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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER: 0-16961
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PRIDE PETROLEUM SERVICES, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 76-0069030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 CITY WEST BLVD., SUITE 400
HOUSTON, TEXAS 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 789-1400
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 27, 1997, based on the closing price on the Nasdaq
National Market on such date was $727,526,284. (The officers and directors of
the registrant are considered affiliates for the purposes of this calculation.)
The number of shares of the registrant's common stock outstanding on March
27, 1997 was 41,925,137.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held in May 1997 are incorporated by reference into Part
III of this report.
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TABLE OF CONTENTS
PART I
PAGE
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Forward-Looking Statements............................................... 1
Item 1. Business....................................................... 1
Item 2. Property....................................................... 10
Item 3. Legal Proceedings.............................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Executive Officers of the Registrant..................................... 14
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters....................................................... 15
Item 6. Selected Financial Data........................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 17
Item 8. Financial Statements and Supplementary Data.................... 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 46
PART III
Item 10. Directors and Executive Officers of the Registrant............. 46
Item 11. Executive Compensation......................................... 46
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 46
Item 13. Certain Relationships and Related Transactions................. 46
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K...................................................... 46
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes certain statements that may be
deemed to be "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
statements, other than statements of historical facts, included in this Annual
Report on Form 10-K that address activities, events or developments that the
Company expects, projects, believes or anticipates will or may occur in the
future, including such matters as future operating results of Forasol, future
capital expenditures and investments in the acquisition and refurbishment of
rigs (including the amount and nature thereof), repayment of debt, expansion and
other development trends of the contract drilling industry, business strategies,
expansion and growth of operations and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by management of the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, including those
discussed herein, general economic and business conditions, prices of crude oil
and natural gas, foreign exchange and currency fluctuations, the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company, changes in laws or regulations and other factors, many of which are
beyond the control of the Company. Prospective investors are cautioned that any
such statements are not guarantees of future performance and that actual results
or developments may differ materially from those projected in the
forward-looking statements.
PART I
ITEM 1. BUSINESS
UNLESS THE CONTEXT INDICATES OTHERWISE, REFERENCES IN THIS ANNUAL REPORT ON
FORM 10-K TO THE "COMPANY" OR "PRIDE" ARE TO PRIDE PETROLEUM SERVICES, INC.
AND ITS SUBSIDIARIES. THE FOLLOWING DESCRIPTION OF THE BUSINESS AND PROPERTIES
OF THE COMPANY GIVES EFFECT TO THE DIVESTITURE OF THE COMPANY'S DOMESTIC
LAND-BASED WELL SERVICING OPERATIONS IN FEBRUARY 1997 AND THE ACQUISITION OF THE
OPERATING SUBSIDIARIES OF FORASOL-FORAMER N.V. (COLLECTIVELY, "FORASOL") IN
MARCH 1997. FORASOL PROVIDES OFFSHORE AND ONSHORE DRILLING, WORKOVER AND
ENGINEERING SERVICES PRIMARILY IN LATIN AMERICA, AFRICA AND THE MIDDLE EAST.
GENERAL
The Company is a leading domestic and international provider of contract
drilling and related services, operating both on land and offshore. In recent
years, the Company has focused its growth strategy on the higher margin offshore
and international drilling and workover markets. Consistent with this strategy,
the Company acquired Quitral-Co S.A.I.C. ("Quitral-Co"), the largest drilling
and workover contractor in Argentina, in April 1996, and Forasol in March 1997,
and divested its domestic land-based well servicing operations in February 1997.
These transactions transformed the Company into one of the largest and most
diversified drilling contractors in the world. The Company operates a global
fleet of 279 rigs, including two semisubmersible rigs, seven tender-assisted
rigs, three jackup rigs, five barge rigs, one swamp barge rig, 23 offshore
platform rigs, 74 land-based rigs and 164 land-based workover rigs. The
significant diversity of the Company's rig fleet enables the Company to provide
a broad range of services and to take advantage of market upturns while reducing
its exposure to sharp downturns in any particular market sector or geographic
region. In June 1997, the Company expects to add 12 mat-supported jackup
drilling rigs and the hull of an additional jackup drilling rig to its offshore
fleet in the Gulf of Mexico. See "-- Pending Rig Purchase."
Internationally, the Company has established leading market positions in
several operating regions. In Argentina, the Company operates a land-based fleet
of 36 drilling rigs and 109 workover rigs. In Venezuela, the Company operates
one tender-assisted rig, five barge rigs, three jackup rigs, 12 land-based
drilling rigs and 33 land-based workover
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rigs. In Colombia, the Company operates 19 land-based rigs, including 13
drilling rigs and six workover rigs. In the western and northern regions of
Africa and in the Middle East, the Company operates two semisubmersible rigs,
five tender-assisted rigs, one swamp barge rig and seven land-based drilling and
workover rigs.
In the Gulf of Mexico, the Company operates a fleet of 23 self-erecting
platform rigs, making it the largest contractor of such offshore platform rigs
in this market with approximately 45% of available capacity and a fleet
approximately twice as large as that of its next largest competitor. See also
"-- Pending Rig Purchase."
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.
OPERATIONS
LATIN AMERICA
The Company has significant Latin American operations. Through a series of
acquisitions and the deployment of underutilized domestic assets, the Company
now operates 145 land-based rigs in Argentina; one tender-assisted rig, five
barge rigs, three jackup rigs and 45 land-based rigs in Venezuela; 19 land-based
rigs in Colombia and one land-based drilling rig in Ecuador. The Company
continues to review opportunities to expand in these markets.
ARGENTINA. In Argentina, the Company currently operates 145 land-based
rigs, which the Company believes represent approximately 53% of rigs in the
Argentine market. Of these rigs, 36 are drilling rigs and 109 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 oil fields to private operators and the privatization of the
state-owned oil company, the predecessor of YPF Sociedad Anonima ("YPF").
These improved conditions have resulted in additional demand for rig services.
Argentine rig operations are generally conducted in remote regions of the
country and require substantial fixed infrastructure and operating support
costs. The Company believes that its established infrastructure and scale of
operations provide it with a competitive advantage in this market.
VENEZUELA. The Company's land-based fleet in Venezuela currently consists
of 45 rigs, of which 12 are drilling rigs and 33 are workover 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 created a new
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mechanism for private sector involvement in the oil and gas industry in that
country through production sharing contracts. As of December 1996, eight of
Venezuela's largest undeveloped properties had been awarded to multinational oil
operators for development through such contracts, and the Venezuelan government
has recently identified 20 additional properties for development.
The Company operates three jackup rigs, five barge rigs and a
tender-assisted rig on Lake Maracaibo, Venezuela. Two of the jackup rigs that
the Company operates under contracts expiring in 1999 are owned by Maraven S.A.
The other jackup rig is owned by the Company and operates under a contract
expiring in 1998. In 1995, the Company placed two drilling/workover barge rigs
into service on Lake Maracaibo that are working under ten-year contracts for
Lagoven, S.A. Through a joint venture in which the Company owns a 62.5%
interest, the Company operates two additional barge rigs under contracts
expiring at the end of May 1997, at which time the customer has a buyout option
for nominal consideration. The Company operates the remaining barge rig and the
tender-assisted rig under management contracts with Maraven S.A. that expire in
December 1997.
COLOMBIA. The Company currently operates 13 drilling rigs and six workover
rigs in Colombia. The Colombian government has recently enacted policies to
encourage oil and gas exploration and production activities and awarded
additional properties for development to major international oil operators under
production sharing contracts. The Company believes it is well positioned to
capitalize on these opportunities in Colombia.
AFRICA AND THE MIDDLE EAST
OFFSHORE. The Company's semisubmersible rig NYMPHEA is currently drilling
offshore West Africa for Chevron Corp. ("Chevron"). Upon completion of the
Chevron contract, the NYMPHEA will be upgraded at an estimated cost of
approximately $6 million, after which the rig will be mobilized to Brazil in
June 1997 to work under a three-year contract with a one-year renewal option
with Petrobras to drill high-pressure, high-temperature wells. The Company's
semisubmersible rig SOUTH SEAS DRILLER, which was recently upgraded, is
currently operating in Nigeria.
The Company operates five tender-assisted rigs in Africa and the Middle
East, four of which are currently operating in West Africa, a highly
consolidated market with only three competitors operating seven tenders, all of
which are currently contracted. The Company operates four of its seven
tender-assisted rigs in this market. The ALLIGATOR and BARRACUDA are currently
contracted through the end of 1997, with two six-months options. Through a joint
venture, the Company owns a 12.5% interest in the self-erecting tender AL BARAKA
I, which was constructed for $56 million. In addition to its ownership interest,
the Company also manages the rig. The CORMORANT is currently under contract
through October 1997, with a six-month option. The remaining tender-assisted
rig, the ILE DE LA MARTINIQUE, is currently stacked in the United Arab Emirates.
The Company operates one swamp barge rig, the BINTANG KALIMANTAN, in Nigeria.
This rig is currently contracted through April 1997, with a 12-month option.
LAND-BASED. The Company operates six land-based drilling rigs and one
land-based workover rig in Algeria, Libya and Oman, all of which were acquired
in the Forasol transaction.
GULF OF MEXICO
In June 1994, the Company commenced operations in the Gulf of Mexico
through the acquisition of the largest fleet of offshore self-erecting platform
workover rigs in that market. The Company has made substantial capital
improvements in this fleet and believes its fleet of 23 platform rigs is one of
the most technologically advanced fleets in the industry, which the Company
believes has led to higher day rates and increased utilization of these rigs.
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OTHER
The Company operates one tender-assisted rig in Southeast Asia, two
land-based drilling rigs in Pakistan, and three land-based drilling rigs and
four workover rigs in Europe. In addition, the Company has two rigs in Russia,
both of which are currently stacked.
PENDING RIG PURCHASE
In February 1997, the Company agreed to purchase 12 mat-supported jackup
drilling rigs and the hull of an additional jackup drilling rigs from Noble
Drilling Corporation and certain subsidiaries (collectively, "Noble") for $265
million in cash. Nine of the rigs are currently operating in the Gulf of Mexico,
one rig is operating offshore West Africa, one is undergoing refurbishment and
two (including the rig hull) are stacked awaiting refurbishment. The Company
expects to spend at least $20 million to upgrade and complete the two rigs
awaiting refurbishment. For the year ended December 31, 1996, the 10 rigs that
were operating generated revenues of approximately $68.7 million, at an average
operating rate of approximately $20,850 per rig per day. Recent high demand for
these types of rigs, which typically work under well-to-well contracts, has
resulted in a significant upward trend in day rates, with the average contracted
rate exceeding $28,000 per day in March 1997.
Purchase of these rigs by the Company is subject to certain conditions,
including expiration or early termination of applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act and completion by the Company
of satisfactory financing arrangements. The closing of the transaction is
expected to occur in early June 1997. The Company has placed in escrow a deposit
of $20 million, which Noble has the right to retain if the Company fails to
secure adequate financing or is otherwise unable to close by June 30, 1997.
SERVICES PROVIDED
DRILLING SERVICES
The Company provides contract drilling services to oil and gas exploration
and production companies through the use of mobile offshore and land-based
drilling rigs. Generally, land-based rigs and offshore platform rigs operate
with crews of six to 17 persons while semisubmersible rigs, tender-assisted
rigs, jackup rigs and barge rigs operate with crews of 15 to 25 persons. The
Company provides the rig and drilling crew and is responsible for the payment of
operating and maintenance expenses. Mobilization expenses are generally paid by
the customer.
MAINTENANCE AND WORKOVER SERVICES
Maintenance services are required on producing oil and natural gas wells to
ensure efficient, continuous operation. These services consist of mechanical
repairs necessary to maintain production from the well, such as repairing parted
sucker rods, replacing defective downhole pumps in an oil well or replacing
defective tubing in a gas well. The Company provides the rigs, equipment and
crews for these maintenance services, which are performed on both oil and gas
wells but which are more often required on oil wells. Many of the Company's rigs
also have pumps and tanks that can be used for circulating fluids into and out
of the well. Typically, maintenance jobs are performed on a series of wells in
geographic proximity to each other, take less than 48 hours per well to complete
and 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.
In addition to 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
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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 from a few days to several weeks.
ENGINEERING SERVICES
The Company believes that the engineering and design expertise acquired in
the Forasol transaction will become important factors in the growth and success
of its business. In Paris, the Company employs a technical staff dedicated to
industry research and development and to designing specialized drilling
equipment to fill specific customer requirements. The engineering staff has
designed and managed the fabrication of seven of the rigs in the offshore rig
fleet and a majority of the land-based rigs operated by Forasol. While few new
rigs have been built in the offshore industry over the last five years, this
staff has supervised the construction of one new tender-assisted rig and
designed and managed the construction of two Lake Maracaibo barge rigs, in
addition to making modifications to eight other offshore rigs. Forasol's
engineering staff is expected to become a strong complement to the Company's
turnkey and project management efforts. As a result of the Forasol acquisition,
the Company also operates a subsidiary dedicated to reservoir drainage analysis,
well engineering and project management for smaller oil fields, which enhances
the Company's contract drilling services.
COMPETITION
Competition in the international markets in which the Company operates is
generally limited to companies ranging 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 strong
market positions in the Gulf of Mexico, northern and western Africa, Argentina,
Venezuela and Colombia, and believes it is well positioned in the Middle East.
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 to maintain optimal production levels. The
market for offshore platform workover rig services is highly competitive, with
the Company's two most significant competitors having an aggregate of
approximately 19 rigs compared to 23 rigs for the Company.
In periods of low rig utilization, drilling contracts are generally awarded
on a competitive bid basis and, while an operator may consider quality of
service and equipment, intense price competition is the primary factor in
determining which contractor, among those with suitable rigs, is awarded a job.
Certain of the Company's competitors have greater financial resources than the
Company, which may enable them to better withstand periods of low utilization,
to compete more effectively on the basis of price, to build new rigs or to
acquire existing rigs.
CUSTOMERS
In international markets, the Company works for government-owned oil
companies, large multinational oil companies and locally owned independent
operators. During 1996, approximately 40% of the revenues from the operations
conducted in Argentina by the Company was derived from YPF, the successor to the
operations of the former state-owned oil company. Services provided to YPF
accounted for approximately 16% of the Company's consolidated revenues for 1996.
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. Forasol derived
16%, 30% and 36% of its consolidated revenues during 1996, 1995 and 1994,
respectively, from Elf Aquitaine Group. During the
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year ended December 31, 1996, an additional 15%, 14%, 14% and 10% of Forasol's
consolidated revenues were derived from Maraven S.A., Chevron, Shell Oil Company
and Total, S.A., respectively. The Company's U.S. customers are predominantly
major integrated and large independent operators. One customer, Shell Oil
Company, accounted for approximately 22% of revenues from domestic offshore
operations during 1996.
CONTRACTS
The Company's drilling contracts are awarded through competitive bidding or
on a negotiated basis. In periods of low rig utilization, contracts are usually
awarded through competitive bidding, but during periods of high drilling
activity, contracts are usually awarded on a negotiated basis. The contract
terms and rates vary depending on competitive conditions, the geographical area,
the geological formation to be drilled, the equipment and services to be
supplied, the on-site drilling conditions and the anticipated duration of the
work to be performed.
Oil and gas well drilling contracts are carried out on either a dayrate,
footage or turnkey basis. Under dayrate contracts, the Company charges the
customer a fixed charge per day regardless of the number of days needed to drill
the well. In addition, dayrate contracts usually provide for a reduced day rate
(or lump sum amount) for mobilizing the rig to the well location and for
assembling and dismantling the rig. Under dayrate contracts, the Company
ordinarily bears no part of the costs arising from down-hole risks (such as time
delays for various reasons, including a stuck or broken drill string or
blowouts). Most of the Company's contracts are on a dayrate basis. Other
contracts provide for payment on a footage basis, whereby the Company is paid a
fixed amount for each foot drilled regardless of the time required or the
problems encountered in drilling the well. The Company may also enter into
turnkey contracts, whereby it agrees to drill a well to a specific depth for a
fixed price and to bear some of the well equipment costs. Compared to dayrate
contracts, footage and turnkey contracts involve a higher degree of risk to the
Company and, accordingly, normally provide greater profit potential.
In international markets, contracts generally provide for longer terms than
contracts in domestic offshore markets. 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. There can be no assurances, however, 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.
Since January 1992, currency exchange transactions in Argentina have been
governed by the country's Convertibility Law. The Convertibility Law was adopted
as the primary fiscal policy of that country's economic reform program and has
resulted in a stable currency since its implementation. The Convertibility Law
requires the Argentine Central Bank to maintain foreign reserves equivalent to
the amount of outstanding domestic currency at a rate of one U.S. dollar to each
Argentine peso issued. The law prevents the Argentine Central Bank from printing
new money to finance the country's treasury. The Company believes the law
provides fiscal and monetary discipline and has served to control inflation by
limiting the government's ability to increase the amount of domestic currency in
the economy. The Convertibility Law also requires the Argentine Central Bank to
sell U.S. dollars to any party who presents Argentine pesos for exchange.
Accordingly, the Company has not been subjected to any significant currency
exchange risks with respect to its Argentine operations and does not contemplate
such risks so long as the Convertibility Law is maintained. Additionally,
substantially all of the Company's contracts in Argentina are denominated in
U.S. dollars.
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In Venezuela, the government has from time to time imposed exchange control
policies and established arbitrary exchange rates for its currency relative to
the U.S. dollar. A deterioration in economic conditions in Venezuela resulted in
significant devaluation of the Venezuelan bolivar during the first half of 1994,
resulting in currency translation losses for the Company during that period. In
December 1995, the Venezuelan government further devalued the bolivar. This
devaluation did not result in the recognition of any material currency
translation gain or loss by the Company. In April 1996, the Venezuelan
government removed exchange control restrictions with respect to the bolivar and
effectively allowed the bolivar to float relative to the U.S. dollar. As a
result, the value of the Venezuelan bolivar has further declined relative to the
U.S. dollar, but the Company has not experienced any material currency
translation gains or losses. At present, the Company has structured its
contracts in Venezuela so that the amount of revenues denominated in local
currency does not exceed its expense requirement in bolivars. Such contract
terms allow the Company to limit its exposure to potential currency losses in
certain circumstances. The Company continues to monitor Venezuelan economic
conditions and intends to take such measures as may be practicable to limit its
exposure to currency translation losses in future periods resulting from
fluctuations in the value of the Venezuelan bolivar relative to the U.S. dollar.
Currently, foreign exchange in Colombia is carried out on a free-market
basis. There can be no assurances, however, that the local monetary authorities
in that country will not implement exchange controls in the future. To date,
contracts for the Company's operations in Russia have provided for payment in
U.S. dollars.
The Company's contracts with Lagoven for the operation of the two
drilling/workover barge rigs on Lake Maracaibo, Venezuela provide for a term
that 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.
SEASONALITY
In general, the Company's business activities are not significantly
affected by seasonal fluctuations. The Company's rigs are located in
geographical areas which are not subject to severe weather that would halt
operations for prolonged periods.
EMPLOYEES
The Company currently employs approximately 2,000 salaried employees and
approximately 6,400 hourly paid employees. Approximately 800 of the employees
are located in the United States and 7,600 are located abroad. Hourly rig crew
members constitute the vast majority of employees. 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 13 of the Notes to Consolidated Financial Statements included in Part II,
Item 8, of this report.
OTHER CONSIDERATIONS
INDUSTRY CONDITIONS
The Company's current business and operations are substantially dependent
upon conditions in the oil and gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. The demand for contract
drilling 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
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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. There can
be no assurance that current levels of exploration and production expenditures
of oil and gas companies will be maintained or that demand for the Company's
services will reflect the level of such activities.
INTERNATIONAL OPERATIONS
A significant portion of the Company's revenues are attributable to
international operations. Risks associated with operating in international
markets include foreign exchange restrictions and currency fluctuations, foreign
taxation, political instability, foreign and domestic monetary and tax policies,
expropriation, nationalization, nullification, modification or renegotiation of
contracts, war and civil disturbances and other risks that may limit or disrupt
markets. Additionally, the ability of the Company to compete in international
contract 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. Furthermore, the
Company's foreign subsidiaries may face governmentally imposed restrictions from
time to time on their ability to transfer funds to the Company. No predictions
can be made as to what foreign governmental regulations may be applicable to the
Company's operations in the future.
One of the foreign subsidiaries of the Company acquired in the Forasol
transaction is currently engaged in drilling operations in Libya, a country
subject to sanctions and embargoes imposed by the U.S. Government. Although
these sanctions and embargoes do not prohibit such subsidiary from completing
its existing contracts or from entering into new contracts to provide drilling
services in Libya, they do prohibit the Company and its domestic subsidiaries,
as well as employees of the Company's foreign subsidiaries who are U.S.
citizens, from participating in or approving any aspect of the business
activities in Libya. The Company is unable to predict whether such constraints
on its ability to have U.S. persons provide managerial oversight and supervision
will adversely affect the financial or operating performance of such business
activities.
OPERATING RISKS AND INSURANCE
The Company's operations are subject to the many hazards inherent in the
oilfield services industry. Contract drilling and well servicing require the use
of heavy equipment and exposure to hazardous conditions, which may subject the
Company to liability claims by employees, customers and third parties. These
hazards can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company's offshore fleet is 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 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.
RISKS OF ACQUISITION STRATEGY
The Company has grown through the acquisition of other oilfield services
businesses and assets. There can be no assurance, however, that the Company will
be able to continue to identify attractive acquisition opportunities, obtain
financing for acquisitions on satisfactory terms or successfully acquire
identified targets. The ability of the Company to react to acquisition
opportunities may be affected by the limitations
8
<PAGE>
on its financing flexibility imposed by certain of its current financing
agreements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" in Part II, Item
7, of this report. Moreover, there can be no assurance that competition for
acquisition opportunities in the industry will not escalate, thereby increasing
the cost to the Company of making further acquisitions or causing the Company to
refrain from making further acquisitions. In addition, no assurance can be given
that the Company will be successful in integrating acquired businesses,
including Forasol, into its existing operations. Such integration may result in
unforeseen operational difficulties or require a disproportionate amount of
management's attention. The Company's failure to achieve consolidation savings,
to incorporate the acquired businesses and assets into its existing operations
successfully or to minimize any unforeseen operational difficulties could have a
material adverse effect on the Company.
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 governmental
regulations that may relate directly or indirectly to the contract drilling and
well servicing industries. 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 nonhazardous 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 contract drilling opportunities.
9
<PAGE>
ITEM 2. PROPERTY
The Company's property consists primarily of drilling rigs, well servicing
rigs and ancillary equipment, a majority of which are owned by the Company.
Certain rigs are operated by the Company pursuant to joint venture arrangements
or operating agreements. The Company owns and operates transport and winch
trucks; plugging and cementing units; pumps, generators, power swivels, coiled
tubing units and similar ancillary equipment. The Company owns approximately 710
vehicles and leases approximately 60 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 used for lifting heavy equipment onto the platforms.
The corporate office in Houston, Texas occupies approximately 20,000 square
feet of leased space under a lease that expires in April 1998. 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 two operating bases. In France, the Company leases
approximately 18,000 square feet of office space. 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.
10
<PAGE>
OFFSHORE RIGS
The following table sets forth, as of March 21, 1997, certain information
concerning the Company's offshore rig fleet:
OFFSHORE RIGS
<TABLE>
<CAPTION>
YEAR WATER DRILLING
BUILT OR DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN REBUILT RATING RATING LOCATION STATUS
- --------------------------------------------------- -------- ------ -------- --------------- -----------
(FEET) (FEET)
<S> <C> <C> <C> <C> <C> <C>
SEMISUBMERSIBLE RIGS - 2
Nymphea Third generation 1987 1,500 25,000 Cabinda Working
South Seas Driller Second generation 1977 1,000 20,000 Nigeria Contracted
TENDER-ASSISTED RIGS - 7
Alligator Self-erecting barge 1992 330 20,000 Angola Working
Barracuda Self-erecting barge 1992 330 20,000 Angola Working
Cormorant Self-erecting converted 1996 300 20,000 Angola Working
ship
Al Baraka I Self-erecting barge 1994 650 20,000 Cabinda Contracted
Ile de Sein Self-erecting barge 1990 450 16,000 Malaysia Stacked
Ile de la Martinique Converted ship 1995 400 16,000 UAE Stacked
GP-18 Tender barge 1985 150 20,000 Venezuela Working
JACKUP RIGS - 3
Ile du Levant Independent leg 1991 270 20,000 Venezuela Working
cantilever
GP-19 Independent leg 1987 150 20,000 Venezuela Working
cantilever
GP-20 Independent leg 1987 200 20,000 Venezuela Working
cantilever
BARGE RIGS - 6
Pride I Drilling/Workover 1995 150 20,000 Venezuela Working
Pride II Drilling/Workover 1995 150 20,000 Venezuela Working
Rig 50 Maracaibo type barge 1992 150 20,000 Venezuela Working
Rig 51 Maracaibo type barge 1992 150 20,000 Venezuela Working
GP-10 Gusto 1967 120 20,000 Venezuela Working
Bintang Kalimantan Posted swamp barge 1995 NA 16,000 Nigeria Working
PLATFORM RIGS - 23
Rig 11 Light workover 1993 NA 10,000 Gulf of Mexico Available
Rig 14 Light workover 1994 NA 10,000 Gulf of Mexico Working
Rig 15 Light workover 1994 NA 10,000 Gulf of Mexico Available
Rig 30 Standard workover 1986 NA 15,000 Gulf of Mexico Stacked
Rig 80 Standard workover 1987 NA 15,000 Gulf of Mexico Stacked
Rig 100 Standard workover 1990 NA 15,000 Gulf of Mexico Available
Rig 110 Standard workover 1990 NA 15,000 Gulf of Mexico Working
Rig 130 Standard workover 1991 NA 15,000 Gulf of Mexico Available
Rig 170 Standard workover 1991 NA 15,000 Gulf of Mexico Working
Rig 200 Improved workover 1993 NA 15,000 Gulf of Mexico Available
Rig 210 Improved workover 1996 NA 15,000 Gulf of Mexico Working
Rig 220 Improved workover 1995 NA 15,000 Gulf of Mexico Working
Rig 650E Improved electric 1994 NA 15,000 Gulf of Mexico Working
workover
Rig 651E Improved electric 1995 NA 15,000 Gulf of Mexico Contracted
workover
Rig 653E Improved electric 1995 NA 15,000 Gulf of Mexico Contracted
workover
Rig 750E Heavy electric workover 1992 NA 16,500 Gulf of Mexico Working
Rig 751E Heavy electric workover 1995 NA 16,500 Gulf of Mexico Working
Rig 951 Heavy mechanical workover 1995 NA 18,000 Gulf of Mexico Working
Rig 952 Heavy mechanical workover 1995 NA 18,000 Gulf of Mexico Working
Rig 1001E Heavy electric workover 1995 NA 20,000 Gulf of Mexico Working
Rig 1002E Heavy electric workover 1996 NA 20,000 Gulf of Mexico Working
Rig 1003E Heavy electric workover 1996 NA 20,000 Gulf of Mexico Working
Rig 1501E Heavy electric workover 1996 NA 25,000 Gulf of Mexico Working
</TABLE>
11
<PAGE>
SEMISUBMERSIBLE RIGS. The Company's two semisubmersible rigs are floating
platforms that, by means of a water ballasting system, can be submerged to a
predetermined depth so that a substantial portion of the lower hulls, or
pontoons, are below the water surface during drilling operations. The rig is
"semi-submerged," remaining afloat in a position where the lower hull is about
60 to 80 feet below the water line and the upper deck protrudes well above the
surface. This type of rig maintains its position over the well through the use
of an anchoring system or computer-controlled thruster system.
TENDER-ASSISTED RIGS. The Company's seven tender-assisted rigs, four of
which are equipped with top-drive drilling systems, are generally
non-self-propelled barges, which are moored alongside a platform and contain
crew quarters, mud pits, mud pumps and power generation systems. The only
equipment on the platform is therefore the derrick equipment set consisting of
the substructure, drillfloor, derrick and drawworks. As a result,
tender-assisted rigs are less hazardous and allow smaller, less costly platforms
to be used for development projects. Self-erecting tenders carry their own
derrick equipment set and have a crane capable of erecting the derrick on the
platform, thereby eliminating the cost associated with a separate derrick barge
and related equipment. Older tenders frequently require the assistance of a
derrick barge to erect the derrick equipment set. Four of the Company's tenders
are self-erecting converted barges. One of the Company's tender-assisted rigs,
the CORMORANT, is a self-erecting converted ship.
JACKUP RIGS. The three jackup rigs currently operated by the Company are
mobile, self-elevating drilling platforms equipped with legs that can be lowered
to the ocean or lake floor until a foundation is established to support the
drilling platform. The rig legs may have a lower hull or mat attached to the
bottom to provide a more stable foundation in soft bottom areas. Independent leg
rigs are better suited for harsher or uneven seabed conditions. Jackup rigs are
generally subject to a maximum water depth of approximately 350 to 400 feet,
while some jackup rigs may drill in water depths as shallow as ten feet. The
water depth limit of a particular rig is determined by the length of the rig's
legs and the operating environment. Moving a rig from one drill site to another
involves lowering the hull down into the water until it is afloat and then
jacking up its legs with the hull floating on the surface of the water. The hull
is then towed to the new drilling site. A cantilever jackup has a feature that
allows the drilling platform to be extended out from the hull, allowing it to
perform drilling or workover operations over a pre-existing platform or
structure. Certain cantilever jackup rigs have "skid-off" capability, which
allows the derrick equipment to be skidded onto an adjacent platform, thereby
increasing the operational capacity of the rig. Slot type jackup rigs are
configured for drilling operations to take place through a slot in the hull.
Slot type rigs are usually used for exploratory drilling because their
configuration makes them difficult to position over existing platforms or
structures. Each of the Company's three jackup rigs is an independent leg rig
equipped with cantilevers, and one has skid-off capability.
BARGE RIGS. The Company operates five barge rigs in Lake Maracaibo,
Venezuela and one in Nigeria. Rigs operating in these regions are generally
barges that have been modified to work in a floating mode with a cantilever
feature and a mooring system that enables the rig to operate in waters up to 150
feet deep. In recent years, demand for barge rigs for drilling and workover
services in certain international markets, especially Venezuela, has increased.
PLATFORM RIGS. The Company's 23 platform rigs in the Gulf of Mexico
consist of well servicing equipment and machinery arranged in modular packages
that 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, providing the foundation upon which the platform rig is placed. One
of the Company's platform rigs is capable of operating at well depths of up to
25,000 feet. In addition to providing workover services offshore, the Company is
using its platform rigs to provide an increasing amount of drilling and
horizontal reentry services using portable top drives, enhanced pumps and solids
control equipment for drilling fluids.
12
<PAGE>
LAND-BASED RIGS
The following table sets forth, as of March 21, 1997, certain information
concerning the Company's land-based rig fleet:
LAND-BASED RIGS
COUNTRY TOTAL DRILLING WORKOVER
- ------------------------------------- ------ --------- ---------
LATIN AMERICA - 210
Argentina....................... 145 36 109
Venezuela....................... 45 12 33
Colombia........................ 19 13 6
Ecuador......................... 1 1 --
AFRICA/MIDDLE EAST - 7
Algeria......................... 3 3 --
Libya........................... 2 1 1
Oman............................ 2 2 --
OTHER - 11........................... 11 5 6
HELD FOR REDEPLOYMENT - 10
United States................... 10 1 9
------ -- ---
Total Land Rigs............ 238 74 164
====== == ===
A land-based drilling rig consists of engines, drawworks, a mast, pumps to
circulate the drilling fluid, blowout preventers, drill string and related
equipment. The engines power a rotary table that turns the drill string, causing
the drill bit to bore through the subsurface rock layers. Rock cuttings are
carried to the surface by the circulating drilling fluid. The intended well
depth and the drilling site conditions are the principal factors that determine
the size and type of rig most suitable for a particular drilling job.
A land-based well servicing rig consists of a mobile carrier, engine,
drawworks and derrick. The primary function of a well servicing rig is to act as
a hoist so that pipe, rods and down-hole equipment can be run into and out of a
well. All of the Company's well servicing rigs can be readily moved between well
sites and between geographic areas of operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely involved in litigation incidental to its business,
which often involves claims for significant monetary amounts, some of which
would not be covered by insurance. In the opinion of management, none of the
existing litigation will have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and descriptions set forth certain information as of
March 28, 1997 with respect to the executive officers of the Company. Officers
are elected annually by the Board of Directors and serve until their successors
are chosen or until their resignation or removal.
NAME AGE POSITION
- --------------------- ---- --------------------------------------------------
Ray H. Tolson........ 62 Chairman of the Board and Chief Executive Officer
Paul A. Bragg........ 41 President and Chief Operating Officer
James W. Allen....... 53 Senior Vice President -- Operations
Gerard Godde......... 54 Senior Vice President -- Forasol Operations
Earl W. McNiel....... 38 Vice President and Chief Financial Officer
Robert W. Randall.... 54 Vice President -- General Counsel and Secretary
John O' Leary........ 41 Vice President -- International Marketing
RAY H. TOLSON was elected Chairman of the Board in December 1993. He has
served as a director since August 1988 and Chief Executive Officer of the
Company and its predecessor since 1975. Mr. Tolson was President of the Company
from February 1975 to February 1997.
PAUL A. BRAGG has been President of the Company since February 1997. He
joined the Company in July 1993 as its Vice President and Chief Financial
Officer. From 1988 until he joined the Company, 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.
JAMES W. ALLEN joined the Company in January 1993 as its Vice
President -- International Operations (Latin America). In February 1996, he was
named Senior Vice President -- Operations. He became Senior Vice President of
Pride International Ltd. in May 1994. From 1988 through 1992, Mr. Allen was an
independent business consultant and managed private investments. From 1984 to
1988, he was Vice President Latin America for Energy Service Company, Inc. Mr.
Allen has 28 years of oilfield experience with several different companies.
GERARD GODDE was named Senior Vice President of the Company in March 1997
in connection with the Forasol transaction. Mr. Godde has served as Senior Vice
President and Chief Operating Officer of Forasol since April 1996 and Managing
Director of Forasol since 1987. Mr. Godde joined Forasol in 1968 and has been
involved with the management of its various offshore and land operations in
Africa, the Middle East and North America.
EARL W. MCNIEL has been Vice President and Chief Financial Officer of the
Company since February 1997. He joined the Company in September 1994 as its
Chief Accounting Officer. From 1990 to 1994, Mr. McNiel served as Chief
Financial Officer of several publicly owned waste management companies. From
1987 to 1990, he was employed by Energy Service Company, Inc. as Manager,
Finance.
ROBERT W. RANDALL has been Vice President and General Counsel of the
Company since May 1991. He was elected Secretary of the Company in 1993. Prior
to 1991, he was Senior Vice President, General Counsel and Secretary for Tejas
Gas Corporation, a natural gas transmission company.
JOHN O' LEARY was named Vice President -- International Marketing in March
1997 in connection with the Forasol transaction. Mr. O' Leary has been Manager,
Marketing and Business Development of Forasol since June 1993, with primary
responsibility for worldwide business development. Mr. O' Leary joined Forasol
S.A. in August 1985.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is listed on the Nasdaq National Market under
the symbol "PRDE." As of March 28, 1997, there were approximately 2,500
shareholders of record of the Common Stock. The following table sets forth the
range of high and low sales prices of the Common Stock on the Nasdaq National
Market for the periods shown:
PRICE
-------------------
HIGH LOW
-------- ---------
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...................... $ 14 3/8 $ 9 1/8
Second Quarter..................... 18 13 5/8
Third Quarter...................... 16 1/4 11 5/8
Fourth Quarter..................... 23 1/4 13 1/8
The Company has not paid any cash dividends on the Common Stock since
becoming a publicly held corporation in September 1988. The Company currently
has a policy of retaining all available earnings for the development and growth
of its business and does not anticipate paying dividends on the Common Stock at
any time in the foreseeable future. The ability of the Company to pay cash
dividends in the future is restricted by the Company's $100 million secured
credit facility. The desirability of paying such dividends could also be
materially affected by U.S. and foreign tax considerations.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial information as of December
31, 1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996, has been derived from the audited consolidated financial
statements of the Company included elsewhere herein. This information should be
read in conjunction with such consolidated financial statements and the notes
thereto. The selected consolidated financial information as of December 31,
1994, 1993 and 1992, and for each of the years in the two-year period ended
December 31, 1993, has been derived from audited consolidated financial
statements of the Company that are not included herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ 101,382 $ 127,099 $ 182,336 $ 263,599 $ 407,174
Operating costs............... 83,829 100,305 139,653 187,203 292,599
Depreciation and
amortization................ 5,649 6,407 9,550 16,657 29,065
Selling, general and
administrative.............. 14,076 17,572 25,105 32,418 45,368
--------- --------- --------- --------- ---------
Earnings (loss) from
operations.................. (2,172) 2,815 8,028 27,321 40,142
Other income (expense)........ 813 504 106 (4,898) (9,323)
--------- --------- --------- --------- ---------
Earnings (loss) before income
taxes....................... (1,359) 3,319 8,134 22,423 30,819
Income tax provision
(benefit)................... (517) (2,621) 1,920 7,064 8,091
--------- --------- --------- --------- ---------
Net earnings (loss)(1)........ $ (842) $ 5,940 $ 6,214 $ 15,359 $ 22,728
========= ========= ========= ========= =========
Net earnings (loss) per
share(1)
Primary................... $ (.05) $ .36 $ .30 $ .60 $ .81
========= ========= ========= ========= =========
Fully diluted............. $ (.05) $ .36 $ .30 $ .60 $ .75
========= ========= ========= ========= =========
Weighted average common shares
and equivalents outstanding
Primary................... 16,245 16,487 20,795 25,465 28,198
Fully diluted............. 16,245 16,487 20,765 25,840 34,719
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital............... $ 29,989 $ 21,758 $ 26,640 $ 31,302 $ 62,722
Property and equipment, net... 45,084 62,823 139,899 178,488 375,249
Total assets.................. 94,842 109,981 205,193 257,605 542,062
Long-term debt, net of current
portion..................... 3,648 200 42,096 61,136 106,508
Convertible subordinated
debentures.................. -- -- -- -- 80,500
Shareholders' equity.......... 61,774 69,126 111,385 131,239 201,797
</TABLE>
- ------------
(1) Net earnings for the year ended December 31, 1993 include $3,835,000 ($0.23
per share) cumulative effect of change in accounting for income taxes.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements as of December 31, 1996 and
1995, and for the years ended December 31, 1996, 1995 and 1994, included
elsewhere herein.
GENERAL
The Company's operations and future results have been and will
be significantly affected by a series of strategic transactions that have
transformed the Company from the second largest provider of land-based workover
and related well services in the U.S. into a diversified drilling contractor
operating both offshore and onshore in international markets and offshore in the
U.S. Gulf of Mexico. With the sale of its domestic land-based well servicing
operations in February 1997, the Company has ceased to provide rig services
onshore in the U.S. Nevertheless, as a result of its recent acquisition
activity, the Company expects to continue to experience revenue growth.
Domestic drilling and well servicing activity historically has had a
significant correlation with changes in oil and gas prices. International
drilling and well servicing activity is also affected by fluctuations in oil and
gas prices, but historically to a lesser extent than domestic activity.
International rig services contracts are typically for terms of one year or
more, while domestic contracts are typically for one well or multiple wells.
Accordingly, international rig services 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 its international and domestic offshore operations,
including the following:
o In June 1994, the Company acquired the largest fleet of platform
workover rigs, consisting of 22 units, in the Gulf of Mexico. Four
additional platform rigs have since been constructed and added to the
fleet, replacing three rigs that were retired.
o In January 1995, the Company commenced operating two drilling/workover
barge rigs on Lake Maracaibo, Venezuela. The barge rigs were
constructed during 1994 pursuant to ten-year operating contracts
entered into with Lagoven, S.A., a subsidiary of the Venezuelan
national oil company.
o In April 1996, the Company acquired Quitral-Co from Perez Companc S.A.
and other shareholders. Quitral-Co operated 23 drilling and 57
workover rigs in Argentina and seven drilling and 23 workover rigs in
Venezuela. Quitral-Co was combined with the Company's existing
land-based operations in those countries. The Company has further
expanded international operations by deploying 35 rigs from its former
U.S. land-based fleet primarily to Argentina and Venezuela.
o In October 1996, the Company acquired Ingeser de Colombia, S.A.
("Ingeser"), which operated seven drilling rigs and six workover
rigs in Colombia.
o In November 1996, the Company added three land-based drilling rigs and
support assets to its operations in Argentina through the acquisition
of the assets of another operator.
o In February 1997, the Company completed the divestiture of its
domestic land-based well servicing operations, which included 407
workover rigs operating in Texas, California, New Mexico and
Louisiana, to Dawson Production Services, Inc. for approximately $136
million in cash.
o In February 1997, the Company agreed to purchase 12 mat-supported
jackup drilling rigs and the hull of an additional jackup drilling rig
from Noble (the "Noble Rigs"). Nine of the rigs are currently
operating in the Gulf of Mexico, one rig is operating offshore West
Africa, one is undergoing refurbishment and two (including the rig
hull) are stacked awaiting refurbishment.
o In March 1997, the Company completed the Forasol acquisition, adding
two semisubmersible rigs, three jackup rigs, seven tender-assisted
rigs, four barge rigs and 29 land-based rigs operating in various
locations in Latin America, Europe, the Middle East, West Africa and
Asia.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial information
of the Company by operating segment for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1994 1995 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Domestic land......... $ 95,860 52.6% $ 113,115 42.9% $ 117,142 28.8%
Domestic offshore..... 23,441 12.9 49,595 18.8 57,450 14.1
International......... 63,035 34.5 100,889 38.3 232,582 57.1
---------- --------- ---------- --------- ---------- ---------
Total revenues... $ 182,336 100.0% $ 263,599 100.0% $ 407,174 100.0%
========== ========= ========== ========= ========== =========
Earnings from operations:
Domestic land......... $ 1,184 14.7% $ 7,906 28.9% $ 7,808 19.5%
Domestic offshore..... 3,304 41.2 6,785 24.9 6,983 17.4
International......... 3,540 44.1 12,630 46.2 25,351 63.1
---------- --------- ---------- --------- ---------- ---------
Total earnings
from
operations.... $ 8,028 100.0% $ 27,321 100.0% $ 40,142 100.0%
========== ========= ========== ========= ========== =========
</TABLE>
1996 COMPARED WITH 1995
REVENUES. Revenues for the year ended December 31, 1996 increased
$143,575,000, or 54%, as compared to the corresponding period in 1995. Of this
increase, $131,693,000 was a result of expansion of the Company's international
operations, primarily due to the acquisition of Quitral-Co in April 1996.
Revenues from domestic land operations increased $4,027,000, primarily as a
result of the inclusion of operating results of X-Pert Enterprises, Inc.
("X-Pert") (the operations of which were sold in February 1997) for twelve
months in 1996 as compared to only ten months in 1995. Revenues attributable to
domestic offshore operations increased $7,855,000, due primarily to an increased
number of the Company's offshore platform rigs working in 1996.
OPERATING COSTS. Operating costs for the year ended December 31, 1996
increased $105,396,000, or 56%, as compared to the corresponding period in 1995.
Of this increase, $93,974,000 was a result of expansion of the Company's
international operations and $3,827,000 was attributable to domestic land-based
operations, primarily due to the inclusion of the operating results of X-Pert
for the full period, which offset a $2,400,000 reduction of workers'
compensation expense recorded in the fourth quarter of 1996. Operating costs
related to domestic offshore operations increased $7,595,000, due to an
increased number of offshore platform rigs working, as discussed above, and a
related increase in mobilization costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 1996 increased $12,408,000, or 74%, as compared to the
corresponding period of 1995, primarily as a result of the Quitral-Co
acquisition and additional expansion of the Company's international and domestic
offshore asset bases.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1996 increased $12,950,000, or 40%, as
compared to the corresponding period in 1995, primarily due to the inclusion of
such costs for Quitral-Co. During the year ended December 31, 1996, the Company
incurred certain nonrecurring expenses in connection with consolidation of
acquired operations with its existing operations in Argentina and Venezuela. As
a percentage of revenues, total selling, general and administrative costs were
11% for 1996 as compared to 12% for 1995.
EARNINGS FROM OPERATIONS. Earnings from operations for the year ended
December 31, 1996 increased by $12,821,000, or 47%, as compared to the
corresponding period in 1995. Of this increase, $12,721,000 was attributable to
international expansion, including the Quitral-Co acquisition. Domestic offshore
utilization also improved, resulting in a $198,000 increase in earnings from
operations. Earnings from domestic land operations were essentially unchanged
between 1996 and 1995.
18
<PAGE>
OTHER INCOME (EXPENSE). Other income (expense) for the year ended December
31, 1996 included net gains from asset sales, foreign exchange transactions and
other sources. Other income (expense) for the corresponding 1995 period
consisted primarily of miscellaneous gains of $638,000 from asset sales,
insurance recoveries, foreign exchange transactions and other sources. Interest
income increased to $2,410,000 for the year ended December 31, 1996 from
$740,000 for the corresponding period in 1995 due to an increase in cash
available for investment. Interest expense for the year ended December 31, 1996
increased by $7,359,000 over the corresponding period in 1995, as a result of
interest accrued on the convertible subordinated debentures and borrowings
related to the Quitral-Co acquisition and other additions to property and
equipment. During the year ended December 31, 1996 and 1995, the Company
capitalized $1,915,000 and $250,000, respectively, of interest expense in
connection with construction projects.
INCOME TAX PROVISION. The Company's consolidated effective income tax rate
for the year ended December 31, 1996 was approximately 26%, as compared to
approximately 32% for the corresponding period in 1995. The decrease was
attributable to the increase in foreign income, which is taxed at a lower
statutory rate, and the reduction in U.S. income, which is taxed at a higher
statutory rate. The decrease was also due to recognition in 1996 of $2,200,000
of foreign net operating loss carryforwards, including net operating loss
carryforwards of acquired businesses. The Company had previously provided a
valuation allowance for certain foreign net operating loss carryforwards, due to
uncertainties regarding the Company's ability to realize such tax benefits.
1995 COMPARED WITH 1994
REVENUES. Revenues for the year ended December 31, 1995 increased
$81,263,000, or 45%, as compared to the year ended December 31, 1994. Of this
increase, $37,854,000 was attributable to the Company's international
operations. The Company experienced increased activity levels in Argentina,
Venezuela and Russia, due primarily to the utilization of additional assets
deployed in those areas. The Company's offshore operations, which were acquired
in mid-1994, accounted for $26,154,000 of the increase, as those operations were
included for a full year in 1995. Revenues from the Company's domestic
land-based operations increased $17,255,000, due primarily to the addition of
X-Pert in March 1995.
OPERATING COSTS. Operating costs for the year ended December 31, 1995
increased $47,550,000, or 34%, as compared to the year ended December 31, 1994.
Of this increase, $21,957,000 was attributable to the Company's international
operations, due to expansion of those operations, as discussed above,
$17,285,000 was attributable to a full year of operations for the Company's
offshore operations, and $8,308,000 was attributable to the Company's domestic
land-based operations. The Company's domestic land-based operations experienced
improved operating margins as a result of extensive cost-cutting efforts,
improved safety performance and reduced insurance costs (attributable to both
reduced rates and improved claims experience).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 1995 increased $7,107,000, or 74%, as compared to the year
ended December 31, 1994, primarily as a result of expansion of the Company's
domestic offshore and international asset base.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1995 increased $7,313,000, or 29%, as
compared to the year ended December 31, 1994, primarily as a result of the
inclusion of such costs related to acquired businesses. As a percentage of
revenues, total selling, general and administrative expenses declined to
approximately 12% in 1995 from approximately 14% in 1994.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the year ended December 31, 1995 of $27,321,000. Of this amount, $12,630,000
was generated from international operations, $6,785,000 was generated from
domestic offshore operations and $7,906,000 was generated from domestic
land-based operations. During 1994, international operations generated earnings
from operations of $3,540,000, domestic offshore operations generated earnings
from operations of $3,304,000, and domestic land-based operations generated
earnings from operations of $1,184,000.
19
<PAGE>
OTHER INCOME (EXPENSE). Other income (expense) for the year ended December
31, 1995 included miscellaneous gains of $638,000 from asset sales, other
insurance recoveries, foreign exchange transactions and other sources. Interest
income increased to $740,000 for the year ended December 31, 1995 from $618,000
in 1994 due to an increase in cash available for investment. Interest expense
for the year ended December 31, 1995 increased by $6,069,000 from 1994, as a
result of borrowings related to the project financing of the Company's two
drilling/workover barge rigs, acquisitions and other additions to property and
equipment.
INCOME TAX PROVISION. The Company's consolidated effective income tax rate
for the year ended December 31, 1995 increased to approximately 32% from
approximately 24% for the year ended December 31, 1994, primarily as a result of
the recognition in 1994 of current tax benefits from the utilization of
approximately $3,000,000 of foreign net operating loss carryforwards. The
Company recognized no such tax benefits from the utilization of foreign net
operating loss carryforwards in 1995.
FORASOL ACQUISITION
On March 10, 1997, the Company consummated the acquisition of Forasol for
aggregate consideration of $285,600,000, consisting of $113,200,000 in cash and
11,099,000 shares of Common Stock valued at $172,400,000. Forasol provides
drilling and workover services in more than 15 countries, including substantial
operations in Latin America and West Africa, and operates a diverse fleet of
offshore rigs, including two semisubmersible rigs, three jackup rigs, seven
tender-assisted rigs, four barge rigs and an international fleet of 29
land-based rigs.
The following table presents summary historical information and other data
for Forasol. The summary historical financial information should be read in
conjunction with the historical financial statements of Forasol included in
other documents filed by the Company with the Securities and Exchange Commission
under the Exchange Act.
YEAR ENDED DECEMBER
31,
----------------------
1995 1996
---------- ----------
(IN THOUSANDS)
Net revenues............................ $ 171,500 $ 199,471
Cost of operations...................... 127,491 161,897
---------- ----------
Gross margin....................... 44,009 37,574
Depreciation and amortization........... (20,264) (23,945)
Selling, general and administrative..... (17,660) (18,490)
Other income, net....................... 382 1,148
Interest expense, net................... (8,783) (7,738)
---------- ----------
Loss before minority interest and
income taxes..................... (2,316) (11,451)
Minority interest....................... (1,288) 825
Income taxes............................ (409) (354)
---------- ----------
Net loss........................... $ (4,013) $ (10,980)
========== ==========
Revenues for the year ended December 31, 1996 increased $27,971,000, or
16%, as compared to the corresponding period in 1995. This increase was
primarily attributable to a $15,781,000 increase in revenues from jackup rigs
and an $8,866,000 increase in revenues from tender-assisted rigs. The increase
in revenues from jackup rigs was due to the commencement of integrated services
contracts in Venezuela from land-based operations, which began in April 1996.
The increase in revenues from tender-assisted rigs was attributable to increased
utilization and the addition of two management contracts in Venezuela. Revenues
from land-based operations were $67,530,000 for 1996 compared to $67,383,000 for
1995, but such revenues for 1995 included an $8,200,000 early termination fee
relating to one of Forasol's ultra-heavy drilling rigs.
20
<PAGE>
The cost of operations for the year ended December 31, 1996 increased
$34,406,000, or 27%, as compared to the corresponding period in 1995. Operating
costs for the tender-assisted rigs, the semisubmersible rigs and the jackup rigs
increased by an aggregate of $17,437,000 as a result of increased utilization.
Although revenues from land-based operations were essentially unchanged in 1996,
an increase in activity resulted in increased operating expenses of $8,406,000.
This increase was primarily due to the Argentine land-based operations and to a
turnkey management contract completed in Algeria. Forasol also experienced
increased base costs in Venezuela due to the commencement of several management
contracts in that country.
During 1996, Forasol's two semisubmersible drilling rigs, the NYMPHEA and
the SOUTH SEAS DRILLER, worked an aggregate of 435 days at an average day rate
of $39,750. The SOUTH SEAS DRILLER recently began work on the first of two term
contracts that provide for a minimum of 285 days of work in 1997 and an
additional 155 days of work in 1998, exclusive of extending options, at an
average day rate of approximately $61,200; separately, the NYMPHEA is scheduled
to commence operations in June 1997 under a four-year contract at an initial day
rate of $79,370. Based on these new contracts, the SOUTH SEAS DRILLER and the
NYMPHEA, on an annualized basis, are expected to generate approximately $34
million of incremental revenue relative to 1996. The Company also expects to
realize significant cost savings and synergies as a result of the Forasol
acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $62,722,000 and $31,302,000 at
December 31, 1996 and 1995, respectively. The Company's current ratio was 1.7 at
both December 31, 1996 and December 31, 1995. During 1996, the Company issued to
the public $80,500,000 principal amount of convertible subordinated debentures
and 3,450,000 shares of Common Stock. Proceeds from these transactions, which
aggregated approximately $123,226,000, together with borrowings under existing
credit facilities, sale-leaseback arrangements and the Company's internally
generated funds, were used primarily to pay the $110,000,000 cash portion of the
purchase price for Quitral-Co, to finance the construction of two platform rigs
for the Company's offshore fleet in the Gulf of Mexico and for various other
capital projects, including rig upgrades and additions to the Company's
land-based fleet in Latin America. Two of the Company's drilling/workover barge
rigs operating on Lake Maracaibo, Venezuela were financed in 1994 on a long-term
project basis with limited recourse to the Company. See generally Notes 4 and 5
of the Notes to Consolidated Financial Statements included in Part II, Item 8,
of this report.
Since the end of 1996, the following transactions have had or are expected
to have a material impact on the Company's cash requirements:
o In February 1997, the Company sold substantially all of the assets
used in its domestic land-based well servicing operations for
approximately $135,900,000 in cash. The Company's net proceeds from
the sale, after payment of taxes, repayment of indebtedness
collateralized by certain of the assets sold, prepayment of terminated
operating leases and reduction for liabilities transferred, were
approximately $82,950,000.
o In March 1997, the Company completed the acquisition of Forasol for
$113,200,000 in cash and 11,099,000 shares of Common Stock. The cash
portion of the purchase price was funded out of working capital,
including the net proceeds from the sale of the Company's domestic
land-based well servicing operations and borrowings of $25,700,000
under the new Credit Facility described below.
o In February 1997, the Company agreed to purchase the Noble Rigs for
$265,000,000 in cash. In addition, the Company expects to spend
at least $20 million to upgrade and complete two of the Noble Rigs
awaiting refurbishment. The Company expects to complete the
purchase of the Noble Rigs in early June 1997 and to finance such
purchase from the proceeds from a public offering of debt securities
under the "shelf" registration statement described below.
In March 1997, the Company entered into a senior secured revolving line of
credit (the "Credit Facility") with a group of banks under which up to $100
million (including $25 million for letters of credit)
21
<PAGE>
is available. Availability under the Credit Facility is limited to a borrowing
base based on the value of collateral. Unless the Company secures its
obligations by June 6, 1997 with additional offshore or domestic assets with a
value of at least $40 million ("Additional Collateral"), the credit line will
be reduced to $75 million. The Credit Facility is collateralized by the accounts
receivable, inventory and intangibles of the Company and its domestic
subsidiaries, two-thirds of the stock of the Company's foreign subsidiaries and
the stock of the Company's domestic subsidiaries. The Company's domestic
subsidiaries also provide guarantees. The Credit Facility terminates on March 6,
2002 if the Additional Collateral is timely provided; otherwise it terminates on
March 6, 2000. The credit line will be reduced by $12.5 million in each of 2000
and 2001.
The Credit Facility limits the ability of the Company and its subsidiaries
to incur additional indebtedness, create liens, enter into mergers and
consolidations, pay cash dividends on its capital stock, make acquisitions, sell
assets or change its business without prior consent of the lenders. Under the
Credit Facility, the Company must maintain certain financial ratios, including
(i) funded debt to pro forma EBITDA, (ii) funded debt to capitalization, (iii)
adjusted EBITDA to debt service and (iv) minimum tangible net worth. The
proposed acquisition and financing of the Noble Rigs will result in the breach
of certain of these covenants. To finance the purchase, therefore, the Company
will be required to obtain waivers from the lenders, amend the Credit Facility
or repay any amounts outstanding under the Credit Facility.
In March 1997, the Company borrowed $40,000,000 under the Credit Facility,
of which $14,300,000 was used to repay amounts outstanding under the Company's
previous credit facility and $25,700,000 was used to partially fund the
acquisition of Forasol. Borrowings under the Credit Facility bear interest at a
variable rate, currently 7.44%, based on either the prime rate or LIBOR.
The Company has filed a "shelf" registration statement under the
Securities Act pursuant to which it may issue up to $500 million of securities
consisting of any combination of debt securities and Common Stock, and has
increased the authorized number of shares of Common Stock from 40,000,000 to
100,000,000. It is expected that the purchase of the Noble Rigs will be financed
from the proceeds of debt securities issued during the second quarter of 1997
pursuant to such registration statement.
Management believes that the cash generated from the Company's operations,
together with borrowings under the Credit Facility and issuances of securities
under its shelf registration statement, will be adequate to fund its normal
ongoing capital expenditure, working capital and debt service requirements.
ACCOUNTING MATTERS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128, which is effective for periods ending after December 15,
1997, including interim periods, simplifies the standards for computing earnings
per share ("EPS") and replaces the presentation of primary EPS with a
presentation of basic EPS. Initial adoption of this standard is not expected to
have a material impact on the Company's financial position or results of
operations. Early adoption is not permitted.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:
We have audited the consolidated balance sheet of Pride Petroleum Services,
Inc. and Subsidiaries as of December 31, 1996 and 1995, 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, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits 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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 30, 1997
23
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......... $ 10,310 $ 9,295
Short-term investments............. 460 2,612
Trade receivables, net of allowance
for doubtful accounts
of $292 and $426, respectively... 99,531 43,767
Parts and supplies................. 27,642 9,473
Deferred income taxes.............. 1,778 1,518
Other current assets............... 16,686 6,488
------------ ------------
Total current assets.......... 156,407 73,153
------------ ------------
PROPERTY AND EQUIPMENT, AT COST......... 514,903 296,939
ACCUMULATED DEPRECIATION................ (139,654) (118,451)
------------ ------------
Net property and equipment.... 375,249 178,488
------------ ------------
GOODWILL AND OTHER INTANGIBLES, net..... 3,134 3,699
OTHER ASSETS............................ 7,272 2,265
------------ ------------
$ 542,062 $ 257,605
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................... $ 32,488 $ 15,010
Accrued expenses................... 25,215 16,550
Current portion of long-term
debt.............................. 35,982 10,291
------------ ------------
Total current liabilities..... 93,685 41,851
------------ ------------
OTHER LONG-TERM LIABILITIES............. 12,134 4,127
LONG-TERM DEBT, net of current portion.. 106,508 61,136
CONVERTIBLE SUBORDINATED DEBENTURES..... 80,500 --
DEFERRED INCOME TAXES................... 47,438 19,252
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value;
40,000,000 shares authorized;
28,571,876 and 24,863,072 shares
issued and 28,517,656 and
24,808,852 shares outstanding,
respectively...................... 1 1
Paid-in capital.................... 143,581 95,751
Treasury stock, at cost............ (191) (191)
Retained earnings.................. 58,406 35,678
------------ ------------
Total shareholders' equity.... 201,797 131,239
------------ ------------
$ 542,062 $ 257,605
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
REVENUES................................ $ 407,174 $ 263,599 $ 182,336
---------- ---------- ----------
COSTS AND EXPENSES
Operating costs.................... 292,599 187,203 139,653
Depreciation and amortization...... 29,065 16,657 9,550
Selling, general and
administrative................... 45,368 32,418 25,105
---------- ---------- ----------
Total costs and expenses...... 367,032 236,278 174,308
---------- ---------- ----------
Earnings from
operations............ 40,142 27,321 8,028
OTHER INCOME (EXPENSE)
Other income (expense)............. 1,902 638 (305)
Interest income.................... 2,410 740 618
Interest expense................... (13,635) (6,276) (207)
---------- ---------- ----------
Total other income
(expense), net........ (9,323) (4,898) 106
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES............ 30,819 22,423 8,134
INCOME TAX PROVISION.................... 8,091 7,064 1,920
---------- ---------- ----------
NET EARNINGS............................ $ 22,728 $ 15,359 $ 6,214
========== ========== ==========
NET EARNINGS PER SHARE
Primary............................ $ .81 $ .60 $ .30
Fully diluted...................... $ .75 $ .60 $ .30
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING
Primary............................ 28,198 25,465 20,795
Fully diluted...................... 34,719 25,840 20,765
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY TOTAL
---------------- PAID-IN STOCK RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL AT COST EARNINGS EQUITY
------ ------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1993............ 16,321 $ 1 $ 55,211 $ (191) $ 14,105 $ 69,126
Net earnings....................... -- -- -- -- 6,214 6,214
Issuance of common stock in public
offering......................... 6,918 -- 32,108 -- -- 32,108
Issuance of common stock in
connection with acquisition...... 785 -- 3,925 -- -- 3,925
Exercise of stock options.......... 4 -- 8 -- -- 8
Tax benefit of non-qualified stock
options.......................... -- -- 4 -- -- 4
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1994............ 24,028 1 91,256 (191) 20,319 111,385
Net earnings....................... -- -- -- -- 15,359 15,359
Issuance of common stock in
connection with acquisitions..... 525 -- 3,279 -- -- 3,279
Exercise of stock options.......... 256 -- 739 -- -- 739
Tax benefit of non-qualified stock
options.......................... -- -- 477 -- -- 477
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1995............ 24,809 1 95,751 (191) 35,678 131,239
Net earnings....................... -- -- -- -- 22,728 22,728
Issuance of common stock in public
offering......................... 3,450 -- 45,641 -- -- 45,641
Issuance of common stock in
connection with acquisition...... 4 -- 29 -- -- 29
Exercise of stock options.......... 255 -- 1,338 -- -- 1,338
Tax benefit of non-qualified stock
options.......................... -- -- 822 -- -- 822
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1996............ 28,518 $ 1 $143,581 $ (191) $ 58,406 $ 201,797
====== ====== ======== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
------------ ---------- ---------
OPERATING ACTIVITIES
Net earnings.................... $ 22,728 $ 15,359 $ 6,214
Adjustments to reconcile net
earnings to net cash provided
by operating activities --
Depreciation and
amortization............... 29,065 16,657 9,550
Gain on sale of assets..... (815) (1,544) (475)
Effect of exchange rates... (437) (142) 362
Deferred tax provision..... 5,876 4,602 1,120
Changes in assets and
liabilities, net of effects
of acquisitions --
Trade receivables..... (16,438) (4,493) (10,106)
Parts and supplies.... (2,303) (2,866) (1,128)
Other current
assets................ (2,330) (1,914) (31)
Accounts payable...... (735) 119 1,534
Accrued expenses and
other................. (13,400) 1,391 1,331
------------ ---------- ---------
Net cash
provided by
operating
activities...... 21,211 27,169 8,371
------------ ---------- ---------
INVESTING ACTIVITIES
Purchase of net assets of
acquired entities, including
acquisition costs, less cash
acquired...................... (119,061) (8,144) (22,217)
Purchases of property and
equipment..................... (61,711) (40,636) (59,171)
Proceeds from dispositions of
property and equipment........ 14,438 6,862 908
Proceeds from sales of
short-term investments........ 6,047 1,250 1,004
Purchases of short-term
investments................... (1,045) (360) --
Other........................... (733) (485) (6)
------------ ---------- ---------
Net cash used in
investing
activities.... (162,065) (41,513) (79,482)
------------ ---------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common
stock........................... 45,641 -- 32,108
Proceeds from exercise of stock
options....................... 1,338 739 8
Proceeds from issuance of
convertible subordinated
debentures.................... 77,585 -- --
Proceeds from debt borrowings... 89,362 27,535 39,358
Reduction of debt............... (72,066) (10,410) (740)
Other........................... 9 (195) (1,162)
------------ ---------- ---------
Net cash
provided by
financing
activities.... 141,869 17,669 69,572
------------ ---------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 1,015 3,325 (1,539)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 9,295 5,970 7,509
------------ ---------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 10,310 $ 9,295 $ 5,970
============ ========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Pride Petroleum Services, Inc. (the "Company") is a Louisiana corporation
which was organized in 1988 as the successor to a company originally
incorporated in 1968. The accompanying consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications have been made to prior year amounts to conform with the
current year presentation.
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, are classified as available for sale, 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, 1996 or 1995.
PARTS AND SUPPLIES
Parts and supplies consist of spare rig parts and supplies held for use in
operations and are valued at the lower of weighted average cost or market value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are capitalized
and depreciated over the respective asset's useful life. Maintenance and repair
costs are charged to expense as incurred. During the years ended December 31,
1996, 1995, and 1994, maintenance and repair costs included in operating costs
were $32,698,000, $20,776,000, and $16,290,000, 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
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. In 1996, 1995 and 1994, total
interest incurred was $15,550,000, $6,526,000, and $665,000, respectively, of
which $1,915,000, $250,000, and $458,000, respectively, was capitalized.
GOODWILL AND OTHER INTANGIBLES
Goodwill, totaling $2,453,000 and $2,650,000 at December 31, 1996 and 1995,
respectively, represents the cost in excess of fair value of the net assets of
companies acquired and is being amortized over 15 years. Other intangible
assets, totaling $681,000 and $1,049,000 at December 31, 1996 and 1995,
28
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 using the straight
line method over their estimated useful lives, which range from three to ten
years. Accumulated amortization of goodwill and other intangible assets for the
years ended December 31, 1996, 1995, and 1994 amounted to $2,006,000,
$1,754,000, and $1,279,000, respectively.
REVENUE RECOGNITION
The Company recognizes revenue from domestic land-based 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
The Company recognizes 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.
FOREIGN CURRENCY TRANSLATION
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." The Company's Venezuelan operations are in a "highly
inflationary" economy resulting in the use of the U.S. dollar as the functional
currency. Therefore, certain assets of this operation are translated at
historical exchange rates and all translation gains or losses are reflected in
the period's results of operations. In Argentina and Colombia, the local
currency is considered the functional currency. Translation of Argentine and
Colombian assets and liabilities is made at the prevailing exchange rate as of
the balance sheet date. Revenues and expenses are translated at the average rate
of exchange during the period. 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.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in U.S.
Government securities and in other high quality financial instruments. By
policy, the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of major
integrated and government-owned international oil companies as well as smaller
independent oil and gas producers. Management believes the credit quality of its
customers is generally high. The Company has in place insurance to cover certain
exposure in its foreign operations and provides allowances for potential credit
losses when necessary.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. While it is believed that such estimates are reasonable,
actual results could differ from those estimates.
29
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDITIONS AFFECTING ONGOING OPERATIONS
Increases and decreases in domestic well servicing activity historically
have had a significant correlation with changes in oil and natural gas prices.
International well servicing activity is also affected by fluctuations in oil
and natural gas prices, but historically to a lesser extent than domestic
activity. International well servicing contracts are typically for terms of one
year or more, while domestic contracts are typically entered into for one or
multiple wells. Accordingly, international well servicing activities generally
are not as sensitive to short-term changes in oil and gas prices as domestic
operations.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 consists of the
following:
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
(IN THOUSANDS)
Land.................................... $ 3,462 $ 2,458
Equipment............................... 463,907 274,378
Buildings............................... 10,984 6,492
Other................................... 640 471
Construction-in-progress................ 35,910 13,140
------------ ------------
514,903 296,939
Accumulated depreciation................ (139,654) (118,451)
------------ ------------
$ 375,249 $ 178,488
============ ============
At December 31, 1996, construction-in-progress included approximately
$21,000,000 of costs related to the acquisition or refurbishment of eleven
land-based drilling rigs, $5,400,000 of costs related to upgrading the rig fleet
and equipment acquired from Quitral-Co S.A.I.C. ("Quitral-Co") and $6,400,000
of costs related to the construction of an offshore platform workover rig.
Construction-in-progress as of December 31, 1995 included approximately
$5,700,000 of costs related to the acquisition, refurbishment, equipping and
deploying to international markets of seven land-based workover rigs and four
land-based drilling rigs and approximately $2,500,000 of costs related to the
construction of an offshore platform workover rig.
30
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACQUISITIONS
In April 1996, the Company acquired all of the outstanding capital stock of
Quitral-Co for an aggregate purchase price of $140,000,000, consisting of
$110,000,000 in cash and a $30,000,000 installment note payable to the selling
shareholders. In connection with the acquisition of Quitral Co, the Company paid
a commission of $310,000 to a director of the Company.
The assets acquired and liabilities assumed in the Quitral-Co acquisition,
based on the Company's preliminary purchase price allocation, were as follows:
ASSETS (LIABILITIES)
--------------------
(IN THOUSANDS)
Cash and cash equivalents............... $ 5,564
Short-term investments.................. 2,851
Trade receivables....................... 35,189
Parts and supplies...................... 15,618
Deferred income taxes................... 1,300
Other current assets.................... 3,814
Property and equipment.................. 161,420
Other assets............................ 2
Accounts payable........................ (21,710)
Accrued expenses........................ (23,462)
Long-term debt.......................... (13,936)
Deferred income taxes................... (26,650)
--------------------
$140,000
====================
Unaudited pro forma results of operations assuming the acquisition of
Quitral-Co had occurred on January 1, 1995, are as follows:
YEAR ENDED DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Revenues................................ $ 470,384 $ 458,163
Net earnings............................ $ 24,759 $ 16,378
Earnings per share
Primary............................ $ .88 $ .64
Fully diluted...................... $ .80 $ .61
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 October 1996, the Company acquired all of the outstanding capital stock
of Ingeser de Colombia, S.A. ("Ingeser") for aggregate consideration of
$5,500,000, consisting of $4,000,000 cash and a contingent note payable to the
sellers for $1,500,000. Based on the debt assumed and the working capital
position of Ingeser, the transaction was valued at approximately $12,000,000.
Ingeser operates seven drilling rigs and six workover rigs in the Republic of
Colombia. In November 1996, the Company acquired three land-based drilling rigs
and other support assets from another operator in Argentina for $8,900,000 cash.
In October 1995, the Company purchased all of the outstanding capital stock
of Marlin Colombia Drilling Co., Inc. for cash consideration of approximately
$6,000,000.
In March 1995, the Company acquired all of the outstanding capital stock of
X-Pert Enterprises, Inc. 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.
31
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
4. DEBT
LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consists of the following:
DECEMBER 31,
---------------------
1996 1995
---------- ---------
Collateralized term loans............... $ 46,169 $ 5,696
Limited-recourse collateralized term
loans................................. 38,935 42,320
Note payable to sellers................. 23,000 --
Eximbank notes payable.................. 8,900 --
Secured term loan....................... 2,700 8,200
Secured revolver........................ 9,946 8,850
Revolving line of credit................ 1,630 762
Acquisition note payable................ 3,877 5,070
Notes payable........................... 7,333 529
---------- ---------
142,490 71,427
Less current portion.................... 35,982 10,291
---------- ---------
$ 106,508 $ 61,136
========== =========
In April 1996, the Company completed two separate financing arrangements
with lending institutions pursuant to which it borrowed an aggregate amount of
$40,000,000, net of repayment of $5,000,000 of borrowings to one of the lenders.
Proceeds from the loans were used to fund a portion of the cash consideration
for the acquisition of Quitral-Co, discussed above. In November 1996, the
Company borrowed an additional $6,500,000 from one of the lenders. The
collateralized term loans bore interest initially at a floating rate of prime
plus 1/2% and are repayable in monthly installments of principal and interest
over a period of five to six years. In December 1996, the Company elected to
convert the interest payable to a fixed rate basis. As a result, the
collateralized term loans currently bear interest at fixed rates ranging from
7.95% to 8.50% per annum. The loans are collateralized by substantially all of
the Company's domestic offshore rig fleet and ancillary equipment. The loan
agreement includes restrictive financial covenants with respect to cash flow
coverage and tangible net worth.
During 1994, the Company entered into long-term financing arrangements with
two Japanese trading companies in connection with the construction and operation
of two drilling/workover barge rigs. The term loans are collateralized by the
barge rigs and related charter contracts. The loans bear interest at a fixed
rate of 9.61% and are being repaid from the proceeds of the related charter
contracts in equal monthly installments of principal and interest through July
2004. In addition, a portion of contract proceeds is being held in trust to
assure that timely payment of future debt service obligations is made. At
December 31, 1996, $2,435,000 of such contract proceeds, which amount is
included in cash and cash equivalents on the accompanying consolidated balance
sheet, are being held in trust as security for the lenders, and are not
presently available for use by the Company. The terms of the financing
agreements limit the lenders' recourse essentially to the barge rigs, contract
proceeds and the assets of the Company's Venezuelan subsidiary. The Company also
provided the lenders a limited guaranty with respect to certain political risks.
The Company has obtained political risks insurance policies from the Overseas
Private Investment Corporation to protect against political risks that could
potentially result in payments under the terms of the Company's guaranty.
32
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of Quitral-Co in April 1996, the Company
issued a note payable to the sellers for $30,000,000. The note bears interest at
LIBOR (5.46% at December 31, 1996) plus 2%, payable quarterly, and principal is
expected to be repaid in 30 monthly installments.
Prior to being acquired by the Company, Quitral-Co had entered into two
loan agreements with a lending institution to finance the purchase and import of
goods manufactured in the United States. Loans made pursuant to the loan
agreements bear interest at rates ranging from LIBOR plus 1.40% to LIBOR plus
1.80% per annum, and are repayable in semi-annual installments through October
2000. Borrowings pursuant to these two loan agreements have been guaranteed
against certain political risks in Argentina and Venezuela by the Export-Import
Bank of the United States ("Eximbank").
In connection with the acquisition of the assets of Offshore Rigs, L.L.C.
in June 1994, the Company's wholly-owned subsidiary, Pride Offshore, Inc.
("Pride Offshore"), entered into a $14,400,000 credit facility with a
financial institution. The credit facility consisted of a secured term loan, a
secured revolver and a 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 revise the interest rates on a portion of the borrowings. Pursuant to
the amended credit facility, the amount of the secured term loan was increased
to $10,000,000, with two tranches. Tranche A had an initial principal amount of
$4,680,000, is repayable in 28 equal monthly principal payments of $90,000 plus
interest and one final principal payment of $2,160,000 in June 1997, and bears
interest, payable monthly, at a rate of 8% per annum. Tranche B had an initial
principal amount of $5,320,000, is repayable in 60 equal monthly principal
payments of $88,667 plus interest and bears interest, payable monthly, at a rate
of 9.25% per annum. The secured term loan was collateralized by certain of the
Company's offshore property and equipment.
Pursuant to the amended loan agreements, the amount of borrowing
availability under the secured revolver is $15,000,000. The secured revolver is
to convert in July 1997 to a term loan which is repayable in 60 equal monthly
principal payments plus interest. The secured revolver was 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 (totaling 8.75% at
December 31, 1996).
The $5,000,000 revolving line of credit was amended to extend the maturity
of such loan to April 30, 1997. The revolving line of credit bears interest,
payable monthly, at a variable rate of prime plus 1/2% per annum (totaling 8.75%
at December 31, 1996) and was collateralized by substantially all of the
accounts receivable of Pride Offshore.
In March 1997, the secured term loan, the secured revolver and the
revolving line of credit were repaid out of the proceeds from a new secured
revolving credit facility. See Note 14, "Subsequent Events."
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.
In March 1995, the Company issued 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.
33
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Notes payable at December 31, 1996 include $3,300,000 of short-term bank
loans, $2,440,000 of financed insurance premiums and a $1,593,000 note payable
collateralized by certain support assets.
Future maturities of long-term debt are as follows:
AMOUNT
--------------
(IN THOUSANDS)
1997.................................... $ 36,986
1998.................................... 32,240
1999.................................... 20,144
2000.................................... 18,541
2001.................................... 15,463
Thereafter.............................. 19,116
The Company has obtained bank commitments which provide for guidance lines
of credit of $18,000,000. As of December 31, 1996, letters of credit totaling
$8,699,000 were outstanding thereunder. Cash and cash equivalents and a portion
of accounts receivable have been pledged as collateral pursuant to these credit
facilities.
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
long-term debt approximates fair market value at December 31, 1996.
CONVERTIBLE SUBORDINATED DEBENTURES
In January 1996, the Company completed the public sale of $80,500,000
principal amount of 6 1/4% convertible subordinated debentures. The debentures,
which are due February 15, 2006, are convertible into common stock of the
Company at a price of $12.25 per share. The debentures are redeemable at the
option of the Company, in whole or in part, at any time on or after March 1,
1999, at an initial redemption price of 103.125% of the principal amount and
declining to 100% of the principal amount by February 15, 2002. Interest is
payable semi-annually on February 15 and August 15 of each year, commencing
August 15, 1996. At December 31, 1996, the debentures had a fair value of
$145,705,000, based on quoted market prices.
5. LEASES
The Company has entered into agreements with a financial institution for
the sale and leaseback of up to $22,000,000 of equipment to be used in the
Company's business. The Company received proceeds of $10,400,000 and $5,500,000
during 1996 and 1995, respectively, pursuant to these facilities attributable to
two offshore platform rigs placed in service in 1996 and one offshore platform
rig placed in service in 1995. The Company has purchase and lease renewal
options at projected future fair market values under the agreement. The leases
have been classified as operating leases for financial statement purposes. The
net book value of the equipment has been removed from the balance sheet, and the
excess of funding over such net book value of $567,000 has been deferred and is
being amortized as a reduction of lease expense over the maximum lease term of
five years. Rentals on these transactions total $3,071,000 annually.
34
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
The components of the provision for income taxes were as follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
United States Federal:
Current......................... $ (243) $ 1,650 $ 410
Deferred........................ 2,762 3,616 1,526
--------- --------- ---------
2,519 5,266 1,936
--------- --------- ---------
State:
Current......................... (14) 89 24
Deferred........................ 203 201 90
--------- --------- ---------
189 290 114
--------- --------- ---------
Foreign:
Current......................... 2,466 723 366
Deferred........................ 2,917 785 (496)
--------- --------- ---------
5,383 1,508 (130)
--------- --------- ---------
Total income tax
provision............... $ 8,091 $ 7,064 $ 1,920
========= ========= =========
The difference between the effective federal income tax rate reflected in
the income tax provision and the amounts which would be determined by applying
the statutory federal tax rate to earnings before income taxes is summarized as
follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
U.S. statutory rate..................... 34.0% 34.0% 34.0%
Foreign................................. (8.0) (7.1) (14.0)
State and local taxes................... 0.6 1.3 1.4
Other................................... (0.3) 3.3 2.2
--------- --------- ---------
Effective tax rate...................... 26.3% 31.5% 23.6%
========= ========= =========
The Company's consolidated effective federal income tax rate for the year
ended December 31, 1996 decreased to approximately 26% from approximately 32%
for the corresponding period in 1995, as a result of the substantial increase of
foreign income, which is taxed at a lower statutory rate, and the reduction in
U.S. income, which is taxed at a higher statutory rate. Foreign taxes reflect
the recognition of $2,200,000 of foreign net operating loss carryforwards,
including net operating loss carryforwards of acquired businesses. The Company
had recognized a valuation allowance in 1995 and 1996 for certain foreign net
operating loss carryforwards due to uncertainties regarding the Company's
ability to realize such tax benefits. The change in the valuation allowance
reflects the utilization of a portion of such net operating loss carryforwards.
The domestic and foreign components of earnings before income taxes were as
follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Domestic................................ $ 8,076 $ 13,302 $ 5,178
Foreign................................. 22,743 9,121 2,956
--------- --------- ---------
$ 30,819 $ 22,423 $ 8,134
========= ========= =========
35
<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, 1996 and 1995 were as follows:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Deferred tax liabilities:
Depreciation....................... $ 50,704 $ 19,850
Other.............................. 2,085 1,133
--------- ---------
Total deferred tax
liabilities................ 52,789 20,983
--------- ---------
Deferred tax assets:
Foreign net operating loss
carryforwards.................... (3,883) (1,462)
Insurance claims................... (461) (2,236)
Bad debts.......................... (105) (153)
Other.............................. (3,186) (1,220)
--------- ---------
Total deferred tax assets..... (7,635) (5,071)
Valuation allowance for deferred
tax assets....................... 506 1,822
--------- ---------
Net deferred tax assets....... (7,129) (3,249)
--------- ---------
Net deferred tax liability.............. $ 45,660 $ 17,734
========= =========
Applicable U.S. income taxes have not been provided on approximately
$27,700,000 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.
36
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. NET EARNINGS PER SHARE
Primary 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 has been computed based on the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period, as if the convertible subordinated debentures
were converted into common stock on the date of sale, after giving retroactive
effect to the elimination of interest expense, net of income tax effect,
applicable to the convertible subordinated debentures.
The following table presents information necessary to calculate fully
diluted net earnings per share:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Net earnings............................ $ 22,728 $ 15,359 $ 6,214
Interest on convertible subordinated
debentures............................ 4,955 -- --
Income tax effect....................... (1,784) -- --
--------- --------- ---------
Net earnings applicable to
common stock............... $ 25,899 $ 15,359 $ 6,214
========= ========= =========
Weighted average number of common shares
outstanding........................... 26,719 24,551 20,418
Additional shares assuming conversion
of:
Convertible subordinated
debentures....................... 6,106 -- --
Stock options and warrants......... 1,894 1,289 347
--------- --------- ---------
Weighted average common shares
and equivalents outstanding 34,719 25,840 20,765
========= ========= =========
Fully diluted net earnings per
share...................... $ .75 $ .60 $ .30
========= ========= =========
8. EMPLOYEE BENEFITS
The Company has a salary deferral plan covering its employees whereby
employees may elect to contribute up to 15% of their annual compensation. The
Company may at its discretion make matching contributions with respect to an
employee's salary contribution of up to $1,000 or 6% of compensation, whichever
is less. The Company made matching contributions to the plan for the years ended
December 31, 1996, 1995, and 1994 totaling $219,000, $229,000 and $150,000,
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.
9. SHAREHOLDERS' EQUITY
COMMON STOCK
In July 1996, the Company completed the public sale of 3,450,000 shares of
common stock, which resulted in net proceeds to the Company of approximately
$45,641,000. Approximately $20,200,000 of such net proceeds was used to repay
outstanding indebtedness, approximately $12,000,000 was used to finance the
construction of two platform rigs for the Company's offshore fleet and
approximately $7,000,000 was used to fund various capital projects for
Quitral-Co, including rig upgrades and expansion
37
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of its rig transportation fleet. The balance of the net proceeds, $6,441,000,
was used for general working capital needs of the Company.
In April 1995, the Company issued 87,000 shares of common stock pursuant to
the contractual earnout provisions of an acquisition agreement to an individual
who became a director of the Company in connection with such acquisition. The
value of such shares, estimated to be $435,000, has been allocated to the
acquired assets and is being amortized over the remaining useful lives of such
assets. In June 1995, the Company entered into an agreement with the director
pursuant to which it issued 203,000 additional shares of common stock in
exchange for the director's remaining contingent right to receive up to 73,000
common shares and the exercise of warrants to acquire an additional 500,000
shares of common stock on a net value basis. The value of the additional shares
issued, estimated to be $1,624,000, was also allocated to the acquired assets.
Also in April 1995, the Company issued 35,200 shares of common stock,
having an estimated aggregate value of $220,000, to a related party as
consideration for the purchase of support assets.
STOCK OPTION PLANS
The Company has a Long-Term Incentive Plan which provides for the granting
or awarding of stock options, restricted stock, stock appreciation rights and
stock indemnification rights to officers and other key employees. The number of
shares authorized and reserved for issuance under the Long-Term Incentive Plan
is limited to 13% of total issued and outstanding shares, subject to adjustment
in the event of certain changes in the Company's corporate structure or capital
stock. Stock options may be exercised in whole or in part beginning six months
from the date of grant and expire ten years from the date of grant. The stock
options also expire 60 days after termination of employment or one year after
retirement, total disability or death of an employee.
In 1993, the shareholders of the Company approved and ratified the 1993
Directors' Stock Option Plan. The purpose of the plan is to afford the Company's
directors who are not full-time employees of the Company or any subsidiary of
the Company an opportunity to acquire a greater proprietary interest in the
Company. A maximum of 200,000 shares of the Company's common stock are to be
available for purchase upon the exercise of options granted pursuant to the 1993
Directors' Stock Option Plan. The exercise price of options is the fair market
value per share on the date the option is granted. Directors'stock options vest
over two years at the rate of 50% per year and expire ten years from the date of
grant.
38
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option transactions pursuant to the Long-Term Incentive Plan and the
1993 Directors' Stock Option Plan (the "Plans") for the last three years are
summarized as follows:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN 1993 DIRECTORS' PLAN
------------------------------ ---------------------------
PRICE SHARES PRICE SHARES
----------------- ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Outstanding at December
31, 1993............... 1,154,850 40,000
Granted............. $5.25 775,000 $5.00 12,000
Exercised........... $2.25 (3,500) -- --
Forfeited........... -- -- $4.25 - $5.00 (13,000)
----------- ---------
Outstanding at December
31, 1994............... 1,926,350 39,000
Granted............. $6.875 483,000 $8.375 - $9.125 19,000
Exercised........... $2.25 - $6.875 (256,000) -- --
Forfeited........... -- -- -- --
----------- ---------
Outstanding at December
31, 1995............... 2,153,350 58,000
Granted............. $9.125 - $14.125 924,000 $17.875 12,000
Exercised........... $2.25 - $6.875 (255,200) -- --
Forfeited........... -- -- -- --
----------- ---------
Outstanding at December
31, 1996............... 2,822,150 70,000
=========== =========
Exercisable at December
31, 1996............... 2,212,816 43,500
=========== =========
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"), which is effective for the Company's fiscal year beginning January
1, 1996.
SFAS No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. It defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans and include the cost in the income statement
as compensation expense. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees." The Company accounts for
compensation cost for stock option plans in accordance with APB Opinion No. 25.
The weighted average fair values per share of options granted during the
years 1996 and 1995 were $5.12 and $3.05, respectively. The fair values were
estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions: dividend yield of 0.00%; volatility of 37.02%;
risk free rate of interest ranging from 5.27% to 6.96%; and an expected term of
five years.
The following table summarizes information on stock options outstanding and
exercisable at December 31, 1996 pursuant to the Plans:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WGTD. AVG. OPTIONS EXERCISABLE
REMAINING -----------------------------
RANGE OF SHARES CONTR. WGTD. AVG. SHARES WGTD. AVG.
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ----------- ---------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.25 - $5.00..... 560,900 3.26 $ 3.06 560,900 $ 3.06
$5.01 - $7.00..... 1,376,250 7.29 $ 5.76 1,376,250 $ 5.64
$7.01 - $17.875... 955,000 9.39 $11.95 319,166 $11.82
----------- ---------- -------------- ----------- --------------
$2.25 - $17.875... 2,892,150 7.18 $ 7.28 2,256,316 $ 5.95
</TABLE>
39
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
If the fair value based method of accounting prescribed by SFAS No. 123 had
been applied, the Company's net income and earnings per share would approximate
the pro forma amounts indicated below. The effects of applying SFAS No. 123 in
this pro forma disclosure are not indicative of future amounts.
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
Net earnings............................ $ 20,673 $ 14,861
Net earnings per share
Primary............................ $ .73 $ .58
Fully diluted...................... $ .69 $ .58
10. 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 (except for thirteen of its largest domestic land
rigs) and other equipment. 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. Nineteen of the Company's 23 offshore
platform rigs and all of its barge rigs are insured with deductibles of $50,000
and $150,000, respectively. Presently, the Company has insurance deductibles of
$250,000 per occurrence for domestic workers' compensation claims, $100,000 per
occurrence for domestic automobile liability claims, and $100,000 for general
liability claims. The Company further limits its exposure by maintaining an
accident and health insurance policy with respect to its domestic employees with
a deductible of $10,000 per occurrence. Coverages with respect to foreign
operations for workers' compensation and automobile claims are subject to
deductibles of generally $40,000 to $100,000 per occurrence.
As of December 31, 1996 and 1995, the Company had accrued approximately
$4,853,000 and $7,249,000, respectively, for estimated claims liabilities, of
which $3,713,000 and $3,940,000, respectively, was included in current
liabilities and $1,140,000 and $3,309,000, respectively, was included in other
long-term liabilities in the accompanying consolidated balance sheet. As of
December 31, 1996, the Company had letters of credit outstanding totaling
$8,699,000. These letters of credit principally guarantee the funding of the
Company's share of insured claims. During 1996 and 1995, the Company experienced
a decline in the number and severity of workers' compensation claims relating to
domestic land-based operations and at the same time experienced a substantial
increase in the number of such claims covered under various insurance policies.
As a result, the Company overestimated the self-insured portion of its claims
liabilities during those periods. Accordingly, during the fourth quarter of
1996, the Company recorded a change in estimate of $2,400,000 to reduce the
workers' compensation liability and operating costs.
Two of the Company's domestic land rigs were destroyed in separate
incidents in June 1996 and July 1995. The damaged rigs were covered by insurance
and the Company received net insurance proceeds, after repurchasing the salvage,
of $1,231,000 and $1,094,000 in 1996 and 1995, respectively. The Company
recognized gains from insurance recoveries of $1,085,000 and $1,049,000,
respectively, which are included as a reduction in operating costs in the
accompanying consolidated statement of operations.
40
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense for equipment, vehicles and various facilities of the
Company for the years ended December 31, 1996, 1995, and 1994 was $19,449,000,
$9,503,000 and $7,987,000, respectively. As of December 31, 1996, future minimum
lease payments for operating leases having initial or remaining noncancelable
lease terms longer than one year are as follows: $227,000 in 1997; $75,000 in
1998; and none thereafter. The Company leases vehicles used in its domestic
operations under revolving master leases. These master leases were paid off in
connection with the sale of the Company's domestic land-based well servicing
operations in March 1997 (see Note 14, "Subsequent Events"). Vehicle lease
expense included in the above rental expense for the years ended December 31,
1996, 1995, and 1994 was $2,297,000, $2,218,000 and $2,134,000, respectively.
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996
<S> <C> <C> <C> <C>
Revenues............................. $ 66,235 $ 101,989 $ 115,369 $ 123,581
Earnings from operations............. 5,358 9,361 11,971 13,452(1)
Net earnings......................... 2,780 4,795 6,879 8,274(1)
Net earnings per share
Primary......................... .11 .18 .23 .27
Fully diluted................... .11 .17 .22 .25
Weighted average common shares and
equivalents outstanding
Primary......................... 26,094 26,583 29,850 30,135
Fully diluted................... 31,051 33,052 36,429 37,087
1995
Revenues............................. $ 62,512 $ 68,856 $ 67,144 $ 65,087
Earnings from operations............. 5,721 7,081 6,637 6,833
Net earnings......................... 3,012 3,582 4,633 4,132
Net earnings per share............... .12 .14 .18 .16
Weighted average common shares and
equivalents outstanding............ 24,675 25,496 25,708 25,893
</TABLE>
- ------------
(1) Includes a $2,400,000 ($1,536,000 after tax) reduction of expense due to a
change in estimate for insurance expense. See Note 10.
12. SUPPLEMENTAL FINANCIAL INFORMATION
OTHER CURRENT ASSETS
Other current assets at December 31, 1996 and 1995 consists of the
following:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Other receivables.................... $ 7,743 $ 1,937
Prepaid expenses..................... 8,943 4,551
--------- ---------
$ 16,686 $ 6,488
========= =========
41
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED EXPENSES
Accrued expenses at December 31, 1996 and 1995 consists of the following:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Insurance (excluding the long-term
portion of $1,140 and $3,309,
respectively)...................... $ 3,713 $ 3,940
Payroll.............................. 7,019 6,318
Taxes, other than income............. 8,826 4,186
Foreign social benefits and
vacation........................... 3,073 900
Other................................ 2,584 1,206
--------- ---------
$ 25,215 $ 16,550
========= =========
OTHER LONG-TERM LIABILITIES
Other long-term liabilities at December 31, 1996 and 1995 consists of the
following:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Foreign social benefits.............. $ 9,502 $ --
Insurance............................ 1,140 3,309
Deferred compensation................ 1,142 456
Deferred lease benefit............... 350 362
--------- ---------
$ 12,134 $ 4,127
========= =========
CASH FLOW INFORMATION
Cash paid for interest and income taxes during the years ended December 31,
1996, 1995, and 1994 was as follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Cash paid during the year for:
Interest, net of amounts
capitalized................... $ 11,220 $ 4,316 $ 623
Income taxes -- U.S............. (472) 500 1,893
Income taxes -- foreign......... 5,844 16 28
42
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
<TABLE>
<CAPTION>
DOMESTIC DOMESTIC
LAND OFFSHORE INTERNATIONAL TOTAL
--------- ---------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
----
Revenues............................. $ 117,142 $ 57,450 $232,582 $407,174
Earnings from operations............. 7,808 6,983 25,351 40,142
Identifiable assets.................. 94,559 61,251 386,252 542,062
Capital expenditures, including
acquisitions....................... 8,666 18,618 211,851 239,135
Depreciation and amortization........ 5,738 3,665 19,662 29,065
1995
----
Revenues............................. $ 113,115 $ 49,595 $100,889 $263,599
Earnings from operations............. 7,906 6,785 12,630 27,321
Identifiable assets.................. 77,243 50,978 129,384 257,605
Capital expenditures, including
acquisitions......................... 14,502 15,066 28,940 58,508
Depreciation and amortization........ 5,578 3,091 7,988 16,657
1994
----
Revenues............................. $ 95,860 $ 23,441 $ 63,035 $182,336
Earnings from operations............. 1,184 3,304 3,540 8,028
Identifiable assets.................. 64,740 46,693 93,760 205,193
Capital expenditures, including
acquisitions....................... 3,062 34,617 48,987 86,666
Depreciation and amortization........ 5,085 1,056 3,409 9,550
</TABLE>
43
<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:
<TABLE>
<CAPTION>
RUSSIA
NORTH SOUTH AND
AMERICA AMERICA OTHER TOTAL
-------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
----
Revenues............................. $174,592 $231,038 $ 1,544 $ 407,174
Earnings (loss) from operations...... 14,791 25,799 (448) 40,142
Identifiable assets.................. 155,810 384,165 2,087 542,062
Capital expenditures................. 27,284 211,851 -- 239,135
Depreciation and amortization 9,403 19,394 268 29,065
1995
----
Revenues............................. $162,710 $ 98,382 $ 2,507 $ 263,599
Earnings from operations............. 14,691 12,448 182 27,321
Identifiable assets.................. 128,221 125,939 3,445 257,605
Capital expenditures................. 29,568 28,940 -- 58,508
Depreciation and amortization........ 8,669 7,611 377 16,657
1994
----
Revenues............................. $119,301 $ 62,430 $ 605 $ 182,336
Earnings (loss) from operations...... 4,488 4,712 (1,172) 8,028
Identifiable assets.................. 111,433 90,195 3,565 205,193
Capital expenditures................. 37,679 48,922 65 86,666
Depreciation and amortization........ 6,141 3,216 193 9,550
</TABLE>
One customer accounted for approximately 16%, 17% and 18% of consolidated
revenues during 1996, 1995, and 1994, respectively, representing 40%, 69% and
67%, respectively, of revenues from operations in Argentina during those years.
Another customer accounted for approximately 54%, and 40%, respectively, of
revenues from domestic offshore operations during 1995 and 1994, respectively.
Revenues from such customer and its affiliates from both land-based and offshore
operations accounted for approximately 13% and 18% of consolidated revenues
during such periods.
14. SUBSEQUENT EVENTS.
In February 1997, the Company sold substantially all of the assets used in
its U.S. land-based well servicing operations to Dawson Production Services,
Inc. for $135.9 million in cash. The Company's U.S. land-based fleet consisted
of 407 workover rigs that operate from 21 yards concentrated primarily in the
Texas and Louisiana Gulf Coasts, the Permian Basin Areas of West Texas and New
Mexico and California. After federal and state income taxes of approximately
$44,600,000, repayment of approximately $3,700,000 of indebtedness
collateralized by certain of the assets sold, prepayment of approximately
$4,000,000 of lease payments on transferred assets subject to operating leases
and reduction for $650,000 of liabilities transferred, the net proceeds to the
Company were approximately $82,950,000. The Company expects to report a gain in
the first quarter of 1997 of approximately $50,000,000 in connection with the
sale.
In March 1997, the Company acquired the operating subsidiaries of
Forasol-Foramer N.V. (collectively, "Forasol") for aggregate consideration of
approximately $285,600,000, consisting of $113,200,000 cash and 11,099,000
shares of common stock. Based on the debt and working capital of Forasol, the
entire transaction value is estimated to be approximately $320,000,000. Of the
cash portion of the purchase price, $87,500,000 was funded out of working
capital, including the net proceeds from the sale of the Company's
44
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
domestic well servicing operations and $25,700,000 was funded out of borrowings
under the Credit Facility described below.
In March 1997, the Company entered into a senior secured revolving line of
credit (the "Credit Facility") with a group of banks under which up to $100
million (including $25 million for letters of credit) is available. Availability
under the Credit Facility is limited to a borrowing base based on the value of
collateral. Unless the Company collateralizes its obligations by June 6, 1997
with additional offshore or domestic assets with a value of at least $40 million
("Additional Collateral"), the amount available under the Credit Facility will
be reduced to $75 million. The Credit Facility is collateralized by the accounts
receivable, inventory and intangibles of the Company and its domestic
subsidiaries, two-thirds of the stock of the Company's foreign subsidiaries and
the stock of the Company's domestic subsidiaries. The Company's domestic
subsidiaries also provide guarantees. The Credit Facility terminates on March 6,
2002 if the Additional Collateral is timely provided; otherwise it terminates on
March 6, 2000. The credit line will be reduced by $12.5 million in each of 2000
and 2001. Borrowings under the Credit Facility bear interest at a variable rate
based on either the prime rate or LIBOR.
In March 1997, the Company borrowed $40,000,000 under the Credit Facility,
of which $14,300,000 was used to repay amounts outstanding under the Company's
previous credit facility and $25,700,000 was used to partially fund the
acquisition of Forasol.
In February 1997, the Company entered into a definitive agreement to
acquire 12 mat-supported jackup drilling rigs and the hull of an additional
jackup drilling rig from Noble Drilling Corporation and certain subsidiaries
(collectively, "Noble") for $265,000,000 in cash. The definitive purchase
agreement is subject to certain conditions, including expiration or early
termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act and completion by the Company of satisfactory financing
arrangements. The closing of the transaction is expected to occur in June 1997.
The Company expects to finance the purchase through a public offering of debt
securities. The Company filed a shelf registration statement with the Securities
and Exchange Commission in February 1997 relating to $500,000,000 of debt
securities and common stock. The Company has placed in escrow a deposit of
$20,000,000, which Noble has the right to retain if the Company fails to obtain
adequate financing or is otherwise unable to close by June 30, 1997.
During the first quarter of 1997, an aggregate of $28,000,000 principal
amount of the Company's convertible subordinated debentures were converted into
2,285,712 shares of common stock. In connection therewith, the Company paid an
aggregate of approximately $3,737,000 in cash to induce such conversions. The
Company will recognize an expense for such amount in the first quarter of 1997.
In February 1997, the Company's shareholders approved an amendment to the
Company's articles of incorporation to increase the number of authorized shares
of common stock from 40,000,000 to 100,000,000.
45
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
independent accountants regarding accounting and financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1996.
Certain information with respect to the executive officers of the Company
is set forth under the caption "Executive Officers of the Registrant" in Part
I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE INCLUDED AS PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS:
Page
----
Report of Independent Accountants ......................................... 23
Consolidated Balance Sheet -- December 31, 1996 and 1995 .................. 24
Consolidated Statement of Operations -- Years ended December 31, 1996, 1995
and 1994 ................................................................ 25
Consolidated Statement of Changes in Shareholders' Equity --
Years ended December 31, 1996, 1995 and 1994 ............................ 26
Consolidated Statement of Cash Flows --
Years ended December 31, 1996, 1995 and 1994 ............................ 27
Notes to Consolidated Financial Statements ................................ 28
(2) FINANCIAL STATEMENT SCHEDULES:
Page
----
Report of Independent Accountants ......................................... 51
Schedule II -- Valuation and Qualifying Accounts .......................... 52
46
<PAGE>
Financial statement schedules other than those listed have been omitted as
they are not applicable, or the information required thereby is included in the
consolidated financial statements or notes thereto included in this report.
(3) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
*3.1 -- Restated Articles of Incorporation of the Company.
*3.2 -- Amendment to Restated Articles of Incorporation.
*3.3 -- Amendment to Amended and Restated Articles of Incorporation.
*3.4 -- By-Laws of the Company, as amended.
4.1 -- Form of Common Stock Certificate (incorporated by reference to Exhibit 4(b) to the
Company's Registration Statement on Form S-1 dated January 29, 1990, Registration No.
33-33233).
4.2 -- Sale and Financing Contract for Lake Maracaibo Drilling Barge dated November 30, 1994, by
and between Perforaciones Western, C.A., Nittetsu Shoji Co., Ltd. and Marubeni Corporation
(incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, File No. 0-16961).
4.3 -- Supplemental, Amended and Restated Agented Multiple Lender Loan Agreement dated February
9, 1995, by and between Pride Offshore, Inc., the Company and First National Bank of
Commerce, The CIT Group/Equipment Financing, Inc., ArgentBank (incorporated by reference
to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-16961).
4.4 -- Indenture dated as of January 26, 1996 by and between the Company and Marine Midland Bank,
as Trustee, relating to $80,500,000 principal amount of 6 1/4% Convertible Subordinated
Debentures due 2006 (incorporated by reference to Exhibit 4.4 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, File No. 0-16961).
4.5 -- Loan Agreement dated as of April 30, 1996 among The CIT Group/Equipment Financing, Inc.,
as agent, The CIT Group/Equipment Financing, Inc. and The Frost National Bank, as
borrowers, and the Company, Pride Petroleum Services of California, Inc. and Pride
Petroleum Services of Louisiana, Inc. (incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-3 dated June 4, 1996, Registration No.
333-05137).
4.6 -- Loan Agreement dated as of April 30, 1996 among Heller Financial Inc., the Company, Pride
Petroleum Services of California, Inc. and Pride Petroleum Services of Louisiana, Inc.
(incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form
S-3 dated June 4, 1996, Registration No. 333-05137).
*4.7 -- Credit Agreement dated as of March 6, 1997 among the Company, each of the banks that are
or may be a party thereto, First National Bank of Commerce, as arranger and syndication
agent, and Wells Fargo Bank (Texas), National Association, as administrative and
documentation agent.
The Company is a party to several debt instruments under which the total amount of
securities authorized does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, the Company agrees to furnish a copy of such instruments to the Commission
upon request.
+10.1 -- Form of Indemnity Agreement between the Company and certain executive officers and
directors (incorporated by reference to Exhibit 10(g) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233).
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
+10.2 -- Pride Petroleum Services, Inc. Long-Term Incentive Plan (incorporated by reference to
Exhibit 10(h) to the Company's Registration Statement on Form S-1 dated January 29, 1990,
Registration No. 33-33233).
+10.3 -- Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated by reference to Exhibit
10(i) to the Company's Registration Statement on Form S-1 dated January 29, 1990,
Registration No. 33-33233).
+10.4 -- Summary of Pride Petroleum Services, Inc. Group Life Insurance and Accidental Death and
Dismemberment Insurance (incorporated by reference to Exhibit 10(j) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233).
+10.5 -- Pride Petroleum Services, Inc. 1993 Directors' Stock Option Plan (incorporated by
reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 0-16961).
+10.6 -- Pride Petroleum Services, Inc. 401(k) Restoration Plan (incorporated by reference to
Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31,
1993, File No. 0-16961).
+10.7 -- Pride Petroleum Services, Inc. Employee Stock Purchase Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8 filed June 26, 1996,
Registration No. 333-06825).
10.8 -- Well Drilling and/or Reconditioning Agreement dated May 1, 1994, by and between Lagoven,
S.A. and Perforaciones Western, C.A. (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, File No.
0-16961).
+10.9 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and Ray H. Tolson (incorporated by reference to Exhibit No. 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
+10.10 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and Paul A. Bragg (incorporated by reference to Exhibit No. 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
+10.11 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and James W. Allen (incorporated by reference to Exhibit No. 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
+10.12 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and Dexter R. Polk (incorporated by reference to Exhibit No. 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
10.13 -- Agreement dated as of June 13, 1995 between the Company and Financial Overseas Management,
S.A. (incorporated by reference to Exhibit No. 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995, File No. 0-16961).
10.14 -- Stock Purchase Agreement dated March 22, 1995 by and among Raymond H. Eaves and Billy B.
Cooper and the Company (incorporated by reference to Exhibit No. 2 to the Company's
Current Report on Form 8-K dated March 22, 1995, File No. 0-16961).
10.15 -- Stock Purchase Agreement dated April 30, 1996 among the Company, Perez Companc S.A., Astra
C.A.P.S.A. and others (incorporated by reference to Exhibit No. 2 to the Company's Current
Report on Form 8-K filed May 15, 1996, File No. 0-16961).
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.16 -- Purchase Agreement, dated as of December 23, 1996, by and between the Company and Dawson
Production Services, Inc. (incorporated by reference to Exhibit No. 2.1 to the Company's
Current Report on Form 8-K filed March 7, 1997, File No. 0-16963).
10.17 -- First Amendment to Purchase Agreement, dated as of February 20, 1997, by and between the
Company and Dawson Production Services, Inc. (incorporated by reference to Exhibit No. 2.2
to the Company's Current Report on Form 8-K filed March 7, 1997, File No. 0-16963).
10.18 -- Purchase Agreement dated as of December 16, 1996 by and among the Company, Forasol-Foramer
N.V. and certain shareholders of Forasol-Foramer N.V. (incorporated by reference to
Appendix A of the Company's Proxy Statement/Prospec-
tus dated January 31, 1997, File No. 0-16963).
*10.19 -- Asset Purchase Agreement dated as of February 19, 1997 by and between the Company and
Noble Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble
Drilling (Mexico) Inc. and NN-1 Limited Partnership.
*21 -- Subsidiaries of the Company.
*23 -- Consent of Coopers & Lybrand L.L.P.
*27 -- Financial Data Schedule
</TABLE>
- ------------
* Filed herewith.
+ Compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1996.
49
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
HOUSTON, STATE OF TEXAS, ON MARCH 31, 1997.
PRIDE PETROLEUM SERVICES, INC.
By: /s/ RAY H. TOLSON
RAY H. TOLSON
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES INDICATED ON MARCH 31, 1997.
SIGNATURE TITLE
- --------------------------------------------------------------------------
/s/RAY H. TOLSON Chairman of the Board, Chief
RAY H. TOLSON Executive Officer and Director
(PRINCIPAL EXECUTIVE OFFICER)
/s/PAUL A. BRAGG President and Chief Operating Officer
PAUL A. BRAGG
(PRINCIPAL EXECUTIVE OFFICER)
/s/EARL W. MCNIEL Vice President and Chief Financial
EARL W. MCNIEL Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Director
CHRISTIAN J. BOON FALLEUR
/s/JAMES B. CLEMENT Director
JAMES B. CLEMENT
Director
REMI DORVAL
Director
JORGE E. ESTRADA M.
/s/RALPH D. MCBRIDE Director
RALPH D. MCBRIDE
/s/THOMAS H. ROBERTS, JR. Director
THOMAS H. ROBERTS, JR.
/s/JAMES T. SNEED Director
JAMES T. SNEED
50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:
Our report on the consolidated financial statements of Pride Petroleum
Services, Inc. is included on page 23 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on page 52 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 30, 1997
51
<PAGE>
SCHEDULE II
PRIDE PETROLEUM SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS BALANCE
BEGINNING AND AT END
OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
1996............................... $ 426 $-- $ 134 $ 292
========== ======== ========== =======
1995............................... $ 394 $ 174 $ 142 $ 426
========== ======== ========== =======
1994............................... $ 811 $-- $ 417 $ 394
========== ======== ========== =======
</TABLE>
52
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
*3.1 -- Restated Articles of Incorporation of
the Company.
*3.2 -- Amendment to Restated Articles of
Incorporation.
*3.3 -- Amendment to Amended and Restated
Articles of Incorporation.
*3.4 -- By-Laws of the Company, as amended.
4.1 -- Form of Common Stock Certificate
(incorporated by reference to Exhibit
4(b) to the Company's Registration
Statement on Form S-1 dated January
29, 1990, Registration No. 33-33233).
4.2 -- Sale and Financing Contract for Lake
Maracaibo Drilling Barge dated
November 30, 1994, by and between
Perforaciones Western, C.A., Nittetsu
Shoji Co., Ltd. and Marubeni
Corporation (incorporated by
reference to Exhibit 4.2 to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1994,
File No. 0-16961).
4.3 -- Supplemental, Amended and Restated
Agented Multiple Lender Loan
Agreement dated February 9, 1995, by
and between Pride Offshore, Inc., the
Company and First National Bank of
Commerce, The CIT Group/Equipment
Financing, Inc., ArgentBank
(incorporated by reference to Exhibit
4.3 to the Company's Annual Report on
Form 10-K for the year ended December
31, 1994, File No. 0-16961).
4.4 -- Indenture dated as of January 26,
1996 by and between the Company and
Marine Midland Bank, as Trustee,
relating to $80,500,000 principal
amount of 6 1/4% Convertible
Subordinated Debentures due 2006
(incorporated by reference to Exhibit
4.4 to the Company's Annual Report on
Form 10-K for the year ended December
31, 1995, File No. 0-16961).
4.5 -- Loan Agreement dated as of April 30,
1996 among The CIT Group/Equipment
Financing, Inc., as agent, The CIT
Group/Equipment Financing, Inc. and
The Frost National Bank, as
borrowers, and the Company, Pride
Petroleum Services of California,
Inc. and Pride Petroleum Services of
Louisiana, Inc. (incorporated by
reference to Exhibit 4.4 to the
Company's Registration Statement on
Form S-3 dated June 4, 1996,
Registration No. 333-05137).
4.6 -- Loan Agreement dated as of April 30,
1996 among Heller Financial Inc., the
Company, Pride Petroleum Services of
California, Inc. and Pride Petroleum
Services of Louisiana, Inc.
(incorporated by reference to Exhibit
4.5 to the Company's Registration
Statement on Form S-3 dated June 4,
1996, Registration No. 333-05137).
*4.7 -- Credit Agreement dated as of March 6,
1997 among the Company, each of the
banks that are or may be a party
thereto, First National Bank of
Commerce, as arranger and syndication
agent, and Wells Fargo Bank (Texas),
National Association, as adminis-
trative and documentation agent.
The Company is a party to several
debt instruments under which the
total amount of securities authorized
does not exceed 10% of the total
assets of the Company and its
subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Regulation S-K, the
Company agrees to furnish a copy of
such instruments to the Commission
upon request.
+10.1 -- Form of Indemnity Agreement between
the Company and certain executive
officers and directors (incorporated
by reference to Exhibit 10(g) to the
Company's Registration Statement on
Form S-1 dated January 29, 1990,
Registration No. 33-33233).
+10.2 -- Pride Petroleum Services, Inc.
Long-Term Incentive Plan
(incorporated by reference to Exhibit
10(h) to the Company's Registration
Statement on Form S-1 dated January
29, 1990, Registration No. 33-33233).
<PAGE>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
+10.3 -- Pride Petroleum Services, Inc. Salary
Deferral Plan (incorporated by
reference to Exhibit 10(i) to the
Company's Registration Statement on
Form S-1 dated January 29, 1990,
Registration No. 33-33233).
+10.4 -- Summary of Pride Petroleum Services,
Inc. Group Life Insurance and
Accidental Death and Dismemberment
Insurance (incorporated by reference
to Exhibit 10(j) to the Company's
Registration Statement on Form S-1
dated January 29, 1990, Registration
No. 33-33233).
+10.5 -- Pride Petroleum Services, Inc. 1993
Directors' Stock Option Plan
(incorporated by reference to Exhibit
10(j) to the Company's Annual Report
on Form 10-K for the year ended
December 31, 1992, File No. 0-16961).
+10.6 -- Pride Petroleum Services, Inc. 401(k)
Restoration Plan (incorporated by
reference to Exhibit 10(k) to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1993,
File No. 0-16961).
+10.7 -- Pride Petroleum Services, Inc.
Employee Stock Purchase Plan
(incorporated by reference to Exhibit
4.4 to the Company's Registration
Statement on Form S-8 filed June 26,
1996, Registration No. 333-06825).
10.8 -- Well Drilling and/or Reconditioning
Agreement dated May 1, 1994, by and
between Lagoven, S.A. and
Perforaciones Western, C.A.
(incorporated by reference to Exhibit
10.8 to the Company's Annual Report
on Form 10-K for the year ended
December 31, 1994, File No. 0-16961).
+10.9 -- Employment/Non-Competition/Confidentiality
Agreement dated August 26, 1994,
between the Company and Ray H. Tolson
(incorporated by reference to Exhibit
No. 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly
period ended September 30, 1994, File
No. 0-16961).
+10.10 -- Employment/Non-Competition/Confidentiality
Agreement dated August 26, 1994,
between the Company and Paul A. Bragg
(incorporated by reference to Exhibit
No. 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarterly
period ended September 30, 1994, File
No. 0-16961).
+10.11 -- Employment/Non-Competition/Confidentiality
Agreement dated August 26, 1994,
between the Company and James W.
Allen (incorporated by reference to
Exhibit No. 10.3 to the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1994, File No. 0-16961).
+10.12 -- Employment/Non-Competition/Confidentiality
Agreement dated August 26, 1994,
between the Company and Dexter R.
Polk (incorporated by reference to
Exhibit No. 10.4 to the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30,
1994, File No. 0-16961).
10.13 -- Agreement dated as of June 13, 1995
between the Company and Financial
Overseas Management, S.A.
(incorporated by reference to Exhibit
No. 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly
period ended June 30, 1995, File No.
0-16961).
10.14 -- Stock Purchase Agreement dated March
22, 1995 by and among Raymond H.
Eaves and Billy B. Cooper and the
Company (incorporated by reference to
Exhibit No. 2 to the Company's
Current Report on Form 8-K dated
March 22, 1995, File No. 0-16961).
10.15 -- Stock Purchase Agreement dated April
30, 1996 among the Company, Perez
Companc S.A., Astra C.A.P.S.A. and
others (incorporated by reference to
Exhibit No. 2 to the Company's
Current Report on Form 8-K filed May
15, 1996, File No. 0-16961).
10.16 -- Purchase Agreement, dated as of
December 23, 1996, by and between the
Company and Dawson Production
Services, Inc. (incorporated by
reference to Exhibit No. 2.1 to the
Company's Current Report on Form 8-K
filed March 7, 1997, File No.
0-16963).
<PAGE>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
10.17 -- First Amendment to Purchase
Agreement, dated as of February 20,
1997, by and between the Company and
Dawson Production Services, Inc.
(incorporated by reference to Exhibit
No. 2.2 to the Company's Current
Report on Form 8-K filed March 7,
1997, File No. 0-16963).
10.18 -- Purchase Agreement dated as of
December 16, 1996 by and among the
Company, Forasol-Foramer N.V. and
certain shareholders of
Forasol-Foramer N.V. (incorporated by
reference to Appendix A of the
Company's Proxy Statement/Prospec-
tus dated January 31, 1997, File No.
0-16963).
*10.19 -- Asset Purchase Agreement dated as of
February 19, 1997 by and between the
Company and Noble Drilling
Corporation, Noble Drilling (U.S.)
Inc., Noble Offshore Corporation,
Noble Drilling (Mexico) Inc. and NN-1
Limited Partnership.
*21 -- Subsidiaries of the Company.
*23 -- Consent of Coopers & Lybrand L.L.P.
*27 -- Financial Data Schedule
- ------------
* Filed herewith.
+ Compensatory plan or arrangement.
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PRIDE PETROLEUM SERVICES, INC.
ARTICLE I
NAME
The name of the Corporation is Pride Petroleum Services, Inc.
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful activity
for which corporations may be formed under the Business Corporation Law of
Louisiana.
ARTICLE III
CAPITAL
A. The total authorized capital stock of the Corporation is Thirty
Million (30,000,000) shares of Common Stock of no par value per share and Five
Hundred Thousand (500,000) shares of Preferred Stock of no par value per share.
B. Shares of Preferred Stock may be issued from time to time in one
or more series. Authority is hereby vested in the Board of Directors of the
Corporation to amend these Articles of Incorporation from time to time to fix
the preferences, limitations and relative rights of the shares of the Preferred
Stock and Common Stock, and to establish and fix variations in the preferences,
limitations and relative rights as between different series of Preferred Stock.
ARTICLE IV
DIRECTORS
A. The Board of Directors shall consist of such number of persons as
shall be designated in the by-laws, provided that no amendment to the by-laws to
decrease the number of directors shall shorten the term of any incumbent
director.
-1-
<PAGE>
B. The members of the Board of Directors shall be elected for terms
of five years and until their successors are elected and qualified. Any vacancy
on the Board (including any vacancy resulting from an increase in the authorized
number of directors, or from failure of the shareholders to elect the full
number of authorized directors) may be filled by the 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 shall have the right at any special
meeting called for the purpose prior to such action by the Board, to fill the
vacancy.
C. Any director or the entire Board of Directors may be removed at
any time, but only for cause, by the affirmative vote of not less than 80% of
the Voting Power (as hereinafter defined) at a meeting of shareholders called
for that purpose, and such holders may forthwith at such meeting proceed to
elect a successor or successors for an unexpired term. Except as set forth in
this Article IV-C, directors shall not be subject to removal.
D. The Board of Directors, when evaluating a tender offer or an
offer to make a tender or exchange offer or to effect a Business Combination (as
hereinafter defined) may, in exercising its judgment in determining what is in
the best interests of the Corporation and its shareholders, consider the
following factors and any other factors that it deems relevant: (1) 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 Corporation, but
also (a) the market price for the capital stock of the Corporation over a period
of years, (b) the estimated price that might be achieved in a negotiated sale of
the Corporation 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 Corporation's financial condition and future
prospects; (2) the social and economic effects of such transaction on the
Corporation, its subsidiaries, or their employees, customers, creditors and the
communities in which the Corporation and its subsidiaries do business; (3) the
business and financial conditions 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 Corporation and its subsidiaries and the
communities in which the Corporation and its subsidiaries do business; and (4)
the competence, experience, and integrity of the acquiring party or parties and
its or their management. Notwithstanding any provision of this Article IV-D,
such
-2-
<PAGE>
Article is not intended to confer any rights on any subsidiary of the
Corporation, or on any of the Corporation's or its subsidiaries' employees,
customers or creditors.
E. Only persons who are nominated in accordance with the procedures
set forth in this Article IV-E shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of shareholders by or at the direction of the Board of
Directors or by a shareholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Article IV-E. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 45 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 55 days notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received at the
principal executive offices of the Corporation no later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such shareholder's
notice shall set forth the following:
1. as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (a) the name, age, business address
and residence address of such person, (b) the principal occupation or
employment of such person, (c) the class and number of shares of the
capital stock of the Corporation of which such person is the beneficial
owner (determined in accordance with paragraph 2 of Article V-A) and (d)
any other information relating to such person that would be required to be
disclosed in solicitations of proxies for election of directors, or would
be otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); and
2. as to the shareholder giving the notice (a) the name and address
of such shareholder and (b) the class and number of shares of the capital
stock of the Corporation of which such shareholder is the beneficial owner
(determined in accordance with paragraph 2 of Article V-A). If requested
in writing by the Secretary of the Corporation at
-3-
<PAGE>
least 15 days in advance of the meeting, such shareholder, with respect to
those shares not registered in his name on the Corporation's books shall
provide the Secretary, within 10 days of such request, with documentary
support for such claim of beneficial ownership.
At the request of the Board of Directors, any person nominated by or at the
direction of the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. If a
shareholder seeks to nominate one or more persons as directors, the Secretary
shall appoint two Inspectors, who shall not be affiliated with the Corporation,
to determine whether a shareholder has complied with this Article IV-E. If the
Inspectors shall determine that a shareholder has not complied with this Article
IV-E, the Inspectors shall direct the Chairman of the meeting to declare to the
meeting that a nomination was not made in accordance with the procedures
prescribed by the Restated Articles of Incorporation; and the Chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE V
CERTAIN BUSINESS COMBINATIONS
A. As used in these Restated Articles of Incorporation:
1. The term "Voting Power" shall mean the right vested by law or by
these Restated Articles of Incorporation in the shareholders or in one or
more classes of shareholders, and the right conferred by the Corporation
pursuant to La.R.S. 12:75H upon the holders of any bonds, debentures or
other obligations issued by the Corporation, to vote in the determination
of a particular question or matter requiring shareholder action. "Total
Voting Power" shall mean the total number of votes that shareholders and
holders of any bonds, debentures or other obligations granted voting
rights by the Corporation are entitled to cast in the determination of a
particular question or matter. Whenever the terms "Voting Power" and
"Total Voting Power" are used in this Article V, reference shall be made
to those shares, bonds, debentures or other obligations that are accorded
voting rights in the election of directors generally.
-4-
<PAGE>
2. The term "Acquiring Entity" shall mean any natural person,
corporation or other entity (other than the Corporation or any Subsidiary
(as hereinafter defined) or any employee benefit plan or related trust of
the Corporation) which is the beneficial owner, directly or indirectly, of
voting securities (or securities convertible into or exchangeable for
voting securities or options, warrants or rights to purchase voting
securities or securities convertible or exchangeable for voting
securities) representing 30% or more of the Total Voting Power. For the
purposes of these Restated Articles of Incorporation, any person,
corporation or entity will be deemed to be the beneficial owner of any
voting securities of the Corporation:
a. which it owns directly, whether or not of record, or
b. which it has the right to acquire, either immediately or
subject to no other condition than passage of time, pursuant to any
agreement, arrangement or understanding or upon exercise of
conversion rights, exchange rights, warrants or options or
otherwise, or
c. which are beneficially owned, directly or indirectly
(including shares deemed to be owned through application of clause
(b) above), by any Affiliate or Associate, or
d. which are beneficially owned, directly or indirectly,
including shares deemed owned through application of clause (b)
above, by any other person, corporation or entity with which it or
any of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or
disposing of voting securities of the Corporation.
3. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule l2b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
August 31, 1988.
4. The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation or any
Subsidiary with or into
-5-
<PAGE>
an Acquiring Entity or any other corporation which is, or after such
merger or consolidation would be, an Affiliate of an Acquiring
Entity; or
b. any sale, lease, exchange or other disposition (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation to an Acquiring
Entity or any Affiliate of an Acquiring Entity; or
c. any sale, lease, exchange or other disposition (in one
transaction or a series of related transactions) to the Corporation
or any Subsidiary of any assets in exchange for which the Acquiring
Entity or an Affiliate of an Acquiring Entity becomes the beneficial
owner of either (i) voting securities (or securities convertible
into or exchangeable for voting securities, or options, warrants or
rights to purchase voting securities or securities convertible into
or exchangeable for voting securities) of the Corporation or any
Subsidiary or (ii) bonds, debentures or other obligations of the
Corporation granting voting rights; or
d. any reclassification of securities, recapitalization or
other transaction designed to decrease the number of holders of the
Corporation's voting securities remaining after an Acquiring Entity
has become an Acquiring Entity; or
e. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation in which anything other than cash
will be received by an Acquiring Entity or any Affiliate of an
Acquiring Entity.
5. "Subsidiary" means any corporation, limited partnership, general
partnership or other firm or entity of which a majority of any class of
equity security or other equity interest is owned, directly or indirectly,
by the Corporation.
B. No Business Combination may be effected unless all of the
following conditions, to the extent applicable, are fulfilled:
1. The per share cash or fair market value of other consideration to
be received by holders
-6-
<PAGE>
of common stock of the Corporation in such Business Combination must bear
the same or a greater percentage relationship to the market price of the
Corporation's common stock immediately prior to the date of the first
public announcement of the proposal of the Business Combination (the
"Announcement Date"), as the highest per share price (including brokerage
commissions, dealer manager and soliciting dealers' fees) which the
Acquiring Entity or any of its Affiliates has theretofore paid for any of
the shares of the Corporation's common stock acquired by them in the
three-year period immediately prior to the Announcement Date bears to the
market price of the common stock of the Corporation immediately prior to
the time when the Acquiring Entity or any of its Affiliates first
purchased shares of the Corporation's common stock.
2. The per share cash or fair market value of other consideration to
be received by holders of common stock of the Corporation in such Business
Combination must be not less than the highest per share price (including
brokerage commissions and soliciting dealers' fees) paid by the Acquiring
Entity or any of its Affiliates in acquiring any of their holdings of the
Corporation's common stock in the three-year period immediately prior to
the Announcement Date, and not less than the product of the earnings per
share of common stock of the Corporation for the four full consecutive
fiscal quarters immediately preceding the record date for determining the
shareholders entitled to vote on such Business Combination, multiplied by
the higher of (i) 7, or (ii) the price/earnings multiple on such record
date of the common stock of the Acquiring Entity as customarily computed
and reported in the financial community.
3. From the date it becomes an Acquiring Entity to the date the
Business Combination is consummated, neither the Acquiring Entity nor any
of its Affiliates shall have become the beneficial owner of any additional
voting securities or any bonds, debentures or other obligations having
voting rights, except (i) as part of the transaction which resulted in
such Acquiring Entity becoming an Acquiring Entity, or (ii) by virtue of
proportionate stock splits or dividends, or (iii) in a Business
Combination to which this Article V did not apply, or (iv) in a Business
Combination to which this Article V did apply and which satisfied all of
the requirements of this Article V.
-7-
<PAGE>
4. After the Acquiring Entity has become an Acquiring Entity and
prior to the consummation of such Business Combination (i) there shall
have been no failure to declare and pay at the regular date therefor any
full periodic dividends, cumulative or not, on any outstanding Preferred
Stock of the Corporation and (ii) there shall have been (a) no reduction
in the annual rate of dividends paid on any class or series of stock of
the Corporation that is not Preferred Stock except as necessary to reflect
any subdivision of the stock, and (b) an increase in such annual rate of
dividends as necessary to reflect any reclassification, including any
reverse stock split, recapitalization, reorganization or similar
transaction which has the effect of reducing the number of outstanding
shares, provided that the provisions of this paragraph shall not apply if
neither the Acquiring Entity nor any of its Associates or Affiliates voted
as a director of the Corporation in a manner inconsistent with clauses (i)
and (ii) of this paragraph and the Acquiring Entity, within ten days after
the Acquiring Entity has actual or constructive knowledge of any act or
failure to act by the Board of Directors in a manner inconsistent with
such clauses, notifies the Board in writing that the Acquiring Entity
disapproves thereof and requests in good faith that the Board rectify such
act or failure to act.
5. After the time it became an Acquiring Entity, neither the
Acquiring Entity nor any of its Affiliates shall have (i) received the
benefit, directly or indirectly, of any loans, advances, extensions of
credit, guarantees, pledges or other financial assistance or tax benefits
provided, directly or indirectly, by the Corporation, or (ii) made or
caused to be made any major change in the Corporation's business or equity
capital structure without the unanimous approval of the directors of the
Corporation then in office.
6. A proxy statement complying with the requirements of the
Securities Exchange Act of 1934, or any similar or superseding federal
statute, as at the time in effect (whether or not the provisions of such
act or statute shall be applicable to the Corporation) shall be mailed to
shareholders of the Corporation for the purpose of soliciting shareholder
approval of the Business Combination and shall contain at the front
thereof, in a prominent place, any recommendations as to the advisability
(or inadvisability) of the Business Combination which any of the directors
may choose to state and
-8-
<PAGE>
an opinion of a reputable investment banking firm stating that the terms
of the Business Combination are fair from the point of view of both the
Corporation and the shareholders of the Corporation other than the
Acquiring Entity and any of its Affiliates.
7. The consideration to be received by holders of shares of a
particular class or series of outstanding capital stock of the Corporation
shall be in cash or in the same form as the Acquiring Entity or any of its
Affiliates has previously paid for shares of such class or series of
capital stock. If the Acquiring Entity or any of its Affiliates have paid
for shares of any class or series of capital stock of the Corporation with
varying forms of consideration, the form of consideration to be received
per share by holders of shares of such class or series shall be either in
cash or the form used to acquire the largest number of shares of such
class or series of capital stock previously acquired by the Acquiring
Entity or any of its Affiliates.
C. In addition to the vote of the holders of any class or series of stock
of the Corporation otherwise required by law or the Restated Articles of
Incorporation, no Business Combination shall be effected unless it is approved,
at a meeting of the Corporation's shareholders called for that purpose, by the
affirmative vote of the holders of voting securities, bonds, debentures or other
obligations representing eighty percent (80%) of the Total Voting Power,
excluding the Voting Power of all voting securities, bonds, debentures, or other
obligations beneficially owned by the Acquiring Entity and its Affiliates.
D. The provisions of this Article V shall not apply to a Business
Combination that (1) shall have been approved by a majority of the Continuing
Directors (as hereinafter defined); provided, however that this condition shall
not be capable of satisfaction unless there are at least three Continuing
Directors or (2) involves solely either (a) a transfer of all or substantially
all of the assets of the Corporation to a wholly-owned subsidiary of the
Corporation; or (b) a merger or consolidation of the Corporation with or into a
successor corporation or a sale of all or substantially all of the assets of the
Corporation to a successor corporation if both (i) immediately after such
transaction is consummated, every shareholder of the Corporation owns securities
of the successor corporation having at least the same percentage of voting power
in the successor corporation as the securities of the Corporation held by such
shareholder had in the Corporation immediately prior to the
-9-
<PAGE>
transaction and (ii) the Articles of Incorporation of such successor corporation
contain the provisions of this Article V, without any amendment, alteration or
deletion.
E. No amendment, alteration, change or repeal of any provision of this
Article V may be effected unless it is approved at a meeting of the
Corporation's shareholders called for that purpose. Notwithstanding any other
provision of the Restated Articles of Incorporation, there shall be required to
amend, alter, change or repeal, directly or indirectly, any provision of this
Article V the affirmative vote of the holders of voting securities, bonds,
debentures or other obligations representing eighty percent (80%) of the Voting
Power excluding the Voting Power of all voting securities, bonds, debentures or
other obligations beneficially owned by any Acquiring Entity.
F. This Corporation claims and shall have the benefits of La.R.S.
12:132-134; provided, however, that the provisions of La.R.S. 12:132-134 shall
not apply to any business combination (as defined in La.R.S. 12:132(4))
involving (1) any person or group of persons who would be, except for the
provisions of this Article V-F, an Interested Shareholder (as defined in La.R.S.
12:132(9)) on the date that this Corporation first has more than one hundred
shareholders, or (2) any transferee of all or substantially all of the voting
stock of the Corporation beneficially owned by such person or group of persons
on such date.
ARTICLE VI
BY-LAWS
A. The term "Continuing Director" shall mean any member of the Board of
Directors who is not an Acquiring Entity or an Affiliate or Associate of an
Acquiring Entity and who was a director of the Corporation prior to the time
that the Acquiring Entity became an Acquiring Entity, or who subsequently became
a director of the Corporation and whose election, or nomination for election by
the Corporation's shareholders, was approved by a majority of the Continuing
Directors then in office, either by a specific vote or by approval of the proxy
statement issued by the Corporation on behalf of the Board of Directors in which
such person is named as a proposed nominee for director.
B. By-laws of the Corporation may be adopted only by (i) a majority of the
entire Board of Directors at any time when there is no Acquiring Entity or (ii)
both a majority of the entire Board of Directors and a majority of the
Continuing Directors at any time when there is an Acquiring Entity. By-laws may
be amended or repealed only by (i) a
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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 Continuing Directors at any time when there is an Acquiring Entity, or (iii)
the affirmative vote of the holders of at least eighty percent (80%) of the
Total Voting Power at any regular or special meeting of shareholders the notice
of which expressly states that the proposed amendment or repeal is to be
considered at the meeting.
C. Any provision of the By-laws amended or repealed by the shareholders
may be re-amended or re-adopted in the manner provided in Article VI-B.
D. Any purported amendment to the By-laws which would add thereto a matter
not covered in the By-laws prior to such purported amendment shall be deemed to
constitute the adoption of a By-law provision and not an amendment to the
By-laws.
ARTICLE VII
CERTAIN TRANSACTIONS
A. Except as provided in Article V with respect to particular Business
Combinations, as defined therein, the affirmative vote of the holders of a
majority of the Voting Power present at a shareholders' meeting shall be
necessary to constitute shareholder approval whenever such approval is required
by law for a merger, consolidation, sale of assets or dissolution of the
Corporation.
B. Shareholders shall not have the power to confer upon the holders of any
bonds, debentures or other obligations issued or to be issued by the
Corporation, the power to vote for directors or on other matters.
ARTICLE VIII
AMENDMENTS
A. The affirmative vote of the holders of eighty percent (80%) of the
Total Voting Power shall be required to amend, alter, change or repeal any
provision of these Restated Articles of Incorporation; provided that this
Paragraph A shall be inapplicable to any amendment if the Board of Directors has
recommended such amendment by a vote of a majority of its members at a time when
there is no Acquiring Entity or of a majority of the Continuing Directors at a
time when there is an Acquiring Entity.
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B. Except as otherwise provided in Article III-B, Article V-E, Article
VIII-A, and Article IX-C, the affirmative vote of the holders of a majority of
the Voting Power present at a shareholders' meeting shall be required to amend
these Restated Articles of Incorporation.
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
A. No director or officer of the Corporation shall be liable to the
Corporation or to its shareholders for monetary damages for breach of his
fiduciary duty as a director or officer, provided that the foregoing provision
shall not eliminate or limit the liability of a director or officer for (1) any
breach of his duty of loyalty to the Corporation or its shareholders; (2) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) liability for unlawful distributions of the
Corporation's assets to, or redemption or repurchase of the Corporation's shares
from, shareholders of the Corporation, under and to the extent provided in
La.R.S. 12:92D; or (4) any transaction from which he derived an improper
personal benefit. If and to the extent the Louisiana law is amended to permit
further elimination or limitation of the liability of directors and officers,
then the liabilities of a director or officer of the Corporation shall be
eliminated or limited to the fullest extent permitted by the amended Louisiana
law.
B. The Board of Directors may (1) cause the Corporation to enter into
contracts with directors and officers providing for the limitation of liability
set forth in this Article IX and for indemnification of directors and officers
to the fullest extent permitted by law, (2) adopt by-laws or resolutions
providing for indemnification of directors, officers and other persons to the
fullest extent permitted by law and (3) cause the Corporation to exercise the
powers set forth in La.R.S. 12:83F, notwithstanding that some or all of the
members of the Board of Directors acting with respect to the foregoing may be
parties to such contracts or beneficiaries of such by-laws or resolutions.
C. Notwithstanding any other provisions of these Restated Articles of
Incorporation, the affirmative vote of at least eighty percent (80%) of the
Total Voting Power shall be required to amend or repeal this Article IX, and any
amendment or repeal of this Article IX shall not adversely affect any
elimination or limitation of liability of a director or officer of the
Corporation under this Article IX with respect to any action or inaction
occurring prior to the time of such amendment or repeal.
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D. No amendment or repeal of any by-law or resolution relating to
indemnification shall adversely affect any person's entitlement to
indemnification whose claim thereto results from conduct occurring prior to the
date of such amendment or repeal.
ARTICLE X
REVERSION
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares, which are not claimed by the shareholders entitled thereto
within one year after the dividend or redemption price became payable or the
shares became issuable, despite reasonable efforts by the Corporation to pay the
dividend or redemption price or deliver the certificates for the shares to such
shareholders within such time, shall, at the expiration of such time, revert in
full ownership to the Corporation, and the Corporation's obligation to pay such
dividend or redemption price or issue such shares, as the case may be, shall
thereupon cease; provided that the Board of Directors may, at any time, for any
reason satisfactory to it, but need not, authorize (A) payment of the amount of
any cash or property dividend or redemption price or (B) issuance of any shares,
ownership of which has reverted to the Corporation pursuant to this Article X,
to the person or entity who or which would be entitled thereto had such
reversion not occurred.
ARTICLE XI
SPECIAL MEETINGS OF SHAREHOLDERS
Special meetings of shareholders, for any purpose or purposes, may be
called in any manner set forth in the by-laws. In addition, at any time, upon
the written request of any shareholder or group of shareholders holding in the
aggregate at least eighty percent (80%) of the Total Voting Power, the Secretary
of the Corporation shall call a special meeting of shareholders to be held at
the registered office of the Corporation at such time as the Secretary may fix,
not less than fifteen nor more than sixty days after the receipt of said
request, and if the Secretary shall neglect or refuse to fix such time or to
give notice of the meeting, the shareholder or shareholders making the request
may do so. Such requests must state the specific purpose or purposes of the
proposed special meeting, and the business to be conducted thereat shall be
limited to such purpose or purposes.
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EXHIBIT 3.2
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
PRIDE PETROLEUM SERVICES, INC.
The undersigned Vice President and Secretary of Pride Petroleum
Services, Inc. do hereby certify that a resolution amending the Restated
Articles of Incorporation of the Corporation was duly adopted pursuant to
Louisiana R.S. ss.ss. 12:31-12:33 by the affirmative vote of the holders of at
least a majority of the voting power of the Corporation and of each class of
shares entitled to vote thereon (which, pursuant to Article VIII-B of such
Restated Articles of Incorporation, is the vote required to amend such Restated
Articles of Incorporation) at a meeting held on May 24, 1994, at which a quorum
was present.
12,602,306 shares of common stock (the only outstanding class of
stock) were represented at the meeting, of which 8,334,121 voted for the
amendment and 2,239,318 voted against the amendment.
Article III-A of the Restated Articles of Incorporation was amended
by said resolution to read in its entirety as follows:
"The total authorized capital stock of the Corporation is Forty
Million (40,000,000) shares of Common Stock of no par value per
share and Five Million (5,000,00) shares of Preferred Stock of no
par value per share."
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These Articles of Amendment are dated June 7, 1994.
/S/EUGENE C. FOWLER
Eugene C. Fowler
Vice President
/S/ROBERT W. RANDALL
Robert W. Randall
Secretary
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EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PRIDE PETROLEUM SERVICES, INC.
The undersigned President and Secretary of Pride Petroleum Services,
Inc. (the "Corporation") do hereby certify that a resolution amending the
Amended and Restated Articles of Incorporation of the Corporation was duly
adopted pursuant to Louisiana R.S. ss.ss. 12:31-12:33 and Article VIII(B) of
such Amended and Restated Articles of Incorporation by the affirmative vote of
the holders of a majority of the voting power of the Corporation present at a
special meeting of the shareholders of the Corporation duly called for such
purpose and held on March 5, 1997, at which a quorum of the voting power of the
Corporation was present in person or by proxy.
21,041,077 shares of common stock (the only outstanding class of
stock) were represented at the meeting, of which 20,161,532 voted for the
amendment and 879,545 voted against the amendment.
Article III(A) of the Restated Articles of Incorporation was amended
by said resolution to read in its entirety as follows:
"The total authorized capital stock of the Corporation is One
Hundred Million (100,000,000) shares of Common Stock of no par value
per share and Five Million (5,000,00) shares of Preferred Stock of
no par value per share."
These Articles of Amendment are dated March 5, 1997.
/S/PAUL A. BRAGG
Paul A. Bragg
President
/S/ROBERT W. RANDALL
Robert W. Randall
Secretary
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EXHIBIT 3.4
AMENDED AS OF FEBRUARY 11, 1997
BY-LAWS
OF
PRIDE PETROLEUM SERVICES, INC.
SECTION 1.
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be
located at 1500 City West Blvd., Suite 400, Houston, Texas 77042.
1.2 ADDITIONAL OFFICES. The Corporation may have such offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
SECTION 2.
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Unless otherwise required by law or these By-laws,
all meetings of the shareholders shall be held at the principal office of the
Corporation or at such other place, within or without the State of Louisiana, as
may be designated by the Board of Directors.
2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the shareholders
shall be held on the date in April and at the time specified by the Board of
Directors in each year. Notice of the annual meeting must state the purpose
thereof and the business to be conducted thereat shall be limited to such
purpose or purposes.
2.3 ELECTION OF DIRECTORS. Directors shall be elected at the annual
meeting in 1993 and at the annual meetings in every fifth calendar year
thereafter. Any shareholder may nominate a person to serve as director only by
complying with the proceedings set forth in the Restated Articles of the
Corporation.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called by the Chairman of the Board, the President
or the Board of Directors. At any time upon the written request of any
shareholder or group of shareholders holding in the aggregate at least eighty
percent (80%) of the Total Voting Power, as that term is defined in Article V of
the Restated Articles of Incorporation (the "Total Voting Power"), the Secretary
shall call a special meeting of shareholders to be held at the registered office
of the Corporation at such time as the Secretary may fix, not less than fifteen
nor more than sixty days after the receipt of said request, and if the Secretary
shall neglect or refuse to fix such time or to give notice of the meeting, the
shareholder or shareholders making the request may do so. Such request must
state the specific purpose or purposes
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of the proposed special meeting, and the business to be conducted thereat shall
be limited to such purpose or purposes.
2.5 NOTICE OF MEETINGS. Except as otherwise provided by law, the
authorized person or persons calling a shareholders' meeting shall cause written
notice of the time, place and purpose of the meeting to be given to all
shareholders entitled to vote at such meeting at least ten days and not more
than sixty days prior to the day fixed for the meeting.
2.6 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list of
shareholders entitled to vote, arranged alphabetically and certified by the
Secretary or by the agent of the Corporation having charge of transfers of
shares, showing the number and class of shares held by each such shareholder on
the record date for the meeting, shall be produced on the request of any
shareholder.
2.7 QUORUM. At all meetings of shareholders, the holders of a majority of
the Total Voting Power shall constitute a quorum, except that at any meeting the
notice of which sets forth any matter that, by law or specified percentage in
excess of a majority of the Total Voting Power of the Corporation, the holders
of that specified percentage shall constitute a quorum.
2.8 VOTING. When a quorum is present at any meeting, the vote of the
holders of a majority of the Voting Power (as defined in Article V of the
Restated Articles of Incorporation) present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which, by express provision of law or the Restated Articles of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Directors
shall be elected by plurality vote.
2.9 PROXIES. At any meeting of the shareholders, every shareholder having
the right to vote shall be entitled to vote in person or by proxy appointed by
an instrument in writing subscribed by such shareholder and bearing a date not
more than eleven months prior to the meeting, unless the instrument provides for
a longer period, but in no case will an outstanding proxy be valid for longer
than three years from the date of its execution and in no case may a proxy be
voted at a meeting called pursuant to La. R.S. 12:138 unless it is executed and
dated by the shareholder within 30 days of the date of such meeting. The person
appointed as proxy need not be a shareholder of the Corporation.
2.10 ADJOURNMENTS. Adjournments of any annual or special meeting of
shareholders may be taken without new notice being given unless a new record
date is fixed for the adjourned meeting, but any meeting at which directors are
to be elected shall be adjourned only from day to day until such directors shall
have been elected.
2.11 WITHDRAWAL. If a quorum is present or represented at a duly organized
meeting, such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough
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shareholders to leave less than a quorum as fixed in Section 2.7 of these
By-laws, or the refusal of any shareholders present to vote.
2.12 LACK OF QUORUM. If a meeting cannot be organized because a quorum has
not attended, those present may adjourn the meeting to such time and place as
they may determine, subject, however, to the provisions of Section 2.10 hereof.
In the case of any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less than a quorum as
fixed in Section 2.7 hereof, shall nevertheless constitute a quorum for the
purpose of electing directors.
2.13 PRESIDING OFFICER. The Chairman of the Board, or in his absence, the
President, shall preside at all shareholders' meetings.
SECTION 3.
DIRECTORS
3.1 NUMBER. All of the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by a Board of Directors
of eight (8) natural persons, provided that, if after proxy materials for any
meeting of shareholders at which directors are to be elected are mailed to
shareholders any person or persons named therein to be nominated at the
direction of the Board of Directors becomes unable or unwilling to serve, the
foregoing number of authorized directors shall be automatically reduced by a
number equal to the number of such persons unless the Board of Directors, by a
majority vote of the entire Board, selects an additional nominee or nominees.
The Board of Directors may, by a two-thirds vote, amend this Section 3.1 to
increase or decrease the number of directors, provided that no amendment to this
Section to decrease the number of directors shall shorten the term of any
incumbent director. The members of the Board of Directors shall be elected for
terms of five years and shall hold office until their successors are elected and
qualified. No director need be a shareholder.
3.2 POWERS. The Board may exercise all such powers of the Corporation and
do all such lawful acts and things which are not by law, the Restated Articles
of Incorporation or these By-laws directed or required to be done by the
shareholders.
3.3 VACANCIES. Except as otherwise provided in the Restated Articles of
Incorporation or these By-laws (a) the office of a director shall become vacant
if he dies, resigns or is removed from office and (b) the Board of Directors may
declare vacant the office of a director if he (i) is interdicted or adjudicated
an incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole opinion of the
Board of Directors becomes incapacitated by illness or other infirmity so that
he is unable to perform his duties for a period of six months or longer, or (iv)
ceases at any time to have the qualifications required by law, the Restated
Articles of Incorporation or these By-laws.
3.4 FILLING VACANCIES. In the event of a vacancy (including any vacancy
resulting from an increase in the authorized number of directors, or from
failure of the shareholders to elect the full
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number of authorized directors) the remaining directors, even though not
constituting a quorum, may, by a vote of at least two-thirds of such remaining
directors, fill any vacancy on the Board for an unexpired term, provided that
the shareholders shall have the right, at any special meeting called for the
purpose prior to such action by the Board, to fill the vacancy.
SECTION 4.
COMPENSATION OF DIRECTORS
Directors as such, shall receive such compensation for their services as
may be fixed by resolution of the Board of Directors and shall receive their
actual expenses of attendance, if any, for each regular or special meeting of
the Board; provided that nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 5.
MEETINGS OF THE BOARD
5.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be held
at such place within or without the State of Louisiana as a majority of the
directors may from time to time appoint.
5.2 INITIAL MEETINGS. The first meeting of each newly elected Board shall
be held immediately following the shareholders' meeting at which the Board is
elected and at the same place as such meeting, and no notice of such first
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting.
5.3 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be held on
such dates as the Board may fix from time to time. Notice of regular meetings of
the Board of Directors shall be required, but no special form of notice or time
of notice shall be necessary.
5.4 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be called
by the President on two days notice given to each director, either personally or
by telephone, mail or by telegram. Special meetings shall be called by the
President or Secretary in like manner and on like notice on the written request
of one-third of the directors and if the President and Secretary fail or refuse,
or are unable to call a meeting within 24 hours to call a meeting when
requested, then the directors making the request may call the meeting on two
days' written notice given to each director. The notice of a special meeting of
directors need not state its purpose or purposes, but if the notice states a
purpose or purposes, and does not state as a further purpose to consider such
other business as may properly come before the meeting, the business to be
conducted at the special meeting shall be limited to the purpose or purposes
stated in the notice.
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5.5 WAIVER OF NOTICE. Directors present at any regular or special meeting
shall be deemed to have received due, or to have waived, notice thereof,
provided that a director who participates in a meeting by telephone (as
permitted by Section 5.9 hereof) shall not be deemed to have received or waived
due notice if, at the beginning of the meeting, he objects to the transaction
because the meeting is not lawfully called.
5.6 QUORUM. A majority of the Board shall be necessary to constitute a
quorum for the transaction of business, and except as otherwise provided by law
or the Restated Articles of Incorporation or these By-laws, the acts of a
majority of the directors present at a meeting at which a quorum is present
shall be the acts of the Board. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
5.7 WITHDRAWAL. If a quorum is present when the meeting is convened, the
directors present may continue to do business, taking action by vote of a
majority of a quorum as fixed in Section 5.6 hereof, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
as fixed in Section 5.6 hereof or the refusal of any director present to vote.
5.8 ACTION BY CONSENT. Any action which may be taken at a meeting of the
Board or any committee thereof, may be taken by a consent in writing signed by
all of the directors or by all members of the committee, as the case may be, and
filed with the records of proceedings of the Board or committee.
5.9 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. Members of the Board
may participate at and be present at any meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment if
all persons participating in such meeting can hear and communicate with each
other.
SECTION 6.
COMMITTEES OF THE BOARD
6.1 DESIGNATION. The Board may designate one or more committees, each
committee to consist of two or more of the directors of the Corporation (and one
or more directors may be named as alternate members to replace any absent or
disqualified regular members), which, to the extent provided by resolution of
the Board or the By-laws, shall have and may exercise the powers of the Board in
the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to documents. Such
committee or committees shall have such name or names as may be stated in the
By-laws, or as may be determined, from time to time, by the Board. Any vacancy
occurring in any such committee shall be filled by the Board, but the President
may designate another director to serve on the committee pending action by the
Board. Each such member of a committee shall hold office during the term of the
Board constituting it, unless otherwise ordered by the Board.
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SECTION 7.
REMOVAL OF BOARD MEMBER
Any director or the entire Board of Directors may be removed at any time,
but only for cause, by the affirmative vote of not less than eighty percent
(80%) of the Total Voting Power, provided that the removal may only be effected
at a meeting of shareholders called for that purpose. The shareholders at such
meeting may proceed to elect a successor or successors for the unexpired term of
the director or directors removed. Except as provided in the Articles of
Incorporation and in this Section 7, directors shall not be subject to removal.
SECTION 8.
NOTICES
8.1 FORM OF DELIVERY. Whenever under the provisions of law, the Restated
Articles of Incorporation or these By-laws notice is required to be given to any
shareholder or director, it shall not be construed to mean personal notice
unless otherwise specifically provided in the Restated Articles of Incorporation
or these By-laws, but said notice may be given by mail, addressed to such
shareholder or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notices shall be deemed to have
been given at the time they are deposited in the United States mail. Notice to a
director pursuant to Section 5.4 hereof may also be given personally or by
telephone or telegram sent to his address as it appears on the records of the
Corporation.
8.2 WAIVER. Whenever any notice is required to be given by law, the
Restated Articles of Incorporation or these By-laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto. In addition, notice
shall be deemed to have been given to, or waived by, any shareholder or director
who attends a meeting of shareholders or directors in person, or is represented
at such meeting by proxy, without protesting at the commencement of the meeting
the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 9.
OFFICERS
9.1 DESIGNATIONS. The officers of the Corporation shall be chosen by the
directors and shall be a President, a Secretary and a Treasurer. The directors
may elect one or more Vice Presidents. Any two offices may be held by one
person, provided that no person holding more than one office may sign, in more
than one capacity, any certificate or other instrument required by law to be
signed by two officers.
9.2 ADDITIONAL DESIGNATIONS. The Board of Directors may appoint such other
officers as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
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9.3 TERM OF OFFICE. The officers of the Corporation shall hold office at
the pleasure of the Board of Directors.
9.4 THE PRESIDENT. The President shall have general and active management
of the business of the Corporation. If a Chairman of the Board of Directors has
not been elected or is incapacitated, the President, if a director, shall
preside at all meetings of the Board.
9.5 THE VICE-PRESIDENTS. The Vice-Presidents (if any) in the order
specified by the Board or, if not so specified, in the order of their seniority
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President, and shall perform such other duties as the
President or the Board of Directors shall prescribe.
9.6 THE SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose. He shall give,
or cause to be given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may be prescribed
by the Board or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation, if any, and affix the same to any
instrument requiring it.
9.7 THE TREASURER. The Treasurer shall have the custody of the corporate
funds and shall keep or cause to be kept full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
He shall keep a proper accounting of all receipts and disbursements and shall
disburse the funds of the Corporation only for proper corporate purposes or as
may be ordered by the Board and shall render to the President and the Board at
the regular meetings of the Board, or whenever they may require it, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation.
SECTION 10.
STOCK
10.1 CERTIFICATES. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by the President or a Vice President and
the Secretary or an Assistant Secretary evidencing the holder's name, the number
and class (and series, if any) of shares owned by him, containing such
information as required by law and bearing the seal of the Corporation. If any
stock certificate is manually signed by a transfer agent or registrar other than
the Corporation itself or an employee of the Corporation, the signature of any
such officer may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
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10.2 MISSING CERTIFICATES. The President or any Vice President may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the officers of the
Corporation shall, unless dispensed with by the President, as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative to advertise
or give the Corporation a bond in such sum as is appropriate as indemnity any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
10.3 TRANSFERS. Upon surrender to the Corporation or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
SECTION 11.
DETERMINATION OF SHAREHOLDERS
11.1 RECORD DATE. For the purpose of determining shareholders entitled to
notice of and to vote at a meeting, or to receive a dividend, or to receive or
exercise subscription or other rights, or to participate in a reclassification
of stock, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a record date for
determination of shareholders for such purpose, such date to be not more than
sixty days and, if fixed for the purpose of determining shareholders entitled to
notice of and to vote at a meeting, not less than ten days, prior to the date on
which the action requiring the determination of shareholders is to be taken.
11.2 REGISTERED SHAREHOLDERS. Except as otherwise provided by law, the
Corporation, and its directors, officers and agents, may recognize and treat a
person registered on its records as the owner of shares, as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares, and
rights under this Section shall not be affected by any actual or constructive
notice which the Corporation, or any of its directors, officers or agents, may
have to the contrary.
SECTION 12.
MISCELLANEOUS
12.1 DIVIDENDS. Except as otherwise provided by law or the Restated
Articles of Incorporation, dividends upon the stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting. Dividends
may be paid in cash, in property, or in shares of stock.
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<PAGE>
12.2 CHECKS. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate. Signatures of the
authorized signatories may be by facsimile.
12.3 FISCAL YEAR. The fiscal Corporation will be a calendar year.
12.4 SEAL. The Board of Directors may adopt a corporate seal, which seal
shall have inscribed thereon the name of the Corporation. Said seal may be used
by causing lt or a facsimile thereof to be impressed or affixed or reproduced or
otherwise. Failure to affix the seal shall not, however, affect the validity of
any instrument.
12.5 GENDER. All pronouns and variations thereof used in these By-laws
shall be deemed to refer to the masculine, feminine or neuter gender, singular
or plural, as the identity of the person, persons, entity or entities referred
to require.
SECTION 13.
INDEMNIFICATION
13.1 DEFINITIONS. As used in this Section:
(a) The term "Expenses" shall mean any expenses or costs (including,
without limitation, attorneys' fees, judgments, punitive or
exemplary damages, fines and amounts paid in settlement). If any of
the foregoing amounts paid on behalf of Indemnitee are not
deductible by Indemnitee for federal or state income tax purposes,
the Corporation will reimburse Indemnitee for his tax liability with
respect thereto by paying to Indemnitee an amount which, after
taking into account taxes on such amount, equals Indemnitee's
incremental tax liability.
(b) The term "Claim" shall mean any threatened, pending or completed
claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether made judicially or
extra-judicially, or any separate issue or matter therein, as the
context requires.
(c) The term "Determining Body" shall mean (i) those members of the
Board of Directors who are not named as parties to the Claim for
which indemnification is being sought ("Impartial Directors"), if
there are at least three Impartial Directors, or (ii) a committee of
at least three directors appointed by the Board of Directors
(regardless whether the members of the Board of Directors voting on
such appointment are Impartial Directors) and composed of Impartial
Directors or (iii) if there are fewer than three Impartial Directors
or if the Board of Directors or a committee appointed thereby so
directs (regardless of whether the members thereof are Impartial
Directors), independent legal counsel, which may be the regular
outside counsel of the Corporation.
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(d) The term "Indemnitee" shall mean each director and officer and
each former director and officer of the Corporation, of any
subsidiary of the Corporation or of Pride Oil Well Service Company,
a Texas corporation (the "Predecessor Corporation") and any
subsidiary of the Predecessor Corporation.
(e) The "Standard of Conduct" shall mean conduct by an Indemnitee
with respect to which a Claim is asserted which conduct he
reasonably believed to be in, or not opposed to, the best interest
of the Corporation, and, in the case of a Claim which is a criminal
action or proceeding, conduct that the Indemnitee had no reasonable
cause to believe was unlawful. The termination of any Claim by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not meet the Standard of Conduct.
13.2 INDEMNITY.
(a) To the extent any Expenses incurred by Indemnitee are in excess
of the amounts reimbursed or indemnified pursuant to policies of
liability insurance maintained by the Corporation or its
subsidiaries, the Corporation shall indemnify and hold harmless
Indemnitee against any such Expenses actually and reasonably
incurred in connection with any Claim against Indemnitee (whether as
a subject of or party to, or a proposed or threatened subject of or
party to, the Claim) or in which Indemnitee is involved solely as a
witness or person required to give evidence, by reason of his
position
(i) as a director or officer of the Corporation,
(ii) as a (A) director or officer of the Predecessor
Corporation or (B) director or officer of any subsidiary of
the Corporation or the Predecessor Corporation which was a
subsidiary of the Corporation or the Predecessor Corporation
when the conduct or alleged conduct of Indemnitee giving rise
to the Claim occurred or when Indemnitee held the position by
reason of which Indemnitee is required to appear as a witness
or give evidence, or (C) fiduciary with respect to any
employee benefit plan of the Corporation or
(iii) as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other for
profit or not for profit entity or enterprise, if such
position is was held at the request of the Corporation,
whether relating to service in such position before or after the
effective date of this Section 13, if (A) the Indemnitee is
successful in his defense of the Claim on the merits or otherwise or
(B) the Indemnitee has been found by the Determining Body (acting in
good faith) to have met the Standard of Conduct; provided that (1)
the amount of Expenses for which the Corporation shall indemnify
Indemnitee may be
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reduced by the Determining Body to such amount as it deems proper if
it determines in good faith that the Claim involved the receipt of a
personal benefit by Indemnitee and (2) no indemnification shall be
made in respect of any Claim as to which Indemnitee shall have been
adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for willful or intentional
misconduct in the performance of his duty to the Corporation or to
have obtained an improper personal benefit, unless, and only to the
extent that, a court shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such Expenses as the court shall deem proper; and
provided further that, if the Claim involves Indemnitee by reason of
his position with an entity or enterprise described in clause (ii)
or (iii) of this Section 13.2(a) and if Indemnitee may be entitled
to indemnification with respect to such Claim from such entity or
enterprise, Indemnitee shall be entitled to indemnification
hereunder only (X) if he has applied to such entity or enterprise
for indemnification with respect to the Claim and (Y) to the extent
that indemnification to which he would be entitled hereunder but for
this proviso exceeds the indemnification paid by such other entity
or enterprise.
(b) Promptly upon becoming aware of the existence of any Claim,
Indemnitee shall notify the President of the existence of the Claim,
who shall promptly advise the members of the Board of Directors
thereof and that establishing the Determining Body will be a matter
presented at the next regularly scheduled meeting or at a special
meeting of the Board of Directors. After the Determining Body has
been established, the President shall inform Indemnitee thereof and
Indemnitee shall immediately notify the Determining Body of all
facts relevant to the Claim known to such Indemnitee. Within 60 days
of the receipt of such notice and information, together with such
additional information as the Determining Body may request of
Indemnitee, the Determining Body shall report to Indemnitee its
determination whether Indemnitee has met the Standard of Conduct.
The Determining Body may extend the period of time for determining
whether the Standard of Conduct has been met, but in no event shall
such period of time be extended beyond an additional sixty days.
(c) If, after determining that the Standard of Conduct has been met,
the Determining Body obtains facts of which it was not aware at the
time it made such determination, the Determining Body on its own
motion, after notifying the Indemnitee and providing him an
opportunity to be heard, may, on the basis of such facts, revoke
such determination, provided that, in the absence of actual fraud by
Indemnitee, no such revocation may be made later than thirty days
after final disposition of the Claim.
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<PAGE>
(d) Indemnitee shall promptly inform the Determining Body upon his
becoming aware of any relevant facts not theretofore provided by him
to the Determining Body, unless the Determining Body has obtained
such facts by other means.
(e) In the case of any Claim not involving a proposed, threatened or
pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment of the
Determining Body, met the Standard of Conduct, the Corporation
may, in its sole discretion, assume all responsibility for the
defense of the Claim, and, in any event, the Corporation and
Indemnitee each shall keep the other informed as to the
progress of the defense of the Claim, including prompt
disclosure of any proposals for settlement; provided that if
the Corporation is a party to the Claim and Indemnitee
reasonably determines that there is a conflict between the
positions of the Corporation and Indemnitee with respect to
the Claim, then Indemnitee shall be entitled to conduct his
defense with counsel of his choice; and provided further that
Indemnitee shall in any event be entitled at his expense to
employ counsel chosen by him to participate in the defense of
the Claim; and
(ii) the Corporation shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Corporation
proposes a settlement of the Claim and such settlement is
acceptable to the person asserting the Claim, or the
Corporation believes a settlement proposed by the person
asserting the Claim should be accepted, it shall inform
Indemnitee of the terms of such proposed settlement and shall
fix a reasonable date by which Indemnitee shall respond. If
Indemnitee agrees to such terms, he shall execute such
documents as shall be necessary to make final the settlement.
If Indemnitee does not agree with such terms, Indemnitee may
proceed with the defense of the Claim in any manner he
chooses, provided that if Indemnitee is not successful on the
merits or otherwise, the Corporation's obligation to indemnify
such Indemnitee as to any Expenses incurred following his
disagreement shall be limited to the lesser of (A) the total
Expenses incurred by Indemnitee following his decision not to
agree to such proposed settlement or (B) the amount that the
Corporation would have paid pursuant to the terms of the
proposed settlement. If, however, the proposed settlement
would impose upon Indemnitee any requirement to act or refrain
from acting that would materially interfere with the conduct
of Indemnitee's affairs, Indemnitee shall be permitted to
refuse such settlement and proceed with the defense of the
Claim, if he so desires, at the Corporation's expense in
accordance with the terms and conditions of this Section of
the By-laws without regard to the limitations imposed by the
immediately preceding sentence. In any event, the
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<PAGE>
Corporation shall not be obligated to indemnify Indemnitee for
an amount paid in a settlement that the Corporation has not
approved.
(f) In the case of a Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct
the defense of the Claim and to make all decisions with respect
thereto, with counsel of his choice; provided that the Corporation
shall not be obligated to indemnify Indemnitee for an amount paid in
settlement that the Corporation has not approved.
(g) After notification to the Corporation of the existence of a
Claim, Indemnitee may from time to time request of the President or,
if the President is a party to the Claim as to which indemnification
is being sought, any officer who is not a party to the Claim and who
is designated by the President (the "Disbursing Officer"), which
designation shall be made promptly after receipt of the initial
request, that the Corporation advance to Indemnitee the Expenses
(other than fines, penalties, judgments or amounts paid in
settlement) that he incurs in pursuing a defense of the Claim prior
to the time that the Determining Body determines whether the
Standard of Conduct has been met. The Disbursing Officer shall pay
to Indemnitee the amount requested (regardless of Indemnitee's
apparent ability to repay the funds) upon receipt of an undertaking
by or on behalf of Indemnitee to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified
by the Corporation under the circumstances, provided that if the
Disbursing Officer does not believe such amount to be reasonable, he
shall advance the amount deemed by him to be reasonable and
Indemnitee may apply directly to the Determining Body for the
remainder of the amount requested.
(h) After a determination that the Standard of Conduct has been met,
for so long as and to the extent that the Corporation is required to
indemnify Indemnitee under this Section of the By-laws, the
provisions of subsection (g) shall continue to apply with respect to
Expenses incurred after such time except that (i) no undertaking
shall be required of Indemnitee and (ii) the Disbursing Officer
shall pay to Indemnitee the amount of any fines, penalties or
judgments against him which have become final for which the
Corporation is obligated to indemnify him or any amount of
indemnification ordered to be paid to him by a court.
(i) Any determination by the Corporation with respect to settlement
of a Claim shall be made by the Determining Body.
(j) The Corporation and Indemnitee shall keep confidential to the
extent permitted by law and their fiduciary obligations all facts
and determinations provided pursuant to or arising out of the
operation of this Section of the By-laws and the Corporation and
Indemnitee shall instruct its or his agents and employees to do
likewise.
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<PAGE>
13.3 ENFORCEMENT.
(a) The rights provided by this Section of the By-laws shall be
enforceable by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights under
this Section of the By-laws, Indemnitee shall be entitled to recover
from the Corporation, and shall be indemnified by the Corporation
against, any and all Expenses actually and reasonably incurred by
him in connection with such proceeding, but only if he prevails
therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the relief sought, then Indemnitee shall
be entitled to be reimbursed for all Expenses incurred by him in
connection with such proceeding if the indemnification amount to
which he is determined to be entitled exceeds 50% of the amount of
his claim. Otherwise, the Expenses incurred by Indemnitee in
connection with such judicial adjudication shall be appropriately
prorated.
(c) In any judicial proceeding described in this Section 13.3, the
Corporation shall bear the burden of proving that Indemnitee is not
entitled to Expenses sought with respect to any Claim.
13.4 SAVING CLAUSE. If any provision of this Section of the By-laws is
determined by a court having jurisdiction over the matter to require the
Corporation to do or refrain from doing any act that is in violation of
applicable law, the court shall be empowered to modify or reform such provision
so that, as modified or reformed, such provision provides the maximum
indemnification permitted by law and such provision, as so modified or reformed,
and the balance of this Section shall be applied in accordance with their terms.
Without limiting the generality of the foregoing, if any portion of this Section
of the By-laws shall be invalidated on any ground, the Corporation shall
nevertheless indemnify an Indemnitee to the full extent permitted by any
applicable portion of this Section of the By-laws that shall not have been
invalidated and to the full extent permitted by law with respect to that portion
that has been invalidated.
13.5 NON-EXCLUSIVITY.
(a) The indemnification and payment of Expenses provided by or
granted pursuant to this Section of the By-laws shall not be deemed
exclusive of any other rights to which Indemnitee is or may become
entitled under any statute, article of incorporation, bylaw,
authorization of shareholders or directors, agreement or otherwise.
(b) It is the intent of the Corporation by this Section of the
By-laws to indemnify and hold harmless Indemnitee to the fullest
extent permitted by law, so that if applicable law would permit the
Corporation to provide broader indemnification rights than are
currently permitted, the Corporation shall indemnify and hold
harmless Indemnitee
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to the fullest extent permitted by applicable law notwithstanding
that the other terms of this Section of the By-laws would provide
for lesser indemnification.
13.6 SUCCESSORS AND ASSIGNS. This Section of the By-laws shall be binding
upon the Corporation, its successors and assigns and shall inure to the benefit
of Indemnitee's heirs and personal representatives.
13.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnity any
person not a director or officer of the Corporation to the extent authorized by
the Board of Directors or a committee of the Board expressly authorized by the
Board of Directors.
SECTION 14.
AMENDMENTS
14.1 ADOPTION OF BY-LAWS; AMENDMENTS THEREOF. By-laws of the Corporation
may be adopted only by (i) a majority of the entire Board of Directors at any
time when there is no Acquiring Entity (as defined in the Restated Articles of
Incorporation) or (ii) both a majority of the entire Board of Directors and a
majority of the Continuing Directors (as defined in the Restated Articles of
Incorporation) at any time when there is an Acquiring Entity. By-laws 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 and a majority of the Continuing Directors at any time when there is an
Acquiring Entity, or (iii) the affirmative vote of the holders of at least
eighty percent (80%) of the Total Voting Power at any regular or special meeting
of shareholders, the notice of which expressly states that the proposed
amendment or repeal is to be considered at the meeting.
14.2 READOPTION BY BOARD OF DIRECTORS. Any provision of these By-laws
amended or repealed by the shareholders may be re-amended or re-adopted in the
manner provided in Section 14.1.
14.3 NEW BY-LAWS; AMENDMENTS. Any purported amendment to these By-laws
which would add hereto a matter not covered herein prior to such purported
amendment shall be deemed to constitute the adoption of a Bylaw provision and
not an amendment to the By-laws.
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EXHIBIT 4.7
******************************************************************************
CREDIT AGREEMENT
Dated as of March 6, 1997
among
PRIDE PETROLEUM SERVICES, INC.,
as Borrower,
FIRST NATIONAL BANK OF COMMERCE,
as Arranger and Syndication Agent,
and
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
as Administrative and Documentation Agent
$100,000,000
OF CREDIT FACILITIES
******************************************************************************
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS......................................................1
Section 1.1 DEFINITIONS.............................................1
Section 1.2 OTHER DEFINITIONAL PROVISIONS..........................20
ARTICLE II ADVANCES........................................................20
Section 2.1 ADVANCES...............................................20
Section 2.2 NOTES..................................................20
Section 2.3 REPAYMENT OF ADVANCES..................................21
Section 2.4 INTEREST...............................................21
Section 2.5 BORROWING PROCEDURE....................................21
Section 2.6 CONVERSIONS AND CONTINUATIONS..........................22
Section 2.7 USE OF PROCEEDS........................................22
Section 2.8 COMMITMENT FEE.........................................23
Section 2.9 VOLUNTARY REDUCTION OR TERMINATION OF COMMITMENTS......23
Section 2.10 MANDATORY COMMITMENT REDUCTIONS AND PRINCIPAL PAYMENTS.23
Section 2.11 LENDERS' COMMITMENT REDUCTION..........................23
Section 2.12 ADMINISTRATIVE FEE.....................................24
ARTICLE III LETTERS OF CREDIT...............................................24
Section 3.1 LETTERS OF CREDIT......................................24
Section 3.2 PROCEDURE FOR ISSUING LETTERS OF CREDIT................24
Section 3.3 PARTICIPATION BY LENDERS...............................25
Section 3.4 PAYMENTS CONSTITUTE ADVANCES...........................25
Section 3.5 LETTER OF CREDIT FEE...................................25
Section 3.6 ISSUER'S RESPONSIBILITIES..............................25
Section 3.7 LETTER OF CREDIT DOCUMENTS.............................26
ARTICLE IV PAYMENTS........................................................26
Section 4.1 METHOD OF PAYMENT......................................26
Section 4.2 VOLUNTARY PREPAYMENT...................................26
Section 4.3 MANDATORY PREPAYMENT...................................27
Section 4.4 PRO RATA TREATMENT.....................................27
Section 4.5 NON-RECEIPT OF FUNDS...................................27
Section 4.6 WITHHOLDING TAXES......................................28
Section 4.7 WITHHOLDING TAX EXEMPTION..............................28
Section 4.8 AUTOMATIC PAYMENT......................................28
ARTICLE V YIELD PROTECTION; LIMITATIONS ON ADVANCES;
CAPITAL ADEQUACY.....................................29
Section 5.1 ADDITIONAL COSTS.......................................29
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.2 LIMITATION ON TYPES OF ADVANCES........................30
Section 5.3 ILLEGALITY.............................................31
Section 5.4 SUBSTITUTE BASE RATE ADVANCES..........................31
Section 5.5 COMPENSATION...........................................31
Section 5.6 CAPITAL ADEQUACY.......................................32
Section 5.7 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT.......32
ARTICLE VI SECURITY........................................................33
Section 6.1 COLLATERAL.............................................33
Section 6.2 SETOFF.................................................34
Section 6.3 OTHER SUBSIDIARIES.....................................34
ARTICLE VII CONDITIONS PRECEDENT...................................35
Section 7.1 INITIAL EXTENSION OF CREDIT............................35
Section 7.2 ALL EXTENSIONS OF CREDIT...............................38
ARTICLE VIII REPRESENTATIONS AND WARRANTIES.........................38
Section 8.1 EXISTENCE AND AUTHORITY................................38
Section 8.2 FINANCIAL STATEMENTS...................................39
Section 8.3 CORPORATE ACTION; NO BREACH............................39
Section 8.4 OPERATION OF BUSINESS..................................39
Section 8.5 LITIGATION AND JUDGMENTS...............................40
Section 8.6 RIGHTS IN PROPERTIES; LIENS............................40
Section 8.7 ENFORCEABILITY.........................................40
Section 8.8 APPROVALS..............................................40
Section 8.9 DEBT...................................................40
Section 8.10 TAXES..................................................40
Section 8.11 USE OF PROCEEDS; MARGIN SECURITIES.....................41
Section 8.12 ERISA..................................................41
Section 8.13 DISCLOSURE.............................................41
Section 8.14 SUBSIDIARIES; FOREIGN AFFILIATES.......................41
Section 8.15 AGREEMENTS.............................................42
Section 8.16 COMPLIANCE WITH LAWS...................................42
Section 8.17 INVESTMENT COMPANY ACT.................................42
Section 8.18 PUBLIC UTILITY HOLDING COMPANY ACT.....................42
Section 8.19 ENVIRONMENTAL MATTERS..................................42
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<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IX AFFIRMATIVE COVENANTS...........................................42
Section 9.1 REPORTING REQUIREMENTS.................................43
Section 9.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS..........44
Section 9.3 MAINTENANCE OF PROPERTIES..............................45
Section 9.4 TAXES AND CLAIMS.......................................45
Section 9.5 INSURANCE..............................................45
Section 9.6 INSPECTION RIGHTS......................................45
Section 9.7 KEEPING BOOKS AND RECORDS..............................46
Section 9.8 COMPLIANCE WITH LAWS AND AGREEMENTS....................46
Section 9.9 FURTHER ASSURANCES.....................................46
Section 9.10 ERISA..................................................46
ARTICLE X NEGATIVE COVENANTS..............................................46
Section 10.1 DEBT...................................................46
Section 10.2 LIMITATION ON LIENS....................................47
Section 10.3 MERGERS, ACQUISITIONS, ETC.............................48
Section 10.4 RESTRICTED PAYMENTS....................................49
Section 10.5 LOANS AND INVESTMENTS..................................49
Section 10.6 TRANSACTIONS WITH AFFILIATES...........................50
Section 10.7 DISPOSITION OF ASSETS..................................50
Section 10.8 SALE AND LEASEBACK.....................................50
Section 10.9 NATURE OF BUSINESS.....................................50
Section 10.10 ENVIRONMENTAL PROTECTION...............................50
Section 10.11 ACCOUNTING.............................................51
ARTICLE XI FINANCIAL COVENANTS.............................................51
Section 11.1 FUNDED DEBT TO EBITDA..................................51
Section 11.2 FUNDED DEBT TO CAPITALIZATION..........................51
Section 11.3 COVERAGE RATIO.........................................51
Section 11.4 TANGIBLE NET WORTH.....................................51
ARTICLE XII DEFAULT................................................52
Section 12.1 EVENTS OF DEFAULT......................................52
Section 12.2 REMEDIES UPON DEFAULT..................................54
Section 12.3 CASH COLLATERAL........................................54
Section 12.4 PERFORMANCE BY THE ADMINISTRATIVE AGENT................55
ARTICLE XIII THE AGENTS.............................................55
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<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
Section 13.1 APPOINTMENT, POWERS AND IMMUNITIES.....................55
Section 13.2 RIGHTS OF AGENTS AS LENDERS............................57
Section 13.3 SHARING OF PAYMENTS, ETC...............................57
Section 13.4 INDEMNIFICATION........................................58
Section 13.5 INDEPENDENT CREDIT DECISIONS...........................58
Section 13.6 SEVERAL COMMITMENTS....................................59
Section 13.7 SUCCESSOR ADMINISTRATIVE AGENT.........................59
ARTICLE XIV MISCELLANEOUS..........................................59
Section 14.1 EXPENSES...............................................59
Section 14.2 INDEMNIFICATION........................................60
Section 14.3 LIMITATION OF LIABILITY................................61
Section 14.4 NO FIDUCIARY RELATIONSHIP..............................61
Section 14.5 NO WAIVER; CUMULATIVE REMEDIES.........................61
Section 14.6 SUCCESSORS AND ASSIGNS.................................61
Section 14.7 SURVIVAL...............................................64
Section 14.8 ENTIRE AGREEMENT.......................................64
Section 14.9 AMENDMENTS, ETC........................................65
Section 14.10 MAXIMUM INTEREST RATE..................................65
Section 14.11 NOTICES................................................66
Section 14.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS...............66
Section 14.13 COUNTERPARTS...........................................66
Section 14.14 SEVERABILITY...........................................67
Section 14.15 HEADINGS...............................................67
Section 14.16 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE.....67
Section 14.17 CONSTRUCTION...........................................67
Section 14.18 INDEPENDENCE OF COVENANTS..............................67
Section 14.19 WAIVER OF JURY TRIAL...................................67
Section 14.20 ARBITRATION............................................67
Section 14.21 SPECIAL PROVISION......................................69
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 6, 1997, is among PRIDE PETROLEUM
SERVICES, INC., a Louisiana corporation (the "Borrower"), each of the banks or
other lending institutions which is or may from time to time become a signatory
hereto or any successor or permitted assignee thereof (each a "Lender" and,
collectively, the "Lenders"), FIRST NATIONAL BANK OF COMMERCE, a national
banking association ("FNBC"), as arranger and syndication agent for the Lenders
(in such capacity, together with its successors in such capacity, the
"Syndication Agent"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, a
national banking association ("Wells"), as administrative and documentation
agent for the Lenders and as issuer of Letters of Credit hereunder (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
R E C I T A L S:
The Borrower has requested the Lenders to extend credit to the Borrower in
the form of revolving credit advances and letters of credit not to exceed an
aggregate principal amount of $100,000,000 at any time outstanding. The Lenders
are willing to make such extensions of credit to the Borrower upon the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"AAA" has the meaning specified in Section 14.20(b).
"ACCEPTABLE COLLATERAL" means one or more marine or domestic assets
reasonably acceptable in all respects to the Administrative Agent using
its reasonable business judgment, having a fair market value (as
determined by an appraisal reasonably acceptable in form and substance to
the Administrative Agent) of not less than $40,000,000.
"ADDITIONAL COSTS" has the meaning specified in Section 5.1.
"ADMINISTRATIVE AGENT" has the meaning specified in the introductory
paragraph hereof.
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<PAGE>
"ADVANCE" means an advance of funds by the Lenders or any one of
them to the Borrower pursuant to Article II or Section 3.4.
"ADVANCE REQUEST FORM" means a certificate, in substantially the
form of Exhibit "A" hereto, properly completed and signed by the Borrower
requesting an Advance.
"AFFILIATE" means, as to any Person, any other Person that directly
or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or
otherwise; PROVIDED, however, in no event shall any Agent or any Lender be
deemed an Affiliate of the Borrower, any of the Subsidiaries, or any of
the Foreign Affiliates.
"AGENTS" means, collectively, the Administrative Agent and the
Syndications Agent.
"APPLICABLE FOREIGN ADVANCE RATE" means the percentage of Eligible
Foreign Accounts to be included in the Borrowing Base, as determined in
accordance herewith and calculating the value of those not payable in
Dollars at their Dollar-equivalent using the applicable Exchange Rate.
From the date hereof until September 1, 1997, the Applicable Foreign
Advance Rate for each of the following types of Eligible Foreign Accounts
shall be the percentage indicated therefor in the table set forth below:
ELIGIBLE FOREIGN APPLICABLE FOREIGN
ACCOUNT ADVANCE RATE
- --------------------------------------------------------------------------------
Majors/Nationals ................................................ 80%
Argentina Accounts .............................................. 50%
Venezuela Accounts .............................................. 40%
Colombia Accounts ............................................... 50%
Other Countries Accounts ........................................ 30%
On September 1, 1997 and on each March 1 and September 1 thereafter the
Administrative Agent shall have the right to adjust the Applicable Foreign
Advance Rates for the various types of Eligible Foreign Accounts and to
identify other categories of Eligible Foreign Accounts with different
Applicable Foreign Advance Rates. The adjustment and determination of the
Applicable Foreign Advance Rates shall be made by the Administrative Agent
using its reasonable business judgment, with the concurrence of the
Lenders taking into account such factors and criteria as Administrative
Agent shall reasonably deem relevant. The above-specified types of
Eligible Foreign Accounts are defined below:
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<PAGE>
"MAJORS/NATIONALS" means accounts receivable of the Borrower
or a Subsidiary that are owing from foreign operations of major
United States petroleum companies, national oil companies of various
jurisdictions, other international oil companies and other major oil
companies that have been pre-approved by the Administrative Agent at
80% Foreign Advance Rate, all as identified by the Borrower on
Schedule 1.1, together with such other petroleum companies as the
Administrative Agent and the Lenders may approve in writing from
time to time.
"ARGENTINA ACCOUNTS" means accounts receivable of the Borrower
or a Subsidiary that originate or arise in Argentina or are owed by
an Argentina account debtor, other than Majors/Nationals.
"VENEZUELA ACCOUNTS" means accounts receivable of the Borrower
or a Subsidiary that originate or arise in Venezuela or are owed by
a Venezuela account debtor, other than Majors/Nationals.
"COLOMBIA ACCOUNTS" means accounts receivable of the Borrower
or a Subsidiary that originate or arise in Colombia or are owed by a
Colombia account debtor, other than Majors/Nationals.
"OTHER COUNTRIES ACCOUNTS" means accounts receivable the
Borrower or a Subsidiary that originate or arise in a country other
than the United States, Argentina, Venezuela and Colombia, or are
owed by an account debtor located or domiciled in such other
country, other than Majors/Nationals.
"APPLICABLE LENDING OFFICE" means for each Lender and each Type of
Advance, the lending office of such Lender (or of an Affiliate of such
Lender) designated for such Type of Advance below its name on the
signature pages hereof or such other office of such Lender (or of an
Affiliate of such Lender) as such Lender may from time to time specify to
the Borrower and the Administrative Agent as the office by which its
Advances of such Type are to be made and maintained.
"APPLICABLE MARGIN" means, for any day, (a) with respect to
Eurodollar Advances, the marginal interest rate over the Eurodollar Rate
that is applicable when any Applicable Rate based on the Eurodollar Rate
is determined under this Agreement, and (b) with respect to Base Rate
Advances, the marginal interest rate over the Base Rate that is applicable
when any Applicable Rate based on the Base Rate is determined under this
Agreement. The Applicable Margin shall be 2% for Eurodollar Advances and
0.50% for Base Rate Advances from the date hereof through December 31,
1997. Beginning January 1, 1998, the Applicable Margin is subject to
adjustment (upwards or downwards, as appropriate), as indicated in the
table and text set forth below:
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<TABLE>
<CAPTION>
S&P/MOODY'S
RATIO OF RATING OF BORROWER'S APPLICABLE MARGIN APPLICABLE MARGIN
FUNDED DEBT TO UNSECURED FOR EURODOLLAR FOR BASE
EBITDA SENIOR DEBT ADVANCES RATE ADVANCES
------ ----------- -------- -------------
<S> <C> <C> <C>
Less than 1.50 to 1.00 BBB-/Baa3 or higher 1.25% 0.50%
Greater than or equal to 1.50 to BB to BB+/ 1.50% 0.50%
1.00, but less than 2.00 to 1.00 Ba2 to Ba3
Greater than or equal to 2.00 to BB-/Ba1 1.75% 0.50%
1.00, but less than 2.50 to 1.00
Greater than or equal to 2.50 to
1.00 B+/B1 2.00% 0.50%
</TABLE>
On January 1, 1998 and on each Quarterly Payment Date thereafter, the
Applicable Margin shall be adjusted to reflect the Applicable Margin which
is the lower of (a) the Applicable Margin prescribed above for the ratio
of the Funded Debt to EBITDA for the most recently ended Rolling Period
demonstrated by the most recently delivered Compliance Certificate, or (b)
the Applicable Margin prescribed above for the S&P and Moody's rating of
the Borrower's unsecured senior debt as of such date as set forth in the
most recently published ratings by S&P and Moody's then publicly
available. In the event of a difference in rating between S&P and Moody's,
the lower rating shall be used, which may result in a higher Applicable
Margin. After each adjustment of the Applicable Margin in accordance
herewith, the new Applicable Margin shall apply to all Advances made or
outstanding thereafter until the next Quarterly Payment Date that another
Applicable Margin is applicable. Upon the request of the Administrative
Agent, the Borrower must demonstrate to the reasonable satisfaction of the
Administrative Agent the required applicable ratio in order to obtain an
adjustment to a lower Applicable Margin. If the Borrower fails to furnish
to the Administrative Agent any Compliance Certificate by the date
required by this Agreement, then the maximum Applicable Margin shall apply
at all times after such date for all Advances made or outstanding after
such date until the Borrower furnishes the required Compliance Certificate
to the Administrative Agent.
"APPLICABLE RATE" means: (i) during the period that an Advance is a
Base Rate Advance, the Base Rate plus the Applicable Margin; and (ii)
during the period that an Advance is a Eurodollar Advance, the Eurodollar
Rate plus the Applicable Margin.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and its assignee and accepted by the
Administrative Agent pursuant to Section 14.6, in substantially the form
of Exhibit "B" hereto.
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<PAGE>
"BASE RATE" means as of any date of determination, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the
greater of (a) the Prime Rate in effect on such day, or (b) the sum of the
Federal Funds Effective Rate in effect on such day plus 0.5%. If for any
reason the Administrative Agent shall have determined (which determination
shall be PRIMA FACIE correct) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure
after diligent effort of the Administrative Agent to obtain sufficient
quotations in accordance with the definition of Federal Funds Effective
Rate, the Base Rate shall be determined without regard to clause (b) of
the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in
the Prime Rate or the Federal Funds Effective Rate, respectively, without
notice to the Borrower.
"BASE RATE ADVANCES" means Advances that bear interest based upon
the Base Rate.
"BORROWER" has the meaning specified in the introductory paragraph.
"BORROWER PLEDGE AGREEMENT" means the Pledge Agreement of the
Borrower in favor of the Administrative Agent in substantially the form of
Exhibit "C" hereto, as the same may be amended, supplemented, or modified
from time to time.
"BORROWER SECURITY AGREEMENT" means the Security Agreement of the
Borrower in favor of the Administrative Agent in substantially the form of
Exhibit "D" hereto, as the same may be amended, supplemented, or modified
from time to time.
"BORROWING BASE" means, at any time, an amount equal to the sum of
(a) 80% of Eligible Domestic Accounts, plus (b) the Applicable Foreign
Advance Rate of each Eligible Foreign Account, plus (c) the lesser of (i)
the amount equal to 40% of the aggregate amount of the Commitments or (ii)
70% of the fair market value of Eligible Acceptable Collateral.
"BUSINESS DAY" means (a) any day on which national banks in Houston,
Texas are open for the conduct of commercial banking business, and (b)
with respect to all borrowings, payments, Conversions, Continuations,
Interest Periods, and notices in connection with each Eurodollar Advance,
any day which is a Business Day described in clause (a) above and which is
also a day on which dealings in Dollar deposits are carried out in the
London eurodollar interbank market.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property, which
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP. For purposes of this
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<PAGE>
Agreement, the amount of such Capital Lease Obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"CAPITALIZATION" means the sum of Funded Debt plus Net Worth.
"CHANGE IN CONTROL" means the acquisition by any Person or two or
more Persons acting in concert of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, or any
successor provision thereto) of 50% or more of the voting stock and the
other voting equity interests of the Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COLLATERAL" has the meaning specified in Section 6.1.
"COMMITMENT" means, as to each Lender, the obligation of such Lender
to make Advances pursuant to Section 2.1 and issue or participate in
Letters of Credit pursuant to Sections 3.1 and 3.3 in an aggregate
principal amount at any time outstanding up to but not exceeding the
amount set forth opposite the name of such Lender on the signature pages
hereto under the heading "Commitment", as such amount may be reduced
pursuant to Section 2.9, 2.10 or 2.11 or terminated pursuant to Section
2.9, Section 12.2 or Section 14.21.
"COMPLIANCE CERTIFICATE" means a certificate of the president, chief
executive officer, chief financial officer or corporate controller of the
Borrower, in the form of Exhibit "E" hereto, with appropriate completions.
"CONDITIONAL CONSENT" means the consent, at the request of the
Borrower or the Administrative Agent, of Lenders consisting of at least
the Required Lenders to a waiver or amendment of Sections 10.1 or 10.3, or
both.
"CONTINGENT LIABILITIES" means, as applied to any Person, those
direct or indirect liabilities of that Person (other than non-monetary
performance obligations) with respect to any Debt, lease, dividend, letter
of credit or other obligation (the "PRIMARY OBLIGATIONS") of another
Person (the "PRIMARY OBLIGOR"), including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary
obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the
ability of the
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<PAGE>
primary obligor to make payment of such primary obligation, or (d)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof. The amount of any Contingent
Liabilities shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Liabilities are made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by the Borrower in good faith.
"CONTINUE", "CONTINUATION", and "CONTINUED" shall refer to the
continuation pursuant to Section 2.6 of a Eurodollar Advance as a
Eurodollar Advance from one Interest Period to the next Interest Period.
"CONVERT", "CONVERSION", and "CONVERTED" shall refer to a conversion
pursuant to Section 2.6 or Article V of one Type of Advance into another
Type of Advance.
"COVERAGE RATIO" means, as of any date, the ratio of (a) EBITDA for
the Rolling Period then most recently ended on such date, minus capital
expenditures that are not financed with Debt, cash income taxes paid,
dividends paid and treasury stock purchases of the Borrower and the
Subsidiaries on a consolidated basis paid during such period to (b)
interest expense of the Borrower and the Subsidiaries on a consolidated
basis for such period, plus the portion of long-term Debt of the Borrower
and the Subsidiaries on a consolidated basis that was scheduled for
repayment during such period.
"DEBT" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, notes, debentures, or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable of
such Person arising in the ordinary course of business (d) all Capital
Lease Obligations of such Person, (e) all Debt or other obligations of
others Guaranteed by such Person, (f) all obligations secured by a Lien
existing on property owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are non-recourse to
the credit of such Person, (g) all Contingent Liabilities and
reimbursement obligations of such Person (whether contingent or otherwise)
in respect of letters of credit, bankers' acceptances, surety or other
bonds and similar instruments, and (h) all liabilities of such Person in
respect of unfunded vested benefits under any Plan.
"DEFAULT" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event
of Default.
"DEFAULT RATE" means the lesser of the Maximum Rate or the sum of
the Base Rate in effect from day to day plus 5%.
"DISPUTE" has the meaning specified in Section 14.20(a).
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<PAGE>
"DOLLARS" and "$" mean lawful money of the United States of America.
"DOMESTIC ACCOUNTS" means all accounts receivable of the Borrower
and the Domestic Subsidiaries, or any of them, with respect to which the
account debtor is domiciled or doing business in the United States of
America.
"DOMESTIC SUBSIDIARY" means each Subsidiary other than the Foreign
Subsidiaries.
"EBITDA" means net income of the Borrower and the Subsidiaries on a
consolidated basis (less any non-cash income included in net income),
plus, to the extent that any of the following were deducted in calculating
such net income, interest expense, tax expenses, depreciation and
amortization but excluding all extraordinary items of income and loss.
"ELIGIBLE ACCEPTABLE COLLATERAL" means, at any time, all Acceptable
Collateral then owned by (and in the possession or under the control of)
the Borrower or any Domestic Subsidiary, in which the Administrative Agent
has a perfected, first priority security interest.
"ELIGIBLE ACCOUNTS" means, at any time, all Domestic Accounts and
Foreign Accounts created in the ordinary course of business that are
acceptable to the Administrative Agent using its reasonable business
judgment and satisfy the following conditions:
(a) The account complies with all applicable laws, rules, and
regulations, including, without limitation, usury laws, the Federal
Truth in Lending Act, and Regulation Z of the Board of Governors of
the Federal Reserve System;
(b) The account has been billed and has not been outstanding
for more than 90 days past the original date of invoice;
(c) The account was created in connection with (i) the sale of
goods by the Borrower or any Subsidiary in the ordinary course of
business and such sale has been consummated and such goods have been
shipped and delivered and received by the account debtor, or (ii)
the performance of services by the Borrower or any Subsidiary in the
ordinary course of business and the portion of such services billed
by the Borrower and its Subsidiaries have been completed and
accepted by the account debtor;
(d) The account arises from an enforceable contract, the
performance of which has been completed by the Borrower or any
Subsidiary for the portion billed;
(e) The account does not include any progress billings for
which billings the services have not been completed and accepted by
the account debtor;
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<PAGE>
(f) The account does not arise from the sale of any good that
is on a bill-and-hold, guaranteed sale, sale-or-return, sale on
approval, consignment, or any other repurchase or return basis;
(g) The Borrower or any Subsidiary has good and indefeasible
title to the account and the account is not subject to any Lien
except Liens in favor of the Administrative Agent and Liens
permitted by Section 10.2;
(h) The account does not arise out of a contract with or order
from an account debtor that prohibits or makes void or unenforceable
the grant of a security interest by the Borrower or any Subsidiary
to the Administrative Agent in and to such account;
(i) The account is not subject to any setoff, counterclaim,
defense, dispute, recoupment, or adjustment other than normal
discounts for prompt payment or contra accounts as set forth below;
(j) The account debtor is not insolvent or the subject of any
bankruptcy or insolvency proceeding and has not made an assignment
for the benefit of creditors, suspended normal business operations,
dissolved, liquidated, terminated its existence, ceased to pay its
debts as they become due, or suffered a receiver or trustee to be
appointed for any of its assets or affairs;
(k) The account is not evidenced by chattel paper or an
instrument;
(l) No payment default exists under the account by any party
thereto;
(m) The account debtor has not returned or refused to retain,
or otherwise notified the Borrower or any Subsidiary of any dispute
concerning, or claimed nonconformity of, any of the goods from the
sale of which the account arose;
(n) The account is not owed by an employee or Affiliate of the
Borrower or any Subsidiary;
(o) The account is payable in Dollars by the account debtor
(except with respect to Eligible Foreign Accounts);
(p) The account shall be ineligible if the account debtor is
domiciled in any country other than the United States of America,
unless the account is an Eligible Foreign Account;
(q) All accounts owed by any account debtor shall be
ineligible if more than 25% of the aggregate balances then
outstanding on accounts owed by such
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<PAGE>
account debtor and its Affiliates to the Companies on a consolidated
basis have been outstanding for more than 90 days past the dates of
their original invoices;
(r) If the aggregate balances then outstanding on accounts
owed by any account debtor and its Affiliates to the Borrower and
the Subsidiaries on a consolidated basis constitute more than 15% of
the total accounts receivable of the Borrower and the Subsidiaries
on a consolidated basis, then the portion of the accounts owed by
such account debtor in excess of the 15% concentration limit shall
be ineligible;
(s) The account shall be ineligible if the account debtor is
the United States of America or any department, agency, or
instrumentality thereof subject to the Federal Assignment of Claims
Act of 1940, as amended ("FACA"), and the FACA shall not have been
complied with.
The amount of the Eligible Accounts owed by an account debtor to the
Borrower or any Subsidiary shall be reduced by the amount of all "contra
accounts," past due credits and other obligations which are owed by the
Borrower or any Subsidiary to such account debtor.
"ELIGIBLE ASSIGNEE" means any commercial bank, savings and loan
association, savings bank, finance company, insurance company, mutual
fund, or other financial institution (whether a corporation, partnership,
or other entity) acceptable to the Administrative Agent.
"ELIGIBLE DOMESTIC ACCOUNTS" means all Eligible Accounts that are
Domestic Accounts.
"ELIGIBLE FOREIGN ACCOUNTS" means all Eligible Accounts that are
Foreign Accounts that (a) constitute Eligible Accounts and (b) (i) are not
subject to an enforceable contractual restrictions of the rights to
assignment of the account thereunder, or (ii) the Borrower or a
Subsidiary, as applicable, has obtained written consent to the assignment
of the rights to payment thereunder from the account debtor.
"ENVIRONMENTAL LAWS" means any and all United States of America
federal, state, and local laws, regulations, and requirements pertaining
to health, safety, or the environment.
"ENVIRONMENTAL LIABILITIES" means all liabilities, obligations,
responsibilities, remedial actions, losses, damages, punitive damages,
consequential damages, treble damages, costs, expenses, fines, penalties,
sanctions, and interest arising from environmental, health or safety
conditions or the release or threatened release of a Hazardous Material
into the environment, resulting from the past, present, or future
operations of Borrower or any Subsidiary.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which
is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Borrower or any Guarantor or
is under common control (within the meaning of Section 414(c) of the Code)
with the Borrower or any Guarantor.
"EURODOLLAR ADVANCES" means Advances the interest rates on which are
determined on the basis of the rates referred to in the definition of
"Eurodollar Rate" in this Section 1.1.
"EURODOLLAR RATE" means, for any Eurodollar Advance for any Interest
Period therefor, an interest rate per annum determined by the
Administrative Agent by DIVIDING: (i) the rate per annum (rounded upwards,
if necessary, to the nearest 1/16th of 1%) determined by the
Administrative Agent at or before 11:00 a.m. (London time) (or as soon
thereafter as practicable) two Business Days before the first day of such
Interest Period to be the rate of interest at which Dollar deposits in
immediately available funds having a term comparable to such Interest
Period and in an amount comparable to the principal amount of such
Eurodollar Advance are offered to Administrative Agent in the London
interbank eurodollar market for delivery on the first day of such Interest
Period; by (ii) Statutory Reserves.
"EXCHANGE RATE" means and refers to the nominal rate of exchange
available to Agent in a chosen foreign exchange market for the purchase by
the Administrative Agent at 11:00 a.m., Houston, Texas time, three
Business Days prior to any date of determination, expressed as the number
of units of such currency per one Dollar.
"EVENT OF DEFAULT" has the meaning specified in Section 12.1.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average of the rate on overnight Federal Funds transactions with members
of the Federal Reserve System arranged by Federal Funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, New York, or if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent in its
sole discretion.
"FINAL CONSENT" means either (a) a written consent or reaffirmation
of the Required Lenders (without giving effect to the percentages held by
the Nonconsenting Lenders requesting an Opt-Out Request) to the request
for waiver or amendment granted in the Conditional Consent that is
provided after knowledge of the Nonconsenting Lenders under the
Conditional Consent, or (b) a Conditional Consent after which no Opt-Out
Request is made.
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"FNBC" has the meaning specified in the introductory paragraph
hereof.
"FORASOL" means Forasol-Foramer N.V., a Dutch corporation.
"FORASOL ACQUISITION" means the acquisition by the Borrower of all
of the outstanding capital stock of Forasub, pursuant to the Forasol
Purchase Agreement, for a total consideration of approximately
$281,000,000 plus assumption of approximately $93,000,000 of Debt, such
consideration to consist of $6.80 per share (approximately $113,222,000)
in cash and the issuance of 0.66 shares of stock of the Borrower for each
share of Forasol.
"FORASOL PURCHASE AGREEMENT" means that certain Purchase Agreement
dated as of December 16, 1996, among Forasol, certain shareholders of
Forasol and the Borrower.
"FORASUB" means Forasub B.V., a Dutch private limited company and a
wholly owned subsidiary of Forasol through which Forasol owns its
operating companies.
"FOREIGN ACCOUNTS" means all accounts receivable of the Borrower and
the Subsidiaries, or any of them, with respect to which the account debtor
is domiciled and operates in any country other than the United States of
America and all accounts receivable of any Foreign Subsidiary.
"FOREIGN AFFILIATE" means any Person in which the Borrower or any
Subsidiary has an equity or ownership interest equal to or less than 50%
and which is organized under the laws of any jurisdiction outside the
United States of America.
"FOREIGN SUBSIDIARY" means any Subsidiary which is organized under
the laws of any jurisdiction outside of the United States of America.
"FUNDED DEBT" means, at any particular time, the sum of the
following, calculated on a consolidated basis for the Borrower and the
Subsidiaries in accordance with GAAP:
(a) all obligations for borrowed money (whether as a direct
obligor on a promissory note, bond, debenture or other similar
instrument, as a reimbursement obligor with respect to an
issued letter of credit or similar instrument, as an obligor
under a Guarantee of borrowed money, or as any other type of
direct or contingent obligor), including but not limited to
senior bank debt, senior notes and subordinated debt PLUS (but
without duplication)
(b) all Capital Lease Obligations (other than the interest
component of such obligations).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute
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of Certified Public Accountants and/or in statements of the Financial
Accounting Standards Board and/or their respective successors and which
are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting
principles applied in a current period are comparable in all material
respects to those accounting principles applied in a preceding period.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise)
or (b) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"GUARANTY" means the joint and several guaranty of Guarantors in
favor of the Agents and the Lenders, in substantially the form of Exhibit
"F" hereto, as the same may be amended, supplemented or modified from time
to time.
"GUARANTOR SECURITY AGREEMENT" means the security agreement of the
Guarantors in favor of the Administrative Agent, in substantially the form
of Exhibit "G" hereto, as the same may be amended, supplemented or
modified from time to time.
"GUARANTORS" means, collectively, each Subsidiary that at any time
executes a Guaranty in favor of the Agents and the Lenders.
"HAZARDOUS MATERIAL" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is
or becomes listed, regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"INTEREST PERIOD" means with respect to any Eurodollar Advances,
each period commencing on the date such Advances are made or Converted
from Base Rate Advances or, in the case of each subsequent, successive
Interest Period applicable to a Eurodollar Advance, the last day of the
next preceding Interest Period with respect to such Advance, and
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ending on the numerically corresponding day in the first, second, third or
sixth calendar month thereafter, as the Borrower may select as provided in
Section 2.5 or 2.6 hereof, except that each such Interest Period which
commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month. Notwithstanding the foregoing: (a)
each Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day (or, if such
succeeding Business Day falls in the next succeeding calendar month, on
the next preceding Business Day); (b) any Interest Period which would
otherwise extend beyond the Termination Date shall end on the Termination
Date; (c) no more than five Interest Periods for Eurodollar Advances shall
be in effect at the same time; (d) no Interest Period for any Eurodollar
Advances shall have a duration of less than one month and, if the Interest
Period for any Eurodollar Advances would otherwise be a shorter period,
such Advances shall not be available hereunder; and (e) no Interest Period
may extend beyond a principal repayment date or Commitment reduction date
unless, after giving effect thereto, the aggregate principal amount of the
Eurodollar Advances having Interest Periods that end after such principal
repayment date or Commitment reduction date plus the aggregate principal
amount of Base Rate Advances shall be equal to or less than the Advances
to be outstanding hereunder after such principal payment date or
Commitment reduction date.
"L/C APPLICATION" has the meaning specified in Section 3.1.
"L/C DOCUMENTS" has the meaning specified in Section 3.1.
"LENDER" and "LENDERS" have the meanings specified in the
introductory paragraph hereof.
"LETTER OF CREDIT" means any letter of credit issued by the
Administrative Agent for the liability of the Borrower pursuant to Article
III.
"LETTER OF CREDIT LIABILITIES" means, at any time, the aggregate
face amounts of all outstanding Letters of Credit.
"LETTER OF CREDIT REQUEST FORM" means a certificate, in
substantially the form of Exhibit "H" hereto, properly completed and
signed by the Borrower requesting issuance of a Letter of Credit.
"LIEN" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of law, or
otherwise.
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"LOAN DOCUMENTS" means this Agreement and all promissory notes,
security agreements, pledge agreements, assignments, letters of credit,
guaranties, L/C Documents, and other instruments, documents, and
agreements executed and delivered pursuant to or in connection with this
Agreement, as such instruments, documents, and agreements may be amended,
modified, renewed, extended, or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" means (a) any material adverse effect on
(i) the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower and its Subsidiaries taken as a
whole, (ii) the ability of the Borrower and its Subsidiaries, taken as a
whole, to carry out its business, or (iii) the ability of the Borrower and
its Subsidiaries, taken as a whole, to perform the obligations under the
Notes, this Agreement and the other Loan Documents in accordance with
their respective obligations; or (b) an Event of Default hereunder.
"MAXIMUM RATE" means, at any time, the maximum rate of interest
under applicable law that the Lenders may charge the Borrower. The Maximum
Rate shall be calculated in a manner that takes into account any and all
fees, payments, and other charges in respect of the Loan Documents that
constitute interest under applicable law. Each change in any interest rate
provided for herein based upon the Maximum Rate resulting from a change in
the Maximum Rate shall take effect without notice to the Borrower at the
time of such change in the Maximum Rate. For purposes of determining the
Maximum Rate under Texas law, the applicable rate ceiling shall be the
indicated rate ceiling described in, and computed in accordance with,
Article 5069-1.04, Vernon's Texas Civil Statutes.
"MOODY'S" means Moody's Investors Service.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
"NET PROCEEDS" from any issuance, sale or other disposition of any
shares of equity securities (or any securities convertible or exchangeable
for any such shares, or any rights, warrants, or options to subscribe for
or purchase any such shares) means the amount equal to (a) the aggregate
gross proceeds of such issuance, sale or other disposition, less (b) the
following: (i) placement agent fees, (ii) underwriting discounts and
commissions, (iii) bank and other lender fees, and (iv) reasonable legal
fees and other reasonable expenses payable by the issuer in connection
with such issuance, sale or other disposition. "NET PROCEEDS" from any
disposition of assets means the amount equal to (a) the aggregate gross
proceeds of such disposition, less (b) the following: (i) sales or other
similar taxes paid or payable by the seller in connection with such
disposition, (ii) reasonable broker fees in connection with such
disposition, (iii) reasonable legal fees and other reasonable expenses
payable by the seller in connection with such disposition and (iv) the
amount of any Debt secured by the
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assets that must be repaid in connection with such disposition so long as
it is a Debt permitted under this Agreement.
"NET WORTH" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as stockholder's equity on a
consolidated balance sheet of the Borrower and the Subsidiaries.
"NONCONSENTING LENDER" means a Lender that does not execute a
Conditional Consent.
"NON-RECOURSE DEBT" of a Person means Debt of such Person under the
terms of which no recourse may be had against such Person, any of its
Subsidiaries, or any of their assets (other than specified assets securing
such Debt) for the payment of the principal, interest or premium on such
Debt.
"NOTES" means promissory notes of the Borrower payable to the order
of the Lenders, in substantially the form of Exhibit "I" hereto, and all
extensions, renewals, and modifications thereof; "NOTE" means one of the
Notes.
"OBLIGATED PARTY" means any Guarantor or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"OBLIGATIONS" means all obligations, indebtedness, and liabilities
of the Borrower to the Agents and the Lenders, or any of them, arising
pursuant to any of the Loan Documents, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several (including,
without limitation, all of the Borrower's contingent reimbursement
obligations in respect of Letters of Credit), and all interest accruing
thereon and all attorneys' fees and other expenses incurred in the
enforcement or collection thereof.
"OPERATING LEASE" means any lease (other than a lease constituting a
Capital Lease Obligation) of real or personal property.
"OPT-OUT REQUEST" means a written request of a Nonconsenting Lender
received by the Borrower and the Administrative Agent not later than three
Business Days after the granting of a Conditional Consent that requests
that the Commitment of such Nonconsenting Lender be terminated on a date
not earlier than 45 Business Days thereafter and that all Loans of such
Nonconsenting Lender be paid in full on such date.
"PAYOR" has the meaning specified in Section 4.5.
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERSON" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority,
or other entity.
"PLAN" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by
Title IV of ERISA.
"PRIME RATE" means at any time the rate of interest most recently
announced within Wells at its principal office in San Francisco as its
Prime Rate. The Borrower understands that the Prime Rate may not be the
best or lowest rate or a favored rate, and any statement, representation
or warranty to that effect is expressly disclaimed by the Agents and the
Lenders.
"PRINCIPAL OFFICE" means the principal office of the Administrative
Agent, presently located at 1000 Louisiana, Third Floor, Houston, Texas
77002.
"PROHIBITED TRANSACTION" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"QUARTERLY PAYMENT DATE" means the first day of each April, July,
October, and January of each year, the first of which shall be the first
such day after the date of this Agreement.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from
time to time.
"REGULATORY CHANGE" means, with respect to any Lender, any
implementation, adoption or change after the date of this Agreement of
United States federal, state, or foreign laws, rules or regulations
(including Regulation D) or the adoption or making after such date of any
interpretations, directives, or requests applying to a class of lenders
including such Lender of or under any United States federal or state, or
any foreign, laws or regulations (whether or not having the force of law)
by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"REGISTER" has the meaning specified in Section 14.6(d).
"REPORTABLE EVENT" means any of the events set forth in Section 4043
of ERISA.
"REQUIRED LENDERS" means, at any time while no Advances are
outstanding, two or more Lenders having at least 66-2/3% of the aggregate
amount of the Commitments and, at
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any time while Advances are outstanding, two or more Lenders holding at
least 66-2/3% of the outstanding aggregate principal amount of the
Advances.
"REQUIRED PAYMENT" has the meaning specified in Section 4.5.
"RESTRICTED PAYMENT" means, as to any Person, (a) the declaration or
payment of any dividends or any other payment or distribution (in cash,
property, or obligations) by a Person on account of such Person's capital
stock, other than dividends paid in stock, (b) the redemption, purchase,
retirement, or other acquisition by a Person of any of its capital stock,
or (c) the setting apart of any money for a sinking fund or other
analogous fund for any dividend or other distribution on such Person's
capital stock or for any redemption, purchase, retirement, or other
acquisition of any of such Person's capital stock.
"ROLLING PERIOD" means, for each fiscal quarter of the Borrower,
such quarter and the three preceding fiscal quarters.
"S&P" means Standard & Poor's Corporation.
"SALE-LEASEBACK DEBT" means, as to any particular lease entered into
in a Sale-Leaseback Transaction, at any date as of which the amount
thereof is to be determined, the total net amount of rent required to be
paid under such lease during the remaining term thereof, discounted from
the respective due dates thereof to such date at the rate per annum which
would then be used to determine the lease classification under GAAP. The
net amount of rent required to be paid under any such lease for any such
period shall be the aggregate amount of the rent payable by the lessee
with respect to such period after excluding amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water
rates, and similar charges.
"SALE-LEASEBACK TRANSACTION" means any sale by the Borrower or any
of the Subsidiaries to any Person (other than the Borrower or another of
the Subsidiaries) of any property owned by the Borrower or such Subsidiary
if, as part of the same transaction or series of transactions, the
Borrower or any of the Subsidiaries shall lease as lessee the same
property or other substantially equivalent property which it intends to
use for substantially the same purposes.
"SENIOR DEBT" means Funded Debt (other than Non-Recourse Debt,
Sale-Leaseback Debt and Guarantees) of the Borrower and the Subsidiaries,
or any of them, which is not subordinated to any other Debt.
"STATUTORY RESERVES" means the difference (expressed as a decimal)
of the number one minus the aggregate of the actual reserve percentages
(including, without limitation, any marginal, special, emergency, or
supplemental reserves) expressed as a decimal established by the Board of
Governors of the Federal Reserve System and any other banking authority
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to which the Administrative Agent is subject for Eurocurrency Liabilities
(as defined in Regulation D). Such reserve percentages shall include,
without limitation, those imposed under Regulation D. Eurodollar Advances
shall be deemed to constitute Eurocurrency Liabilities and as such shall
be deemed to be subject to such reserve requirements without benefit of or
credit for proration, exceptions or offsets which may be available from
time to time to the Administrative Agent under Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the effective date
of any change in any reserve percentage.
"SUBSIDIARY" means (a) any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time owned or
controlled, directly or indirectly, through one or more intermediaries, by
a Person, by one or more of the Subsidiaries of such Person, or by such
Person and the Subsidiaries, or both, and (b) any limited liability
company, partnership or other entity (i) of which at least a majority of
the ownership, equity or voting interests is at the time owned or
controlled, directly or indirectly, through one or more intermediaries, by
a Person, by one or more of the Subsidiaries of such Person, or by such
Person and one or more of its Subsidiaries, or both, and (ii) which is
treated as a subsidiary in accordance with GAAP.
"SUBSIDIARY PLEDGE AGREEMENT" means the Pledge Agreement of the
Domestic Subsidiaries in favor of the Administrative Agent in
substantially the form of Exhibit "J" hereto, and such other forms as may
be required by applicable law of the foreign jurisdiction in which a
Foreign Subsidiary may be incorporated or otherwise organized in order to
effectively create and perfect a Lien, as the same may be amended,
supplemented, or modified from time to time.
"SYNDICATION AGENT" has the meaning specified in the introductory
paragraph hereof.
"TANGIBLE NET WORTH" means Net Worth, less (a) any amount at which
shares of capital stock of any Person appear as an asset on the balance
sheet of such Person, (b) goodwill, including any amounts, however
designated, that represent the excess of the purchase price paid for
assets or stock over the value assigned thereto, (c) patents, trademarks,
trade names, and copyrights, (d) deferred expenses, (e) loans and advances
to or other obligations owing by any stockholder, director, officer,
partner, or employee of the Borrower, any Subsidiary, or any Affiliate of
the Borrower or any Subsidiary, and (f) all other assets which are
properly classified as intangible assets under GAAP.
"TERMINATION DATE" means 11:00 A.M. Houston, Texas time on (a) March
6, 2002 in the event Acceptable Collateral is provided in accordance with
Section 6.1(e) on or before the date specified therein, (b) March 6, 2000
in the event Acceptable Collateral is not so
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provided by such date, or (c) such earlier date on which the Commitments
terminate as provided in this Agreement.
"TYPE" means any type of Advance (i.e., Base Rate Advance or
Eurodollar Advance).
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
"WELLS" has the meaning specified in the introductory paragraph
hereof.
Section 1.2 OTHER DEFINITIONAL PROVISIONS. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Historical Forasol
financial results shall be included in the relevant Rolling Periods for use in
calculating compliance with the financial covenants hereunder. Compliance with
Sections 11.1, 11.2 and 11.3 will be tested quarterly commencing with the
quarter ending March 31, 1997. Unless otherwise specified, all Article and
Section references pertain to this Agreement. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. Terms
used herein that are defined in the UCC, unless otherwise defined herein, shall
have the meanings specified in the UCC.
ARTICLE II
ADVANCES
Section 2.1 ADVANCES. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make one or more Advances to the
Borrower from time to time from the date hereof to and including the Termination
Date in an aggregate principal amount at any time outstanding up to but not
exceeding the amount of such Lender's Commitment as then in effect, PROVIDED
that the aggregate amount of all Advances at any time outstanding shall not
exceed, and the Lenders shall not be obligated to make any Advance which would
cause the aggregate amount of all outstanding Advances to exceed, the amount
equal to (a) the lesser of (i) the aggregate amount of the Commitments or (ii)
the Borrowing Base, minus (b) the Letter of Credit Liabilities. Subject to the
foregoing limitations, and the other terms and provisions of this Agreement, the
Borrower may borrow, repay, and reborrow hereunder. The Borrower may borrow
hereunder by means of Base Rate Advances or Eurodollar Advances and, until the
Termination Date, Borrower may Convert all or part of one Type of Advance into
another Type of Advance or Continue all or part of any Eurodollar Advance.
Advances of each Type made by each Lender shall be made and maintained at such
Lender's Applicable Lending Office for Advances of such Type.
Section 2.2 NOTES. The obligation of the Borrower to repay each Lender for
Advances made by such Lender and interest thereon shall be evidenced by a Note
executed by the Borrower, payable to the order of such Lender, in the principal
amount of such Lender's Commitment as in effect on the date hereof, and
initially dated the date hereof.
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Section 2.3 REPAYMENT OF ADVANCES. The Borrower shall repay the unpaid
principal amount of all Advances as provided in Sections 2.9, 2.10, 2.11 and 4.3
and on the Termination Date.
Section 2.4 INTEREST. The unpaid principal amount of the Advances shall
bear interest prior to maturity at a varying rate per annum equal from day to
day to the lesser of (a) the Maximum Rate, or (b) the Applicable Rate. Interest
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed (including the first day but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may be. If at
any time the Applicable Rate for any Advance shall exceed the Maximum Rate,
thereby causing the interest accruing on such Advance to be limited to the
Maximum Rate, then any subsequent reduction in the Applicable Rate for such
Advance shall not reduce the rate of interest on such Advance below the Maximum
Rate until the aggregate amount of interest accrued on such Advance equals the
aggregate amount of interest which would have accrued on such Advance if the
Applicable Rate had at all times been in effect. Accrued and unpaid interest on
the Advances shall be due and payable as follows:
(i) in the case of Base Rate Advances, on each Quarterly Payment
Date;
(ii) in the case of each Eurodollar Advance, on the last day of the
Interest Period with respect thereto and, in the case of an Interest
Period greater than three months, at three-month intervals after the first
day of such Interest Period;
(iii) upon the payment or prepayment of any Advance or the Conversion
of any Advance to an Advance of another Type (but only on the principal
amount so paid, prepaid, or Converted); and
(iv) on the Termination Date.
All past due principal and interest shall bear interest at the Default Rate.
Interest payable at the Default Rate shall be payable from time to time on
demand.
Section 2.5 BORROWING PROCEDURE. The Borrower shall give the
Administrative Agent notice of each requested Advance, by means of an Advance
Request Form, before 11:00 A.M. Houston, Texas time on the same Business Day as
the requested date of each Base Rate Advance and before 11:00 A.M. Houston,
Texas time at least three Business Days before the requested date of each
Eurodollar Advance, specifying: (i) the requested date of such Advance (which
shall be a Business Day), (ii) the amount of such Advance, (iii) the Type of the
Advance, and (iv) in the case of a Eurodollar Advance, the duration of the
Interest Period for such Advance. The Administrative Agent at its option may
accept telephonic requests for Advances, provided that such acceptance shall not
constitute a waiver of the Administrative Agent's right to delivery of an
Advance Request Form in connection with subsequent Advances. Any telephonic
request for an Advance by the Borrower shall be promptly confirmed by submission
of a properly completed Advance Request Form to the
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Administrative Agent. Each Advance shall be in a minimum principal amount of
$5,000,000 or such greater amount which is an integral multiple of $5,000,000.
The aggregate principal amount of Eurodollar Advances having the same Interest
Period shall be at least equal to $5,000,000. The Administrative Agent shall
notify each Lender of the contents of each such notice on the day such notice is
received by Administrative Agent if received by 11:00 a.m. Houston, Texas time
on a Business Day and otherwise on the next succeeding Business Day. Promptly on
the date specified for each Advance hereunder, each Lender will make available
to the Administrative Agent at the Principal Office in immediately available
funds, for the account of the Borrower, such Lender's pro rata share of each
Advance. After the Administrative Agent's receipt of such funds and subject to
the terms and conditions of this Agreement, the Administrative Agent will make
each Advance available to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower maintained with the
Administrative Agent designated by the Borrower or by wire transfer in
accordance with written instructions from the Borrower. All notices by the
Borrower to the Administrative Agent under this Section shall be irrevocable and
shall be given not later than the time specified above for such notice on the
day which is not less than the number of Business Days specified above for such
notice.
Section 2.6 CONVERSIONS AND CONTINUATIONS. The Borrower shall have the
right from time to time to Convert all or part of one Type of Advance into
another Type of Advance or to Continue all or part of any Eurodollar Advance by
giving the Administrative Agent written notice (by means of an Advance Request
Form) at least one Business Day before Conversion into a Base Rate Advance, and
at least three Business Days before Conversion into or Continuation of a
Eurodollar Advance, specifying: (i) the Conversion or Continuation date, (ii)
the amount of the Advance to be Converted or Continued, (iii) in the case of
Conversions, the Type of Advance to be Converted into, and (iv) in the case of a
Continuation of or Conversion into a Eurodollar Advance, the duration of the
Interest Period applicable thereto; provided that (a) Eurodollar Advances may
only be Converted on the last day of the Interest Period, (b) except for
Conversions to Base Rate Advances, no Conversions shall be made while a Default
has occurred and is continuing and no Continuations of any Eurodollar Advances
shall be made while a Default has occurred and is continuing, unless such
Conversion or Continuation has been approved by Required Lenders, and (c) the
aggregate principal amount of Eurodollar Advances having the same Interest
Period shall be at least equal to $5,000,000. All notices given under this
Section shall be irrevocable and shall be given not later than 11:00 A.M.
Houston, Texas time on the day which is not less than the number of Business
Days specified above for such notice. If the Borrower shall fail to give the
Administrative Agent the notice as specified above for Continuation or
Conversion of a Eurodollar Advance prior to the end of the Interest Period with
respect thereto, such Eurodollar Advance shall automatically be Converted into a
Base Rate Advance on the last day of the Interest Period for such Eurodollar
Advance.
Section 2.7 USE OF PROCEEDS. The proceeds of Advances shall be used by the
Borrower and its Subsidiaries for working capital in the ordinary course of
business, for general corporate purposes, to refinance existing Debt, and to
finance a portion of the purchase price for the Forasol Acquisition.
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Section 2.8 COMMITMENT FEE. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee on the
daily average unused amount of such Lender's Commitment at the rate of 0.375%
per annum based on a 360 day year and the actual number of days elapsed. For the
purpose of calculating the commitment fee hereunder, the Commitments shall be
deemed utilized by the amount of all outstanding Advances and Letter of Credit
Liabilities. Accrued commitment fees shall be payable in arrears on each
Quarterly Payment Date and on the Termination Date.
Section 2.9 VOLUNTARY REDUCTION OR TERMINATION OF COMMITMENTS. The
Borrower shall have the right to terminate in whole or reduce in part to
$75,000,000 the unused portion of the Commitments upon at least five Business
Days prior notice (which notice shall be irrevocable) to the Administrative
Agent specifying the effective date thereof, whether a termination or reduction
is being made, and the amount of any partial reduction, provided that each
partial reduction shall be in a minimum amount of $5,000,000 or such greater
amount which is an integral multiple of $5,000,000 and the Borrower shall
simultaneously prepay the amount by which the unpaid principal amount of the
Advances exceeds the Commitments (after giving effect to such notice) plus
accrued and unpaid interest on the principal amount so prepaid. The Commitments
may not be reinstated after they have been terminated or reduced.
Section 2.10 MANDATORY COMMITMENT REDUCTIONS AND PRINCIPAL PAYMENTS.
(a) In the event the Termination Date has not sooner occurred, on
March 6, 2000 and March 6, 2001, (i) the Commitments shall automatically
reduce by the principal amount of $12,500,000 on each such date, and (ii)
the Borrower shall simultaneously prepay the amount by which the unpaid
principal amount of the Advances exceeds the Commitments (after giving
effect to such reduction) plus accrued and unpaid interest on the
principal amount so prepaid.
(b) On the date of each sale of assets (other than sales of
inventory in the ordinary course of business) by the Borrower or any
Subsidiary resulting in Net Proceeds which, when aggregated with the Net
Proceeds from all other such sales of assets in the same fiscal year,
exceed $5,000,000, (i) the Commitments shall automatically reduce by the
amount of the Net Proceeds from the sale of assets occurring on such date,
and (ii) the Borrower shall simultaneously prepay the amount by which the
unpaid principal amount of the Advances exceeds the Commitments (after
giving effect to such reduction) plus accrued and unpaid interest on the
principal amount so prepaid.
Section 2.11 LENDERS' COMMITMENT REDUCTION. In the event Acceptable
Collateral is not provided in accordance with Section 6.1(e) on or before the
date specified therein, the Commitments shall automatically reduce by
$25,000,000 effective on such date, unless all of the Lenders elect to waive
such reduction. If all of the Lenders elect to waive such reduction, notice of
such waiver shall be given to the Borrower in writing by the Administrative
Agent. In the event such notice is given after the date such reduction has
automatically occurred as provided herein, the Commitments shall
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be reinstated (with the concurrence of all of the Lenders) to the amount of such
Commitments immediately prior to such reduction, such reinstatement to be
effective as of the date specified in such notice to the Borrower. The election
by the Lenders to waive the reduction of Commitments provided for in this
Section shall be at the option of the Lenders in the exercise of their sole and
absolute discretion, and nothing herein shall be construed to require any such
waiver.
Section 2.12 ADMINISTRATIVE FEE. The Borrower shall pay to the
Administrative Agent, solely for its own account, an annual administrative fee
as separately agreed between the Borrower and the Administrative Agent.
ARTICLE III
LETTERS OF CREDIT
Section 3.1 LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, the Administrative Agent agrees to issue one or more standby Letters
of Credit for the account of the Borrower from time to time from the date hereof
to and including the Termination Date; PROVIDED, HOWEVER, that the outstanding
Letter of Credit Liabilities shall not at any time exceed, and the
Administrative Agent shall not be obligated to issue any Letter of Credit which
would cause the outstanding Letter of Credit Liabilities to exceed, an amount
equal to (a) the least of (1) $25,000,000, (2) the aggregate amount of the
Commitments or (3) the Borrowing Base, minus (b) the outstanding Advances. Each
Letter of Credit may be issued for the account of or used by the Borrower or any
Subsidiary, but the Borrower shall have full liability for each Letter of
Credit. Each Letter of Credit shall have an expiration date that does not extend
beyond the Termination Date (which shall be deemed to exclude clause (b) of the
definition thereof unless Acceptable Collateral has been delivered to the
Administrative Agent by June 6, 1997), shall be payable in Dollars, shall have a
minimum face amount of $50,000, must support a transaction that is entered into
in the ordinary course of the Borrower's or its Subsidiaries' business, must
support a transaction or purpose approved by the Administrative Agent in the
exercise of its reasonable business judgment, must be reasonably satisfactory in
form and substance to the Administrative Agent, and shall be issued pursuant to
such documents and instruments (including, without limitation, the
Administrative Agent's standard application for issuance of standby letters of
credit, as the case may be, as then in effect [each an "L/C APPLICATION"]) as
the Administrative Agent may require (collectively, the "L/C DOCUMENTS"). A copy
of the form of L/C Application which is in effect as of the date hereof for
standby letters of credit is attached hereto as Exhibit "K". However, the form
of L/C Application may be changed by the Administrative Agent from time to time
without notice to the Borrower or the Lenders.
Section 3.2 PROCEDURE FOR ISSUING LETTERS OF CREDIT. Each Letter of Credit
shall be issued on at least four Business Days prior notice from the Borrower to
the Administrative Agent by means of a Letter of Credit Request Form describing
the transaction proposed to be supported thereby and specifying (a) the
requested date of issuance (which shall be a Business Day), (b) the face amount
of the Letter of Credit, (c) the expiration date of the Letter of Credit, (d)
the name and address of the beneficiary, and (e) the name and address of the
account party (which shall be the Borrower or a
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Subsidiary of the Borrower), (f) the purpose for which such Letter of Credit
will be used, and (g) the form of the draft and any other documents required to
be presented at the time of any drawing (such notice to set forth the exact
wording of such documents or to attach copies thereof). The Administrative Agent
shall notify each Lender of the contents of each such notice on the day such
notice is received by Administrative Agent if received by 11:00 a.m. Houston,
Texas time on a Business Day and otherwise on the next succeeding Business Day.
Section 3.3 PARTICIPATION BY LENDERS. Immediately upon the Administrative
Agent's issuance of any Letter of Credit on or after the date hereof, the
Administrative Agent shall be deemed to have sold and transferred to each other
Lender and each other Lender shall be deemed irrevocably and unconditionally to
have purchased and received from the Administrative Agent, without recourse or
warranty, an undivided interest and participation (to the extent of such
Lender's pro rata share of the Commitments) in such Letter of Credit and all
applicable rights of the Administrative Agent in such Letter of Credit. The
Administrative Agent shall provide to each other Lender a copy of each Letter of
Credit issued on or after the date hereof, promptly after issuance.
Section 3.4 PAYMENTS CONSTITUTE ADVANCES. Each payment by the
Administrative Agent pursuant to a drawing under a Letter of Credit shall
constitute and be deemed a Base Rate Advance by each Lender to the Borrower
under such Lender's Note and this Agreement as of the day and time such payment
is made by the Administrative Agent and in the amount of such Lender's pro rata
share of such payment. Promptly on the date of each payment by the
Administrative Agent pursuant to a drawing under a Letter of Credit and after
receipt of notice from the Administrative Agent as to the amount of such
payment, each Lender will make available to the Administrative Agent at the
Principal Office in immediately available funds, such Lender's pro rata share of
such payment.
Section 3.5 LETTER OF CREDIT FEE. The Borrower shall pay to the
Administrative Agent for the account of the Lenders a letter of credit fee in an
amount equal to 0.75% per annum on the undrawn amount of each Letter of Credit
based upon a year of 360 days for the period during which such Letter of Credit
is outstanding, payable quarterly in advance on a non-refundable basis on the
date each such Letter of Credit is issued and on each quarterly anniversary date
thereof while such Letter of Credit remains outstanding. The Borrower shall pay
to the Administrative Agent, solely for its own account, a nonrefundable
issuance and fronting fee for each Letter of Credit in an amount equal to 0.25%
per annum of the face amount of such Letter of Credit for the period during
which such Letter of Credit is outstanding, calculated on the basis of a year of
360 days and payable on the date each such Letter of Credit is issued. The
Borrower shall also pay to the Administrative Agent, solely for its own account
as issuer of Letters of Credit, such amendment, transfer, negotiation and other
fees as the Administrative Agent shall charge in accordance with its customary
practices.
Section 3.6 ISSUER'S RESPONSIBILITIES. The Administrative Agent agrees
with each Lender that it will exercise and give the same care and attention to
each Letter of Credit as it gives to its other letters of credit. Each Lender
and the Borrower agree that, in paying any draft or draw under any Letter of
Credit, the Administrative Agent has no responsibility to obtain any document
(other than any documents expressly required by the respective Letter of Credit)
or to ascertain or inquire
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as to any document's validity, enforceability, sufficiency, accuracy or
genuineness or the authority of any Person delivering it. Neither the
Administrative Agent nor any of its representatives, directors, officers,
employees, attorneys or agents shall be liable to any Lender, the Borrower or
any Subsidiary for any Letter of Credit's use or for any beneficiary's acts or
omissions. The Administrative Agent shall have no liability to the Borrower, any
Guarantor or any Lender for any action, inaction, error, delay or omission taken
or suffered by the Administrative Agent or any of its representatives,
directors, officers, employees, attorneys or agents in connection with any
Letter of Credit, applicable draws, drafts or documents, or the transmission,
dispatch or delivery of any related message or advice, if done, taken or made in
accordance with the L/C Documents.
Section 3.7 LETTER OF CREDIT DOCUMENTS. Certain additional provisions
regarding the obligations, liabilities, rights, remedies and agreements of the
Borrower and the Administrative Agent relative to the Letters of Credit shall be
set forth in the L/C Documents. The terms of this Agreement shall control any
express conflict between the terms of this Agreement and the terms of any L/C
Application. Omission of any term shall not be construed as an express conflict.
ARTICLE IV
PAYMENTS
Section 4.1 METHOD OF PAYMENT. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Administrative Agent at the Principal Office in
Dollars and immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 A.M., Houston, Texas time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). The Borrower shall, at the time of making each such payment, specify to
the Administrative Agent the sums payable by the Borrower under this Agreement
and the other Loan Documents to which such payment is to be applied (and in the
event the Borrower fails to so specify, or if an Event of Default has occurred
and is continuing, the Administrative Agent may apply such payment to the
Obligations in such order and manner as it may elect in its sole discretion,
subject to Section 4.4 hereof). Each payment received by the Administrative
Agent under this Agreement or any other Loan Document for the account of a
Lender shall be paid promptly to such Lender, in immediately available funds,
for the account of such Lender's Applicable Lending Office. Whenever any payment
under this Agreement or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fee, as
the case may be.
Section 4.2 VOLUNTARY PREPAYMENT. The Borrower may, upon at least three
Business Days' prior notice to the Administrative Agent prepay the Advances in
whole at any time or from time to time in part without premium or penalty,
provided that Eurodollar Advances prepaid on other than the last day of the
Interest Period for such Advances must also be accompanied by payment to the
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Administrative Agent for the account of each Lender the amounts required under
Section 5.5 hereof. All notices under this Section shall be irrevocable and
shall be given not later than 11:00 A.M. Houston, Texas time on the day which is
not less than the number of Business Days specified above for such notice.
Section 4.3 MANDATORY PREPAYMENT. If at any time the amount equal to the
sum of (i) the outstanding principal amount of the Advances, plus (ii) the
Letter of Credit Liabilities exceeds the Borrowing Base, the Borrower shall
promptly prepay the outstanding Advances by the amount of the excess plus
accrued and unpaid interest on the amount so prepaid or, if no Advances are
outstanding, the Borrower shall immediately pledge to the Administrative Agent
cash or cash equivalent investments acceptable to the Administrative Agent in an
amount equal to the excess as security for the Obligations.
Section 4.4 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each Advance shall be made by the Lenders under Section 2.1 or
deemed made by the Lenders under Section 3.4, each payment of the commitment fee
under Section 2.8 and each letter of credit fee under Section 3.5 shall be made
for the account of the Lenders, each termination or reduction of the Commitments
under Sections 2.9, 2.10 and 2.11 shall be applied to the Commitments of the
Lenders, and each Letter of Credit shall be deemed participated in by the
Lenders, pro rata according to the amounts of their respective Commitments; (b)
the making, Conversion, and Continuation of Advances of a particular Type (other
than Conversions provided for by Section 5.4) shall be made pro rata among the
Lenders holding Advances of such Type according to the amounts of their
respective Commitments; (c) each payment and prepayment of principal of or
interest on Advances by the Borrower of a particular Type shall be made to the
Administrative Agent for the account of the Lenders holding Advances of such
Type pro rata in accordance with the respective unpaid principal amounts of such
Advances held by such Lenders; and (d) Interest Periods for Advances of a
particular Type shall be allocated among the Lenders holding Advances of such
Type pro rata according to the respective principal amounts held by such
Lenders.
Section 4.5 NON-RECEIPT OF FUNDS. Unless the Administrative Agent shall
have been notified by a Lender or the Borrower (the "PAYOR") prior to the date
on which such Lender is to make payment to the Administrative Agent of the
proceeds of an Advance to be made by it hereunder or the Borrower is to make a
payment to the Administrative Agent for the account of one or more of the
Lenders, as the case may be (such payment being herein called the "REQUIRED
PAYMENT"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date and, if the Payor has
not in fact made the Required Payment to the Administrative Agent, the recipient
of such payment shall, on demand, pay to the Administrative Agent the amount
made available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by the Administrative
Agent until the date the Administrative Agent recovers such amount at a rate per
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annum equal to (a) the Federal Funds Effective Rate for such period if the
recipient is a Lender or (b) the Applicable Rate for such period if the
recipient is the Borrower.
Section 4.6 WITHHOLDING TAXES. All payments by the Borrower of principal
of and interest on the Advances and of all fees and other amounts payable under
any Loan Document are payable without deduction for or on account of any present
or future taxes, duties or other charges levied or imposed by the United States
of America or by the government of any jurisdiction outside the United States of
America or by any political subdivision or taxing authority of or in any of the
foregoing through withholding or deduction with respect to any such payments. If
any such taxes, duties or other charges are so levied or imposed, the Borrower
will pay additional interest or will make additional payments in such amounts so
that every net payment of principal of and interest on the Advances and of all
other amounts payable by it under any Loan Document, after withholding or
deduction for or on account of any such present or future taxes, duties or other
charges, will not be less than the amount provided for herein or therein,
provided that the Borrower shall have no obligation to pay such additional
amounts to any Lender to the extent that such taxes, duties, or other charges
are levied or imposed by reason of the failure of such Lender to comply with the
provisions of Section 4.7. The Borrower shall furnish promptly to the
Administrative Agent for distribution to each affected Lender, as the case may
be, official receipts evidencing any such withholding or reduction.
Section 4.7 WITHHOLDING TAX EXEMPTION. Each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Administrative Agent two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive payments
from the Borrower under any Loan Document without deduction or withholding of
any United States federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to Borrower and the Administrative
Agent two additional copies of such form (or a successor form) on or before the
date such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Administrative Agent, in each case certifying
that such Lender is entitled to receive payments from the Borrower under any
Loan Document without deduction or withholding of any United States federal
income taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Borrower and the
Administrative Agent that it is not capable of receiving such payments without
any deduction or withholding of United States federal income tax.
Section 4.8 AUTOMATIC PAYMENT. In addition to the payment methods provided
in Article IV hereof, the Administrative Agent shall have the right to
automatically debit the account of the Borrower, Account No. 4439820788, for the
payment of principal, interest, fees and other amounts to be made by the
Borrower under this Agreement and the other Loan Documents. In the
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event such automatic debit results in an overdraft, such overdraft shall be
deemed to be an Advance, if available, under this Agreement, or if an Advance is
not made hereunder, the Borrower shall immediately deposit sufficient funds into
such operating account to cover such overdraft.
ARTICLE V
YIELD PROTECTION; LIMITATIONS ON ADVANCES; CAPITAL ADEQUACY
Section 5.1 ADDITIONAL COSTS.
(a) The Borrower shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate it
for any costs incurred by such Lender which such Lender determines are
attributable to its making or maintaining of any Eurodollar Advances
hereunder or its obligation to make such Advances hereunder, or any
reduction in any amount receivable by such Lender hereunder in respect of
any such Advances or such obligation (such increases in costs and
reductions in amounts receivable being herein called "ADDITIONAL COSTS"),
resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
such Lender under this Agreement or its Note in respect of any
Eurodollar Advances (other than taxes imposed on the overall net
income of such Lender or its Applicable Lending Office for any
Eurodollar Advances by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio, or similar requirement relating to any
extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender (including any
Eurodollar Advances or any deposits referred to in the definition of
"Eurodollar Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement or
its Note or any of such extensions of credit or liabilities or
commitments.
Each Lender will notify the Borrower (with a copy to the Administrative
Agent) of any event occurring after the date of this Agreement which will
entitle such Lender to compensation pursuant to this Section 5.1(a) as
promptly as practicable after it obtains knowledge thereof and determines
to request such compensation, and will designate a different Applicable
Lending Office for Eurodollar Advances if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
sole opinion of such Lender, violate any law, rule, or regulation or be in
any way disadvantageous to such Lender, provided that such Lender shall
have no obligation to so designate an Applicable Lending Office located
outside the United States of America. Each Lender will furnish to the
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Borrower, within 120 days after the occurrence of the event resulting in
Additional Costs, a certificate setting forth the basis and the amount of
each request of such Lender for compensation under this Section 5.1(a). If
any Lender requests compensation from the Borrower under this Section
5.1(a), the Borrower may, by notice to such Lender (with a copy to
Administrative Agent), suspend the obligation of such Lender to make or
Continue making, or Convert Advances into, Eurodollar Advances until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 5.4 hereof shall be applicable) and
may convert any Eurodollar Advance into a Base Rate Advance, subject to
the provisions of Section 5.5.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.1, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or
other liabilities of such Lender which includes deposits by reference to
which the interest rate on Eurodollar Advances is determined as provided
in this Agreement or a category of extensions of credit or other assets of
such Lender which includes Eurodollar Advances or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets
which it may hold, then, if such Lender so elects by notice to the
Borrower the obligation of such Lender to make or Continue making, or
Convert Advances into, Eurodollar Advances hereunder shall be suspended
until such Regulatory Change ceases to be in effect (in which case the
provisions of Section 5.4 hereof shall be applicable).
(c) Determinations and allocations by any Lender for purposes of
this Section 5.1 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Advances or of making or maintaining
Advances or on amounts receivable by it in respect of Advances, and of the
additional amounts required to compensate such Lender in respect of any
Additional Costs, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis.
Section 5.2 LIMITATION ON TYPES OF ADVANCES. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Advances for any
Interest Period therefor:
(a) The Administrative Agent determines using its reasonable
business judgment (which determination shall be conclusive) that
quotations of interest rates for the relevant deposits referred to in the
definition of "Eurodollar Rate" in Section 1.1 hereof are not being
provided in the relative amounts or for the relative maturities for
purposes of determining the rate of interest for such Advances as provided
in this Agreement; or
(b) Required Lenders determine using their reasonable business
judgment (which determination shall be conclusive) that the relevant rates
of interest referred to in the definition of "Eurodollar Rate" in Section
1.1 hereof on the basis of which the rate of interest for such Advances
for such Interest Period is to be determined do not accurately reflect the
cost to the Lenders of making or maintaining such Advances for such
Interest Period;
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then the Administrative Agent shall give the Borrower prompt notice thereof
specifying relevant amounts or periods, and so long as such condition remains in
effect, the Lenders shall be under no obligation to make additional Eurodollar
Advances or to Convert Base Rate Advances into Eurodollar Advances and the
Borrower shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Advances, either prepay such Eurodollar Advances or
Convert such Eurodollar Advances into Base Rate Advances in accordance with the
terms of this Agreement.
Section 5.3 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar
Advances hereunder or (b) maintain Eurodollar Advances hereunder, then such
Lender shall promptly notify the Borrower (with a copy to the Administrative
Agent) thereof and such Lender's obligation to make or maintain Eurodollar
Advances and to Convert Base Rate Advances into Eurodollar Advances hereunder
shall be suspended until such time as such Lender may again make and maintain
Eurodollar Advances (in which case the provisions of Section 5.4 hereof shall be
applicable).
Section 5.4 SUBSTITUTE BASE RATE ADVANCES. If the obligation of any Lender
to make Eurodollar Advances shall be suspended pursuant to Section 5.1 or 5.3
hereof, all Advances which would be otherwise made by such Lender as Eurodollar
Advances shall be made instead as Base Rate Advances and all Advances which
would otherwise be Converted into Eurodollar Advances shall be Converted instead
into (or shall remain as) Base Rate Advances (and, if an event referred to in
Section 5.1(b) or 5.3 hereof has occurred and such Lender so requests by notice
to the Borrower (with a copy to the Administrative Agent), all Eurodollar
Advances of such Lender then outstanding shall be automatically Converted into
Base Rate Advances on the date specified by such Lender in such notice) and, to
the extent that Eurodollar Advances are so made as (or Converted into) Base Rate
Advances, all payments and prepayments of principal which would otherwise be
applied to such Lender's Eurodollar Advances shall be applied instead to its
Base Rate Advances.
Section 5.5 COMPENSATION. The Borrower shall pay to the Administrative
Agent for the account of each Lender, upon the request of such Lender through
the Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any actual loss, cost,
or expense (other than loss of profit) incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar Advance
for any reason (including, without limitation, the acceleration of
outstanding Advances pursuant to Section 12.2) on a date other than the
last day of an Interest Period for such Advance; or
(b) Any failure by the Borrower for any reason (including, without
limitation, the failure of any conditions precedent specified in Article
VII to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar
Advance on the date for such borrowing, Conversion, Continuation, or
prepayment, specified in the relevant notice of borrowing, Conversion,
Continuation, or prepayment under this Agreement.
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Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Advance (or,
in the case of a failure to borrow, the Interest Period for such Advance which
would have commenced on the date specified for such borrowing) at the applicable
rate of interest for such Advance provided for herein over (ii) the interest
component of the amount such Lender would have bid in the London interbank
market for Dollar deposits of leading lenders and amounts comparable to such
principal amount and with maturities comparable to such period.
Section 5.6 CAPITAL ADEQUACY. If after the date hereof, any Lender shall
have determined that any Regulatory Change or compliance by such Lender (or its
parent) with any guideline, request, or directive regarding capital adequacy
(whether or not having the force of law) of any such central bank or other
Governmental Authority, has or would have the effect of reducing the rate of
return on such Lender's (or its parent's) capital as a consequence of its
obligations hereunder or the transactions contemplated hereby to a level below
that which such Lender (or its parent) could have achieved but for such
Regulatory Change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within 10 Business Days after demand by
such Lender (with a copy to the Administrative Agent), the Borrower shall pay to
such Lender (or its parent) such additional amount or amounts as will compensate
such Lender for such reduction. Each Lender will furnish to the Borrower, within
120 days after such Lender actually incurs such reduction in its rate of return,
a certificate of such Lender claiming compensation under this Section and
setting forth the basis and the additional amount or amounts to be paid to it
hereunder. Each such certificate shall be conclusive, provided that the
determination of such amount or amounts is made on a reasonable basis. In
determining such amount or amounts, such Lender may use any reasonable averaging
and attribution methods.
Section 5.7 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a
result of any Regulatory Change there shall be imposed, modified, or deemed
applicable any tax, reserve, special deposit, or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder or the Commitments to issue or participate in Letters of Credit
hereunder, and the result shall be to increase the cost to the Administrative
Agent or any Lender of issuing, maintaining or participating in any Letter of
Credit or its Commitment to issue or participate in Letters of Credit hereunder
or reduce any amount receivable by the Administrative Agent or any Lender
hereunder in respect of any Letter of Credit (which increase in cost, or
reduction in amount receivable, shall be the result of the Administrative
Agent's or such Lender's reasonable allocation of the aggregate of such
increases or reductions resulting from such event), then, upon demand by the
Administrative Agent or such Lender, the Borrower agrees to pay the
Administrative Agent or such Lender, as the case may be, from time to time as
specified by the Administrative Agent or such Lender, as the case may be, such
additional amounts as shall be sufficient to compensate the Administrative Agent
or such Lender for such increased costs or
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reductions in amount. Each Lender will furnish to the Borrower, within 180 days
after such Lender actually incurs such increase in cost or reduction in amount
receivable, a certificate of such Lender claiming compensation under this
Section and setting forth the basis and the additional amount or amounts to be
paid to it hereunder. Each such certificate shall be conclusive, provided that
the determination of such amount or amounts is made on a reasonable basis.
ARTICLE VI
SECURITY
Section 6.1 COLLATERAL. To secure full and complete payment and
performance of the Obligations, the Borrower shall execute and deliver or cause
to be executed and delivered the documents described below covering the property
and collateral described in this Section 6.1 (which, together with any other
property and collateral which may now or hereafter secure the Obligations or any
part thereof, is sometimes herein called the "COLLATERAL"):
(a) The Borrower shall grant to the Administrative Agent, for the
pro rata benefit of the Lenders, a first priority security interest in all
of the Borrower's accounts, accounts receivable, inventory, chattel paper,
documents, instruments and general intangibles, whether now owned or
hereafter acquired, and all products and proceeds thereof, to the extent
provided in the Borrower Security Agreement.
(b) The Guarantors shall grant to the Administrative Agent, for the
pro rata benefit of the Lenders, a first priority security interest in all
accounts, accounts receivable, inventory, chattel paper, documents,
instruments and general intangibles of each Guarantor, whether now owned
or hereafter acquired, and all products and proceeds thereof, to the
extent provided in the Guarantor Security Agreement.
(c) The Borrower shall grant to the Administrative Agent, for the
pro rata benefit of the Lenders, a first priority security interest in (a)
all of the Borrower's shares of capital stock and other equity interests
of each Domestic Subsidiary, whether now owned or hereafter acquired by
the Borrower, and (b) 66% of the shares of voting stock and other voting
equity interests and all of the shares of non-voting preferred stock and
other non-voting equity interests of each direct Foreign Subsidiary,
whether now owned or hereafter acquired by the Borrower, pursuant to the
Borrower Pledge Agreement.
(d) Each Domestic Subsidiary shall grant to the Administrative
Agent, for the pro rata benefit of the Lenders, a first priority security
interest in (a) all of such Domestic Subsidiary's shares of capital stock
and other equity interests of each other Domestic Subsidiary, whether now
owned or hereafter acquired by such Domestic Subsidiary, and (b) 66% of
the shares of voting stock and other voting equity interests and all of
the shares of non-voting preferred stock and other non-voting equity
interests of each direct Foreign Subsidiary, whether now owned or
hereafter acquired by such Domestic Subsidiary, pursuant
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to the Subsidiary Pledge Agreement (a Subsidiary Pledge Agreement and
Netherlands notarial deed being due within 45 Business Days of the closing
of the Forasol Acquisition in the case of Forasub).
(e) On or before June 6, 1997, the Borrower or its Subsidiaries
shall grant or cause to be granted to the Administrative Agent, for the
pro rata benefit of the Lenders, a first priority security interest in
Acceptable Collateral, pursuant to such security agreements, assignments
and other documents as Administrative Agent may require; provided,
however, that the Borrower's failure to provide Acceptable Collateral in
accordance with this subsection shall not in and of itself be a Default or
Event of Default hereunder, but shall result in the other consequences
specified elsewhere herein.
(f) The Borrower and each Guarantor shall execute and cause to be
executed such further documents and instruments, including without
limitation Uniform Commercial Code financing statements, as the
Administrative Agent, in its sole discretion, deems necessary or desirable
to create, evidence, preserve, and perfect its liens and security interest
in the Collateral.
Section 6.2 SETOFF. If an Event of Default shall have occurred and be
continuing, each Lender shall have the right to set off and apply against the
Obligations in such manner as such Lender may determine, at any time and without
notice to the Borrower, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from such Lender to the Borrower whether or not the Obligations are then due.
Each Lender agrees to promptly notify the Administrative Agent after any such
setoff and application. The rights and remedies of the Lenders hereunder are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Lenders may have.
Section 6.3 OTHER SUBSIDIARIES. Within 10 Business Days of becoming a
Domestic Subsidiary, each Person which hereafter becomes a Domestic Subsidiary
shall execute and deliver to the Administrative Agent (a) a Guaranty in form and
substance satisfactory to the Administrative Agent, pursuant to which such
Domestic Subsidiary guaranties the prompt payment and performance in full of all
of the Obligations, (b) a Guarantor Security Agreement in form and substance
satisfactory to the Administrative Agent, pursuant to which such Domestic
Subsidiary grants to the Administrative Agent, for the pro rata benefit of the
Lenders, a first priority security interest in all of such Domestic Subsidiary's
personal property of the types described in Section 6.1(b), whether now owned or
hereafter acquired, and all products and proceeds thereof, and (c) a Subsidiary
Pledge Agreement in form and substance satisfactory to the Administrative Agent,
pursuant to which such Domestic Subsidiary grants to the Administrative Agent,
for the pro rata benefit of the Lenders, a first priority security interest in
(i) all of the capital stock and other equity interests of each other Domestic
Subsidiary, whether now owned or hereafter acquired by such Domestic Subsidiary,
and (ii) 66% of the shares of voting stock and other voting equity interests and
all of the shares of non-voting preferred stock and other non-voting equity
interests of each direct Foreign Subsidiary, whether now owned or hereafter
acquired by such Domestic Subsidiary, (d) such further documents
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and instruments (including without limitation Uniform Commercial Code financing
statements, stock certificates and stock powers) as the Administrative Agent in
its sole discretion deems necessary or desirable to create, evidence, preserve,
and perfect its Liens in the Collateral, and (e) such legal opinions, corporate
and partnership documents and certificates as Administrative Agent or its
counsel may require in connection with the documents executed and delivered
pursuant to this Section.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 INITIAL EXTENSION OF CREDIT. The obligation of the Lenders to
make the initial Advance or issue the initial Letter of Credit hereunder is
subject to the satisfaction in full of each of the following conditions
precedent:
(a) The Administrative Agent shall have received on or before the
day of such Advance or Letter of Credit all of the following, each dated
(unless otherwise indicated) the date hereof, in form and substance
satisfactory to the Administrative Agent:
(1) RESOLUTIONS. Resolutions of the Board of Directors of the
Borrower and each Domestic Subsidiary that is a corporation
certified by the Secretary or an Assistant Secretary of such Person
which authorize (i) the execution, delivery, and performance by the
Borrower of this Agreement and the other Loan Documents to which
such Person is or is to be a party, and (ii) the execution,
delivery, and performance by each such Domestic Subsidiary of the
Guaranty and other Loan Documents to which such Person is or is to
be a party;
(2) INCUMBENCY CERTIFICATE. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of the Borrower
and each Domestic Subsidiary that is a corporation, respectively,
certifying the names of (i) the officers of the Borrower authorized
to sign this Agreement and each of the other Loan Documents to which
the Borrower is or is to be a party (including the certificates
contemplated herein) together with specimen signatures of such
officers, and (ii) the officers of each such Domestic Subsidiary
authorized to sign the Guaranty and the other Loan Documents to
which such Person is or is to be a party (including the certificates
contemplated herein) together with specimen signatures of such
officers;
(3) ARTICLES OF INCORPORATION. The articles or certificate of
incorporation of the Borrower and each Domestic Subsidiary that is a
corporation, respectively, certified by the Secretary or Assistant
Secretary of such Person;
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(4) BYLAWS. The bylaws of the Borrower and each Domestic
Subsidiary that is a corporation certified by the Secretary or an
Assistant Secretary of such Person;
(5) GOVERNMENTAL CERTIFICATES. Certificates of the appropriate
governmental officials of the respective states of incorporation of
the Borrower and each Domestic Subsidiary that is a corporation as
to the existence and good standing of such Persons and certificates
of the appropriate governmental officials of each state where any
such Persons own property, conduct business or employ any Persons as
to the qualification and good standing of such Persons,
respectively, in such jurisdictions, each dated within 10 days prior
to the date hereof.
(6) NOTES. The Note of each Lender executed by the Borrower;
(7) BORROWER SECURITY AGREEMENT. The Borrower Security
Agreement executed by the Borrower;
(8) GUARANTOR SECURITY AGREEMENT. The Guarantor Security
Agreement executed by the Domestic Subsidiaries;
(9) BORROWER PLEDGE AGREEMENT. The Borrower Pledge Agreement
executed by the Borrower;
(10) FINANCING STATEMENTS. Uniform Commercial Code financing
statements executed by the Borrower and the Domestic Subsidiaries
and covering such Collateral as the Administrative Agent may
request;
(11) STOCK CERTIFICATES. Original certificates representing
all shares of stock of Domestic Subsidiaries pledged pursuant to the
Borrower Pledge Agreement and the Subsidiary Pledge Agreement,
together with original stock powers duly executed in blank;
(12) GUARANTIES. The Guaranties executed by the Domestic
Subsidiaries;
(13) CONTRIBUTION AND INDEMNIFICATION AGREEMENT. A
Contribution and Indemnification Agreement in the form of Exhibit
"L" hereto, executed by Borrower and the Domestic Subsidiaries;
(14) L/C DOCUMENTS. With respect to issuance of any Letter of
Credit, all applicable L/C Documents, if any, as required by Section
3.1;
(15) INSURANCE POLICIES. Copies of certificate of insurance
with respect to all insurance policies required by Section 9.5;
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(16) UCC SEARCHES. The results of Uniform Commercial Code
searches showing all financing statements and other documents or
instruments on file against the Borrower and the Domestic
Subsidiaries in the office of the Secretary of State of the State of
Texas and such other jurisdictions as the Administrative Agent may
request, each such search to be as of a date no more than 10 days
prior to the date hereof, with copies of results from prior Uniform
Commercial Code searches to be as of a date no more than 30 days
prior to the date hereof;
(17) OPINION OF COUNSEL. A favorable opinion of legal counsel
to the Borrower and the Subsidiaries, as to the matters set forth in
Exhibit "M" hereto, and such other matters as the Administrative
Agent may reasonably request;
(18) AGENTS' FEES. Evidence that all fees due to the Agents in
accordance with a fee letter of even date shall have been paid in
full by the Borrower;
(19) COMPLIANCE CERTIFICATE. An initial short-form Compliance
Certificate as of March 6, 1997, based on a pro forma post-closing
balance sheet, executed by the president, chief executive officer,
chief financial officer or corporate controller of the Borrower;
(20) BORROWING BASE REPORT. A Borrowing Base Report as of
March 6, 1997, based on a pro forma post-closing balance sheet, in
substantially the form of Exhibit "N" hereto, certified by the
president, chief financial officer or corporate controller of the
Borrower;
(21) SOLVENCY CERTIFICATE. A certificate, in form and
substance satisfactory to the Agent, executed by the chief financial
officer of Borrower as to the solvency of the Borrower and each of
the Guarantors;
(22) FORASOL PURCHASE AGREEMENT. A true, correct and complete
copy of the Forasol Purchase Agreement; and
(23) FORASOL ACQUISITION. Evidence that each and every
material condition to the Forasol Acquisition has been completed,
except payment of the purchase price.
(b) DUE DILIGENCE. The due diligence review of the Borrower and the
Subsidiaries by the Lenders and the Agents shall have been completed and
the results thereof shall be satisfactory to the Agents and the Lenders in
all respects, such review to include without limitation a review of and
satisfaction with five-year financial projections, a pro-forma
post-closing balance sheet, insurance coverage, contingent liabilities,
material contracts and corporate legal structure.
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(c) REPAYMENT OF DEBT AND RELEASE OF LIENS. Provision satisfactory
to the Agents shall have been made for the payment and refinancing of all
Debt of the Borrower and the Subsidiaries and termination of commitments
described on Schedule 8.9, subject only to making available the proceeds
of the Advances for such payment and refinancing and all Liens identified
on Schedule 10.2 shall have been released or documentation providing for
the release of all such Liens shall have been duly executed by all
necessary Persons and provision satisfactory to the Agents shall have been
made for delivery thereof to the Administrative Agent upon payment of the
Debt of the Borrower and the Subsidiaries described on Schedule 8.9.
Section 7.2 ALL EXTENSIONS OF CREDIT. The obligation of the Lenders to
make any Advance or issue any Letter of Credit (including the initial Advance
and the initial Letter of Credit) is subject to the following additional
conditions precedent:
(a) REQUEST FOR ADVANCE OR LETTER OF CREDIT. The Administrative
Agent shall have received in accordance with Section 2.5 or 3.2, as the
case may be, an Advance Request Form or Letter of Credit Request Form
dated the date of such Advance or Letter of Credit and executed by an
authorized officer of the Borrower;
(b) L/C DOCUMENTS. With respect to any Letter of Credit,
Administrative Agent shall have received all applicable L/C Documents as
required by Section 3.1;
(c) NO DEFAULT. No Default shall have occurred and be continuing, or
would result from such Advance or Letter of Credit; and
(d) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in Article VIII hereof and in the other Loan
Documents shall be true and correct in all material aspects on and as of
the date of such Advance with the same force and effect as if such
representations and warranties had been made on and as of such date.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement, the
Borrower represents and warrants to the Agents and the Lenders (which
representations and warranties made by the Borrower as of the date hereof or as
of the date of the initial Advance hereunder shall also be true and correct
after the Forasol Acquisition has occurred) that:
Section 8.1 EXISTENCE AND AUTHORITY. The Borrower and each Subsidiary (a)
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or is a limited partnership
duly organized and validly existing under the laws of
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the jurisdiction of its organization; (b) has all requisite power and authority
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of its business makes such qualification necessary and where failure to
so qualify would have a material adverse effect on its business, condition
(financial or otherwise), operations, prospects, or properties. The Borrower and
each Guarantor each has the power and authority to execute, deliver, and perform
its obligations under this Agreement and the other Loan Documents to which it is
or may become a party.
Section 8.2 FINANCIAL STATEMENTS. The Borrower has delivered to the
Administrative Agent audited consolidated financial statements of the Borrower
and its Subsidiaries as at and for the fiscal year ended December 31, 1995 and
unaudited consolidated financial statements of the Borrower and its Subsidiaries
for the nine-month period ended September 30, 1996. Such financial statements
are true and correct, have been prepared in accordance with GAAP, and fairly and
accurately present, on a consolidated basis, the financial condition of the
Borrower and the Subsidiaries as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein. Neither
the Borrower nor any of the Subsidiaries has any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments, or unrealized
or anticipated losses from any unfavorable commitments that are material with
respect to the Borrower or the Subsidiaries taken as a whole, except as referred
to or reflected in such financial statements. There has been no material adverse
change in the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or any of the Subsidiaries since the
effective date of the most recent consolidated financial statements referred to
in this Section.
Section 8.3 CORPORATE ACTION; NO BREACH. The execution, delivery, and
performance by the Borrower of this Agreement and by the Borrower and each
Guarantor of the other Loan Documents to which they are party and compliance
with the terms and provisions hereof and thereof, have been duly authorized by
all requisite corporate and partnership action on the part of each such Person
and do not and will not (a) violate or conflict with, or result in a breach of,
or require any consent under (i) the articles of incorporation, certificate of
incorporation, bylaws, partnership agreement or other organizational documents
of any such Person, (ii) any applicable law, rule, or regulation or any order,
writ, injunction, or decree of any Governmental Authority or arbitrator, or
(iii) any material agreement or instrument to which any such Person is a party
or by which any of them or any of their property is bound or subject, or (b)
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien (except as provided in Article VI) upon any
of the revenues or assets of any such Person.
Section 8.4 OPERATION OF BUSINESS. The Borrower and each of the
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and none of the Borrower or the Subsidiaries is in violation of
any valid rights of others with respect to any of the foregoing, the violation
of which could have a Material Adverse Effect.
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Section 8.5 LITIGATION AND JUDGMENTS. Except as disclosed on Schedule 8.5
hereto, there is no action, suit, investigation, or proceeding before or by any
Governmental Authority or arbitrator pending, or to the knowledge of the
Borrower, threatened against or affecting the Borrower, any Subsidiary, or any
Foreign Affiliate that would, if adversely determined, have a material adverse
effect on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower and the Subsidiaries taken as a whole
or the ability of the Borrower or any Guarantor to pay and perform the
Obligations. On the date hereof, there are no outstanding judgments against the
Borrower or any Subsidiary.
Section 8.6 RIGHTS IN PROPERTIES; LIENS. The Borrower and each Subsidiary
have good and marketable title to or valid leasehold interests in their
respective properties and assets, real and personal, including the properties,
assets, and leasehold interests reflected in the financial statements described
in Section 8.2, and none of the properties, assets, or leasehold interests of
the Borrower or any Subsidiary is subject to any Lien, except as permitted by
Section 10.2.
Section 8.7 ENFORCEABILITY. This Agreement constitutes, and the other Loan
Documents when delivered, shall constitute legal, valid, and binding obligations
of the Borrower and each Guarantor, respectively, which are party thereto,
enforceable against such Persons, respectively, in accordance with their
respective terms, except as limited by (i) bankruptcy, insolvency, or other laws
of general application relating to the enforcement of creditors' rights, and
(ii) general principles of equity, whether applied in a proceeding in equity or
at law.
Section 8.8 APPROVALS. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower or
any Guarantor of this Agreement and the other Loan Documents to which the
Borrower or the Guarantors, respectively, is or may become a party or the
validity or enforceability thereof, except for authorizations, approvals,
consents, filings and registrations which have been made or obtained and for
filing of any financing statements or similar instruments in connection with any
of the Collateral.
Section 8.9 DEBT. The Borrower and the Subsidiaries have no Debt, except
as disclosed on Schedule 8.9 hereto or otherwise permitted by Section 10.1
hereof.
Section 8.10TAXES. The Borrower and each Subsidiary have filed all tax
returns (federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales tax returns, except for any state or
local tax returns the nonfiling of which will not have a material adverse effect
on the business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower or any Subsidiary. The Borrower and each Subsidiary
have paid all of their respective liabilities for taxes, assessments,
governmental charges, and other levies that are due and payable, except for any
state or local taxes, assessments, governmental charges and levies which are not
known by Borrower or any Subsidiary to be due and payable if the nonpayment
thereof will not have a material adverse effect on the business, condition
(financial or otherwise), operations, prospects, or properties of the Borrower
or any Subsidiary. The Borrower knows of no pending
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investigation of the Borrower or any Subsidiary by any taxing authority or of
any pending but unassessed tax liability of the Borrower or any Subsidiary that
could reasonably be expected to have a Material Adverse Effect.
Section 8.11 USE OF PROCEEDS; MARGIN SECURITIES. None of the Borrower or
the Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U, or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying margin stock.
Section 8.12 ERISA. The Borrower and each Subsidiary are in compliance in
all material respects with all applicable provisions of ERISA and the
non-compliance with which could reasonably be expected to have a Material
Adverse Effect. Neither a Reportable Event nor a Prohibited Transaction has
occurred and is continuing with respect to any Plan that could reasonably be
expected to have a Material Adverse Effect. No notice of intent to terminate a
Plan has been filed, nor has any Plan been terminated that could reasonably be
expected to have a Material Adverse Effect. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings. Neither the Borrower nor any Guarantor nor any ERISA Affiliate has
completely or partially withdrawn from a Multiemployer Plan. The Borrower, each
Guarantor and each ERISA Affiliate have met their minimum funding requirements
under ERISA with respect to all of their Plans, and the present value of all
vested benefits under each Plan do not exceed the fair market value of all Plan
assets allocable to such benefits, as determined on the most recent valuation
date of the Plan and in accordance with ERISA. Neither the Borrower nor any
Guarantor nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA that could reasonably be expected to have a Material Adverse Effect.
Section 8.13 DISCLOSURE. No written statement, information, report,
representation, or warranty made by the Borrower or any Guarantor in this
Agreement or in any other Loan Document or furnished to any Agent or any Lender
in connection with this Agreement or any of the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not materially
misleading. There is no fact known to the Borrower or any Guarantor (other than
matters of a economic nature affecting business generally) which has a Material
Adverse Effect, or which is likely to in the future have a Material Adverse
Effect that has not been disclosed in writing to the Administrative Agent.
Section 8.14 SUBSIDIARIES; FOREIGN AFFILIATES. On the date hereof, the
Borrower has no Subsidiaries other than those listed on Schedule 8.14 hereto,
and Schedule 8.14 (a) sets forth the jurisdiction of incorporation or
organization of each Subsidiary, (b) sets forth the percentage of the Borrower's
or any Subsidiary's ownership of the outstanding voting stock or other ownership
or equity interests of each Subsidiary, and (c) designates the Foreign
Subsidiaries. All of the outstanding capital stock of each Subsidiary has been
validly issued, is fully paid, and is
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nonassessable. Borrower shall, from time to time as necessary, deliver to the
Administrative Agent an updated Schedule 8.14 to this Agreement, together with a
certificate of an authorized officer of Borrower certifying that the information
set forth in such schedule is true, correct, and complete as of such date.
Section 8.15 AGREEMENTS. None of the Borrower or the Subsidiaries is a
party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction
which could have a material adverse effect on the business, condition (financial
or otherwise), operations, prospects, or properties of the Borrower or any
Subsidiary, or the ability of the Borrower or any Guarantor to pay and perform
their respective obligations under the Loan Documents. None of the Borrower or
the Subsidiaries is in default in any material respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
Section 8.16 COMPLIANCE WITH LAWS. None of the Borrower, the Subsidiaries
or, to the best of the Borrower's knowledge, the Foreign Affiliates is in
violation in any material respect of any law, rule, regulation, order, or decree
of any Governmental Authority or arbitrator, except to the extent that the
failure to comply therewith will not have a material adverse effect on the
business, condition (financial or otherwise), operations, prospects, or
properties of the Borrower, any Subsidiary, or any Foreign Affiliate.
Section 8.17 INVESTMENT COMPANY ACT. None of the Borrower or the
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 8.18 PUBLIC UTILITY HOLDING COMPANY ACT. None of the Borrower or
the Subsidiaries is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 8.19 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 8.19
hereto, (a) there are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the Borrower
or any Subsidiary that could reasonably be expected to give rise to any
Environmental Liabilities of the Borrower or any Subsidiary which could
reasonably be expected to have a Material Adverse Effect, and (b) no Lien
arising under any Environmental Law has attached to any property or revenues of
the Borrower or any Subsidiary.
ARTICLE IX
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any Commitment hereunder, the
Borrower will perform and observe
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the following affirmative covenants, unless the Required Lenders (or the
Administrative Agent with the consent of the Required Lenders) shall otherwise
consent in writing:
Section 9.1 REPORTING REQUIREMENTS. The Borrower will furnish to the
Administrative Agent and each Lender:
(a) ANNUAL CONSOLIDATED AND CONSOLIDATING FINANCIAL STATEMENTS. As
soon as available, and in any event within 90 days after the end of each
fiscal year of the Borrower, beginning with the fiscal year ending
December 31, 1996, (i) a copy of the Borrower's annual report on Form 10-K
as filed with the Securities and Exchange Commission and a copy of the
annual audited financial report of the Borrower and the Subsidiaries for
such fiscal year containing, on a consolidated basis, balance sheets and
statements of operations, stockholders' equity, and cash flows as at the
end of such fiscal year and for the 12-month period ending immediately
before such date, in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail and
audited and certified by, and accompanied by the unqualified opinion of,
independent certified public accountants of recognized standing acceptable
to the Administrative Agent, to the effect that such report has been
prepared in accordance with GAAP and presents fairly the consolidated
financial condition and results of operations of the Borrower and the
Subsidiaries at the date and for the periods indicated therein, and (ii)
consolidating financial statements of the Borrower and the Subsidiaries,
containing a balance sheet and statement of operations, all in reasonable
detail;
(b) QUARTERLY CONSOLIDATED AND CONSOLIDATING FINANCIAL STATEMENTS.
As soon as available, and in any event within 45 days after the end of
each of the first three quarters of each fiscal year of the Borrower, (i)
a copy of an unaudited financial report of the Borrower and the
Subsidiaries as of the end of such fiscal quarter and for the portion of
the fiscal year then ended on Form 10-Q as filed with the Securities and
Exchange Commission, containing, on a consolidated basis, balance sheets
and statements of operations and cash flows, in each case setting forth in
comparative form the figures for the corresponding period of the preceding
fiscal year, all in reasonable detail and certified by the chief financial
officer or corporate controller of the Borrower to have been prepared in
accordance with GAAP and to fairly and accurately present (subject to
year-end audit adjustments) the financial condition and results of
operations of the Borrower and the Subsidiaries, on a consolidated basis,
at the date and for the periods indicated therein, and (ii) consolidating
financial statements of the Borrower and the Subsidiaries, containing a
balance sheet and statement of operations, all in reasonable detail;
(c) COMPLIANCE CERTIFICATE. Concurrently with the delivery of each
of the financial statements referred to in subsections 9.1(a) and (b), a
Compliance Certificate;
(d) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any Governmental
Authority or arbitrator affecting the
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Borrower, any Subsidiary or any Foreign Affiliate which, if determined
adversely to the Borrower, such Subsidiary, or such Foreign Affiliate
which could have a Material Adverse Effect;
(e) NOTICE OF DEFAULT. As soon as possible and in any event within
five days after the Borrower, any Subsidiary or any Foreign Affiliate
obtains knowledge or becomes aware of the occurrence of any Default, a
written notice setting forth the details of such Default and the action
that the Borrower and such other Person have taken and propose to take
with respect thereto;
(f) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as possible and in
any event within five days after the Borrower, any Subsidiary or any
Foreign Affiliate obtains knowledge or becomes aware of the occurrence of
any matter that could have a Material Adverse Effect, written notice of
such matter;
(g) NOTICE OF CHANGE IN REPRESENTATION OR WARRANTY. As soon as
possible and in any event within five days after the Borrower, any
Subsidiary or any Foreign Affiliate obtains knowledge or becomes aware of
any change in any material fact or circumstance represented or warranted
in any of the Loan Documents, written notice of such change;
(h) BORROWING BASE REPORT. As soon as available, and in any event
within 45 days after the end of each calendar month, a Borrowing Base
Report, in substantially the form of Exhibit "N" hereto, certified by the
president, chief executive officer, chief financial officer or corporate
controller of the Borrower, together with an accounts receivable aging
report in form and detail satisfactory to the Administrative Agent showing
all accounts receivable of the Borrower and the Subsidiaries divided into
domestic and international categories and aged in 30-day intervals; and
(i) UPDATED APPRAISALS. By June 6, 1997 and on the last day of each
18-month period thereafter, updated rig and equipment appraisals for the
Borrower's rigs and equipment (including any Acceptable Collateral
provided in accordance with Section 6.1(e))(the cost of which shall be
borne by the Borrower).
(j) GENERAL INFORMATION. Promptly, such other information concerning
the Borrower, any Subsidiary or any Foreign Affiliate as any Agent or any
Lender may from time to time reasonably request.
All financial statements and reports, including Borrowing Base Reports, required
to be delivered under this Section shall be due on the Business Day immediately
following the specified due date if the specified due date is not a Business
Day.
Section 9.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. The Borrower
will preserve and maintain, and will cause each Subsidiary to preserve and
maintain, its corporate or partnership
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existence and all of its leases, privileges, licenses, permits, franchises,
qualifications, agreements and rights that are necessary or desirable in the
ordinary conduct of its business. The Borrower will conduct, and will cause each
Subsidiary, and will use its best efforts to cause each Foreign Affiliate to
conduct, its business in an orderly and efficient manner in accordance with good
business practices.
Section 9.3 MAINTENANCE OF PROPERTIES. The Borrower will maintain, keep,
and preserve, and cause each Subsidiary, and will use its best efforts to cause
each Foreign Affiliate to maintain, keep, and preserve, in good working order
and condition, all of its properties (tangible and intangible) which are useful
in any material respect in the proper conduct of its business or are necessary
in the proper conduct of its business.
Section 9.4 TAXES AND CLAIMS. The Borrower will pay or discharge, and will
cause each Subsidiary to pay or discharge, at or before the date on which
penalties attach the following which, if unpaid, would become a Lien on its
Property: (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its property, and (b) all lawful claims
for labor, material, and supplies, which, if unpaid, might become a Lien upon
any of its property; PROVIDED, however, that none of the Borrower or the
Subsidiaries shall be required to pay or discharge any tax, levy, assessment, or
governmental charge or any claim for labor, material, or supplies which is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves have been established.
Section 9.5 INSURANCE. The Borrower will maintain, and will cause each of
the Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general geographic areas in which the Borrower and the
Subsidiaries operate, provided that in any event the Borrower will maintain and
cause each Subsidiary to maintain workmen's compensation insurance, property
insurance, comprehensive general liability insurance, and products liability
insurance reasonably satisfactory to the Administrative Agent. Each insurance
policy covering Collateral shall name the Administrative Agent as loss payee and
shall provide that such policy will not be cancelled or reduced without 15 days
prior written notice to the Administrative Agent.
Section 9.6 INSPECTION RIGHTS. At any reasonable time during normal
business hours and from time to time, the Borrower each will permit, and will
cause each Subsidiary, and will use its best efforts to cause each Foreign
Affiliate to permit, representatives of the Administrative Agent and each Lender
to examine, copy, and make extracts from its books and records, to visit and
inspect its properties, and to discuss its business, operations, and financial
condition with its officers, employees, and independent certified public
accountants. Without in any way limiting the foregoing, the Administrative Agent
may conduct (or cause a third party to conduct) annual audits of the Collateral
and appraisals of equipment collateral at the expense of the Borrower. Such
audits may be performed by the Administrative Agent's in-house audit and asset
management review staff. The Borrower agrees to pay to the Administrative Agent
on demand all fees, charges and
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out-of-pocket expenses of the Administrative Agent in connection with each such
audit. Notwithstanding the foregoing, the cost of equipment and rig appraisals
more frequently than every 18-months (provided no Default then exists) will be
borne by the Lenders.
Section 9.7 KEEPING BOOKS AND RECORDS. The Borrower will maintain, and
will cause each Subsidiary, and will use its best efforts to cause each Foreign
Affiliate to maintain, proper books of record and account in which full, true,
and correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its business and activities; provided, however, that
the Foreign Subsidiaries and the Foreign Affiliates shall be permitted to
maintain day-to-day books of record and account in accordance with local
statutory accounting practices rather than GAAP.
Section 9.8 COMPLIANCE WITH LAWS AND AGREEMENTS. The Borrower will comply,
and will cause each Subsidiary to comply, in all material respects with all
applicable laws, rules, regulations, orders, and decrees of any Governmental
Authority or arbitrator and all material agreements, contracts, and instruments
binding on it or affecting its properties or business.
Section 9.9 FURTHER ASSURANCES. The Borrower will, and will cause each
Subsidiary, and will use its best efforts to cause each Foreign Affiliate to,
execute and deliver such further agreements and instruments and take such
further action as may be reasonably requested by the Administrative Agent to
carry out the provisions and purposes of this Agreement and the other Loan
Documents and to create, preserve, and perfect the Liens of the Administrative
Agent in the Collateral.
Section 9.10ERISA. The Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability for failure to comply with the requirements of ERISA.
ARTICLE X
NEGATIVE COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any Commitment hereunder, the
Borrower will perform and observe the following negative covenants, unless the
Required Lenders (or the Administrative Agent with the consent of the Required
Lenders) shall otherwise consent in writing:
Section 10.1DEBT. The Borrower will not incur, create, assume, or permit
to exist, or permit any Subsidiary to incur, create, assume, or permit to exist,
any Debt, except:
(a) Debt to the Lenders hereunder;
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(b) Debt existing on the date hereof and described on Schedule 8.9
hereto, provided that any such Debt indicated on Schedule 8.9 as "Debt to
be Repaid" shall have been repaid on or before the date of the initial
Advance hereunder;
(c) Demand intercompany Debt among the Borrower and its
Subsidiaries;
(d) Senior Debt (other than Debt described in subsections (a)
through (c) above) in an amount (i) not to exceed $20,000,000 in the
aggregate at any time outstanding and (ii) which when added to the amount
of outstanding Non-Recourse Debt and Sale-Leaseback Debt of the Borrower
and the Subsidiaries, or any of them, shall not exceed $75,000,000 in the
aggregate at any time outstanding;
(e) Non-Recourse Debt (other than the Non-Recourse Debt described in
subsection (d) above) and Sale-Leaseback Debt of the Borrower and the
Subsidiaries, or any of them, in an amount which when added to the amount
of outstanding Senior Debt (other than Debt described in subsections (a)
through (c) above) shall not exceed $75,000,000 in the aggregate at any
time outstanding; and
(f) Guarantees by the Borrower and the Subsidiaries existing on the
date hereof and described on Schedule 8.9 hereto, and Guarantees by the
Borrower and the Subsidiaries, or any of them, in an amount not to exceed
$5,000,000 in the aggregate at any time.
Section 10.2 LIMITATION ON LIENS. The Borrower will not incur, create,
assume, or permit to exist, or permit any Subsidiary to incur, create, assume,
or permit to exist, any Lien upon any of its property, assets, or revenues,
whether now owned or hereafter acquired, except:
(a) Liens in favor of the Administrative Agent pursuant to the Loan
Documents;
(b) Liens disclosed on Schedule 10.2 hereto, provided that any such
Liens indicated on Schedule 10.2 as a "Lien to be Released" shall have
been released or provision satisfactory to the Agents for the release of
such Liens shall have been made on or before the date of the initial
Advance hereunder;
(c) Encumbrances consisting of minor easements, zoning restrictions,
or other restrictions on the use of real property that do not
(individually or in the aggregate) materially affect the value of the
assets encumbered thereby or materially impair the ability of the Borrower
or the Subsidiaries to use such assets in their respective businesses, and
none of which is violated in any material respect by existing or proposed
structures or land use;
(d) Liens for taxes, assessments, or other governmental charges
which are not delinquent or which are being contested in good faith and
for which adequate reserves have been established;
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(e) Liens of landlords (for any location where a landlord's waiver
is not required under the Loan Documents), mechanics, materialmen,
warehousemen, carriers, or other similar statutory Liens securing
obligations that (i) are not yet due and are incurred in the ordinary
course of business or (ii) are being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate
reserves have been established;
(f) Liens resulting from good faith deposits to secure payments of
workmen's compensation, unemployment insurance or other social security
programs or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, or contracts (other than for payment of
Debt), or leases made in the ordinary course of business, or arising from
litigation which are effectively stayed from execution and would not
otherwise constitute a Default or cause an Event of Default;
(g) Liens on specified assets securing any Non-Recourse Debt
permitted by Section 10.1(e);
(h) Liens on any assets which are the subject of a Sale-Leaseback
Transaction, securing the Sale-Leaseback Debt resulting therefrom,
provided such Sale-Leaseback Debt is permitted by Section 10.1(e); and
(i) Liens securing any purchase money Senior Debt permitted by
Section 10.1(d), provided that such Liens do not encumber any property
other than the property for which such purchase money was incurred.
Section 10.3 MERGERS, ACQUISITIONS, ETC. The Borrower will not, and will
not permit any Subsidiary to, become a party to a merger or consolidation, or
purchase or otherwise acquire all or substantially all of the assets of any
Person or any shares or other evidence of beneficial ownership of any Person, or
wind-up, dissolve, or liquidate; provided, however, that (a) the Forasol
Acquisition shall be permitted so long as no Default is then existing or will
result therefrom, and (b) the Borrower or any Subsidiary shall be permitted to
become a party to a merger or consolidation or acquire all or any part of the
assets of any Person or any shares or other beneficial ownership of any Person
(in addition to the Forasol Acquisition), so long as (i) no Default is existing
or would result therefrom, (ii) the Borrower has given the Administrative Agent
at least 20 days prior notice of such merger, consolidation or acquisition,
(iii) the Borrower has provided to the Lenders calculations demonstrating the
pro forma compliance with all financial and other covenants contained herein,
after giving effect to such merger, consolidation or acquisition, based on the
most recently delivered financial statements, (iv) the total cash and non-cash
consideration paid and Debt assumed or incurred by the Borrower or any
Subsidiary in connection with all such mergers, consolidations or acquisitions
shall not exceed $50,000,000 in the aggregate for any fiscal year, and (v) the
Borrower or such Subsidiary, as the case may be, is the surviving corporation in
such merger or consolidation.
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Section 10.4 RESTRICTED PAYMENTS. The Borrower will not make and will not
permit any Subsidiary to make, any Restricted Payment; provided, however, that
the Subsidiaries shall be permitted to declare and pay dividends to the Borrower
or any Guarantor.
Section 10.5 LOANS AND INVESTMENTS. The Borrower will not make, and will
not permit any Subsidiary to make, any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, or permit any Subsidiary
to purchase, any stock, bonds, notes, debentures, or other securities of, any
Person, except:
(a) readily marketable direct obligations of the United States of
America or any agency thereof with maturities of one year or less from the
date of acquisition;
(b) certificates of deposit with maturities of one year or less from
the date of acquisition issued by any commercial bank operating in the
United States of America having capital and surplus in excess of
$50,000,000;
(c) commercial paper of a domestic issuer if at the time of purchase
such paper is rated in one of the two highest rating categories of S&P or
Moody's;
(d) debt securities which shall have one of the two highest ratings
from S&P or Moody's and which mature within one year from the date of
acquisition;
(e) investments in eurodollars placed through any financial
institution having combined capital, surplus, and undivided profits of not
less than $100,000,000;
(f) repurchase agreements with any financial institution having
combined capital, surplus, and undivided profits of not less than
$100,000,000 for U.S. Government obligations maturing in less than 10
days;
(g) investments in daily money market mutual funds having assets
greater than $200,000,000 and limited in holdings to assets of the types
described in subsections (a), (b) and (c) of this Section;
(h) equity contributions, loans, and advances among the Borrower, it
Subsidiaries, and its Foreign Affiliates; provided that the aggregate
outstanding amount of equity contributions, loans, and advances to its
Foreign Affiliates does not exceed the amount outstanding on the date of
this Agreement plus $5,000,000;
(i) payroll advances made in the ordinary course of business;
(j) accounts receivable in the ordinary course of business;
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(k) loans and advances made by the Borrower, any Subsidiary or any
Foreign Affiliate to their respective officers and employees in the
ordinary course of business not to exceed $1,000,000 in the aggregate
outstanding at any time;
(l) demand deposits at Brown Brothers Harriman & Co. or banks with
capital surplus and undivided profits of at least $100,000,000 and whose
deposits are insured by the Federal Deposit Insurance Corporation,
maintained by the Borrower or any Subsidiary in the ordinary course of
business for the purpose of paying operating expenses; and
(m) short-term investments made in accordance with the investment
guideline policy dated effective April 24, 1990 and revised through the
date hereof, a true and correct copy of which has been delivered to the
Administrative Agent.
Section 10.6 TRANSACTIONS WITH AFFILIATES. The Borrower will not enter
into, and will not permit any Subsidiary and will use its best efforts to not
permit any Foreign Affiliate to enter into, any transaction, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate of the Borrower, such Subsidiary or such Foreign
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's, such Subsidiary's or such Foreign Affiliate's
business and upon fair and reasonable terms no less favorable to the Borrower,
such Subsidiary or such Foreign Affiliate than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of the Borrower, such
Subsidiary or such Foreign Affiliate.
Section 10.7 DISPOSITION OF ASSETS. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, and will not permit
any Subsidiary to do so with any of its assets, except (a) dispositions of
inventory in the ordinary course of business, and (b) dispositions of equipment
and fixtures having a fair market value not to exceed $50,000,000 in the
aggregate during any fiscal year of the Borrower.
Section 10.8 SALE AND LEASEBACK. The Borrower will not enter into, and
will not permit any Subsidiary to enter into, any Sale-Leaseback Transaction
unless the amount of Sale-Leaseback Debt resulting therefrom, plus the aggregate
of all other Sale-Leaseback Debt then existing, does not exceed the amount
permitted by Section 10.1(e).
Section 10.9 NATURE OF BUSINESS. The Borrower will not, and will not
permit any Subsidiary to, engage in any business substantially different than
the businesses in which they are engaged as of the date hereof.
Section 10.10 ENVIRONMENTAL PROTECTION. The Borrower will not, and will
not permit any Subsidiary to, (a) use (or permit any tenant to use) any of their
respective properties or assets for the handling, processing, storage,
transportation, or disposal of any Hazardous Material in violation of any
Environmental Law that the violation of which could reasonably be expected to
have a Material Adverse Effect, (b) generate any Hazardous Material in violation
of any Environmental Law that the
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violation of which could reasonably be expected to have a Material Adverse
Effect, (c) conduct any activity that causes a release or threatened release of
any Hazardous Material that could reasonably be expected to have a Material
Adverse Effect, or (d) otherwise conduct any activity or use any of their
respective properties or assets in any manner that is likely to violate any
Environmental Law that the violation of which could reasonably be expected to
have a Material Adverse Effect or create any Environmental Liabilities for which
the Borrower or any Subsidiary would be responsible that could reasonably be
expected to have a Material Adverse Effect.
Section 10.11 ACCOUNTING. The Borrower will not, and will not permit any
Subsidiary to, change its fiscal year or make any change (a) in accounting
treatment or reporting practices, except as required by GAAP and disclosed to
the Administrative Agent, or (b) in tax reporting treatment, except as required
by law and disclosed to the Administrative Agent.
ARTICLE XI
FINANCIAL COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Lender has any Commitment hereunder, the
Borrower will observe and perform the following financial covenants, unless the
Required Lenders (or the Administrative Agent with the consent of the Required
Lenders) shall otherwise consent in writing:
Section 11.1 FUNDED DEBT TO EBITDA. The Borrower will not permit the ratio
of its Funded Debt, as of the date hereof and as of each fiscal quarter
thereafter, to EBITDA, for the most recent Rolling Period then ended, to exceed
(a) 3.50 to 1.00 for each determination made during the period from and
including the date hereof to and including the fiscal quarter ending December
31, 2000, and (b) 3.00 to 1.00 for each fiscal quarter ending thereafter.
Section 11.2 FUNDED DEBT TO CAPITALIZATION. The Borrower will not permit
the ratio of Funded Debt to Capitalization, as of the end of each fiscal
quarter, for the most recent Rolling Period, to exceed (a) 0.55 for each
determination made during the period from and including the date hereof to and
including September 30, 1997, (b) 0.50 for each determination made during the
period from and including October 1, 1997 to and including the fiscal quarter
ending December 31, 2000, and (c) 0.40 for each fiscal quarter ending
thereafter.
Section 11.3 COVERAGE RATIO. The Borrower will maintain, at all times
(measured at the end of each fiscal quarter), a Coverage Ratio of not less than
1.50 to 1.00.
Section 11.4 TANGIBLE NET WORTH. The Borrower will at all times maintain
or cause to be maintained Tangible Net Worth in an amount not less than the sum
of (a) $189,415,000, plus (b) the increase in Tangible Net Worth resulting from
the Forasol Acquisition, plus (c) 75% of net income, after provision for income
taxes, of the Borrower and the Subsidiaries (without any deduction for losses),
for each fiscal quarter of the Borrower ended through the date of determination
beginning
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with the fiscal quarter ended December 31, 1996, plus (d) 100% of the Net
Proceeds received by the Borrower or any Subsidiary from any issuance, sale or
other disposition of any shares of capital stock or other equity securities of
the Borrower of any class (or any securities convertible or exchangeable for any
such shares, or any rights, warrants, or options to subscribe for or purchase
any such shares).
ARTICLE XII
DEFAULT
Section 12.1 EVENTS OF DEFAULT. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay any installment of principal or
interest on any of the Notes, any fees, or any other portion of the
Obligations when due.
(b) Any representation or warranty made or deemed made by the
Borrower or any Obligated Party (or any of their respective officers) in
any Loan Document or in any certificate, report, notice, or financial
statement furnished at any time in connection with this Agreement shall be
false, misleading, or erroneous in any material respect when made or
deemed to have been made.
(c) The Borrower or any Obligated Party shall (i) fail to perform,
observe, or comply with any of the affirmative covenants contained in
Article IX hereof (other than those in Sections 9.1(e) and 9.1(f)) and
such failure shall remain unremedied for 15 days after its occurrence, or
(ii) fail to perform, observe, or comply with any other covenants
contained in this Agreement.
(d) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with any (i) affirmative covenant, agreement, or term
contained in any other Loan Document (except those described in
subsections (a) and (c) of this Section) and such failure shall remain
unremedied for 15 days after its occurrence, or (ii) negative or
prohibitive covenant, agreement, or term contained in any other Loan
Document.
(e) The Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or a substantial part of its property or shall
consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it or shall make a general assignment for the benefit of
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creditors or shall generally fail to pay its debts as they become due or
shall take any corporate action to authorize any of the foregoing.
(f) An involuntary proceeding shall be commenced against the
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian, or
other similar official for it or a substantial part of its property, and
such involuntary proceeding shall remain undismissed and unstayed for a
period of 60 days.
(g) The Borrower, any Subsidiary, or any Obligated Party shall fail
to discharge or stay within a period of 30 days after the commencement
thereof any attachment, sequestration, or similar proceeding or
proceedings involving an aggregate amount in excess of $5,000,000 against
any of its assets or properties.
(h) A final judgment or judgments for the payment of money in excess
of $2,500,000 in the aggregate shall be rendered by a court or courts
against the Borrower, any Subsidiary, or any Obligated Party and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
30 days from the date of entry thereof and the Borrower, the relevant
Subsidiary, or the relevant Obligated Party shall not, within said period
of 30 days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(i) (i) The Borrower, any Subsidiary, or any Obligated Party shall
fail to pay when due, after any applicable grace periods, any principal of
or interest on any Debt in excess of $1,000,000 in the aggregate (other
than the Obligations), or (ii) the maturity of any such Debt shall have
been accelerated, or (iii) any such Debt shall have been required to be
prepaid prior to the stated maturity thereof, or (iv) any event shall have
occurred that permits (or, with the giving of notice or lapse of time or
both, would permit) any holder or holders of such Debt or any Person
acting on behalf of such holder or holders to accelerate the maturity
thereof or require any such prepayment.
(j) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity
or enforceability thereof shall be contested or challenged by the
Borrower, any Subsidiary, any Obligated Party or any of their respective
shareholders, or the Borrower, any Subsidiary, or any Obligated Party
shall deny that it has any further liability or obligation under any of
the Loan Documents, or any lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.
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(k) Any of the following events shall occur or exist with respect to
the Borrower, any Obligated Party or any ERISA Affiliate: (i) any
Prohibited Transaction involving any Plan; (ii) any Reportable Event with
respect to any Plan; (iii) filing under Section 4041 of ERISA of a notice
of intent to terminate any Plan or the termination of any Plan; (iv) any
event or circumstance that might constitute grounds entitling the PBGC to
institute proceedings under Section 4042 of ERISA for the termination of,
or for the appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; or (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency, or termination of
any Multiemployer Plan; and in each case above, such event or condition,
together with all other events or conditions, if any, have subjected or
could in the reasonable opinion of the Required Lenders subject the
Borrower or any Obligated Party to any tax, penalty, or other liability to
a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate could reasonably be expected to have a
Material Adverse Effect.
(l) Any Change in Control shall occur.
(m) The Borrower, any Subsidiary, or any Obligated Party, or any of
their properties, revenues, or assets in excess of $1,000,000 in the
aggregate, shall become subject to an order of forfeiture, seizure, or
divestiture and the same shall not have been discharged within 30 days
from the date of entry thereof.
Section 12.2 REMEDIES UPON DEFAULT. If any Event of Default shall occur
and be continuing, the Administrative Agent may, with the consent of the
Required Lenders (and if directed by the Required Lenders, shall), do any one or
more of the following: (a) declare, upon written notice to the Borrower, the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without demand, presentment,
notice of dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, protest, or other formalities of any kind, all of
which are hereby expressly waived by the Borrower, (b) terminate, upon written
notice to the Borrower, the Commitments, but without notice to any Subsidiary or
any other Obligated Party, (c) reduce any claim to judgment, (d) foreclose or
otherwise enforce any Lien granted to the Administrative Agent for the benefit
of itself and the Lenders to secure payment and performance of the Obligations,
and (e) exercise any and all rights and remedies afforded by the laws of the
State of Texas or any other jurisdiction, by any of the Loan Documents, by
equity, or otherwise; provided, however, that upon the occurrence of an Event of
Default under Section 12.1(e) or Section 12.1(f), the Commitments of the Lenders
shall automatically terminate, and the Obligations shall become immediately due
and payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
Section 12.3 CASH COLLATERAL. If any Event of Default shall occur and be
continuing, the Borrower agrees to, if requested by the Administrative Agent or
the Required Lenders, immediately
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deposit with and pledge to the Administrative Agent cash or cash equivalent
investments satisfactory to the Administrative Agent in its sole and absolute
discretion in an amount equal to the outstanding Letter of Credit Liabilities as
security for the Obligations, and the Administrative Agent may retain, as
additional Collateral for the payment of the Obligations with respect to the
Letters of Credit, any amounts received upon foreclosure, or in lieu of
foreclosure, through offset, as proceeds of any Collateral or otherwise.
Section 12.4 PERFORMANCE BY THE ADMINISTRATIVE AGENT. If the Borrower
shall fail to perform any covenant or agreement contained in any of the Loan
Documents, the Administrative Agent may perform or attempt to perform such
covenant or agreement on behalf of the Borrower. In such event, the Borrower
agrees to, at the request of the Administrative Agent, promptly pay any amount
expended by the Administrative Agent in connection with such performance or
attempted performance to the Administrative Agent, together with interest
thereon at the Default Rate from and including the date of such expenditure to
but excluding the date such expenditure is paid in full. Notwithstanding the
foregoing, it is expressly agreed that neither the Administrative Agent nor any
Lender shall have any liability or responsibility for the performance of any
obligation of the Borrower under this Agreement or any other Loan Document.
ARTICLE XIII
THE AGENTS
Section 13.1 APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite the
various transactions contemplated by this Agreement, the Lenders hereby
irrevocably appoint and authorize (1) Wells to act as their Administrative Agent
hereunder and under each of the other Loan Documents and (2) FNBC to act as
their Syndication Agent hereunder. Wells consents to such appointment and agrees
to perform the duties of the Administrative Agent as specified herein. FNBC
consents to such appointment and the Agents agree, in consultation with the
Borrower, to select a syndicate of Lenders to participate in the Commitments.
The Lenders authorize and direct the Administrative Agent to take such action in
their name and on their behalf under the terms and provisions of the Loan
Documents and to exercise such rights and powers thereunder as are specifically
delegated to or required of the Administrative Agent for the Lenders, together
with such rights and powers as are reasonably incidental thereto. The
Administrative Agent is hereby expressly authorized to act as the Administrative
Agent on behalf of itself and the other Lenders:
(a) To receive on behalf of each of the Lenders any payment of
principal, interest, fees or other amounts paid pursuant to this Agreement
and the Notes and to distribute to each Lender its pro rata share of all
payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the
Loan Documents;
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(c) To act as nominee for and on behalf of the Lenders in and under
the Loan Documents;
(d) To arrange for the means whereby the funds of the Lenders are to
be made available to the Borrower;
(e) To distribute to the Lenders information, requests, notices,
payments, prepayments, documents and other items received from the
Borrower, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrower, the other Obligated
Parties, and other Persons, all requests, demands, approvals, notices, and
consents received from the Lenders;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Lender all rights and remedies of Lenders upon the
occurrence of any Event of Default;
(h) To accept, execute, and deliver the Borrower Security Agreement,
the Guarantor Security Agreement, the Borrower Pledge Agreement, the
Subsidiary Pledge Agreement, and any other security documents as the
secured party; and
(i) To take such other actions as may be requested by Required
Lenders.
Neither the Administrative Agent nor any of its Affiliates, officers,
directors, employees, attorneys, or agents shall be liable for any action taken
or omitted to be taken by any of them hereunder or otherwise in connection with
this Agreement or any of the other Loan Documents except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Administrative Agent (i) may treat the payee of any Note
as the holder thereof until the Administrative Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form satisfactory
to the Administrative Agent; (ii) shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be a
trustee or fiduciary for any Lender; (iii) shall not be required to initiate any
litigation or collection proceedings hereunder or under any other Loan Document
except to the extent requested by Required Lenders; (iv) shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan Document, or any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, enforceability, or sufficiency of this Agreement or any
other Loan Document or any other document referred to or provided for herein or
therein or for any failure by any Person to perform any of its obligations
hereunder or thereunder; (v) may consult with legal counsel (including counsel
for the Borrower), independent public accountants, and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, or
experts; and (vi) shall incur no
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liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters not
expressly provided for by this Agreement, the Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by Required Lenders, and such instructions
of Required Lenders and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders; PROVIDED, however, that the
Administrative Agent shall not be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement or any other Loan Document or applicable law.
Section 13.2 RIGHTS OF AGENTS AS LENDERS. With respect to its Commitment,
the Advances made by it and the Note issued to it, Wells in its capacity as a
Lender hereunder and FNBC in its capacity as a Lender hereunder shall each have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Administrative Agent or the
Syndications Agent, as the case may be, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Administrative Agent
and the Syndications Agent, each in its individual capacity. Each Agent and its
Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, act as trustee under indentures of, provide
merchant banking services to, and generally engage in any kind of business with
the Borrower, any of its Subsidiaries, any other Obligated Party, and any other
Person who may do business with or own securities of the Borrower, any
Subsidiary, or any other Obligated Party, all as if it were not acting as the
Administrative Agent or the Syndications Agent and without any duty to account
therefor to the Lenders.
Section 13.3 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment of any principal of or interest on any Advance made by it under this
Agreement or payment of any other obligation under the Loan Documents then owed
by the Borrower or any other Obligated Party to such Lender, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Lender shall promptly purchase from the other Lenders participations in the
Advances held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of the other Lenders in accordance with its
pro rata portion thereof. To such end, all of the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if all or any portion of such excess payment is thereafter rescinded or must
otherwise be restored. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any Lender so purchasing a
participation in the Advances made by the other Lenders may exercise all rights
of setoff, banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Advances to the
Borrower in the amount of such participation. Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower.
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SECTION 13.4 INDEMNIFICATION. THE LENDERS HEREBY AGREE TO INDEMNIFY EACH
AGENT FROM AND HOLD EACH AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED
UNDER SECTIONS 14.1 AND 14.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SECTIONS 14.1 AND 14.2), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY
BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH AGENT IN ANY WAY RELATING
TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN BY SUCH AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS;
PROVIDED, FURTHER, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE
FOREGOING TO THE EXTENT CAUSED BY SUCH AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF
THE LENDERS THAT EACH AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD
HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY
AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH LENDER AGREES
TO REIMBURSE EACH AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED
ON THE BASIS OF THE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES
(INCLUDING ATTORNEYS' FEES) INCURRED BY SUCH AGENT IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF,
OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN
DOCUMENTS, TO THE EXTENT THAT SUCH AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY
THE BORROWER OR ANY OTHER OBLIGATED PARTY.
Section 13.5 INDEPENDENT CREDIT DECISIONS. Each Lender agrees that it has
independently and without reliance on any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of the Borrower and the Guarantors and decision to enter into
this Agreement and that it will, independently and without reliance upon any
Agent or any other Lender, and based upon such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Loan Documents. Neither of the Agents shall be required to keep itself
informed as to the performance or observance by the Borrower or any Obligated
Party of this Agreement or any other Loan Document or to inspect the properties
or books of the Borrower or any Obligated Party. Except for notices, reports and
other documents and
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information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the other Loan Documents, neither of the
Agents shall have any duty or responsibility to provide any Lender with any
credit or other financial information concerning the affairs, financial
condition or business of the Borrower or any Obligated Party (or any of their
Affiliates) which may come into the possession of any Agent or any of its
Affiliates.
Section 13.6 SEVERAL COMMITMENTS. The Commitments and other obligations of
the Lenders under this Agreement are several. The default by any Lender in
making an Advance in accordance with its Commitment shall not relieve the other
Lenders of their obligations under this Agreement. In the event of any default
by any Lender in making any Advance, each nondefaulting Lender shall be
obligated to make its Advance but shall not be obligated to advance the amount
which the defaulting Lender was required to advance hereunder. In no event shall
any Lender be required to advance an amount or amounts which shall in the
aggregate exceed such Lender's Commitment. No Lender shall be responsible for
any act or omission of any other Lender.
Section 13.7 SUCCESSOR ADMINISTRATIVE AGENT. Subject to the appointment
and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the
Lenders and the Borrower and the Administrative Agent may be removed at any time
with or without cause by Required Lenders. Upon any such resignation or removal,
Required Lenders will have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized under the laws
of the United States of America or any State thereof and having combined capital
and surplus of at least $100,000,000. Upon the acceptance of its appointment as
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all rights, powers, privileges,
immunities, and duties of the resigning or removed Administrative Agent, and the
resigning or removed Administrative Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents. After any
Administrative Agent's resignation or removal as Administrative Agent, the
provisions of this Article XIII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was the
Administrative Agent.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 EXPENSES. The Borrower hereby agrees to pay on demand: (a)
all reasonable costs and out-of-pocket expenses of the Agents in connection with
the preparation, negotiation, execution, and delivery of this Agreement and the
other Loan Documents and any and all amendments, modifications, renewals,
extensions, and supplements thereof and thereto, including,
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without limitation, the reasonable fees and expenses of legal counsel for the
Agents, (b) all reasonable costs and out-of-pocket expenses of the Agents and
the Lenders, or any of them in connection with any Default and the enforcement
of this Agreement or any other Loan Document, including, without limitation, the
reasonable fees and expenses of legal counsel for the Agents and the Lenders, or
any of them, (c) all transfer, stamp, documentary, or other similar taxes,
assessments, or charges levied by any Governmental Authority in respect of this
Agreement or any of the other Loan Documents, (d) all reasonable costs,
out-of-pocket expenses, assessments, and other charges incurred in connection
with any filing, registration, recording, or perfection of any security interest
or Lien contemplated by this Agreement or any other Loan Document, and (e) all
other reasonable costs and out-of-pocket expenses incurred by the Agents in
connection with this Agreement or any other Loan Document, including, without
limitation, all fees, costs, out-of-pocket expenses, and other charges incurred
in connection with performing or obtaining any audit or appraisal in respect of
the Collateral.
SECTION 14.2 INDEMNIFICATION. THE BORROWER HEREBY AGREES TO INDEMNIFY EACH
AGENT AND EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE PARTNERS,
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS, AND PARTICIPANTS FROM, AND
HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, INTEREST, EXPENSES
(INCLUDING REASONABLE ATTORNEYS' FEES), AND AMOUNTS PAID IN SETTLEMENT TO WHICH
ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE
TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE BORROWER OR ANY
GUARANTOR OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED
RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON,
ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF THE BORROWER OR
ANY SUBSIDIARY, (E) THE USE OR PROPOSED USE OF ANY LETTER OF CREDIT, (F) ANY AND
ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON ANY AGENT OR ANY LENDER OR
ANY OF THEIR RESPECTIVE CORRESPONDENTS IN RESPECT OF ANY LETTER OF CREDIT, OR
(G) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING,
RELATING TO ANY OF THE FOREGOING; PROVIDED, HOWEVER THAT NO PERSON TO BE
INDEMNIFIED HEREUNDER SHALL HAVE THE RIGHT TO BE INDEMNIFIED FOR ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITING ANY PROVISION OF THIS
AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
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UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM
THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.
Section 14.3 LIMITATION OF LIABILITY. None of the Agents, Lenders, or any
Affiliate, officer, director, employee, attorney, or agent thereof shall have
any liability with respect to, and the Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. The Borrower hereby waives,
releases, and agrees not to sue any Agent or any Lender or any of their
respective Affiliates, partners, officers, directors, employees, attorneys, or
agents for punitive damages in respect of any claim in connection with, arising
out of, or in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any of
the other Loan Documents.
Section 14.4 NO FIDUCIARY RELATIONSHIP. The relationship between the
Borrower and each Lender with respect to the Loan Documents and the transactions
governed thereby is solely that of debtor and creditor, and neither any Agent
nor any Lender has any fiduciary or other special relationship with the Borrower
with respect to the Loan Documents and the transactions governed thereby, and no
term or condition of any of the Loan Documents shall be construed so as to deem
the relationship between the Borrower and any Lender with respect to the Loan
Documents and the transactions governed thereby to be other than that of debtor
and creditor.
Section 14.5 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of any
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.
Section 14.6 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The
Borrower shall not be permitted to assign or transfer any of its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all of the Lenders. Any Lender may sell
participations to one or more banks or other institutions in or to all or
a portion of its rights and obligations under this Agreement and the other
Loan Documents (including, without limitation, all or a portion of its
Commitments, the Advances owing to it and its share of Letter of Credit
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Liabilities); PROVIDED, however, that (i) such Lender's obligations under
this Agreement and the other Loan Documents (including, without
limitation, its Commitment) shall remain unchanged, (ii) such Lender shall
remain solely responsible to the Borrower for the performance of such
obligations, (iii) such Lender shall remain the holder of its Note for all
purposes of this Agreement, (iv) the Borrower shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents,
and (v) such Lender shall not sell a participation that conveys to the
participant the right to vote or give or withhold consents under this
Agreement or any other Loan Document, other than the right to vote upon or
consent to (A) any increase of such Lender's Commitment, (B) any reduction
of the principal amount of, or interest to be paid on, the Advances of
such Lender, (C) any reduction of any commitment fee or other amount
payable to such Lender under any Loan Document, (D) any postponement of
any date for the payment of any amount payable in respect of the Advances
of such Lender, or (E) any material release of Collateral other than
releases contemplated in the Loan Documents as in effect on the date
hereof and releases upon full payment and performance of the Obligations
and termination of the Commitments. Such participants shall have no rights
under the Loan Documents, other than certain voting rights as provided
above. Subject to the following, each Lender may obtain (on behalf of its
participants) the benefits of Article V with respect to all participations
in its part of the Obligations outstanding from time to time. If a
participant is entitled to the benefits of Article V or a Lender grants
rights to its participants to vote or give or withhold consents respecting
the matters described above, then that Lender must include a voting
mechanism in the relevant participation agreement whereby a majority of
its portion of the Obligations (whether held by it or participated) shall
control the vote for all of that Lender's portion of the Obligations.
Except in the case of the sale of a participating interest to another
Lender, the relevant participation agreement shall prohibit the
participant from transferring, pledging, assigning, selling participations
in, or otherwise encumbering its portion of the Obligations.
(b) The Borrower and each of the Lenders agree that any Lender may
at any time assign to one or more Eligible Assignees all, or a
proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Commitment, Advances and Letter of Credit Liabilities); PROVIDED, however,
that (i) each such assignment shall be of a consistent, and not a varying,
percentage of all of the assigning Lender's rights and obligations under
this Agreement and the other Loan Documents, (ii) except in the case of an
assignment of all of a Lender's rights and obligations under this
Agreement and the other Loan Documents, the amount of the Commitment of
the assigning Lender being assigned pursuant to each assignment
(determined as of the date of the Assignment and Acceptance with respect
to such assignment) shall in no event be less than $5,000,000, and the
amount of the Commitment of the assigning Lender remaining after each such
assignment shall in no event be less than $5,000,000, and (iii) the
parties to each such assignment shall execute and deliver to the
Administrative Agent for its acceptance and recording in the Register (as
defined below), an Assignment and Acceptance, together with the Note
subject to such assignment, and a processing and recordation fee of
$3,500. Upon
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such execution, delivery, acceptance, and recording, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be at least 10 Business Days after the execution
thereof, or, if so specified in such Assignment and Acceptance, the date
of acceptance thereof by the Administrative Agent, (x) the assignee
thereunder shall be a party hereto as a "Lender" and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and under the Loan Documents and (y) the Lender that is an
assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
under this Agreement and the other Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
Lender's rights and obligations under the Loan Documents, such Lender
shall cease to be a party thereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender that is an assignor thereunder and the assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties, or representations made in or
in connection with the Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency, or value of the Loan
Documents or any other instrument or document furnished pursuant thereto;
(ii) such assigning Lender makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
or any Obligated Party or the performance or observance by the Borrower or
any Obligated Party of its obligations under the Loan Documents; (iii)
such assignee confirms that it has received a copy of the other Loan
Documents, together with copies of the financial statements referred to in
Section 8.2 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon any Agent or such assignor and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Administrative Agent to take such action as agent on its
behalf and exercise such powers under the Loan Documents as are delegated
to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
(d) The Administrative Agent may maintain at its Principal Office a
copy of each Assignment and Acceptance delivered to and accepted by it and
a register for the recordation of the names and addresses of the Lenders
and the Commitment of, and principal amount of the Advances owing to, each
Lender from time to time (the "REGISTER"). The
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entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Agents, and the Lenders may
treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes under the Loan Documents. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and assignee representing that it is an Eligible
Assignee, together with any Note subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit "B" hereto and all
requirements set forth in this Section have been satisfied, (i) accept
such Assignment and Acceptance, (ii) record the information contained
therein in the Register, if any, and (iii) give prompt written notice
thereof to the Borrower. Within five Business Days after its receipt of
such notice, the Borrower shall execute and deliver to the Administrative
Agent in exchange for the surrendered Note a new Note payable to the order
of such Eligible Assignee in an amount equal to the Commitment assumed by
it pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained a Commitment, a new Note payable to the order of the
assigning Lender in an amount equal to the Commitment retained by it
hereunder (each such promissory note shall constitute a "Note" for
purposes of the Loan Documents). Such new Notes shall be in an aggregate
face amount of the surrendered Note, shall be dated the effective date of
such Assignment and Acceptance, and shall otherwise be in substantially
the form of Exhibit "I" hereto.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee or
participant, subject to the confidentiality agreements between the
Borrower and the Lenders, any information relating to the Borrower, the
Subsidiaries or the Foreign Affiliates furnished to such Lender by or on
behalf of the Borrower, the Subsidiaries or the Foreign Affiliates.
Section 14.7 SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by any Agent or any Lender or any closing shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them. Without prejudice to the survival of any other obligation of the
Borrower hereunder, the obligations of the Borrower under Sections 14.1, and
14.2 shall survive repayment of the Notes and termination of the Commitments and
the Letters of Credit.
Section 14.8 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS,
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WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
Section 14.9 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Loan Document to which the Borrower is a
party, nor any consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be agreed or consented to in writing by
Required Lenders (or Administrative Agent with the consent of Required Lenders)
and the Borrower, and each such waiver, amendment, or consent shall be effective
only in the specific instance and for the specific purpose for which given;
PROVIDED, that no amendment, waiver, or consent shall, unless in writing and
signed by all of the Lenders and the Borrower, do any of the following: (a)
increase or reinstate Commitments of the Lenders or subject the Lenders to any
additional obligations; (b) reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder (except any fees payable to any
Agent solely for its account as specified herein or in any other document); (c)
change the Borrowing Base or the Termination Date or postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder (except any fees payable to any Agent solely for its
account as specified herein or in any other document); (d) waive any of the
conditions specified in Article VII; (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes or the
number of Lenders which shall be required for the Lenders or any of them to take
any action under this Agreement; (f) change any provision contained in this
Section 14.9; or (g) release any Collateral, except for dispositions permitted
herein. Notwithstanding anything to the contrary contained in this Section, no
amendment, waiver, or consent shall be made with respect to Article XIII hereof
without the prior written consent of the Administrative Agent.
Section 14.10 MAXIMUM INTEREST RATE. No provision of this Agreement or any
other Loan Document shall require the payment or the collection of interest in
excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event any Lender ever receives, collects, or applies as
interest any such sum, such amount which would be in excess of the maximum
amount permitted by applicable law shall be applied as a payment and reduction
of the principal of the indebtedness; and, if the principal has been paid in
full, any remaining excess shall forthwith be paid to the Borrower. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and each Lender shall, to the extent permitted by applicable
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal
parts the
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total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by the Notes so that interest for the entire term does
not exceed the Maximum Rate.
Section 14.11 NOTICES. All notices and other communications provided for
in this Agreement and the other Loan Documents shall be given in writing and
telecopied, mailed by certified mail return receipt requested, or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof; or, as to any party at such other address as shall
be designated by such party in a notice to the other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid; PROVIDED, however, notices to the
Administrative Agent pursuant to Article II and Article III shall not be
effective until received by the Administrative Agent.
Section 14.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST THE
BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. THE BORROWER HEREBY
IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B)
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14.11.
NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF
ANY AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF ANY AGENT OR ANY LENDER TO BRING ANY ACTION OR
PROCEEDING AGAINST THE BORROWER OR WITH RESPECT TO ANY OF THEIR RESPECTIVE
PROPERTY IN COURTS IN OTHER JURISDICTIONS. ANY ACTION OR PROCEEDING BY THE
BORROWER AGAINST ANY AGENT OR ANY LENDER SHALL BE BROUGHT ONLY IN A COURT
LOCATED IN HARRIS COUNTY, TEXAS.
Section 14.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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Section 14.14 SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 14.15 HEADINGS. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 14.16 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section 14.17 CONSTRUCTION. The Borrower, each Agent and each Lender
acknowledge that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review this Agreement and the
other Loan Documents with its legal counsel and that this Agreement and the
other Loan Documents shall be construed as if jointly drafted by the parties
hereto.
Section 14.18 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 14.19 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF ANY AGENT
OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
Section 14.20 ARBITRATION. Upon the demand of any party, any Dispute shall
be resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Agreement. A "Dispute" shall mean any action,
dispute, claim or controversy of any kind, whether in contract or tort,
statutory or common law, legal or equitable, now existing or hereafter arising
under or in connection with, or in any way pertaining to, any of the Loan
Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party may
by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration
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following a lawful demand by any other party shall bear all costs and expenses
incurred by such other party in compelling arbitration of any Dispute.
(a) GOVERNING RULES. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Texas selected by
the AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(b) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(c) ARBITRATOR QUALIFICATIONS AND POWERS AWARDS. Arbitrators must be
active members of the Texas State Bar with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of Texas, (ii) may grant any
remedy or relief that a court of the state of Texas could order or grant within
the scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(d) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make
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specific, written findings of fact and conclusions of law. In such arbitrations
(i) the arbitrators shall not have the power to make any award which is not
supported by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings of fact are
supported by substantial evidence and the conclusions of law are not erroneous
under the substantive law of the state of Texas, and (iii) the parties shall
have in addition to the grounds referred to in the Federal Arbitration Act for
vacating, modifying or correcting an award the right to judicial review of (A)
whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B) whether the conclusions of law are erroneous under
the substantive law of the state of Texas. Judgment confirming an award in such
a proceeding may be entered only if a court determines the award is supported by
substantial evidence and not based on legal error under the substantive law of
the state of Texas.
(e) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provisions most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
Section 14.21 SPECIAL PROVISION. Notwithstanding any other provision in
this Agreement, no waiver or amendment to Sections 10.1 or 10.3, or both, shall
be effective until both a Conditional Consent and a Final Consent related
thereto are received, it being understood and agreed that each Lender (other
than any Nonconsenting Lender that has given an Opt-Out Request) shall be
entitled to give or withhold its consent to the Final Consent that is the
subject of a Conditional Consent and that the result may be that consent is not
given for the requested waiver or amendment of Sections 10.1 or 10.3, or both.
Failure of the Administrative Agent to receive a Conditional Consent or a Final
Consent within 10 Business Days of requesting the same shall be deemed a
rejection of the request and any Opt-Out Request shall be deemed revoked. If a
Final Consent is given after one or more Opt-Out Requests, the Borrower agrees
to, and the Lenders consent to, terminate the Commitment of each Nonconsenting
Lender and repay its Loans in full as required in the Opt-Out Request, but
without premium, penalty or breakage costs, and on the date its Commitment is
terminated and its Loan are paid in full, each Nonconsenting Lender that
provided an Opt-Out Request shall no longer be a "Lender" hereunder, and the
participation in all Letters of Credit shall be redistributed among all of the
remaining Lenders in accordance with the remaining Commitments.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER:
PRIDE PETROLEUM SERVICES, INC.
By: /S/ ROBERT W. RANDALL
Robert W. Randall
Vice President, General Counsel and Secretary
Address for Notices:
1500 City West Boulevard, Suite 400
Houston, Texas 77042
Fax No.: (713) 789-1430
Telephone No.: (713) 789-1400
Attention: Treasurer
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AGENTS AND LENDERS:
FIRST NATIONAL BANK OF COMMERCE,
as Syndication Agent and as a Lender
COMMITMENT By: /S/ JOSHUA C. CUMMINGS
Joshua C. Cummings
$30,000,000 Relationship Manager - Energy Group
Address for Notices:
P.O. Box 60279
201 St. Charles Ave., 28th Floor
New Orleans, Louisiana 70170
Fax No.: (504) 623-1316
Telephone No.: (504) 623-1361
Attention: Joshua C. Cummings
Principal Office and Applicable Lending
Office for Base Rate Advances and
Eurodollar Advances:
P.O. Box 60279
201 St. Charles Ave., 28th Floor
New Orleans, Louisiana 70170
Fax No.: (504) 623-1316
Telephone No.: (504) 623-1361
Attention: Joshua C. Cummings
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WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, as Administrative
Agent and a Lender
COMMITMENT By: /S/ MARC A. DUNMIRE
Marc A. Dunmire
$30,000,000 Vice President
Address for Notices and Applicable Lending
Office for Base Rate Advances and Eurodollar
Advances:
1000 Louisiana, Third Floor
Houston, Texas 77002
Fax No.: (713) 250-7041
Telephone No.: (713) 250-7240
Attention: Marc A. Dunmire
Principal Office for interest rate
determinations:
1000 Louisiana, Third Floor
Houston, Texas 77002
Fax No.: (713) 250-7041
Telephone No.: (713) 250-7240
Attention: Marc A. Dunmire
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HIBERNIA NATIONAL BANK
COMMITMENT By: /S/ LYNDSAY JOBE
Lyndsay Jobe
$15,000,000 Senior Vice President
Address for Notices and Applicable Lending
Office for Base Rate Advances and Eurodollar
Advances:
P.O. Box 61540
New Orleans, Louisiana 70161
Fax No.: (504) 533-5434
Telephone No.: (504) 533-5458
Attention: John Benoit
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THE FUJI BANK, LIMITED -HOUSTON
AGENCY
COMMITMENT By: /S/ PHIL LAUINGER
Phil Lauinger
$15,000,000 Vice President & Joint Manager
Address for Notices:
One Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Fax No.: (713) 759-0048
Telephone No.: (713) 650-7852
Attention: Phil Lauinger
Lending Office for Base Rate Advances and
Eurodollar Rate Advances:
One Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Fax No.: (713) 759-0048
Telephone No.: (713) 650-7852
Attention: Phil Lauinger
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per pro BROWN BROTHERS HARRIMAN & CO.
COMMITMENT By: /S/ W. CARTER SULLIVAN III
W. Carter Sullivan III
$10,000,000 Senior Manager
Address for Notices and Applicable Lending
Office for Base Rate Advances and Eurodollar
Advances:
59 Wall Street
New York, New York 10005-2818
Fax No.: (212) 493-7280
Telephone No.: (212) 493-7901
Attention: Jeffrey C. Lockwood
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT SECTION
"A" Advance Request Form 1.1; 2.5
"B" Assignment and Acceptance 1.1; 14.6
"C" Borrower Pledge Agreement 1.1; 6.1(c)
"D" Borrower Security Agreement 1.1; 6.1(a)
"E" Compliance Certificate 1.1; 9.1(c)
"F" Guaranty 1.1; 7.1(a)(14)
"G" Guarantor Security Agreement 1.1; 6.1(b)
"H" Letter of Credit Request Form 1.1; 3.2
"I" Form of Note 1.1; 2.2
"J" Subsidiary Pledge Agreement 1.1; 6.1(d)
"K" L/C Application for Standby Letters of Credit 1.1; 3.1
"L" Contribution and Indemnification Agreement 7.1(a)(15)
"M" Matters to be Addressed in Opinion of Counsel 7.1(a)(20)
"N" Borrowing Base Report 9.1(h)
INDEX TO SCHEDULES
SCHEDULE DESCRIPTION OF EXHIBIT SECTION
1.1 Approved Majors/Nationals for Borrowing
Base Purposes 1.1
8.5 Existing Litigation 8.5
8.9 Existing Debt (including Contingent Liabilities
and Guaranties) 8.9
8.14 Subsidiaries and Foreign Affiliates 8.14
8.19 Environmental Matters 8.19
10.2 Existing Liens 10.2
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EXHIBIT 10.19
================================================================================
ASSET PURCHASE AGREEMENT
by and between
Noble Drilling Corporation,
Noble Drilling (U.S.) Inc.,
Noble Offshore Corporation,
Noble Drilling (Mexico) Inc. and
NN-1 Limited Partnership
and
Pride Petroleum Services, Inc.
February 19, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
PARTIES.................................................................... 1
RECITALS................................................................... 1
ARTICLE I -- CERTAIN DEFINITIONS..................................... 1
ARTICLE II -- PURCHASE AND SALE OF ASSETS............................ 4
2.1 Assets to be Purchased................................... 4
2.2 Excluded Assets.......................................... 5
2.3 Assumed Liabilities...................................... 5
2.4 Limitation on Assignments................................ 6
2.5 Delivery of Records...................................... 6
ARTICLE III -- PURCHASE PRICE........................................ 7
3.1 Consideration for the Purchased Assets................... 7
3.2 Buyer's Default.......................................... 7
3.3 Return of Deposit........................................ 8
3.4 Allocation of Purchase Price............................. 8
ARTICLE IV -- THE CLOSING............................................ 8
4.1 Time and Place of Closing................................ 8
4.2 Deliveries by Parent and Sellers......................... 8
4.3 Deliveries by Buyer...................................... 9
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF SELLERS............... 9
5.1 Organization and Existence............................... 9
5.2 Authority; Etc........................................... 9
5.3 No Violations............................................ 10
5.4 Ownership of Rigs........................................ 10
5.5 Inventory................................................ 11
5.6 Contracts................................................ 11
5.7 Litigation............................................... 11
5.8 Governmental Approval.................................... 12
5.9 Compliance With Laws..................................... 12
5.10 Reserved................................................. 12
5.11 Rig Classifications and Certifications................... 12
5.12 Environmental Matters.................................... 12
5.13 No Brokers............................................... 13
5.14 Decrees, etc............................................. 13
5.15 Performance Bonds; Letters of Credit..................... 13
ARTICLE VI -- REPRESENTATIONS AND WARRANTIES OF PARENT............... 13
6.1 Organization and Existence............................... 13
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6.2 Authority; Etc........................................... 14
6.3 No Violations............................................ 14
6.4 Governmental Approval.................................... 14
6.5 Litigation............................................... 15
6.6 No Brokers............................................... 15
6.7 Employees and Related Matters............................ 15
ARTICLE VII -- REPRESENTATIONS AND WARRANTIES OF BUYER............... 15
7.1 Organization and Existence............................... 15
7.2 Authority; Etc........................................... 15
7.3 No Violations............................................ 16
7.4 Inspections.............................................. 16
7.5 Litigation............................................... 16
7.6 Governmental Approval.................................... 17
7.7 No Brokers............................................... 17
7.8 Certain Knowledge Regarding Assignment of Contracts...... 17
7.9 Registration Statement................................... 17
ARTICLE VIII -- CONDITIONS TO THE OBLIGATIONS OF
PARENT AND SELLERS........................................ 17
8.1 Accuracy of Representations and Warranties............... 17
8.2 Covenants and Agreements Performed....................... 17
8.3 Officer's Certificate.................................... 17
8.4 Legal Opinion............................................ 18
8.5 HSR Act.................................................. 18
ARTICLE IX -- CONDITIONS TO THE OBLIGATIONS OF BUYER................. 18
9.1 Accuracy of Representations and Warranties............... 18
9.2 Covenants and Agreements Performed....................... 18
9.3 Officer's Certificate.................................... 18
9.4 Legal Opinion............................................ 19
9.5 HSR Act.................................................. 19
9.6 Financing by Buyer....................................... 19
ARTICLE X -- COVENANTS AND AGREEMENTS OF THE PARTIES BEFORE,
RELATING TO AND SUBSEQUENT TO THE CLOSING.................... 19
10.1 Expenses................................................. 19
10.2 HSR Act Compliance....................................... 19
10.3 Access................................................... 19
10.4 Conduct of Business and Preservation of Assets........... 20
10.5 Transition of Business Operations........................ 20
10.6 Litigation............................................... 20
10.7 Certain Taxes............................................ 21
10.8 Actions with Respect to Closing.......................... 21
10.9 Public Statements........................................ 21
10.10 Books and Records........................................ 21
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10.11 Rig Loss................................................. 22
10.12 Use of Names............................................. 22
10.13 Continued Effectiveness of Representations and Warranties 22
10.14 Post-Closing Collection, Payment and Administrative
Procedures .............................................. 22
10.15 Action of Buyer Regarding Financing...................... 23
10.16 Certain Financial Statements............................. 23
10.17 Import Duties; Performance Bonds......................... 23
10.18 Availability of Rigs to Triton Engineering Services
Company.................................................. 24
10.19 Acquisition Proposal..................................... 24
ARTICLE XI -- EMPLOYEES.............................................. 25
11.1 Employees................................................ 25
11.2 Non-Solicitation of Certain Employees.................... 26
ARTICLE XII -- TERMINATION........................................... 26
12.1 Termination.............................................. 26
12.2 Effect of Termination.................................... 27
ARTICLE XIII -- EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS...................... 28
13.1 Scope of Representations of Sellers...................... 28
13.2 Indemnification by Parent................................ 28
13.3 Indemnification by Buyer................................. 29
13.4 Indemnification Procedure................................ 29
13.5 Survival................................................. 30
13.6 Tax Benefits; Insurance Proceeds......................... 30
13.7 Applicability of Indemnification Obligation.............. 30
ARTICLE XIV -- PARENT GUARANTEE...................................... 30
ARTICLE XV -- MISCELLANEOUS.......................................... 31
15.1 Notices.................................................. 31
15.2 Entire Agreement......................................... 32
15.3 Amendments and Waiver; Rights and Remedies............... 32
15.4 Governing Law............................................ 32
15.5 Binding Effect; Assignment............................... 32
15.6 Counterparts............................................. 33
15.7 References............................................... 33
15.8 Severability of Provisions............................... 33
15.9 Gender................................................... 33
15.10 Descriptive Headings..................................... 33
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of February 19,
1997, is by and between Pride Petroleum Services, Inc., a Louisiana corporation
("Buyer"), and Noble Drilling Corporation, a Delaware corporation ("Parent"),
Noble Drilling (U.S.) Inc., a Delaware corporation ("NDUS"), Noble Offshore
Corporation, a Delaware corporation ("NOC"), Noble Drilling (Mexico) Inc., a
Delaware corporation ("NDMEX"), and NN-1 Limited Partnership, a Texas limited
partnership ("NN-1") (NDUS, NOC, NDMEX and NN-1 are sometimes referred to
herein, collectively, as "Sellers" and, individually, as a "Seller");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase the Purchased Assets (as hereinafter
defined) from Sellers; and
WHEREAS, Sellers desire to sell the Purchased Assets to Buyer in exchange
for the payment by Buyer of the Purchase Price (as hereinafter defined) and the
assumption by Buyer of the Assumed Liabilities (as hereinafter defined); and
WHEREAS, Parent desires to take such actions as are necessary or
appropriate to cause Sellers to effect the transactions above described in this
preamble and, in connection therewith, to guarantee the agreements and
obligations of Sellers in and under this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
"Acquisition Proposal" has the meaning specified in Section 10.19.
"Affiliate" means, as to the person specified, any person controlling,
controlled by or under common control with such person, with the concept of
control in such context meaning the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning specified in the preamble.
"Applicable Environmental Laws" has the meaning specified in Section
5.12(b).
"Applicable Laws" has the meaning specified in Section 5.9.
"Assumed Liabilities" has the meaning specified in Section 2.3.
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"Best Efforts" means a party's best efforts in accordance with reasonable
commercial practice and without the incurrence of unreasonable expense.
"Business Day" means a day on which national banks are generally open for
the transaction of business in Houston, Texas.
"Buyer" has the meaning specified in the preamble.
"Buyer Basket" has the meaning specified in Section 13.2.
"Buyer Designee" has the meaning specified in Section 15.5(b)(ii).
"Claims" has the meaning specified in Section 13.2.
"Closing" means the consummation of the transactions contemplated by
Article II of this Agreement in accordance with the terms and upon the
conditions set forth in Article II.
"Closing Date" has the meaning specified in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent Required Contract" has the meaning specified in Section 2.4.
"Deposit" has the meaning specified in Section 3.1(a).
"Drilling Contracts" has the meaning specified in Section 2.1(e)(i).
"Employer" and "Employers" have the meanings specified in Section 11.1(c).
"Employment Arrangements" has the meaning specified in Section 11.1(d).
"Encumbrances" means liens, charges, pledges, options, mortgages, security
interests, claims, title defects and other encumbrances of every type and
description, whether imposed by law, agreement, understanding or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning specified in Section 6.7.
"Escrow Agent" has the meaning specified in Section 3.1(a).
"Escrow Agreement" has the meaning specified in Section 3.1(a).
"Escrow Funds" has the meaning specified in Section 3.1(a).
"Excluded Assets" has the meaning specified in Section 2.2.
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"General Assignment" has the meaning specified in Section 4.2(a).
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign).
"hazardous material" has the meaning specified in Section 5.12(b).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" has the meaning specified in Section 13.4.
"Indemnifying Party" has the meaning specified in Section 13.4.
"Inventory" has the meaning specified in Section 2.1(c).
"NDMEX" has the meaning specified in the preamble.
"NDUS" has the meaning specified in the preamble.
"NN-1" has the meaning specified in the preamble.
"NN-1 Partner's Consent" has the meaning specified in Section 5.2.
"NOC" has the meaning specified in the preamble.
"Nonassigned Contract" has the meaning specified in Section 2.4.
"Other Contracts" has the meaning specified in Section 2.1(e)(ii).
"Parent" has the meaning specified in the preamble.
"PEMEX Contracts" has the meaning specified in Section 10.18(a).
"Permits" has the meaning specified in Section 2.1(d)(ii).
"Permitted Encumbrances" means (i) Encumbrances for taxes, assessments and
governmental charges not yet due and payable or the validity of which are being
contested in good faith by appropriate proceedings; (ii) statutory liens arising
in the ordinary course of business relating to obligations as to which there is
no default on the part of Parent or Sellers, excluding any mortgage; (iii) the
Drilling Contracts and Other Contracts; (iv) outstanding recommendations to
class against any of the Rigs; and (v) any other Encumbrances which in the
aggregate do not exceed $200,000; provided, however, that at the Closing
"Permitted Encumbrances" shall not include any Encumbrances for taxes,
assessments or governmental charges filed of record against the Purchased
Assets, or statutory liens filed of record against
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the Purchased Assets, unless any such Encumbrances are being diligently
contested in good faith by appropriate proceedings.
"Proceedings" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental Entity.
"Purchased Assets" has the meaning specified in Section 2.1.
"Purchase Price" shall mean $265,000,000.
"Registration Statement" has the meaning specified in Section 7.9.
"Retained Employees" has the meaning specified in Section 11.1(b).
"Richardson Hull" has the meaning specified in Section 2.1(b).
"Rigs" has the meaning specified in Section 2.1(b).
"Securities Act" has the meaning specified in Section 7.9.
"Seller Basket" has the meaning specified in Section 13.3.
"Seller Designee" has the meaning specified in Section 15.5(b)(i).
"Seller" and "Sellers" have the meanings specified in the preamble.
"Taxes" has the meaning specified in Section 10.7.
"Triton" has the meaning specified in Section 10.18(a).
"Triton Contracts" has the meaning specified in Section 10.18(a).
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 ASSETS TO BE PURCHASED. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, Sellers agree to sell, assign,
transfer, deliver and convey to Buyer, and Buyer agrees to purchase, the
following (collectively, the "Purchased Assets"):
(a) the 12 mat supported jackup drilling rigs described on Schedule
2.1(a), of which the CECIL FORBES is "cold-stacked";
(b) the hull from the former mat supported jackup drilling rig, LINN
RICHARDSON, which has become a constructive total loss and no longer has any
drilling machinery or other equipment onboard or associated therewith (the
"Richardson Hull", and, together with the mat supported jackup drilling rigs
described in Section 2.1(a), collectively referred to herein as the "Rigs");
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(c) the stocks owned by Sellers or any of their Affiliates described on
Schedule 2.1(c) (collectively, "Inventory"), as such Inventory may be reduced
through consumption thereof, or increased through replacement thereof or
addition thereto, in the ordinary course of the maintenance and operation of the
Rigs through the Closing Date;
(d) the following tangible and intangible assets used or held for use in
connection with the ownership, maintenance and operation of the Rigs, to the
extent assignable by law and Sellers or their Affiliates have the right to
assign and transfer such assets:
(i) all records to be delivered to Buyer pursuant to Section 2.5;
and
(ii) the certificates, licenses, permits, consents, operating
authorities, orders, exemptions, franchises, approvals, registrations and
other authorizations and applications therefor specifically associated
with the maintenance and operation of a Rig and listed on Schedule
2.1(d)(ii) hereto ("Permits"); and
(e) the benefit and burden subsequent to the Closing Date of:
(i) all drilling contracts and any amendments thereto for the
employment of the Rigs in effect on the Closing Date (the "Drilling
Contracts"), including without limitation the Drilling Contracts
identified on Schedule 2.1(e)(i) hereto in effect on the Closing Date; and
(ii) all other contracts to which Sellers or any of their Affiliates
is a party relating to the ownership, maintenance and operation of the
Rigs in effect on the Closing Date and described on Schedule 2.1(e)(ii)
(the "Other Contracts").
2.2 EXCLUDED ASSETS. The Purchased Assets to be transferred by Sellers to
Buyer hereunder shall include only those described or referred to in Section
2.1, and no other assets or properties of Sellers shall be transferred to Buyer
hereunder. Without limiting the generality of the preceding sentence, the
Purchased Assets shall not include (i) Parent's subsidiaries, (ii) cash,
accounts receivable, prepaid expenses and deposits, (iii) the blowout preventer
(and related BOP handling equipment) currently installed on the NN-1, it being
understood that the blowout preventer shown on Schedule 2.1(a) for the NN-1 will
be installed therefor, (iv) equipment and stores owned by third-party suppliers
(such as catering consumables, cement units or logging equipment) or (v) claims
and rights under contracts not assigned to and assumed by Buyer hereunder and,
in the case of contracts that are assigned to and assumed by Buyer, claims and
rights thereunder to the extent, but only to the extent, that such claims and
rights relate to the ownership or operation of the Purchased Assets prior to the
Closing, including, without limitation, claims for reimbursements, day, footage
or turnkey rates, lost equipment, indemnity or escalation of fees that relate to
periods prior to the Closing Date, whether or not billed on or before the
Closing Date (collectively, the "Excluded Assets").
2.3 ASSUMED LIABILITIES. As of the Closing Date, Buyer shall not assume or
otherwise be obligated for any obligations of Parent or Sellers or their
Affiliates except for all obligations under the Drilling Contracts and Other
Contracts being assumed by Buyer to the extent, but only to the extent, that
such obligations relate to the conduct of the ownership or operation of the
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Purchased Assets after the Closing, but, excluding accounts payable and accrued
liabilities for property received by Parent or any Seller or for services
performed, on or prior to the Closing (collectively, the "Assumed Liabilities"),
which Drilling Contracts and Other Contracts Buyer shall assume and thereafter
perform.
2.4 LIMITATION ON ASSIGNMENTS. Notwithstanding any other provision hereof,
this Agreement shall not constitute nor require an assignment to Buyer of any
Drilling Contract, Other Contract or Permit if an attempted assignment of the
same without the consent of any party would constitute a breach thereof or a
violation of any law or any judgment, decree, order, writ, injunction, rule or
regulation of any Governmental Entity unless and until such consent shall have
been obtained. In the case of any such Drilling Contract, Other Contract or
Permit that cannot be effectively transferred to Buyer without such consent (a
"Consent Required Contract"), Sellers agree that between the date hereof and the
Closing Date they will use their Best Efforts to obtain or cause to be obtained
the necessary consents to the transfer of any Consent Required Contract. Buyer
agrees to cooperate and to cause any Buyer Designee to cooperate with Sellers in
obtaining such consents and to enter into such arrangement of assumption as may
be reasonably requested by Sellers or the other contracting party under a
Consent Required Contract. In the event that Sellers shall have failed prior to
the Closing Date to obtain consents to the transfer of any Consent Required
Contract, the terms of this Section 2.4 shall govern the transfer of the
benefits of each such contract. Sellers and Buyer shall use their Best Efforts
after the Closing Date to obtain any required consent to the assignment to, and
assumption by, Buyer of each Consent Required Contract that is not transferred
to Buyer at the Closing (a "Nonassigned Contract"). Sellers, or a Seller
Designee, and Buyer, or a Buyer Designee, shall enter into an agreement
substantially in the form of that attached hereto as Exhibit 2.4 on the Closing
Date with respect to each Nonassigned Contract providing that until the rights
and obligations of Sellers thereunder are transferred to or assumed by Buyer,
or, if earlier, until termination of such Nonassigned Contract, Sellers shall
continue to perform their obligations thereunder and Buyer shall provide such
assistance, at the sole expense of Buyer, as Sellers may reasonably request for
such purpose, including, without limitation, the use of personnel and assets (by
lease or otherwise) of Buyer and its Affiliates of the type and quantity that
Sellers would have used to perform such Nonassigned Contract had the
transactions contemplated by this Agreement not been consummated. Such agreement
shall also provide that in consideration of the provision of such assistance,
Sellers shall, promptly after payment of any amounts to Sellers by the other
party to a Nonassigned Contract, pay such amounts to Buyer after subtracting
therefrom the costs and expenses incurred by Sellers as a result of Sellers'
performance of the Nonassigned Contract.
2.5 DELIVERY OF RECORDS.
(a) Buyer shall be entitled to the records physically located on the Rigs
on the Closing Date and relevant to the Rigs.
(b) As promptly following the Closing as practicable, Sellers shall
deliver or cause to be delivered to Buyer at the offices where such records are
located or such other location as mutually agreed, a copy of the technical
records described on Schedule 2.5(b) in the possession of Sellers or their
Affiliates related to the Rigs or the Inventory, and that are not physically
located on the Rigs.
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(c) Each Seller shall be entitled to retain all originals of its
corporate, financial, accounting, legal, tax and audit records.
ARTICLE III
PURCHASE PRICE
3.1 CONSIDERATION FOR THE PURCHASED ASSETS.
(a) Concurrently with the execution and delivery of this Agreement, Buyer,
Parent and Southwest Bank of Texas, N.A. (the "Escrow Agent") have executed and
delivered the escrow agreement among Buyer, Parent and the Escrow Agent (the
"Escrow Agreement"), a copy of which is attached as Exhibit 3.1(a), and Buyer
has delivered to the Escrow Agent an amount in cash equal to $10,000,000. Buyer
shall deliver an additional $10,000,000 to the Escrow Agent by no later than
February 21, 1997 (such $10,000,000, together with the $10,000,000 delivered
concurrently with the execution and delivery of this Agreement, is referred to
herein as the "Escrow Funds"). Buyer, Parent and Sellers agree that the Escrow
Agent shall hold and deliver the Escrow Funds in accordance with the terms and
conditions set forth in the Escrow Agreement. Buyer shall have the right at any
time to substitute on a dollar for dollar basis an irrevocable letter of credit
in favor of Parent (drawn on a bank and containing terms and conditions
satisfactory to Parent) for all or a part of the Escrow Funds. For purposes of
this Agreement, any such letter of credit, together with the Escrow Funds, if
any, held by the Escrow Agent shall be referred to herein as the "Deposit".
(b) At the Closing, (i) Buyer shall pay to Parent and Sellers the Purchase
Price by delivering to Sellers the amount of $265,000,000 in immediately
available funds by confirmed wire transfer to a bank account or accounts to be
designated by Parent (such designation to occur no later than the second
business day prior to the Closing Date), and (ii) Parent shall cooperate with
Buyer to (y) cause the Escrow Agent to deliver the Escrow Funds to Buyer, in
accordance with the Escrow Agreement, and (z) release any letter of credit
constituting part of the Deposit.
(c) As additional consideration for the Purchased Assets, the Buyer shall
assume at Closing and shall thereafter perform the Assumed Liabilities.
3.2 BUYER'S DEFAULT. Parent shall be entitled to receive the Deposit, as
liquidated damages and not as a penalty, without right on the part of Buyer to a
return of any part thereof if the Closing
(i) does not occur on the Closing Date by reason of Buyer's default
under the terms of this Agreement; or
(ii) does not occur by June 30, 1997 and Parent and Sellers have
performed their covenants set forth in Section 10.2, unless Buyer has
performed its covenants set forth in Section 10.2 and the sole reason the
Closing has not occurred by such date is that the conditions in Sections
8.5 and 9.5 have not been satisfied;
provided, however, that Parent and Sellers must show themselves then able and
willing to satisfy the conditions set forth in Section 9.1, 9.2, 9.3 and 9.4.
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Buyer shall be deemed in default for the purpose of this Section 3.2 if
Buyer (i) shall have been unable to satisfy any of the conditions set forth in
Sections 8.1, 8.2, 8.3, 8.4 or 9.6, or (ii) shall have failed to perform any of
Buyer's material covenants of this Agreement or have been in material and
willful breach of this Agreement, including by not delivering or having
insufficient funds to deliver the Purchase Price. Notwithstanding anything to
the contrary contained in this Agreement, if the Closing does not occur on the
Closing Date or there is no Closing by June 30, 1997 by reason of Buyer's
default under the terms of the immediately preceding sentence, Parent and
Sellers' sole and exclusive remedy against Buyer and its Affiliates shall be to
receive the Deposit, which the parties stipulate shall be liquidated damages and
not a penalty.
3.3 RETURN OF DEPOSIT. In the event the Closing shall not occur and Parent
is not entitled to receive the Deposit pursuant to Section 3.2, the Escrow Funds
shall be returned to Buyer in the manner specified in the Escrow Agreement and
the letter of credit, if any, constituting part of the Deposit shall be released
to Buyer.
3.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Purchased Assets in the manner set forth on Schedule 3.4. After the
Closing, Parent and Buyer shall cooperate with each other in the preparation,
execution and filing of (i) all information returns and supplements thereto
required to be filed with the Internal Revenue Service by the parties under
Section 1060 of the Code and the Treasury Regulations promulgated thereunder
relating to the allocation of the Purchase Price and (ii) all similar filings
required to be filed with respect to the transactions contemplated by this
Agreement with the Internal Revenue Service and other appropriate taxing
authorities.
ARTICLE IV
THE CLOSING
4.1 TIME AND PLACE OF CLOSING. The Closing shall take place (i) at the
offices of Thompson & Knight, P.C., 1700 Texas Commerce Tower, 600 Travis
Street, Houston, Texas 77002, at 9:00 a.m., local time, on the later of (y) June
3, 1997 or (z) the third Business Day following the satisfaction of the
conditions to the obligations of the parties set forth in Sections 8.5 and 9.5,
or (ii) at such other place, date or time as the parties may agree in writing.
The date on which the Closing is required to take place is herein referred to as
the "Closing Date."
4.2 DELIVERIES BY PARENT AND SELLERS. At the Closing, Parent and Sellers
shall deliver the following to Buyer:
(a) a duly executed General Conveyance, Assignment and Bill of Sale and
Transfer and Assumption of Liabilities (the "General Assignment") in the form of
Exhibit 4.2(a), together with such other bills of sale, assignments and other
instruments of transfer, assignment and conveyance as Buyer shall reasonably
request to vest in Buyer or a Buyer Designee good and marketable title to the
Purchased Assets;
(b) instructions in accordance with the Escrow Agreement;
(c) copies of any consents obtained as contemplated by Section 2.4; and
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(d) the officer's certificates and opinion of counsel contemplated by
Sections 9.3 and 9.4, respectively.
4.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver the following
to Parent and Sellers:
(a) the Purchase Price;
(b) a duly executed General Assignment and such other instruments of
transfer and assumption as Parent shall reasonably request in order to cause an
effective assignment to and assumption by Buyer of the Drilling Contracts and
Other Contracts;
(c) instructions in accordance with the Escrow Agreement;
(d) the officer's certificate and opinion of counsel contemplated by
Sections 8.3 and 8.4, respectively; and
(e) the Triton Contracts, duly executed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby represents and warrants, with respect to itself and the
Purchased Assets owned by it, to Buyer as follows:
5.1 ORGANIZATION AND EXISTENCE.
(a) Seller, if a corporation, is duly incorporated, validly existing and
in good standing under the laws of the state of its incorporation, with all
necessary corporate power and authority to own the Purchased Assets and to carry
on its business as such business is currently conducted.
(b) Seller, if a partnership, is duly formed, validly existing and in good
standing under the laws of the state of its formation, with all necessary
partnership power and authority to own the Purchased Assets and to carry on its
business as such business is currently conducted.
(c) Seller is duly qualified or licensed to transact business as a foreign
corporation or partnership, as the case may be, and is in good standing in all
jurisdictions in which the character of the Purchased Assets or the nature of
the business currently conducted by it requires it so to be qualified or
licensed unless the failure so to qualify or be licensed would not reasonably be
expected to have a material adverse effect on the business of Parent and Sellers
taken as a whole or create an Encumbrance on any of the Purchased Assets, except
for a Permitted Encumbrance.
5.2 AUTHORITY; ETC. Seller has all necessary corporate or partnership, as
the case may be, power and authority to execute and deliver this Agreement and
all agreements, instruments and documents to be executed and delivered hereunder
by Seller, to consummate the transactions
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contemplated hereby and to perform all terms and conditions hereof to be
performed by it, except that Parent, as general partner of NN-1, must obtain the
consent of the sole limited partner in NN-1 to the sale of the Rig, NN-1 (the
"NN-1 Partner's Consent"). The execution and delivery of this Agreement by
Seller and all agreements, instruments and documents to be executed and
delivered by Seller hereunder, the performance by Seller of all the terms and
conditions hereof to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by all necessary
corporate or partnership proceedings of Seller, and no other corporate or
partnership proceedings of Seller are necessary with respect thereto, except
that (i) stockholder approval may be necessary in the case of NDUS, NOC and
NDMEX and (ii) Parent must obtain the NN-1 Partner's Consent, which approvals
and consent will be obtained, if necessary, prior to the Closing Date. All
persons who have executed and delivered this Agreement, and all persons who will
execute and deliver the other agreements, documents and instruments to be
executed and delivered by Seller hereunder, have been duly authorized to do so
by all necessary actions on the part of Seller. This Agreement constitutes, and
each other agreement or instrument to be executed by Seller hereunder, when
executed and delivered by Seller, will constitute, the legal, valid and binding
obligation of Seller, enforceable against it in accordance with its terms,
except to the extent the enforceability hereof and thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws relating to or
affecting creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.3 NO VIOLATIONS. The execution and delivery of this Agreement by Seller,
the fulfillment of and compliance by it with the terms and conditions hereof and
the consummation by it of the transactions contemplated hereby will not:
(a) violate any of the terms of the certificate of incorporation or bylaws
(or the equivalent), or partnership agreement, as appropriate, of Seller;
(b) (i) except for the consents to assignment referred to in Section 2.4,
result in a breach of or constitute a default under (whether with notice or the
lapse of time or both) any note, bond, mortgage, loan agreement, indenture or
other instrument evidencing borrowed money to which Seller is a party or by
which Seller is bound or to which any of the Purchased Assets is subject which
breach or default would reasonably be expected to have a material adverse effect
on the ownership or operation of the Purchased Assets, or (ii) result in the
creation of any Encumbrance on any of the Purchased Assets, or otherwise give
any person the right to terminate any Drilling Contract, Permit or Other
Contract assumed by Buyer; or
(c) to Seller's knowledge, violate any provision of any law, statute, rule
or administrative regulation or any judgment, order, injunction or decree of any
Governmental Entity applicable to or binding upon Seller, or its assets, except
that no representation is made as to the application of any United States
antitrust law or regulation to the transactions contemplated by this Agreement,
which violation with respect to the matters specified in clauses (b) and (c) of
this Section 5.3 would reasonably be expected to have a material adverse effect
on the ownership or operation of the Purchased Assets taken as a whole.
5.4 OWNERSHIP OF RIGS. Seller (other than NN-1) owns and, upon the
execution and delivery of the General Assignment at Closing by each Seller
(including NN-1), Buyer will own,
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good and marketable title to the Rigs, free and clear of all Encumbrances except
for Permitted Encumbrances.
5.5 INVENTORY. Seller owns, and upon Seller's execution and delivery of
the General Assignment, Buyer will own, good and marketable title to the
Inventory reflected on Schedule 2.1(c), as such Inventory may be reduced through
the consumption thereof, or increased through replacement thereof or additions
thereto, in the ordinary course of the maintenance and operation of the Rigs
through the Closing Date, free and clear of all Encumbrances except for
Permitted Encumbrances.
5.6 CONTRACTS. Seller has made available to Buyer for review complete and
correct copies of all the Drilling Contracts and Other Contracts. Except as
separately identified on Schedule 2.1(f)(i) or 2.1(f)(ii), each of the Drilling
Contracts and Other Contracts may be transferred to Buyer without the consent of
any person. All the Drilling Contracts and Other Contracts are valid, binding
and in full force and effect against Seller or its Affiliates, as the case may
be, and, to Seller's knowledge, are valid, binding and in full force and effect
against the other parties thereto. Except as set forth on Schedule 5.6, neither
Seller nor any of its Affiliates is in default in any material respect, and no
notice of alleged default has been received by Seller or any of its Affiliates,
under any of the Drilling Contracts and Other Contracts, no other party thereto
is, to the knowledge of Seller or its Affiliates, in default thereunder in any
material respect, and, to the knowledge of Seller or its Affiliates, there
exists no condition or event which, with or without notice or lapse of time or
both, would constitute a material default under any of the Drilling Contracts
and Other Contracts by Seller, any of its Affiliates or any other party thereto.
5.7 LITIGATION.
(a) Except for litigation adequately covered by insurance or otherwise
described on Schedule 5.7(a), there is no litigation and there are no
Proceedings, suits or investigations pending, instituted or, to the knowledge of
Seller, overtly threatened against any of the Purchased Assets or against Seller
or any of its Affiliates and relating to the ownership and operation of the
Purchased Assets before any Governmental Entity applicable to or binding upon
Seller or any of the Purchased Assets that (i) seeks permanent injunctive
relief, (ii) if adversely determined would delay or prevent the consummation of
the transactions contemplated by this Agreement or (iii) would reasonably be
expected to have a material adverse effect on the ownership, maintenance or
operation of the Purchased Assets taken as a whole.
(b) Except for matters described on Schedule 5.7(b), neither Seller nor
any of its properties or assets is subject to any judicial or administrative
judgment, order, decree or restraint currently affecting the ownership,
maintenance and operation of the Purchased Assets in a manner that is material
and adverse to the ownership, maintenance and operation of the Purchased Assets
taken as a whole. Except as referred to on Schedule 5.7(b), Seller has not
received any notifications or charges in writing from any Governmental Entity
involving alleged violations of or alleged obligations to remediate under
occupational safety and health or water quality or other environmental matters
that materially and adversely affect the conduct by Seller of the ownership,
maintenance and operation of the Purchased Assets taken as a whole or that have
not been finally dismissed or otherwise disposed of.
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5.8 GOVERNMENTAL APPROVAL. Except for required filings under the HSR Act
and as set forth on Schedule 5.8, no consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made in connection with the execution and
delivery of this Agreement by Seller or the consummation by Seller of the
transactions contemplated hereby, the failure of which to obtain would have a
material adverse effect on the ownership, maintenance and operation of the
Purchased Assets taken as a whole.
5.9 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.9, Seller is
not to its knowledge in violation of or in default under any applicable law,
rule, regulation, code, governmental determination, order, governmental
certification requirement or other public limitation, other than Applicable
Environmental Laws (collectively, "Applicable Laws"), relating to the ownership,
maintenance or operation of the Purchased Assets, which violation or default
materially and adversely affects Seller's ownership, maintenance or operation
(as presently conducted) of the Purchased Assets, and no claim is pending or, to
Seller's knowledge, overtly threatened with respect to any such matters which if
determined adversely to Seller would have such effect.
5.10 Reserved.
5.11 RIG CLASSIFICATIONS AND CERTIFICATIONS.
(a) The classification of each Rig and the flag, if any, under which it is
documented are set forth on Schedule 1(a).
(b) Set forth on Schedule 5.11(b) is a summary of the outstanding
recommendations to class against each of the Rigs based on the most recent
survey received by Seller for such Rig as of the date of this Agreement, as well
as a listing of certifications (including American Bureau of Shipping and United
States Coast Guard certifications) maintained by Seller for the present
operation of such and the expiration date of each such certification.
(c) Except as set forth on Schedule 5.11(c), to the knowledge of Seller,
no Rig has suffered any material damage to its condition (ordinary wear and tear
excepted) since February 10, 1997, the date of completion of Buyer's inspection
of the Rigs.
5.12 ENVIRONMENTAL MATTERS.
(a) Seller has received no written notice of any investigation or inquiry
by any Governmental Entity under any Applicable Environmental Laws (as defined
below) relating to the ownership or operation of the Purchased Assets. To the
actual current knowledge of Seller, Seller has not disposed of any hazardous
material (as defined below) on any of the Purchased Assets and no condition
exists on any of the Purchased Assets which would subject Seller or the
Purchased Assets to any remedial obligations under any Applicable Environmental
Laws.
(b) For purposes of this Agreement, "Applicable Environmental Laws" means
any and all Applicable Laws pertaining to health, safety, or the environment in
effect in any and all jurisdictions in which the Purchased Assets are located or
in which Seller has conducted
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operations using any of the Purchase Assets, including, without limitation, the
Clear Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Rivers and Harbors Act
of 1899, as amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act,
as amended, the Toxic Substances Control Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and other environmental conservation or
protection laws. For purposes of this Agreement, the term "hazardous material"
means (i) any substance which is listed or defined as a hazardous substance,
hazardous constituent, or solid waste pursuant to any Applicable Environmental
Laws and (ii) petroleum (including crude oil and any fraction thereof), natural
gas and natural gas liquids.
5.13 NO BROKERS. Seller has not employed or authorized anyone to represent
it as a broker or finder in connection with the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission or
finder's fee from Seller in connection with such transactions. Seller agrees to
indemnify and hold harmless Buyer from and against any and all losses, claims,
demands, damages, costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, Buyer may sustain or incur as a result of any
claim for a commission or fee by a broker or finder acting on behalf of Seller.
5.14 DECREES, ETC. No order, writ, injunction, decree, judgment, award or
determination of any court or Governmental Entity has been issued or entered
against Seller or any of its Affiliates which continues to be in effect and
affects the ownership or operation of the Purchased Assets.
5.15 PERFORMANCE BONDS; LETTERS OF CREDIT. Set forth on Schedule 5.15 is a
listing of all performance and similar bonds and letters of credit currently
posted by, or any certificate of financial responsibility or similar evidence of
financial accountability obtained or procured by, Seller or any of its
Affiliates for the purpose of operating the Rigs.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Buyer as follows:
6.1 ORGANIZATION AND EXISTENCE. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, with all necessary corporate power and authority to own and lease
the assets it currently owns and leases and to carry on its business as such
business is currently conducted. Parent is duly qualified or licensed to
transact business as a foreign corporation and is in good standing in all
jurisdictions in which the character of the assets currently owned or leased by
it or the nature of the business currently conducted by it requires it so to be
qualified or licensed unless the failure so to qualify or be licensed would not
reasonably be expected to have a material adverse effect on the business or
financial condition of Parent and its subsidiaries taken as a whole.
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6.2 AUTHORITY; ETC. Parent has all necessary corporate power and authority
to execute and deliver this Agreement and all agreements, instruments and
documents to be executed and delivered hereunder by Parent, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement by Parent
and all agreements, instruments and documents to be executed and delivered by
Parent hereunder, the performance by Parent of all the terms and conditions
hereof to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the board of
directors of Parent, and no other corporate proceedings of Parent are necessary
with respect thereto. All persons who have executed and delivered this
Agreement, and all persons who will execute and deliver the other agreements,
documents and instruments to be executed and delivered by Parent hereunder, have
been duly authorized to do so by all necessary actions on the part of Parent.
This Agreement constitutes, and each other agreement or instrument to be
executed by Parent hereunder, when executed and delivered by Parent, will
constitute, the legal, valid and binding obligation of Parent, enforceable
against it in accordance with its terms, except to the extent the enforceability
hereof and thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws relating to or affecting creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6.3 NO VIOLATIONS. The execution and delivery of this Agreement by Parent,
the fulfillment of and compliance by it with the terms and conditions hereof and
the consummation by it of the transactions contemplated hereby will not:
(a) violate any of the terms of the certificate of incorporation or bylaws
of Parent;
(b) result in a breach of or constitute a default under (whether with
notice or the lapse of time or both) any note, bond, mortgage, loan agreement,
indenture or other instrument evidencing borrowed money to which Parent is a
party or by which Parent is bound or to which any of its assets is subject or
result in the creation of any Encumbrance on any of its assets, which breach or
default would reasonably be expected to have a material adverse effect on its
ability to perform its obligations hereunder; or
(c) to Parent's knowledge, violate any provision of any law, statute, rule
or administrative regulation or any judgment, order, injunction or decree of any
Governmental Entity applicable to or binding upon Parent or any of its
subsidiaries, except that no representation is made as to the application of any
United States antitrust law or regulation to the transactions contemplated by
this Agreement, which violation with respect to the matters specified in clauses
(b) and (c) of this Section 6.3 would reasonably be expected to have a material
adverse effect on its ability to perform its obligations hereunder.
6.4 GOVERNMENTAL APPROVAL. Except for required filings under the HSR Act
and as contemplated by Section 10.2 or set forth on Schedule 6.4, no consent,
approval, waiver, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made in
connection with the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, the failure of
which to obtain would delay or prevent the consummation of the transactions
contemplated by this Agreement.
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6.5 LITIGATION. There is no litigation and there are no Proceedings, suits
or investigations pending, instituted or, to the knowledge of Parent overtly
threatened against Parent or its subsidiaries that could reasonably be expected
to delay or prevent the consummation of the transactions contemplated by this
Agreement.
6.6 NO BROKERS. Except for Schroder Wertheim & Co. Incorporated (whose fee
in respect of the transactions contemplated hereby shall be paid solely by
Parent), Parent has not employed or authorized anyone to represent it as a
broker or finder in connection with the transactions contemplated by this
Agreement, and no broker or other person is entitled to any commission or
finder's fee from Parent in connection with such transactions. Parent will
indemnify and hold harmless Buyer from and against any and all losses, claims,
demands, damages, costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, Buyer may sustain or incur as a result of any
claim for a commission or fee by a broker or finder acting on behalf of Parent.
6.7 EMPLOYEES AND RELATED MATTERS. To Parent's knowledge, all of the
employee benefit plans (as defined in Section 3(3) of ERISA) which are or have
been maintained or contributed to by Parent or any incorporated or
unincorporated trade or business (an "ERISA Affiliate") which together with
Parent would be treated as a single employer under Section 414 of the Code have
been maintained and contributed to in compliance with the requirements of ERISA,
the Code and other applicable law; and to Parent's knowledge, Parent and its
ERISA Affiliates have paid and discharged when due all obligations and
liabilities arising under such plans, ERISA, the Code and other Applicable Law
of a character which, if not paid or discharged, are likely to result in the
imposition of an Encumbrance or the assertion of a liability enforceable against
the Purchased Assets. There are no labor agreements between Parent or any
Affiliate of Parent and any collective bargaining representative who represents
employees employed by Parent or any of its Affiliates which relate to or affect
the ownership, maintenance or operation of the Purchased Assets.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Parent and each of the Sellers as
follows:
7.1 ORGANIZATION AND EXISTENCE. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, with all necessary corporate power and authority to own and lease
the assets it currently owns and leases and to carry on its business as such
business is currently conducted. Buyer is duly qualified or licensed to transact
business as a foreign corporation and is in good standing in all jurisdictions
in which the character of the assets currently owned or leased by it or the
nature of the business currently conducted by it requires it so to be qualified
or licensed unless the failure so to qualify or be licensed would not reasonably
be expected to have a material adverse effect on the business or financial
condition of Buyer and its subsidiaries taken as a whole.
7.2 AUTHORITY; ETC. Buyer has all necessary corporate power and authority
to execute and deliver this Agreement and all agreements, instruments and
documents to be executed and
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delivered hereunder by Buyer, to consummate the transactions contemplated hereby
and to perform all terms and conditions hereof to be performed by it. The
execution and delivery of this Agreement by Buyer and all agreements,
instruments and documents to be executed and delivered by Buyer hereunder, the
performance by Buyer of all the terms and conditions hereof to be performed by
it and the consummation of the transactions contemplated hereby have been duly
authorized and approved by the board of directors of Buyer, and no other
corporate proceedings of Buyer are necessary with respect thereto. All persons
who have executed and delivered this Agreement, and all persons who will execute
and deliver the other agreements, documents and instruments to be executed and
delivered by Buyer hereunder, have been duly authorized to do so by all
necessary actions on the part of Buyer. This Agreement constitutes, and each
other agreement or instrument to be executed by Buyer hereunder, when executed
and delivered by Buyer, will constitute, the legal, valid and binding obligation
of Buyer, enforceable against it in accordance with its terms, except to the
extent the enforceability hereof and thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or other laws relating to or affecting
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
7.3 NO VIOLATIONS. The execution and delivery of this Agreement by Buyer,
the fulfillment of and compliance by it with the terms and conditions hereof and
the consummation by it of the transactions contemplated hereby will not:
(a) violate any of the terms of the certificate of incorporation or bylaws
of Buyer;
(b) result in a breach of or constitute a default under (whether with
notice or the lapse of time or both) any note, bond, mortgage, loan agreement,
indenture or other instrument evidencing borrowed money to which Buyer is a
party or by which Buyer is bound or to which any of its assets is subject or
result in the creation of any Encumbrance on any of its assets, which breach or
default would reasonably be expected to have a material adverse effect on its
ability to perform its obligations hereunder; or
(c) to Buyer's knowledge, violate any provision of any law, statute, rule
or administrative regulation or any judgment, order, injunction or decree of any
Governmental Entity applicable to or binding upon Buyer or any of its
subsidiaries, except that no representation is made as to the application of any
United States antitrust law or regulation to the transactions contemplated by
this Agreement, which violation with respect to the matters specified in clauses
(b) and (c) of this Section 7.3 would reasonably be expected to have a material
adverse effect on its ability to perform its obligations hereunder.
7.4 INSPECTIONS. Buyer has made its own inspection of each of the Rigs
except the NN-1 and the Richardson Hull.
7.5 LITIGATION. There is no litigation and there are no Proceedings, suits
or investigations pending, instituted or, to the knowledge of Buyer overtly
threatened against Buyer or its subsidiaries that could reasonably be expected
to delay or prevent the consummation of the transactions contemplated by this
Agreement.
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7.6 GOVERNMENTAL APPROVAL. Except for required filings under the HSR Act
and as contemplated by Section 10.2 or set forth on Schedule 7.6, no consent,
approval, waiver, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made in
connection with the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby, the failure of
which to obtain would delay or prevent the consummation of the transactions
contemplated by this Agreement.
7.7 NO BROKERS. Buyer has not employed or authorized anyone to represent
it as a broker or finder in connection with the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission or
finder's fee from Buyer in connection with such transactions. Buyer will
indemnify and hold harmless Parent and Sellers from and against any and all
losses, claims, demands, damages, costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses, Parent and/or any Seller
may sustain or incur as a result of any claim for a commission or fee by a
broker or finder acting on behalf of Buyer.
7.8 CERTAIN KNOWLEDGE REGARDING ASSIGNMENT OF CONTRACTS. To the knowledge
of Buyer, no condition or circumstance exists that would prevent the obtainment
of any necessary consents to the effective assignment to and assumption by Buyer
of the Drilling Contracts or Other Contracts.
7.9 REGISTRATION STATEMENT. On February 7, 1997, Buyer filed a
registration statement on Form S-3 (file no. 333-21385) (the "Registration
Statement") with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), covering a maximum aggregate offering of $500,000,000 of
Buyer's debt securities and common stock.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND SELLERS
The obligations of Parent and Sellers to proceed with the Closing
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing Date, of all the following conditions, any one or more of which may be
waived, in whole or in part, by Parent:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Buyer contained in this Agreement shall be true and correct in all
material respects as of the Closing Date with the same effect as though made on
the Closing Date, except as otherwise specifically contemplated by this
Agreement.
8.2 COVENANTS AND AGREEMENTS PERFORMED. Buyer shall have complied on or
before the Closing Date in all material respects with each of its covenants or
agreements contained in this Agreement to be performed on or before the Closing
Date.
8.3 OFFICER'S CERTIFICATE. Parent and Sellers shall have received a
certificate in the form of Exhibit 8.3 hereto, dated as of the Closing Date, of
the President or a Vice President of Buyer certifying as to the matters
specified in Sections 8.1 and 8.2.
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8.4 LEGAL OPINION. Parent and Sellers shall have received from Robert W.
Randall, Esq., Vice President, General Counsel and Secretary of Buyer, an
opinion dated the Closing Date, substantially in the form of Exhibit 8.4 hereto.
8.5 HSR ACT. All required filings under the HSR Act shall have been made
as required and the waiting period (and any extension thereof) under the HSR Act
relating to the transactions contemplated hereby shall have expired or been
terminated without governmental objection thereto.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to proceed with the Closing contemplated by this
Agreement are subject to the satisfaction, on or before the Closing Date, of all
the following conditions, any one or more of which may be waived, in whole or in
part, by Buyer:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
(a) Each representation and warranty of Sellers contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though made on the Closing Date, except as
otherwise specifically contemplated by this Agreement.
(b) Each representation and warranty of Parent contained in this Agreement
shall be true and correct in all material respects as of the Closing Date with
the same effect as though made on the Closing Date, except as otherwise
specifically contemplated by this Agreement.
9.2 COVENANTS AND AGREEMENTS PERFORMED.
(a) Sellers shall have complied on or before the Closing Date in all
material respects with each of the covenants or agreements of Sellers contained
in this Agreement to be performed on or before the Closing Date.
(b) Parent shall have complied on or before the Closing Date in all
material respects with each of the covenants or agreements of Parent contained
in this Agreement to be performed on or before the Closing Date.
9.3 OFFICER'S CERTIFICATE.
(a) Buyer shall have received a certificate in the form of Exhibit 9.3(a)
hereto, dated as of the Closing Date, of the President or a Vice President, or
the general partner of each Seller certifying as to the matters specified in
Sections 9.1(a) and 9.2(a).
(b) Buyer shall have received a certificate in the form of Exhibit 9.3(b)
hereto, dated as of the Closing Date, of the President or a Vice President of
Parent certifying as to the matters specified in Sections 9.1(b) and 9.2(b).
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9.4 LEGAL OPINION. Buyer shall have received from Thompson & Knight, P.C.,
counsel for Parent and Sellers, an opinion dated the Closing Date, substantially
in the form of Exhibit 9.4 hereto.
9.5 HSR ACT. All required filings under the HSR Act shall have been made
as required and the waiting period (and any extension thereof) under the HSR Act
relating to the transactions contemplated hereby shall have expired or been
terminated without governmental objection thereto.
9.6 FINANCING BY BUYER. Buyer shall have obtained financing for the
Purchased Assets in an amount no less than the Purchase Price.
ARTICLE X
COVENANTS AND AGREEMENTS OF THE PARTIES BEFORE,
RELATING TO AND SUBSEQUENT TO THE CLOSING
Parent, Sellers and Buyer hereby covenant and agree as follows:
10.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each of the parties hereto shall assume and bear all expenses, costs and fees
incurred or assumed by such party in the preparation and execution of this
Agreement and in compliance with and performance of the agreements and covenants
contained in this Agreement, regardless of whether the transactions contemplated
hereby are consummated.
10.2 HSR ACT COMPLIANCE. The parties shall comply with all provisions of
the HSR Act. Parent, Sellers and Buyer agree to cooperate with each other and
furnish all information to the other party that is necessary in connection with
the HSR Act filings required to be made by the parties hereto. Buyer and Parent
each agree to request early termination of any applicable waiting period under
the HSR Act.
10.3 ACCESS. Until the Closing, Parent and Sellers shall give the
officers, employees and attorneys of Buyer reasonable access, subject to
Applicable Laws, during normal business hours upon Buyer's reasonable prior
notice to Parent, to the Purchased Assets and the records of Sellers
specifically relating thereto. Parent and Sellers will cooperate fully with such
representatives of Buyer in connection with such review. Buyer will hold in
strict confidence and not use for purposes other than those contemplated by this
Agreement any documents or information furnished concerning Parent, Sellers or
the Purchased Assets. Such confidence shall be maintained for at least two years
after the date of this Agreement. If the transactions contemplated by this
Agreement shall not be consummated, all such documents and all copies thereof
shall immediately thereafter be returned to Parent, and all documents prepared
by Buyer or any of its Affiliates or their representatives shall be destroyed.
The confidentiality obligations set forth in the preceding sentence shall not
apply to information (i) in the public domain, (ii) obtained by Buyer from a
third party source with the right to disclose such information or (iii) with
respect to which disclosure is required by law in the opinion of counsel to
Buyer reasonably acceptable to Parent. Buyer agrees to assume the risk of
personal injury to its representatives or loss of or damage to its and its
representatives' property occurring during the course of investigating the
Purchased Assets, Parent and Sellers, regardless of any fault
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(including the negligence) of any of Parent, Sellers or their Affiliates, and
Buyer will indemnify and hold harmless Parent, Sellers and their Affiliates from
and against any and all losses, claims, demands, damages, costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses, Parent,
any Seller and/or any of their Affiliates may sustain or incur as a result of
any such personal injury or loss of or damage to property.
10.4 CONDUCT OF BUSINESS AND PRESERVATION OF ASSETS.
(a) Until the Closing, Buyer and Sellers agree to cooperate with each
other to effect an orderly transition of the ongoing operation of the Purchased
Assets and Sellers shall use their respective Best Efforts to preserve, maintain
and protect the Purchased Assets. From and after the date of this Agreement and
until the Closing Date, without the prior express written consent of Buyer,
which consent shall not be unreasonably withheld or delayed, Sellers will not,
and Parent will not permit any of its Affiliates to, (i) make any material
change in the conduct of the ongoing operation of the Rigs taken as a whole,
(ii) enter into any new drilling contracts with respect to the Rigs or any other
contracts or agreements with respect to the Rigs other than the PEMEX Contracts
and other contracts entered into in the ordinary course of business that are not
expected to extend beyond 180 days, or amend, in any respect adverse to Sellers
or Buyer, any Drilling Contract or Other Contract or (iii) commit itself to do
any of the foregoing.
(b) Buyer, Parent and Sellers acknowledge that the FRANK REIGER is
currently undergoing refurbishment at Texas Drydock, Inc., in Port Arthur,
Texas. NDUS agrees, at its expense, to complete the refurbishment contemplated
under its shipyard contract for such refurbishment work, and upon completion of
such refurbishment, to obtain such certifications from Governmental Entities as
are necessary to permit the FRANK REIGER to engage in offshore oil and gas
drilling and workover operations in the U.S. Gulf of Mexico.
10.5 TRANSITION OF BUSINESS OPERATIONS. Buyer will use its Best Efforts to
obtain and to cause any Buyer Designee to obtain prior to the Closing Date all
requisite qualifications or licenses to transact business as a foreign
corporation in each jurisdiction in which the consummation of the transactions
contemplated hereby or the nature of the business to be conducted by it after
the Closing requires it so to be qualified or licensed. If Buyer or any Buyer
Designee is not so duly qualified or licensed on the Closing Date, then (i)
Buyer agrees to use its Best Efforts to become or to cause each Buyer Designee
to become so qualified or licensed at the earliest practicable date and (ii)
Sellers agree to cooperate with Buyer to effect the consummation of the
transactions contemplated by this Agreement, provided same can be effected
without violation of law in the jurisdiction involved and any additional expense
associated with same is borne by Buyer.
10.6 LITIGATION. Until the Closing, Parent will promptly notify Buyer of
any action, suit, proceeding, claim or investigation which is overtly threatened
or commenced against a Seller which is not fully insured against (except
standard deductible or self-retention amounts) and which relates to or affects
the Purchased Assets or this Agreement or the transactions contemplated hereby,
and Buyer will promptly notify Parent of any action, suit, proceeding, claim or
investigation which is overtly threatened or commenced against Buyer which is
not fully insured against (except standard deductible or self-retention amounts)
and which relates to and
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materially and adversely affects Buyer or its business or affects this Agreement
or the transactions contemplated hereby.
10.7 CERTAIN TAXES. Buyer shall be liable for and shall pay all applicable
duties, sales, use, transfer, stamp, recording, value added or similar taxes and
assessments payable as a result of the consummation of the transactions
contemplated hereby, and Buyer and Sellers agree to cooperate to obtain all
available exemptions from such taxes. All ad valorem taxes, utility and other
service charges and other taxes, fees and expenses relating to the Purchased
Assets (collectively, "Taxes"), for all periods up to and including the Closing
Date shall be the obligations of Sellers and for all periods following the
Closing Date shall be the obligation of Buyer. All Taxes relating to periods
prior to the Closing that have been assessed prior to Closing and that are not
then being diligently contested in good faith by appropriate proceedings shall
be paid by a Seller prior to the Closing. Each Seller shall promptly pay from
time to time such Seller's prorated share of all Taxes to Buyer upon Buyer's
request accompanied by appropriate documentation that such Taxes are due and
payable. Buyer agrees to pay such amounts on behalf of such Seller and to
indemnify such Seller with respect to any Claims (as defined in Section 13.2)
for such Taxes if a Seller shall have paid to Buyer such Seller's pro rata share
thereof, if any. Sellers and Buyer agree to cooperate with each other in order
to reduce the amount of taxes or other assessments imposed on or charged to any
Seller or Buyer as a result of the consummation of the transactions contemplated
by this Agreement, including, without limitation, by (i) accommodating a
tax-deferred exchange by one or more Sellers under Section 1031 of the Code or
(ii) effectively transferring ownership of Purchased Assets to Buyer by
transferring to Buyer all of the outstanding ownership interest in the entity
that owns such Purchased Assets; provided, that none of Parent, any Seller nor
Buyer shall be obligated to take any action that it determines in its sole
discretion may subject it to additional taxes, liabilities or expenses.
10.8 ACTIONS WITH RESPECT TO CLOSING. Each of Parent and each Seller will
use its Best Efforts to obtain and to cause any Seller Designee to obtain the
satisfaction of the conditions to Closing applicable to Parent and Sellers set
forth in Article IX as soon as practicable. Buyer will use its Best Efforts to
obtain and to cause each Buyer Designee to obtain the satisfaction of the
conditions to Closing applicable to Buyer set forth in Article VIII as soon as
practicable.
10.9 PUBLIC STATEMENTS. Prior to making any news release or other
announcement concerning the transactions contemplated hereby, Buyer and Parent
shall consult with each other regarding the proposed contents thereof (but no
approval thereof shall be required).
10.10 BOOKS AND RECORDS. Parent and Sellers shall have the right, at their
own expense, at any time or from time to time within five years after the
Closing Date during reasonable business hours upon reasonable notice to Buyer to
inspect, and make copies of or extracts from, any of the records delivered to
Buyer at the Closing that are in the possession of Buyer or its Affiliates. None
of the records in the possession of Buyer or its Affiliates shall be destroyed
prior to December 31, 2002 or five years after generated, whichever is earlier,
without the consent of Parent, unless first reproduced by microfilm or any other
similar process. In the event that Buyer shall wish to destroy any of such
records at any time or from time to time after the Closing Date, Buyer shall
give not less than 60 days' notice to Parent and Parent shall have
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the right, at its own expense, during reasonable business hours to remove such
records and to keep possession of the same.
10.11 RIG LOSS. Notwithstanding any other provision of this Agreement:
(a) If any Rig (other than the Richardson Hull) shall become an actual or
constructive total loss (as determined by Parent's insurance underwriter's
marine surveyor) prior to the Closing Date: (i) Buyer shall not be required to
purchase such Rig, (ii) the Purchase Price shall be reduced by the amount
allocated to such Rig pursuant to Schedule 3.4, (iii) the term "Purchased
Assets" shall be deemed not to include such Rig and (iv) the other provisions of
this Agreement shall continue to be in effect and the Closing shall take place
in the manner contemplated herein.
(b) Without limiting the obligations of any Seller or Parent under Section
10.4(a), if a Rig sustains damage not amounting to an actual or constructive
total loss prior to the Closing Date, either (i) the Seller owning such Rig
shall repair or cause to be repaired the damage to the Rig at such Seller's own
expense or (ii) in the case of damage to a Rig in respect of which insurance
proceeds are available, Buyer, at its option, may require the Seller to assign
to Buyer at the Closing the rights the Seller has to receive insurance proceeds
in respect of such loss or damage and pay to Buyer the amount by which any such
insurance proceeds otherwise payable to Buyer are reduced by any deductible or
deductibles under the terms of the relevant policy or policies (offset by any
amounts paid through the Closing Date by the Seller for such repair), and, in
the case of either (i) or (ii) above, Buyer shall remain obligated to purchase
the Purchased Assets on the Closing Date and the Purchase Price shall not be
reduced. If, pursuant to this subsection (b), Buyer is to conduct or cause to be
conducted repairs to a damaged Rig subsequent to Closing, then Parent and Buyer
shall agree on a plan for the manner of conduct and the scope of such repairs,
and neither Parent nor any Seller shall be obligated to pay costs resulting from
any deviation from such plan.
10.12 USE OF NAMES. Buyer agrees that (i) it will not use the name "Noble"
or "Noble Drilling" or any derivative thereof, (ii) it will within 90 days of
the Closing Date, change the name of each Rig to other than the name of a
current or former personnel or associate of Parent, and (iii) it will within 90
days from the Closing Date, remove from the Purchased Assets or paint over such
name and any logos, symbols or trademarks relating thereto.
10.13 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES. Each of
Parent, each Seller and Buyer shall use its Best Efforts to cause the
representations and warranties made by it herein to continue to be true and
correct on and as of the Closing Date as if made on and as of the Closing Date.
Nothing contained in this Section 10.13 shall be construed as being inconsistent
with or in derogation of Section 13.1 or 13.5.
10.14 POST-CLOSING COLLECTION, PAYMENT AND ADMINISTRATIVE PROCEDURES.
Subsequent to Closing, (i) Buyer agrees to deliver to Parent, within three
Business Days of receipt of same, any and all (A) monies paid to or received by
Buyer or its Affiliates in respect of amounts due Sellers or their Affiliates,
including, but not limited to, payment of receivables, refunds, rebates, release
of performance or similar bonds or letters of credit, and (B) inquiries,
correspondence or documents received by Buyer or its Affiliates related to such
amounts; and (ii) Sellers and
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Parent agree to deliver to Buyer, within three Business Days of receipt of same,
any and all (A) monies paid to or received by Sellers or their Affiliates in
respect of amounts due Buyer or its Affiliates, including, but not limited to,
payment of receivables, refunds, rebates, release of performance or similar
bonds or letters of credit, and (B) inquiries, correspondence or documents
received by Sellers or their Affiliates related to such amounts.
10.15 ACTION OF BUYER REGARDING FINANCING.
(a) Buyer shall promptly after the date of this Agreement initiate and
diligently pursue action to obtain financing in an amount not less than the
Purchase Price. In such connection, Buyer agrees to amend the Registration
Statement or supplement to the prospectus forming a part thereof to provide for
the firm commitment underwritten offer and sale of its debt securities and/or
common stock and/or arrange for bank financing in an amount not less than the
Purchase Price. Buyer shall consult with Parent, and Parent shall cooperate with
and assist Buyer, in preparing any amendment to the Registration Statement or
supplement to the prospectus forming a part thereof, particularly with respect
to the information therein relating to Parent or Sellers. Buyer agrees to use
its Best Efforts to cause the Registration Statement to become effective under
the Securities Act as soon as practicable.
(b) Buyer shall keep Parent informed at all times with respect to the
status of the financing contemplated by subsection (a) of this Section 10.15 and
in any event shall inform Parent (i) of notice from the SEC of the effectiveness
of the Registration Statement under the Securities Act, (ii) upon pricing of the
securities under the Registration Statement or (iii) upon receipt by Buyer of
notice from the SEC of the issuance of a stop order with respect to the
Registration Statement.
10.16 CERTAIN FINANCIAL STATEMENTS. Parent agrees to prepare, or cause the
preparation of, and to deliver to Buyer as soon as practicable following the
date of this Agreement for inclusion in the Registration Statement or otherwise
in connection with the financing contemplated by Section 10.15 or in any Form
8-K or other form of Buyer relating to the transactions contemplated hereby
required, if any, to be filed with the SEC, such financial statements relating
to Sellers or the Purchased Assets as Buyer may be required by Applicable Law to
include therein. Buyer shall pay the fees of Price Waterhouse LLP, independent
accountants for Parent and Sellers, relating to the preparation and audit of
such financial statements and the participation, if any, of Price Waterhouse LLP
in the preparation of an amendment to the Registration Statement or other
documents filed by Buyer with the SEC or otherwise in connection with the
financing contemplated by Section 10.15.
10.17 IMPORT DUTIES; PERFORMANCE BONDS. If any Seller or any subsidiary of
any Seller has posted a performance or other similar bond or letter of credit or
procured any certificate of financial responsibility or similar evidence of
financial accountability in connection with any Seller's or any such
subsidiary's ownership or operation of any of the Rigs or the performance by any
Seller or any such subsidiary under a Drilling Contract or Other Contract, Buyer
and Sellers shall cooperate in order (i) for Sellers or any of Sellers'
subsidiaries to obtain the release of any such bond, letter of credit or
certificate and (ii) to the extent required, for Buyer to obtain a substitute
bond, letter of credit or certificate or to assume the existing bond, letter of
credit or certificate of any Seller or any subsidiary of any Seller. Sellers and
Buyer agree to cooperate
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with each other in order to reduce import duties assessed against any Seller or
any subsidiary of any Seller, or Buyer as a result of the consummation of the
transactions contemplated by this Agreement, including by postponing the date of
transfer of legal title to any Rig operating in foreign waters until completion
of the Drilling Contract under which such a Rig is operating on the Closing
Date; provided, that neither Sellers, any subsidiary of any Seller nor Buyer
shall be obligated to take any action that it determines in its sole discretion
may subject it to additional import duties, liabilities or expenses. Buyer shall
reimburse Sellers or any subsidiary of any Seller for all out-of-pocket costs
incurred by any Seller or any such subsidiary as a result of their leaving a
performance or similar bond, letter of credit or certificate in place after the
Closing Date in order to permit Buyer to operate the Purchased Assets after the
Closing Date.
10.18 AVAILABILITY OF RIGS TO TRITON ENGINEERING SERVICES COMPANY.
(a) On or before the Closing Date and subject to the occurrence of the
Closing, Buyer and Triton Engineering Services Company or one or more of its
subsidiaries ("Triton") shall enter into a drilling contract for each of four of
the Rigs, pursuant to which, effective as of the termination of the drilling
contract for such Rig in existence on the Closing Date, Buyer will agree to
contract each of such Rigs to Triton for drilling and workover operations.
Parent shall designate the four Rigs prior to the Closing Date. Each of such
drilling contracts (the "Triton Contracts") shall be substantially in the form
of Exhibit 10.18. Anything in this Section 10.18(a) to the contrary
notwithstanding, if prior to the Closing Date a Seller has entered into a
contract with Triton to provide one or two of the Rigs to Triton for operations
in the Mexican Gulf of Mexico on behalf of PEMEX for terms exceeding the
one-year anniversary of the Closing Date and containing operating day rates
(fixed for the term of such contracts) of at least $32,000 per day and such
other terms as are acceptable to Buyer ("PEMEX Contracts"), then Buyer shall
assume at Closing and agree to perform thereafter such PEMEX Contracts in
accordance with the terms thereof and the number of Rigs which shall become
subject to Triton Contracts under this Section 10.18(a) shall be reduced by the
number of such Rigs that are subject to the PEMEX Contracts as of the Closing
Date.
(b) Parent shall have the option, exercisable within one year after the
Closing Date, to cause Buyer to contract to Triton up to three additional Rigs
(other than the Richardson Hull and the CECIL FORBES) on contracts containing
the same terms and conditions as specified in Section 10.18(a) except that the
term of any such contract will be one year from the effective date of such
contract. During the one-year term of such option, Buyer shall give Parent 30
days advance notice of the expected date of completion of any drilling contract
with respect to a Rig other than the Rigs referred to in Subsection 10.18(a).
Parent shall have until the later of 15 days after receipt of Buyer's notice and
30 days prior to such date of completion of such contract to notify Buyer of
Parent's election to cause Buyer to contract such Rig to Triton. Any drilling
contracts entered into pursuant to this Section 10.18(b) shall also be referred
to herein as a "Triton Contract".
10.19 ACQUISITION PROPOSAL. Seller shall immediately cease or cause to be
terminated any existing activities, discussions or negotiations with any persons
conducted heretofore with respect to any Acquisition Proposal. Parent and
Sellers hereby agree that, without the prior express written consent of Buyer,
which consent shall not be unreasonably withheld or delayed, neither Parent nor
Sellers nor any director, officer, employee, representative or advisor of Parent
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or Sellers will, directly or indirectly, (i) solicit, initiate or pursue any
Acquisition Proposal (as defined below) or (ii) except to the extent the Board
of Directors of Parent determines, upon advice of counsel, that it is otherwise
legally required by its fiduciary duties, engage in discussions or negotiations
with, or disclose any nonpublic information relating to Parent or Sellers or
afford access to the properties, books or records of Parent or Sellers to, any
person that may be considering making or has made an Acquisition Proposal.
Should Parent or Sellers receive an Acquisition Proposal, Parent will
immediately notify Buyer of such proposal. Subject to payment of the $15,000,000
liquidated damages amount provided for in Section 12.2, nothing contained in
this Agreement shall prevent the Board of Directors of Parent from approving any
unsolicited Acquisition Proposal if required in the exercise of its fiduciary
duties, as determined by the Board of Directors of Parent after consultation
with legal counsel. The term "Acquisition Proposal," as used herein, means any
offer or proposal for, or any indication of interest in the acquisition of any
two or more of the Rigs (other than the transactions contemplated by this
Agreement). The provisions of this Section 10.19 shall remain in effect until
the earlier of the termination of this Agreement pursuant to Section 12.1 or the
Closing.
ARTICLE XI
EMPLOYEES
11.1 EMPLOYEES.
(a) The employment of all employees of Sellers or any of their Affiliates
who work on any of the Rigs, other than the Retained Employees, shall be
terminated effective as of the Closing Date. Buyer may, but is not in any way
obligated to, offer employment to some or all of the terminated employees upon
such terms and conditions as Buyer shall determine.
(b) For the purposes of this Agreement, "Retained Employees" shall mean
the employees of Sellers or any of their Affiliates identified by Parent in a
schedule delivered by Parent to Buyer at least five days prior to the Closing
Date. Such schedule shall set forth a list of the names, positions and salaries
or hourly rates, as applicable, of the Retained Employees as of the date
thereof. At the Closing, Parent shall deliver to Buyer, if necessary, a revised
schedule updating such information as of the Closing Date. Parent shall have the
right to identify on such schedule a number of Retained Employees sufficient to
crew not more than five of the Rigs.
(c) Neither Sellers nor Parent, nor any of their Affiliates, shall be
required to terminate the employment of the Retained Employees in connection
with the consummation of the transactions contemplated hereby. Each Seller and
any Affiliate of such Seller that employs a Retained Employee (an "Employer" and
collectively, "Employers") shall enter into an Employee Leasing Agreement with
Buyer pursuant to which such Employer shall agree to provide to Buyer the
services of the Retained Employees for purposes of manning one or more of the
Rigs. Such agreement shall provide, among other things, that (i) the term of
such agreement shall be for up to one year after the Closing Date, (ii) Buyer
shall bear all salary, insurance and benefit costs incurred by an Employer in
respect of any Retained Employee during the period such agreement is in effect
as to such Retained Employee, (iii) it is understood that Parent has made such
arrangement available to Buyer to provide an orderly transition, and Buyer shall
use its Best Efforts to engage its own personnel to replace Retained Employees,
from time
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to time, as soon as reasonably practicable and (iv) Buyer shall indemnify and
hold harmless Parent and its Affiliates from and against any Claims arising in
favor of Buyer, any of its Affiliates or any of its employees and Parent shall
indemnify and hold harmless Buyer and its Affiliates from and against any Claims
arising in favor of any Retained Employee. The parties shall agree to a form of
Employee Leasing Agreement as soon as practicable after the date hereof and in
any event at least 10 days before the Closing Date.
(d) Buyer is not hereby, and at no time hereafter will be, adopting,
accepting or assuming any employee benefit plan or collective bargaining
agreement of Parent or any Employer relating to any of their employees or any
other agreement, trust, plan, fund or other arrangement of Parent or any
Employer that provides for employee benefits or perquisites (collectively,
"Employment Arrangements"), and Buyer shall have no liability or obligation
whatsoever under any Employment Arrangement to Parent or any Employer or to any
employees of Parent or any Employer, whether or not any of such employees are
offered employment by or become employees of Buyer. Buyer is not obligated to
replace any of the Employment Arrangements for any employee of any Employer who
becomes an employee of Buyer, nor is Buyer obligated to provide any such person
with any similar agreements, plans or arrangements.
11.2 NON-SOLICITATION OF CERTAIN EMPLOYEES.
(a) Buyer agrees that, for a period of two years from and after the
Closing Date, neither Buyer nor any of its Affiliates will, directly or
indirectly, solicit to employ (as an employee, consultant, independent
contractor or otherwise) any Retained Employee or any drilling superintendent or
rig manager of Parent or any Seller or any of their respective Affiliates, or
otherwise induce or attempt to persuade any such Retained Employee or drilling
superintendent or rig manager to leave such employment.
(b) Parent and Sellers agree that, for a period of two years after the
Closing Date, neither Parent nor Sellers, nor any of their Affiliates, will,
directly or indirectly, solicit to employ (as an employee, consultant,
independent contractor or otherwise) any employee of Buyer or any of its
Affiliates that has become an employee of Buyer or any of its Affiliates in
connection with the acquisition of the Rigs from Sellers, or any drilling
superintendent or rig manger of Buyer or any of its Affiliates, or otherwise
induce or attempt to persuade any such employee, drilling superintendent or rig
manager to leave such employment.
ARTICLE XII
TERMINATION
12.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by mutual written consent of Buyer and Parent;
(b) by either Buyer or Parent, if there shall be any statute, rule or
regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or a Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
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contemplated hereby, and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by Buyer, if
(i) the Closing shall not have occurred by June 30, 1997 (provided
that the right to terminate this Agreement under this clause (i) shall not
be available to Buyer if Buyer's failure to fulfill any of its obligations
under this Agreement or its misrepresentation or breach of warranty
hereunder has been the sole cause thereof); or
(ii) there has been a material breach by any Seller of any covenant
or agreement, or a material inaccuracy of any representation or warranty
of any Seller, contained in this Agreement which has rendered the
satisfaction of any condition to the obligations of Buyer impossible and
such breach or inaccuracy has not been cured by any Seller within five
Business Days after Parent's receipt of notice thereof from Buyer, or
waived by Buyer.
(d) by Parent, if
(i) the Closing shall not have occurred by June 30, 1997 (provided
that the right to terminate this Agreement under this clause (i) shall not
be available to Parent if Sellers' failure to fulfill any of their
obligations under this Agreement or their misrepresentation or breach of
warranty hereunder has been the sole cause thereof); or
(ii) there has been a material breach by Buyer of any covenant or
agreement, or a material inaccuracy of any representation or warranty of
Buyer, contained in this Agreement which has rendered the satisfaction of
any condition to the obligations of Sellers impossible and such breach or
inaccuracy has not been cured by Buyer within five Business Days after
Buyer's receipt of notice thereof from any Seller, or waived by Parent; or
(iii) the Board of Directors of Parent shall have determined to
approve an Acquisition Proposal.
12.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 12.1 by Buyer or Parent, written notice thereof
shall forthwith be given to the other party specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
Buyer, Parent or Sellers or any of their respective directors, officers,
employees, stockholders or representatives, except that (i) the agreements
contained in this Section 12.2 and in Article XIII and Sections 5.13, 6.6, 7.7,
10.1 and 10.3 shall survive the termination hereof; (ii) Parent shall have the
right to receive the Deposit to the extent permitted under Section 3.2, as
liquidated damages and not as a penalty; and (iii) in the event of termination
by Parent under Section 12.1(d)(iii) and an Acquisition Proposal is consummated
within one year after the date of this Agreement, then Parent shall promptly pay
to Buyer $15,000,000 as liquidated damages and not as a penalty. Nothing
contained in this Section 12.2 shall relieve any party from liability for
damages actually incurred (excluding consequential damages) for breach of any
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covenant or agreement, or for the inaccuracy of any representation or warranty,
contained herein, except that a party receiving liquidated damages under this
agreement pursuant to Section 3.2 or the preceding sentence shall not be
entitled to recover any additional damages for any breach of this Agreement.
ARTICLE XIII
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
13.1 SCOPE OF REPRESENTATIONS OF SELLERS.
(a) BUYER UNDERSTANDS AND AGREES THAT, OTHER THAN REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS SET FORTH HEREIN AND ANY WARRANTIES OF OR
CONCERNING TITLE SET FORTH HEREIN OR IN ANY INSTRUMENT OF CONVEYANCE TO BE
EXECUTED AND DELIVERED PURSUANT TO THIS AGREEMENT, NEITHER PARENT NOT SELLERS
NOR ANYONE ACTING ON THEIR BEHALF, MAKE ANY EXPRESS OR IMPLIED REPRESENTATIONS
OR WARRANTIES WITH RESPECT TO THE ASSUMED LIABILITIES, THE RIGS, OR THE OTHER
PURCHASED ASSETS (CURRENT, FIXED, PERSONAL, REAL, TANGIBLE AND INTANGIBLE)
REFERRED TO HEREIN, INCLUDING BUT NOT LIMITED TO SEAWORTHINESS, CONDITION OR
WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
PATENT, CAPACITY, SUITABILITY, UTILITY, SALABILITY, AVAILABILITY,
COLLECTIBILITY, OPERATIONS, CONDITION, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND BUYER ACCEPTS SAID RIGS AND PURCHASED ASSETS ON AN "AS
IS, WHERE IS, WITH ALL FAULTS" BASIS.
(b) Parent and Sellers expressly disclaim, and Buyer accepts such
disclaimer, with respect to any and all obligations or liabilities for
representations and warranties, express or implied, contained in, or from
omissions from, any written or oral communications furnished by or on behalf of
Parent or Sellers (including without limitation, any representations or
warranties contained in or omissions from the confidential selling memorandum
furnished by Schroder Wertheim & Co. Incorporated dated November 20, 1996,
relating to "Selected Mat Supported Jackup Rigs of Noble Drilling Corporation"),
other than those set forth in this Agreement or in any document, certificate or
other writing required to be furnished by Parent or Sellers pursuant hereto.
Buyer acknowledges and affirms that it will have had the opportunity to complete
its own independent investigation, inspection, analysis and evaluation of the
Purchased Assets, and that in making its decision to enter into this Agreement
and to consummate the transactions contemplated hereby it has relied solely on
its own independent investigation, inspection, analysis and evaluation of the
Purchased Assets and on the express representations and warranties by Parent and
Sellers made in Articles V and VI hereof as a basis for entering into this
Agreement, and that it has made all such reviews and inspections of the
foregoing as it has deemed necessary or appropriate.
13.2 INDEMNIFICATION BY PARENT. With respect only to the representations,
warranties, covenants and agreements made herein that, pursuant to Section 13.5,
shall survive after the Closing Date, Parent agrees to indemnify, defend and
hold Buyer and its Affiliates harmless
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from, any losses, liabilities, claims, demands, damages (excluding consequential
damages), costs or expenses (including reasonable attorneys' fees) of every
kind, nature and description (collectively, "Claims") arising out of or
resulting from (i) any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by Sellers herein; (ii) the operation,
ownership or use of the Purchased Assets prior to the Closing; (iii) any
Proceedings relating solely to facts that existed before the Closing, which
affect the ownership or operation by the Buyer or its Affiliates of the
Purchased Assets or results in any change in the Assumed Liabilities; (iv) any
Claim by any person who is an employee of the Parent or any of its Affiliates on
the date of this Agreement that relates solely to any employment of such
employee by Parent or any of its Affiliates prior to the Closing; or (v) any
Claim related to any of the matters set forth on Schedules 5.7(a) or 5.9;
provided, however, that Parent shall have no liability pursuant to this Section
13.2 for the first $200,000 of aggregate Claims incurred by Buyer (the "Buyer
Basket") and Parent shall be responsible only for such amounts or such Claims as
exceed the Buyer Basket; and provided further, however, that the aggregate of
all Claims for which Buyer is entitled to reimbursement hereunder shall not
exceed the Purchase Price.
13.3 INDEMNIFICATION BY BUYER. Subject to Section 13.5, Buyer hereby
agrees to indemnify, defend and hold Parent and Sellers and their Affiliates
harmless from any Claims arising out of or resulting from (i) any inaccuracy in
or breach of any of the representations, warranties, covenants or agreements
made by Buyer herein; or (ii) the operation, ownership or use of the Purchased
Assets after the Closing; provided, however, that Buyer shall have no liability
pursuant to this Section 13.3 for the first $200,000 of aggregate Claims
incurred by Parent and Sellers (the "Seller Basket") and Buyer shall be
responsible only for such amounts of such Claims as exceed the Seller Basket;
and provided further, however, that the aggregate of all Claims for which Parent
and Sellers are entitled to reimbursement hereunder shall not exceed the
Purchase Price.
13.4 INDEMNIFICATION PROCEDURE. Any party seeking information or
reimbursement for Claims hereunder (the "Indemnified Party") shall notify the
party from which such indemnification is sought (the "Indemnifying Party")
within 45 Business Days of the assertion of any Claim or discovery of any fact
(which fact has been brought to the attention of a responsible executive officer
of the Indemnified Party) upon which the Indemnified Party intends to base a
claim for indemnification or reimbursement hereunder. The failure of the
Indemnified Party so to notify the Indemnifying Party shall relieve the
Indemnifying Party from any liability under this Agreement to the Indemnifying
Party with respect to such claim for indemnification or reimbursement. In the
event of any claims for indemnification or reimbursement, the Indemnifying
Party, at its option, may assume (with legal counsel reasonably acceptable to
the Indemnified Party) the defense of any claim, demand, lawsuit or other
proceeding brought against the Indemnified Party, which claim, demand, lawsuit
or other proceeding may give rise to the indemnity or reimbursement obligation
of the Indemnifying Party hereunder, and may assert any defense of any party;
provided, however, that the Indemnified Party shall have the right at its own
expense to participate jointly with the Indemnifying Party in the defense of any
claim, demand, lawsuit or other proceeding in connection with which the
Indemnified Party claims indemnification or reimbursement hereunder.
Notwithstanding the right of the Indemnified Party so to participate, the
Indemnifying Party shall have the sole right to settle or otherwise dispose of
such claim, demand, lawsuit or other proceeding on such terms as the
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Indemnifying Party, in its sole discretion, shall deem appropriate with respect
to any issue involved in such claim, demand, lawsuit or other proceeding as to
which (i) the Indemnifying Party shall have acknowledged the obligation to
indemnify the Indemnified Party hereunder, or (ii) the Indemnified Party shall
have declined so to participate; provided, however, that no such Claim shall be
settled by the Indemnifying Party in any manner that could reasonably be
expected to have a material adverse effect on the business of the Indemnified
Party and its subsidiaries, taken as a whole, without the prior written consent
of the Indemnifying Party.
13.5 SURVIVAL. The representations, warranties, covenants and agreements
set forth in this Agreement and in any certificate or instrument delivered in
connection herewith shall terminate upon Closing, following which no party may
bring any action or present any claim for the inaccuracy or breach of such
representations, warranties, covenants or agreements, except that the
representations, warranties, covenants and agreements set forth in Sections 3.2,
3.4, 5.1, 5.2, 5.13, 6.1, 6.2, 6.6, 7.1, 7.2, 7.7, 10.1, 10.3 (last sentence
only), 10.4 (last sentence only), 10.5, 10.7, 10.9, 10.10, 10.11(b), 10.12,
10.14, 10.16, 10.17, 10.18 and 12.2 and Articles II, XI, XIII, XIV and XV and in
the General Assignment shall survive the Closing Date.
13.6 TAX BENEFITS; INSURANCE PROCEEDS. In determining the amount of any
Claim, for which any party is entitled to reimbursement under Article XIII of
this Agreement, the gross amount thereof will be reduced by any correlative net
tax benefit or insurance proceeds realized or to be realized by such party and
such correlative insurance benefit shall be net of any insurance premium that
becomes due as a result of such claim.
13.7 APPLICABILITY OF INDEMNIFICATION OBLIGATION. EACH OF THE AGREEMENTS
TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED IN SECTION 13.2 OR 13.3 SHALL
APPLY IRRESPECTIVE OF WHETHER THE SUBJECT CLAIM IS BASED IN WHOLE OR IN PART
UPON THE SOLE OR CONTRIBUTORY NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR GROSS),
BREACH OF WARRANTY, OR BREACH OR VIOLATION OF ANY DUTY IMPOSED BY ANY LAW OR
REGULATION, ON THE PART OF THE BENEFICIARY OF THE AGREEMENT, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT.
ARTICLE XIV
PARENT GUARANTEE
Parent irrevocably and unconditionally guarantees as primary obligor the
due and punctual performance by Sellers of the agreements and obligations of
Sellers and the completeness and accuracy of the representations and warranties
made by Sellers, under this Agreement and all agreements and instruments to be
executed by Sellers hereunder, including, without limitation, Article XIII
INDEMNIFICATION, and the instruments of conveyance referred to in Section
4.3(b). This guaranty shall survive the Closing and any liquidation of any
Seller.
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ARTICLE XV
MISCELLANEOUS
15.1 NOTICES. All notices and other communications required or permitted
to be given or made hereunder by either party hereto shall be in writing and
shall be deemed to have been duly given if delivered personally or transmitted
by first class registered or certified mail, postage prepaid, return receipt
requested, or sent by prepaid overnight delivery service, or sent by cable,
telegram, telefax or telex, to the parties at the following addresses (or at
such other addresses as shall be specified by the parties by like notice):
If to Buyer:
Pride Petroleum Services, Inc.
1500 City West Boulevard
Suite 400
Houston, Texas 77042
Attention: Ray H. Tolson, Chairman and
Chief Executive Officer
Telephone: 713-789-1400
Facsimile: 713-789-1450
If to Parent or any Seller:
Noble Drilling Corporation
10370 Richmond Avenue
Suite 400
Houston, Texas 77042
Attention: James C. Day, Chairman, President and
Chief Executive Officer
Telephone: (713) 974-3131
Facsimile: (713) 953-1126
with a copy to:
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: Robert D. Campbell
Telephone: (214) 969-1353
Facsimile: (214) 969-1751
Such notices, demands and other communications shall be effective (i) if
delivered personally or sent by courier service, upon actual receipt by the
intended receipt, (ii) if mailed, upon the earlier of five days after deposit in
the mail or the date of delivery as shown by the return receipt therefor, or
(iii) if sent by telecopy or facsimile transmission, when confirmation of
receipt is received.
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15.2 ENTIRE AGREEMENT. This Agreement, including the Schedules, Exhibits,
Annexes and other writings referred to herein or delivered pursuant hereto,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
15.3 AMENDMENTS AND WAIVER; RIGHTS AND REMEDIES. This Agreement may be
amended, superseded, cancelled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of either party
based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty, covenant or agreement contained in this
Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
15.4 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas, without regard to
the principles of conflicts of laws thereof.
15.5 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement and all the provisions hereof shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto (by operation of law or otherwise) without the prior written
consent of the other party, except as provided in subsection (b) below.
(b) (i) Parent and Sellers may upon notice to Buyer cause one or more of
Parent's wholly owned subsidiaries (direct or indirect) (a "Seller
Designee") to purchase any or all of the Purchased Assets from a Seller in
order to allow such Seller Designee to become a transferor of such
Purchased Assets hereunder; provided, however, that (y) each Seller
Designee shall be made a party to this Agreement at or prior to the
Closing and (z) no such designation shall relieve Parent or any Seller of
any of its duties, liabilities or obligations hereunder.
(ii) Buyer may upon notice to Parent and Sellers direct that title
to all or part of the Purchased Assets be taken in one or more of Buyer's
wholly owned subsidiaries (direct or indirect) (a "Buyer Designee");
provided, however, that (y) each Buyer Designee shall be made a party to
this Agreement at or prior to the Closing and (z) no
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such designation shall relieve Buyer of any of its duties, liabilities or
obligations hereunder.
15.6 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
15.7 REFERENCES. All references in this Agreement to Articles, Sections
and other subdivisions refer to the Articles, Sections and other subdivisions of
this Agreement unless expressly provided otherwise. The words "this Agreement,"
"herein," "hereof," "hereby," "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited.
15.8 SEVERABILITY OF PROVISIONS. If any provision of this Agreement is
held to be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
15.9 GENDER. Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
15.10 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only, do not constitute a part of this Agreement,
and shall not affect in any manner the meaning or interpretation of this
Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers hereunto duly authorized as of the date first above
written.
PRIDE PETROLEUM SERVICES, INC.
By:/s/RAY H. TOLSON
Ray H. Tolson, Chairman and
Chief Executive Officer
NOBLE DRILLING CORPORATION
By:/s/JAMES C. DAY
James C. Day, Chairman, President
and Chief Executive Officer
NOBLE DRILLING (U.S.) INC.
By:/s/BYRON L. WELLIVER
Byron L. Welliver, President
NOBLE OFFSHORE CORPORATION
By:/s/JAMES C. DAY
James C. Day, President
NOBLE DRILLING (MEXICO) INC.
By:/s/JAMES C. DAY
James C. Day, President
NN-1 LIMITED PARTNERSHIP
By Noble Drilling Corporation,
General Partner
By:/s/JAMES C. DAY
James C. Day, Chairman, President
and Chief Executive Officer
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INDEX TO SCHEDULES AND EXHIBITS
SCHEDULE
NUMBER DESCRIPTION
- -------- -----------
2.1(a) Rigs (excluding the Richardson Hull)
2.1(c) Inventory
2.1(d)(ii) Permits
2.1(e)(i) Drilling Contracts
2.1(e)(ii) Other Contracts
2.5(b) Technical Records
3.4 Allocation of Purchase Price
5.6 Sellers' Defaults
5.7(a) Sellers' Litigation
5.7(b) Sellers' Governmental Notifications
5.8 Sellers' Governmental Approvals
5.9 Sellers' Compliance with Laws
5.11(b) Rig Class Recommendation
5.11(c) Rig Damage
5.15 Sellers' Performance Bonds; Letters of Credit
6.4 Parent's Governmental Approvals
7.6 Buyer's Governmental Approvals
EXHIBIT
NUMBER
- -------
2.4 Form of Agreement Regarding Nonassigned Contracts
3.1(a) Form of Escrow Agreement
4.2(a) Form of General Assignment
8.3 Form of Buyer's Officer's Certificate
8.4 Buyer's Opinion of Counsel
9.3(a) Form of Sellers' Officer's Certificate
9.3(b) Form of Parent's Officer's Certificate
9.4 Parent's and Sellers' Opinion of Counsel
10.18 Form of Triton Contract
35
EXHIBIT 21
SUBSIDIARIES OF PRIDE PETROLEUM SERVICES, INC.
STATE OR OTHER JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
- --------------------------------------------------------------------------------
Pride Petroleum Services of California, Inc. Texas
Pride Petroleum Services of Louisiana, Inc. Texas
Sierra Production Services, Inc. California
Petroleum Supply Company Texas
Pride Drilling, Inc. Texas
Pride International Holdings, Inc. Delaware
Larcom Insurance, Ltd. Bermuda
Pride International, Inc. Texas
Pride International, Ltd. British Virgin Islands
Pride [Limassol] Limited Cyprus
Pride [Cyprus] Limited Cyprus
Pride International JSC Russia
Pride International, S.A. Argentina
Pride International, C.A. Venezuela
Perforaciones Quitral-Co de Venezuela Venezuela
Pride South America Ltd. British Virgin Islands
Pride de Venezuela Venezuela
Pride Vulcan (Joint Venture) British Virgin Islands
Ranger Well Service, Inc. Texas
Ranger Corporation Delaware
Pride Offshore, Inc. Delaware
Xpert Enterprises, Inc. New Mexico
Xpert Well Service, Inc. New Mexico
B&M Service Co., Inc. New Mexico
Marlin Colombia Drilling Co., Inc. Cayman Islands
Ingeser de Colombia, S.A. Colombia
Pride Peru, S.A. Peru
Forasub B.V. Netherlands
Durand Maritime Limited Liberia
Al-Jazirah Forasol Drilling Corporation (AJFDC) Liberia
BASAFOJAGU (HS), Inc. Liberia
Dundee Corporation Liberia
C. A. Foravep (Forasol Venezuela de Perforaciones CA) Venezuela
Caland Boren B.V. Netherlands
Comoser SAM Monaco
Dayana Finance S.A. Panama
Drilling Labor Services PTE LTD (Drillaser) Singapore
Foracasp Russia
1
<PAGE>
STATE OR OTHER JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
- --------------------------------------------------------------------------------
Foradel, SDN B.H.D. Malaysia
Forafels, Inc. Panama
Foramer S.A. France
Forarom sri Romania
Forasol Arabia LTD Arabia
Forasol Argentina, S.A. Argentina
Forasol Drilling (West Africa) Limited Abuja
Forasol s.a. France
Forasud SPA Algeria
Foratex, Inc. Texas
Foraven S.A. France
Foritalia SRL Italy
Forsing S.A. France
Forwest de Venezuela Venezuela
Forwest, Inc. Texas
Hispano Americana de Petroles (HAPSA) Argentina
Horwell S.A. France
Internationale de Travaux et de Materiel Sarl (ITM France)France
National Drilling & Services Co. Inc. (NDSC) Oman
Pelerin Drilling Partnership Marshall
Petrosamsol SARL France
S.B.M. France S.A. France
Samarine SARL France
Sea Holding Management PTE LTD Singapore
Somaser SNC France
South East Asia Holdings Singapore
Dupont Maritime LTD Liberia
Forinter, LTD Jersey
Glace Bay Shipping Corporation Liberia
Inter-Drill Limited Liberia Liberia
Inter-Drill LTD, Bahamas Bahamas
Key Largo Corporation Liberia
Plaza Shipping & Trading Corp. Liberia
Foramac Drilling LTD U.K.
Gisor s.n.c. France
Gisor U.K. U.K.
2
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Pride Petroleum Services, Inc. on Form S-3 (File No. 333-21385) and on Forms
S-8 (File Nos. 33-26854, 33-44823 and 333-06825) of our report dated March 30,
1997 on our audits of the consolidated financial statements and financial
statement schedule of Pride Petroleum Services, Inc. as of December 31, 1996 and
1995, and for the years ended December 31, 1996, 1995, and 1994, which report is
included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 30, 1997
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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