all-cash distributions to which the second succeeding paragraph
applies), exceeds 12.5% of the Company's market capitalization on the
expiration of such Offer. The Company reserves the right to make such
reductions in the conversion price in addition to those required in the
foregoing provisions 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 recipients. No adjustment of the conversion price
will be required to be made until the cumulative adjustments amount to 1.0% or
more of the conversion price as last adjusted; PROVIDED, that the Company may
make any such adjustment at its election.
In the event that the Company distributes rights, options or warrants
(other than those referred to in (b) in the preceding paragraph) 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
33
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.
In case of any reclassification, consolidation or merger of the Company
with or into another Person or any merger of another Person with or into the
Company (with certain exceptions), or in the case of any sale, transfer or
conveyance of all or substantially all of the assets of the Company (computed
on a consolidated basis), each Debenture then outstanding will, without the
consent of any Holder, become convertible only into the kind and amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, sale, transfer or conveyance by a holder of the number
of shares of Common Stock into which such Debenture was convertible
immediately prior thereto, after giving effect to any adjustment event
(assuming such holder of Common Stock (i) is not a person party to such
transaction and (ii) failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality of
non-electing shares).
If at any time the Company makes a distribution of cash or property to
shareholders that would be taxable to such shareholders as a dividend for
Federal income tax purposes (for example, distributions of cash, assets or
evidences of indebtedness of the Company, but generally not stock dividends or
rights to subscribe for Common Stock), and pursuant to the antidilution
provisions of the Indenture, the Conversion Price is decreased, such decrease
may be deemed to result in taxable dividends to holders of the Debentures.
SUBORDINATION
The Debentures are general, unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. In addition, the Debentures are effectively
subordinated to all of the creditors of the Company's Subsidiaries, including
trade creditors. The Indenture will not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company or its Subsidiaries. As of
September 30, 1995, as adjusted to give effect to this offering and the
anticipated use of the net proceeds therefrom, the Company and its
subsidiaries would have had an aggregate of $105.4 million of consolidated
indebtedness and other obligations effectively ranking senior to the
Debentures.
The Indenture will provide that no payment may 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 repurchases of 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
(i) default in the payment of any principal of, premium, if any, or interest
on, any Senior Indebtedness of the Company when it 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, or (ii) any other event
of 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
"Default 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 under clause (ii) above for more than 179 days after an
applicable Default Notice has been received by the Trustee unless the
Designated Senior Indebtedness in respect 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 Default
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 Default Notice, and only one such Default Notice may be given in any
365-day period.
34
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, then, unless such
payment or distribution is no longer prohibited by the foregoing provisions,
such payment or distribution shall be received and held in trust by the
Trustee or such Holders or the 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 the Paying Agent, as the case may be, to the
holders of the 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 the 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 any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors, (i) the
holders of all Senior Indebtedness of the Company will first be entitled to
receive payment 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) and (ii) any payment or distribution
of assets of the Company of any kind or character, whether in cash, property
or securities (other than Junior Securities) to which the Holders or the
Trustee on behalf of the Holders would be entitled, except for the
subordination provisions contained in the Indenture, will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of Senior Indebtedness of the Company 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 any concurrent payment or distribution to the holders of such Senior
Indebtedness.
No provision contained in the Indenture or the Debentures will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on the Debentures. The
subordination provisions of the Indenture and the Debentures will not prevent
the occurrence of any Default or Event of Default under the Indenture or limit
the rights of the Trustee or any Holder, subject to the preceding paragraphs,
to pursue any other rights or remedies with respect to the Debentures.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshalling of assets or liabilities of the
Company and its Subsidiaries, Holders of the Debentures may receive ratably
less than other creditors.
REDEMPTION AT THE COMPANY'S OPTION
The Debentures will not be subject to redemption prior to February 15,
1999 and will be redeemable on such date and thereafter at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice to each Holder, 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 accrued and unpaid interest thereon to the Redemption Date:
YEAR PERCENTAGE
1999................................. %
2000................................. %
2001................................. %
2002 and thereafter.................. %
35
In the case of a partial redemption, the Trustee shall select the
Debentures or portions thereof for redemption 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 Debentures may be redeemed in part in multiples of
$1,000 only.
The Debentures will not be subject to any sinking fund.
Notice of any redemption will be sent, by first-class mail, postage
prepaid, at least 30 days and not more than 60 days prior to the date for
redemption to the Holder of each Debenture to be redeemed to such Holder's
last address as then shown upon the registry books. The notice of redemption
must state, among other things, the Redemption Date, the Redemption Price,
including the amount of accrued and unpaid interest to be paid upon such
redemption, and that the Debentures called for redemption may not be converted
after the fifth Business Day prior to the Redemption Date. Any notice which
relates to a Debenture to be redeemed in part only must state the portion of
the principal amount equal to the unredeemed portion thereof and must state
that on and after the Redemption Date, upon surrender of such Debenture, a new
Debenture or Debentures in principal amount equal to the unredeemed portion
thereof will be issued. On and after the Redemption Date, interest will cease
to accrue on the Debentures or portions thereof called for redemption, unless
the Company defaults in is obligations with respect thereto.
REPURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER
The Indenture will provide that in the event that a Repurchase Event has
occurred, each Holder will have the right, at such Holders' option, pursuant
to an irrevocable and unconditional offer by the Company (the "Repurchase
Offer"), 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 determined by the
Company (the "Repurchase Payment") equal to 100% of the principal amount
thereof, together with accrued and unpaid interest to the Repurchase Date. The
Repurchase Offer shall be made within 15 Business Days following a Repurchase
Event and shall remain open for 20 Business Days following its commencement
and no longer, except to the extent that a longer period is required by
applicable law (the "Repurchase Offer Period"). Upon expiration of the
Repurchase Offer Period, the Company shall purchase all Debentures properly
tendered in response to the Repurchase Offer.
A Repurchase Event will be deemed to have occurred at such time as:
(1) there is a Change in Control (as defined) of the Company; or
(2) the Company's Common Stock (or other common stock into which
the Debentures are then convertible) is not listed for trading on a
United States national securities exchange or the NASDAQ National Market
System.
The Indenture will provide that a "Change of Control" occurs (i) upon 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 or related transactions, if, immediately after
giving effect to such transaction or transactions, 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) when 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 of the
Company, or (iii) when, 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
36
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.
On or before the Repurchase Payment Date, the Company will (i) accept for
payment Debentures or portions thereof properly tendered pursuant to the
Repurchase Offer, (ii) deposit with the Paying Agent cash sufficient to pay
the Repurchase Payment 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 will on the Repurchase Payment Date
mail to the Holders of Debentures so accepted payment in an amount equal to
the Repurchase Payment, and the Trustee will promptly authenticate and mail or
deliver to each such Holder a new Debenture equal in principal amount to any
unpurchased portion of the Debentures surrendered. Any Debentures not so
accepted will be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Repurchase
Offer on or as soon as practicable after the Repurchase Date.
The term "all or substantially all of the assets" is likely to be
interpreted by reference to applicable state law at the time applicable, and
will be dependent on the facts and circumstances existing at such time. As a
result, there may be a degree of uncertainty in ascertaining whether a sale or
transfer of "all or substantially all of the assets" of the Company has
occurred. In addition, no assurances can be given that the Company will be
able to acquire the Debentures tendered upon the occurrence of a Repurchase
Event.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange
Act as in effect on the Issue Date, whether or not applicable; and (ii) the
term "beneficial owner" shall have the meaning used 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.
The Change of Control feature of the Debentures may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Underwriters.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that
may adversely affect Holders, if such transaction does not constitute a Change
of Control, as set forth above.
To the extent applicable and if required by law, the Company will comply
with Section 14 of the Exchange Act and the provisions of Regulation 14E, Rule
13e-4 and any other tender offer rules under the Exchange Act and any other
securities laws, rules and regulations which may then be applicable to any
offer by the Company to purchase the Debentures at the option of Holders upon
a Repurchase Event.
The right to require the Company to repurchase Debentures as a result of
the occurrence of a Change of Control could create an event of default under
Senior Indebtedness as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provision of the Debentures. See
"-- Subordination." Failure of the Company to repurchase the Debentures when
required would result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions.
There can be no assurance that the Company will have sufficient resources to
purchase Debentures upon a Change of Control.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may 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 or related transactions,
37
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 the Indenture; (ii) no Default
or Event of Default shall exist or shall occur immediately after giving effect
on a PRO FORMA basis to such transaction.
Upon any consolidation or merger or any 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 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 to the Indenture and pursuant to the Debentures, the
Company will be released from its obligations under the Indenture and the
Debentures, except as to any obligations that arise from or as a result of such
transaction.
REPORTS
The Company shall deliver to the Trustee its annual and quarterly
reports, within 15 days after it files such reports with the Securities and
Exchange Commission pursuant to the reporting requirements of Section 13 or
15(d) of the Exchange Act. The Company shall deliver to each Holder such
annual and quarterly reports as it provides to its shareholders.
EVENTS OF DEFAULTS AND REMEDIES
The Indenture will define an Event of Default as (i) the failure by the
Company to pay any installment of interest on the Debentures as and when due
and payable and the continuance of any such failure for 30 days, (ii) the
failure by the Company to pay all or any part of the principal of, or premium,
if any, on the Debentures when and as the same become due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, pursuant to any Repurchase Offer or otherwise, (iii) the failure
of the Company to perform any conversion of Debentures required under the
Indenture and the continuance of any such failure for 30 days, (iv) the
failure by the Company to observe or perform any other covenant or agreement
contained in the Debentures or the Indenture and, subject to certain
exceptions, the 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 that such default or
breach be remedied and stating that such notice is a "Notice of Default" under
the Indenture, (v) certain events of bankruptcy, insolvency or reorganization
in respect of the Company or any of its Significant Subsidiaries, (vi) 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 million 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 million and
(vii) 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 million, at any one time rendered against the Company or any of
its Subsidiaries and not stayed, bonded or discharged within 75 days (or, in
the case of any such final judgment that provides for payment over time, that
shall remain so unstayed, unbonded or undischarged beyond any applicable
payment date provided therein). The Indenture provides that, with certain
exceptions, if a Default occurs and is continuing, the Trustee must, within 90
days after the occurrence of such default, give to the Holders notice of such
Default.
The Indenture will provide that if an Event of Default occurs and is
continuing (other than an Event of Default specified in clause (v) above with
respect to the Company), then in every such case, unless the principal of all
of the Debentures shall have already become due and payable, either the
38
Trustee or the Holders of 25% in aggregate principal amount of the Debentures
then outstanding, by 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. If an Event of Default
specified in clause (v) above occurs with respect to the Company, 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. The Holders of no less than a majority in aggregate
principal amount of Debentures generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Debentures which have
become due solely by such acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the
Debentures, the Holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may waive on behalf of all of the Holders
any default, except a default in the payment of principal of or interest on
any Debenture not yet cured, or a 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. Subject to the provisions of
the Indenture relating to the duties of the Trustee, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at
the request, order or direction of any of the Holders, unless such Holders
have offered to the Trustee reasonable security or indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the Debentures at the time outstanding will 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 on the Trustee.
AMENDMENTS AND SUPPLEMENTS
The Indenture will contain provisions permitting the Company and the
Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. With the consent of the Holders of not
less than a majority in aggregate principal amount of the Debentures at the
time outstanding, the Company and the Trustee are permitted to amend or
supplement the Indenture or any supplemental indenture or modify the rights of
the Holders; PROVIDED, that no such modification may, without the consent of
each Holder affected thereby: (i) change the Stated Maturity of any Debenture
or reduce the principal amount thereof or the rate (or extend the time for
payment) of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Debenture or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on
or after the due date thereof (including, in the case of redemption, on or
after the Redemption Date) or the conversion of any Debenture, or reduce the
Repurchase Price, or alter the redemption, subordination, conversion or
repurchase provisions in a manner adverse to the Holders, or (ii) reduce the
percentage in principal amount of the outstanding Debentures, the consent of
whose Holders is required for any such amendment, supplemental indenture or
waiver provided for in the Indenture, or (iii) adversely affect the right of
such Holder to convert Debentures, or (iv) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Debenture affected thereby.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICER, DIRECTORS
The Indenture will provide that no shareholder, employee, officer or
director, 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 Indenture or the Debentures by reason of his or its
status as such shareholder, employee, officer or director.
39
CERTAIN DEFINITIONS
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"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.
"DESIGNATED SENIOR INDEBTEDNESS" means any Senior Indebtedness that (i)
at the time of delivery of a Default 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 the 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).
"INDEBTEDNESS" of any person means, without duplication, the following
(whether currently outstanding or subsequently incurred or created): (a) all
liabilities and obligations, contingent or otherwise, of any such person (i)
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), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii)
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, (iv) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks, (v) for the payment of money
relating to a Capitalized Lease Obligation, or (vi) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all net obligations of such person under Interest Swap and
Hedging Obligations; (c) all liabilities of others of the kind described in
the preceding clauses (a) or (b) that such person has guaranteed or that is
otherwise its legal liability and all obligations to purchase, redeem or
acquire any Capital Stock; and (d) any and all deferrals, renewals,
extensions, refinancing and refundings (whether direct or indirect) of, or
amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a), (b) or (c), or this clause (d),
whether or not between or among the same parties.
"ISSUE DATE" means the date of the first issuance of the Debentures under
the Indenture.
"JUNIOR SECURITIES" of any Person means any Qualified Capital Stock (as
defined in the Indenture) and 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.
"LIMITED RECOURSE INDEBTEDNESS" means (A) Indebtedness with respect to
the two drilling/workover barge rigs owned by the Company's Venezuelan
Subsidiary as in effect on the date of the Indenture (the "Venezuelan Barge
Financing") and (B) Indebtedness incurred to finance the purchase,
acquisition, renovation or construction of capital assets and related items
(including interest added to principal), or refinancings thereof, (i) in
respect of which the recourse of the holder of such Indebtedness is
effectively limited to specified assets or (ii) in which the recourse and
security are similar to (or more favorable to the Company and its Subsidiaries
than) the Venezuelan Barge Financing.
"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,
refundings, 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,
40
director or employee of the Company or any Subsidiary of the Company, (b)
Indebtedness to trade creditors, or (c) any liability for taxes owed or owing
by the Company.
"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.
DESCRIPTION OF CAPITAL STOCK
The Company has 45,000,000 authorized shares of capital stock, consisting
of 40,000,000 shares of Common Stock, no par value, and 5,000,000 shares of
Preferred Stock, no par value. To date no series of Preferred Stock has been
designated or issued.
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the Restated Articles of
Incorporation of the Company, as amended (the "Articles"), a copy of which has
been incorporated by reference as an exhibit to the Registration Statement of
which this Prospectus forms a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on each matter
to be voted upon by the shareholders of the Company. Dividends may be paid to
the holders of Common Stock when, as and if declared by the Board of Directors
out of funds legally available for such purpose. Holders of Common Stock have
no conversion, redemption, cumulative voting or preemptive rights. In the
event of any liquidation, dissolution or winding up of the Company, after
payment or provision for payment of the debts and other liabilities of the
Company and payment or provision for payment of all amounts to which holders
of all other series or classes of the Company's stock hereafter issued that
rank senior as to liquidation rights to the Common Stock are entitled, the
holders of Common Stock will be entitled to share ratably in any remaining
assets of the Company. All outstanding shares of Common Stock are, and the
shares issuable upon conversion of the Debentures will be, duly and validly
issued, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
PREFERRED STOCK
Shares of each series of Preferred Stock will have such rights and
preferences as are fixed by the Board of Directors in the resolution or
resolutions authorizing the issuance of that particular series. In designating
any series of Preferred Stock, the Board of Directors has the authority,
without further action of the holders of Common Stock, to fix the number of
shares constituting that series and to fix the preferences, limitations and
relative rights of the series, including the dividend rights, dividend rate,
terms and prices of redemption, liquidation preferences, sinking fund rights,
conversion rights and voting rights. It is expected that the holders of any
series of Preferred Stock, when and if issued, will have priority with respect
to dividends and any distributions upon liquidation of the Company, and may
have other preferences over the holders of the Common Stock, including the
preferential right to elect directors in the event dividends on the Preferred
Stock are not paid for a specified period. Although the Company has no present
intent to issue shares of Preferred Stock, the issuance of Preferred Stock
could be used to discourage an unsolicited acquisition proposal or otherwise
have an anti-takeover effect.
41
CERTAIN PROVISIONS OF THE ARTICLES, BYLAWS AND LOUISIANA LAW
The Articles, the Company's Bylaws (the "Bylaws") and Louisiana law
contain certain other provisions that may impede an unsolicited takeover
attempt or otherwise have an anti-takeover effect.
DIRECTOR TERMS AND RELATED PROVISIONS
The Articles provide that the members of the Board of Directors of the
Company will be elected for terms of five years and until their successors are
elected and qualified. The Articles further provide that the number of
directors will be as designated in the Bylaws, provided that no amendment to
the Bylaws to decrease the number of directors shall shorten the term of any
incumbent director. The Bylaws provide for six directors and in addition
provide that the Bylaws may be amended by shareholders only upon the
affirmative vote of at least 80% of the total voting power. In addition, the
Articles provide that any vacancy on the Board of Directors may be filled by a
vote of at least two-thirds of the directors then in office, and a director
elected to fill a vacancy shall serve until the next shareholders' meeting
held for the election of directors generally, provided that the shareholders
have the right at a special meeting, if called for such purpose prior to such
action by the Board of Directors, to fill a vacancy. The Articles also provide
that directors may be removed only for cause and only by the affirmative vote
of not less than 80% of the voting power, provided that the removal may only
be effected at a meeting of shareholders called for that purpose.
SHAREHOLDER MEETINGS
The Articles and the Bylaws provide that special meetings of shareholders
may be called by any shareholder or group of shareholders holding in the
aggregate at least 80% of the total voting power, or by the Chairman of the
Board, the President or the Board of Directors of the Company.
SHAREHOLDER NOMINATIONS OF DIRECTORS
The Articles provide that only persons who are nominated by, or at the
direction of, the Board of Directors of the Company or by a shareholder who
has given timely notice to the Secretary of the Company prior to the meeting
at which directors are to be elected will be eligible for election as
directors. To be timely, notice must be received by the Company at its
principal executive offices not less than 45 days nor more than 90 days prior
to the meeting (or, if less than 55 days' notice or prior public disclosure of
the meeting date is given or made to shareholders, not later than the tenth
day following the day on which such notice was mailed or such prior public
disclosure was made). Notice to the Company from a shareholder who proposes to
nominate a person at a meeting for election as a director must contain certain
specified information about that person.
SUPERMAJORITY VOTE FOR CERTAIN BUSINESS COMBINATIONS
The Articles provide that no Business Combination (as hereinafter
defined) shall be effected unless it is approved at the shareholders' meeting
called for that purpose by the affirmative vote of 80% of the total voting
power of the holders of voting securities or other obligations with voting
power (excluding such securities and obligations owned by an Acquiring Entity
(as hereinafter defined) and its affiliates). In addition to the voting
requirements, no Business Combination may be effected without first satisfying
substantive conditions with regard to: (i) the consideration to be received by
shareholders; (ii) certain restrictions prohibiting the Acquiring Entity from
purchasing voting securities or obligations with voting power subsequent to
becoming an Acquiring Entity but prior to any Business Combination; (iii) the
dividends paid on the outstanding stock of the Company; (iv) certain
restrictions prohibiting the Acquiring Entity from receiving the benefit of
any financial assistance of the Company or making any major change in the
Company's business or equity capital structure without unanimous approval of
the directors; and (v) the distribution of a proxy statement containing any
recommendations by the directors and the opinion of a reputable investment
banking firm as to the fairness of the terms of the Business Combination.
These requirements will not apply to a Business Combination that (i) is
approved by a majority of directors unaffiliated with the Acquiring Entity who
were directors prior to an Acquiring Entity's becoming such (or certain
successors) (the "Continuing Directors"), if there are at least three
42
Continuing Directors, or (ii) involves solely either (A) transfer of assets of
the Company to a subsidiary wholly owned by the Company or (B) a merger or
consolidation with or into a successor corporation, as long as the percentages
of shareholder ownership remain the same and the successor corporation's
articles of incorporation contain the same provisions as the Articles.
A "Business Combination" is defined in the Articles as: (i) any merger or
consolidation of the Company with or into any entity unrelated to the Company
which is the beneficial owner of securities representing 30% or more of the
voting power of Company securities or other obligations of the Company
granting voting rights (an "Acquiring Entity") or any affiliate thereof; (ii)
any sale or other disposition of all or substantially all of the assets of the
Company to an Acquiring Entity or any affiliate thereof; (iii) any sale or
other disposition to the Company or any subsidiary thereof of any assets in
exchange for which an Acquiring Entity or any affiliate thereof becomes the
beneficial owner of either (A) voting securities of the Company or any
subsidiary thereof or (B) other obligations of the Company granting voting
rights; (iv) any transaction designed to decrease the number of holders of the
Company's voting securities remaining after an Acquiring Entity has become an
Acquiring Entity; or (v) the adoption of any plan or proposal for the
liquidation or dissolution of the Company in which anything other than cash
will be received by an Acquiring Entity or any affiliates thereof.
LOUISIANA LAW
Louisiana law requires that certain transactions, such as mergers,
consolidations or share exchanges, with a shareholder beneficially owning 10%
or more of the voting power of the corporation (an "Interested Shareholder")
or its affiliates be recommended by the board of directors and approved by the
affirmative vote of (i) 80% of the votes entitled to be cast by outstanding
shares of the corporation's voting stock and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock other than the Interested
Shareholder and its affiliates. These voting requirements do not apply to such
transactions if the transaction (i) does not alter the contract rights of the
stock or change or convert, in whole or in part, the outstanding shares of the
corporation or (ii) satisfies certain requirements with regard to the
consideration to be received by shareholders and certain procedural
requirements.
OTHER PROVISIONS
The Articles and Louisiana law provide that the Board of Directors of the
Company, when evaluating a tender offer or an offer to make a tender or
exchange offer or to effect a Business Combination, may, in exercising its
judgment in determining what is in the best interests of the Company and its
shareholders, consider the following factors and any other factors that it
deems relevant: (i) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the outstanding
capital stock of the Company, but also (A) the market price for the capital
stock of the Company over a period of years, (B) the estimated price that
might be achieved in a negotiated sale of the Company as a whole or in part or
through orderly liquidation, (C) the premiums over market price for the
securities of other corporations in similar transactions, (D) current
political, economic and other factors bearing on securities prices and (E) the
Company's financial condition and future prospects; (ii) the social and
economic effects of such transaction on the Company, its subsidiaries or their
employees, customers, creditors and the communities in which the Company and
its subsidiaries do business; (iii) the business and financial condition and
earnings prospects of the acquiring party or parties, including, but not
limited to, debt service and other existing or likely financial obligations of
the acquiring party or parties, and the possible effect of such conditions
upon the Company and its subsidiaries and the communities in which the Company
and its subsidiaries do business; and (iv) the competence, experience and
integrity of the acquiring party or parties and its or their management.
AMENDMENT OF CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
The Articles provide, with certain exceptions, that the holders of 80% of
the total voting power are required to amend certain provisions of the
Articles. The Bylaws provide that the Bylaws may be amended or repealed only
by (i) a majority of the entire Board of Directors at any time when there is
no Acquiring Entity, (ii) both a majority of the entire Board of Directors and
a majority of the
43
Continuing Directors at any time when there is an Acquiring Entity or (iii)
the affirmative vote of the holders of at least 80% of the total voting power.
UNDERWRITING
The Underwriters named below have agreed, severally and not jointly, and
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company the respective principal amounts of Debentures set forth
opposite their names below.
PRINCIPAL
AMOUNT OF
UNDERWRITERS DEBENTURES
Donaldson, Lufkin & Jenrette
Securities Corporation............. $
Robert W. Baird & Co. Inc............
Morgan Keegan & Company, Inc.........
Total........................... $70,000,000
-----------
-----------
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Debentures offered hereby
are subject to approval of certain legal matters by counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all the
Debentures offered hereby if any are taken.
The Underwriters have advised the Company that the Underwriters propose
to offer the Debentures directly to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per Debenture.
Any Underwriter may allow, and such dealers may reallow, a discount not in
excess of $ per Debenture to any other Underwriter and to certain other
dealers. After the initial public offering of the Debentures, the public
offering price and other selling terms may be changed by the Underwriters.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to an additional $10,500,000 principal amount of Debentures at the
public offering price less the underwriting discounts and commissions set
forth on the cover page hereof. The Underwriters may exercise such option to
purchase additional Debentures solely for the purpose of covering
over-allotments, if any, made in connection with the sale of the Debentures
offered hereby. To the extent such over-allotment option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
the same percentage of such additional Debentures as the number set forth next
to such Underwriter's name in the preceding table bears to the total number of
Debentures set forth on the cover page hereof.
The current executive officers and directors of the Company will agree
with the Underwriters, subject to certain exceptions, not to offer, sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for, or warrants, rights or options to
acquire Common Stock, or enter into any agreement to do any of the foregoing,
for a period of 90 days (30 days in the case of Dexter Polk) after the Closing
Date without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), and to contribute to payments the Underwriters
may be required to make in respect thereof
In connection with this offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock
on the NASDAQ National Market System immediately prior to the commencement of
sales in this offering, in accordance with Rule 10b-6A under the Exchange Act.
Passive market making consists of, among other things, displaying bids on the
NASDAQ National Market System limited by the bid prices of independent market
makers and purchases limited by such prices and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average
44
daily trading volume in the Common Stock during a specified prior period, and
all passive market making activity must be discontinued when such limit is
reached. Passive market making may stabilize the market price of the Common
Stock at a level above that which might otherwise prevail and, if commenced,
may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the Debentures offered hereby
will be passed upon for the Company by Baker & Botts, L.L.P., Houston, Texas
and for the Underwriters by Weil, Gotshal & Manges LLP, Dallas, Texas.
McGlinchey Stafford Lang, a professional limited liability company, New
Orleans, Louisiana, will pass on all matters of Louisiana law in this
connection.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheet of the Company as of December 31, 1994 and
1993, 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, 1994, and the related schedules, included and incorporated
by reference in this Prospectus, have been included and incorporated by
reference herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
auditing and accounting. With respect to the unaudited interim financial
information for the periods ended March 31, June 30 and September 30, 1995 and
1994, included or incorporated by reference in this Prospectus, Coopers &
Lybrand L.L.P. has reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports related to the interim financial information
included or incorporated by reference herein state that they did not audit and
they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Coopers & Lybrand L.L.P. is not subject to the liability provisions
of Section 11 of the Securities Act for their reports on the unaudited interim
financial information because those reports are not a "report" or a "part" of
the registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act.
The consolidated balance sheet of X-Pert Enterprises, Inc. as of February
28, 1995 and March 31, 1994, and the related consolidated statements of
earnings, shareholders' equity and cash flows for the 11 months and the year
then ended, have been incorporated by reference herein in reliance on the
report of Johnson, Miller & Co., independent certified public accountants,
given on the authority of that firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Pride is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission, which can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at the regional
offices of the Commission at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at 7 World Trade Center, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
at prescribed rates. The Common Stock is traded on the NASDAQ National Market
System.
This Prospectus, which constitutes part of the Registration Statement
filed by Pride with the Commission under the Securities Act, omits certain of
the information contained in the Registration Statement. Reference is hereby
made to the Registration Statement and the exhibits thereto, which may be
obtained at the public reference facilities maintained by the Commission as
provided in the preceding paragraph, for further information with respect to
Pride and the securities offered hereby. Statements contained herein
concerning the provisions of such documents are necessarily summaries of
45
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Pride with the
Commission pursuant to the Exchange Act (File No. 0-16961), are incorporated
in this Prospectus by reference and shall be deemed to be a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31,
1994; and
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995;
(c) Current Report on Form 8-K filed on April 6, 1995, as amended
by an amendment on Form 8-K/A filed on June 2, 1995.
All documents filed by Pride pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed supplement to this
Prospectus or in any document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Pride hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated
in this Prospectus by reference, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Written or telephone requests for such copies should be directed to Pride at
its principal executive offices located at 1500 City West Blvd., Suite 400,
Houston, Texas 77042, Attention: Paul A. Bragg (telephone number: (713)
789-1400).
46
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Pride Petroleum Services, Inc.
Annual Financial Statements
Report of Independent Accountants ...................... F-2
Consolidated Balance Sheet as of
December 31, 1994 and 1993 ........................... F-3
Consolidated Statement of Operations
for the Years Ended December 31,
1994, 1993 and 1992 .................................. F-4
Consolidated Statement of
Changes in Shareholders'
Equity for the Years Ended
December 31, 1994, 1993 and 1992 ..................... F-5
Consolidated Statement of Cash
Flows for the Years Ended
December 31, 1994, 1993
and 1992 ............................................. F-6
Notes to Consolidated
Financial Statements ................................. F-7
Interim Financial Statements
(unaudited)
Report of Independent
Accountants on Review of
Interim Financial Information ........................ F-20
Consolidated Balance Sheet
as of September 30, 1995
and December 31, 1994 ................................ F-21
Consolidated Statement of
Operations for the Nine
Months Ended September 30,
1995 and 1994 ........................................ F-22
Consolidated Statement of
Cash Flows for the Nine
Months Ended September 30,
1995 and 1994 ........................................ F-23
Notes to Unaudited Consolidated
Financial Statements ................................. F-24
F-1
<PAGE>
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, 1994 and 1993, 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,
1994. 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, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the financial statements, the Company changed
its method of accounting for income taxes in 1993.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 20, 1995
F-2
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31,
-------------------------
1994 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents....... $ 5,970 $ 7,509
Short-term investments.......... 3,001 7,659
Trade receivables, net of
allowance for doubtful
accounts
of $394 and $811,
respectively.................. 38,334 22,695
Parts and supplies.............. 4,468 2,277
Deferred income taxes........... 2,388 2,380
Other current assets............ 6,128 3,521
------------ -----------
Total current assets...... 60,289 46,041
------------ -----------
PROPERTY AND EQUIPMENT, AT COST...... 246,365 162,299
ACCUMULATED DEPRECIATION............. (106,466) (99,476)
------------ -----------
Net property and
equipment............... 139,899 62,823
------------ -----------
GOODWILL AND OTHER INTANGIBLES,
net................................ 3,580 1,105
OTHER ASSETS......................... 1,425 12
------------ -----------
$ 205,193 $ 109,981
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................ $ 14,715 $ 9,973
Accrued expenses................ 15,332 10,463
Current portion of long-term
debt.......................... 3,602 3,847
------------ -----------
Total current
liabilities............. 33,649 24,283
------------ -----------
OTHER LONG-TERM LIABILITIES.......... 5,327 5,099
LONG-TERM DEBT, net of current
portion............................ 42,096 200
DEFERRED INCOME TAXES................ 12,736 11,273
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value;
40,000,000 shares authorized;
24,081,872 and 16,375,372
shares issued and 24,027,652
and 16,321,152 shares
outstanding, respectively..... 1 1
Paid-in capital................. 91,256 55,211
Treasury stock, at cost......... (191) (191)
Retained earnings............... 20,319 14,105
------------ -----------
Total shareholders'
equity.................. 111,385 69,126
------------ -----------
$ 205,193 $ 109,981
============ ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
<S> <C> <C> <C>
REVENUES................................................................ $ 182,336 $ 127,099 $ 101,382
----------- ----------- -----------
COSTS AND EXPENSES
Operating costs.................................................... 139,653 100,305 83,829
Depreciation and amortization...................................... 9,550 6,407 5,649
Selling, general and administrative................................ 25,105 17,572 14,076
----------- ----------- -----------
Total costs and expenses..................................... 174,308 124,284 103,554
----------- ----------- -----------
Earnings (loss) from operations......................... 8,028 2,815 (2,172)
OTHER INCOME (EXPENSE)
Other income (expense)............................................. (305) (135) 5
Interest income.................................................... 618 649 811
Interest expense................................................... (207) (10) (3)
----------- ----------- -----------
Total other income, net................................. 106 504 813
----------- ----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES........................................... 8,134 3,319 (1,359)
INCOME TAX PROVISION (BENEFIT).......................................... 1,920 1,214 (517)
----------- ----------- -----------
NET EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR
INCOME TAXES.......................................................... 6,214 2,105 (842)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES.............. -- 3,835 --
----------- ----------- -----------
NET EARNINGS (LOSS)..................................................... $ 6,214 $ 5,940 $ (842)
=========== =========== ===========
NET EARNINGS (LOSS) PER SHARE
Before cumulative effect of change in accounting for income
taxes........................................................... $ .30 $ .13 $ (.05)
Cumulative effect of change in accounting for income taxes......... -- .23 --
----------- ----------- -----------
EARNINGS (LOSS) PER SHARE............................................... $ .30 $ .36 $ (.05)
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE EQUIVALENTS
OUTSTANDING........................................................... 20,795 16,487 16,245
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
F-4
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, 1991......... 15,924 $ 1 $ 53,603 $ (235) $ 9,007 $ 62,376
Net loss........................ -- -- -- -- (842) (842)
Purchase of treasury stock...... (20) -- -- (72) -- (72)
Exercise of stock options....... 130 -- 293 -- -- 293
Amortization of restricted stock
awards....................... -- -- 17 -- -- 17
Tax benefit of non-qualified
stock options................ -- -- 2 -- -- 2
--------- ------ --------- -------- --------- --------------
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
========= ====== ========= ======== ========= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
OPERATING ACTIVITIES
Net earnings (loss)................ $ 6,214 $ 5,940 $ (842)
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating
activities --
Depreciation and
amortization................. 9,550 6,407 5,649
Gain on sale of assets....... (475) (241) (283)
Effect of exchange rates..... 362 167 --
Deferred tax provision
(benefit).................... 1,120 (103) 128
Effect of change in
accounting for income
taxes........................ -- (3,835) --
Changes in assets and
liabilities, net of
effects of acquisitions
Trade receivables....... (10,106) (830) (840)
Parts and supplies...... (1,128) (313) (128)
Other current assets.... (31) (395) 132
Accounts payable........ 1,534 2,778 598
Accrued expenses and
other................... 1,331 (343) 6,120
----------- ----------- -----------
Net cash provided
by operating
activities..... 8,371 9,232 10,534
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of net assets of acquired
entities, including acquisition
costs, less cash acquired....... (22,217) (9,752) --
Purchases of property and
equipment....................... (59,171) (12,123) (4,094)
Proceeds from sale of short-term
investments..................... 1,004 2,852 --
Proceeds from sale of property and
equipment....................... 908 285 377
Purchase of short-term
investments..................... -- (2,000) (3,883)
Other.............................. (6) 45 1,317
----------- ----------- -----------
Net cash used in
investing
activities........ (79,482) (20,693) (6,283)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of common
stock........................... 32,116 129 293
Proceeds from debt borrowings...... 39,358 400 --
Reduction of debt.................. (740) (1,797) (1,270)
Other.............................. (1,162) -- (72)
----------- ----------- -----------
Net cash provided
(used) by
financing
activities..... 69,572 (1,268) (1,049)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (1,539) (12,729) 3,202
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 7,509 20,238 17,036
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 5,970 $ 7,509 $ 20,238
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<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 Company was acquired by DEKALB Energy Corporation
("DEKALB") in 1978 and operated as a subsidiary until 1988, when DEKALB
effected a tax-free distribution of all the Company's outstanding shares to
the DEKALB shareholders. As a result, the Company became an independent
publicly traded company as of September 1, 1988.
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.
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, 1994.
Included in the consolidated balance sheet at December 31, 1993, was a
short-term investment and related debt of $4,651,000 and $3,647,000,
respectively. In February 1994, the Company disposed of both the investment
security and the related non-recourse debt in exchange for a net payment of
$1,200,000. The resulting gain of $196,000 was included in income during 1994.
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, 1994, 1993 and 1992, maintenance and repair costs
included in operating costs were $16,290,000, $12,541,000 and $9,531,000,
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.
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
F-7
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. In 1994, total interest
incurred was $665,000, of which $458,000 was capitalized. No interest was
capitalized in 1993 or 1992.
GOODWILL AND OTHER INTANGIBLES
Goodwill, totalling $2,846,000 at December 31, 1994, 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 $734,000 and
$1,105,000 at December 31, 1994 and 1993, 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, 1994, 1993 and 1992 amounted to $475,000,
$453,000 and $442,000, 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
Until 1993, the Company provided for deferred income taxes resulting from
timing differences in reporting revenues and expenses for financial statement
and income tax purposes. 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. The tax effects of temporary differences which give rise to
deferred tax assets and liabilities are presented in Note 5.
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, the local
currency is considered the functional currency. Translation of Argentine
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. The foreign exchange losses for
1994 and 1993 of $362,000 and $167,000, respectively, result primarily from
operations in Venezuela.
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
F-8
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
periods in which their effect is dilutive. Common share equivalents include
the number of shares issuable upon exercise of 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.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1993 consists of the
following:
DECEMBER 31,
------------------------
1994 1993
(IN THOUSANDS)
Land................................. $ 2,340 $ 1,696
Equipment............................ 191,248 148,159
Buildings............................ 5,495 3,094
Other................................ 251 242
Construction-in-progress............. 47,031 9,108
----------- -----------
246,365 162,299
Accumulated depreciation............. (106,466) (99,476)
----------- -----------
$ 139,899 $ 62,823
=========== ===========
Construction-in-progress as of December 31, 1994 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. At December 31, 1993, construction-in-progress
included approximately $7,700,000 of costs related to the refurbishment,
upgrading and deployment of eleven rigs to Argentina.
3. ACQUISITIONS
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.
F-9
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assets acquired and liabilities assumed, which were transferred to
the Company's new wholly-owned subsidiary, Pride Offshore, Inc. ("Pride
Offshore"), were as follows:
ASSETS (LIABILITIES)
(IN THOUSANDS)
Trade receivables.................... $ 4,434
Parts and supplies................... 21
Other current assets................. 827
Property and equipment............... 27,508
Other assets, including goodwill..... 2,944
Accounts payable..................... (2,707)
Accrued expenses..................... (1,814)
Long-term debt....................... (6,680)
----------
$24,533
==========
Unaudited pro forma results of operations assuming the acquisition of the
assets of Offshore Rigs had occurred on January 1, 1993, are as follows:
<TABLE>
<S> <C>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues............................................................... $ 199,817 $ 166,742
Net Earnings........................................................... $ 7,367 $ 5,167
Earnings per share..................................................... $ .35 $ .30
</TABLE>
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.
In July 1993, the Company acquired for cash Perforaciones Western, C.A.,
renamed Pride International, C.A., of Cuidad Ojeda, Venezuela, which owned 14
well servicing and drilling rigs equipped for 24-hour operation.
Also in July 1993, the Company purchased for cash a 51% interest in an
Argentine company previously owned by Western Atlas International. The
business, renamed Pride Petrotech S.A.M.P.I.C., owned a fleet of 23 well
servicing rigs. Effective August 1, 1993, the Company acquired the remaining
49% ownership from minority interest owners. This transaction was accomplished
principally through the issuance of common stock and stock purchase warrants.
The acquisitions in 1993 resulted in cash expenditures of $11,549,000
(including payments to retire assumed debt) and the issuance of 270,000 shares
of common stock and 315,000 stock purchase warrants valued at an aggregate of
$1,215,000. The issuance of an additional 160,000 shares and 200,000 warrants
is contingent upon the achievement of certain future operating results by
Pride Petrotech S.A.M.P.I.C.
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 were included
in consolidated earnings from the date of acquisition.
F-10
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1993 consists of the following:
DECEMBER 31,
--------------------
1994 1993
(IN THOUSANDS)
Limited-recourse secured term
loans.............................. $ 33,311 $ --
Secured term loans................... 8,860 --
Revolving line of credit............. 3,325 --
Notes payable........................ 202 400
Non-recourse term loan............... -- 3,647
--------- ---------
45,698 4,047
Less current portion................. 3,602 3,847
--------- ---------
$ 42,096 $ 200
========= =========
In September 1994, the Company entered into long-term financing
arrangements with two Japanese trading companies in connection with the
construction of two drilling/workover barge rigs. The construction loans
provided for a floating interest rate, initially 6.875%, and were
collateralized by the two barge rigs under construction. Upon completion of
the two drilling/workover barge rigs, the interim construction loans were
repaid from the proceeds of separate secured term loans made by the Japanese
firms to the Company's wholly-owned Venezuelan subsidiary. The term loans are
collateralized by the barge rigs and related charter contracts. The aggregate
amount of the secured term loans was $42,000,000, including construction
advances made subsequent to December 31, 1994. The interest rate on the
secured term loans has been fixed at 9.61% per annum. The secured term loans
will be repaid from project revenues over the ten-year term of the related rig
charter contracts. The terms of the financing agreement limit the lenders'
recourse essentially to the barge rigs and 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 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 a $5,400,000 secured term loan, 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 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 borrowings
outstanding under the secured term loan, $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 has a 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 has a principal amount of
$5,320,000, is repayable in
F-11
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 was increased to $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
to be 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.
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% 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.
Current maturities of long-term debt in the consolidated balance sheet as
of December 31, 1994 have been revised to reflect the terms of the amended
loan agreements. Future maturities of long-term debt are as follows:
AMOUNT
(IN THOUSANDS)
1995................................. $ 3,602
1996................................. 6,158
1997................................. 8,355
1998................................. 4,030
1999................................. 3,350
Thereafter........................... 20,203
The Company has obtained bank commitments which provide for guidance
lines of credit of $19,585,000. As of December 31, 1994, letters of credit
totaling $17,129,000 were outstanding against 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, 1994.
5. 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".
F-12
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision (benefit) for income taxes were as
follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
(IN THOUSANDS)
United States Federal:
Current......................... $ 410 $ 832 $ (618)
Deferred........................ 1,526 (14) 156
--------- --------- ---------
1,936 818 (462)
--------- --------- ---------
State:
Current......................... 24 85 (27)
Deferred........................ 90 (89) (28)
--------- --------- ---------
114 (4) (55)
--------- --------- ---------
Foreign:
Current......................... 366 400 --
Deferred........................ (496) -- --
--------- --------- ---------
(130) 400 --
--------- --------- ---------
Total income tax provision
(benefit)............... $ 1,920 $ 1,214 $ (517)
========= ========= =========
The difference between the effective federal income tax rate reflected in
the income tax provision (benefit) and the amounts which would be determined
by applying the statutory federal tax rate to earnings (loss) before income
taxes is summarized as follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
U.S. statutory rate.................. 34.0% 34.0% (34.0)%
Foreign.............................. (14.0) (1.1) --
State and local taxes................ 1.4 (0.1) (2.2)
Other................................ 2.2 3.8 (1.8)
--------- --------- ---------
Effective tax rate................... 23.6% 36.6% (38.0)%
========= ========= =========
The Company's consolidated effective federal income tax rate for the year
ended December 31, 1994 declined to approximately 24% from approximately 37%
for the corresponding period in 1993, before the cumulative effect of a change
in accounting for income taxes, 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. 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.
The domestic and foreign components of earnings (loss) before income
taxes and cumulative effect of change in accounting for income taxes were as
follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
(IN THOUSANDS)
Domestic.................. $ 5,178 $ 1,933 $ (1,359)
Foreign................... 2,956 1,386 --
--------- --------- ---------
$ 8,134 $ 3,319 $ (1,359)
========= ========= =========
F-13
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1994 and 1993 were as follows:
DECEMBER 31,
--------------------
1994 1993
(IN THOUSANDS)
Deferred tax liabilities:
Depreciation.................................... $ 13,949 $ 12,450
Other........................................... 983 977
--------- ---------
Total deferred tax liabilities............ $ 14,932 $ 13,427
--------- ---------
Deferred tax assets:
Insurance claims................................ (3,814) (3,848)
Investment receipts............................. -- (300)
Bad debts....................................... (142) (292)
Other........................................... (628) (94)
--------- ---------
Total deferred tax assets................. (4,584) (4,534)
Valuation allowance for deferred tax assets..... -- --
--------- ---------
Net deferred tax assets................... (4,584) (4,534)
--------- ---------
Net deferred tax liability........................... $ 10,348 $ 8,893
========= =========
In conjunction with the acquisitions described in Note 3, deferred tax
liabilities of $417,000 and $1,900,000 were recorded during 1994 and 1993,
respectively.
Applicable U.S. income taxes have not been provided on approximately
$5,000,000 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.
6. SHAREHOLDERS' EQUITY
COMMON STOCK
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 9% of total issued and outstanding shares,
currently 2,162,000, 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 part beginning six months from the date of grant and
expire 10 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.
F-14
<PAGE>
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, 1991..... 965,850
Granted......................... --
Exercised ($2.25 per share)..... (130,000)
Forfeited ($2.25 per share)..... (2,500)
----------
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)....... 785,000
Exercised ($2.25 per share)..... (3,500)
Forfeited....................... --
----------
Options Outstanding at December 31,
1994............................... 1,936,350
==========
Exercisable at December 31, 1994..... 1,936,350
==========
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
subsidiaries 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. Options expire ten
years from the date of the grant.
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
=========
Exercisable at December 31, 1994..... 15,000
=========
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
F-15
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1994, 1993 and 1992
totaling $150,000, $105,000 and $114,000, 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.
The Company does not provide post-retirement benefits.
8. 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 eight of its
largest domestic rigs). Eight 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 $250,000 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. The Company accrues for its
estimated share of insured claims. As of December 31, 1994 and 1993, the
Company had accrued approximately $11,111,000 and 11,087,000, respectively for
claims liabilities, of which $6,047,000 and $5,988,000, respectively was
included in current liabilities and $5,064,000 and $5,099,000, respectively,
was reflected as other long-term liabilities in the accompanying balance
sheet.
As of December 31, 1994, the Company had letters of credit outstanding
totaling $17,129,000. 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, 1994, 1993, and 1992 was $7,987,000,
$4,505,000 and $3,307,000, respectively. As of December 31, 1994, future
minimum lease payments for operating leases having initial or remaining
noncancelable lease terms longer than one year are as follows: $215,000 in
1995; $223,000 in 1996; $223,000 in 1997; $80,000 in 1998; and none
thereafter. The Company leases vehicles used in its 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, 1994, 1993 and
1992 was $2,134,000, $1,809,000 and $1,571,000, respectively.
F-16
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for 1994 and 1993 are as follows:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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
1993
Revenues............................. $ 25,085 $ 26,503 $ 37,254 $ 38,257
Earnings (loss) from operations...... (1,245) 539 1,934 1,587
Net earnings (loss) before cumulative
effect of change in accounting for
income taxes....................... (704) 481 1,308 1,020
Net earnings......................... 3,131 481 1,308 1,020
Earnings (loss) per share:
Before cumulative effect of
change in accounting for
income taxes................. (.04) .03 .08 .06
Earnings per share.............. .19 .03 .08 .06
Weighted average common shares and
equivalents outstanding............ 16,314 16,389 16,483 16,813
10. SUPPLEMENTAL FINANCIAL INFORMATION
OTHER CURRENT ASSETS
Other current assets at December 31, 1994 and 1993 consists of the
following:
DECEMBER 31,
--------------------
1994 1993
(IN THOUSANDS)
Pre-funded construction costs........ $ 1,692 $ --
Other receivables.................... 1,382 1,424
Prepaid expenses..................... 3,054 2,097
--------- ---------
$ 6,128 $ 3,521
========= =========
ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and 1993 consists of the following:
DECEMBER 31,
--------------------
1994 1993
(IN THOUSANDS)
Insurance (excluding the long-term
portion of $5,064
and $5,099, respectively).......... $ 6,047 $ 5,988
Payroll.............................. 4,149 2,215
Taxes, other than income............. 4,193 1,622
Other................................ 943 638
--------- ---------
$ 15,332 $ 10,463
========= =========
F-17
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH FLOW INFORMATION
Cash paid for interest and income taxes during the years ended December
31, 1994, 1993 and 1992 was as follows:
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
(IN THOUSANDS)
Cash paid during the year for:
Interest........................ $ 623 $ 10 $3
Income taxes -- U.S............. 1,893 2 2
Income taxes -- foreign......... 28 871 --
11. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by industry segment.
<TABLE>
<S> <C>
DOMESTIC DOMESTIC
LAND OFFSHORE INTERNATIONAL TOTAL
(IN THOUSANDS)
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
1992
Revenues............................. $ 101,382 $ -- $-- $ 101,382
Earnings (loss) from operations...... (2,172) -- -- (2,172)
Identifiable assets.................. 94,842 -- -- 94,842
Capital expenditures................. 4,108 -- -- 4,108
Depreciation and amortization........ 5,649 -- -- 5,649
</TABLE>
F-18
<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)
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
1992
Revenues......................... $ 101,382 $ -- $ -- $ 101,382
Earnings (loss) from operations.. (2,172) -- -- (2,172)
Identifiable assets.............. 94,842 -- -- 94,842
Capital expenditures............. 4,108 -- -- 4,108
Depreciation and amortization.... 5,649 -- -- 5,649
One customer accounted for approximately 18% of consolidated revenues
representing 67% of revenues from operations in Argentina during 1994. Another
customer which accounted for less than 10% of consolidated revenues, accounted
for approximately 40% of revenues from domestic offshore operations. Since
June 1994, when the Company acquired its offshore operations, such customer
has accounted for approximately 18% of consolidated revenues. During 1993 and
1992, no customer accounted for more than 10% of consolidated revenues.
12. SUBSEQUENT AND PROPOSED TRANSACTIONS
In February 1995, the Company agreed to acquire all of the outstanding
capital stock of X-Pert Enterprises, Inc. ("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. X-pert operates 35 well
servicing rigs in New Mexico and also provides lease maintenance services to
oilfield operators. X-pert has annual revenues of approximately $15,000,000
and working capital and other monetary assets in excess of liabilities of
approximately $3,000,000. Conclusion of the acquisition is subject to certain
conditions, including finalization of a definitive purchase agreement.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:
We have reviewed the accompanying consolidated balance sheet of Pride
Petroleum Services, Inc. as of September 30, 1995 and the related consolidated
statements of operations and cash flows for the nine-month periods ended
September 30, 1995 and 1994. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31, 1994,
and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 20, 1995, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying balance sheet as of December 31,
1994 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Houston, Texas
November 3, 1995
F-20
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents....... $ 11,139 $ 5,970
Short-term investments.......... 2,000 3,001
Trade receivables, net of
allowance for doubtful
accounts
of $617 and $394,
respectively.................. 45,710 38,334
Parts and supplies.............. 7,235 4,468
Deferred income taxes........... 2,532 2,388
Other current assets............ 9,070 6,128
------------- ------------
Total current assets...... 77,686 60,289
------------- ------------
PROPERTY AND EQUIPMENT, AT COST...... 290,273 246,365
ACCUMULATED DEPRECIATION............. (117,009) (106,466)
------------- ------------
Net property and
equipment.............. 173,264 139,899
------------- ------------
GOODWILL AND OTHER INTANGIBLES,
NET................................ 3,675 3,580
OTHER ASSETS......................... 2,193 1,425
------------- ------------
$ 256,818 $ 205,193
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................ $ 18,408 $ 14,715
Accrued expenses................ 17,608 15,332
Current portion of long-term
debt.......................... 12,756 3,602
------------- ------------
Total current
liabilities............ 48,772 33,649
------------- ------------
OTHER LONG-TERM LIABILITIES.......... 5,118 5,327
LONG-TERM DEBT, net of current
portion............................ 58,817 42,096
DEFERRED INCOME TAXES................ 17,565 12,736
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value;
40,000,000 shares authorized;
24,849,572 and 24,081,872
shares issued and 24,795,352
and 24,027,652 shares
outstanding, respectively..... 1 1
Paid-in capital................. 95,190 91,256
Treasury stock, at cost......... (191) (191)
Retained earnings............... 31,546 20,319
------------- ------------
Total shareholders'
equity................. 126,546 111,385
------------- ------------
$ 256,818 $ 205,193
============= ============
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1994
REVENUES............................. $ 198,512 $ 128,036
----------- -----------
COSTS AND EXPENSES
Operating costs................. 143,376 99,402
Depreciation and amortization... 12,077 6,807
Selling, general and
administrative................ 23,620 16,802
----------- -----------
Total costs and
expenses................ 179,073 123,011
----------- -----------
Earnings from
operations....... 19,439 5,025
OTHER INCOME (EXPENSE)
Other income (expense).......... 1,640 (320)
Interest income................. 577 471
Interest expense................ (4,689) (170)
----------- -----------
Total other expense,
net.............. (2,472) (19)
----------- -----------
EARNINGS BEFORE INCOME TAXES......... 16,967 5,006
INCOME TAX PROVISION................. 5,740 1,170
----------- -----------
NET EARNINGS......................... $ 11,227 $ 3,836
=========== ===========
NET EARNINGS PER SHARE............... $ .44 $ .20
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS
OUTSTANDING........................ 25,280 19,590
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-22
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1995 1994
OPERATING ACTIVITIES
Net earnings.................... $ 11,227 $ 3,836
Adjustments to reconcile net
earnings to net cash provided
by operating activities --
Depreciation and
amortization............ 12,077 6,807
Deferred interest......... 1,947 --
Gain on sale of assets.... (1,597) (398)
Effect of exchange
rates................... 7 393
Deferred tax provision
(benefit)............... 1,001 (51)
Changes in assets and
liabilities, net of
effects of
acquisitions --
Trade receivables.... (5,122) (6,029)
Parts and supplies... (2,475) (1,040)
Other current
assets............ (4,759) (1,042)
Accounts payable..... 2,988 7,949
Accrued expenses and
other............. 1,141 450
-------- --------
Net cash
provided by
operating
activities... 16,435 10,875
-------- --------
INVESTING ACTIVITIES
Purchase of net assets of
acquired entities, including
acquisition costs, less cash
acquired...................... (1,999) (22,054)
Pre-funded construction costs... -- (21,440)
Purchases of property and
equipment..................... (34,426) (12,375)
Proceeds from short-term
investments................... 1,009 1,004
Proceeds from sales of property
and equipment................. 6,603 724
Other........................... (473) (6)
-------- --------
Net cash used
in investing
activities... (29,286) (54,147)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of common
stock......................... 655 32,073
Proceeds from debt borrowings... 22,682 4,663
Reduction of debt............... (5,410) (420)
Other........................... 93 (199)
-------- --------
Net cash
provided by
financing
activities... 18,020 36,117
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH
EQUIVALENTS........................ 5,169 (7,155)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 5,970 7,509
-------- --------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 11,139 $ 354
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-23
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The unaudited consolidated financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted, pursuant to
such rules and regulations. These unaudited consolidated financial statements
should be read in conjunction with Pride Petroleum Services, Inc.'s (the
"Company's") audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994. Certain reclassifications have been made to prior year
amounts to conform with the current year presentation.
The unaudited consolidated financial information included herein reflects
all adjustments, consisting only of normal recurring adjustments, which are
necessary, in the opinion of management, for a fair presentation of the
Company's financial position, results of operations and cash flows for the
interim periods presented. The results of operations for the interim periods
presented herein are not necessarily indicative of the results to be expected
for full years.
2. 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 land 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 $250,000 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 generally $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
has received net insurance proceeds 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 unaudited consolidated statements of operations.
The Company accrues expenses and liabilities for its estimated share of
insured claims. As of September 30, 1995 and December 31, 1994, the Company
had accrued approximately $9,846,000 and $11,111,000, respectively, for claims
liabilities, of which $5,626,000 and $6,047,000, respectively, were included
in current liabilities and $4,220,000 and $5,064,000, respectively, were
reflected as other long-term liabilities in the accompanying unaudited
consolidated balance sheet. As of September 30, 1995, the Company had letters
of credit outstanding totaling $11,048,000. These letters of credit guarantee
principally the Company's funding of its share of insured claims.
F-24
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT
Long-term debt at September 30, 1995 and December 31, 1994 consists of
the following:
SEPTEMBER 30, DECEMBER 31,
1995 1994
(IN THOUSANDS)
Limited-recourse secured term
loans................................ $ 43,117 $33,311
Secured term loans................... 12,590 8,860
Notes payable........................ 7,025 200
Acquisition note payable............. 5,368 --
Revolving line of credit............. 2,773 3,325
Bank overdraft facility.............. 700 2
-------------- -------------
71,573 45,698
Less: current portion................ 12,756 3,602
-------------- -------------
$ 58,817 $42,096
============== =============
The balance of the limited-recourse secured term loans at September 30,
1995 includes $9,172,000 of construction advances and $2,020,000 of accrued
interest which was added to the principal amount of the loans during the first
nine months of 1995. Approximately $73,000 of such accrued interest was
capitalized as part of the cost of the related assets during the first nine
months of 1995. 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 until the first scheduled payment in July 1995, and is being paid from
the proceeds of the related charter contracts in 109 equal monthly
installments of principal and interest. In addition, a portion of contract
proceeds are being held in trust to assure that timely payment of future debt
service obligations is made. At September 30, 1995, $2,435,000 of such
contract proceeds, which amount is included in cash and cash equivalents on
the accompanying unaudited consolidated balance sheet, are being held in trust
for the benefit of the lenders, and is not presently available for use by the
Company.
Borrowings pursuant to the secured term loans were increased by
$5,170,000 during the first nine months of 1995 to finance certain additions
to property and equipment.
Notes payable include five notes payable to lending institutions totaling
an aggregate $6,720,000 which are collateralized by selected property and
equipment, financed insurance premiums in the amount of $255,000, 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 acquisition note
is collateralized by certain of the property and equipment of the acquired
business.
The Company had domestic revolving bank lines of credit of $23,000,000 as
of September 30, 1995, and letters of credit totaling $11,048,000 outstanding
against these facilities. Additionally, $2,773,000 of borrowings were
outstanding thereunder. Cash and cash equivalents and a portion of accounts
receivable have been pledged as security pursuant to these credit facilities.
4. 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 September 30, 1995, the Company has
received proceeds of $5,500,000 pursuant to this facility. The
F-25
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 $587,000 realized on the transaction has
been deferred and will be amortized as a reduction of lease expense over the
maximum lease term of five years.
5. NET EARNINGS PER SHARE
Net earnings 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 the
exercise of stock options and warrants, less the number of shares that could
have been repurchased with the exercise proceeds, using the treasury stock
method. Fully diluted net earnings per share have not been presented as the
results are not materially different.
6. 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.
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:
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1994
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues............................. $ 200,505 $ 138,845
Net Earnings......................... $ 11,356 $ 4,477
Earnings per share................... $ .45 $ .23
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.
F-26
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also in March 1995, the Company acquired substantially all of the assets
used in the fluids hauling business of McNeel Company, Inc. for total
consideration of $400,000, consisting of $350,000 cash and a note payable to
the sellers in the amount of $50,000.
Each of the acquisitions discussed above was recorded using the purchase
method of accounting. The operating results of each acquisition have been
included in the Company's consolidated results of operations from the date of
acquisition.
7. ISSUANCES OF COMMON STOCK
During the nine months ended September 30, 1995, 242,500 shares of the
Company's common stock were issued pursuant to the exercise of employee stock
options. The Company received proceeds of $655,000 in connection with the
exercise of such employee stock options.
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 will be 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, as consideration for the
purchase of support assets.
8. SEGMENT INFORMATION
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by industry segment.
<TABLE>
<S> <C>
DOMESTIC DOMESTIC
LAND OFFSHORE(1) INTERNATIONAL TOTAL
(IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1995
Revenues............................. $ 85,990 $37,564 $ 74,958 $198,512
Earnings from operations............. 4,574 5,074 9,791 19,439
Identifiable assets.................. 78,514 55,521 122,783 256,818
Capital expenditures, including
acquisitions....................... 15,202 12,852 20,349 48,403
Depreciation and amortization........ 4,155 2,274 5,648 12,077
NINE MONTHS ENDED SEPTEMBER 30, 1994
Revenues............................. $ 72,545 $11,229 $ 44,262 $128,036
Earnings from Operations............. 1,367 1,172 2,486 5,025
Identifiable assets.................. 79,065 39,987 53,858 172,910
Capital expenditures, including
acquisitions....................... 1,693 27,379 30,722 59,794
Depreciation and amortization........ 3,843 539 2,425 6,807
</TABLE>
- ------------
(1) The Company acquired its offshore operations in June 1994.
F-27
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE DEBENTURES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary................... 3
Investment Considerations............ 7
Price Range of Common Stock and
Dividend Policy.................... 10
Use of Proceeds...................... 10
Capitalization....................... 11
Selected Financial Data.............. 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 13
Business............................. 20
Management........................... 30
Security Ownership of Management and
Certain Beneficial Owners.......... 31
Description of Debentures............ 32
Description of Capital Stock......... 41
Underwriting......................... 44
Legal Matters........................ 45
Independent Public Accountants....... 45
Available Information................ 45
Incorporation of Certain Documents by
Reference.......................... 46
Index to Financial Statements........ F-1
$70,000,000
[PRIDE LOGO]
% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2006
------------------------------
PROSPECTUS
------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERT W. BAIRD & CO.
INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses in connection with the offering described in this
Registration Statement will be paid by the Company. The estimated expenses are
as follows:
Securities and Exchange Commission
registration fee................... $ 27,759
Printing expenses.................... 75,000
Accounting fees and expense.......... 60,000
Legal fees and expenses.............. 125,000
Blue Sky fees and expenses........... 15,000
Transfer Agent fees.................. 10,000
Trustee fees and expenses............ 25,000
NASD fees............................ 7,400
NASDAQ SmallCap Market fees.......... 3,000
Miscellaneous........................ 151,841
-----------
Total........................... $ 500,000
-----------
-----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 83 of the Business Corporation Law of the State of Louisiana
gives corporations the power to indemnify officers and directors under certain
circumstances. Article IX of the Company's Restated Articles of Incorporation
and Section 13 of the Company's Bylaws contain provisions that provide for
indemnification of certain persons (including officers and directors).
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ------------------------ ------------------------------------------------------------------------------------------
<S> <C>
1 -- Underwriting Agreement.
*4.1 -- Restated Articles of Incorporation of the Company (Form S-1, Registration No. 33-33233,
Exhibit 3(a)).
*4.2 -- Amendment to Restated Articles of Incorporation (Form S-3, Registration No. 33-76310,
Exhibit 4.2).
*4.3 -- Bylaws of the Company (Form S-1, Registration No. 33-33233, Exhibit 3(b)).
4.4 -- Indenture.
4.5 -- Form of Convertible Subordinated Debenture (contained in Exhibit 4.4).
5.1 -- Opinion of Baker & Botts, L.L.P.
5.2 -- Opinion of McGlinchey Stafford Lang
12 -- Statement of computation of ratios.
15.1 -- Awareness Letter of Coopers & Lybrand, L.L.P.
23.1 -- Consent of Coopers & Lybrand, L.L.P.
23.2 -- Consent of Johnson, Miller & Co.
23.3 -- Consent of Baker & Botts, L.L.P. (contained in Exhibit 5.1).
23.4 -- Consent of McGlinchey Stafford Lang (contained in Exhibit 5.2)
**24 -- Powers of Attorney (included on the signature page of the Registration Statement as
originally filed).
**25 -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939.
</TABLE>
- ------------
* Incorporated by reference as indicated
**Previously filed.
II-1
ITEM 17. UNDERTAKINGS
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The Company hereby undertakes:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the provisions described under Item 15 above, or
otherwise, the Company has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless, in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF HOUSTON, THE STATE OF TEXAS, ON JANUARY 19, 1996.
PRIDE PETROLEUM SERVICES, INC.
By: /s/ ROBERT W. RANDALL
ROBERT W. RANDALL,
VICE PRESIDENT AND GENERAL
COUNSEL
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON JANUARY 19, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------- --------------------------------------------------------
<S> <C>
* Chairman of the Board, President and
RAY H. TOLSON Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
* Vice President, Chief Financial Officer
PAUL A. BRAGG and Treasurer
(PRINCIPAL FINANCIAL OFFICER)
/s/EARL W. MCNIEL Chief Accounting Officer
EARL W. MCNIEL
(PRINCIPAL ACCOUNTING OFFICER)
* Director
JAMES T. SNEED
* Director
THOMAS H. ROBERTS, JR.
* Director
JORGE E. ESTRADA M.
* Director
JAMES B. CLEMENT
* Director
RALPH D. MCBRIDE
*By: /s/ROBERT W. RANDALL
ROBERT W. RANDALL,
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
Pride Petroleum Services, Inc.
___% Convertible Subordinated Debentures due 2006
UNDERWRITING AGREEMENT
January ___, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERT W. BAIRD & CO. INC.
MORGAN KEEGAN & COMPANY, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
Pride Petroleum Services, Inc., a Louisiana corporation (the
"COMPANY"), confirms its agreement with the several underwriters listed in
Schedule I hereto (the "UNDERWRITERS") as follows.
1. THE DEBENTURES. Subject to the terms and conditions herein
set forth, the Company proposes to issue and sell to the Underwriters
$60,000,000 aggregate principal amount of its ___% Convertible Subordinated
Debentures due 2006 (the "FIRM DEBENTURES"). The Company also proposes to issue
and sell to the several Underwriters not more than $9,000,000 aggregate
principal amount of additional ___% Convertible Subordinated Debentures due 2006
(the "ADDITIONAL DEBENTURES" and, together with the Firm Debentures, the
"DEBENTURES"), if requested by the Underwriters as provided in Section 3 hereof.
The Debentures are to be issued under an Indenture to be dated as of
____________, 1996, by and between the Company and Marine Midland Bank, as
Trustee (the "INDENTURE"), and will be convertible, at the option of the
holders, into newly-issued shares of the Company's Common Stock, no par value
(the "COMMON STOCK"). The Debentures and the shares of Common Stock into which
the Debentures are convertible are herein collectively called the "SECURITIES."
1
2. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 (No. 333-00027),
including a prospectus, subject to completion, related to the Securities. The
registration statement, as amended by pre-effective or post-effective amendment
pursuant to the Act, including all documents incorporated or deemed to be
incorporated by reference therein, financial statements, exhibits (other than
the Form T-1), the information (if any) contained in a prospectus that is deemed
to be a part of such registration statement at the time of its effectiveness
pursuant to Rule 430A under the Act, is hereinafter referred to as the
"REGISTRATION STATEMENT," and the prospectus in the form first used to confirm
sales of the Debentures, including all documents incorporated or deemed to be
incorporated by reference therein, is hereinafter referred to as the
"PROSPECTUS."
3. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to the
terms and conditions hereof, the Company agrees to issue and sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, Firm Debentures in the respective principal amount
set forth opposite the name of such Underwriter in Schedule I hereto, plus such
amount as they individually may become obligated to purchase pursuant to Section
11 hereof, at ___% of the principal amount thereof, plus accrued interest, if
any, from the date of first issuance of any Debentures (the "PURCHASE PRICE").
On the basis of the representations and warranties contained
in this Agreement, and subject to the terms and conditions hereof, the Company
agrees to issue and sell to the Underwriters, and the Underwriters shall have a
one-time right to purchase from the Company, up to all of the Additional
Debentures at the Purchase Price. Additional Debentures may be purchased as
provided in Section 5 hereof solely for the purpose of covering over-allotments
made in connection with the offering of the Firm Debentures. If any Additional
Debentures are to be purchased, each Underwriter, severally and not jointly,
agrees to purchase the principal amount of Additional Debentures (subject to
such adjustments to eliminate partial Debentures as Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") may determine) that bears the same proportion to
the total principal amount of
2
Additional Debentures to be purchased as the principal amount of Firm Debentures
set forth opposite the name of such Underwriter in Schedule I hereto bears to
the total principal amount of Firm Debentures.
The Company hereby agrees, and, concurrently with the
execution of this Agreement, shall deliver a letter executed by each of the
current directors and executive officers of the Company pursuant to which such
directors and executive officers agree that, for a period of 90 days after the
date of the Prospectus (or 30 days, in the case of Dexter R. Polk), without the
prior written consent of DLJ, neither the Company, nor such directors and
executive officers, will, directly or indirectly, offer, sell, contract to sell,
grant any option to purchase, or otherwise dispose of any shares of Common
Stock, or any securities convertible into or exercisable or exchangeable for, or
warrants, options or rights to purchase or acquire, Common Stock or enter into
any agreement to do any of the foregoing, except pursuant to this Agreement.
Notwithstanding the foregoing, during such period (x) the Company may grant
stock options pursuant to the Company's currently existing stock option plans,
and (y) the directors, officers and other stockholders subject to such
agreements may transfer or otherwise dispose of shares of Common Stock pursuant
to BONA FIDE gifts, provided that, prior to any such transfers or dispositions
referred to in this clause (y), the transferee delivers to DLJ, on behalf of the
Underwriters, a written agreement pursuant to which such transferee agrees to be
bound by the terms of such agreement as if a signatory thereto.
4. TERMS OF THE PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Securities as soon after the effective date of the Registration
Statement as in your judgment is advisable and (ii) initially to offer the
Securities upon the terms set forth in the Prospectus.
5. DELIVERY AND PAYMENT. Delivery to the Underwriters of and
payment for the Firm Debentures shall be made at 10:00 A.M., New York City time,
on the third business day (or fourth business day if permitted by Rule 15c6-1(c)
of the Exchange Act (as defined below)) (such time and date being referred to as
the "CLOSING DATE") following the initial public offering of the Firm Debentures
as advised by you to the Company, at such place as you shall designate. The
Closing Date and the location of delivery of and the form of payment for the
Firm Debentures may be varied by agreement between you and the Company.
3
Delivery to the Underwriters of and payment for any Additional
Debentures to be purchased by the Underwriters shall be made at such place as
DLJ shall designate, at 10:00 A.M., New York City time, on such date (the
"OPTION CLOSING DATE"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date, as shall be specified in a written
notice from DLJ to the Company of the Underwriters' determination to purchase a
principal amount, specified in said notice, of Additional Debentures. Such
notice may be given at any time within 30 days after the date of this Agreement,
provided that the Option Closing Date shall not be earlier than two business
days nor later than ten business days after such notice. The Option Closing Date
and the location of delivery of and payment for the Additional Debentures may be
varied by agreement between DLJ and the Company.
The Debentures shall be registered in such names and issued in
such denominations as you shall request in writing not later than two full
business days prior to the Closing Date or the Option Closing Date, as the case
may be, and shall be made available to you for inspection not later than 9:30
A.M., New York City time, on the business day next preceding the Closing Date or
the Option Closing Date, as the case may be. Definitive Debentures shall be
delivered to you on the Closing Date or the Option Closing Date, as the case may
be, with any transfer taxes payable upon initial issuance thereof duly paid by
the Company, for the respective accounts of the Underwriters against payment of
the Purchase Price therefor by certified or official bank check or checks
payable in New York Clearing House or similar next-day funds to the order of the
Company.
6. AGREEMENTS OF THE COMPANY. The Company agrees
with you that:
(a) It will, if the Registration Statement has not heretofore
become effective under the Act, and, if necessary or required by law,
file an amendment to the Registration Statement or, if necessary
pursuant to Rule 430A under the Act, a post-effective amendment to the
Registration Statement, as soon as practicable after the execution and
delivery of this Agreement, and will use its best efforts to cause the
Registration Statement or such post-effective amendment to become
effective at the earliest possible time. The Company will comply fully
and in a timely manner with the applicable provisions of Rule 424 and
Rule 430A under the Act.
4
(b) It will advise you promptly and, if requested by you,
confirm such advice in writing, (i) when the Registration Statement has
become effective, if and when the Prospectus is sent for filing
pursuant to Rule 424 under the Act and when any post-effective
amendment to the Registration Statement becomes effective, (ii) of the
receipt of any comments from the Commission that relate to the
Registration Statement or requests by the Commission for amendments to
the Registration Statement or amendments or supplements to the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, or of the suspension of qualification of the
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by the Commission or any state
securities commission or other regulatory authority, and (iv) of the
happening of any event during the period referred to in paragraph (e)
below which makes any statement of a material fact made in the
Registration Statement (as amended or supplemented from time to time)
untrue or which requires the making of any additions to or changes in
the Registration Statement (as amended or supplemented from time to
time) in order to make the statements therein not misleading or that
makes any statement of a material fact made in the Prospectus (as
amended or supplemented from time to time) untrue or which requires the
making of any additions to or changes in the Prospectus (as amended or
supplemented from time to time) in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption of the Securities
under any state securities or Blue Sky laws, the Company shall, if
reasonably requested by you, use every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time.
(c) It will furnish to the Underwriters without charge four
(4) signed copies of the Registration Statement as first filed with the
Commission and of each amendment to it, including all exhibits filed
therewith or incorporated by reference therein, and will furnish to you
and each Underwriter designated by you such number of conformed copies
of the Registration Statement
5
as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
(d) It will not file any amendment to the Registration
Statement, whether before or after the time when the Registration
Statement becomes effective, or make any amendment or supplement to the
Prospectus, of which you shall not previously have been advised and
provided a copy prior to the filing or making thereof or to which you
shall reasonably object; and it will prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or any amendment or supplement to the Prospectus
that may be necessary or advisable in connection with the distribution
of the Debentures by you, and will use its best efforts to cause the
same to become effective as promptly as possible.
(e) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the
Act to be delivered in connection with sales by an Underwriter or a
dealer, it will furnish to each Underwriter and dealer without charge
as many copies of the Prospectus (and of any amendment or supplement to
the Prospectus) as such Underwriter or dealer may reasonably request
for the purposes contemplated by the Act.
(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing as of the date the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement
the Prospectus to comply with the Act, it will, as promptly as
practicable, prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not, in the light of
the circumstances existing as of the date the Prospectus is so
delivered, be misleading, and will comply with the Act, and will
furnish to each Underwriter and to such dealers as you shall specify
without charge such number of copies thereof as such Underwriter and
such dealers may reasonably request.
6
(g) Prior to any public offering of the Securities, it will
cooperate with you and counsel for the Underwriters in connection with
the registration or qualification of the Securities for offer and sale
by the several Underwriters and by dealers under the state securities
or Blue Sky laws of such jurisdictions as you may request (provided,
that the Company shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to
take any action that would subject it to general consent to service of
process in any jurisdiction in which it is not now so subject). The
Company will continue such qualification in effect so long as required
by law for distribution of the Securities and will file such consents
to service of process or other documents as may be necessary in order
to effect such registration or qualification (provided, that the
Company shall not be obligated to take any action that would subject it
to general consent to service of process in any jurisdiction in which
it is not now so subject).
(h) It will make generally available to its security holders
as soon as reasonably practicable a consolidated earnings statement
covering a period of at least twelve months beginning after the
"effective date" (as defined in Rule 158 under the Act) of the
Registration Statement (but in no event commencing later than 90 days
after such date) which shall satisfy the provisions of Section 11(a) of
the Act and Rule 158 thereunder.
(i) It will timely complete all required filings and otherwise
comply fully in a timely manner with all provisions of the Securities
Exchange Act of 1934, as amended, including the rules and regulations
thereunder (collectively, the "Exchange Act"), to cause the Securities
to be registered pursuant thereto.
(j) During the period of five years after the date of this
Agreement, to furnish to you as soon as available a copy of each report
or other publicly available information of the Company mailed to the
holders of the Securities or of its Common Stock or filed with the
Commission and such other publicly available information concerning the
Company and its subsidiaries as you may reasonably request.
(k) It will use the proceeds from the sale of the
Debentures in the manner described in the Prospectus
under the caption "Use of Proceeds."
7
(l) (i) It will cause the Debentures to be included for
trading on the Nasdaq SmallCap Market and any shares of Common Stock
issuable upon conversion of the Debentures to be included for trading
on the Nasdaq Stock Market National Market (the "NASDAQ-NM") and (ii)
will use commercially reasonable efforts to maintain the inclusion of
the Debentures for trading on the Nasdaq SmallCap Market or a national
securities exchange for a period of three years after the effective
date of the Registration Statement.
(m) It has not taken and will not take, directly or
indirectly, any action designed, or that might reasonably be expected,
to cause or result in stabilization or manipulation of the market price
of the Debentures or the Common Stock to facilitate the sale or resale
of the Debentures.
(n) It will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to
or after the Closing Date or the Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the
Debentures.
7. PAYMENT OF EXPENSES. The Company agrees with you that
whether or not the transactions contemplated hereby are consummated or this
Agreement is terminated, the Company will pay and be responsible for all costs,
expenses, fees (other than, except as provided in Sections 7(iii) and (v),
Section 9 and Section 11 hereof, the fees and expenses of your counsel) and
taxes in connection with (i) the preparation, printing, filing and distribution
under the Act of the Registration Statement (including financial statements and
exhibits), each Prospectus, preliminary prospectus and all amendments and
supplements to any of them, prior to or during the period specified in paragraph
6(e) (but not exceeding 270 days following the effective date of the
Registration Statement), (ii) the issuance and delivery of the Securities, (iii)
the registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the jurisdictions referred to in paragraph 6(g)
above (including, in each case, the reasonable fees and disbursements of counsel
for the Underwriters relating to such registration or qualification and any
memoranda relating thereto), (iv) furnishing such copies of the Registration
Statement, Prospectus and preliminary prospectus, and all amendments and
supplements to any of them, as may be requested for use in connection with the
8
offering or sale of the Securities by the Underwriters or by dealers to whom
Securities may be sold, prior to or during the period specified in paragraph
6(e) (but not exceeding 270 days following the effective date of the
Registration Statement), (v) filing, registration and clearance with the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the offering of the Securities (including in each case any disbursements of
counsel for the Underwriters relating thereto), (vi) the printing (including
word processing) of this Agreement, any memoranda describing state securities or
Blue Sky laws and all other agreements, memoranda, correspondence and other
documents printed, distributed and delivered in connection with the offering of
the Securities, (vii) the inclusion of the Securities on the Nasdaq SmallCap
Market and the Nasdaq-NM and (viii) the performance by the Company of its other
obligations under this Agreement, the cost of its personnel and other internal
costs, including (without limitation) the fees of the Trustee, the cost of
printing and engraving the Debentures and the certificates representing the
Common Stock issuable upon conversion of the Debentures, and all expenses and
taxes incident to the sale and delivery of the Securities to you.
8. REPRESENTATIONS AND WARRANTIES. (a) The
Company represents and warrants to each Underwriter that:
(i) When the Registration Statement becomes effective
and at the date of the Prospectus (if different), including at the date
of any post-effective amendment or supplement, the Registration
Statement will comply in all material respects with the provisions of
the Act, and will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; the Prospectus
(and any supplements or amendments thereto) will at all such times
comply in all material respects with the provisions of the Act and will
not at any such time contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties contained in this paragraph 8(i) shall not apply to (A)
statements in or omissions from the Registration Statement or the
Prospectus (or any supplement or amendment to any of them) based upon
and conforming with information relating to any Underwriter furnished
to the Company in writing by or on behalf of
9
any Underwriter through DLJ expressly for use therein or (B) the Form
T-1. The Company acknowledges for all purposes under this Agreement
(including this paragraph and Section 9 hereof) that the statements set
forth in the first (including the table), third and final paragraphs of
the section entitled "Underwriting" in the Prospectus constitute the
only written information furnished to the Company by or on behalf of
the Underwriters for use in the Registration Statement or the
Prospectus or any preliminary prospectus (or any amendment or
supplement to any of them) and that the Underwriters shall not be
deemed to have provided any information (and therefore are not
responsible for any statements or omissions) pertaining to any
arrangement or agreement with respect to any party other than the
Underwriters. No contract or document of a character required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement is not described and
filed as required.
(ii) The documents incorporated by reference in the
Registration Statement or the Prospectus pursuant to Item 12 of Form
S-3 under the Act, at the time they were or hereafter are filed or last
amended, as the case may be, with the Commission, complied and will
comply in all material respects with the requirements of the Exchange
Act and, when read together and with the other information in the
Prospectus, at the time the Registration Statement becomes effective
and at the Closing Date and the Option Closing Date, as the case may
be, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were or are made, not misleading.
(iii) Each preliminary prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 or 430A under the Act,
complied when so filed in all material respects with the provisions of
the Act and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
10
(iv) Each "significant subsidiary" (as such term is
defined in Regulation S-X under the Exchange Act) of the Company is
listed on Exhibit 21 to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1994 or is described in the
Registration Statement as having been acquired after December 31, 1994.
Each of the Company and the subsidiaries of the Company (the
"SUBSIDIARIES") has been duly organized, is validly existing and in
good standing under the laws of its jurisdiction of organization and
has full corporate power and authority to carry on its business as it
is currently being conducted (and, in the case of the Company, to
authorize the offering of the Securities and to issue, sell and deliver
the Securities), and is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined below).
(v) All of the issued and outstanding shares of
capital stock of each of the Subsidiaries has been duly authorized and
validly issued and are owned directly or indirectly by the Company. All
such shares are fully paid and nonassessable, and, except as disclosed
in the Prospectus, are owned by the Company free and clear of any
security interest, mortgage, pledge, claim, lien, encumbrance or
adverse interest of any nature (each, a "LIEN"). There are no
outstanding subscriptions, rights, warrants, options, calls,
convertible or exchangeable securities, commitments of sale, or Liens
related to or entitling any person to purchase or otherwise to acquire
any shares of the capital stock of, or other ownership interests in,
any Subsidiary.
(vi) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under
"Capitalization"; all the shares of issued and outstanding Common Stock
have been duly authorized and validly issued and are fully paid,
nonassessable and not subject to any preemptive or similar rights;
except as disclosed in the Prospectus and for options issued under the
Pride Petroleum Services, Inc. Long-Term Incentive Plan or the Pride
Petroleum Services, Inc. 1993 Directors' Stock Option Plan, there are
no outstanding (a) securities or
11
obligations of the Company convertible into or exchangeable for any
capital stock of the Company, (b) warrants, rights or options to
subscribe for or purchase from the Company any such capital stock or
any such convertible or exchangeable securities or obligations, or (c)
obligations of the Company to issue any shares of capital stock, any
such convertible or exchangeable securities or obligations, or any such
warrants, rights or options; all offers and sales of the Company's
capital stock by the Company prior to the date hereof were at all
relevant times duly registered under the Act or exempt from the
registration requirements of the Act and were duly registered or the
subject of an available exemption from the registration requirements of
the applicable state securities or blue sky laws; the shares of Common
Stock initially issuable upon conversion of the Debentures have been
duly authorized and reserved for issuance and sale upon conversion of
the Debentures, and the Common Stock, when issued and delivered by the
Company upon such conversion, will be validly issued and fully paid and
nonassessable and free of any Lien (other than Liens created by the
holder of the Debentures); the capital stock of the Company, including
the Common Stock, conforms in all material respects to all statements
relating thereto in the Prospectus and the Registration Statement; and
the issuance of the shares of Common Stock by the Company upon
conversion of the Debentures will not be subject to preemptive or other
similar rights;
(vii) The Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended, and has been duly authorized
by all necessary corporate action on the part of the Company and, when
executed and delivered by the Company in accordance with its terms
(assuming the due execution and delivery thereof by the Trustee), will
be a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws, now or hereafter in effect, relating to or
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought at
law or in equity).
(viii) The Debentures have been duly authorized by
all necessary corporate action on the part of the Company and on the
Closing Date, the Indenture and
12
the Debentures will have been duly executed by the Company and will
conform in all material respects to the descriptions thereof in the
Prospectus. When the Debentures are issued, executed and authenticated
in accordance with the Indenture and paid for in accordance with the
terms of this Agreement, the Debentures will be legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, relating to or affecting creditors' rights and
remedies generally (regardless of whether enforcement is sought at law
or in equity).
(ix) Neither the Company nor any Subsidiary is in
violation of or in default under (a) its charter or bylaws or (b) any
bond, debenture, note or any other evidence of indebtedness or any
indenture, mortgage, deed of trust or other contract, lease or other
instrument to which it is a party or by which it is bound, or to which
any of its property or assets is subject, which could reasonably be
expected to have a material adverse effect, singly or in the aggregate,
on the business, results of operations, financial condition or business
affairs, of the Company and the Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(x) This Agreement has been duly and validly
authorized, executed and delivered by the Company, and constitutes a
valid and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms (except as rights to indemnity
and contribution hereunder may be limited by federal or state
securities laws or public policy relating thereto).
(xi) The execution and delivery of this Agreement and
the Indenture by the Company, the issuance and sale of the Securities,
the performance of this Agreement and the Indenture and the
consummation of the transactions contemplated hereby and thereby will
not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body (except for such consents as have been obtained and except as such
may be required under the securities or Blue Sky laws of the various
states) and will not conflict with or result in a breach of any of the
terms or provisions of, or
13
constitute a default or cause an acceleration of any obligation under,
(A) the charter or bylaws of the Company or any Subsidiary, (B) any
bond, note, debenture or other evidence of indebtedness or any
indenture, mortgage, deed of trust or other contract, lease or other
instrument to which the Company or any Subsidiary is a party or by
which any of them is bound, or to which any of the property or assets
of the Company or any Subsidiary is subject, which could reasonably be
expected to have a Material Adverse Effect, (C) any order of any court
or governmental agency or authority entered in any proceeding to which
the Company or any Subsidiary is a party or by which any of them is
bound, or (D) violate or conflict with any applicable Federal, state or
local law, rule, administrative regulation or ordinance or
administrative or court decree applicable to the Company or any
Subsidiary or any of its property.
(xii) Except as disclosed in the Prospectus, there is
no action, suit or proceeding before or by any court or governmental
agency or body pending against the Company or any of its Subsidiaries
that is required to be disclosed in the Registration Statement or the
Prospectus, or which could reasonably be expected to have a Material
Adverse Effect, or materially and adversely affect the performance of
the Company's obligations pursuant to this Agreement and, to the best
of the Company's knowledge, no such proceedings are contemplated or
threatened. No action has been taken with respect to the Company or any
Subsidiary, and no statute, rule or regulation or order has been
enacted, adopted or issued by any governmental agency that prevents the
issuance of the Securities, suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any preliminary
prospectus or the Prospectus or prevents or suspends the sale of the
Securities in any of the jurisdictions that you may have specified
pursuant to Section 6(g) hereof; no injunction, restraining order or
other order of any court of competent jurisdiction has been issued with
respect to the Company or any Subsidiary that would prevent the
issuance of the Securities, suspend the effectiveness of the
Registration Statement, prevent or suspend the use of any preliminary
prospectus or the Prospectus or prevent or suspend the sale of the
Securities in any jurisdiction that you may have specified pursuant to
Section 6(g) hereof; no action, suit or proceeding before any court or
arbitrator or any governmental body, agency or official (domestic or
14
foreign), is pending against or, to the knowledge of the Company,
threatened against, the Company or any Subsidiary that, if adversely
determined, could reasonably be expected to (a) interfere with or
adversely affect the issuance of the Securities or (b) in any manner
invalidate this Agreement or the Indenture; and every request of the
Commission, or any securities authority or agency of any jurisdiction,
for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) has been complied with in all
material respects.
(xiii) The Debentures have been approved for
inclusion in the Nasdaq SmallCap Market and the Common Stock issuable
upon conversion of the Debentures have been approved for inclusion in
the Nasdaq-NM, subject to official notice of issuance.
(xiv) Coopers & Lybrand L.L.P., the firm of
accountants that has certified the applicable consolidated financial
statements and supporting schedules of the Company filed with the
Commission as part of or incorporated by reference in the Registration
Statement and the Prospectus, are independent public accountants with
respect to the Company and the Subsidiaries, as required by the Act.
The consolidated financial statements, together with related schedules
and notes, set forth or incorporated by reference in the Prospectus and
the Registration Statement comply as to form in all material respects
with the requirements of the Act. Such financial statements fairly
present in all material respects the consolidated financial position of
the Company and the Subsidiaries at the respective dates indicated and
the results of their operations and their cash flows for the respective
periods indicated, and have been prepared in accordance with generally
accepted accounting principles ("GAAP"), except as otherwise expressly
stated therein, as consistently applied throughout such periods. The
other financial and statistical information and data included or
incorporated by reference in the Prospectus and in the Registration
Statement, historical and PRO FORMA, are, in all material respects,
accurate and prepared on a basis consistent with such financial
statements and the books and records of the Company. Each of the
Company and its subsidiaries keeps books and records that fairly
reflect its assets and maintains internal accounting controls which
provide reasonable assurance that (a) transactions are executed in
accordance with management's
15
authorization, (b) transactions are recorded as necessary to permit
preparation of the Company's consolidated financial statements in
accordance with generally accepted accounting principles and to
maintain accountability for the assets of the Company, (c) access to
the assets of the Company and each of its subsidiaries is permitted
only in accordance with management's authorization, and (d) the
recorded accountability for assets of the Company and each of its
subsidiaries is compared with existing assets at reasonable intervals
and appropriate action is taken with respect to any material
differences.
(xv) Except as disclosed in the Registration
Statement, subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (i) neither
the Company nor any Subsidiary has incurred any liabilities or
obligations, direct or contingent, that are material to the Company and
the Subsidiaries, taken as a whole, nor entered into any transaction
not in the ordinary course of business that is material to the Company
and the Subsidiaries, taken as a whole, and is required to be disclosed
on a balance sheet in accordance with GAAP, either when considered
alone or together with all other such transactions, (ii) there has been
no decision or judgment in the nature of litigation adverse to the
Company or any Subsidiary that could reasonably be expected to have a
Material Adverse Effect, and (iii) there has been no material adverse
change in the financial condition or in the results of operations,
business affairs or business prospects of the Company and the
Subsidiaries, taken as a whole (any of the above, a "MATERIAL ADVERSE
CHANGE").
(xvi) The Company and each of its Subsidiaries has
such certificates, permits, licenses, approvals, authorizations and
other rights (collectively, "PERMITS") issued by governmental or
regulatory authorities as are, in all material respects, necessary to
own, lease and operate their respective properties and to conduct their
respective businesses; the Company and each of its Subsidiaries has
fulfilled and performed all of its material obligations with respect to
such Permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results
or would result in any other material impairment of the rights of the
holder of any such Permit; and, except as described
16
in the Prospectus, such Permits contain no restrictions that are
materially burdensome to the Company and its Subsidiaries considered as
a whole.
(xvii) All material tax returns required to be filed
by the Company and the Subsidiaries in every jurisdiction have been
filed, other than those filings being contested in good faith, and,
except as disclosed in the Prospectus, all taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due
or claimed to be due from such entities have been paid.
(xviii) Except as would not, individually or in the
aggregate, have a Material Adverse Effect (a) neither the Company nor
any Subsidiary is in violation of any foreign, Federal, state or local
laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata),
including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of toxic or
hazardous substances, materials or wastes, or petroleum and petroleum
products ("MATERIALS OF ENVIRONMENTAL CONCERN"), or otherwise relating
to the storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, "ENVIRONMENTAL LAWS"), which
violation includes, but is not limited to, noncompliance with any
permits or other governmental authorizations; (b) neither the Company
nor any Subsidiary has received any communication (written or oral),
whether from a governmental authority or otherwise, alleging any such
violation or noncompliance, and there are no circumstances, either
past, present or that are reasonably foreseeable, that may lead to such
violation in the future; (c) there is no pending or threatened claim,
action, investigation or notice (written or oral) by any person or
entity alleging potential liability for investigatory, cleanup, or
governmental responses costs, or natural resources or property damages,
or personal injuries, attorney's fees or penalties relating to (x) the
presence, or release into the environment, of any Material of
Environmental Concern at any location owned or operated by the Company
or any Subsidiary, now or in the past, or (y) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law
(collectively, "ENVIRONMENTAL CLAIMS"); and (d) there are no past or
present actions, activities,
17
circumstances, conditions, events or incidents, that could form the
basis of any Environmental Claim against the Company or any Subsidiary
or against any person or entity whose liability for any Environmental
Claim the Company or any Subsidiary has retained or assumed either
contractually or by operation of law.
(xix) Except as would not have a Material Adverse
Effect, (A) neither the Company nor any Subsidiary is in material
violation of any Federal, state or local law relating to discrimination
in the hiring, promotion or pay of employees nor any applicable wage or
hour laws nor any provisions of the Employee Retirement Income Security
Act of 1974, as amended, or the rules and regulations promulgated
thereunder, (B) there is no unfair labor practice complaint pending
against the Company or any Subsidiary or, to the best knowledge of the
Company, threatened against any of them, before the National Labor
Relations Board or any state or local labor relations board, and (C)
there is no labor dispute in which the Company or any Subsidiary is
involved nor, to the best knowledge of the Company, is any labor
dispute imminent, other than routine disciplinary and grievance
matters.
(xx) Except as otherwise set forth in the Prospectus
or such as would not have a Material Adverse Effect, the Company and
each Subsidiary has good and marketable title, free and clear of all
Liens (except Liens for taxes not yet due and payable), to all property
and assets described in the Registration Statement as being owned by
it. All leases to which the Company or any Subsidiary is a party are
valid and binding and no default has occurred or is continuing
thereunder, which might result in a Material Adverse Effect, and the
Company and each Subsidiary enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with
such exceptions as do not materially interfere with the use made by the
Company or such Subsidiary.
(xxi) The Company and its Subsidiaries maintain what
they believe to be reasonably adequate insurance coverage for those
risks that the Company believes to be customarily insured against by
companies in the same business.
(xxii) Except for the Registration Rights
Agreement between the Company and Offshore Rigs, L.L.C.,
18
the Registration Rights Agreement between the Company and Raymond H.
Eaves and Billy B. Cooper, and the Agreement dated as of June 13, 1995
between the Company, Financial Overseas Management, S.A. (or its
designee) and Jorge E. Estrada Mora and Ana Maria Estrada Mora, no
holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company. No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of
the Company as part of or under the Registration Statement.
(xxiii) Neither the Company nor any Subsidiary is a
party to any agreement that currently prohibits, directly or
indirectly, any Subsidiary from paying any dividends to the Company,
from making any other distributions on such Subsidiary's capital stock,
from repaying to the Company any loans or advances to such subsidiary
or from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary of the Company, except as disclosed in
the Prospectus.
(xxiv) The Company and the Subsidiaries own or
possess the right to use all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in
the Prospectus as being owned by them or any of them or necessary for
the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person
to the rights of the Company and the Subsidiaries with respect to the
foregoing.
(xxv) The Company is not, and will not be as a result
of the consummation of the transactions contemplated by this Agreement,
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(xxvi) The conditions for use of a Registration
Statement on Form S-3 set forth in the General Instructions to Form S-3
have been satisfied with respect to the Company and the transactions
contemplated by this Agreement and the Registration Statement.
19
(xxvii) To the knowledge of the Company after inquiry
of its executive officers and directors, there are no direct or
indirect associations or affiliations with any member of the NASD among
the Company's executive officers, directors or principal stockholders,
except as set forth in the Registration Statement or as otherwise
disclosed to the Underwriters.
(xxviii) Neither the Company nor any of its
subsidiaries, or any of their affiliates, does business with the
government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes (Chapter
92-198, Laws of Florida).
(xxix) Except as disclosed in the Prospectus, there
are no business relationships or related party transactions required to
be disclosed therein by Item 404 of Regulation S-K of the Commission.
9. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless, (i)
each of the Underwriters and (ii) each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any of the Underwriters (any of the persons referred to
in this clause (ii) being hereinafter referred to as a "CONTROLLING
PERSON") (any person referred to in clause (i) or (ii) may hereinafter
be referred to as an "INDEMNIFIED PERSON") to the fullest extent
lawful, from and against any and all losses, claims, damages,
liabilities, actions and expenses (including without limitation and as
incurred, reimbursement of all reasonable costs of investigating,
preparing, pursuing, or defending any claim or action, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of
counsel employed by any Indemnified Person in accordance with the
provisions of this Section 9) directly or indirectly caused by, related
to, based upon or arising out of, or in connection with any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (including, in each case,
any amendment or supplement thereto) or any preliminary prospectus, or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary
20
to make the statements therein (in the case of the Prospectus, in light
of the circumstances under which they were made) not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement
or omission that is made in reliance upon and in conformity with
information relating to any Underwriter furnished in writing to the
Company through DLJ by or on behalf of any such Underwriter expressly
for use therein; PROVIDED that the foregoing indemnity with respect to
any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims,
damages, liabilities, actions or expenses purchased Debentures, or any
controlling person of such Underwriter, if a copy of the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) had not been sent or given by or on
behalf of such Underwriter to such person at or prior to the written
confirmation of the sale of Debentures to such person by such
Underwriter and the untrue statement or omission (or alleged untrue
statement or omission) of a material fact in such preliminary
prospectus was corrected in the Prospectus (as amended or
supplemented).
(b) In case any action or proceeding (including any
governmental investigation) shall be brought or asserted against any of
the Indemnified Persons with respect to which indemnity may be sought
against the Company, such Underwriter (or the Underwriter controlled by
such controlling person) shall promptly notify the Company in writing
(provided, that the failure to give such notice shall not relieve the
Company of any liability which it may have pursuant to this Agreement,
unless and only to the extent that such omission results in the loss or
compromise of any material rights or defenses by the Company). Upon
receiving such notice, the Company shall be entitled to participate in
any such action or proceeding and to assume, at its sole expense, the
defense thereof, with counsel reasonably satisfactory to such
Indemnified Person and, after written notice from the Company to such
Indemnified Person of its election so to assume the defense thereof,
the Company shall not be liable to such Indemnified Person hereunder
for legal expenses of other counsel subsequently incurred by such
Indemnified Person in connection with the defense thereof, other than
reasonable costs of investigation, unless (i) the Company agrees in
writing to pay such
21
fees and expenses, or (ii) the Company fails promptly to assume such
defense or fails to employ counsel reasonably satisfactory to such
Indemnified Person or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both such
Indemnified Person and the Company or an affiliate of the Company, and
such Indemnified Person shall have been advised by counsel either (x)
that there may be one or more legal defenses available to such
Indemnified Person that are different from or additional to those
available to the Company or such affiliate or (y) a conflict may exist
between such Indemnified Person and the Company or such affiliate (in
which case, if such Indemnified Person notifies the Company in writing,
the Company shall not have the right to assume the defense thereof), it
being understood, however, that the Company shall not, in connection
with any one such action or proceeding or separate but substantially
similar or related actions or proceedings arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition
to any local counsel) at any time for each such Indemnified Person. The
Company shall be liable for any settlement of any such action or
proceeding effected with the prior written consent of the Company,
which consent will not be unreasonably withheld, and the Company agrees
to indemnify and hold harmless any Indemnified Person from and against
any loss, claim, damage, liability or expense by reason of any such
settlement. Notwithstanding the immediately preceding sentence, if in
any case where the fees and expenses of counsel are at the expense of
the indemnifying party and an Indemnified Person shall have requested
the indemnifying party to reimburse the Indemnified Person for such
fees and expenses of counsel as incurred, such indemnifying party
agrees that it shall be liable for any settlement of any action
effected without its written consent if (i) such settlement is entered
into more than 30 days after the receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall have
failed to reimburse the Indemnified Person in accordance with such
request for reimbursement (or, if within 30 days of the receipt of the
aforesaid request, the indemnifying party shall have made a good faith
written challenge to the reasonableness of the amount or nature of the
reimbursement requested or the sufficiency of the documentation
supporting the reimbursement requested (which challenge shall
specifically set forth the amount
22
or nature of the requested reimbursement which the indemnifying party
in good faith believes to be unreasonable or the basis for the good
faith claim as to the insufficiency of any supporting documentation),
then such indemnifying party shall not have reimbursed the indemnified
party for the amount which is not being so challenged) prior to the
date of such settlement. The Company shall not, without the prior
written consent of each Indemnified Person, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any
pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all liability
arising out of such action, claim, litigation or proceeding.
(c) Each of the Underwriters agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors,
officers who sign the Registration Statement, any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing
indemnity from the Company and the Subsidiaries to each of the
Indemnified Persons, but only with respect to claims and actions based
on information relating to such Underwriter that was furnished in
writing by such Underwriter through DLJ expressly for use in the
Registration Statement or the Prospectus or any Preliminary Prospectus
and only insofar as the information included in the Registration
Statement, the Prospectus or any Preliminary Prospectus was presented
therein in conformity with the information furnished by such
Underwriter as provided above. In case any action or proceeding
(including any governmental investigation) shall be brought or asserted
against the Company, any of its directors, any such officer, or any
such controlling person based on the Registration Statement, the
Prospectus or any preliminary prospectus in respect of which indemnity
may be sought against any Underwriter pursuant to the foregoing
sentence, the Underwriter shall have the rights and duties given to the
Company (except that if the Company shall have assumed the defense
thereof, such Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of
such
23
Underwriter), and the Company, its directors, any such officers and
each such controlling person shall have the rights and duties given to
the Indemnified Person by Section 9(b) above.
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other hand, from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying parties and the indemnified party,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand, and the Underwriters,
on the other hand, shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company,
bear to the total underwriting discounts and commissions received by
the Underwriters, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company on the one
hand and the Underwriters on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact related to information supplied by the Company on the one
hand or by the Underwriters on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The indemnity and contribution
obligations set forth herein of any party shall be in addition to any
liability or obligation such party may otherwise have to the other.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 9(d) were
determined by pro rata allocation (even if the Underwriters were
treated as one
24
entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 9,
no Underwriter (and its related Indemnified Persons) shall be required
to contribute, in the aggregate, any amount in excess of the amount by
which the total underwriting discount applicable to the Debentures
purchased by such Underwriter exceeds the amount of any damages which
such Underwriter (and its related Indemnified Persons) has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 9(d) are several in
proportion to the respective aggregate price to the public of
Securities purchased by each of the Underwriters hereunder and not
joint.
10. CONDITIONS TO UNDERWRITERS' OBLIGATIONS. The
obligations of the several Underwriters to purchase the Firm
Debentures under this Agreement are subject to the satisfac-
tion of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing
Date. All agreements of the Company set forth in Sections 6(a) through
(f), Sections 6(i), 6(l)(i) and 6(m), and the last paragraph of Section
3 of this Agreement that are required to be performed or complied with
by the Company at or prior to the Closing Date shall have been
performed or complied with by the Company at or prior to the Closing
Date. The Company shall have performed or complied in all material
respects with all of its agreements herein contained (other than those
referenced in the immediately preceding sentence) and required to be
25
performed or complied with by it at or prior to the
Closing Date.
(b) (i) The Registration Statement shall have become effective
(or, if a post-effective amendment is required to be filed pursuant to
Rule 430A under the Act, such post-effective amendment shall have
become effective) not later than 5:00 p.m., New York City time, on the
date of this Agreement or at such later date and time as you may
approve in writing and, at the Closing Date, no stop order suspending
the effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been commenced or shall
be pending before or threatened by the Commission, (ii) every request
for additional information on the part of the Commission shall have
been complied with in all material respects, and (iii) no stop order
suspending the sale of the Securities in any jurisdiction referred to
in Section 6(g) shall have been issued and no proceeding for that
purpose shall have been commenced or shall be pending or threatened
which would, in your reasonable judgment, make it impracticable or
inadvisable to market the Securities or to enforce contracts for the
sale of the Securities.
(c) (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have
been any Material Adverse Change, whether or not arising in the
ordinary course of business, (ii) since the date of the latest balance
sheet included in the Registration Statement and the Prospectus, there
shall not have been any material adverse change, or any development
involving a prospective material adverse change, in the capital stock
or long-term debt, or any material increase in short-term debt, of the
Company or any of its Subsidiaries and (iii) the Company and its
Subsidiaries shall have no liability or obligation, direct or
contingent, that is material to the Company and its Subsidiaries taken
as a whole and is required to be disclosed in the notes to its
financial statements in accordance with GAAP and which is not so
disclosed in or incorporated by reference into the Registration
Statement.
(d) You shall have received a certificate of the Company,
dated the Closing Date, executed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company, in
their capacities as
26
officers of the Company confirming the matters set forth
in paragraphs (a), (b) and (c) of this Section 10.
(e) You shall have received an opinion (satisfactory to you
and your counsel), dated the Closing Date, of McGlinchey Stafford Lang,
a law corporation, counsel for the Company, to the effect that:
(i) (A) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation and (B) has the corporate power and
authority to own and lease its properties and to conduct its business
as described in the Prospectus;
(ii) the Company has the corporate power and
authority to enter into and perform this Agreement and the Indenture
and to issue, sell and deliver the Securities; this Agreement and the
Indenture have been duly and validly authorized by all necessary
corporate action by the Company, and have been duly executed and
delivered by the Company;
(iii) (A) the authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in
the "Description of Capital Stock" section of the Registration
Statement and the Prospectus; and (B) the shares of Common Stock
initially issuable upon conversion of the Debentures have been duly
authorized and reserved for issuance upon conversion of the Debentures
and, when issued and delivered upon such conversion, the Common Stock
will be validly issued, fully paid and nonassessable and not subject to
any preemptive or similar rights pursuant to Louisiana Law or the
Company's charter or by-laws;
(iv) the Debentures have been duly authorized
for issuance and sale to the Underwriters pursuant to
this Agreement;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) neither the issuance and sale of the Securities,
nor the performance of the Company's obligations pursuant to this
Agreement or the Indenture will (A) conflict with, result in a breach
of, or constitute a default under the terms of any Louisiana statute,
rule or regulation to which the Company or any of its
27
properties is subject Company or (B) violate any of the
provisions of the charter or by-laws of the Company as
in effect on the date of the opinion;
(vii) the certificate of incorporation and bylaws of
the Company conform to the descriptions thereof contained in the
Registration Statement and the Prospectus and the provisions of
Louisiana law described in the Registration Statement and the
Prospectus conform to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(f) You shall have received an opinion (satisfactory to you
and your counsel), dated the Closing Date, of such foreign counsel for
the Company as are acceptable to you, to the effect that:
(i) (A) Each of Pride International, C.A.
and Pride Petrotech S.A.M.P.I.C. (the "FOREIGN
SUBSIDIARIES") has been duly organized and is validly
existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and (B) has
the corporate power and authority to own and lease its
properties and to conduct its business as described in
the Prospectus;
(ii) Each of the Foreign Subsidiaries is duly
qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a Material
Adverse Effect;
(iii) all of the issued and outstanding capital stock
of each of the Foreign Subsidiaries has been duly authorized and
validly issued, and is fully paid and nonassessable, and the shares of
capital stock of each Foreign Subsidiary are owned directly by the
Company free and clear of any perfected security interest and, to such
counsel's knowledge, any other security interests, claims, liens or
encumbrances; and
(iv) to such counsel's knowledge, except as disclosed
in the Prospectus or in this Agreement, there are no outstanding (a)
securities or obligations of the any of the Foreign Subsidiaries
convertible into or exchangeable for any capital stock of any such
subsidiary, (b) warrants, rights or options to subscribe
28
for or purchase from any such subsidiary any such capital stock or any
such convertible or exchangeable securities or obligations, or (c)
obligations of any such subsidiary to issue any shares of capital
stock, any such convertible or exchangeable securities or obligations,
or any such warrants, rights or options.
(g) You shall have received an opinion (satisfactory to you
and your counsel), dated the Closing Date, of Baker & Botts, L.L.P.,
counsel for the Company, to the effect that:
(i) to such counsel's knowledge, except as disclosed
in the Prospectus and for options issued under the Pride Petroleum
Services, Inc. Long-Term Incentive Plan or the Pride Petroleum
Services, Inc. 1993 Directors' Stock Option Plan, there are no
outstanding (a) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of
the Company or any such subsidiary, (b) warrants, rights or options to
subscribe for or purchase from the Company or any such subsidiary any
such capital stock or any such convertible or exchangeable securities
or obligations, or (c) obligations of the Company or any such
subsidiary to issue any shares of capital stock, any such convertible
or exchangeable securities or obligations, or any such warrants, rights
or options;
(ii) the Indenture, assuming due authorization,
execution and delivery thereof by the Company and the Trustee, is a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws then or thereafter in effect relating to or affecting
rights and remedies of creditors, and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity) and to the discretion of the court before which any
proceeding therefor may be brought;
(iii) the Debentures, when issued, executed and
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Underwriters in accordance with the
terms of this Agreement, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with
their terms, subject to applicable bank-
29
ruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws then or thereafter in effect relating to or affecting
rights and remedies of creditors, and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity) and to the discretion of the court before which any
proceeding therefor may be brought;
(iv) this Agreement (assuming the due authorization,
execution and delivery hereof by the Company and the valid
authorization, execution and delivery by the Underwriters) is a valid
and binding agreement of the Company enforceable in accordance with its
terms (except as rights to indemnity and contribution hereunder may be
limited by applicable law) subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws then or thereafter in effect relating to or affecting
rights and remedies of creditors, and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity) and to the discretion of the court before which any
proceeding therefor may be brought;
(v) the Registration Statement has become effective
under the Act and the Form 8-A relating to the Debentures has become
effective under the Exchange Act; any required filing of the
Prospectus, and any supplements thereto, pursuant to Rule 424(b) has
been made in the manner and within the time period required by Rule
424(b); and to the knowledge of such counsel no stop order suspending
the effectiveness of the Registration Statement or of the Form 8-A has
been issued and no proceedings therefor initiated or threatened by the
Commission;
(vi) each document previously filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus, at the
time it was filed or last amended (except for financial statements, the
notes thereto and related schedules and other financial, numerical,
statistical or accounting data included or incorporated by reference
therein or omitted therefrom, as to which such counsel need express no
opinion), appeared on its face to comply as to form in all material
respects to the applicable requirements of the Exchange Act.
30
(vii) the Indenture complies as to form in all
material respects with the Trust Indenture Act of 1939, as amended (the
"TIA"), and the rules and regulations thereunder and, upon
effectiveness of the Registration Statement, will be duly qualified
under the TIA;
(viii) to the knowledge of such counsel, no
authorization, approval, consent or order of any court or United States
Federal or State, governmental authority or agency is required to be
obtained by the Company in connection with the sale by the Company of
the Securities to you, except (a) such as have been obtained under the
Act, and (b) such as may be required by the NASD or under the state
securities or Blue Sky laws or regulations of any jurisdiction in the
United States in connection with the purchase and distribution of the
Securities by the Underwriters.
(ix) the respective provisions of the Debentures and
the Indenture described in the Registration Statement and the
Prospectus conform in all material respects to the respective
descriptions thereof contained in the Registration Statement and the
Prospectus;
(x) the Registration Statement, at the time it became
effective, and the Prospectus, on its issue date and on the Closing
Date (except, in each case, for financial statements, the notes
thereto, the auditors' report thereon and related schedules and other
financial, numerical, statistical or accounting data included or
incorporated by reference therein or omitted therefrom, as to which no
opinion need be expressed), appeared on their face to comply as to form
in all material respects with the applicable requirements of the Act;
to the knowledge of such counsel, there are no contracts or agreements
to which the Company or any Subsidiary is a party or by which any of
them may be bound that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement other than those described therein or filed or
incorporated by reference as exhibits thereto;
(xi) neither the issuance and sale of the Securities,
nor the performance of the Company's obligations pursuant to this
Agreement or the Indenture will conflict with, result in a breach of,
or constitute a
31
default under (A) the terms of any indenture or other agreement or
instrument and to which the Company or any Subsidiary is a party or
bound which is material to the Company and its Subsidiaries considered
as a whole and of which such counsel has knowledge, (B) any statute,
rule or regulation to which the Company or any Subsidiary is a party or
by which any of them is bound, or to which any of the properties of the
Company or any Subsidiary is subject, or (C) any order of any court or
governmental agency or body having jurisdiction over the Company or any
Subsidiary or any of their properties of which such counsel has
knowledge;
(xii) to the knowledge of such counsel, there is no
current, pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator
involving the Company or any Subsidiary or to which any of their
respective property is subject of a character required to be disclosed
in the Registration Statement which is not disclosed in the Prospectus;
(xiii) the Company is not, and will not be as a
result of the consummation of the transactions contemplated by this
Agreement, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended;
(xiv) to the knowledge of such counsel, no holder of
any security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company as part of
or under the Registration Statement;
(h) You shall have received an opinion (satis-
factory to you and your counsel), dated the Closing
Date, of Robert W. Randall, General Counsel of the
Company, to the effect that:
(i) Each of the Subsidiaries that has been organized
under the laws of a state of the United States (the "U.S.
SUBSIDIARIES") has been duly organized and is validly existing as
corporations in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to own and
lease its properties and to conduct its business as described in the
Prospectus;
32
(ii) the Company and each of the U. S.
Subsidiaries is duly qualified and is in good standing
as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such
qualification, except where the failure to be so
qualified would not have a Material Adverse Effect;
(iii) all of the issued and outstanding capital stock
of each of the U. S. Subsidiaries has been duly authorized and validly
issued, and is fully paid and nonassessable, and the shares of capital
stock of each Subsidiary are owned directly by the Company free and
clear of any perfected security interest and, to such counsel's
knowledge, any other security interests, claims, liens or encumbrances;
(iv) to such counsel's knowledge, except as disclosed
in the Prospectus and for options issued under the Pride Petroleum
Services, Inc. Long-Term Incentive Plan or the Pride Petroleum
Services, Inc. 1993 Directors' Stock Option Plan, there are no
outstanding (a) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of
the Company or any such subsidiary, (b) warrants, rights or options to
subscribe for or purchase from the Company or any such subsidiary any
such capital stock or any such convertible or exchangeable securities
or obligations, or (c) obligations of the Company or any such
subsidiary to issue any shares of capital stock, any such convertible
or exchangeable securities or obligations, or any such warrants, rights
or options;
(v) neither the issuance and sale of the Securities,
nor the performance of the Company's obligations pursuant to this
Agreement or the Indenture will violate any of the provisions of the
charter or by-laws of the Company or any Subsidiary as in effect on the
date of the opinion;
(vi) to the knowledge of such counsel, no holder of
any security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company as part of
or under the Registration Statement;
(vii) to the knowledge of such counsel, there
is no current, pending or threatened action, suit or
33
proceeding before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary or to which
any of their respective property is subject of a character required to
be disclosed in the Registration Statement which is not disclosed in
the Prospectus;
(viii) except as will not have a Material Adverse
Effect: to the knowledge of such counsel, each of the Company and its
Subsidiaries has such Permits, as are in all material respects,
necessary to own, lease and operate their respective properties and to
conduct their respective businesses in the manner described in the
Prospectus; to the knowledge of such counsel, each of the Company and
its Subsidiaries has fulfilled and performed all of its material
obligations with respect to such Permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit, subject in each case to
such qualification as may be set forth in the Prospectus;
(ix) to the knowledge of such counsel, neither the
issuance and sale of the Securities, nor the performance of the
Company's obligations pursuant to this Agreement or the Indenture will
(A) conflict with, result in a breach of, or constitute a default under
the terms of any material indenture or other material agreement or
instrument to which any Foreign Subsidiary is a party or bound, or
constitute a default under, any statute, rule or regulation to which
any Foreign Subsidiary is a party or by which any of them is bound, or
to which any of the properties of any Foreign Subsidiary is subject, or
any order of any court or governmental agency or body having
jurisdiction over any Foreign Subsidiary or any of their properties,
except as will not have a Material Adverse Effect, or (B) violate any
of the provisions of the charter or by-laws of any Foreign Subsidiary
as in effect on the date of the opinion; and
(x) the respective provisions of the employment
agreements and the Pride Petroleum Services, Inc. Long-Term Incentive
Plan described in the Company's proxy statement incorporated by
reference into the Prospectus conform in all material respects to the
respective descriptions thereof contained in such proxy statement.
34
In addition, each of Baker & Botts, L.L.P. and Robert W.
Randall shall state that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, your representatives and your
counsel at which the contents of the Registration Statement and Prospectus and
related matters were discussed and, although such counsel did not independently
verify such information and is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, on the basis of the
foregoing (relying as to the factual matters upon the statements of officers and
other representatives of the Company and state officials and as to materiality
to a large degree on officers and other representatives of the Company and your
representatives) no facts came to such counsel's attention that led such counsel
to believe that the Registration Statement (other than the financial statements,
the notes thereto and the auditors' report thereon and other financial,
numerical, statistical and accounting data included or incorporated by reference
therein, or omitted therefrom, or the exhibits thereto or the Form T-1, as to
which such counsel need express no belief) as amended or supplemented, at the
time such Registration Statement or any post-effective amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading (other than information omitted therefrom in
reliance on Rule 430A under the Act), or the Prospectus (other than the
financial statements and notes thereto and other financial, numerical,
statistical and accounting data included or incorporated by reference therein,
or omitted therefrom, as to which such counsel need express no belief) as
amended or supplemented, as of its date and the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
The opinion of Baker & Botts shall be limited to the laws of
the United States and the laws of the State of New York and the State of Texas.
The opinion of Robert W. Randall shall be limited to the laws of the United
States, the laws of the State of Texas, and the corporate law of the State of
Delaware. The opinion of each foreign counsel shall be limited to the laws of
the jurisdiction in which the
35
Foreign Subsidiary with respect to which such opinion is given is organized.
(i) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Weil, Gotshal & Manges LLP, counsel for the
Underwriters, in form and substance reasonably satisfactory to you.
(j) You shall have received letters on and as of the date
hereof as well as on and as of the Closing Date (in the latter case
constituting an affirmation of the statements set forth in the former,
based on limited procedures), in form and substance satisfactory to
you, from Coopers & Lybrand L.L.P., independent public accountants,
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(k) You shall have received letters on and as of the date
hereof as well as on and as of the Closing Date (in the latter case
constituting an affirmation of the statements set forth in the former,
based on limited procedures), in form and substance satisfactory to
you, from Johnson, Miller & Co., independent public accountants, with
respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus.
(l) At the Closing Date, the Debentures shall have been
approved for inclusion on the Nasdaq SmallCap Market, subject to
official notice of issuance, and the Common Stock issuable upon
conversion of the Debentures have been approved for inclusion in the
Nasdaq-NM, subject to official notice of issuance, and the Company
shall have furnished to you evidence of the foregoing.
(m) Prior to the Closing Date, the Company shall have
furnished to you or caused to be furnished to you such further
information, certificates and documents as you may reasonably request.
(n) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company
at or prior to the Closing Date.
(o) There shall not have been any announcement by
any "nationally recognized statistical rating
36
organization," as defined for purposes of Rule 436(g) under the Act,
nor shall any such organization have advised the Company or the
Underwriters, that (i) it is downgrading its rating assigned to any
class of securities of the Company or (ii) it is reviewing any such
rating with a view to possible downgrading, or with negative
implications, or direction not determined.
The several obligations of the Underwriters to purchase
Additional Debentures hereunder are subject to satisfaction on and as of the
Option Closing Date of the conditions set forth in paragraphs (a) through (o)
above except that the opinions called for in paragraphs (e) through (i) and the
letters referred to in (j) and (k) shall be revised to reflect the sale of the
Additional Debentures.
11. EFFECTIVE DATE OF AGREEMENT, DEFAULTS AND TERMINATION.
This Agreement shall become effective upon the later of (i) the execution of
this Agreement, (ii) the effectiveness of the Registration Statement, and (iii)
if a post-effective amendment is required to be filed pursuant to Rule 430A
under the Act, the effectiveness of such post-effective amendment.
This Agreement may be terminated at any time prior to the
Closing Date or the Option Closing Date, as the case may be, by you by written
notice to the Company if any of the following has occurred: (i) subsequent to
the date the Registration Statement is declared effective or the date of this
Agreement, any Material Adverse Change to the Company, which would, in your
opinion, make it impracticable or inadvisable to market the Securities, or to
enforce contracts for the sale of the Securities, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or material adverse change in the financial markets of the United States or
elsewhere, if the effect of such outbreak, escalation, calamity, crisis or
change in such financial markets would, in your opinion, make it impracticable
or inadvisable to market the Securities or to enforce contracts for the sale of
the Securities, (iii) any suspension of trading generally in securities on the
NYSE, the American Stock Exchange or the Nasdaq NM or limitation on prices for
securities on any such exchange or system, (iv) the delisting of the Common
Stock from the Nasdaq NM (v) any declaration of a general banking moratorium by
either Federal or New York state authorities, (vi) the enactment, publication,
decree or other promulgation of any Federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
would have
37
a Material Adverse Effect, (vii) the taking of any action by any Federal, state
or local government or agency in respect of its monetary or fiscal affairs that
in your opinion has a material adverse effect on the financial markets in the
United States, and would, in your opinion, make it impracticable or inadvisable
to market the Securities or (viii) the Debentures shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
If on the Closing Date or on the Option Closing Date, as the
case may be, any of the Underwriters shall fail or refuse to purchase the Firm
Debentures or the Additional Debentures, as the case may be, which it has agreed
to purchase hereunder on such date, and the aggregate principal amount of such
Firm Debentures or Additional Debentures, as the case may be, that such
defaulting Underwriter or Underwriters, as the case may be, agreed but failed or
refused to purchase does not exceed 10% of the total principal amount of such
Debentures to be purchased on such date by all Underwriters, each non-defaulting
Underwriter shall be obligated severally, in the proportion which the amount of
Firm Debentures set forth opposite its name in Schedule I hereto bears to the
aggregate principal amount of Firm Debentures which all the non-defaulting
Underwriters, as the case may be, have agreed to purchase, or in such other
proportion as you (at your option) may specify, to purchase the Firm Debentures
or Additional Debentures that such defaulting Underwriter or Underwriters, as
the case may be, agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the aggregate principal amount of Firm Debentures or
Additional Debentures, as the case may be, that any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 11
by an amount in excess of one-ninth of such principal amount of Firm Debentures
or Additional Debentures without the written consent of such Underwriter. If, on
the Closing Date or on the Option Closing Date, as the case may be, any of the
Underwriters shall fail or refuse to purchase the Firm Debentures or Additional
Debentures, as the case may be, and the total principal amount of Firm
Debentures or Additional Debentures with respect to which such default occurs
exceeds 10% of the total amount of Debentures to be purchased on such date by
all Underwriters and arrangements satisfactory to you and the Company for the
purchase of such Debentures are not made within 48 hours after such default,
this Agreement shall terminate without liability on the part of the
non-defaulting Underwriters and the Company, except as otherwise provided in
this Section 11. In any such case that does not result in
38
termination of this Agreement, either you or the Company may postpone the
Closing Date or the Option Closing Date, as the case may be, for not longer than
seven (7) days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve a defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.
The indemnity and contribution provisions and the other
agreements, representations and warranties set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Debentures, regardless of (i) any investigation,
or statement as to the results thereof, made by or on behalf of any of the
Underwriters or by or on behalf of the Company or the officers or directors of
the Company or any controlling person of the Company, (ii) acceptance of the
Debentures and payment for them hereunder and (iii) termination of this
Agreement.
If this Agreement shall be terminated by the Underwriters
pursuant to clause (i) or (viii) of the second paragraph of this Section 11 as a
result of any act or omission of the Company or because of the failure or
refusal on the part of the Company to comply with the terms or to fulfill any of
the conditions of this Agreement, the Company agrees to reimburse you for all
reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) incurred by you. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it agrees to
pay pursuant to Section 7 hereof.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Subsidiaries, the Underwriters, any indemnified party referred to herein and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The terms "successors and assigns" shall not include a
purchaser of any of the Securities from any of the several Underwriters merely
because of such purchase.
12. MISCELLANEOUS. Notices given pursuant to any
provision of this Agreement shall be addressed as follows:
(a) if to the Company, to it at 1500 City West Boulevard,
Suite 400, Houston, Texas 77042, Attention: Robert W.
39
Randall, with a copy to Baker & Botts, L.L.P., at 3000 One Shell Plaza, Houston,
Texas 77002, Attention: L. Proctor Thomas, Esq., (b) if to any Underwriter, to
Donaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, New York, New
York 10005, Attention: Syndicate Department, and, in each case, with a copy to
Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas
75201-6950, Attention: Thomas A. Roberts, Esq., or in any case to such other
address as the person to be notified may have requested in writing.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOV-
ERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW
YORK.
40
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument. Please confirm that the
foregoing correctly sets forth the agreement among the Company and you.
Very truly yours,
PRIDE PETROLEUM SERVICES, INC.
By:
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
Date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERT W. BAIRD & CO. INC.
MORGAN KEEGAN & COMPANY, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
Name: _________________________
Title: ________________________
41
SCHEDULE I
PRINCIPAL
AMOUNT
Donaldson, Lufkin & Jenrette
Securities Corporation $
Robert W. Baird & Co. Inc.
Morgan Keegan & Company, Inc.
Total $60,000,000
42
01/19/96 DRAFT
PRIDE PETROLEUM SERVICES, INC.
ISSUER,
AND
MARINE MIDLAND BANK
TRUSTEE
INDENTURE
Dated as of _________________, 1996
$69,000,000
____% Convertible Subordinated Debentures due 2006
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS....................................... 1
SECTION 1.2. INCORPORATION BY REFERENCE
OF TIA................................................................... 10
SECTION 1.3. RULES OF CONSTRUCTION............................. 10
ARTICLE II
THE DEBENTURES
SECTION 2.1. FORM AND DATING................................... 11
SECTION 2.2. EXECUTION AND AUTHENTICATION...................... 11
SECTION 2.3. REGISTRAR AND PAYING
AGENT.................................................................... 12
SECTION 2.4. PAYING AGENT TO HOLD
ASSETS IN TRUST.......................................................... 13
SECTION 2.5. SECURITYHOLDER LIST............................... 13
SECTION 2.6. TRANSFER AND EXCHANGE............................. 14
SECTION 2.7. REPLACEMENT DEBENTURES............................ 14
SECTION 2.8. OUTSTANDING DEBENTURES............................ 15
SECTION 2.9. TREASURY DEBENTURES............................... 15
SECTION 2.10. TEMPORARY DEBENTURES............................. 15
SECTION 2.11. CANCELLATION..................................... 16
SECTION 2.12. DEFAULTED INTEREST............................... 16
SECTION 2.13. PERSONS DEEMED OWNERS............................ 18
ARTICLE III
REDEMPTION
SECTION 3.1. RIGHT OF REDEMPTION............................... 18
SECTION 3.2. NOTICES TO TRUSTEE................................ 18
SECTION 3.3. SELECTION OF DEBENTURES TO
BE REDEEMED.............................................................. 19
SECTION 3.4. NOTICE OF REDEMPTION.............................. 19
SECTION 3.5. EFFECT OF NOTICE OF
REDEMPTION............................................................... 20
SECTION 3.7. DEBENTURES REDEEMED IN
PART..................................................................... 21
ARTICLE IV
COVENANTS
SECTION 4.1. PAYMENT OF DEBENTURES............................. 22
SECTION 4.2. MAINTENANCE OF OFFICE OR
AGENCY................................................................... 22
i
......................................................................... 23
SECTION 4.3. CORPORATE EXISTENCE............................... 23
SECTION 4.4. PAYMENT OF TAXES AND OTHER
CLAIMS................................................................... 23
SECTION 4.5. MAINTENANCE OF PROPERTIES......................... 23
SECTION 4.6. COMPLIANCE CERTIFICATE;
NOTICE OF DEFAULT........................................................ 24
SECTION 4.7. REPORTS........................................... 24
SECTION 4.8. LIMITATION ON STATUS AS
INVESTMENT COMPANY....................................................... 25
SECTION 4.9. WAIVER OF STAY, EXTENSION
OR USURY LAWS............................................................ 25
......................................................................... 25
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. LIMITATION ON MERGER, SALE
OR CONSOLIDATION......................................................... 26
SECTION 5.2. SUCCESSOR CORPORATION
SUBSTITUTED.............................................................. 26
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT................................. 27
SECTION 6.2. ACCELERATION OF MATURITY
DATE; RESCISSION AND ANNULMENT........................................... 29
SECTION 6.3. COLLECTION OF INDEBTEDNESS
AND SUITS FOR ENFORCEMENT BY TRUSTEE..................................... 30
SECTION 6.4. TRUSTEE MAY FILE PROOFS OF
CLAIM.................................................................... 31
SECTION 6.5. TRUSTEE MAY ENFORCE CLAIMS
WITHOUT POSSESSION OF THE DEBENTURES..................................... 32
SECTION 6.6. PRIORITIES........................................ 33
SECTION 6.7. LIMITATION ON SUITS............................... 33
SECTION 6.8. UNCONDITIONAL RIGHT OF
HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST................................................................. 34
SECTION 6.9. RIGHTS AND REMEDIES
CUMULATIVE............................................................... 34
SECTION 6.10. DELAY OR OMISSION NOT
WAIVER................................................................... 35
SECTION 6.11. CONTROL BY HOLDERS............................... 35
SECTION 6.12. WAIVER OF PAST DEFAULT........................... 35
SECTION 6.13. UNDERTAKING FOR COSTS............................ 36
SECTION 6.14. RESTORATION OF RIGHTS AND
REMEDIES................................................................. 36
ARTICLE VII
ii
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE................................. 37
SECTION 7.2. RIGHTS OF TRUSTEE................................. 38
SECTION 7.3. INDIVIDUAL RIGHTS OF
TRUSTEE.................................................................. 39
SECTION 7.4. TRUSTEE'S DISCLAIMER.............................. 40
SECTION 7.5. NOTICE OF DEFAULT................................. 40
SECTION 7.6. REPORTS BY TRUSTEE TO
HOLDERS.................................................................. 40
SECTION 7.7. COMPENSATION AND
INDEMNITY................................................................ 41
SECTION 7.8. REPLACEMENT OF TRUSTEE............................ 42
SECTION 7.9. SUCCESSOR TRUSTEE BY
MERGER, ETC.............................................................. 43
SECTION 7.10. ELIGIBILITY;
DISQUALIFICATION......................................................... 43
SECTION 7.11. PREFERENTIAL COLLECTION
OF CLAIMS AGAINST COMPANY................................................ 43
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1. SATISFACTION AND DISCHARGE
OF INDENTURE............................................................. 44
SECTION 8.2. REPAYMENT TO THE COMPANY.......................... 44
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. SUPPLEMENTAL INDENTURES
WITHOUT CONSENT OF HOLDERS............................................... 45
SECTION 9.2. AMENDMENTS, SUPPLEMENTAL
INDENTURES AND WAIVERS WITH CONSENT OF
HOLDERS.................................................................. 45
SECTION 9.3. COMPLIANCE WITH TIA............................... 47
SECTION 9.4. REVOCATION AND EFFECT OF
CONSENTS................................................................. 47
SECTION 9.5. NOTATION ON OR EXCHANGE OF
DEBENTURES............................................................... 48
SECTION 9.6. TRUSTEE TO SIGN
AMENDMENTS, ETC.......................................................... 48
ARTICLE X
MEETINGS OF SECURITYHOLDERS
SECTION 10.1. PURPOSES FOR WHICH
MEETINGS MAY BE CALLED................................................... 49
SECTION 10.2. MANNER OF CALLING
MEETINGS................................................................. 49
iii
SECTION 10.3. CALL OF MEETINGS BY THE
COMPANY OR HOLDERS....................................................... 50
SECTION 10.4. WHO MAY ATTEND AND VOTE
AT MEETINGS.............................................................. 50
SECTION 10.5. REGULATIONS MAY BE MADE
BY TRUSTEE; CONDUCT OF THE MEETING; VOTING
RIGHTS; ADJOURNMENT...................................................... 51
SECTION 10.6. VOTING AT THE MEETING AND
RECORD TO BE KEPT........................................................ 52
SECTION 10.7. EXERCISE OF RIGHTS OF
TRUSTEE OR SECURITYHOLDERS MAY NOT BE
HINDERED OR DELAYED BY CALL OF MEETING................................... 52
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. REPURCHASE OF DEBENTURES
AT OPTION OF THE HOLDER.................................................. 53
ARTICLE XII
SUBORDINATION
SECTION 12.1. DEBENTURES SUBORDINATED
TO SENIOR INDEBTEDNESS................................................... 56
SECTION 12.2. NO PAYMENT ON DEBENTURES
IN CERTAIN CIRCUMSTANCES................................................. 56
SECTION 12.3. DEBENTURES SUBORDINATED
TO PRIOR PAYMENT OF ALL SENIOR INDEBTEDNESS
ON DISSOLUTION, LIQUIDATION OR REORGANI-
ZATION................................................................... 58
SECTION 12.4. SECURITYHOLDERS TO BE
SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS............................................................. 59
SECTION 12.5. OBLIGATIONS OF THE
COMPANY UNCONDITIONAL.................................................... 60
SECTION 12.6. TRUSTEE ENTITLED TO
ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE OF
NOTICE................................................................... 61
SECTION 12.7. APPLICATION BY TRUSTEE OF
ASSETS DEPOSITED WITH IT................................................. 61
SECTION 12.8. SUBORDINATION RIGHTS NOT
IMPAIRED BY ACTS OR OMISSIONS OF THE COMPANY
OR HOLDERS OF SENIOR INDEBTEDNESS........................................ 62
SECTION 12.9. SECURITYHOLDERS AUTHORIZE
TRUSTEE TO EFFECTUATE SUBORDINATION OF
DEBENTURES............................................................... 62
SECTION 12.10. RIGHT OF TRUSTEE TO HOLD
SENIOR INDEBTEDNESS...................................................... 63
SECTION 12.11. ARTICLE XII NOT TO
PREVENT EVENTS OF DEFAULT................................................ 63
iv
SECTION 12.12. NO FIDUCIARY DUTY OF
TRUSTEE TO HOLDERS OF SENIOR INDEBTEDNESS................................ 63
ARTICLE XIII
CONVERSION OF DEBENTURES
SECTION 13.1. CONVERSION PRIVILEGE............................. 63
SECTION 13.2. EXERCISE OF CONVERSION
PRIVILEGE................................................................ 64
SECTION 13.3. FRACTIONAL INTERESTS............................. 65
SECTION 13.4. CONVERSION PRICE................................. 66
SECTION 13.5. ADJUSTMENT OF CONVERSION
PRICE.................................................................... 66
SECTION 13.6. CONTINUATION OF
CONVERSION PRIVILEGE IN CASE OF
RECLASSIFICATION, CHANGE, MERGER, CONSOLIDATION OR SALE OF ASSETS........ 71
SECTION 13.7. NOTICE OF CERTAIN EVENTS......................... 73
SECTION 13.8. TAXES ON CONVERSION.............................. 74
SECTION 13.9. COMPANY TO PROVIDE STOCK......................... 74
SECTION 13.10. DISCLAIMER OF
RESPONSIBILITY FOR CERTAIN MATTERS....................................... 75
SECTION 13.11. RETURN OF FUNDS
DEPOSITED FOR REDEMPTION OF CONVERTED
DEBENTURES............................................................... 76
SECTION 13.12. CERTAIN DISTRIBUTIONS........................... 76
SECTION 14.1. TIA CONTROLS..................................... 76
SECTION 14.2. NOTICES.......................................... 77
SECTION 14.3. COMMUNICATIONS BY HOLDERS
WITH OTHER HOLDERS....................................................... 78
SECTION 14.4. CERTIFICATE AND OPINION
AS TO CONDITIONS PRECEDENT............................................... 78
SECTION 14.5. STATEMENTS REQUIRED IN
CERTIFICATE OR OPINION................................................... 78
SECTION 14.6. RULES BY TRUSTEE, PAYING
AGENT, REGISTRAR......................................................... 79
SECTION 14.7. LEGAL HOLIDAYS................................... 79
SECTION 14.8. GOVERNING LAW.................................... 79
SECTION 14.9. NO ADVERSE INTERPRETATION
OF OTHER AGREEMENTS...................................................... 80
SECTION 14.10. NO RECOURSE AGAINST
OTHERS................................................................... 80
SECTION 14.11. SUCCESSORS...................................... 80
SECTION 14.12. DUPLICATE ORIGINALS............................. 81
SECTION 14.13. SEVERABILITY.................................... 81
SECTION 14.14. TABLE OF CONTENTS,
HEADINGS, ETC............................................................ 81
SIGNATURES............................................................... 82
EXHIBIT A................................................................ 1
v
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
310(a)(1)...................................................... 7.10
(a)(2)....................................................... 7.10
(a)(3)....................................................... N.A.
(a)(4)...................................................... N.A.
(a)(5)...................................................... 7.10
(b)......................................................... 7.8;
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
(a)(1)(B)................................................... 6.12
vi
TIA INDENTURE
SECTION SECTION
(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 purpose, be deemed to be a
part of the Indenture.
vii
<PAGE>
INDENTURE, dated as of _______________, 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 ___% 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.
"BOARD OF DIRECTORS" means, with respect to any
Person, the Board of Directors of such Person or any commit-
1
tee 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 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
2
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 ___%
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.
"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
3
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.
"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
4
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
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.
5
"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,
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 other-
6
wise 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 redemption 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
7
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 Commission.
"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
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.
8
"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.
"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.
9
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;
(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
10
(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 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.
11
The Trustee shall authenticate the Debentures for original
issue in the aggregate principal amount of up to $69,000,000 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 $69,000,000 except
as provided in Section 2.7; PROVIDED, that Debentures in excess of $60,000,000
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 $60,000,000 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.
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 Inden-
12
ture, 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 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
13
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 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
14
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 cancelled 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.
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
15
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 cancelled as provided in this
Section 2.11, except as expressly permitted in the form of Debentures and as
permitted by this Indenture.
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:
16
(1) The Company may elect to make payment
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 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
17
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 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
cancelled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
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SECTION 3.3. SELECTION OF DEBENTURES TO BE REDEEMED.
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.
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;
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(4) that Debentures called for redemption
must be surrendered to the Paying Agent at the
address specified in such notice to collect the Redemption 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;
(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
20
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.
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.
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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.
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 desig-
22
nates 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.
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
23
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 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.
24
(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.
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
25
SECTION 5.1. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
(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 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
26
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
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;
27
(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;
(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
28
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 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
29
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 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. 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,
30
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 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
31
(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, 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.
32
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 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
33
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
(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
34
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 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
35
(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.
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
36
shall continue as though no such proceeding had been instituted.
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.
37
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(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.
38
(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.
(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
39
their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with 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.
40
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.
41
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
42
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.
43
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1. SATISFACTION AND DISCHARGE OF INDENTURE.
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.
44
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 guarantors
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 delivered to the Company and the Trustee, the Company, when
45
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
(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
46
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 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
47
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.
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
48
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.
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 meet-
49
ing, 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.
SECTION 10.4. WHO MAY ATTEND AND VOTE AT MEETINGS.
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
50
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, 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
51
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.
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.
52
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:
(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;
53
(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);
(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
com-
54
pleted, 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.
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
55
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.
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 prepay-
56
ment 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 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
57
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, LIQUIDATION
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:
(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
58
(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 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
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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 UNCONDITIONAL.
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, 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
60
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.
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.
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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.
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
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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 principal of,
premium, if any, or interest on the Debentures by 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
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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.
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
64
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 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
65
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
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 $______.
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.
66
(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
(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
67
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 exclusively 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
68
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 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 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
69
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.
(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
70
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 (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 PRIVILEGE IN CASE OF
RECLASSIFICATION, CHANGE, MERGER, CONSOLIDATION 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
71
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 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
72
Company shall be obligated to file with the Trustee prior to the execution of
any such supplemental indenture) with respect thereto.
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
73
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 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
74
as possible endeavor to secure such registration or approval, as the case may
be, PROVIDED, HOWEVER, that nothing in 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.
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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 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.
76
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of 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.
77
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 CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
78
(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 ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MAN-
79
HATTAN 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 direct or indirect partner, employee, stockholder, director
or officer, 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 partner, stockholder, employee, director or officer. 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.
80
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.
81
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:
Name:
Title:
Attest:
Secretary
MARINE MIDLAND BANK,
as Trustee
By:
Name:
Title:
82
EXHIBIT A
[FORM OF DEBENTURE]
PRIDE PETROLEUM SERVICES, INC.
____% CONVERTIBLE SUBORDINATED DEBENTURE
DUE 2006
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.
____% 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 ____% 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 ____% 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
________________, 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 registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Marine Midland Bank (the "Trustee") 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 co-Registrar.
4. INDENTURE.
The Company issued the Debentures under an Indenture, dated as
of ____________, 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. 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
$60,000,000 ($69,000,000 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 February 15, 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 . . . . . . . . . %
2000 . . . . . . . . . %
2001 . . . . . . . . . %
2002 and thereafter. %
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 written request. After that, all liability of the
Trustee and such Paying Agent(s) with respect to such money shall cease.
A-6
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 $______ (equivalent to a conversion rate of
____ 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 may elect to have such Debentures purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below.
A-7
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 as
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 direct or indirect partner, employee, stockholder, director
or officer, 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 partner, stockholder, 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.
A-8
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 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 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:
$--------
Date:_____________ Signature:______________________________
(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 ___________________
Signature
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 address)
Principal amount to be
converted: (if less than all)
$
A-12
EXHIBIT 5.1
BAKER & BOTTS, L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
20475.0105 January 22, 1996
Pride Petroleum Services, Inc.
1500 City West Boulevard
Suite 400
Houston, Texas 77042
Gentlemen:
As set forth in the Registration Statement on Form S-3 (Registration No.
333-00027) (the "Registration Statement") filed by Pride Petroleum Services,
Inc., a Louisiana corporation (the "Company"), with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to $80.5
million aggregate principal amount of the Company's Convertible Subordinated
Debentures due 2006 (the "Debentures"), certain legal matters in connection with
the Debentures are being passed upon for the Company by us. We understand that
the Debentures are to be sold pursuant to the terms of an Underwriting Agreement
(the "Underwriting Agreement") in substantially the form filed as Exhibit 1 to
the Registration Statement and an Indenture in substantially the form filed as
Exhibit 4.4 to the Registration Statement (the "Indenture"). At your request,
this opinion is being furnished to you for filing as Exhibit 5 to the
Registration Statement.
In our capacity as your counsel in the connection referred to above, we
have examined the Company's Restated Articles of Incorporation and Bylaws, each
as amended to date, and the originals, or copies certified or otherwise
identified, of corporate records of the Company, certificates of public
officials and of representatives of the Company, statutes and other instruments
and documents as a basis for the opinions hereinafter expressed. In giving such
opinions, we have relied upon certificates of officers of the Company with
respect to the accuracy of the material factual matters contained in such
certificates.
On the basis of the foregoing, we are of the opinion that, assuming (i) the
taking of all necessary corporate action by the Company, including action by the
Board of Directors and the duly authorized Pricing Committee of the Board of
Directors of the Company to approve the terms of the offering of the Debentures,
including approval of the terms and conditions of, and the authorization,
execution and delivery of, the Underwriting Agreement, the Indenture and the
Debentures, (ii) the due execution and delivery of the Indenture, (iii) the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, and (iv) the due execution and authentication of the Debentures
pursuant to and in accordance with the Indenture, the Debentures will, when
issued against payment therefor in accordance with the terms of the Indenture
and the Underwriting Agreement, be validly issued and constitute valid and
binding obligations of the Company, enforceable against the Company except to
the extent that the enforceability thereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under "Legal Opinions" in the
prospectus forming a part of the Registration Statement.
Very truly yours,
JDK/NJE BAKER & BOTTS, L.L.P.
2
EXHIBIT 5.2
McGLINCHEY STAFFORD LANG
643 Magazine Street
New Orleans, Louisiana 70130-3477
Telephone: (504) 586-1200
Fax: (504) 596-2800
January 22, 1996
Pride Petroleum Services, Inc.
1500 City West Boulevard, Suite 400
Houston, Texas 77042
Re: Offering of $80,500,000 Aggregate Principal Amount of
Convertible Subordinated Debentures of Pride Petroleum
Services, Inc.
Gentlemen:
We are acting as special Louisiana counsel to Pride Petroleum Services,
Inc., a Louisiana corporation (the "Company"), and we have been asked to render
certain opinions in connection with the Registration Statement (the
"Registration Statement") on Form S-3 (Registration No. 333-00027) filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, relating to $80,500,000 aggregate principal
amount of Convertible Subordinated Debentures (the "Debentures") of the Company
and shares of the Company's Common Stock, no par value ("Common Stock") issuable
upon conversion thereof. As set forth in the Registration Statement, certain
legal matters involving Louisiana law are being passed upon for the Company by
us. The Debentures are being issued and sold pursuant to the terms of an
Underwriting Agreement (the "Underwriting Agreement") among the Company and
Donaldson, Lufkin & Jenrette Securities Corporation, Robert W. Baird & Co.
Incorporated and Morgan Keegan & Company, Inc. (collectively, the
"Underwriters") and an Indenture between the Company and Marine Midland Bank, as
trustee (the "Indenture"). Unless otherwise defined, capitalized terms used
herein shall have the respective meaning set forth in the Registration
Statement.
We do not represent the Company on a general or regular basis and,
accordingly, have no detailed information concerning its business or operations.
In our capacity as special Louisiana counsel to the Company in connection with
this opinion, we have examined the Amended and Restated Articles of
Incorporation, as amended, and the Bylaws of the Company and copies, certified
or otherwise identified, of corporate records of the Company, including extracts
from the minute books of the Company as furnished to us by the Company,
certificates of public officials and representatives of the Company, and other
instruments and documents pertaining to the Company as a basis for the opinions
hereinafter expressed. In giving such opinions, we have relied upon certificates
of officers of the Company with respect to the accuracy of the material factual
matters contained in such certificates, without undertaking to verify the same
by independent investigation.
For purposes of this opinion we have assumed, with your permission and
without independent investigation:
(i) the genuineness of all signatures on all documents and certificates
referred to herein or relied upon by us, and the conformity to
original documents of documents submitted to us as conformed,
certified, or photostatic copies;
(ii) the accuracy of all statements of fact set forth in the Registration
Statement, the Underwriting Agreement and the Indenture; and
(iii) that the Company shall reserve, free from preemptive rights, out of
its authorized but unissued shares, sufficient shares of Common Stock
for issuance of the Shares (as hereinafter defined) as shall be
issuable upon conversion of the Debentures pursuant to the Indenture,
such number initially to be the number obtained by dividing the
Conversion Price (as determined by the pricing committee of the Board
of Directors of the Company (the "Pricing Committee") into the
aggregate principal amount of the Debentures to be issued and sold
pursuant to the Underwriting Agreement, together with such additional
shares of Common Stock as may be required to be issued by reason of
the Indenture, the Registration Statement or any other agreement
binding between the Company and the Holders.
We have made no investigation or inquiry to determine the accuracy of the
foregoing assumptions and are not responsible for the effect of the inaccuracy
of any of these assumptions on the opinions expressed herein.
Subject to the foregoing assumptions, and the qualifications and exceptions
set forth below, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Louisiana;
2. When the Pricing Committee has determined the aggregate principal amount
of Debentures to be sold to the Underwriters, the price to be paid to the
Company upon issuance of the Debentures and the conversion price for the shares
of Common Stock issuable upon conversion of the Debentures (the "Shares") and
has authorized the issuance of such Shares, upon the issuance and sale of the
Shares by the Company pursuant to the Underwriting Agreement and the Indenture
and upon receipt by the Company of the consideration described in the
Registration Statement, such Shares will be duly authorized, validly issued,
fully paid and nonassessable.
The opinions set forth above are subject to the following qualifications
and exceptions:
(1) This Opinion is rendered solely as to matters of Louisiana law, and we
do not purport to express any opinion herein concerning any law other than the
laws of the State of Louisiana. We are not opining as to any securities laws,
blue-sky laws, or laws of the United States of America. To the extent, if any,
that the laws of any jurisdiction other than the State of Louisiana may be
applicable to any of the transactions or documents referred to herein, we
express no opinion with respect to any such laws or their effect on any of the
transactions or documents.
2
(2) Our opinions are limited to the specific issues addressed and are
limited in all respects to laws and facts existing on the date of this letter.
We undertake no responsibility to advise you of any changes in the law or the
facts after the date hereof that would alter the scope or substance of the
opinions expressed herein.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement.
Very truly yours,
/s/ McGlinchey Stafford Lang
McGLINCHEY STAFFORD LANG
A Professional Limited Liability Company
3
EXHIBIT 12
<TABLE>
<CAPTION>
PRIDE PETROLEUM SERVICES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Historical:
Net earnings from continuing
operations before provision for
income taxes..................... $ 7,591 $ 5,718 $ (1,359) $ 3,319 $ 8,134 $ 5,006 $ 16,967
Add:
Portion of rents representative
of the interest factor.......... 149 415 595 688 812 609 632
Interest on indebtedness......... 84 14 3 10 207 170 4,614
Amortization of deferred
financing costs................ -- -- -- -- -- -- 75
--------- --------- --------- --------- --------- --------- ---------
Earnings as adjusted........ $ 7,824 $ 6,147 $ (761) $ 4,017 $ 9,153 $ 5,785 $ 22,288
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Fixed charges:
Portion of rents representative of
the interest factor.............. $ 149 $ 415 $ 595 $ 688 $ 812 $ 609 $ 632
Interest on indebtedness........... 84 14 3 10 207 170 4,689
Amortization of deferred financing
costs............................ -- -- -- -- -- -- 75
Capitalized interest............... -- -- -- -- 458 219 15
--------- --------- --------- --------- --------- --------- ---------
Fixed charges............... $ 233 $ 429 $ 598 $ 698 $ 1,477 $ 998 $ 5,411
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges... 33.6 14.3 (1.3) 5.8 6.2 5.8 4.1
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma(1):
Earnings as adjusted............... $ 9,153 $ 5,785 $ 22,288
--------- --------- ---------
--------- --------- ---------
Fixed charges -- historical........ $ 1,477 $ 998 $ 5,411
Pro forma adjustments --
Annual interest requirements of
the Convertible Subordinated
Debentures(2).................. 4,200 3,150 3,150
Annual amortization of deferred
financing costs(3)............. 260 195 195
Reduction of annual interest
requirement.................... (665) (389) (638)
--------- --------- ---------
Pro forma fixed charges..... $ 5,272 $ 3,954 $ 8,118
--------- --------- ---------
--------- --------- ---------
Pro forma ratio of earnings to fixed
charges............................ 1.7 1.5 2.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------
(1) The pro forma computations give effect to the sale of the Debentures
offered hereby.
(2) Based on an assumed interest rate of 6% per annum.
(3) Includes amortization of underwriters' discount ($2,100,000) and estimated
offering expenses ($500,000) over the ten-year term of the Debentures.
EXHIBIT 15.1
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Pride Petroleum Services, Inc.
Registration Statement on Form S-3
We are aware that our reports dated May 5, August 4 and November 3, 1995,
on our review of interim financial information of Pride Petroleum Services, Inc.
for the periods ended March 31, 1995 and 1994, June 30, 1995 and 1994 and
September 30, 1995 and 1994 and included in the Company's quarterly reports on
Form 10-Q for the quarters then ended are incorporated by reference in this
registration statement on Form S-3. Pursuant to Rule 436(c) under the Securities
Act of 1933, this report should not be considered a part of the registration
statement prepared or certified by us within the meaning of Sections 7 and 11 of
that Act.
COOPERS & LYBRAND L.L.P.
Houston, Texas
January 19, 1996
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 of
our report dated February 20, 1995, on our audits of the financial statements
and the related financial statement schedule of Pride Petroleum Services, Inc.
We also consent to the reference to our firm under the caption "Independent
Public Accountants."
COOPERS & LYBRAND L.L.P.
Houston, Texas
January 19, 1995
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-3 of our report dated May 19, 1995, on our audits of the
consolidated financial statements of X-Pert Enterprises, Inc. as of February
28, 1995 and March 31, 1994, and for the eleven months and year then ended. We
also consent to the reference to our firm under the caption "Independent
Public Accountants."
JOHNSON, MILLER & CO.
Hobbs, New Mexico
January 19, 1996
