PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 4, 1997)
$325,000,000
[LOGO] PRIDE PETROLEUM SERVICES, INC.
9 3/8% SENIOR NOTES DUE 2007
The 9 3/8% Senior Notes due 2007 (the "Notes") offered hereby (the
"Notes Offering") are being issued by Pride Petroleum Services, Inc. (the
"Company"). Interest on the Notes is payable semiannually on May 1 and
November 1 of each year, commencing November 1, 1997. The Notes will mature on
May 1, 2007. The Notes will not be redeemable prior to May 1, 2002, after which
the Notes will be redeemable, in whole or in part, at the option of the Company
at the redemption prices set forth herein, plus accrued and unpaid interest to
the redemption date. In the event the Company consummates a Public Equity
Offering (as defined herein) (other than the Common Stock Offering described
below) on or prior to May 1, 2000, the Company at its option may use all or a
portion of the proceeds from such Public Equity Offering to redeem up to
$108,333,000 principal amount of the Notes at a redemption price equal to
109.375% of the aggregate principal amount thereof, together with accrued and
unpaid interest to the date of redemption, provided that at least $216,667,000
aggregate principal amount of Notes remains outstanding immediately after such
redemption. In the event of a Change of Control (as defined herein), the Company
will be obligated to make an offer to purchase all outstanding Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. The Notes will be senior
unsecured obligations of the Company and will rank PARI PASSU in right of
payment with all other senior indebtedness of the Company, and will be senior in
right of payment to all existing and future subordinated indebtedness of the
Company. As of December 31, 1996, on a pro forma combined basis after giving
effect to the Recent Transactions (as defined herein), the Offerings (as defined
herein) and the application of the net proceeds therefrom, the Company would
have had an aggregate of approximately $690.5 million of consolidated
indebtedness, of which approximately $52.5 million was subordinated to the
Notes, approximately $34.7 million was unsecured and PARI PASSU with the Notes
and approximately $278.3 million was secured or owed by subsidiaries and
therefore effectively senior to the Notes. The Indenture Supplement governing
the Notes (the "Indenture Supplement") will permit the Company and its
subsidiaries to incur additional Indebtedness (as defined herein) in the future,
subject to certain limitations. See "Description of Notes."
The Notes will be issued in the form of one or more global Notes (the
"Global Notes") registered in the name of Cede & Co., as nominee of The
Depository Trust Company, which will act as the depositary (the "Depositary").
Beneficial interests in the Global Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary and its
participants. Except as described herein, Notes in definitive form will not be
issued. See "Description of Notes -- Book Entry, Delivery and Form." The
Company does not intend to list the Notes on any national securities exchange.
In connection with the Notes Offering, the Company is offering 4,300,000
shares (4,945,000 shares if the underwriters' over-allotment option is exercised
in full) of its common stock, no par value ("Common Stock"), for sale to the
public pursuant to a separate prospectus supplement (the "Common Stock
Offering" and, together with the Notes Offering, the "Offerings"). Neither
the Notes Offering nor the Common Stock Offering is contingent upon the
consummation of the other. There can be no assurance that the Common Stock
Offering will be consummated and, if so, on what terms.
SEE "RISK FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT
FOR A DISCUSSION OF CERTAIN FACTORS THAT PROSPECTIVE INVESTORS IN THE NOTES
SHOULD CONSIDER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- ---------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------
Per Note....... 100.0% 2.375% 97.625%
Total.......... $325,000,000 $7,718,750 $317,281,250
- ---------------------------------------------------------------------------
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS (AS DEFINED HEREIN)
AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED TO BE $681,250.
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of the Notes will be made against payment
therefor in New York, New York on or about May 7, 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
SIMMONS & COMPANY
INTERNATIONAL
SOUTHCOAST CAPITAL
CORPORATION
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 2, 1997.
<PAGE>
[GRAPHIC]
The NYMPHEA, a third-generation semisubmersible rig, is scheduled to begin a
four year contract with Petrobras in July 1997.
[GRAPHIC]
The ILE DU LEVANT, an independent-leg, cantilevered jackup rig, is operating on
Lake Maracaibo in Venezuela.
[GRAPHIC]
The ALLIGATOR, one of the Company's self-erecting tender-assisted rigs, was
acquired in the Forasol transaction.
[GRAPHIC]
The JIM BAWCOM, one of the Noble Rigs to be acquired, is a 250', mat-supported
jackup rig, which currently operates in the Gulf of Mexico.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING,
AMONG OTHERS, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE NOTES, AND THE
IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) INCLUDED IN
AND INCORPORATED BY REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. UNLESS THE CONTEXT INDICATES OTHERWISE, REFERENCES IN
THIS PROSPECTUS SUPPLEMENT TO THE "COMPANY" OR "PRIDE" ARE TO PRIDE
PETROLEUM SERVICES, INC. AND ITS SUBSIDIARIES. UNLESS OTHERWISE INDICATED, THE
PRO FORMA INFORMATION CONTAINED HEREIN GIVES EFFECT TO THE FOLLOWING
TRANSACTIONS (COLLECTIVELY REFERRED TO HEREIN AS THE "RECENT TRANSACTIONS"):
(I) THE ACQUISITION OF QUITRAL-CO S.A.I.C. ("QUITRAL-CO") IN APRIL 1996 AND
THE RELATED FINANCING TRANSACTIONS, (II) THE DIVESTITURE OF THE COMPANY'S
DOMESTIC LAND-BASED WELL SERVICING OPERATIONS IN FEBRUARY 1997, (III) THE
ACQUISITION OF THE OPERATING SUBSIDIARIES OF FORASOL-FORAMER N.V. (COLLECTIVELY,
"FORASOL") IN MARCH 1997 AND THE RELATED FINANCING TRANSACTIONS AND (IV) THE
CONVERSION IN THE FIRST QUARTER OF 1997 OF $28.0 MILLION AGGREGATE PRINCIPAL
AMOUNT OF THE COMPANY'S CONVERTIBLE SUBORDINATED DEBENTURES INTO 2.3 MILLION
SHARES OF COMMON STOCK. UNLESS OTHERWISE INDICATED, THE PRO FORMA COMBINED
INFORMATION CONTAINED HEREIN ILLUSTRATES THE EFFECT ON THE COMPANY'S PRO FORMA
DATA OF THE OFFERINGS AND THE APPLICATION OF THE NET PROCEEDS THEREFROM,
INCLUDING THE PURCHASE OF 12 MAT-SUPPORTED JACKUP RIGS AND THE HULL OF AN
ADDITIONAL JACKUP RIG (THE "NOBLE RIGS") FROM NOBLE DRILLING CORPORATION AND
CERTAIN SUBSIDIARIES (COLLECTIVELY, "NOBLE").
THE COMPANY
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 several international and offshore businesses, including
Quitral-Co and Forasol, and divested its domestic land-based well servicing
operations, thereby transforming 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, eight tender-assisted
rigs, three jackup rigs, five floating lake barge rigs, one posted swamp barge
rig, 22 offshore platform rigs, 76 land-based drilling rigs and 162 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. With the closing of the pending purchase of the
Noble Rigs, the Company will add 12 mat-supported jackup rigs and the hull of an
additional jackup rig to its offshore fleet. The Company's rig fleet operates in
some of the most prolific hydrocarbon producing regions in the world, as
depicted below:
PRIDE'S WORLDWIDE OPERATIONS
[MAP DEPICTING PRIDE'S WORLDWIDE OPERATIONS]
S-3
<PAGE>
The Company has grown rapidly in recent years, increasing revenue 203% from
$182.3 million in 1994 on a historical basis to $552.7 million in 1996 on a pro
forma basis. Over the same period, the Company increased EBITDA 403% from $17.3
million in 1994 on a historical basis to $86.8 million in 1996 on a pro forma
basis. On a pro forma combined basis, the Company would have had revenue of
$621.5 million and EBITDA of $115.2 million in 1996, representing increases of
241% and 567% from the respective historical levels in 1994.
International and offshore markets, where the Company now focuses its
operations, generally offer greater profit potential than domestic land-based
markets, primarily as a result of less competition, higher utilization rates and
stronger demand resulting from a general trend by major oil and gas operators to
shift expenditures to exploration and development activities abroad and in the
Gulf of Mexico.
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
three jackup rigs, one tender-assisted rig, five lake barge rigs, 12 land-based
drilling rigs and 33 land-based workover rigs. In Colombia, the Company operates
13 land-based drilling rigs and six land-based workover rigs. In the western and
northern regions of Africa and in the Middle East, the Company operates two
semisubmersible rigs, six 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 22 self-erecting
platform rigs and is constructing one additional rig, 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. The purchase of the Noble Rigs will position the
Company as the second largest operator in the Gulf of Mexico of mat-supported
jackup rigs capable of operating in water depths of 200 feet or greater.
BUSINESS STRATEGY
The Company's strategy is focused on achieving revenue and earnings growth
through:
o Establishing and maintaining leading market positions to maximize
operating performance.
o Diversifying operations by asset class and geographic region.
o Developing and maintaining long-term relationships with major oil
and gas companies, including state-owned companies, by providing a
full range of drilling expertise and technology.
o Acquiring businesses and assets in international onshore and
offshore markets and domestic offshore markets where significant
consolidation savings and economies of scale can be achieved.
o Acquiring or constructing offshore and deepwater rigs, primarily
supported by long-term contracts.
Implementation of this strategy, including the Recent Transactions, has
repositioned the Company to take advantage of the benefits resulting from
operating a balanced fleet, which the pending purchase of the Noble Rigs is
expected to enhance. These benefits include more stable cash flows produced by
the Company's international and offshore rigs under term contracts, improved
cash flow and higher margins generally produced by offshore rigs, reduced
exposure to downturns in a single market and increased exposure to higher margin
international and offshore drilling and workover markets. To reflect more
accurately the nature and scope of the Company's current operations and business
strategy, the Board of Directors of the Company has approved a proposal to
change the name of the Company to Pride International, Inc., which is being
submitted to the Company's shareholders for their approval at the Company's
Annual Meeting of Shareholders to be held on May 22, 1997.
S-4
<PAGE>
RECENT DEVELOPMENTS
Consistent with its business strategy, the Company has realigned its
operations to concentrate on more profitable international and offshore drilling
markets, as evidenced by the following transactions:
o QUITRAL-CO ACQUISITION. In April 1996, the Company acquired
Quitral-Co (now Pride International S.A.) from Perez Companc S.A.
and others for an aggregate purchase price of $140 million.
Quitral-Co, the largest drilling and workover contractor in
Argentina, added 23 land-based drilling and 57 land-based workover
rigs in Argentina and seven land-based drilling and 23 land-based
workover rigs in Venezuela to the Company's existing fleets in those
countries.
o DIVESTITURE OF U.S. LAND-BASED OPERATIONS. 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. The Company
retained 14 of its larger land-based rigs for redeployment to
international markets, four of which have since been redeployed. The
divested operations generated the Company's lowest operating
margins.
o FORASOL ACQUISITION. In March 1997, the Company acquired Forasol
for approximately $113 million in cash and 11 million shares of
Common Stock. The transaction provided entry into new international
markets while contributing additional capacity in the Company's
existing Latin American markets, as well as a deepwater asset base
and expertise. Forasol provides drilling, workover and engineering
services in more than 15 countries, including substantial operations
in Latin America and West Africa, and operates a diversified fleet
of offshore rigs, including two semisubmersible rigs, three jackup
rigs, seven tender-assisted rigs, three lake barge rigs and one
swamp barge rig, and an international fleet of 29 land-based rigs.
The Company recently acquired an additional tender-assisted rig for
$6.5 million, which is currently located in West Africa and being
marketed for several projects.
o PURCHASE OF NOBLE RIGS. In February 1997, the Company entered into
a definitive agreement to purchase the Noble Rigs, consisting of 12
mat-supported jackup rigs and the hull of an additional jackup rig,
for $265 million in cash. The purchase, which is subject to
completion by the Company of satisfactory financing arrangements and
a purchase price adjustment if the transaction closes prior to June
3, 1997, will position the Company as the second largest operator in
the Gulf of Mexico of mat-supported jackup rigs capable of operating
in water depths of 200 feet or greater. See "The Noble Rigs."
o ADDITIONAL ACTIVITIES. In addition to the transactions described
above, since mid-1993 the Company acquired six businesses with an
aggregate of 62 land-based rigs serving international markets and a
fleet of 22 platform rigs serving the domestic offshore market. The
Company has further expanded international operations by deploying
35 rigs from its former U.S. land-based fleet, primarily to
Argentina and Venezuela, and by constructing new offshore rigs,
including two lake barge rigs operating in Venezuela and four
offshore platform rigs operating in the Gulf of Mexico.
FIRST QUARTER RESULTS OF OPERATIONS. The Company reported net earnings for
the first quarter of 1997 of $44.9 million, or $1.15 per share, on revenues of
$131.4 million. Net earnings include a gain on the divestiture of the Company's
U.S. land-based well servicing operations of $54.6 million, net of tax. The gain
was partially offset by (i) a charge of $13.3 million, net of tax, for costs
expected to be incurred in connection with the combination of the business units
of Forasol with the Company's existing operations, (ii) a charge of $4.6 million
relating to the conversion of $28.0 million aggregate principal amount of the
Company's convertible subordinated debentures and (iii) a charge of $288,000,
net of tax, as a result of the Company's decision to cease operations in Russia.
Excluding such nonrecurring items, net earnings were $8.6 million, or $.23 per
share, for the quarter. For the same period in 1996, the Company reported net
earnings of $2.8 million, or $.11 per share, on revenues of $66.2 million. The
increase in revenues and earnings was primarily attributable to the inclusion of
the businesses and assets acquired in the Recent Transactions, the most
significant of which to this year's first quarter operating results was that of
Quitral-Co.
S-5
<PAGE>
THE NOTES OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities............... 9 3/8% Senior Notes due 2007.
Principal Amount......... $325,000,000.
Maturity Date............ May 1, 2007.
Interest Payment Dates... May 1 and November 1 of each year, commencing November 1, 1997.
Optional Redemption...... The Notes will be redeemable, at the Company's option, in whole or in part
from time to time on or after May 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest to the redemption date. In the event
the Company consummates a Public Equity Offering (other than the Common Stock
Offering) on or prior to May 1, 2000, the Company at its option may use all
or a portion of the proceeds from such Public Equity Offering to redeem up to
$108,333,000 principal amount of the Notes at a redemption price equal to
109.375% of the aggregate principal amount thereof, together with accrued and
unpaid interest to the date of redemption, provided that at least
$216,667,000 aggregate principal amount of Notes remains outstanding
immediately after such redemption. See "Description of Notes -- Optional
Redemption."
Ranking.................. The Notes will be general senior unsecured obligations of the Company,
ranking PARI PASSU in right of payment with all senior indebtedness of the
Company and senior in right of payment to all subordinated indebtedness of
the Company. As of December 31, 1996, on a pro forma combined basis, the
Notes would have been effectively subordinated to approximately $47.8 million
of secured indebtedness of the Company and to approximately $230.5 million of
indebtedness of the Company's subsidiaries. In addition, the Company has a
revolving credit facility secured by the accounts receivable, inventory and
intangibles of the Company and its domestic subsidiaries, all of the stock of
the Company's domestic subsidiaries, two-thirds of the stock of the Company's
foreign subsidiaries and certain other assets, whereas the Notes will not be
secured by any assets of the Company. In the event that any subsidiary of the
Company guarantees any Indebtedness of the Company, such subsidiary (a
"Subsidiary Guarantor"), with certain exceptions, will be required to
guarantee the Notes (the "Subsidiary Guarantees"). Initially, there are
expected to be no Subsidiary Guarantors. See "Description of
Notes -- Subsidiary Guarantees of Notes" and "-- Ranking."
Change of Control........ Upon a Change of Control, each holder of Notes will have the right to require
the Company to repurchase all or any part of such holder's Notes at a
purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest to the date of purchase. See "Description of
Notes -- Change of Control."
Certain Covenants........ The Indenture Supplement will contain covenants limiting the ability of the
Company and its subsidiaries to, among other things, pay dividends or make
other restricted payments, incur additional indebtedness and issue preferred
stock, create liens, incur dividend and other payment restrictions affecting
subsidiaries, enter into mergers or consolidations, make asset sales, enter
into transactions with affiliates and engage in other lines of business.
These covenants are subject to certain exceptions and qualifications. See
"Description of Notes -- Certain Covenants" and " -- Consolidation, Merger
and Sale of Assets."
Use of Proceeds.......... The net proceeds from the Offerings will be used to finance the purchase of
the Noble Rigs, to refurbish two of the Noble Rigs, to repay outstanding
indebtedness and for general corporate purposes. See "Use of Proceeds."
Common Stock Offering.... In connection with the Notes Offering, the Company is offering 4,300,000
shares (4,945,000 shares if the underwriters' over-allotment option is
exercised in full) of Common Stock for sale to the public. Neither the Notes
Offering nor the Common Stock Offering is contingent upon the consummation of
the other.
</TABLE>
S-6
<PAGE>
SUMMARY FINANCIAL DATA
The following tables set forth summary historical, pro forma and pro forma
combined financial information for the Company as of the dates and for the
periods indicated. The summary unaudited pro forma financial information
illustrates the effect of the Recent Transactions. The summary unaudited pro
forma combined financial information illustrates the effect on the Company's pro
forma data of the Offerings and the application of the net proceeds therefrom,
including the purchase of the Noble Rigs. The unaudited pro forma combined
financial information does not purport to represent what the Company's financial
position or results of operations actually would have been had such transactions
in fact occurred at or prior to December 31, 1996 or the period then ended.
Furthermore, the unaudited pro forma combined financial information does not
reflect changes that may occur as the result of post-combination activities and
other matters. The following data should be read in conjunction with
" -- Recent Operating Information," "Unaudited Pro Forma and Pro Forma
Combined Financial Statements," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company (including
the notes thereto) incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
PRO FORMA
PRO FORMA COMBINED
1994 1995 1996 1996 1996(3)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .......................... $ 182,336 $ 263,599 $ 407,174 $ 552,713 $ 621,460
Operating costs ................... 139,653 187,203 292,599 414,882 453,780
Depreciation and amortization ..... 9,550 16,657 29,065 54,220 70,420
Selling, general and
administrative .................. 25,105 32,418 45,368 54,048 55,548
--------- --------- --------- --------- -----------
Earnings from operations .......... 8,028 27,321 40,142 29,563 41,712
Other income (expense) ............ (305) 638 1,902 2,227 2,227
Interest income ................... 618 740 2,410 4,167 4,167
Interest expense .................. (207) (6,276) (13,635) (24,802) (50,336)
Minority interest ................. -- -- -- 825 825
--------- --------- --------- --------- -----------
Earnings before income taxes ...... 8,134 22,423 30,819 11,980 (1,405)
Income tax provision .............. 1,920 7,064 8,091 4,356 (474)
--------- --------- --------- --------- -----------
Net earnings (loss) ............... $ 6,214 $ 15,359 $ 22,728 $ 7,624 $ (931)
========= ========= ========= ========= ===========
Net earnings (loss) per share
Primary ....................... $ .30 $ .60 $ .81 $ .18 $ (.02)
========= ========= ========= ========= ===========
Fully diluted ................. $ .30 $ .60 $ .75 * *
========= ========= ========= ========= ===========
OTHER DATA:
EBITDA(1) ......................... $ 17,273 $ 44,616 $ 71,109 $ 86,835 $ 115,184
Capital expenditures .............. 59,171 40,636 61,711 98,850
Ratio of EBITDA to interest
expense ......................... 83.4x 7.1x 5.2x 3.5x 2.3x
Ratio of earnings to fixed
charges(2) ...................... 6.2x 4.0x 2.7x 1.3x --
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital ................... $ 26,640 $ 31,302 $ 62,722 $ 31,457 $ 107,457
Property and equipment, net ....... 139,899 178,488 375,249 695,571 965,571
Total assets ...................... 205,193 257,605 542,062 939,862 1,259,262
Long-term debt, net of current
portion ......................... 42,096 61,136 106,508 154,323 439,323
Long-term lease obligations, net of
current portion ................. -- -- -- 30,663 30,663
Convertible subordinated
debentures ...................... -- -- 80,500 52,500 52,500
Shareholders' equity .............. 111,385 131,239 201,797 438,048 507,449
</TABLE>
- -----------------------------
* Anti-dilutive.
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net income
as an indicator of the Company's operating performance or as an alternative
to cash flows as a better measure of liquidity.
(2) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest expense
plus capitalized interest and the portion of operating lease rental expense
that represents the interest factor). For the year ended December 31, 1996,
pro forma combined earnings were inadequate to cover fixed charges by
$3,972,000.
(3) The summary unaudited pro forma combined financial information assumes the
Notes bear interest at an annual rate of 9 3/8%, but does not give effect to
interest earned on proceeds from the Offerings prior to application thereof.
S-7
<PAGE>
RECENT OPERATING INFORMATION
The pro forma combined financial information presented in this Prospectus
Supplement reflects substantial dilution of earnings per share as a result of
including the 1996 operating results of Forasol and the Noble Rigs. The Company
believes, however, that such information is not indicative of the operating
performance expected to be achieved by the Company in 1997 and future years,
because such information does not reflect current day rates and utilization
levels, which are substantially above historical levels, or net cost savings and
synergies realized or expected to be realized in the Forasol acquisition and the
purchase of the Noble Rigs.
DAY RATES AND UTILIZATION. Within certain of the Company's offshore
operating areas, day rates and utilization levels have increased significantly
in 1997 relative to their average levels during 1996. For the year ended
December 31, 1996, the nine Noble Rigs that were operating generated revenues of
approximately $68.7 million, at an average operating rate of approximately
$22,000 per rig per day. As a result of increasing demand for offshore drilling
services and tightening supply of offshore drilling rigs in the Gulf of Mexico
and worldwide, current effective industry utilization for actively marketed
jackup rigs is approximately 100%. The Noble Rigs, other than those undergoing
or awaiting refurbishment, are currently experiencing 100% utilization at an
average contracted rate of approximately $28,000 per day. Based on such current
operating levels, on an annualized basis, the 10 Noble Rigs currently working
and an additional contracted rig to be placed in service during the second
quarter of 1997 are expected to generate an incremental $42.0 million of revenue
relative to 1996. There can be no assurance, however, that these rigs will in
fact continue to operate at such levels or generate such incremental revenue in
1997 or future years.
Also during 1996, Forasol's two semisubmersible drilling rigs, the NYMPHEA
and the SOUTH SEAS DRILLER, worked an aggregate of 449 days at an average day
rate of approximately $37,900. 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. In addition, 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 $34.0 million of incremental revenue relative to 1996. There can
be no assurance, however, that these rigs will in fact generate such incremental
revenue in 1997 or future years.
COST SAVINGS AND SYNERGIES. The Company expects to realize significant
cost savings and synergies as a result of the Forasol acquisition and the sale
of the Company's domestic land-based well servicing operations, net of certain
incremental costs associated with the purchase of the Noble Rigs. Similarly, the
Company has achieved certain additional cost savings and synergies since
completing the Quitral-Co acquisition in April 1996. The pro forma combined
financial information included in this Prospectus Supplement does not give full
effect to these cost savings and operational efficiencies, some of which have
already been achieved or which the Company estimates will be achieved by the end
of 1997, primarily resulting from the consolidation of certain facilities and
the reduction of personnel. On the other hand, the Company believes that rig
operating costs will increase to some extent during 1997 and in future years as
a result of strong demand for drilling services and limited supply of qualified
crews. The pro forma combined financial information included in this Prospectus
Supplement also does not give effect to such anticipated operating cost
increases. The Company believes that the net cost savings and synergies
associated with the acquisitions of Quitral-Co and Forasol and the sale of the
Company's domestic land-based well servicing operations will exceed any
operating costs associated with increased utilization, the limited supply of
qualified crews and the costs associated with operating two previously idle
Noble Rigs. Cost savings are subject to a number of factors, however, many of
which are beyond the control of the Company.
S-8
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus include 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 Prospectus Supplement or the accompanying
Prospectus 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 and the Noble
Rigs, cost savings and synergies expected to be achieved in the Recent
Transactions, 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 the risk factors discussed herein, general economic and
business conditions, prices of oil and 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.
RISK FACTORS
THE FOLLOWING SHOULD BE CONSIDERED CAREFULLY WITH THE INFORMATION PROVIDED
ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE
DOCUMENTS INCORPORATED BY REFERENCE THEREIN IN REACHING A DECISION REGARDING AN
INVESTMENT IN THE NOTES OFFERED HEREBY.
SIGNIFICANT LEVERAGE AND RESTRICTIONS
As of December 31, 1996, on a pro forma combined basis, the Company would
have had approximately $690.5 million in total indebtedness, compared with total
actual indebtedness of $292.8 million. On March 6, 1997, the Company entered
into a $100 million secured bank credit facility (the "Credit Facility") for
working capital and for general corporate purposes. The level of the Company's
indebtedness will have several important effects on the Company's future
operations, including, among others, (i) a significant portion of the Company's
cash flow from operations will be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
contained in the Credit Facility and the Indenture Supplement relating to the
Notes require the Company to meet certain financial tests, which may affect the
Company's flexibility in planning for, and reacting to, changes in its business,
including possible acquisition opportunities, and (iii) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate and other purposes may be limited. The Company's
ability to meet its debt service obligations and to reduce its total
indebtedness will be dependent upon the Company's future performance, which will
be subject to general economic conditions, industry cycles and financial,
business and other factors affecting the operations of the Company, many of
which are beyond its control. There can be no assurance that the Company's
business will continue to generate sufficient cash flow from operations to
service its indebtedness. If the Company is unable to generate sufficient cash
flow from operations, it may be required to sell assets, to refinance all or a
portion of its indebtedness, including the Notes, or to obtain additional
financings. There can be no assurance that any such refinancing would be
possible or that any additional financing could be obtained.
EFFECTIVE SUBORDINATION OF THE NOTES; HOLDING COMPANY STRUCTURE;
SUBSIDIARY CASH FLOW
The Notes will be effectively subordinated in right of payment to all
existing and future senior secured indebtedness of the Company and its
subsidiaries and to the unsecured indebtedness of the Company's
S-9
<PAGE>
subsidiaries that are not Subsidiary Guarantors. The Credit Facility is secured
by the accounts receivable, inventory and intangibles of the Company and its
domestic subsidiaries, all of the stock of the Company's domestic subsidiaries,
two-thirds of the stock of the Company's foreign subsidiaries and certain other
assets, whereas the Notes will not be secured by any assets of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of
Notes -- Ranking." Accordingly, the lenders under the Credit Facility and other
secured debt of the Company have claims with respect to the assets constituting
collateral for any indebtedness thereunder and the assets of any subsidiary
guaranteeing such indebtedness, which will be satisfied prior to the unsecured
claims of holders of the Notes. In the event of a default on the Notes or a
bankruptcy, liquidation or reorganization of the Company, such assets will be
available to satisfy obligations with respect to the indebtedness secured
thereby before any payment therefrom could be made on the Notes. Thus, the Notes
will be effectively subordinated to claims of the lenders under the Credit
Facility to the extent of such pledged collateral. Assuming the Credit Facility
had been in place at December 31, 1996, on a pro forma combined basis, the
Company would have had $47.8 million of senior secured indebtedness at that date
and $100.0 million of borrowing capacity under the Credit Facility.
In addition, the Notes are effectively subordinated to all of the
creditors, including trade creditors and tort claimants, of the Company's
subsidiaries that are not Subsidiary Guarantors and to all secured creditors of
the Subsidiary Guarantors. The Company conducts substantially all of its
operations through both U.S. and foreign subsidiaries, and substantially all of
the Company's assets consist of equity in such subsidiaries. Accordingly, the
Company is and will be dependent on its ability to obtain funds from its
subsidiaries to service its indebtedness, including the Notes. Certain financing
arrangements that the Company's subsidiaries are party to impose restrictions on
the ability of the Company to gain access to the cash flow or assets of its
subsidiaries. In addition, the Company's foreign subsidiaries may face
governmentally imposed restrictions, from time to time, on their ability to
transfer funds to the Company. As of December 31, 1996, on a pro forma combined
basis, the Company's subsidiaries would have had $230.5 million of indebtedness
outstanding.
FRAUDULENT CONVEYANCE CONSIDERATIONS RELATING TO SUBSIDIARY GUARANTEES
The Indenture Supplement does not require any subsidiary to guarantee the
Notes unless such subsidiary guarantees other Indebtedness of the Company. On
the date of the Indenture Supplement, there are expected to be no Subsidiary
Guarantors. Various fraudulent conveyance laws have been enacted for the
protection of creditors and may be used by a court of competent jurisdiction to
subordinate or avoid any Subsidiary Guarantee that may be delivered. To the
extent that a court were to find that (x) a Subsidiary Guarantee was incurred
with the intent to hinder, delay or defraud any present or future creditor or
that such Subsidiary Guarantor contemplated insolvency with a design to favor
one or more creditors to the exclusion in whole or in part of others or (y) a
Subsidiary Guarantor did not receive fair consideration or reasonably equivalent
value for issuing its Subsidiary Guarantee and, at the time it issued the
Subsidiary Guarantee, such Subsidiary Guarantor (i) was insolvent or rendered
involvent by reason of the issuance of the Subsidiary Guarantee, (ii) was
engaged or about to engage in a business or transaction for which the remaining
assets of such Subsidiary Guarantor constituted unreasonably small capital or
(iii) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, a court could avoid or subordinate
the Subsidiary Guarantee in favor of such Subsidiary Guarantor's other
creditors. Among other things, a legal challenge of the Subsidiary Guarantee
issued by such Subsidiary Guarantor on fraudulent conveyance grounds may focus
on the benefits, if any, realized by such Subsidiary Guarantor as a result of
the issuance by the Company of the Notes. To the extent the Subsidiary Guarantee
was avoided as a fraudulent conveyance or held unenforceable for any other
reason, the holders of the Notes would cease to have any claim against such
Subsidiary Guarantor and would be creditors solely of the Company and any
Subsidiary Guarantors whose Subsidiary Guarantees were not avoided or held
unenforceable. In such event, the claims of the holders of the Notes against the
issuer of an invalid Subsidiary Guarantee would be subject to the prior payment
of all liabilities of such Subsidiary Guarantor.
S-10
<PAGE>
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally, a
Subsidiary Guarantor may be considered insolvent if the sum of its debts,
including contingent liabilities, is greater than the fair market value of all
its assets at a fair valuation, if the present fair market value of its assets
is less than the amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they become absolute
and mature, or if it has insufficient capital to carry on its business.
DEPENDENCE ON OIL AND GAS INDUSTRY; 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 and related services is directly influenced by oil and gas prices,
expectations about future prices, the cost of producing and delivering oil and
gas, government regulations, local and international political and economic
conditions, including the ability of the Organization of Petroleum Exporting
Countries ("OPEC") to set and maintain production levels and prices, the level
of production by non-OPEC countries and the policies of the various governments
regarding exploration and development of their oil and gas reserves. 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. On a pro forma combined basis, international
operations provided approximately 80% of the Company's revenues for the year
ended December 31, 1996. 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.
From time to time, certain foreign subsidiaries of the Company acquired in
the Forasol transaction operate in countries such as Libya and Iran that are
subject to sanctions and embargoes imposed by the U.S. Government. Although
these sanctions and embargoes do not prohibit such subsidiaries from completing
existing contracts or from entering into new contracts to provide drilling
services in such countries, 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 such countries. 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
S-11
<PAGE>
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
A substantial portion of the Company's growth has resulted from 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, negotiate acceptable acquisition terms,
obtain financing for acquisitions on satisfactory terms or successfully acquire
identified targets. As indicated above under " -- Significant Leverage and
Restrictions," the ability of the Company to pursue acquisition opportunities
may be affected by the limitations on its financing flexibility imposed by the
Credit Facility and the Indenture Supplement. 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 and assets, including Forasol and the Noble
Rigs, 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.
In the pending purchase of the Noble Rigs, Noble may identify crews
sufficient to operate up to five of the Noble Rigs, which crews it will retain
as employees but will lease to the Company for up to one year. After such
period, the Company will be required to replace all such employees retained by
Noble. See "The Noble Rigs." There can be no assurance that at the end of such
lease period the Company will be able to employ and retain sufficient qualified
personnel at cost-effective levels to replace such employees.
COMPETITION
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. In periods of low
rig utilization, drilling contracts are usually awarded on a competitive bid
basis and, while an operator may consider factors such as quality of service and
type and location of equipment as well as the ability to provide ancillary
services, price is generally the primary factor in determining which contractor
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 rig utilization, to compete more effectively on the basis of price, to build
new rigs or to acquire existing rigs. There can be no assurance that the Company
will be able to compete successfully against its competitors in the future.
RISKS OF NEW CONSTRUCTION, UPGRADE AND REFURBISHMENT PROJECTS
The Company intends to make significant expenditures to construct new rigs
and to upgrade and refurbish other rigs that are not currently under contract.
These projects are subject to the risks of delay or cost overruns inherent in
large construction and refurbishment projects, including shipyard availability,
shortages of materials or skilled labor, unforeseen engineering problems, work
stoppages, weather interference, unanticipated cost increases, nonavailability
of necessary equipment and inability to obtain any of the requisite permits or
approvals. Significant delays could also have a material adverse effect on the
S-12
<PAGE>
Company's marketing plans for such rigs and could jeopardize the contracts under
which the Company plans to operate such rigs.
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.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes will be a new issue of securities for which there currently is no
public market, and the Company does not intend to list the Notes on any national
securities exchange. Although the Underwriters have informed the Company that
they currently intend to make a market in the Notes, the Underwriters are not
obligated to do so and may discontinue such market-making at any time.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Notes.
S-13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Notes Offering and the Common
Stock Offering (assuming that the underwriters' over-allotment option is not
exercised) are estimated to be approximately $316.6 million and $69.4 million,
respectively, after deducting underwriting discounts and estimated offering
expenses payable by the Company. Neither the Notes Offering nor the Common Stock
Offering is contingent upon the consummation of the other. Of such net proceeds,
approximately $270.0 million will be used to finance the purchase of the Noble
Rigs, including the estimated acquisition costs, and at least $20.0 million is
expected to be used to upgrade and equip the two Noble Rigs awaiting
refurbishment. See "The Noble Rigs." Approximately $75.0 million will be used
to repay certain indebtedness, including all outstanding indebtedness under the
Credit Facility, which bears interest at a variable rate, currently 7.44%, based
on either the prime rate or LIBOR, and matures in March 2002. Of the $45.0
million borrowed under the Credit Facility as of March 31, 1997, $14.3 million
was used to repay amounts outstanding under the Company's previous credit
facility and $25.7 million was used to partially fund the acquisition of
Forasol. The Company intends to use excess proceeds from the Offerings and
available borrowing capacity for general corporate purposes, including
acquisitions and capital projects. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
S-14
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents,
short-term debt and capitalization of the Company and its subsidiaries as of
December 31, 1996 (i) on a historical basis, (ii) on a pro forma basis to give
effect to the Recent Transactions and (iii) on a pro forma combined basis to
illustrate the effect on the Company's pro forma data of the Offerings and the
application of the net proceeds therefrom, including the purchase of the Noble
Rigs. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA COMBINED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS............ $ 10,310 $ 3,619 $ 44,619
=========== ========== ===========
SHORT-TERM DEBT AND CURRENT
MATURITIES OF LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS.......... $ 35,982 $ 63,040 $ 28,040
=========== ========== ===========
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS
Bank credit facilities.......... $ 11,566 $ 55,278 $ 15,278
Collateralized term loans....... 37,036 37,036 37,036
Note payable to sellers......... 11,000 11,000 11,000
Limited-recourse collateralized
term loans.................... 35,211 35,211 35,211
Notes payable................... 11,695 15,798 15,798
Capital lease obligations....... -- 30,663 30,663
9 3/8% Senior Notes due 2007.... -- -- 325,000
6 1/4% Convertible Subordinated
Debentures due 2006........... 80,500 52,500 52,500
----------- ---------- -----------
Total long-term debt and
capital lease
obligations............. 187,008 237,486 522,486
----------- ---------- -----------
SHAREHOLDERS' EQUITY
Preferred Stock, no par value,
5,000,000 shares authorized;
no shares issued or
outstanding................... -- -- --
Common Stock, no par value,
40,000,000 shares authorized;
100,000,000 shares authorized,
pro forma and pro forma
combined; 28,571,876 shares
issued and 28,517,656 shares
outstanding, historical;
41,956,779 shares issued and
41,902,559 shares outstanding,
pro forma; and 46,256,779
shares issued and 46,202,559
shares outstanding, pro forma
combined (1).................. 1 1 1
Paid-in capital................. 143,581 343,981 413,381
Treasury stock.................. (191) (191) (191)
Retained earnings............... 58,406 94,258 94,258
----------- ---------- -----------
Total shareholders'
equity.................. 201,797 438,049 507,449
----------- ---------- -----------
Total capitalization....... $ 388,805 $675,535 $ 1,029,935
=========== ========== ===========
</TABLE>
- -----------------------------
(1) Does not include 6,571,428 shares historical and 4,285,714 shares pro forma
and pro forma combined issuable upon conversion of the Company's convertible
subordinated debentures, and 2,907,150 shares historical and 3,294,350
shares pro forma and pro forma combined reserved for issuance upon exercise
of outstanding stock options and warrants.
S-15
<PAGE>
UNAUDITED PRO FORMA AND PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma and pro forma combined financial
statements as of and for the year ended December 31, 1996 illustrate the effect
of the Recent Transactions and of the Offerings and the application of the net
proceeds therefrom, including the purchase of the Noble Rigs. The unaudited pro
forma and pro forma combined balance sheets have been prepared assuming that
such transactions were completed as of December 31, 1996. The unaudited pro
forma and pro forma combined statements of operations have been prepared
assuming that such transactions were completed as of January 1, 1996. Of the
Recent Transactions, the acquisition of Quitral-Co was completed in April 1996,
the sale of the Company's U.S. land-based well servicing operations was
completed on February 20, 1997, the acquisition of Forasol was completed on
March 10, 1997 and the conversion of $28.0 million principal amount of the
Company's convertible subordinated debentures occurred in several transactions
during the first quarter of 1997. The purchase of the Noble Rigs by the Company
is expected to close concurrently with the closing of the Notes Offering.
The historical results of operations for the Company have been derived from
the Company's consolidated financial statements, the historical results of
operations for Quitral-Co have been derived from Quitral-Co's consolidated
financial statements as adjusted for generally accepted accounting principles in
the United States ("U.S. GAAP") and have been translated into U.S. dollars in
accordance with U.S. GAAP, and the historical results of operations for Forasol
have been derived from Forasol's historical consolidated financial statements,
all of which are incorporated by reference in the accompanying Prospectus. The
historical results of operations attributable to the Noble Rigs have been
derived from Noble's historical financial statements.
The pro forma adjustments and the resulting unaudited pro forma and pro
forma combined financial statements are based upon available information and
certain assumptions and estimates described in the Notes to Unaudited Pro Forma
and Pro Forma Combined Financial Statements. A final determination of required
purchase accounting adjustments, including the allocation of the purchase price
to the assets acquired and liabilities assumed based on their respective fair
values, has not yet been made. Accordingly, the purchase accounting adjustments
reflected in the pro forma information are preliminary and have been made solely
for purposes of developing such information. The Company's management believes,
however, that the pro forma adjustments and the underlying assumptions and
estimates reasonably present the significant effects of the transactions
reflected thereby and that any subsequent changes in the underlying assumptions
and estimates (other than changes affected by the matters described under
"Summary -- Recent Operating Information") will not materially affect the pro
forma and pro forma combined financial statements presented herein. The pro
forma and pro forma combined financial statements do not purport to represent
what the Company's financial position or results of operations actually would
have been had the Recent Transactions, the Offerings and the purchase of the
Noble Rigs occurred on the dates indicated or to project the Company's financial
position or results of operations for any future date or period. Furthermore,
the unaudited pro forma and pro forma combined financial statements do not
reflect changes that may occur as the result of post-combination activities and
other matters.
The unaudited pro forma and pro forma combined financial statements and the
notes thereto should be read in conjunction with the historical financial
statements of the Company, including the notes thereto, the historical financial
statements of Forasol, including the notes thereto, and the historical financial
statements of Quitral-Co, including the notes thereto, all of which are
incorporated by reference in the accompanying Prospectus.
The pro forma and pro forma combined financial information presented in
this Prospectus Supplement reflects substantial dilution of earnings per share
as a result of including the 1996 operating results of Forasol and the Noble
Rigs. The Company believes, however, that such information is not indicative of
the operating performance expected to be achieved by the Company in 1997 and
future years. See "Summary -- Recent Operating Information."
S-16
<PAGE>
UNAUDITED PRO FORMA AND PRO FORMA COMBINED
BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
PRIDE FORASOL PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS FORMA ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........ $ 10,310 $ 16,646 $ 83,750(O) $ 3,619 $ 291,600(V) $ 44,619
25,150(H) 19,400(X)
(128,500)(I) (270,000)(Z)
(3,737)(R)
Short-term investments........... 460 -- 460 460
Trade receivables, net........... 99,531 51,799 151,330 151,330
Parts and supplies............... 27,642 -- (3,000)(O) 24,642 24,642
Deferred income taxes............ 1,778 1,221 2,999 2,999
Other current assets............. 16,686 12,487 29,173 29,173
---------- ---------- -------- ---------
Total current assets..... 156,407 82,153 212,223 253,223
---------- ---------- -------- ---------
PROPERTY AND EQUIPMENT, NET.......... 375,249 237,148 (42,850)(O) 695,571 270,000(Z) 965,571
126,024(I)
OTHER ASSETS
Investments in and advances to
affiliates..................... -- 9,406 9,406 9,406
Deferred income taxes............ -- 7,346 7,346 7,346
Goodwill and other intangibles,
net............................ 3,134 -- 3,134 3,134
Other............................ 7,272 5,271 550(H) 12,182 8,400(V) 20,582
(911)(R)
---------- ---------- -------- ---------
Total other assets....... 10,406 22,023 32,068 40,468
---------- ---------- -------- ---------
$542,062 $341,324 $939,862 $1,259,262
========== ========== ======== =========
CURRENT LIABILITIES
Accounts payable................. $ 32,488 $ 26,954 $ 59,442 $ 59,442
Accrued expenses................. 25,215 33,069 58,284 58,284
Current portion of long-term
debt........................... 35,982 26,108 $ (2,700)(H) 58,190 $ (25,000)(V) 23,190
(1,200)(O) (10,000)(X)
Current portion of long-term
lease obligations.............. -- 4,850 4,850 4,850
---------- ---------- -------- ---------
Total current
liabilities............ 93,685 90,981 180,766 145,766
---------- ---------- -------- ---------
OTHER LONG-TERM LIABILITIES.......... 12,134 10,107 22,241 22,241
LONG-TERM DEBT, NET OF CURRENT
PORTION............................ 106,508 22,115 28,400(H) 154,323 325,000(V) 439,323
(2,700)(O) (40,000)(X)
LONG-TERM LEASE OBLIGATIONS, NET OF
CURRENT PORTION.................... -- 30,663 30,663 30,663
CONVERTIBLE SUBORDINATED
DEBENTURES......................... 80,500 -- (28,000)(R) 52,500 52,500
DEFERRED INCOME TAXES................ 47,438 3,014 (12,000)(O) 58,952 58,952
20,500(I)
MINORITY INTEREST.................... -- 2,368 2,368 2,368
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock..................... 1 94 (94)(I) 1 1
Paid-in capital.................. 143,581 140,688 (140,688)(I) 343,981 69,400(X) 413,381
172,400(I)
28,000(R)
Treasury stock, at cost.......... (191) -- (191) (191)
Retained earnings................ 58,406 41,435 53,800(O) 94,258 94,258
(54,735)(I)
(4,648)(R)
Cumulative translation
adjustment..................... -- (141) 141(I) -- --
---------- ---------- -------- ---------
Total shareholders'
equity................. 201,797 182,076 438,049 507,449
---------- ---------- -------- ---------
$542,062 $341,324 $939,862 $1,259,262
========== ========== ======== =========
</TABLE>
The accompanying notes are an integral part of the pro forma and pro forma
combined financial statements.
S-17
<PAGE>
UNAUDITED PRO FORMA AND PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOBLE
PRIDE FORASOL PRO RIGS
HISTORICAL HISTORICAL ADJUSTMENTS FORMA HISTORICAL ADJUSTMENTS
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $407,174 $199,471 $ 63,210(A) $552,713 $ 68,747
---------- ---------- -------- ----------
(117,142)(P)
COSTS AND EXPENSES
Operating costs.................. 292,599 161,897 49,341(A) 414,882 38,898
(88,955)(P)
Depreciation and amortization.... 29,065 23,945 3,797(A) 54,220 18,160 $ (1,960)(AA)
80(B)
2,800(J)
(5,467)(P)
Selling, general and
administrative................. 45,368 18,490 3,831(A) 54,048 6,863 (5,363)(BB)
(13,641)(P)
---------- ---------- -------- ----------
Total costs and
expenses............... 367,032 204,332 523,150 63,921
---------- ---------- -------- ----------
EARNINGS (LOSS) FROM OPERATIONS...... 40,142 (4,861) 29,563 4,826
==========
OTHER INCOME (EXPENSE)
Other income (expense)........... 1,902 1,148 (519)(A) 2,227
(304)(P)
Interest income.................. 2,410 2,310 322(A) 4,167
(875)(C)
Interest expense................. (13,635) (10,048) (394)(A) (24,802) (25,534)(W)
(450)(D)
(1,920)(E)
(2,010)(K)
1,425(L)
380(P)
1,850(S)
---------- ---------- --------
Total other expense,
net.................... (9,323) (6,590) (18,408)
---------- ---------- --------
EARNINGS (LOSS) BEFORE MINORITY
INTEREST AND INCOME TAXES.......... 30,819 (11,451) 11,155
MINORITY INTEREST.................... -- (825) (825)
---------- ---------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES.............................. 30,819 (10,626) 11,980
INCOME TAX PROVISION................. 8,091 354 360(F) 4,356 (4,830)(CC)
(1,700)(M)
(3,415)(Q)
666(T)
---------- ---------- --------
NET EARNINGS (LOSS).................. $ 22,728 $(10,980) $ 7,624
========== ========== ========
NET EARNINGS (LOSS) PER SHARE
Primary.......................... $ .81 $ .18
========== ========
Fully diluted.................... $ .75
==========
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING
Primary.......................... 28,198 11,099(N) 41,582 3,088(Y)
========== ========
2,285(U)
Fully diluted.................... 34,719 465(G) 46,283
========== ========
11,099(N)
</TABLE>
PRO
FORMA
COMBINED
REVENUES............................. $621,460
--------
COSTS AND EXPENSES
Operating costs.................. 453,780
Depreciation and amortization.... 70,420
Selling, general and
administrative................. 55,548
--------
Total costs and
expenses............... 579,748
--------
EARNINGS (LOSS) FROM OPERATIONS...... 41,712
OTHER INCOME (EXPENSE)
Other income (expense)........... 2,227
Interest income.................. 4,167
Interest expense................. (50,336)
--------
Total other expense,
net.................... (43,942)
--------
EARNINGS (LOSS) BEFORE MINORITY
INTEREST AND INCOME TAXES.......... (2,230)
MINORITY INTEREST.................... (825)
--------
EARNINGS (LOSS) BEFORE INCOME
TAXES.............................. (1,405)
INCOME TAX PROVISION................. (474)
--------
NET EARNINGS (LOSS).................. $ (931)
========
NET EARNINGS (LOSS) PER SHARE
Primary.......................... $ (.02)
========
Fully diluted....................
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING
Primary.......................... 44,670
========
Fully diluted....................
The accompanying notes are an integral part of the pro forma and pro forma
combined financial statements.
S-18
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS
1. BACKGROUND
In April 1996, the Company acquired all of the outstanding capital stock of
Quitral-Co for aggregate consideration of $140.0 million, consisting of $110.0
million in cash and a note payable to the sellers for $30.0 million. The note
payable bears interest at a variable rate of LIBOR plus 2% per annum payable
quarterly. Payments of principal are being made in 30 monthly installments. Of
the cash portion of the purchase price, $70.0 million was funded from the
Company's working capital and $40.0 million from the net proceeds from two
long-term financing arrangements with three lending institutions. Borrowings
under these arrangements, which are collateralized by substantially all of the
Company's domestic offshore platform rig fleet and ancillary equipment, bear
interest at annual rates ranging from 7.95% to 8.50% and are repayable in
monthly installments of principal and interest over a period of five to six
years.
In January 1996, the Company completed the public sale of $80.5 million
principal amount of its convertible subordinated debentures, which resulted in
net proceeds to the Company of approximately $77.6 million. Such net proceeds
were used to fund various capital projects, including the acquisition of
Quitral-Co. During the first quarter of 1997, $28.0 million principal amount of
the convertible subordinated debentures was converted into 2.3 million shares of
Common Stock.
In February 1997, the Company sold substantially all of the assets used in
its U.S. land-based well servicing operations for $135.7 million in cash. After
federal and state income taxes of approximately $44.3 million, repayment of
approximately $3.9 million of indebtedness collateralized by certain of the
assets sold and prepayment of approximately $3.7 million of lease payments on
transferred assets subject to operating leases, the net proceeds to the Company
were approximately $83.8 million.
In March 1997, the Company completed the acquisition of Forasol for $113.2
million in cash and 11.1 million shares of Common Stock with a value of $172.4
million. Of the cash portion of the purchase price, $87.5 million was funded out
of working capital, including the net proceeds from the sale of the Company's
U.S. land-based well servicing operations, and $25.7 million was funded out of
net borrowings under the Credit Facility, which mature in March 2002 and bear
interest at a variable rate, currently 7.44%, based on either the prime rate or
LIBOR.
In February 1997, the Company agreed to purchase the Noble Rigs for $265.0
million in cash. The transaction is subject to certain conditions, including
completion by the Company of satisfactory financing arrangements. See "The
Noble Rigs." The Company expects to finance the purchase with a portion of the
proceeds from the Offerings.
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma and pro forma combined balance sheets
have been prepared assuming that the Recent Transactions, the Offerings and the
purchase of the Noble Rigs were consummated as of December 31, 1996. The
accompanying unaudited pro forma and pro forma combined statements of operations
have been prepared assuming that such transactions were consummated as of
January 1, 1996.
Net earnings per share have been computed based on the weighted average
number of common shares and common share equivalents outstanding on a pro forma
and pro forma combined basis during the year ended December 31, 1996. Common
share equivalents include the number of shares issuable upon the exercise of
stock options and warrants, less the number of shares that could have been
repurchased with the exercise proceeds, using the treasury stock method. Fully
diluted net earnings per share have not been presented on a pro forma or pro
forma combined basis as the calculation is anti-dilutive.
S-19
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. MANAGEMENT ASSUMPTIONS
The unaudited pro forma and pro forma combined financial statements reflect
the following pro forma adjustments related to the acquisition of Quitral-Co and
Forasol and the related financing transactions, the sale of the Company's U.S.
land-based well servicing operations, the conversion of $28.0 million principal
amount of the Company's convertible subordinated debentures, the Offerings and
the purchase of the Noble Rigs:
QUITRAL-CO ACQUISITION
(A) Operating results for Quitral-Co for the period in 1996 prior to the
acquisition by the Company, based on actual results for the period from January
1, 1996 through March 31, 1996 and estimated results for the month of April
1996. Prior to the acquisition by the Company in April 1996, the books and
records of Quitral-Co were maintained in constant Argentine pesos in accordance
with Argentine GAAP, which differs in certain respects from U.S. GAAP. Financial
information in U.S. dollars prepared in accordance with U.S. GAAP has been
prepared through March 31, 1996. However, such information is not available for
the period from March 31, 1996 through April 30, 1996, the date the acquisition
by the Company was consummated. Accordingly, management has estimated such
results for purposes of preparing the accompanying pro forma financial
information and believes that actual results would not be materially different.
(B) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase cost to the assets acquired and
application of the Company's depreciation policies to such assets. Based on a
preliminary determination of the fair values of the assets and liabilities
acquired, approximately $161.4 million was allocated to property and equipment.
The pro forma adjustment to depreciation expense was based upon an estimated
salvage value of 10% and an estimated average remaining useful life of 12.5
years for the Quitral-Co assets.
(C) Reduction in historical interest income as a result of utilization of
$70.0 million in cash for the acquisition of Quitral-Co. Such cash amount
constituted a portion of the net proceeds from the issuance by the Company in
January 1996 of $80.5 million principal amount of the Company's convertible
subordinated debentures. Therefore, historical interest income on such cash
amount for the three months prior to the acquisition of Quitral-Co has been
reduced, based upon an approximate annual interest rate on investments during
the period of 5.0%.
(D) Increase in interest expense due to issuance and sale of $80.5 million
principal amount of the Company's convertible subordinated debentures. The pro
forma adjustment to interest expense relating to these financing transactions is
composed of the following:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS)
Interest on convertible subordinated
debentures......................... $ 425
Amortization of deferred financing
costs.............................. 25
------
$ 450
======
S-20
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(E) Increase in interest expense resulting from $40.0 million of net
borrowings pursuant to collateralized term loans entered into in connection with
the acquisition of Quitral-Co and the addition of a $30.0 million note payable
to the sellers. The pro forma adjustment to interest expense relating to these
financing transactions is composed of the following:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS)
Collateralized term loans............ $ 1,170
Note payable to sellers.............. 750
--------
$ 1,920
========
The pro forma adjustment to interest expense relating to these financing
transactions is based upon interest rates of 8.75% per annum for the
collateralized term loans and 7.50% per annum for the note payable to sellers,
which were the approximate actual rates in effect during 1996 for each of these
loans. For each .25% change in the actual interest rates incurred on the
collateralized term loans and the note payable to sellers, pro forma net
earnings for the year ended December 31, 1996 would change by approximately
$64,000 and $48,000, respectively.
(F) Income tax effects of the pro forma adjustments included herein, based
on a combined U.S. federal and state income tax rate of 36%, an Argentine income
tax rate of 33% and a Venezuelan tax rate of 34%. Such rates approximate the
statutory rates in effect for the period.
(G) Increase in weighted average common shares and equivalents outstanding
for fully diluted earnings per share calculation purposes, due to issuance by
the Company of $80.5 million principal amount of its convertible subordinated
debentures, which are convertible at a price of $12.25 per share.
FORASOL ACQUISITION
(H) Receipt of aggregate net proceeds of $25.7 million from the Credit
Facility, less $550,000 of debt issuance costs.
(I) Acquisition of Forasol for aggregate consideration of $285.6 million,
consisting of $113.2 million cash and 11.1 million shares of Common Stock valued
at $172.4 million, based on the approximate market value of the Common Stock
prior to the date of the letter agreement of $15.50 per share. In addition,
management estimates that the Company will ultimately incur legal, accounting
and other transaction-related costs, including Forasol closing costs, of
approximately $2.0 million. Management expects to incur approximately $13.3
million of costs in connection with the combination of the business units of
Forasol with the Company's existing operations and the cost to wind up Forasol's
affairs and liquidate, which amount is expected to be charged to expense in the
first quarter of 1997. Based on a preliminary determination of the fair values
of the assets and liabilities acquired, approximately $363.2 million of the
total purchase cost was allocated to property and equipment. Additional
adjustments to reflect the acquisition include elimination of the historical
capital accounts of Forasol and an increase in the deferred income tax liability
by approximately $20.5 million to provide for temporary differences resulting
from the allocation of the pro forma purchase cost at the statutory income tax
rates in the appropriate taxing jurisdictions.
(J) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase cost to the assets acquired and adoption
by Forasol of the Company's depreciation policies, based upon an estimated
salvage value of 10% and an estimated average remaining useful life of 12.5
years for the Forasol property and equipment.
(K) Increase in interest expense resulting from $25.7 million of net
borrowings under the Credit Facility. The pro forma adjustment to interest
expense is based on the variable rate of the Credit Facility,
S-21
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
currently 7.44%. For each .25% change in the current variable rate, pro forma
net earnings for the year ended December 31, 1996 would change by approximately
$41,000.
(L) Reduction in interest expense resulting from use of a portion of the
net proceeds from Forasol's public offering of common shares in May 1996 to
repay indebtedness and liquidate capital lease obligations of Forasol. The
principal amounts extinguished and the related interest savings are as follows:
AMOUNT INTEREST
EXTINGUISHED SAVINGS RATE RANGE
(IN THOUSANDS)
Credit Facility...................... $20,840 $ 585 7.5%
Current portion of long-term debt.... 8,650 240 7.1% - 7.7%
Current portion of long-term lease
obligations........................ 3,210 100 6.4% - 8.6%
Long-term debt....................... 8,860 250 7.1% - 7.7%
Long-term lease obligations.......... 8,040 250 6.4% - 8.6%
------------- -------
Total........................... $49,600 $ 1,425
============= =======
Forasol operates in tax free jurisdictions (primarily Angola) and
approximately $1.3 million of the $1.4 million in pro forma annual savings
result from such tax jurisdictions.
(M) Income tax effects of the pro forma adjustments included herein, based
on a combined U.S. federal and state income tax rate of 36% and a French income
tax rate of 37%. Such rates approximate the statutory rates in effect for the
period.
(N) Estimated increase in weighted average common shares and equivalents
outstanding due to issuance of 11.1 million shares of Common Stock in connection
with the acquisition of Forasol.
SALE OF U.S. LAND-BASED WELL SERVICING OPERATIONS
(O) Receipt of net proceeds from sale of U.S. land-based well servicing
operations, net of $44.3 million of estimated federal and state income taxes,
repayment of approximately $3.9 million of indebtedness collateralized by
certain of the assets sold and prepayment of approximately $3.7 million of lease
payments on transferred assets subject to operating leases. Also, elimination of
the assets to be sold and reflection of an estimated gain of approximately $53.8
million on the sale.
(P) Elimination of the results of operations related to the assets of the
Company's U.S. land-based well servicing business to be sold.
(Q) Adjustment of income tax expense as follows:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS)
Elimination of actual income tax
expense incurred by U.S. land-based
operations......................... $ (371)
Income tax effects of pro forma
adjustments based on a combined
U.S. federal and state income tax
rate of 36%, which rate
approximates the combined statutory
rate in effect for the period...... (3,044)
------------
$(3,415)
============
S-22
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONVERSION OF CONVERTIBLE SUBORDINATED DEBENTURES
(R) To induce conversion of $28.0 million of convertible subordinated
debentures for 2,285,712 shares of Common Stock. Conversion costs, including
$3.7 million in cash and $.9 million of deferred financing costs, will be
recorded as a charge to income in the first quarter of 1997.
(S) Decrease in interest expense due to the conversion.
(T) Increase in federal and state income taxes as a result of the
conversion and based on a combined U.S. federal and state income tax rate of
36%.
(U) Increase of 2,285,712 primary shares of Common Stock outstanding as a
result of the conversion.
THE OFFERINGS
(V) Receipt of the assumed proceeds from the Notes Offering, net of
estimated issuance costs of $8.4 million, and application of a portion of the
proceeds to repay $25.0 million of indebtedness.
(W) Increased interest expense on the Notes, including amortization of
issuance costs, based on an assumed interest rate of 9 3/8%, less interest
expense on debt to be retired out of the net proceeds from the Offerings, as
follows:
AMOUNT
(IN THOUSANDS)
Interest on the Notes................ $30,469
Amortization of issuance costs....... 840
Interest on debt to be retired
Credit Facility................. (2,975)
Other short-term debt........... (2,800)
---------------
$25,534
===============
(X) Receipt of the assumed proceeds from the Common Stock Offering of
$69.4 million, net of estimated issuance costs of $3.7 million, and application
of a portion of the proceeds to repay $50.0 million of indebtedness.
(Y) Increased shares outstanding as a result of the Common Stock Offering.
For purposes of the pro forma combined statement of operations, shares are
assumed to be outstanding only to the extent that proceeds are applied to reduce
debt as follows:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS,
EXCEPT
PER SHARE AMOUNT)
Debt repaid.......................... $50,000
Assumed offering price per share, net
of estimated issuance costs.......... $ 16.19
Assumed shares issued................ 3,088
NOBLE RIG PURCHASE
(Z) Purchase of the Noble Rigs for $265.0 million plus estimated
acquisition costs of $5.0 million.
(AA) Adjustment to depreciation expense resulting from the preliminary
allocation of purchase cost to the rigs acquired and application of the
Company's depreciation policies for such rigs. The pro forma combined adjustment
to depreciation expense was based on an estimated average salvage value of 10%
and an estimated average remaining useful life of 15 years.
(BB) To reduce selling, general and administrative expenses for corporate
allocations from the seller of the Noble Rigs, which costs will not be incurred
by the Company.
(CC) Income tax benefit as a result of the pro forma combined adjustments.
S-23
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected consolidated financial information as of December
31, 1995 and 1996, 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 incorporated by reference in the accompanying
Prospectus. 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 have
previously been included in the Company's reports under the Exchange Act that
are not incorporated by reference herein or in the accompanying Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
(DOLLARS 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)............... 5 (135) (305) 638 1,902
Interest income...................... 811 649 618 740 2,410
Interest expense..................... (3) (10) (207) (6,276) (13,635)
--------- --------- --------- --------- ---------
Earnings (loss) before income
taxes.............................. (1,359) 3,319 8,134 22,423 30,819
Income tax provision (benefit)(1).... (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
OTHER DATA:
EBITDA(2)............................ $ 3,482 $ 9,087 $ 17,273 $ 44,616 $ 71,109
Capital expenditures................. 4,094 12,123 59,171 40,636 61,711
Ratio of EBITDA(2) to interest
expense............................ 1,160.7x 908.7x 83.4x 7.1x 5.2x
Ratio of earnings to fixed
charges(3)......................... -- 5.8x 6.2x 4.0x 2.7x
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) Income tax provision (benefit) and 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.
(2) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net income
as an indicator of the Company's operating performance or as an alternative
to cash flows as a better measure of liquidity.
(3) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest expense
plus capitalized interest and the portion of operating lease rental expense
that represents the interest factor). For the year ended December 31, 1992,
earnings were inadequate to cover fixed charges by $1,359,000.
S-24
<PAGE>
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, incorporated by
reference in the accompanying Prospectus. The following information contains
forward-looking statements. For a discussion of certain limitations inherent in
such statements, see "Forward-Looking Statements."
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 United States 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 United States. 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 mid-1993, the Company commenced operations in Latin America with
the acquisition of businesses operating 23 land-based rigs in
Argentina and 13 land-based rigs in Venezuela.
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 four rigs that were retired. One additional rig is
currently under construction.
o In January 1995, the Company commenced operating two 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 October 1995, the Company acquired six land-based drilling rigs in
Colombia through the acquisition of Marlin Colombia Drilling Co. Inc.
o In April 1996, the Company acquired Quitral-Co from Perez Companc S.A.
and other shareholders. Quitral-Co operated 23 land-based drilling and
57 land-based workover rigs in Argentina and seven land-based drilling
and 23 land-based 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 and by acquiring four rigs from an Argentine competitor.
o In October 1996, the Company acquired Ingeser de Colombia, S.A., which
operated seven land-based drilling rigs and six land-based 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 contractor.
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.
S-25
<PAGE>
o In February 1997, the Company agreed to purchase 12 mat-supported
jackup rigs and the hull of an additional jackup rig from Noble. 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, three lake barge rigs, one swamp barge rig and 29 land-based
rigs operating in various locations in Latin America, Europe, the
Middle East, West Africa and Asia. The Company recently acquired an
additional tender-assisted rig, which is currently located in West
Africa and being marketed for several projects.
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
(DOLLARS IN THOUSANDS)
<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 $143.6
million, or 54%, as compared to the corresponding period in 1995. Of this
increase, $131.7 million 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 $4.0 million,
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 $7.9 million, 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 $105.4 million, or 56%, as compared to the corresponding period in
1995. Of this increase, $94.0 million was a result of expansion of the Company's
international operations and $3.8 million 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 $2.4 million reduction of workers'
compensation expense recorded in the fourth quarter of 1996. Operating costs
related to domestic offshore operations increased $7.6 million, 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 $12.4 million, 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 assets.
S-26
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1996 increased $13.0 million, 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 $12.8 million, or 47%, as compared to the
corresponding period in 1995. Of this increase, $12.7 million 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.
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 $2.4 million 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 $7.4 million 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 $1.9 million 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 $2.2 million
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 $81.3
million, or 45%, as compared to the year ended December 31, 1994. Of this
increase, $37.9 million 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 $26.2 million of the increase, as those operations
were included for a full year in 1995. Revenues from the Company's domestic
land-based operations increased $17.3 million, due primarily to the addition of
X-Pert in March 1995.
OPERATING COSTS. Operating costs for the year ended December 31, 1995
increased $47.6 million, or 34%, as compared to the year ended December 31,
1994. Of this increase, $22.0 million was attributable to the Company's
international operations, due to expansion of those operations, as discussed
above, $17.3 million was attributable to a full year of operations for the
Company's offshore operations, and $8.3 million 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 $7.1 million, 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.
S-27
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1995 increased $7.3 million, 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 $27.3 million. Of this amount, $12.6
million was generated from international operations, $6.8 million was generated
from domestic offshore operations and $7.9 million was generated from domestic
land-based operations. During 1994, international operations generated earnings
from operations of $3.5 million, domestic offshore operations generated earnings
from operations of $3.3 million, and domestic land-based operations generated
earnings from operations of $1.2 million.
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 $6.1 million from 1994, as a
result of borrowings related to the project financing of two lake 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 $3.0 million 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 $285.6 million, consisting of $113.2 million in cash
and 11.1 million shares of Common Stock valued at $172.4 million. 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, three lake barge rigs, one swamp barge rig 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 incorporated by
reference in the accompanying Prospectus.
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 $28.0 million, or
16%, as compared to the corresponding period in 1995. This increase was
primarily attributable to a $15.8 million increase in
S-28
<PAGE>
revenues from jackup rigs and an $8.9 million 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, 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 $67.5 million for 1996 compared to
$67.4 million for 1995.
The cost of operations for the year ended December 31, 1996 increased $34.4
million, 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 $17.4 million 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 $8.4
million. This increase was primarily due to the Argentine land-based operations
and to a turnkey drilling 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 449 days at an average day rate
of approximately $37,900. 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. In addition, 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 $62.7 million and $31.3 million 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 $80.5 million principal amount of convertible subordinated debentures
and 3,450,000 shares of Common Stock. Proceeds from these transactions, which
aggregated approximately $123.2 million, together with borrowings under existing
credit facilities, sale-leaseback arrangements and the Company's internally
generated funds, were used primarily to pay the $110.0 million 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 barge rigs operating on
Lake Maracaibo, Venezuela were financed in 1994 on a long-term project basis
with limited recourse to the Company.
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 $135.7 million in cash. The Company's net proceeds from
the sale, after payment of taxes, repayment of indebtedness
collateralized by certain of the assets sold and prepayment of
terminated operating leases, were approximately $83.8 million.
o In March 1997, the Company completed the acquisition of Forasol for
$113.2 million in cash and 11.1 million 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 $25.7 million
under the Credit Facility described below.
o In February 1997, the Company agreed to purchase the Noble Rigs for
$265.0 million in cash. In addition, the Company expects to spend at
least $20 million to upgrade and equip the two Noble Rigs awaiting
refurbishment. The Company expects to finance the purchase of the
Noble Rigs from the proceeds from the Offerings.
S-29
<PAGE>
In March 1997, the Company entered into the Credit Facility with a group of
banks which provides for availability of up to $100.0 million (including $25.0
million for letters of credit). 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 $40.0 million ("Additional Collateral"), the
credit line will be reduced to $75.0 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, the stock of the Company's domestic subsidiaries and
certain other assets. 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, unless extended, 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 Notes
Offering and the purchase of the Noble Rigs will result in the breach of certain
of these covenants as currently structured. To complete the Notes Offering and
finance the purchase, therefore, the Company will be required to obtain waivers
from the lenders, amend the Credit Facility and obtain releases of domestic
subsidiary guarantees, or repay any amounts outstanding under the Credit
Facility.
In March 1997, the Company borrowed $40.0 million under the Credit
Facility, of which $14.3 million was used to repay amounts outstanding under the
Company's previous credit facility and $25.7 million 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 Notes Offering and the Common Stock Offering are being made under a
"shelf" registration statement under the Securities Act pursuant to which the
Company may issue up to $500.0 million of securities consisting of any
combination of debt securities and Common Stock. As part of their approval of
the Forasol acquisition, shareholders of the Company approved an increase in the
authorized number of shares of Common Stock from 40 million to 100 million.
Management believes that the cash generated from the Company's operations,
together with the net proceeds from the Offerings and borrowings under the
Credit Facility or any replacement thereof, 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 and replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. 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.
S-30
<PAGE>
BUSINESS
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 several international and offshore businesses, including
Quitral-Co and Forasol, and divested its domestic land-based well servicing
operations, thereby transforming 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, eight tender-assisted
rigs, three jackup rigs, five floating lake barge rigs, one posted swamp barge
rig, 22 offshore platform rigs, 76 land-based rigs and 162 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. With the closing of the pending purchase of the Noble
Rigs, the Company will add 12 mat-supported jackup rigs and the hull of an
additional jackup rig to its offshore fleet. See "The Noble Rigs."
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
three jackup rigs, one tender-assisted rig, five lake barge rigs, 12 land-based
drilling rigs and 33 land-based workover rigs. In Colombia, the Company operates
13 land-based drilling rigs and six land-based workover rigs. In the western and
northern regions of Africa and in the Middle East, the Company operates two
semisubmersible rigs, six 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 22 self-erecting
platform rigs and is constructing one additional rig, 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. The purchase of the Noble Rigs will position the
Company as the second largest operator in the Gulf of Mexico of mat-supported
jackup rigs capable of operating in water depths of 200 feet or greater.
BUSINESS STRATEGY
The Company's strategy is focused on achieving revenue and earnings growth
through:
o Establishing and maintaining leading market positions to maximize
operating performance.
o Diversifying operations by asset class and geographic region.
o Developing and maintaining long-term relationships with major oil and
gas companies, including state-owned companies, by providing a full
range of drilling expertise and technology.
o Acquiring businesses and assets in international onshore and offshore
markets and domestic offshore markets where significant consolidation
savings and economies of scale can be achieved.
o Acquiring or constructing offshore and deepwater rigs, primarily
supported by long-term contracts.
Implementation of this strategy, including the Recent Transactions, has
repositioned the Company to take advantage of the benefits resulting from
operating a balanced fleet, which the pending purchase of the Noble Rigs is
expected to enhance. These benefits include more stable cash flows produced by
the Company's international and offshore rigs under term contracts, improved
cash flow and higher margins generally produced by offshore rigs, reduced
exposure to downturns in a single market and increased exposure to higher margin
international and offshore drilling and workover markets. To reflect more
accurately the nature and scope of the Company's current operations and business
strategy, the Board of Directors of the Company has approved a proposal to
change the name of the Company to Pride International, Inc., which is being
submitted to the Company's shareholders for their approval at the Company's
Annual Meeting of Shareholders to be held on May 22, 1997.
S-31
<PAGE>
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; three jackup rigs, one
tender-assisted rig, five lake barge 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 Latin America.
ARGENTINA. In Argentina, the Company currently operates 145 land-based
rigs. 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 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 by private-sector operators.
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 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 land-based drilling rigs and
six land-based 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 new 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 $10 million, after which the rig will be mobilized to Brazil in
May 1997 to work under a four-year contract 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 owns six tender-assisted rigs in Africa and the Middle East,
five of which are currently in West Africa, a highly consolidated market with
only three competitors operating seven tenders. The ALLIGATOR and BARRACUDA are
currently contracted through the end of 1997, with two six-months options.
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<PAGE>
Through a joint venture, the Company owns a 12.5% interest in the self-erecting
tender AL BARAKA I. In addition to its ownership interest, the Company also
manages the rig for an operating fee. The CORMORANT is currently under contract
through October 1997, with a six-month option. The Company has recently acquired
the tender-assisted rig TENAGA, which is located in Cameroon and being marketed
for several projects. 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, which 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 22 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.
OTHER
The Company owns a tender-assisted rig, the ILE DE SEINE, in Southeast
Asia, two land-based drilling rigs in Pakistan, and five land-based drilling
rigs and two land-based workover rigs in Europe. In addition, the Company has
two land-based workover rigs in Russia, both of which are currently stacked.
S-33
<PAGE>
RIG FLEET
OFFSHORE RIGS
The following table sets forth, as of April 1, 1997, certain information
concerning the offshore rig fleet operated by the Company:
OFFSHORE RIGS
<TABLE>
<CAPTION>
YEAR WATER DRILLING
BUILT OR DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN REBUILT RATING RATING LOCATION
(FEET) (FEET)
<S> <C> <C> <C> <C> <C>
SEMISUBMERSIBLE RIGS -- 2
Nymphea Third generation 1987 1,500 25,000 Cabinda
South Seas Driller Second generation 1977 1,000 20,000 Nigeria
TENDER-ASSISTED RIGS -- 8
Alligator Self-erecting barge 1992 330 20,000 Angola
Barracuda Self-erecting barge 1992 330 20,000 Angola
Cormorant Self-erecting ship-shaped 1996 300 16,400 Angola
Al Baraka I Self-erecting barge 1994 650 20,000 Cabinda
Ile de Seine Self-erecting barge 1990 450 16,000 Malaysia
Ile de la Martinique Ship-shaped 1995 400 16,000 UAE
GP-18 Tender barge 1985 150 20,000 Venezuela
Tenaga Tender barge 1978 600 20,000 Cameroon
JACKUP RIGS -- 15*
Ile du Levant Independent leg cantilever 1991 270 20,000 Venezuela
GP-19 Independent leg cantilever 1987 150 20,000 Venezuela
GP-20 Independent leg cantilever 1987 200 20,000 Venezuela
Marvin Winters* Mat-supported cantilever 1982 250 20,000 Gulf of Mexico
Jack Clark* Mat-supported slot 1996 250 20,000 Gulf of Mexico
Jim Bawcom* Mat-supported slot 1981 250 25,000 Gulf of Mexico
Cliff Matthews* Mat-supported slot 1976 250 20,000 Gulf of Mexico
W.T. Johnson* Mat-supported cantilever 1982 200 20,000 Gulf of Mexico
Duke Hinds* Mat-supported cantilever 1990 200 25,000 Gulf of Mexico
Frank Lamaison* Mat-supported cantilever 1982 200 20,000 Gulf of Mexico
Red McCarty* Mat-supported cantilever 1982 200 25,000 Gulf of Mexico
Mac McCoy* Mat-supported cantilever 1982 200 20,000 Gulf of Mexico
NN-1* Mat-supported slot 1990 45 20,000 Nigeria
Frank Reiger** Mat-supported slot 1975 250 20,000 Gulf of Mexico
Cecil Forbes* Mat-supported slot 1997 300 20,000 Gulf of Mexico
BARGE RIGS -- 6
Pride I Floating cantilever 1995 150 20,000 Venezuela
Pride II Floating cantilever 1995 150 20,000 Venezuela
Rig 50 Floating cantilever 1992 150 20,000 Venezuela
Rig 51 Floating cantilever 1992 150 20,000 Venezuela
GP-10 Floating cantilever 1967 120 20,000 Venezuela
Bintang Kalimantan Posted swamp 1995 NA 15,000 Nigeria
PLATFORM RIGS -- 22***
Rig 11 Light mechanical 1993 NA 10,000 Gulf of Mexico
Rig 14 Light mechanical 1994 NA 10,000 Gulf of Mexico
Rig 15 Light mechanical 1994 NA 10,000 Gulf of Mexico
Rig 30 Intermediate mechanical 1986 NA 15,000 Gulf of Mexico
Rig 80 Intermediate mechanical 1987 NA 15,000 Gulf of Mexico
Rig 100 Intermediate mechanical 1990 NA 15,000 Gulf of Mexico
Rig 110 Intermediate mechanical 1990 NA 15,000 Gulf of Mexico
Rig 130 Intermediate mechanical 1991 NA 15,000 Gulf of Mexico
Rig 170 Intermediate mechanical 1991 NA 15,000 Gulf of Mexico
Rig 200 Intermediate mechanical 1993 NA 15,000 Gulf of Mexico
Rig 210 Intermediate mechanical 1996 NA 15,000 Gulf of Mexico
Rig 220 Intermediate mechanical 1995 NA 15,000 Gulf of Mexico
Rig 650E Intermediate electric 1994 NA 15,000 Gulf of Mexico
Rig 651E Intermediate electric 1995 NA 15,000 Gulf of Mexico
Rig 653E Intermediate electric 1995 NA 15,000 Gulf of Mexico
Rig 750E Heavy electric 1992 NA 16,500 Gulf of Mexico
Rig 751E Heavy electric 1995 NA 16,500 Gulf of Mexico
Rig 951 Heavy mechanical 1995 NA 18,000 Gulf of Mexico
Rig 952 Heavy mechanical 1995 NA 18,000 Gulf of Mexico
Rig 1002E Heavy electric 1996 NA 20,000 Gulf of Mexico
Rig 1003E Heavy electric 1996 NA 20,000 Gulf of Mexico
Rig 1501E Heavy electric 1996 NA 25,000 Gulf of Mexico
</TABLE>
RIG NAME STATUS
SEMISUBMERSIBLE RIGS -- 2
Nymphea Working
South Seas Driller Working
TENDER-ASSISTED RIGS -- 8
Alligator Working
Barracuda Working
Cormorant Working
Al Baraka I Contracted
Ile de Seine Contracted
Ile de la Martinique Stacked
GP-18 Working
Tenaga Available
JACKUP RIGS -- 15*
Ile du Levant Working
GP-19 Working
GP-20 Working
Marvin Winters* Working
Jack Clark* Working
Jim Bawcom* Working
Cliff Matthews* Working
W.T. Johnson* Working
Duke Hinds* Working
Frank Lamaison* Working
Red McCarty* Working
Mac McCoy* Working
NN-1* Working
Frank Reiger** Shipyard
Cecil Forbes* Stacked
BARGE RIGS -- 6
Pride I Working
Pride II Working
Rig 50 Working
Rig 51 Working
GP-10 Working
Bintang Kalimantan Working
PLATFORM RIGS -- 22***
Rig 11 Available
Rig 14 Working
Rig 15 Available
Rig 30 Stacked
Rig 80 Stacked
Rig 100 Available
Rig 110 Working
Rig 130 Available
Rig 170 Working
Rig 200 Available
Rig 210 Working
Rig 220 Working
Rig 650E Working
Rig 651E Contracted
Rig 653E Contracted
Rig 750E Working
Rig 751E Working
Rig 951 Working
Rig 952 Working
Rig 1002E Working
Rig 1003E Working
Rig 1501E Working
(NOTES ON FOLLOWING PAGE)
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- ------------
* Pending closing of the purchase of the Noble Rigs. See "The Noble Rigs."
** Currently under contract and scheduled to be placed in service in the Gulf
of Mexico by May 1997.
*** On April 1, 1997, the Company's heavy electric platform workover Rig 1001E
operating in the Gulf of Mexico was destroyed by a blowout and resulting
fire. No personnel were injured. The Company has a substantially identical
rig under construction, which it expects to place in service in July 1997.
The Company currently intends to use insurance proceeds from the loss of Rig
1001E to construct an additional platform rig for its Gulf of Mexico fleet.
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. Of the eight tender-assisted rigs operated by the
Company, four are equipped with top-drive drilling systems. Tender-assisted rigs
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 transferred to the platform for drilling or workover operations
is 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.
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 swamp barge in Nigeria. Rigs operating in Venezuela are
generally barges that have been designed 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. The swamp barge rig in Nigeria is held in position by means of
legs or "posts" submerged to the ocean floor.
PLATFORM RIGS. The Company's 22 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
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operating at well depths of up to 25,000 feet. 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 as well as for workover services.
LAND-BASED RIGS
The following table sets forth, as of April 1, 1997, certain information
concerning the land-based rig fleet operated by the Company:
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 7 4
HELD FOR REDEPLOYMENT -- 10
United States................... 10 1 9
--
----- ---
Total Land Rigs............ 238 76 162
===== == ===
A land-based drilling rig consists of engines, drawworks, a mast,
substructure, 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.
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 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.
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<PAGE>
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 a
region.
In addition to periodic maintenance, producing oil and gas wells
occasionally require major repairs or modifications, called "workovers."
Workover services include the opening of new producing zones in an existing
well, recompletion of a well in which production has declined, drilling out
plugs and packers and the conversion of a producing well to an injection well
during enhanced recovery operations. These extensive workover operations are
normally performed by a well servicing rig with additional specialized accessory
equipment, which may include rotary drilling equipment, mud pumps, mud tanks and
blowout preventers, depending upon the particular type of workover operation.
Most of the Company's rigs are designed and equipped to handle the more complex
workover operations. A workover may last 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
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. The Company also has an engineering staff that
provides turnkey and project management services, reservoir drainage analysis
and well engineering, which enhances the Company's contract drilling services.
COMPETITION
Competition in the international markets in which the Company operates
ranges 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 22 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
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<PAGE>
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 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. 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. Two of the
Company's jackup rigs in Venezuela are currently operating under turnkey
contracts.
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, Venezuela 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.
The Company's contracts with Lagoven, S.A. for the operation of two 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.
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<PAGE>
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.
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.
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.
THE NOBLE RIGS
In February 1997, the Company entered into a definitive agreement to
purchase 12 mat-supported jackup rigs and the hull of an additional jackup rig
from Noble for $265.0 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 $20.0 million to upgrade
and equip the two rigs awaiting refurbishment. For the year ended December 31,
1996, the nine rigs that were operating generated revenues of approximately
$68.7 million, at an average operating rate of approximately $22,000 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 current average contracted rate being approximately $28,000 per day.
The Noble Rigs are mobile, self-elevating drilling platforms equipped with
legs that can be lowered to the ocean floor until a foundation is established to
support the hull, which contains the drilling equipment, jacking system, crew
quarters, loading and unloading facilities, storage areas for bulk and liquid
materials, helicopter landing deck and other related equipment. All of the Noble
Rigs are mat-supported rigs, of which six are cantilever design, a feature that
permits the drilling platform to be extended out from the hull, allowing
drilling or workover capabilities over pre-existing platforms or structures. The
other six rigs are slot-type design configured for the drilling operations to
take place through a keyway in the hull. Jackup rigs with the cantilever feature
historically have achieved higher day rates and utilization levels. The Noble
Rigs are capable of drilling to maximum depths of 20,000 to 25,000 feet in water
depths of up to 250 feet for the cantilever units and 300 feet for the slot
units.
Purchase of the Noble Rigs by the Company is subject to certain conditions,
including completion by the Company of satisfactory financing arrangements. The
closing of the transaction is expected to occur concurrently with the closing of
the Notes Offering. If the closing occurs prior to June 3, 1997, the purchase
price will be adjusted to compensate Noble for the estimated operating cash
flows the Noble Rigs would have otherwise generated for Noble's benefit until
that date. The Company has placed in escrow a deposit of $20.0 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.
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<PAGE>
MANAGEMENT
The following table and descriptions set forth information regarding the
directors and executive officers of the Company. Directors are elected at the
Company's annual meeting of shareholders and serve for five-year terms or until
their successors are elected and qualified or until their earlier resignation or
removal in accordance with the Company's bylaws. Officers are elected annually
by the Board of Directors and serve until their successors are chosen or until
their resignation or removal.
NAME AGE* POSITION
Ray H. Tolson(1)................. 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
Christian J. Boon Falleur........ 50 Director
James B. Clement(1)(2)(3)........ 51 Director
Remi Dorval...................... 46 Director and Vice Chairman
Jorge E. Estrada M............... 49 Director
Ralph D. McBride(1)(2)(3)........ 50 Director
Thomas H. Roberts, Jr.(2)........ 72 Director
James T. Sneed(1)(3)............. 65 Director
- ------------
* As of April 1, 1997
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Ray H. Tolson was elected Chairman of the Board in December 1993. He has
served as a director since August 1988 and 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.
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<PAGE>
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.
Christian J. Boon Falleur became a director of the Company in March 1997 in
connection with the Forasol transaction. Prior to becoming a director, Mr. Boon
Falleur was a Supervisory Director and Executive Vice President of Forasol. He
has been affiliated since 1972 with Ackermans & van Haaren Group, a publicly
traded company listed on the Brussels Stock Exchange, and is currently in charge
of its energy services and construction sections.
James B. Clement has been a director of the Company since November 1993.
Since 1977, he has been an executive officer of Offshore Logistics, Inc. and has
served as its President, Chief Executive Officer and a director since 1988.
Remi Dorval became a director and vice chairman of the Company in March
1997 in connection with the Forasol transaction. Prior to becoming a director,
Mr. Dorval was a Supervisory Director and Chief Executive Officer of Forasol.
Since 1990, he has been a supervisory director of Soletanche Group, a privately
held French company, and is in charge of its interests in the oil and gas
sector.
Jorge E. Estrada M. has been a director of the Company since October 1993.
For more than five years, Mr. Estrada has been President and Chief Executive
Officer of JEMPSA Media and Entertainment, a company specializing in the Spanish
and Latin American entertainment industry. Previously Mr. Estrada served as
President -- Worldwide Drilling Division of Geosource and Vice President of
Geosource Exploration Division -- Latin America.
Ralph D. McBride became a director of the Company in September 1995. Mr.
McBride has been a partner with the law firm of Bracewell & Patterson, Houston,
Texas, since 1980.
Thomas H. Roberts, Jr. has been a director of the Company since 1988. He
held a variety of management positions with DEKALB Energy Company until his
retirement in 1996. Mr. Roberts is currently a director of IMC Global Inc., a
public company engaged in the production and distribution of crop nutrients and
related products.
James T. Sneed has been a director of the Company since October 1992. In
1991 he retired after 37 years of employment with Mobil Oil Corporation where he
was Production Manager USA.
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes (referred to
in the Prospectus as the "Offered Debt Securities") supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and
provisions of Debt Securities set forth in the Prospectus, to which description
reference is hereby made.
GENERAL
The Notes are a series of Debt Securities described in the accompanying
Prospectus. The Notes will be issued under an indenture, dated as of May 1,
1997, as supplemented by the First Supplemental Indenture thereto, dated as of
May 1, 1997 (such indenture, as so supplemented, is referred to in this section
of the Prospectus Supplement as the "Indenture"), by and between the Company
and The Chase Manhattan Bank as trustee under the Indenture (the "Trustee").
The Notes are subject to the terms stated in the Indenture and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Holders of the
Notes are referred to the Indenture and the Trust Indenture Act for a statement
of those terms. The statements and definitions of terms under this caption
relating to the Notes and the Indenture described below are summaries and do not
purport to be complete. Such summaries make use of certain terms defined in the
Indenture and are qualified in their entirety by express reference to the
Indenture. For purposes of this section of this Prospectus Supplement,
references to the "Company" are to Pride Petroleum Services, Inc., excluding
its subsidiaries. Certain terms used herein are defined below under
" -- Certain Definitions."
The Notes will be unsecured senior obligations of the Company, limited in
aggregate principal amount to $325 million. The Notes will mature on May 1,
2007, and will bear interest at the rate per annum stated on the cover page
hereof from the date of issuance or from the most recent Interest Payment Date
to which interest has been paid or provided for. Interest on the Notes will be
payable semiannually in arrears on May 1 and November 1 of each year, commencing
November 1, 1997, to the Persons in whose names such Notes are registered at the
close of business on the April 15 or October 15 immediately preceding such
Interest Payment Date. Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
Principal, premium, if any, and interest on the Notes will be payable, and
the Notes will be transferable, at the office or agency of the Company within
the City and State of New York, maintained for such purpose. In addition, in the
event the Notes do not remain in book-entry form, interest may be paid, at the
option of the Company, by check mailed to the registered holders of the Notes at
the respective addresses as set forth on the Note Register. The Notes will be
issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof. No service charge will be made for any
registration of transfer or exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge payable in connection
therewith.
RANKING
The Indebtedness evidenced by the Notes will rank PARI PASSU in right of
payment with all other indebtedness of the Company that is not subordinated by
its terms to other indebtedness of the Company and senior to all Indebtedness of
the Company that by its terms is so subordinated.
The holders of secured indebtedness of the Company (including Indebtedness
under the Company's Credit Facility, which is secured by first priority liens on
the receivables, inventory, general intangibles, stock of all domestic
Subsidiaries, two-thirds of the stock of each of the Company's direct or
indirect foreign Subsidiaries and certain other assets of the Company and its
domestic Subsidiaries), will have claims with respect to the assets constituting
collateral for such indebtedness that are prior to claims of holders of the
Notes. In the event of a default on the Notes or a bankruptcy, liquidation or
reorganization of the Company, such assets will be available to satisfy
obligations with respect to the indebtedness secured thereby before any payment
therefrom could be made on the Notes. To the extent that the value of such
collateral is not sufficient to satisfy the indebtedness secured thereby,
amounts remaining outstanding on such indebtedness would be entitled to share
with the Notes and their claims with respect to any other assets
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of the Company. At December 31, 1996 on a pro forma combined basis, the Company
would have had outstanding approximately $47.8 million of secured indebtedness.
The Notes will be effectively subordinated to claims of creditors and
preferred stockholders of the Company's subsidiaries (other than the Company and
any Subsidiary Guarantors) and the claims of secured creditors of the Subsidiary
Guarantors. Claims of creditors and preferred stockholders of such subsidiaries
(other than the Company), including trade creditors, tort claimants, secured
creditors, taxing authorities and creditors holding guarantees, will generally
have priority as to assets of such subsidiaries over the claims and equity
interest of the Company and, thereby indirectly, the holders of the indebtedness
of the Company, including the Notes. At December 31, 1996, on a pro forma
combined basis, the Company's subsidiaries would have had outstanding
indebtedness to creditors other than the Company of approximately $230.5
million.
SUBSIDIARY GUARANTEES OF NOTES
Under the circumstances described below, the Company's payment obligations
under the Notes may in the future be jointly and severally guaranteed by
existing or future Subsidiaries of the Company as Subsidiary Guarantors. It is
not expected that any Subsidiaries of the Company will initially execute and
deliver the Indenture as a Subsidiary Guarantor. Although the Indenture does not
contain any requirement that any Subsidiary execute and deliver a Subsidiary
Guarantee, certain covenants described below require a Subsidiary in the future
to execute and deliver a Subsidiary Guarantee prior to its guarantee of other
Indebtedness of the Company. See "Certain Covenants -- Limitation on
Non-Guarantor Subsidiaries."
Each Subsidiary Guarantor will guarantee, jointly and severally, to each
Holder of Notes and the Trustee, the full and prompt performance of the
Company's obligations under the Indenture and the Notes, including the payment
of principal of (or premium, if any, on) and interest on the Notes pursuant to
its Subsidiary Guarantee.
The Subsidiary Guarantees will be unsecured senior obligations of each
respective Subsidiary Guarantor and will rank PARI PASSU in right of payment
with all senior Indebtedness of such Subsidiary Guarantor, and senior in right
of payment to all Subordinated Indebtedness of such Subsidiary Guarantor.
However, the Subsidiary Guarantees will be effectively subordinated to secured
Indebtedness of the Subsidiary Guarantors, with respect to the assets securing
such Indebtedness.
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the Indenture, as
will result in the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Subsidiary Guarantor that makes a payment or
distribution under a Subsidiary Guarantee shall be entitled to a contribution
from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted
Net Assets of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell or
otherwise dispose of all or substantially all of its Property and assets to the
Company or another Subsidiary Guarantor without limitation, except to the extent
any such transaction is subject to the "Consolidation, Merger and Sale of
Assets" covenant of the Indenture. Each Subsidiary Guarantor may consolidate
with or merge into or sell all or substantially all of its Property and assets
to a Person other than the Company or another Subsidiary Guarantor (whether or
not Affiliated with the Subsidiary Guarantor), provided that (a) if the
surviving Person is not the Subsidiary Guarantor, the surviving Person agrees to
assume such Subsidiary Guarantors Subsidiary Guarantee and all its obligations
pursuant to the Indenture (except to the extent the following paragraph would
result in the release of such Subsidiary Guarantee and obligations) and (b) such
transaction does not (i) violate any of the covenants described below under
"-- Certain Covenants" or (ii) result in a Default or Event of Default
immediately thereafter that is continuing.
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Upon (i) the sale or other disposition (by merger or otherwise) of a
Subsidiary Guarantor (or all or substantially all of its Property and assets) to
a Person other than the Company or another Subsidiary Guarantor and pursuant to
a transaction that is otherwise in compliance with the Indenture (including as
described in the foregoing paragraph) or (ii) the release of all guarantees by a
Subsidiary Guarantor of Indebtedness of the Company, such Subsidiary Guarantor
shall be released from its Subsidiary Guarantee and all of its obligations in
respect of the Indenture; provided, however, that any such termination shall
occur only to the extent that all obligations of such Subsidiary Guarantor under
all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, other Indebtedness of the Company or any other
Subsidiary shall also terminate or be released upon such sale or other
disposition.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the option of the Company prior to May
1, 2002. On or after such date, the Notes will be redeemable at the option of
the Company, in whole at any time or in part from time to time, at the following
prices (expressed in percentages of the principal amount), if redeemed during
the 12 months beginning May 1 of the years indicated below, in each case
together with interest accrued to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
YEAR PERCENTAGE
- ------------------------------------- ----------
2002................................. 104.688%
2003................................. 103.125%
2004................................. 101.563%
2005 and thereafter.................. 100.000%
If fewer than all the Notes are redeemed, selection for redemption will be
made by the Trustee, by lot or by any other means the Trustee determines to be
fair and appropriate.
Notwithstanding the foregoing, at any time on or prior to May 1, 2000, the
Company may redeem up to an aggregate of $108,333,000 principal amount of Notes
at a redemption price of 109.375% of the principal amount thereof, plus accrued
and unpaid interest thereon to the redemption date, with the net proceeds of a
Public Equity Offering (other than the Common Stock Offering), PROVIDED that at
least $216,667,000 in aggregate principal amount of Notes remain outstanding
immediately after the occurrence of such redemption and PROVIDED, FURTHER, that
such redemption occurs within 60 days of the date of the closing of such Public
Equity Offering.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder will have the right
to require the Company to repurchase all of such Holder's Notes in whole or in
part (the "Change of Control Offer") at a purchase price (the "Change of
Control Payment") in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Payment Date (as defined below) on the terms described below.
Within 30 days following any Change of Control, the Company will mail a
notice to each Holder and to the Trustee stating, among other things, (i) that a
Change of Control has occurred and a Change of Control Offer is being made as
described in the Indenture, and that, although Holders are not required to
tender their Notes, all Notes that are timely tendered will be accepted for
payment; (ii) the Change of Control Payment and the repurchase date, which will
be no earlier than 30 days and no later than 60 days after the date such notice
is mailed (the "Change of Control Payment Date"); (iii) that any Note accepted
for payment pursuant to the Change of Control Offer will cease to accrue
interest after the Change of Control Payment Date; and (iv) the instructions and
any other information necessary to enable Holders to tender their Notes and have
such Notes purchased pursuant to the Change of Control Offer. The Company will
comply with any applicable tender offer rules (including, without limitation,
any applicable requirements of Rule 14e-1 under the Exchange Act) in the event
that the Change of Control Offer is triggered under the circumstances described
herein.
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Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders to require the
Company to repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
One of the events that constitutes a Change of Control under the Indenture
is a sale, conveyance, transfer or lease of all or substantially all of the
assets of the Company and the Subsidiaries, taken as a whole. The Indenture will
be governed by New York law, and there is no established quantitative definition
under New York law of "substantially all" of the assets of a corporation.
Accordingly, if the Company were to engage in a transaction in which it disposed
of less than all of its assets, a question or interpretation could arise as to
whether such disposition was of "substantially all" of its assets and whether
the Company was required to make a Change of Control Offer.
The provisions of the Indenture may not afford Holders protection in the
event of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction affecting the Company that may adversely affect Holders,
if such transaction is not the type of transaction included within the
definition of Change of Control. A transaction involving the management of the
Company or its Affiliates, or a transaction involving a recapitalization of the
Company, will result in a Change of Control only if it is the type of
transaction specified in such definition.
The source of funds for the repurchase of Notes upon a Change of Control
will be the Company's cash or cash generated from operations or other sources,
including borrowings or sales of assets; however, a change of control (as
defined in the Credit Facility) constitutes an event of default thereunder that
relieves the lenders from any obligation to make loans and allows them to
accelerate the indebtedness outstanding thereunder. There can be no assurance
that sufficient funds will be available at the time of any Change of Control to
repay all Indebtedness owing under such other senior Indebtedness or to make the
required payments of the Notes. Any failure by the Company to repurchase Notes
tendered pursuant to a Change of Control Offer will constitute an Event of
Default.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture.
TRANSACTIONS WITH AFFILIATES. Subsequent to the Issue Date, the Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into or permit to exist any transaction or series of related transactions,
including, but not limited to, the purchase, sale or exchange of Property, the
making of any Investment, the giving of any guarantee or the rendering of any
service with any Affiliate of the Company (other than transactions among the
Company and any Wholly Owned Subsidiaries) unless (i) such transaction or series
of related transactions is on terms no less favorable to the Company or such
Subsidiary than those that could be obtained in a comparable arm's length
transaction with a Person that is not such an Affiliate and (ii) (a) with
respect to a transaction or series of related transactions that has a Fair
Market Value in excess of $2 million but less than $5 million, the Company
delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (i) above and
(b) with respect to a transaction or series of related transactions that has a
Fair Market Value equal to or in excess of $5 million, the transaction or series
of related transactions is approved by a majority of the Board of Directors of
the Company (including a majority of the disinterested directors), which
approval is set forth in a Board Resolution certifying that such transaction or
series of transactions complies with clause (i) above. The foregoing provisions
shall not be applicable to (i) reasonable compensation, indemnification and
other benefits paid or made available to an officer, director or employee of the
Company or a Subsidiary for services rendered in such person's capacity as an
officer, director or employee (including reimbursement or advancement of
reasonable out-of-pocket expenses and provisions of directors' and officers'
liability insurance) or (ii) the making of any Restricted Payment otherwise
permitted by the Indenture.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any Subsidiary (other than Non-Recourse Subsidiaries) to, make any
Restricted Payment, unless at the time of and after giving effect to the
proposed Restricted Payment (a) no Default shall have occurred and be continuing
(or would result therefrom), (b) the Company could incur at least $1.00 of
additional Indebtedness under the tests
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described in the first sentence under the caption "-- Limitation on
Indebtedness" and (c) the aggregate amount of all Restricted Payments declared
or made on or after the Issue Date by the Company or any Subsidiary (other than
Non-Recourse Subsidiaries) shall not exceed the sum of (i) 50% (or if such
Consolidated Net Income shall be a deficit, minus 100% of such deficit) of the
aggregate Consolidated Net Income accrued during the period beginning on the
first day of the fiscal quarter in which the Issue Date falls and ending on the
last day of the fiscal quarter ending immediately prior to the date of such
proposed Restricted Payment, plus (ii) an amount equal to the aggregate net cash
proceeds received by the Company, subsequent to the Issue Date, from the
issuance or sale (other than to a Subsidiary) of shares of its Capital Stock
(excluding Redeemable Stock and the net proceeds from the Common Stock
Offering), but including Capital Stock issued upon the exercise of options,
warrants or rights to purchase Capital Stock (other than Redeemable Stock) of
the Company) and the liability (expressed as a positive number) in accordance
with GAAP in respect of any Indebtedness of the Company or carrying value of
Redeemable Stock, which has been converted into, exchanged for or satisfied by
the issuance of shares of Capital Stock (other than Redeemable Stock) of the
Company, subsequent to the Issue Date plus (iii) to the extent not otherwise
included in Consolidated Net Income, the net reduction in Investments in
Non-Recourse Subsidiaries resulting from dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or a
Subsidiary after the Issue Date from any Non-Recourse Subsidiary or from the
redesignation of a Non-Recourse Subsidiary as a Subsidiary (valued in each case
as provided in the definition of Investment), not to exceed in the case of any
Non-Recourse Subsidiary the total amount of Investments (other than Permitted
Investments) in such Non-Recourse Subsidiary made by the Company and its
Subsidiaries in such Non-Recourse Subsidiary after the Issue Date, plus (iv) $50
million minus the sum of Investments described in clauses (k) and (l) under the
definition of "Permitted Investments," but in no event to exceed $10 million.
The foregoing provisions will not prevent (A) the payment of any dividend
on Capital Stock of any class within 60 days after the date of its declaration
if at the date of declaration such payment would be permitted by the Indenture;
(B) any repurchase or redemption of Capital Stock or Subordinated Indebtedness
of the Company made by exchange for Capital Stock of the Company (other than
Redeemable Stock), or out of the net cash proceeds from the substantially
concurrent issuance or sale (other than to a Subsidiary) of Capital Stock of the
Company (other than Redeemable Stock), PROVIDED that the net cash proceeds from
such sale are excluded from computations under clause (c)(ii) above to the
extent such proceeds are applied to purchase or redeem such Capital Stock or
Subordinated Indebtedness; and (C) any repurchase or redemption of Subordinated
Indebtedness of the Company solely in exchange for, or out of the net cash
proceeds from the substantially concurrent sale of, new Subordinated
Indebtedness of the Company, so long as such Subordinated Indebtedness (x) is
subordinated to the Notes at least to the same extent as the Subordinated
Indebtedness so exchanged, purchased or redeemed, (y) has a stated maturity
later than the stated maturity of the Subordinated Indebtedness so exchanged,
purchased or redeemed and (z) has an Average Life at the time incurred that is
greater than the remaining Average Life of the Subordinated Indebtedness so
exchanged, purchased or redeemed. Restricted Payments permitted to be made as
described in the preceding sentence will be excluded in calculating the amount
of Restricted Payments thereafter, except such Restricted Payments made as
described in clause (A), which will be included in calculating the amount of
Restricted Payments thereafter.
LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, assume, suffer to exist,
guarantee or otherwise become liable, with respect to the payment of
(collectively, "incur"), any Indebtedness (other than Non-Recourse
Indebtedness), unless after giving pro forma effect to the incurrence of such
Indebtedness, the Consolidated Interest Coverage Ratio for the Determination
Period preceding the Transaction Date is at least 2.5 to 1.0. Notwithstanding
the foregoing, the Company or any Subsidiary may incur Permitted Indebtedness.
Any Indebtedness of a Person existing at the time such Person became a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be incurred by such Subsidiary at the time it becomes a Subsidiary.
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LIMITATION ON SUBSIDIARY INDEBTEDNESS AND PREFERRED STOCK. The Company
will not permit any Subsidiary to incur, directly or indirectly, any
Indebtedness (other than Indebtedness of Non-Recourse Subsidiaries) or issue any
preferred stock except:
(a) Indebtedness or preferred stock issued to and held by the Company
or a Wholly Owned Subsidiary, so long as any transfer of such Indebtedness
or preferred stock to a Person other than the Company or a Wholly Owned
Subsidiary will be deemed to constitute the issuance of such Indebtedness
or preferred stock by the issuer thereof;
(b) Indebtedness or preferred stock of a Subsidiary issued and
outstanding prior to the date on which such Subsidiary was acquired by the
Company (other than Indebtedness or preferred stock issued in connection
with or in anticipation of such acquisition);
(c) Indebtedness or preferred stock outstanding on the Issue Date;
(d) Indebtedness described in clauses (b), (c), (d), (f) and (g)
under the definition of "Permitted Indebtedness";
(e) Permitted Subsidiary Refinancing Indebtedness of such Subsidiary;
(f) Preferred stock issued in exchange for, or the proceeds of which
are used to refinance, repurchase or redeem, Indebtedness or preferred
stock described in clauses (b) and (c) of this paragraph (the Retired
Indebtedness or Stock), PROVIDED that the preferred stock so issued has (i)
a liquidation value not in excess of the principal amount or liquidation
value of the Retired Indebtedness or Stock plus related expenses for
redemption and issuance and (ii) a redemption date later than the stated
maturity or redemption date (if any) of the Retired Indebtedness or Stock;
(g) Indebtedness of a Subsidiary which represents the assumption by
such Subsidiary of Indebtedness of another Subsidiary (other than
Non-Recourse Indebtedness) in connection with a merger of such
Subsidiaries, PROVIDED that no Subsidiary or any successor (by way of
merger) thereto existing on the Issue Date shall assume or otherwise become
responsible for any Indebtedness of an entity which is not a Subsidiary on
the Issue Date, except to the extent that a Subsidiary would be permitted
to incur such Indebtedness under this paragraph; and
(h) Indebtedness of any Subsidiary, which when taken together with
all other Indebtedness of the Subsidiaries (except Indebtedness incurred
pursuant to clauses (a), (b) and (d) of this covenant), does not exceed at
any one time outstanding the greater of (i) $230 million and (ii) 15% of
Consolidated Net Tangible Assets determined as of the date of incurrence of
such Indebtedness.
LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not permit any Subsidiary (other
than a Non-Recourse Subsidiary) to, directly or indirectly, create, enter into
any agreement with any Person or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind which by its
terms restricts the ability of any Subsidiary (other than a Non-Recourse
Subsidiary) to (a) pay dividends, in cash or otherwise, or make any other
distributions on its Capital Stock to the Company or any Subsidiary (other than
a Non-Recourse Subsidiary), (b) pay any Indebtedness owed to the Company or any
Subsidiary (other than a Non-Recourse Subsidiary), (c) make loans or advances to
the Company or any Subsidiary (other than a Non-Recourse Subsidiary) or (d)
transfer any of its Property or assets to the Company or any Subsidiary (other
than a Non-Recourse Subsidiary) except any encumbrance or restriction contained
in any agreement or instrument:
(i) existing on the Issue Date;
(ii) relating to any Property or asset acquired after the Issue Date,
so long as such encumbrance or restriction relates only to the Property or
asset so acquired;
(iii) relating to any Indebtedness of any Subsidiary at the date on
which such Subsidiary was acquired by the Company or any Subsidiary (other
than Indebtedness incurred in anticipation of such acquisition);
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(iv) effecting a refinancing of Indebtedness issued pursuant to an
agreement referred to in the foregoing clauses (i) through (iii), so long
as the encumbrances and restrictions contained in any such refinancing
agreement are no more restrictive than the encumbrances and restrictions
contained in such agreements;
(v) which constitute customary provisions restricting subletting or
assignment of any lease of the Company or any Subsidiary or provisions in
agreements that restrict the assignment of such agreement or any rights
thereunder; and
(vi) which constitute restrictions on the sale or other disposition of
any Property securing Indebtedness as a result of a Permitted Lien on such
Property.
LIMITATION ON ASSET SALES. The Company will not engage in, and will not
permit any Subsidiary to engage in, any Asset Sale unless (a) except in the case
of (i) an Asset Sale resulting from the requisition of title to, seizure or
forfeiture of any Property or assets or any actual or constructive total loss or
an agreed or compromised total loss or (ii) a Bargain Purchase Contract, the
Company or such Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the Property;
(b) except in the case of an Asset Sale described in clause (a), at least 75% of
such consideration consists of Cash Proceeds (or the assumption of Indebtedness
of the Company or such Subsidiary relating to the Capital Stock or Property that
was the subject of such Asset Sale and the release of the Company or such
Subsidiary from Indebtedness); (c) after giving effect to such Asset Sale, the
total non-cash consideration held by the Company from all such Asset Sales does
not exceed $10 million, and (d) the Company delivers to the Trustee an Officers'
Certificate, which Officers' Certificate shall be conclusive, certifying that
such Asset Sale complies with clauses (a), (b) and (c); PROVIDED, HOWEVER, that
the requirement set forth in clause (b) shall not apply to an Asset Sale in
which the Company exchanges (a "Permitted Exchange") assets for assets that
constitute Replacement Assets. The Company or such Subsidiary, as the case may
be, may apply the Net Available Proceeds from each Asset Sale (x) to the
acquisition of one or more Replacement Assets, or (y) to repurchase or repay
Senior Debt (with a permanent reduction of availability in the case of revolving
credit borrowings); PROVIDED, HOWEVER, that such acquisition or such repurchase
or repayment shall be made within 365 days after the consummation of the
relevant Asset Sale.
Any Net Available Proceeds from any Asset Sale that are not used to so
acquire Replacement Assets or to repurchase or repay Senior Debt within 365 days
after consummation of the relevant Asset Sale constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10 million, the Company
shall, or at any time after receipt of Excess Proceeds, the Company may, at its
option, make a pro rata offer (an "Asset Sale Offer") to purchase from all
Holders an aggregate principal amount of Notes equal to the Excess Proceeds, at
a price in cash equal to 100% of the outstanding principal amount thereof plus
accrued interest, if any, to the purchase date, in accordance with the
procedures set forth in the Indenture. Upon completion of such Asset Sale Offer,
the amount of Excess Proceeds shall be reset to zero and the Company may use any
remaining amount for general corporate purposes.
The Company will comply with any applicable tender offer rules (including,
without limitation, any applicable requirements of Rule 14e-1 under the Exchange
Act) in the event that an Asset Sale Offer is required under the circumstances
described herein.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, enter into, assume,
guarantee or otherwise become liable with respect to any Sale and Lease-Back
Transaction (other than a Sale and Lease-Back Transaction between Non-Recourse
Subsidiaries) unless (i) the proceeds from such Sale and Lease-Back Transaction
are at least equal to the Fair Market Value of such Property being transferred
and (ii) the Company or such Subsidiary would have been permitted to enter into
such transaction under the tests described in the first sentence under the
captions "-- Limitation on Indebtedness", "-- Limitation on Subsidiary
Indebtedness and Preferred Stock" and "-- Limitation on Liens."
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LIMITATION ON LIENS. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, affirm, incur, assume or suffer
to exist any Liens on or with respect to any Property of the Company or such
Subsidiary or any interest therein or any income or profits therefrom, whether
owned at the Issue Date or thereafter acquired, without effectively providing
that the Notes shall be secured equally and ratably with (or prior to) the
Indebtedness so secured, other than Permitted Liens.
LIMITATION ON NON-GUARANTOR SUBSIDIARIES. The Indenture will provide that
the Company will not permit any Subsidiary that is not a Subsidiary Guarantor to
guarantee the payment of any Indebtedness of the Company unless: (i)(A) such
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a Subsidiary Guarantee of the Notes by such Subsidiary
and (B), with respect to any guarantee of Subordinated Indebtedness by a
Subsidiary, any such guarantee shall be subordinated to such Subsidiary's
Subsidiary Guarantee at least to the same extent as such Subordinated
Indebtedness is subordinated to the Notes; (ii) such Subsidiary waives, and
agrees not in any manner whatsoever to exercise any right or claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Subsidiary as a result of
any payment by such Subsidiary under its Subsidiary Guarantee until such time as
the obligations guaranteed thereby are paid in full; and (iii) such Subsidiary
shall deliver to the Trustee an opinion of independent legal counsel to the
effect that such Subsidiary Guarantee has been duly executed and authorized and
constitutes a valid, binding and enforceable obligation of such Subsidiary,
except insofar as enforcement thereof may be limited by bankruptcy, insolvency
or similar laws (including, without limitation, all laws relating to fraudulent
transfers) and except insofar as enforcement thereof is subject to general
principles of equity; PROVIDED that this covenant shall not be applicable to any
guarantee of any Subsidiary that (x) existed at the time such Person became a
Subsidiary of the Company and (y) was not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Company. Further, a
pledge of assets to secure any Indebtedness for which the pledgor is not
otherwise liable shall not be considered a guarantee.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not, in any transaction or series of transactions,
consolidate with or merge into any other Person (other than a merger of a
Subsidiary into the Company in which the Company is the continuing corporation),
or sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Property and assets of the Company and the
Subsidiaries, taken as a whole, to any Person, unless
(i) either (a) the Company shall be the continuing corporation or (b)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged, or the Person which acquires, by sale,
assignment, conveyance, transfer, lease or other disposition, all or
substantially all of the Property and assets of the Company and the
Subsidiaries, taken as a whole (such corporation or Person, the "Surviving
Entity"), shall be a corporation organized and validly existing under the
laws of the United States of America, any political subdivision thereof or
any state thereof or the District of Columbia, and shall expressly assume,
by a supplemental indenture, the due and punctual payment of the principal
of (and premium, if any) and interest on all the Notes and the performance
of the Company's covenants and obligations under the Indenture;
(ii) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), no Event of
Default or Default shall have occurred and be continuing or would result
therefrom;
(iii) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), the Company (or
the Surviving Entity if the Company is not continuing) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth
of the Company immediately prior to such transactions; and
(iv) immediately after giving effect to any such transaction or series
of transactions on a pro forma basis as if such transaction or series of
transactions had occurred on the first day of the
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Determination Period, the Company (or the Surviving Entity if the Company
is not continuing) would be permitted to incur $1.00 of additional
Indebtedness pursuant to the tests described in the first sentence under
the caption " -- Certain Covenants -- Limitation on Indebtedness."
EVENTS OF DEFAULT
In addition to the Events of Default described in the accompanying
Prospectus, each of the following is an "Event of Default" with respect to the
Notes under the Indenture:
(a) the Company fails to comply with any of its covenants or
agreements contained in "-- Consolidation, Merger or Sale of Assets" or
fails to make a Change of Control Offer or an Asset Sale Offer in
accordance with " -- Change of Control" and "-- Certain
Covenants -- Limitation on Asset Sales," respectively;
(b) default in the performance or breach of any covenant or agreement
of the Company or any Subsidiary Guarantor contained in the Notes, any
Subsidiary Guarantee or the Indenture (other than a covenant or agreement a
default in performance or breach of which is specifically dealt with) and
continuance of such default or breach for a period of 30 days after written
notice thereof has been mailed, by registered or certified mail, to the
Company or such Subsidiary Guarantor by the Trustee or to the Company and
the Trustee by the Holders of at least 25% of the aggregate principal
amount of the outstanding Notes;
(c) Indebtedness of the Company or any Subsidiary (other than
Non-Recourse Indebtedness or Limited Recourse Indebtedness) is not paid
when due within the applicable grace period or is accelerated by the
holders thereof and, in either case, the aggregate principal amount of such
due and unpaid or accelerated Indebtedness exceeds $10 million;
(d) the entry by a court of competent jurisdiction of one or more
judgments or orders against the Company or any Subsidiary (other than a
Non-Recourse Subsidiary) in an uninsured or unindemnified aggregate amount
in excess of $10 million which remain undischarged or unsatisfied for a
period of 60 consecutive days after the right to appeal them has expired;
(e) any Subsidiary Guarantee shall for any reason cease to be, or be
asserted by the Company or any Subsidiary Guarantor, as applicable, not to
be, in full force and effect (except pursuant to the release of any such
Subsidiary Guarantee in accordance with the Indenture); and
(f) certain events of bankruptcy, insolvency or reorganization of any
Subsidiary (other than a Non-Recourse Subsidiary) that constitutes a
Significant Subsidiary or any group of Subsidiaries (other than
Non-Recourse Subsidiaries) that, taken together, would constitute a
Significant Subsidiary.
AMENDMENT, SUPPLEMENT AND WAIVER
The Company, the Subsidiary Guarantors and the Trustee may, at any time and
from time to time, without notice to or consent of any Holder, enter into one or
more indentures supplemental to the Indenture (a) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company under the Indenture and contained in the Notes, (b) to
add to the covenants of the Company, for the benefit of the Holders, or to
surrender any right or power conferred upon the Company by the Indenture, (c) to
add any additional Events of Default, (d) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (e) to change or eliminate any of
the provisions of the Indenture, PROVIDED that any such change or elimination
will become effective only when there is not outstanding any Note created prior
to the execution of such supplemental indenture which is entitled to the benefit
of such provision, (f) to evidence and provide for the acceptance of appointment
under the Indenture by the successor Trustee, (g) to secure the Notes, (h) to
cure any ambiguity, to correct or supplement any provision in the Indenture
which may be inconsistent with any other provision therein or to add any other
provisions with respect to matters or questions arising under the Indenture, or
(i) to add or release any Subsidiary Guarantor pursuant to the terms of the
Indenture, PROVIDED that such actions will not adversely affect the interests of
the Holders in any material respect.
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With the consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Notes, the Company, the Subsidiary
Guarantors and the Trustee may enter into one or more indentures supplemental to
the Indenture for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of modifying in
any manner the rights of the Holders; PROVIDED, HOWEVER, that no such
supplemental indenture will, without the consent of the Holder of each
outstanding Note, (a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount thereof (or
premium, if any), or the interest thereon that would be due and payable upon
Maturity thereof, or change the place of payment where, or the coin or currency
in which, any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof, (b) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is necessary for any such
supplemental indenture or required for any waiver of compliance with certain
provisions of the Indenture or certain Defaults thereunder, (c) modify the
obligations of the Company to make a Change of Control Offer or Asset Sale
Offer, (d) subordinate in right of payment, or otherwise subordinate, the Notes
to any other Indebtedness or (e) modify any of the provisions of this paragraph
(except to increase any percentage set forth herein).
The Holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the Holders of all the Notes waive any past
Default under the Indenture and its consequences, except a Default (a) in the
payment of the principal of (or premium, if any) or interest on any Note or (b)
in respect of a covenant or provision hereof which under the proviso to the
prior paragraph cannot be modified or amended without the consent of the Holder
of each outstanding Note affected.
DEFEASANCE
The Company may, at its option, elect (a) to have all of the obligations of
the Company and the Subsidiary Guarantors discharged with respect to the Notes
and any Subsidiary Guarantees (except for certain obligations to register the
transfer or exchange of Notes, replace stolen, lost or mutilated Notes or
maintain paying agencies and hold moneys for payment in trust) or (b) to have
their obligations released with respect to certain restrictive covenants of the
Indenture and certain Events of Default will no longer constitute Events of
Default with respect to any Notes, upon the deposit with the Trustee, in trust,
of money or the equivalent in U.S. Government Obligations, or a combination
thereof, which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient to pay
all the principal (and premium, if any, on) and interest on such Notes on the
dates such payments are due in accordance with the terms of the Notes. To
exercise any such option, among other things, no Event of Default specified
under "Events of Default" with respect to such Notes shall have occurred and
be continuing. The Company is required to deliver to the applicable Trustee an
Opinion of Counsel (i) to the effect that the deposit and related defeasance
would not cause the Holders of the Notes to recognize income, gain or loss for
federal income tax purposes and, in the case of a discharge pursuant to clause
(a), accompanied by an opinion based upon a ruling from the United Stated
Internal Revenue Service or a change in law to that effect and (ii) with respect
to certain other matters.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any capitalized terms used herein for which no definition
is provided.
"ADJUSTED NET ASSETS" of a Subsidiary Guarantor at any date shall mean
the amount by which the fair value of the properties and assets of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such
date.
"AFFILIATE" of any specified Person means another Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and
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"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"ASSET SALE" means any direct or indirect sale, conveyance, transfer,
lease or other disposition (including, without limitation, by way of merger or
consolidation or by means of a Sale and Lease-Back Transaction other than a Sale
and Lease-Back Transaction that results in the creation or incurrence of (a) a
Capital Lease Obligation of the Company or any Subsidiary or (b) a lease of
newly constructed assets, which lease is treated as an operating lease in
accordance with GAAP and entered into within 180 days of completion of
construction) by the Company or any Subsidiary to any Person other than the
Company or a Wholly Owned Subsidiary, in one transaction, or a series of related
transactions, of (i) any Capital Stock of any Subsidiary (except for directors'
qualifying shares or certain minority interests sold to other Persons solely due
to local law requirements that there be more than one stockholder, but which are
not in excess of what is required for such purpose) or (ii) any other Property
or assets of the Company or any Subsidiary, other than (A) sales of drill-string
components and obsolete or worn out equipment in the ordinary course of business
or other assets that, in the Company's reasonable judgment, are no longer used
or useful in the conduct of the business of the Company and its Subsidiaries,
(B) any drilling contract, charter (bareboat or otherwise) or other lease of
Property or other asset entered into by the Company or any Subsidiary in the
ordinary course of business, other than any Bargain Purchase Contract, (C) a
Restricted Payment or Permitted Investment permitted under "-- Certain
Covenants -- Limitation on Restricted Payments," (D) a Change of Control, (E) a
consolidation, merger or the disposition of all or substantially all of the
assets of the Company in compliance with the provision of the Indenture
described in "-- Consolidation, Merger, Conveyance, Lease or Transfer," (F)
any trade or exchange by the Company or any Subsidiary of one or more drilling
rigs for one or more other drilling rigs of like kind owned or held by another
Person, PROVIDED that (x) the Fair Value of the rig or rigs traded or exchanged
by the Company or such Subsidiary (including cash or cash equivalents to be
delivered by the Company or such Subsidiary) is reasonably equivalent to the
fair value of the drilling rig or rigs (together with cash or cash equivalents
to be received by the Company or such Subsidiary) as determined by written
appraisal by a nationally (or industry) recognized investment banking firm or
appraisal firm and (y) such exchange is approved by a majority of the
disinterested directors of the Company and (G) any transfers that, but for this
clause (G), would be Asset Sales, if (y) the Company elects to designate such
transfers as not constituting Asset Sales and (z) after giving effect to such
transfers, the aggregate Fair Market Value of the Property or assets transferred
in such transaction or any such series of related transactions so designated by
the Company does not exceed $500,000. An Asset Sale shall include the
requisition of title to, seizure of or forfeiture of any Property or assets, or
any actual or constructive total loss or an agreed or compromised total loss of
any Property or assets.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a Sale and Lease-Back
Transaction means, at any date of determination, the present value (discounted
at the interest rate borne by the Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease (or to the first date on which the lessee is permitted to terminate such
lease without the payment of a penalty) included in such Sale and Lease-Back
Transaction (including any period for which such lease has been extended).
"AVERAGE LIFE" means, as of any date, with respect to any debt security,
the quotient obtained by dividing (i) the sum of the products of (x) the number
of years from such date to the date of each scheduled principal payment
(including any sinking fund or mandatory redemption payment requirements) of
such debt security multiplied in each case by (y) the amount of such principal
payment by (ii) the sum of all such principal payments.
"BARGAIN PURCHASE CONTRACT" means a drilling contract, charter (bareboat
or otherwise) or lease that provides for acquisition of Property by the other
party to such agreement during or at the end of the term thereof for less than
Fair Market Value thereof at the time such right to acquire such Property is
granted.
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"CAPITAL LEASE OBLIGATION" means, at any time as to any Person with
respect to any Property leased by such Person as lessee, the amount of the
liability with respect to such lease that would be required at such time to be
capitalized and accounted for as a capital lease on the balance sheet of such
Person prepared in accordance with GAAP.
"CAPITAL STOCK" in any Person means any and all shares, interests,
partnership interests, participations or other equivalents in the equity
interest (however designated) in such Person and any rights (other than debt
securities convertible into an equity interest), warrants or options to acquire
an equity interest in such Person.
"CASH PROCEEDS" means, with respect to any Asset Sale by any Person, the
aggregate consideration received for such Asset Sale by such Person in the form
of cash or cash equivalents (including any amounts of insurance or other
proceeds received in connection with an Asset Sale of the type described in the
last sentence of the definition thereof), including payments in respect of
deferred payment obligations when received in the form of cash or cash
equivalents (except to the extent that such obligations are financed or sold
with recourse to such Person or any subsidiary thereof). For purposes of this
definition, "cash or cash equivalents" shall be deemed to include, for a
period not to exceed 12 months from the related Asset Sale, noncash
consideration received with respect to an Asset Sale to the extent that such
noncash consideration consists of (i) publicly traded debt securities of a
Person, which securities are rated as "BBB-" or higher by Standard & Poor's
Ratings Group ("S&P") and "Baa3" or higher by Moody's Investors Service,
Inc. ("Moody's"), or (ii) other Indebtedness of a Person if (x) the lowest
rated long-term, unsecured debt obligation issued by such Person is rated
"BBB-" or higher by S&P and "Baa3" or higher by Moody's or (y) in the case
of other Indebtedness, the payment of such other Indebtedness is secured by an
irrevocable letter of credit issued by a commercial bank having capital and
surplus in excess of $100 million and long-term unsecured debt obligations rated
at least "A-" by S&P and "A3" by Moody's.
"CHANGE OF CONTROL" means (i) a determination by the Company that any
Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act)
has become the direct or indirect beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the Voting Stock of the Company;
(ii) the Company is merged with or into or consolidated with another corporation
and, immediately after giving effect to the merger or consolidation, less than
50% of the outstanding voting securities entitled to vote generally in the
election of directors or persons who serve similar functions of the surviving or
resulting entity are then beneficially owned (within the meaning of Rule 13d-3
of the Exchange Act) in the aggregate by (x) the stockholders of the Company
immediately prior to such merger or consolidation, or (y) if the record date has
been set to determine the stockholders of the Company entitled to vote on such
merger or consolidation, the stockholders of the Company as of such record date;
(iii) the Company, either individually or in conjunction with one or more
Subsidiaries, sells, conveys, transfers or leases, or the Subsidiaries sell,
convey, transfer or lease, all or substantially all of the assets of the Company
and the Subsidiaries, taken as a whole (either in one transaction or a series of
related transactions), including Capital Stock of the Subsidiaries, to any
Person (other than a Wholly Owned Subsidiary); (iv) the liquidation or
dissolution of the Company; or (v) the first day on which a majority of the
individuals who constitute the Board of Directors are not Continuing Directors.
"CONSOLIDATED CURRENT LIABILITIES' of any Person means, as of any date,
the total liabilities (including tax and other proper accruals) of such Person
and its subsidiaries (other than Non-Recourse Subsidiaries) on a consolidated
basis at such date which may properly be classified as current liabilities in
accordance with GAAP.
"CONSOLIDATED INTEREST COVERAGE RATIO" means as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company for the latest four fiscal quarters for which financial
information in respect thereof is available immediately prior to the applicable
Transaction Date (the "Determination Period") to (ii) the aggregate
Consolidated Interest Expense of the Company that is anticipated to accrue
during a period consisting of the fiscal quarter in which the Transaction Date
occurs and the three fiscal quarters immediately subsequent thereto (based upon
the pro forma amount and maturity
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of, and interest payments in respect of, Indebtedness of the Company and its
consolidated Subsidiaries expected by the Company to be outstanding on the
Transaction Date and reasonably anticipated by the Company to be outstanding
from time to time during such period), assuming for the purposes of this
measurement the continuation of market interest rates prevailing on the
Transaction Date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in effect as of
the Transaction Date, PROVIDED that if the Company or any of its consolidated
Subsidiaries (other than Non-Recourse Subsidiaries) is a party to any Interest
Swap Obligation which would have the effect of changing the interest rate on any
Indebtedness of the Company or any of its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) for such four-quarter period (or a portion thereof),
the resulting rate shall be used for such four-quarter period or portion
thereof; PROVIDED, HOWEVER, that any Consolidated Interest Expense of the
Company with respect to Indebtedness incurred or retired by the Company or any
of its Subsidiaries (other than Non-Recourse Subsidiaries) during the fiscal
quarter in which the Transaction Date occurs shall be calculated as if such debt
was so incurred or retired on the first day of the fiscal quarter in which the
Transaction Date occurs; PROVIDED, FURTHER, that if the transaction giving rise
to the need to calculate the Consolidated Interest Coverage Ratio would have the
effect of increasing or decreasing EBITDA in the future and if such increase or
decrease is readily quantifiable and is directly attributable to such
transaction, EBITDA shall be calculated on a pro forma basis as if such
transaction had occurred on the first day of the four fiscal quarters referred
to in clause (i) of this definition, and if, during the same four fiscal
quarters, (x) the Company or any of its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) shall have engaged in any Asset Sale, EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive), or
increased by an amount equal to the EBITDA (if negative), directly attributable
to the assets which are the subject of such Asset Sale for such period
calculated on a pro forma basis as if such Asset Sale and any related retirement
of Indebtedness had occurred on the first day of such period or (y) after the
Issue Date, the Company or any of its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) shall have acquired any material assets other than in
the ordinary course of business, EBITDA and Consolidated Interest Expense (if
Indebtedness is incurred or assumed in connection with such acquisition) shall
be calculated on a pro forma basis as if such acquisition and related financing
had occurred on the first day of such period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any person for any
period, without duplication, (A) the sum of (i) the aggregate amount of cash and
noncash interest expense (including capitalized interest) of such Person and its
subsidiaries (other than Non-Recourse Subsidiaries) for such period as
determined on a consolidated basis in accordance with GAAP in respect of
Indebtedness (including, without limitation, (v) any amortization of debt
discount, (w) net costs associated with Interest Swap Obligations (including any
amortization of discounts), (x) the interest portion of any deferred payment
obligation, (y) all accrued interest and (z) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bankers
acceptances or similar facilities paid or accrued, or scheduled to be paid or
accrued, during such period other than in respect of Non-Recourse Indebtedness);
(ii) dividends on preferred stock of such Person (and preferred stock of its
subsidiaries (other than Non-Recourse Subsidiaries) if paid to a Person other
than such Person or its subsidiaries) declared and payable in cash; (iii) the
portion of any rental obligation of such Person or its subsidiaries (other than
Non-Recourse Subsidiaries) in respect of any Capital Lease Obligation allocable
to interest expense in accordance with GAAP; (iv) the portion of any rental
obligation of such Person or its subsidiaries (other than Non-Recourse
Subsidiaries) in respect of any Sale and Lease-Back Transaction allocable to
interest expense (determined as if such were treated as a Capital Lease
Obligation); and (v) to the extent any debt of any other Person is guaranteed by
such Person or any of its subsidiaries (other than Non-Recourse Subsidiaries),
(A) the aggregate amount of interest paid, accrued or scheduled to be paid or
accrued, by such other Person during such period attributable to any such debt,
LESS (B) to the extent included in (A) above, amortization or writeoff of
deferred financing costs of such Person and its subsidiaries during such period
and any charge related or any premium or penalty paid in connection with
redeeming or retiring any Indebtedness of such Person and its subsidiaries prior
to its stated maturity; in the case of both (A) and (B) above, after elimination
of intercompany accounts among such Person and its subsidiaries and as
determined in accordance with GAAP.
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"CONSOLIDATED NET INCOME" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP, PROVIDED that there shall be excluded therefrom, without duplication,
(i) any net income of any Non-Recourse Subsidiary, except that the Company's or
any Subsidiary's equity in the net income of such Non-Recourse Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash or cash equivalents actually distributed by such Non-
Recourse Subsidiary during such period to the Company or such subsidiary as a
dividend or other distribution, (ii) gains and losses from Asset Sales or
reserves relating thereto, (iii) items classified as extraordinary (other than
the tax benefit, if any, of the utilization of net operating loss carryforwards
or alternative minimum tax credits), (iv) the net income of any Person acquired
by such specified Person (other than a Non-Recourse Subsidiary) or any of its
subsidiaries in a pooling-of-interests transaction for any period prior to the
date of such acquisition, (v) any gain or loss, net of taxes, realized on the
termination of any employee pension benefit plan, and (vi) the net income of any
subsidiary of such specified Person to the extent that the transfer to that
Person of that income is not at the time permitted, directly or indirectly, by
any means (including by dividend, distribution, advance or loan or otherwise),
by operation of the terms of its charter or any agreement with a Person other
than with such specified Person, instrument held by a Person other than by such
specified Person, judgment, decree, order, statute, law, rule or governmental
regulations applicable to such subsidiary or its stockholders, except for any
dividends or distributions actually paid by such subsidiary to such Person.
"CONSOLIDATED NET TANGIBLE ASSETS" of any Person means, as of any date,
Consolidated Tangible Assets of such Person at such date, after deducting
therefrom (without duplication of deductions) all Consolidated Current
Liabilities of such Person at such date.
"CONSOLIDATED NET WORTH" of any Person means, as of any date, the sum of
the Capital Stock and additional paid-in capital plus retained earnings (or
minus accumulated deficit) of such Person and its subsidiaries on a consolidated
basis at such date, each item determined in accordance with GAAP, less amounts
attributable to Redeemable Stock of such Person or any of its subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of any Person means, as of any date, the
consolidated assets of such Person and its subsidiaries (other than Non-Recourse
Subsidiaries) at such date, after eliminating intercom-pany items and after
deducting from such total (i) the net book value of all assets that would be
classified as intangibles under GAAP (including, without limitation, goodwill,
organizational expenses, trademarks, trade names, copyrights, patents, licenses
and any rights in any thereof) and (ii) any prepaid expenses, deferred charges
and unamortized debt discount and expense, each such item determined in
accordance with GAAP.
"CONTINUING DIRECTOR" means an individual who (i) is a member of the
Board of Directors of the Company and (ii) either (A) was a member of the Board
of Directors of the Company on the Issue Date or (B) whose nomination for
election or election to the Board of Directors of the Company was approved by
vote of at least 66 2/3% of the directors then still in office who were either
directors on the Issue Date or whose election or nomination for election was
previously so approved.
"CURRENCY HEDGE OBLIGATIONS" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or future contract or other similar agreement or arrangement designed to protect
against or manage such Person's or any of its subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"DEFAULT" means any event, act or condition the occurrence of which is,
or after notice or the passage time or both would be, an Event of Default.
"DETERMINATION PERIOD" has the meaning specified under clause (i) of the
definition of "Consolidated Interest Coverage Ratio."
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such person, for such period, plus to the extent
reflected in the income statement of such Person for such period
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from which Consolidated Net Income is determined, without duplication, (i)
Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation
expense, (iv) amortization expense, (v) any charge related to any premium or
penalty paid in connection with redeeming or retiring any Indebtedness prior to
its stated maturity, and (vi) any other non-cash charges.
"FAIR MARKET VALUE" means, with respect to consideration received or to
be received pursuant to any transaction by any Person, the fair market value of
such consideration as determined in good faith by the Board of Directors of the
Company.
"FAIR VALUE" means, with respect to any asset or Property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"FUNDED INDEBTEDNESS" means all Indebtedness incurred under any revolving
credit, letter of credit or working capital facility that matures by its terms,
or that is renewable at the option of any obligor therein to a date more than
one year after the date on which such Indebtedness is originally incurred.
"GAAP" means, at any date, United States generally accepted accounting
principles, consistently applied, as set forth in the opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants
("AICPA") and statements of the Financial Accounting Standards Board, or in
such other statements by such other entity as may be designated by the AICPA,
that are applicable to the circumstances as of the date of determination;
PROVIDED, HOWEVER, that all calculations made for purposes of determining
compliance with the provisions set forth in "Consolidation, Merger and Sale of
Assets" and with the terms of the covenants set forth in "Certain Covenants"
shall utilize GAAP in effect at the Issue Date.
"INDEBTEDNESS" as applied to any Person means, at any time, without
duplication, (i) any obligation of such Person, contingent or otherwise, for
borrowed money; (ii) any obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments; (iii) any obligation of such
Person for all or any part of the purchase price of Property or for the cost of
Property constructed or of improvements thereto (including any obligation under
or in connection with any letter of credit related thereto), other than accounts
payable included in current liabilities incurred in respect of Property and
services purchased in the ordinary course of business; (iv) any obligation of
such Person upon which interest charges are customarily paid (other than
accounts payable incurred in the ordinary course of business); (v) any
obligation of such Person under conditional sale or other title retention
agreements relating to purchased Property; (vi) any obligation of such Person
issued or assumed as the deferred purchase price of Property (other than
accounts payable incurred in the ordinary course of business); (vii) any Capital
Lease Obligation; (viii) any obligation of any other Person secured by (or for
which the obligee thereof has an existing right, contingent or otherwise, to be
secured by) any Lien on Property owned or acquired, whether or not any
obligation secured thereby has been assumed, by such Person; (ix) any obligation
of such Person in respect of any letter of credit supporting any obligation of
any other Person; (x) the maximum fixed repurchase price of any Redeemable Stock
of such Person (or if such Person is a subsidiary, any preferred stock of such
Person); (xi) any Interest Swap Obligation or Currency Hedge Obligation of such
Person; and (xii) any obligation which is in economic effect a guarantee,
regardless of its characterization (other than an endorsement in the ordinary
course of business), with respect to any Indebtedness of another Person, to the
extent guaranteed. For purposes of the preceding sentence, the maximum fixed
repurchase price of any Redeemable Stock or subsidiary preferred stock that does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Stock or subsidiary preferred stock as if such
Redeemable Stock or subsidiary preferred stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to the Indenture;
PROVIDED, HOWEVER, that if such Redeemable Stock or subsidiary preferred stock
is not then permitted to be repurchased, the repurchase price shall be the book
value of such Redeemable Stock or subsidiary preferred stock. The amount of
Indebtedness of any Person at any date shall be (x) the outstanding book value
at such date of all unconditional obligations as described above and (y) the
maximum liability of any such contingent obligation at such date.
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"INTEREST SWAP OBLIGATIONS" means, with respect to any Person, the
obligation of such Person pursuant to any interest rate swap agreement, interest
rate cap, collar or floor agreement or other similar agreement or arrangement
designed to protect against or manage such Person's or any of its subsidiaries'
exposure to fluctuations in interest rates.
"INVESTMENT" means, with respect to any Person, any investment in another
Person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures or prepayments or deposits in the
ordinary course of business) or similar credit extension constituting
Indebtedness of such other Person and any guarantee of Indebtedness of any other
Person; PROVIDED, HOWEVER, that the term "Investment" shall not include any
transaction involving the purchase or other acquisition (including by way of
merger) of Property (including Capital Stock) by the Company or any Subsidiary
in exchange for Capital Stock (other than Redeemable Stock) of the Company. The
amount of any Person's Investment shall be the original cost of such Investment
to such Person, PLUS the cost of all additions thereto paid by such Person, and
MINUS the amount of any portion of such Investment repaid to such Person in cash
as a repayment of principal or a return of capital, as the case may be, but
without any other adjustments for increases or decreases in value, or writeups,
writedowns or writeoffs with respect to such Investment in determining the
amount of any investment involving a transfer of any Property other than cash,
such Property shall be valued at its Fair Value at the time of such transfer as
determined in good faith by the board of directors (or comparable body) of the
Person making such transfer.
"ISSUE DATE" means the date on which the Notes are first authenticated
and delivered under the Indenture.
"LIEN" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encum-brance, security interest, lien (statutory or other),
or preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"LIMITED RECOURSE INDEBTEDNESS" means (A) Indebtedness with respect to
the two drilling / workover barge rigs owned by the Company's Venezuelan
Subsidiary as in effect on the date of the Indenture (the "Venezuelan Barge
Financing") and (B) Indebtedness incurred to finance the purchase, acquisition,
renovation or construction of capital assets and related items (including
interest added to principal), or refinancings thereof, (i) in respect of which
the recourse of the holder of such Indebtedness is effectively limited to such
capital assets and related items or (ii) in which the recourse and security are
similar to (or more favorable to the Company and its Subsidiaries than) the
Venezuelan Barge Financing.
"MATURITY" means the date on which the principal of a Note becomes due
and payable as provided therein or in the Indenture, whether at the Stated
Maturity or by declaration of acceleration or otherwise.
"NET AVAILABLE PROCEEDS" means, (a) as to any Asset Sale (other than a
Bargain Purchase Contract), the Cash Proceeds therefrom, net of all legal and
title expenses, commissions and other fees and expenses incurred, and all
Federal, state, provincial, foreign, recording and local taxes payable as a
consequence of such Asset Sale, net of all payment made to any Person other than
the Company or a Subsidiary on any Indebtedness which is secured by such assets,
in accordance with the terms of any Lien upon or with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such Asset
Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale
and, as for any Asset Sale by a Subsidiary, net of the equity interest in such
Cash Proceeds of any holder of Capital Stock of such Subsidiary (other than the
Company or any other Subsidiary) and (b) as to any Bargain Purchase Contract, an
amount equal to (i) that portion of the rental or other payment stream arising
under a Bargain Purchase Contract that represents an amount in excess of the
Fair Market Value of the rental or other payments with respect to the pertinent
Property or other asset and (ii) the Cash Proceeds from the sale of such
Property or other asset, net of the amounts set forth in clause (a) above, in
each case as and when received.
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"NON-RECOURSE INDEBTEDNESS" means Indebtedness or that portion of
Indebtedness of a Non-Recourse Subsidiary as to which (a) neither the Company
nor any other Subsidiary (other than a Non-Recourse Subsidiary) (i) provides
credit support including any undertaking, agreement or instrument which would
constitute Indebtedness or (ii) is directly or indirectly liable for such
Indebtedness and (b) no default with respect to such Indebtedness (including any
rights which the holders thereof may have to take enforcement action against a
Non-Recourse Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of the Company or its Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"NON-RECOURSE SUBSIDIARY" means (i) any Subsidiary of the Company that at
the time of determination will be designated a Non-Recourse Subsidiary by the
Board of Directors of the Company as provided below and (ii) any Subsidiary of a
Non-Recourse Subsidiary. The Board of Directors of the Company may designate any
Subsidiary of the Company as a Non-Recourse Subsidiary so long as (a) neither
the Company nor any Subsidiary is directly or indirectly liable pursuant to the
terms of any Indebtedness of such Subsidiary; (b) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Subsidiary
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity; (c) neither the Company
nor any Subsidiary has made an Investment in such Subsidiary unless such
Investment was made pursuant to, and in accordance with, the "Limitation on
Restricted Payments" covenant (other than Investments of the type described in
clause (i) of the definition of "Permitted Investments"); and (d) such
designation shall not result in the creation or imposition of any Lien on any
Property of the Company or any Subsidiary (other than any Permitted Lien or any
Lien the creation or imposition of which shall have been in compliance with the
"Limitation on Liens" covenant); PROVIDED, HOWEVER, that with respect to
clause (a), the Company or a Subsidiary may be liable for Indebtedness of a
Non-Recourse Subsidiary if (x) such liability constituted a Permitted Investment
or a Restricted Payment permitted by the "Limitation on Restricted Payments"
covenant, in each case at the time of incurrence, or (y) the liability would be
a Permitted Investment at the time of designation of such Subsidiary as a
Non-Recourse Subsidiary. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing a Board Resolution with the
Trustee giving effect to such designation. The Board of Directors of the Company
may designate any Non-Recourse Subsidiary as a Subsidiary if, immediately after
giving effect to such designation, (i) no Default or Event of Default shall have
occurred and be continuing, (ii) the Company could incur $1.00 of additional
Indebtedness (not including the incurrence of Permitted Indebtedness) under the
first paragraph of the "Limitation on Indebtedness" covenant and (iii) if any
Property of the Company or any of its Subsidiaries would upon such designation
become subject to any Lien (other than a Permitted Lien), the creation or
imposition of such Lien shall have been in compliance with the "Limitation on
Liens" covenant.
"PERMITTED INDEBTEDNESS" means (a) Indebtedness of the Company under the
Notes; (b) Indebtedness (and any guarantee or pledge thereof) under one or more
bank revolving credit facilities in an aggregate principal amount at any one
time outstanding not to exceed the greater of (A) $100 million and (B) an amount
equal to 10% of Consolidated Net Tangible Assets determined as of the date of
the incurrence of such Indebtedness (plus interest and fees under such
facilities), less any amounts derived from Asset Sales and applied to the
permanent reduction of Indebtedness thereunder (and a permanent reduction of the
related commitment to lend thereunder) as contemplated by the "Limitation on
Asset Sales" covenant; (c) Indebtedness of the Company or any Subsidiary under
Interest Swap Obligations, PROVIDED that (i) such Interest Swap Obligations are
related to payment obligations on Indebtedness otherwise permitted under the
covenants described in "-- Certain Covenants -- Limitation on Indebtedness"
and (ii) the notional principal amount of such Interest Swap Obligations does
not exceed the principal amount of the Indebtedness to which such Interest Swap
Obligations relate; (d) Indebtedness of the Company or any Subsidiary under
Currency Hedge Obligations, PROVIDED that (i) such Currency Hedge Obligations
are related to payment obligations on Indebtedness otherwise permitted under the
covenants described in "-- Certain Covenants -- Limitation on Indebtedness" or
to the foreign currency cash flows reasonably expected to be generated by the
Company and the Subsidiaries and (ii) the notional principal amount of such
Currency
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Hedge Obligations does not exceed the principal amount of the Indebtedness and
the amount of the foreign currency cash flows to which such Currency Hedge
Obligations relate; (e) Indebtedness of the Company or any Subsidiary
outstanding on the Issue Date; (f) the Subsidiary Guarantees of the Notes (and
any assumption of the obligations guaranteed thereby); (g) Indebtedness of the
Company or any Subsidiary in respect of bid performance bonds, surety bonds,
appeal bonds and letters of credit or similar arrangement issued for the account
of the Company or any Subsidiary, in each case in the ordinary course of
business; (h) Indebtedness of the Company to any Wholly Owned Subsidiary (but
only so long as it remains a Wholly Owned Subsidiary); (i) Indebtedness of any
Subsidiary (other than a Non-Recourse Subsidiary) to the Company or any Wholly
Owned Subsidiary (but only so long as it remains a Wholly Owned Subsidiary); (j)
Indebtedness of the Company in connection with a purchase of the Notes pursuant
to a Change of Control Offer, PROVIDED that the aggregate principal amount of
such Indebtedness does not exceed 101% of the aggregate principal amount of the
Notes purchased pursuant to such Change of Control Offer plus the related
expenses of such purchase; PROVIDED, FURTHER, that such Indebtedness (A) has an
Average Life equal to or greater than the remaining Average Life of the Notes
and (B) does not mature prior to one year following the Stated Maturity of the
Notes; (k) Permitted Refinancing Indebtedness and (l) Permitted Subsidiary
Refinancing Indebtedness. So as to avoid duplication in determining the amount
of Permitted Indebtedness under any clause of this definition, guarantees of, or
obligations in respect of letters of credit supporting, Indebtedness otherwise
included in the determination of such amount shall not also be included.
"PERMITTED INVESTMENTS" means (a) certificates of deposit, bankers
acceptances, time deposits, Eurocurrency deposits and similar types of
Investments routinely offered by commercial banks with final maturities of one
year or less issued by commercial banks having capital and surplus in excess of
$100 million; (b) commercial paper issued by any corporation, if such commercial
paper has credit ratings of at least A-l by "S&P" and at least "P-I" by
Moody's; (c) U.S. Government Obligations with a maturity of four years or less;
(d) repurchase obligations for instruments of the type described in clause (c);
(e) shares of money market mutual or similar funds having assets in excess of
$100 million; (f) payroll advances in the ordinary course of business; (g) other
advances and loans to officers and employees of the Company or any Subsidiary,
so long as the aggregate principal amount of such advances and loans does not
exceed $500,000 at any one time outstanding; (h) Investments represented by that
portion of the proceeds from Asset Sales (1) that is not Cash Proceeds or (2)
that is deemed to be Cash Proceeds pursuant to the second sentence of the
definition of Cash Proceeds; (i) Investments made by the Company in its Wholly
Owned Subsidiaries (or any Person that will be a Wholly Owned Subsidiary as a
result of such Investment) or by a Subsidiary in the Company or in one or more
Wholly Owned Subsidiaries (or any Person that will be a Wholly Owned Subsidiary
as a result of such Investment ); (j) Investments in stock, obligations or
securities received in settlement of debts owing to the Company or any
Subsidiary as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection or enforcement of any Lien in favor of the Company or
any Subsidiary, in each case as to debt owing to the Company or any Subsidiary
that arose in the ordinary course of business of the Company or any such
Subsidiary, provided that any stocks, obligations or securities received in
settlement of debts that arose in the ordinary course of business (and received
other than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within 30 days of
receipt, converted into cash or cash equivalents shall be treated as having been
cash or cash equivalents at the time received; (k) Investments in any Person
(other than the Company or any Wholly Owned Subsidiary) engaged in construction,
ownership or operation of rigs and related equipment pursuant to the tender of
Petrobras for construction and operation of two dynamically positioned
semi-submersible rigs designated Amethyst 2 and 3 in an aggregate amount not to
exceed $35 million at any time outstanding; and (l) Investments in any Person
(other than the Company or any Wholly Owned Subsidiary) engaged in the
construction, ownership or operation of rigs and related equipment pursuant to
Lagoven, S.A.'s Call for Bids No. 96-0-016-4-0 for construction and operations
of "Multipurpose Units" in Venezuela in an aggregate amount not to exceed $15
million at any time outstanding.
"PERMITTED LIENS" means (a) Liens in existence on the Issue Date; (b)
Liens created for the benefit of the Notes; (c) Liens on Property of a Person
existing at the time such Person is merged or consolidated with or into the
Company or a Subsidiary (and not incurred as a result of, or in anticipation of,
such transaction),
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PROVIDED that such Lien relates solely to such Property and the proceeds thereof
and accessories and upgrades thereto; (d) Liens on Property existing at the time
of the acquisition thereof (and not incurred as a result of, or in anticipation
of, such transaction), PROVIDED that such Liens relate solely to such Property
and the proceeds thereof and accessories and upgrades thereto; (e) Liens
incurred or pledges and deposits made in connection with worker's compensation,
unemployment insurance and other social security benefits, statutory
obligations, bid, surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business; (f) Liens imposed
by law or arising by operation of law, including, without limitation,
landlords', mechanics', carriers', warehousemen's, materialmen's, suppliers' and
vendors' Liens and Liens for master's and crew's wages and other similar
maritime Liens, and incurred in the ordinary course of business; (g) zoning
restrictions, easements, licenses, covenants, reservations, restrictions on the
use of real property and defects, irregularities and deficiencies in title to
real property that do not, individually or in the aggregate, materially affect
the ability of the Company or any Subsidiary to conduct its business presently
conducted; (h) Liens for taxes or assessments or other governmental charges or
levies not yet due and payable, or the validity of which is being contested by
the Company or a Subsidiary in good faith appropriate proceedings upon stay of
execution or the enforcement thereof and for which adequate reserves in
accordance with GAAP or other appropriate provision has been made; (i) Liens to
secure Indebtedness incurred for the purpose of financing all or a part of the
purchase price or construction cost of Property (including the cost of upgrading
or refurbishing rigs or drillships) acquired or constructed after the Issue
Date, PROVIDED that (1) the principal amount of Indebtedness secured by such
Liens shall not exceed 100% of the lesser of cost or Fair Market Value of the
Property so acquired, upgraded or constructed plus transaction costs related
thereto, (2) such Liens shall not encumber any other assets or Property of the
Company or any Subsidiary (other than the proceeds thereof and accessions and
upgrades thereto) and (3) such Liens shall attach to such Property within 120
days of the date of the completion of the construction or acquisition of such
Property; (j) Liens securing Capital Lease Obligations, PROVIDED that such Liens
secure Capital Lease Obligations which, when combined with (1) the outstanding
secured Indebtedness of the Company and it Subsidiaries (other than Indebtedness
secured by Liens described under clauses (b) and (i) hereof) and (2) the
aggregate amount of all other Capital Lease Obligations of the Company and
Subsidiaries, does not exceed 10% of the Company's Consolidated Net Tangible
Assets; (k) Liens to secure any extension, renewal, refinancing or refunding (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, of any Indebtedness secured by Liens referred to in the foregoing clauses
(a), (b), (c) and (d), PROVIDED that such Liens do not extend to any other
Property of the Company or any Subsidiary (other than the proceeds thereof and
accessions and upgrades thereto) and the principal amount of the Indebtedness
secured by such Liens is not increased; (l) any charter or lease of drilling
rigs in the ordinary of course of business; (m) leases or subleases of real
property to other Persons in the ordinary course of business; (n) Liens securing
Non-Recourse Indebtedness; (o) Liens securing Permitted Indebtedness described
in clause (b) of the definitions thereof; (p) judgment liens not giving rise to
an Event of Default so long as any appropriate legal proceedings which may have
been only initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall not
have expired; and (q) rights of set-off of banks and other Persons.
"PERMITTED NON-RECOURSE SUBSIDIARY REFINANCING INDEBTEDNESS" means
Non-Recourse Indebtedness of any Non-Recourse Subsidiary, incurred in exchange
for, or the net proceeds of which are used to renew, extend, refinance, refund
or repurchase outstanding Non-Recourse Indebtedness of such Subsidiary which
outstanding Non-Recourse Indebtedness was incurred in accordance with, or is
otherwise permitted by, the terms of the Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness of the Company,
incurred in exchange for, or the net proceeds of which are used to renew,
extend, refinance, refund or repurchase outstanding Indebtedness of the Company
which outstanding Indebtedness was incurred in accordance with, or is otherwise
permitted by, the terms of the Indenture (excluding any Permitted Indebtedness),
PROVIDED that (i) if the Indebtedness being renewed, extended, refinanced,
refunded or repurchased is PARI PASSU with or subordinated in right of payment
to the Notes, then such new Indebtedness is PARI PASSU with or subordinated in
right of payment (without regard to its being secured) to, as the case may be,
the Notes at
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least to the same extent as the Indebtedness being renewed, extended, refinanced
refunded or repurchased, (ii) such new Indebtedness is scheduled to mature later
than the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, (iii) such new Indebtedness has an Average Life at the time such
Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, and
(iv) such new Indebtedness is in an aggregate principal amount (or, if such
Indebtedness is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the aggregate
principal amount then outstanding of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased (or if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased was issued at a price less than
the principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses and premium, if any, incurred by the Company or such
Subsidiary in connection therewith.
"PERMITTED SUBSIDIARY REFINANCING INDEBTEDNESS" means Indebtedness of any
Subsidiary (other than a Non-Recourse Subsidiary) incurred in exchange for, or
the net proceeds of which are used to renew, extend, refinance, refund or
repurchase outstanding Indebtedness of such Subsidiary which outstanding
Indebtedness was incurred in accordance with, or is otherwise permitted by, the
terms of the Indenture, PROVIDED that (i) such new Indebtedness is scheduled to
mature later than the Indebtedness being renewed, extended, refinanced, refunded
or repurchased, (ii) such new Indebtedness has an Average Life at the time such
Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, and
(iii) such new Indebtedness is in an aggregate principal amount (or, if such
indebtedness is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the aggregate
principal amount then outstanding of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased (or if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased was issued at a price less than
the principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses and premium, if any, incurred by the Company or such
Subsidiary in connection therewith.
"PERSON" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"PROPERTY" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, excluding Capital Stock in any other Person.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of Common
Stock for cash by the Company pursuant to a registration statement that has been
declared effective by the Commission (other than a registration statement on
Form S-8 or any successor form or otherwise relating to equity securities
issuable under any employee benefit plan of the Company).
"REDEEMABLE STOCK" means, with respect to any Person, any equity security
that by its terms or otherwise is required to be redeemed, or is redeemable at
the option of the holder thereof, at any time prior to one year following the
Stated Maturity of the Notes or is exchangeable into Indebtedness of such Person
or any of its subsidiaries.
"RELATED BUSINESS" means any business related, ancillary or complementary
to the business of the Company and its Subsidiaries on the Issue Date.
"REPLACEMENT ASSET" means a Property or asset that, as determined by the
Board of Directors of the Company as evidenced by a Board Resolution, is used or
is useful in a Related Business.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED PAYMENT" means to (i) declare or pay any dividend on, or make
any distribution in respect of, or purchase, redeem, retire or otherwise acquire
for value any Capital Stock of the Company or any Affiliate of the Company, or
warrants, rights or options to acquire such Capital Stock, other than (x)
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dividends payable solely in the Capital Stock (other than Redeemable Stock) of
the Company or such Affiliate, as the case may be, or in warrants, rights or
options to acquire such Capital Stock and (y) dividends or distributions by a
Subsidiary to the Company or to a Wholly Owned Subsidiary; (ii) make any
principal payment on, or redeem, repurchase, defease or otherwise acquire or
retire for value, prior to any scheduled principal payment, scheduled sinking
fund payment or other stated maturity, Indebtedness of the Company or any
Subsidiary which is subordinated in right of payment to the Notes; or (iii) make
any Restricted Investment in any Person.
"SALE AND LEASE-BACK TRANSACTION" means, with respect to any Person, any
direct or indirect arrange-ment pursuant to which Property is sold or
transferred by such Person or a subsidiary of such Person and is thereafter
leased back from the purchaser or transferee thereof by such Person or one of
its subsidiaries.
"SENIOR DEBT" means any Indebtedness incurred by the Company, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is subordinated in right of payment to the Notes, PROVIDED that Senior Debt will
not include (a) any liability for federal, state, local or other taxes owed or
owing, (b) any Indebtedness owing to any Subsidiaries of the Company, (c) any
trade payables or (d) any Indebtedness that is incurred in violation of the
Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"STATED MATURITY," when used with respect to a Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees, as the case may be, and does not mature prior to one
year following the Stated Maturity of the Notes.
The term "SUBSIDIARY" means, with respect to any Person, (i) any
corporation more than 50% of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person, or by one or more other subsidiaries or
such Person, or by such Person and one or more other subsidiaries of such
Person, (ii) any general partnership, joint venture or similar entity, more than
50% of the outstanding partnership or similar interests of which is owned,
directly or indirectly, by such Person, or by one or more other subsidiaries of
such Person, or by such Person and one or more other subsidiaries of such Person
and (iii) any limited partnership of which such Person or any subsidiary of such
Person is a general partner.
"SUBSIDIARY" means a subsidiary of the Company other than a Non-Recourse
Subsidiary.
"SUBSIDIARY GUARANTEE" means any guarantee of the Notes by any Subsidiary
Guarantor in accordance with the provisions described under "-- Subsidiary
Guarantees of Notes."
"SUBSIDIARY GUARANTOR" means (i) each of the Company's Subsidiaries, if
any, executing a supplemental indenture in which such Subsidiary agrees to be
bound by the terms of the Indenture and (ii) any Person that becomes a successor
guarantor of the Notes in compliance with the provisions described under
"-- Subsidiary Guarantees of Notes."
"TRANSACTION DATE" has the meaning specified within the definition of
"Consolidated Interest Coverage Ratio."
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) above, are not callable or redeemable at the option of the
issuer thereof; or (iii) depository receipts issued by a bank or trust company
as custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a depository receipt,
PROVIDED that
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(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation evidenced by such depository receipt.
"VOTING STOCK" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or at the times that such class of Capital Stock has
voting power by reason of the happening of any contingency) to vote in the
election of members of the board of directors or comparable body of such Person.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary to the extent (i) all of
the Capital Stock or other ownership interests in such Subsidiary, other than
any director's qualifying shares mandated by applicable law, is owned directly
or indirectly by the Company or (ii) such Subsidiary is organized in a foreign
jurisdiction and is required by the applicable laws and regulations of such
foreign jurisdiction to be partially owned by the government of such foreign
jurisdiction or individual or corporate citizens of such foreign jurisdiction in
order for such Subsidiary to transact business in such foreign jurisdiction,
provided that the Company, directly or indirectly, owns the remaining Capital
Stock or ownership interest in such Subsidiary and, by contract or otherwise,
controls the management and business of such Subsidiary and derives the economic
benefits of ownership of such Subsidiary to substantially the same extent as if
such Subsidiary were a wholly owned Subsidiary.
BOOK ENTRY, DELIVERY AND FORM
The Notes will be issued in the form of a fully registered Global Note (the
"Global Note"). The Global Note will be deposited on or about the date of the
closing of the sale of the Notes offered hereby (the "Closing Date") with, or
on behalf of, the Depositary and registered in the name of Cede & Co., as
nominee of the Depositary (such nominee being referred to herein as the "Global
Note Holder").
The Depositary is a limited-purpose trust company which was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between Participants
through electronic book-entry changes in accounts of its Participants. The
Depositary's Participants include securities brokers and dealers (including the
Initial Purchasers), banks and trust companies, clearing corporations and
certain other organizations. Access to the Depositary's system is also available
to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
the Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Note and (ii) ownership of the Notes will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of some
states require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Notes will be
limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole owner or holder of such Notes
outstanding under the Indenture. Except as provided below, owners of Notes will
not be entitled to have Notes registered in their names, will not receive or be
entitled to receive physical delivery of Notes in definitive form, and will not
be considered the owners or holders thereof under the Indenture for any purpose,
including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. As a result, the ability of a Person having
a beneficial interest in Notes represented by the Global Note to pledge such
interest to Persons or entities that do not
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participate in the Depositary's system or to otherwise take actions in respect
of such interest may be affected by the lack of a physical certificate
evidencing such interest.
Neither the Company, the Trustee, the Paying Agent nor the Notes Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of Notes by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such Notes.
Payments in respect of the principal, premium, if any, and interest on any
Notes registered in the name of a Global Note Holder on the applicable record
date will be payable by the Trustee to or at the direction of such Global Note
Holder in its capacity as the registered holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the Persons in
whose names the Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, none of the Company nor the Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of Notes (including principal, premium, if any, and interest).
The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payment, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owner of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
As long as the Notes are represented by a Global Note, the Depositary's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. See
"-- Change of Control" and "-- Certain Covenants -- Limitation on Asset
Sales." Notice by Participants or Indirect Participants or by owners of
beneficial interests in a Global Note held through such Participants or Indirect
Participants of the exercise of the option to elect repayment of beneficial
interests in Notes represented by a Global Note must be transmitted to the
Depositary in accordance with its procedures on a form required by the
Depositary and provided to Participants. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment with respect to a
particular Note, the beneficial owner of such Note must instruct the broker or
the Participant or Indirect Participant through which it holds an interest in
such Note to notify the Depositary of its desire to exercise a right to
repayment. Different firms have cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other Participant or Indirect Participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary. The Company will not be liable for any delay in delivery of notices
of the exercise of the option to elect repayment.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in
the Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for Notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Notes in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof). In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the relevant Global Note Holder of its Global
Note, Notes in such form will be issued to each Person that such Global Note
Holder and the Depositary identify as the beneficial owner of the related Notes.
Neither the Company nor the Trustee shall be liable for any delay by the
related Global Note Holder or the Depositary in identifying the beneficial
owners of Notes and each such Person may conclusively rely on and shall be
protected in relying on, instructions from the Global Note Holder or of the
Depositary for all
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purposes (including with respect to the registration and delivery, and the
respective principal amounts, of the Notes to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes (including
principal, premium, if any, and interest) be made by wire transfer of
immediately available funds to the accounts specified by the Global Note
Holders. Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearing-house or next-day funds. In contrast,
the Notes are expected to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in the Notes will
therefore be required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in the Certificated Notes also
will be settled in immediately available funds.
TRANSFER AND EXCHANGE
A holder may transfer or exchange the Notes in accordance with the
procedures set forth in the Indenture. The Registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any Note
for a period of 15 days before a selection of the Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Notes, the Company has agreed to sell to the several
Underwriters named below (the "Underwriters"), and the several Underwriters
have agreed to purchase, the principal amounts of the Notes set forth opposite
their respective names:
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
Donaldson, Lufkin & Jenrette
Securities Corporation............. $ 130,000,000
Jefferies & Company, Inc............. 97,500,000
Robert W. Baird & Co.
Incorporated....................... 24,375,000
Morgan Keegan & Company, Inc......... 24,375,000
Simmons & Company International...... 24,375,000
Southcoast Capital Corporation....... 24,375,000
-----------------
Total........................... $ 325,000,000
=================
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of .40% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of .25% of the principal amount of the Notes to certain other dealers.
After the initial offering, the public offering price, concession and discount
may be changed.
During and after the Notes Offering, the Underwriters may purchase and sell
the Notes in the open market. These transactions may include stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the Notes Offering. The Underwriters may also impose a penalty
bid, whereby selling concessions allowed to syndicate members or other
broker-dealers for the Notes sold in the Notes Offering for their account may be
reclaimed by the syndicate if such Notes are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Notes, which may be higher than the
price that might otherwise prevail in the open market, and, if commenced, may be
discontinued at any time.
The Company has agreed to indemnify the Underwriters against or make
contributions relating to certain liabilities, including liabilities under the
Securities Act.
There currently is no public market for the Notes. The Notes will not be
listed on any securities exchange, and there can be no assurance that there will
be a secondary market for the Notes. From time to time, the Underwriters may
make a market in the Notes; however, the Underwriters are not obligated to do so
and may discontinue such market-making at any time. Accordingly, there can be no
assurance as to whether an active trading market for the Notes will develop or
as to the liquidity of any trading market for the Notes.
The Underwriting Agreement will provide that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to the
approval of certain legal matters by counsel to the Underwriters and to certain
other conditions. The Underwriters are committed to take and pay for all of the
Notes if any are taken.
In connection with the Forasol acquisition, Jefferies & Company, Inc. acted
as financial advisor to Forasol, and Simmons & Company International acted as
financial advisor to the Company, and both received customary fees in connection
therewith.
LEGAL MATTERS
Certain legal matters in connection with the Notes offered hereby will be
passed upon for the Company by Baker & Botts, L.L.P., Houston, Texas, and for
the Underwriters by Vinson & Elkins L.L.P., Houston, Texas. McGlinchey Stafford,
a professional limited liability company, New Orleans, Louisiana, will pass on
all matters of Louisiana law in this connection.
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<PAGE>
PROSPECTUS
[LOGO] $500,000,000
PRIDE PETROLEUM SERVICES, INC.
DEBT SECURITIES
COMMON STOCK
------------------
Pride Petroleum Services, Inc. (the "Company") may offer from time to
time its unsecured debt securities consisting of notes, debentures or other
evidences of indebtedness (the "Debt Securities"). The Company may also offer
and sell from time to time shares of its common stock, no par value (the
"Common Stock"). The aggregate initial offering price of the Debt Securities
and the Common Stock to be offered by the Company hereby (the "Securities")
will not exceed $500,000,000 or, if applicable, the equivalent thereof in any
other currency or currency unit. The Securities may be offered as separate
series in amounts, at prices and on terms to be determined in light of market
conditions at the time of sale and set forth in a Prospectus Supplement.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized denominations,
maturity, rate or rates (or method of determining the same) and time or times of
payment of any interest, any terms for optional or mandatory redemption, which
may include redemption at the option of holders upon the occurrence of certain
events, or payment of additional amounts or any sinking fund provisions, any
provisions with respect to conversion (in the case of Debt Securities that may
be convertible into Common Stock), the initial public offering price, the net
proceeds to the Company and any other specific terms in connection with the
offering and sale of such series will be set forth in a Prospectus Supplement.
As used herein, the Debt Securities shall include securities denominated in
United States dollars or, at the option of the Company if so specified in an
applicable Prospectus Supplement, in any other currency or currency unit, or in
amounts determined by reference to an index. In addition, all or a portion of
the Debt Securities of a series may be issuable in temporary or permanent global
form.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents of the Company or any underwriters
are involved in the sale of any Securities in respect of which this Prospectus
is being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement.
The Common Stock is traded on the Nasdaq National Market under the symbol
"PRDE." Any Common Stock offered will be traded, subject to notice of
issuance, on the Nasdaq National Market.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is April 4, 1997.
<PAGE>
NO DEALERS, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING COVERED
BY THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
PAGE
----
Available Information................ 3
Incorporation of Certain Documents by
Reference.......................... 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 4
Description of Capital Stock......... 10
Plan of Distribution................. 13
Legal Matters........................ 14
Independent Public Accountants....... 14
------------------
IN CONNECTION WITH AN OFFERING THROUGH UNDERWRITERS, CERTAIN PERSONS
PARTICIPATING IN SUCH OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED, INCLUDING,
AMONG OTHERS, OVERALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER SUCH OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), which can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and
at the regional offices of the Commission at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at 7 World Trade Center, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. The Commission maintains an Internet
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
(http://www.sec.gov). The Common Stock is traded on the Nasdaq National Market.
This Prospectus, which constitutes part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), omits
certain of the information contained in the Registration Statement. Reference is
hereby made to the Registration Statement and the exhibits thereto, which may be
obtained at the public reference facilities maintained by the Commission as
provided in the preceding paragraph, for further information with respect to the
Company and the Securities offered hereby. Statements contained herein
concerning the provisions of such documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 0-16961), are incorporated in
this Prospectus by reference and shall be deemed to be a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on February 6, 1989, as such
Registration Statement may be amended from time to time for the purpose of
updating, changing or modifying such description;
(c) Current Report on Form 8-K filed March 7, 1997; and
(d) Current Report on Form 8-K filed March 25, 1997.
All documents filed by the Company with the Commission pursuant to sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby (by the
filing of a post-effective amendment to the Registration Statement which
indicates that all securities offered hereby have been sold, or which
deregisters all securities then remaining unsold) shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon the written or oral request of such person, a copy of any or all documents
that have been incorporated herein by reference (not including exhibits to the
documents that have been incorporated herein by reference unless such exhibits
are specifically incorporated by reference in the documents this Prospectus
incorporates). Requests should be directed to
3
<PAGE>
Robert W. Randall, Secretary, Pride Petroleum Services, Inc., 1500 City West
Blvd., Suite 400, Houston, Texas 77042 (telephone number: (713) 789-1400).
THE COMPANY
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., the largest drilling and workover
contractor in Argentina, in April 1996, divested its domestic land-based well
servicing operations in February 1997, and acquired the operating subsidiaries
of Forasol-Foramer N.V., which provide offshore and onshore drilling, workover
and engineering services primarily in Latin America, Africa and the Middle East,
in March 1997. These transactions transformed the Company into one of the
largest and most diversified drilling contractors in the world. 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. Pride Petroleum Services, Inc. is a Louisiana corporation with its
principal executive offices located at 1500 City West Blvd., Suite 400, Houston,
Texas 77042. Its telephone number at that address is (713) 789-1400.
USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement or any Pricing
Supplement, the net proceeds from the sale of Securities will be used for
general corporate purposes, which may include refinancings of indebtedness,
working capital, capital expenditures, acquisitions and repurchases and
redemptions of Securities.
RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994 1993 1992
Ratio of Earnings to Fixed Charges...... 2.7x 4.0x 6.2x 5.8x --
The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus fixed
charges less capitalized interest) by fixed charges (interest expense plus
capitalized interest and the portion of operating lease rental expense that
represents the interest factor). For the year ended December 31, 1992, earnings
were inadequate to cover fixed charges by $1,359,000.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered
Debt Securities and the extent to which such general provisions may apply will
be described in a Prospectus Supplement relating to such Offered Debt
Securities.
The Debt Securities will be general unsecured obligations of the Company
and will be issued under an Indenture (the "Indenture"), between the Company
and The Chase Manhattan Bank, as trustee (the "Trustee"). The statements under
this caption relating to the Debt Securities and the Indenture are summaries
only and do not purport to be complete. Such summaries make use of terms defined
in the Indenture. Wherever such terms are used herein or particular provisions
of the Indenture are referred to, such terms or provisions, as the case may be,
are incorporated by reference as part of the statements made herein, and such
statements are qualified in their entirety by such reference. Certain defined
terms in the Indenture are capitalized herein. The italicized parenthetical
references below refer to the section numbers in the Indenture, unless otherwise
indicated.
4
<PAGE>
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder and provides that Debt Securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indenture does not limit the amount of other unsecured indebtedness or
securities that may be issued by the Company.
Unless otherwise indicated in a Prospectus Supplement, the Debt Securities
will not benefit from any covenant or other provision that would afford Holders
of such Debt Securities special protection in the event of a highly leveraged
transaction involving the Company.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities, which will be issued in registered form: (i) the
title and aggregate principal amount of the Offered Debt Securities; (ii) the
date or dates on which the Offered Debt Securities will mature; (iii) the rate
or rates (which may be fixed or variable) per annum, if any, at which the
Offered Debt Securities will bear interest or the method of determining such
rate or rates; (iv) the date or dates from which such interest, if any, will
accrue and the date or dates at which such interest, if any, will be payable;
(v) the terms for redemption or early payment, if any, including any mandatory
or optional sinking fund or analogous provision; (vi) the terms for conversion
or exchange, if any, of the Offered Debt Securities; (vii) whether such Offered
Debt Securities will be issued in the form of one or more global securities and
whether such global securities are to be issuable in temporary global form or
permanent global form; (viii) if other than U.S. dollars, the currency,
currencies or currency unit or units in which such Offered Debt Securities will
be denominated and in which the principal of, and premium and interest, if any,
on, such Offered Debt Securities will be payable; (ix) whether, and the terms
and conditions on which, the Company or a Holder may elect that, or the other
circumstances under which, payment of principal of, or premium or interest, if
any, on, such Offered Debt Securities is to be made in a currency or currencies
or currency unit or units other than that in which such Offered Debt Securities
are denominated; and (x) any other specific terms of the Offered Debt
Securities. Reference is also made to the Prospectus Supplement for information
with respect to any additional covenants that may be included in the terms of
the Offered Debt Securities. (SECTION 301)
No service charge will be made for any registration of transfer or exchange
of the Debt Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
(SECTION 305)
To the extent the Company conducts its operations through Subsidiaries, the
Holders of Debt Securities will have a junior position to any creditors of the
Company's Subsidiaries.
Offered Debt Securities may be sold at a discount (which may be
substantial) below their stated principal amount bearing no interest or interest
at a rate that at the time of issuance is below market rates. Any material
United States federal income tax consequences and other special considerations
applicable thereto will be described in the Prospectus Supplement relating to
any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of, or premium or interest, if any, on, any of
the Offered Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT
Unless otherwise provided with respect to any series of Debt Securities,
the following are Events of Default under the Indenture with respect to the Debt
Securities of such series issued under such Indenture: (a) failure to pay
principal of (or premium, if any, on) any Debt Security of such series when due;
(b) failure to pay any interest on any Debt Security of such series when due,
continued for 30 days; (c) failure to deposit any mandatory sinking fund
payment, when due, in respect of the Debt Securities of such series, continued
for 30 days; (d) failure to perform any other covenant of the Company in the
Indenture (other
5
<PAGE>
than a covenant included in the Indenture for the benefit of a series of Debt
Securities other than such series), continued for 90 days after written notice
as provided in the Indenture; (e) certain events of bankruptcy, insolvency or
reorganization; and (f) any other Event of Default as may be specified with
respect to Debt Securities of such series. (SECTION 501) If an Event of Default
with respect to any outstanding series of Debt Securities occurs and is
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the outstanding Debt Securities of such series (in the case of an
Event of Default described in clause (a), (b), (c) or (f) above) or at least 25%
in principal amount of all outstanding Debt Securities under the Indenture (in
the case of other Events of Default) may declare the principal amount of all the
Debt Securities of the applicable series (or of all outstanding Debt Securities
under the Indenture, as the case may be) to be due and payable immediately. At
any time after a declaration of acceleration has been made, but before a
judgment has been obtained, the Holders of a majority in principal amount of the
outstanding Debt Securities of such series (or of all outstanding Debt
Securities under the applicable Indenture, as the case may be) may, under
certain circumstances, rescind and annul such acceleration. (SECTION 502)
Depending on the terms of other indebtedness of the Company outstanding from
time to time, an Event of Default under the Indenture may give rise to cross
defaults on such other indebtedness of the Company.
The Indenture provides that, within 90 days after the occurrence of a
default in respect of any series of Debt Securities, the Trustee will give to
the Holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; PROVIDED, HOWEVER, that, except in the case of a
default in the payment of the principal of (or premium, if any) or any interest
on, or any sinking fund installment with respect to, any Debt Securities of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
Holders of the Debt Securities of such series; and PROVIDED, FURTHER, that such
notice shall not be given until at least 30 days after the occurrence of a
default in the performance or breach of any covenant or warranty of the Company
under such Indenture other than for the payment of the principal of (or premium,
if any) or any interest on, or any sinking fund installment with respect to, any
Debt Securities of such series. For the purpose of this provision, "default"
with respect to Debt Securities of any series means any event that is, or after
notice or lapse of time, or both, would become, an Event of Default with respect
to the Debt Securities of such Series. (SECTION 602)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the Indenture) have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of such series (or of all outstanding Debt
Securities under the Indenture). (SECTION 512) The Indenture provides that in
case an Event of Default shall occur and be continuing, the Trustee shall
exercise such of its rights and powers under the applicable Indenture and use
the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(SECTION 601) Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the Holders of the Debt Securities unless they shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request. (SECTION 603)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the Indenture) may on behalf of the Holders of all Debt Securities of such
series (or of all outstanding Debt Securities under the Indenture) waive any
past default under the Indenture, except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security or in respect
of a provision that under the applicable Indenture cannot be modified or amended
without the consent of the Holder of each outstanding Debt Security affected.
(SECTION 513) The Holders of a majority in principal amount of the outstanding
Debt Securities affected thereby may on behalf of the Holders of all such Debt
Securities waive compliance by the Company with certain restrictive provisions
of the Indenture. (SECTION 1006)
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The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (SECTION 1005)
MODIFICATION
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the outstanding Debt Securities under the Indenture affected thereby;
PROVIDED, HOWEVER, that no such modification or amendment may, without the
consent of the Holder of each outstanding Debt Security affected thereby, (a)
change the stated maturity date of the principal of, or any installment of
principal of or interest on, any Debt Security, (b) reduce the principal amount
of, or the premium (if any) or interest on, any Debt Security, (c) change the
place or currency, currencies, or currency unit or units of payment of principal
of, or premium (if any) or interest on, any Debt Security, (d) impair the right
to institute suit for the enforcement of any payment on or with respect to any
Debt Security or (e) reduce the percentage in principal amount of outstanding
Debt Securities the consent of the Holders of which is required for modification
or amendment of the Indenture or for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults. (SECTION 902)
The Indenture provides that the Company and the Trustee may, without the
consent of any Holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to the Company's covenants,
adding additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in the Indenture, provided
that such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the Holders of the Debt Securities in any material
respect.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of outstanding Debt
Securities, may consolidate with or merge into, or convey, transfer or lease its
assets substantially as an entirety to, any Person, provided that (i) the Person
formed by such consolidation or into which the Company is merged or that
acquires or leases the assets of the Company substantially as an entirety is a
Person that assumes by supplemental indenture the Company's obligations on the
Debt Securities and under the Indenture, (ii) after giving effect to the
transaction, no Event of Default and no event that, after notice or lapse of
time or both, would become an Event of Default shall have occurred and be
continuing, and (iii) certain other conditions are met. Upon compliance with
these provisions by a successor Person, the Company will (except in the case of
a lease) be relieved of its obligations under the Indenture and the Debt
Securities. (ARTICLE EIGHT)
DISCHARGE AND DEFEASANCE
The Company may terminate its obligations under the Indenture, other than
its obligation to pay the principal of (and premium, if any) and interest on the
Debt Securities of any series and certain other obligations, provided that it
(i) irrevocably deposits or causes to be irrevocably deposited with the Trustee
as trust funds money or U.S. Government Obligations maturing as to principal and
interest sufficient to pay the principal of, any interest on, and any mandatory
sinking funds in respect of, all outstanding Debt Securities of such series on
the stated maturity of such payments or on any redemption date and (ii) complies
with any additional conditions specified to be applicable with respect to the
covenant defeasance of Debt Securities of such series. (SECTION 401)
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to the Indenture. In such case, if the Company (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series and
(iii) complies with any additional conditions specified to be applicable with
respect to legal defeasance of Debt Securities of such series, then the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
outstanding Debt Securities of such series, the obligations of the Company under
the Indenture and the Debt Securities
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of such series to pay the principal of (and premium, if any) and interest on the
Debt Securities of such series shall cease, terminate and be completely
discharged, and the Holders thereof shall thereafter be entitled only to payment
out of the money or U.S. Government Obligations deposited with the Trustee as
aforesaid, unless the Company's obligations are revived and reinstated because
the Trustee is unable to apply such trust fund by reason of any legal
proceeding, order or judgment. (SECTIONS 403 AND 404).
"U.S. Government Obligations" is defined in the Indenture as direct
noncallable obligations of, or noncallable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or to
the payment of which obligations or guarantees the full faith and credit of the
United States of America is pledged, or beneficial interests in a trust the
corpus of which consists exclusively of money or such obligations or a
combination thereof. (SECTION 101)
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities are issuable in definitive form as Registered Debt
Securities. (SECTION 301) Reference is made to the Prospectus Supplement for the
terms relating to the form, exchange, registration and transfer of Debt
Securities issuable in temporary or permanent global forms.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations.
Registered Debt Securities may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the Person making the request. The Company
has appointed the Trustee as Security Registrar. (SECTION 305) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security Registrar)
initially designated by the Company with respect to any series of Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Debt Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities. (SECTION 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Registered Debt Securities of
any series during a period beginning at the opening of business 15 days prior to
the selection of Debt Securities of that series for redemption and ending on the
close of business on the day of mailing of the relevant notice of redemption or
(ii) register the transfer of or exchange any Registered Debt Security, or
portion thereof, called for redemption, except the unredeemed portion of any
Registered Debt Security being redeemed in part. (SECTION 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Debt Securities will
be made in the designated currency or currency unit at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, except
that, at the option of the Company, payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered Debt
Securities will be made to the Person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest. (SECTION 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in New York, New York will be designated
as a Paying Agent for the Company for payments with respect to Debt Securities
issuable solely as Registered Debt Securities. The Company may at any time
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designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that the Company will be required to maintain a Paying Agent in each
Place of Payment for such series. (SECTION 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security that remain
unclaimed at the end of three years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (SECTION 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more global Debt Securities that would be deposited with a
depositary or its nominee identified in the applicable Prospectus Supplement.
Global Debt Securities may be issued in either temporary or permanent form. The
specific terms of any depositary arrangement with respect to any portion of a
series of Debt Securities and the rights of, and limitations on, owners of
beneficial interests in any such global Debt Security representing all or a
portion of a series of Debt Securities will be described in the applicable
Prospectus Supplement. (SECTION 204)
MEETINGS
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. (SECTION 1301) A meeting may be called at any time
by the Trustee, and also, upon request, by the Company or the Holders of at
least 10% in principal amount of the Outstanding Debt Securities of such series,
in any such case upon notice given as described under "Notices" below.
(SECTION 1302) Except for any consent that must be given by the Holder of each
Outstanding Debt Security affected thereby, as described under "Modification"
above, any resolution presented at a meeting or adjourned meeting at which a
quorum is present may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series;
PROVIDED, HOWEVER, that, except for any consent that must be given by the Holder
of each Outstanding Debt Security affected thereby, as described under
"Modification" above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority in principal amount of the Outstanding Debt Securities of a
series, may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Subject to the proviso set forth above, any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Debt
Securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the Outstanding Debt
Securities of a series. (SECTION 1304)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York. (SECTION 113)
NOTICES
Notices to Holders of Registered Debt Securities will be given by mail to
the addresses of such Holders as they appear in the Security Register. (SECTION
107)
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, as
a creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. (SECTION 613) The Trustee is permitted to engage in other
transactions,
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except that, if it acquires any conflicting interest (as defined), it must
eliminate such conflict or resign. (SECTION 608)
The Trustee has made loans to the Company and its subsidiaries and
affiliates from time to time in the ordinary course of business and at
prevailing interest rates under agreements with commercial bank groups. In
addition, the Trustee may from time to time serve as a depositary of funds of,
and perform other services for, the Company.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 100,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, no par value ("Preferred Stock"). To
date, no series of Preferred Stock has been designated or issued. The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the Articles, a copy of which has been incorporated by
reference as an exhibit to the Registration Statement.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share, and, in
general, a majority of votes cast with respect to a matter is sufficient to
authorize action. Dividends may be paid to the holders of Common Stock when, as
and if declared by the Board of Directors out of funds legally available for
such purpose. Holders of Common Stock have no conversion, redemption, cumulative
voting or preemptive rights. In the event of any liquidation, dissolution or
winding up of the Company, after payment or provision for payment of the debts
and other liabilities of the Company and payment or provision for payment of all
amounts to which holders of any other series or class of the Company's stock
hereafter issued that ranks senior as to liquidation rights to the Common Stock
are entitled, the holders of Common Stock will be entitled to share ratably in
any remaining assets of the Company. All outstanding shares of Common Stock are,
and any shares of Common Stock to be sold by the Company hereby will be, duly
and validly issued, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
PREFERRED STOCK
When and if issued, shares of each series of Preferred Stock will have such
rights and preferences as are fixed by the Board of Directors in the resolution
or resolutions authorizing the issuance of that particular series. In
designating any series of Preferred Stock, the Board of Directors has the
authority, without further action of the holders of Common Stock, to fix the
number of shares constituting that series and to fix the preferences,
limitations and relative rights of the series, including the dividend rights,
dividend rate, terms and prices of redemption, liquidation preferences, sinking
fund rights, conversion rights and voting rights. It is expected that the
holders of any series of Preferred Stock, when and if issued, will have priority
with respect to dividends and any distributions upon liquidation of the Company,
and may have other preferences over the holders of the Common Stock, including
the preferential right to elect directors in the event dividends on the
Preferred Stock are not paid for a specified period. Although the Company has no
present intent to issue shares of Preferred Stock, the issuance of Preferred
Stock could be used to discourage an unsolicited acquisition proposal or
otherwise have an antitakeover effect.
CERTAIN PROVISIONS OF THE ARTICLES, BYLAWS AND LOUISIANA LAW
The Articles, the Company's Bylaws (the "Bylaws") and Louisiana law
contain certain other provisions that may impede an unsolicited takeover attempt
or otherwise have an antitakeover effect.
DIRECTOR TERMS AND RELATED PROVISIONS
The Articles provide that the members of the Board of Directors of the
Company will be elected for terms of five years and until their successors are
elected and qualified. The Articles further provide that the number of directors
will be as designated in the Bylaws, although no amendment to the Bylaws to
decrease
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the number of directors shall shorten the term of any incumbent director. The
Bylaws provide for eight directors and, in addition, that the Bylaws may be
amended by shareholders only upon the affirmative vote of at least 80% of the
voting power. Moreover, the Articles provide that any vacancy on the Board of
Directors may be filled by a vote of at least two-thirds of the directors then
in office, and a director elected to fill a vacancy shall serve until the next
shareholders' meeting held for the election of directors generally. The
shareholders, however, have the right at a special meeting, if called for such
purpose prior to such action by the Board of Directors, to fill a vacancy. The
Articles also provide that directors may be removed only for cause and only by
the affirmative vote of not less than 80% of the voting power, provided that the
removal may only be effected at a meeting of shareholders called for that
purpose.
SHAREHOLDER MEETINGS
The Articles and the Bylaws provide that special meetings of shareholders
may be called by any shareholder or group of shareholders holding in the
aggregate at least 80% of the total voting power, or by the Chairman of the
Board, the President or the Board of Directors of the Company. A quorum for a
meeting of shareholders is a majority of the outstanding shares of Common Stock
entitled to vote. Unless the question brought before the meeting is one for
which, by express provision of law or the Articles, a different vote is
required, a majority of the votes cast decides the question. Unless otherwise
required by law or the Bylaws, meetings of shareholders may be held at any place
within or without Louisiana, as designated by the Board of Directors.
SHAREHOLDER NOMINATIONS OF DIRECTORS
The Articles provide that only persons who are nominated by, or at the
direction of, the Board of Directors of the Company or by a shareholder who has
given timely notice to the Secretary of the Company prior to the meeting at
which directors are to be elected will be eligible for election as directors. To
be timely, notice must be received by the Company at its principal executive
offices not less than 45 days nor more than 90 days prior to the meeting (or, if
less than 55 days' notice or prior public disclosure of the meeting date is
given or made to shareholders, not later than the tenth day following the day on
which such notice was mailed or such prior public disclosure was made). Notice
to the Company from a shareholder who proposes to nominate a person at a meeting
for election as a director must contain certain specified information about that
person.
SUPERMAJORITY VOTE FOR CERTAIN BUSINESS COMBINATIONS
The Articles provide that no Business Combination (as hereinafter defined)
shall be effected unless it is approved at the shareholders' meeting called for
that purpose by the affirmative vote of 80% of the total voting power of the
holders of voting securities or other obligations with voting power (excluding
such securities and obligations owned by an Acquiring Entity (as hereinafter
defined) and its affiliates). In addition to the voting requirements, no
Business Combination may be effected without first satisfying substantive
conditions with regard to: (i) the consideration to be received by shareholders;
(ii) certain restrictions prohibiting the Acquiring Entity from purchasing
voting securities or obligations with voting power subsequent to becoming an
Acquiring Entity but prior to any Business Combination; (iii) the dividends paid
on the outstanding stock of the Company; (iv) certain restrictions prohibiting
the Acquiring Entity from receiving the benefit of any financial assistance of
the Company or making any major change in the Company's business or equity
capital structure without unanimous approval of the directors and (v) the
distribution of a proxy statement containing any recommendations by the
directors and the opinion of a reputable investment banking firm as to the
fairness of the terms of the Business Combination.
These requirements will not apply to a Business Combination that (i) is
approved by a majority of directors unaffiliated with the Acquiring Entity who
were directors prior to an Acquiring Entity's becoming such (or certain
successors) (the "Continuing Directors"), if there are at least three
Continuing Directors or (ii) involves solely either (A) a transfer of assets of
the Company to a subsidiary wholly owned by the Company or (B) a merger or
consolidation with or into a successor corporation, as long as the percentages
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of shareholder ownership remain the same and the successor corporation's
articles of incorporation contain the same provisions as the Articles.
A "Business Combination" is defined in the Articles as: (i) any merger or
consolidation of the Company with or into any entity unrelated to the Company
which is the beneficial owner of securities representing 30% or more of the
voting power of the Company's securities or other obligations of the Company
granting voting rights (an "Acquiring Entity") or any affiliate thereof; (ii)
any sale or other disposition of all or substantially all of the assets of the
Company to an Acquiring Entity or any affiliate thereof; (iii) any sale or other
disposition to the Company or any subsidiary thereof of any assets in exchange
for which an Acquiring Entity or any affiliate thereof becomes the beneficial
owner of either (A) voting securities of the Company or any subsidiary thereof
or (B) other obligations of the Company granting voting rights; (iv) any
transaction designed to decrease the number of holders of the Company's voting
securities remaining after an Acquiring Entity has become an Acquiring Entity or
(v) the adoption of any plan or proposal for the liquidation or dissolution of
the Company in which anything other than cash will be received by an Acquiring
Entity or any affiliates thereof.
LOUISIANA LAW
Louisiana law requires that certain transactions, such as mergers,
consolidations or share exchanges, with a shareholder beneficially owning 10% or
more of the voting power of the corporation (an "Interested Shareholder") or
its affiliates be recommended by the board of directors and approved by the
affirmative vote of (i) 80% of the votes entitled to be cast by outstanding
shares of the corporation's voting stock and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock other than the Interested
Shareholder and its affiliates. These voting requirements do not apply to such
transactions if the transaction (i) does not alter the contract rights of the
stock or change or convert, in whole or in part, the outstanding shares of the
corporation or (ii) satisfies certain requirements with regard to the
consideration to be received by shareholders and certain procedural
requirements.
OTHER PROVISIONS
The Articles and Louisiana law provide that the Board of Directors of the
Company, when evaluating a tender offer or an offer to make a tender or exchange
offer or to effect a Business Combination, may, in exercising its judgment in
determining what is in the best interests of the Company and its shareholders,
consider the following factors and any other factors that it deems relevant: (i)
not only the consideration being offered in the proposed transaction, in
relation to the then current market price for the outstanding capital stock of
the Company, but also (A) the market price for the capital stock of the Company
over a period of years, (B) the estimated price that might be achieved in a
negotiated sale of the Company as a whole or in part or through orderly
liquidation, (C) the premiums over market price for the securities of other
corporations in similar transactions, (D) current political, economic and other
factors bearing on securities prices and (E) the Company's financial condition
and future prospects; (ii) the social and economic effects of such transaction
on the Company, its subsidiaries or their employees, customers, creditors and
the communities in which the Company and its subsidiaries do business; (iii) the
business and financial condition and earnings prospects of the acquiring party
or parties, including, but not limited to, debt service and other existing or
likely financial obligations of the acquiring party or parties, and the possible
effect of such conditions upon the Company and its subsidiaries and the
communities in which the Company and its subsidiaries do business; and (iv) the
competence, experience and integrity of the acquiring party or parties and its
or their management.
AMENDMENT OF CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
The Articles provide, with certain exceptions, that the holders of a
majority of the total voting power present at a shareholders' meeting are
required to amend certain provisions of the Articles. The exceptions relate
generally to the authority of the Board of Directors to issue Preferred Stock,
the antitakeover provisions and limitations on director liability, in which
instances an amendment requires approval of holders of 80% of the total voting
power. The Bylaws provide that they may be amended or repealed only
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by (i) a majority of the entire Board of Directors at any time when there is no
Acquiring Entity, (ii) both a majority of the entire Board of Directors and a
majority of the Continuing Directors at any time when there is an Acquiring
Entity or (iii) the affirmative vote of the holders of at least 80% of the total
voting power.
PLAN OF DISTRIBUTION
The Company may sell the Securities in and/or outside the United States:
(i) through underwriters or dealers, (ii) directly to a limited number of
purchasers or to a single purchaser or (iii) through agents. The Prospectus
Supplement with respect to the Securities offered thereby (the "Offered
Securities") will set forth the terms of the offering of the Offered
Securities, including the name or names of any underwriters or agents, the
purchase price of the Offered Securities and the proceeds to the Company from
such sale, any delayed delivery arrangements, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Securities to be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to conditions precedent, and the
underwriters will be obligated to purchase all the Offered Securities if any are
purchased.
During and after an offering through underwriters, such underwriters may
purchase and sell the Securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers for the Offered Securities sold for
their account may be reclaimed by the syndicate if such Offered Securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Offered Securities, which may be higher than the price that might otherwise
prevail in the open market, and, if commenced, may be discontinued at any time.
If dealers are used in the sale of Offered Securities in respect of which
this Prospectus is delivered, the Company will sell such Offered Securities to
dealers as principals. The dealers may then resell such Offered Securities to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Offered Securities in respect to which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
The Securities may be sold directly by the Company to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any sale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Offered Securities from the Company
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at the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for the Securities.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by McGlinchey Stafford, a professional
limited liability company, New Orleans, Louisiana. Certain legal matters in
connection with the Debt Securities offered hereby will be passed upon for the
Company by Baker & Botts, L.L.P., Houston, Texas. McGlinchey Stafford, a
professional limited liability company, will pass on all matters of Louisiana
law in this connection.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheet of the Company as of December 31, 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, and the related schedules, incorporated by reference in
this Prospectus, have been incorporated by reference herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREAFTER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary........... S-3
Forward-Looking Statements.............. S-9
Risk Factors............................ S-9
Use of Proceeds......................... S-14
Capitalization.......................... S-15
Unaudited Pro Forma and Pro Forma
Combined Financial Statements......... S-16
Selected Historical Financial Data...... S-24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ S-25
Business................................ S-31
The Noble Rigs.......................... S-39
Management.............................. S-40
Description of Notes.................... S-42
Underwriting............................ S-66
Legal Matters........................... S-66
PROSPECTUS
Available Information................... 3
Incorporation of Certain Documents by
Reference............................. 3
The Company............................. 4
Use of Proceeds......................... 4
Ratio of Earnings to Fixed Charges...... 4
Description of Debt Securities.......... 4
Description of Capital Stock............ 10
Plan of Distribution.................... 13
Legal Matters........................... 14
Independent Public Accountants.......... 14
$325,000,000
[LOGO]
PRIDE PETROLEUM
SERVICES, INC.
9 3/8% SENIOR NOTES DUE 2007
___________________________________________
PROSPECTUS SUPPLEMENT
___________________________________________
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
SIMMONS & COMPANY
INTERNATIONAL
SOUTHCOAST CAPITAL
CORPORATION
May 2, 1997
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