UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER: 1-13289
------------------------
PRIDE INTERNATIONAL, INC.
(FORMERLY PRIDE PETROLEUM SERVICES, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
LOUISIANA 76-0069030
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5847 SAN FELIPE, SUITE 3300
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 789-1400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------- -----------------------------------------
Common Stock, no par value New York Stock Exchange
6 1/4% Convertible Subordinated New York Stock Exchange
Debentures due 2006
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 12, 1998, based on the closing price on the New York
Stock Exchange on such date, was $910,554,536. (The officers and directors of
the registrant are considered affiliates for the purposes of this calculation.)
The number of shares of the registrant's Common Stock outstanding on March
12, 1998 was 50,068,048.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held in May 1998 are incorporated by reference into Part
III of this report.
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TABLE OF CONTENTS
PART I
PAGE
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Forward-Looking Statements ............................................... 1
Item 1. Business ........................................................ 1
Item 2. Property ........................................................ 12
Item 3. Legal Proceedings ............................................... 12
Item 4. Submission of Matters to a Vote of Security Holders ............. 12
Executive Officers of the Registrant ..................................... 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters ........................................... 14
Item 6. Selected Financial Data ......................................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 16
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk ............................................. 20
Item 8. Financial Statements and Supplementary Data ..................... 21
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .......................................... 45
PART III
Item 10. Directors and Executive Officers of the Registrant .............. 45
Item 11. Executive Compensation .......................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and Management .. 45
Item 13. Certain Relationships and Related Transactions .................. 45
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 45
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes certain statements that may be
deemed to be "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
statements, other than statements of historical facts, included in this Annual
Report on Form 10-K that address activities, events or developments that the
Company expects, projects, believes or anticipates will or may occur in the
future, including such matters as future capital expenditures and investments in
the construction, acquisition and refurbishment of rigs (including the amount
and nature thereof and the timing of completion thereof), repayment of debt,
expansion and other development trends of the contract drilling industry,
business strategies, expansion and growth of operations and other such matters
are forward-looking statements. These statements are based on certain
assumptions and analyses made by management of the Company in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate in the
circumstances. Such statements are subject to a number of assumptions, risks and
uncertainties, including those discussed herein, general economic and business
conditions, prices of crude oil and natural gas, foreign exchange controls and
currency fluctuations, the business opportunities (or lack thereof) that may be
presented to and pursued by the Company, changes in laws or regulations, the
ability to obtain shipyard contracts and other factors, many of which are beyond
the control of the Company. See "Business -- Other Considerations." Prospective
investors are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward-looking statements.
PART I
ITEM 1. BUSINESS
UNLESS THE CONTEXT INDICATES OTHERWISE, REFERENCES IN THIS ANNUAL REPORT ON
FORM 10-K TO THE "COMPANY" OR "PRIDE" ARE TO PRIDE INTERNATIONAL, INC.
(FORMERLY PRIDE PETROLEUM SERVICES, INC.) AND ITS SUBSIDIARIES.
GENERAL
Pride is a leading international provider of contract drilling and related
services, operating both offshore and on land. In recent years, the Company has
focused its growth strategy on the higher margin offshore and international
drilling markets. Offshore and international markets, where the Company now
focuses its operations, generally have 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 companies to shift expenditures to exploration and development
activities abroad and in the Gulf of Mexico. For these reasons, the Company has
actively sought to diversify beyond its former domestic land-based operations,
which prior to mid-1993 accounted for substantially all of the Company's
revenues and earnings. Since 1993, the Company has completed acquisitions adding
more than 250 rigs to its offshore and international fleet and has further
expanded its international operations by deploying more than 40 underutilized
rigs from its former U.S. land-based fleet to Argentina and Venezuela.
During 1997, the Company realigned its operations to concentrate on more
profitable offshore and international drilling markets through the following
strategic transactions:
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, for approximately $136
million in cash. The Company retained 14 of its larger land-based rigs
for redeployment to international markets, ten of which have since
been redeployed to South America. The divested operations generated
the Company's lowest operating margins.
o FORASOL ACQUISITION. In March 1997, the Company acquired the
operating subsidiaries of Forasol-Foramer N.V. (collectively,
"Forasol") for approximately $113 million in cash and 11 million
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shares of Common Stock. The transaction provided entry into new
international markets while contributing additional capacity in the
Company's existing South 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 South America, West Africa, the Middle East and
Southeast Asia.
o PURCHASE OF JACKUP RIGS. In May 1997, the Company purchased 13
mat-supported jackup rigs for approximately $269 million. The purchase
of these rigs positioned 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.
o PURCHASE OF ADDITIONAL OFFSHORE ASSETS. In April 1997, the Company
purchased a tender-assisted rig, which has been upgraded and deployed
to Southeast Asia. In October 1997, the Company purchased an
independent-leg, cantilevered jackup rig for approximately $35
million. The jackup rig, capable of operating in water depths of up to
300 feet, is currently under contract in Southeast Asia.
Currently, the Company operates a global fleet of 295 rigs, including two
semisubmersible rigs, 17 jackup rigs, nine tender-assisted rigs, seven barge
rigs, 23 offshore platform rigs, 78 land-based drilling rigs and 159 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.
Most recently, the Company has focused on increasing the size of its fleet
capable of drilling in deeper waters. The Company is participating in the
following new offshore rig construction projects:
o AMETHYST JOINT VENTURES. A newly organized, special purpose
subsidiary of the Company is participating in joint ventures to
construct, own and operate six Amethyst-class dynamically positioned
semisubmersible drilling rigs. The rigs will be operated under charter
and service contracts with Petroleo Brasileiro S.A. ("Petrobras")
having initial terms of six to eight years. The total estimated cost
to construct, equip and mobilize the six rigs is approximately $1
billion, approximately 90% of which is expected to be provided from
the proceeds of project finance obligations of the ventures without
recourse to the joint venture participants. Delivery of the rigs is
expected during late 1999 and 2000. The Company estimates that its
total equity investment in the project will be approximately $30
million, which will represent a 30% ownership interest.
o PRIDE AFRICA JOINT VENTURE. A subsidiary of the Company has entered
into a joint venture to construct, own and operate the PRIDE AFRICA,
an ultra-deepwater drillship currently under construction in South
Korea. The PRIDE AFRICA, which will be capable of operating in water
depths of up to 10,000 feet, is contracted to work for Elf Exploration
Angola for a term of five years. It is anticipated that the PRIDE
AFRICA will commence operations in mid-1999. The joint venture has
entered into a financing arrangement with a group of banks providing
that, upon delivery of the drillship, approximately 80% of the
estimated construction cost of $235 million will be financed by loans
that are without recourse to the joint venture participants. The
Company estimates that its total equity investment in the project will
be approximately $12 million, which will represent a 51% ownership
interest. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Liquidity and Capital
Resources."
o NAVIS JOINT VENTURE. In March 1998, the Company entered into an
agreement with a Norwegian company pursuant to which they will jointly
market the drillship NAVIS EXPLORER, an ultra-deepwater dynamically
positioned drillship currently under construction in South Korea. If
the joint venture is successful in obtaining a suitable long-term
contract, the Company may acquire up to a 51% ownership interest in
the vessel.
The Company will continue to pursue expansion of its offshore and
international drilling operations through acquisitions, rig upgrades and
redeployment of assets to active geographic regions, as well as through
participation in strategic new construction projects such as those described
above.
2
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Pride is a Louisiana corporation with its principal executive offices
located at 5847 San Felipe, Suite 3300, Houston, Texas 77057. Its telephone
number at such address is (713) 789-1400.
OPERATIONS
SOUTH AMERICA
Through a series of acquisitions and the deployment of underutilized
assets, the Company has significantly expanded its South American operations and
now operates one semisubmersible rig, three jackup rigs, two tender-assisted
rigs, six floating barge rigs and 215 land-based rigs in the region.
BRAZIL. In September 1997, the Company's semisubmersible rig NYMPHEA began
drilling offshore Brazil for Petrobras. The rig is working under a four-year
contract with two one-year renewal options. In addition, a newly organized,
special purpose subsidiary of the Company is participating in joint ventures to
construct, own and operate six Amethyst-class dynamically positioned
semisubmersible drilling rigs. The rigs are to be operated offshore Brazil under
charter and service contracts with Petrobras with initial terms of six to eight
years, with delivery of the rigs expected during late 1999 and 2000. The
Company's interest in the project will be approximately 30%.
VENEZUELA. The Company's offshore fleet in Venezuela includes three jackup
rigs, two tender-assisted rigs and six barge rigs operating on Lake Maracaibo.
Two of the jackup rigs that the Company operates under contracts expiring in
1999 are owned by Petroleos de Venezuela, S.A. ("PDVSA"). The other jackup rig
is owned by the Company and operates under a contract expiring in December 2000.
In 1995, the Company placed two floating barge rigs into service on Lake
Maracaibo that are working under ten-year contracts with PDVSA. The Company also
operates four other floating barge rigs and two tender-assisted rigs under
management contracts with PDVSA.
The Company's land-based fleet in Venezuela currently consists of 47 rigs,
of which 14 are drilling rigs and 33 are workover rigs. In recent years, PDVSA
has entered into numerous exploitation agreements with international oil
companies to reactivate and develop selected oilfields. Development of these
fields is providing additional demand for the Company's rig services in
Venezuela.
ARGENTINA. In Argentina, the Company currently operates 148 land-based
rigs, which the Company believes represent more than 50% of the land-based rigs
in the Argentine market. Of these rigs, 38 are drilling rigs and 110 are
workover rigs. The Argentine oil and gas production market has experienced
improved conditions in recent years as a result of general economic reform,
sales of certain state-owned 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.
COLOMBIA. The Company currently operates 14 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 these opportunities in Colombia.
BOLIVIA. The Company has recently agreed to mobilize seven land-based rigs
from Argentina to Bolivia to work under contracts with two customers. Demand for
rig services has increased in Bolivia as a result of the privatization of
components of the Bolivian national oil company, as well as significant sales of
exploration blocks to private-sector operators. Exploration activity for natural
gas in Bolivia is currently increasing as a result of the ongoing construction
of a major gas pipeline from Bolivia to markets in Brazil.
GULF OF MEXICO
In May 1997, the Company acquired 13 mat-supported jackup rigs, 11 of which
are currently located in the Gulf of Mexico. The remaining two rigs are located
in West Africa and Southeast Asia. This
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acquisition positioned 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.
The Company also operates a fleet of 23 offshore modular platform rigs in
the Gulf of Mexico. In recent years, the Company has made substantial capital
improvements in this fleet and believes its fleet is one of the most
technologically advanced fleets in the industry, which the Company believes has
led to higher dayrates and increased utilization of these rigs.
OTHER INTERNATIONAL
OFFSHORE. The Company's semisubmersible rig SOUTH SEAS DRILLER, which was
recently upgraded, is currently operating offshore South Africa under contracts
extending through early 2000. The Company also operates four tender-assisted
rigs in Africa and the Middle East. The BARRACUDA is currently contracted
through November 1998, with a six-month option. Through a joint venture, the
Company owns a 12.5% interest in the self-erecting tender-assisted rig AL BARAKA
I. In addition to its ownership interest, the Company also manages the rig,
which is contracted through November 1998, with a six-month option. The
ALLIGATOR is presently being upgraded at a shipyard in South Africa. The rig is
expected to commence operations in Cabinda in May 1998. The CORMORANT is
currently under contract through mid-1998.
In Nigeria, the Company operates one swamp barge rig, the BINTANG
KALIMANTAN, as well as a shallow-water jackup rig, the PRIDE UTAH. The BINTANG
KALIMANTAN is currently contracted through April 1999, with a 12-month option.
The PRIDE UTAH is contracted through March 2000. In Southeast Asia, the Company
operates two jackup rigs and two tender-assisted rigs.
LAND-BASED. The Company currently operates six land-based rigs in North
Africa, three in the Middle East and two in Pakistan.
4
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RIG FLEET
OFFSHORE RIGS
The following table sets forth, as of March 1, 1998, certain information
concerning the Company's offshore rig fleet:
OFFSHORE RIGS
<TABLE>
<CAPTION>
BUILT/UPGRADED WATER DRILLING
OR EXPECTED DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN COMPLETION RATING RATING LOCATION
- ------------------------------------- -------------------------- -------------- ------ -------- --------------
<S> <C> <C> <C> <C> <C>
DRILLSHIP - 1
Pride Africa(1) Gusto 10,000 1999 10,000 30,000 Korea
SEMISUBMERSIBLE RIGS - 8
Nymphea F&G Pacesetter 1987 1,500 25,000 Brazil
South Seas Driller Aker H-3 1977/1997 1,000 20,000 South Africa
Amethyst 2(1) Amethyst Class 1999 5,000 25,000 Canada
Amethyst 3(1) Amethyst Class 1999 5,000 25,000 Canada
Amethyst 4(2) Amethyst Class 2000 5,000 25,000 TBD
Amethyst 5(2) Amethyst Class 2000 5,000 25,000 TBD
Amethyst 6(2) Amethyst Class 2000 5,000 25,000 TBD
Amethyst 7(2) Amethyst Class 2000 5,000 25,000 TBD
JACKUP RIGS - 17
Pride Pennsylvania Independent leg cantilever 1973/1998 300 20,000 Indonesia
Ile du Levant Independent leg cantilever 1991 270 20,000 Venezuela
GP-19(3) Independent leg cantilever 1987 150 20,000 Venezuela
GP-20(3) Independent leg cantilever 1987 200 20,000 Venezuela
Pride Alabama Mat supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Alaska Mat supported cantilever 1982 250 25,000 Gulf of Mexico
Pride Arkansas Mat supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Colorado Mat supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Kansas Mat supported cantilever 1998 250 25,000 Gulf of Mexico
Pride Mississippi Mat supported cantilever 1990 200 25,000 Gulf of Mexico
Pride New Mexico Mat supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Texas Mat supported cantilever 1998 300 20,000 Gulf of Mexico
Pride California Mat supported slot 1997 250 20,000 Malaysia
Pride Louisiana Mat supported slot 1981 250 25,000 Gulf of Mexico
Pride Oklahoma Mat supported slot 1996 250 20,000 Gulf of Mexico
Pride Wyoming Mat supported slot 1976 250 25,000 Gulf of Mexico
Pride Utah Mat supported slot 1990/1998 45 20,000 Nigeria
TENDER-ASSISTED RIGS - 9
Alligator Self-erecting barge 1992/1998 330 20,000 South Africa
Barracuda Self-erecting barge 1992 330 20,000 Middle East
Al Baraka I(4) Self-erecting barge 1994 650 20,000 Middle East
Ile de Sein Self-erecting barge 1990/1997 450 16,000 Malaysia
Piranha Self-erecting barge 1978/1998 600 20,000 Brunei
Cormorant Converted ship 1991 300 16,400 Angola
Ile de la Martinique Converted ship 1985 400 16,000 UAE
GP-14(3) Tender barge 1985 150 20,000 Venezuela
GP-18(3) Tender barge 1985 150 20,000 Venezuela
BARGE RIGS - 7
Pride I Floating cantilever 1995 150 20,000 Venezuela
Pride II Floating cantilever 1995 150 20,000 Venezuela
GP-10(3) Floating cantilever 1967 120 15,000 Venezuela
GP-23(3) Floating cantilever 1992 150 20,000 Venezuela
GP-24(3) Floating cantilever 1992 150 20,000 Venezuela
Galileo II(3) Floating cantilever 1992/1997 150 20,000 Venezuela
Bintang Kalimantan Posted swamp barge 1995 N/A 16,000 Nigeria
</TABLE>
RIG NAME STATUS
- ------------------------------------- -------------
DRILLSHIP - 1
Pride Africa(1) Shipyard
SEMISUBMERSIBLE RIGS - 8
Nymphea Working
South Seas Driller Working
Amethyst 2(1) Shipyard
Amethyst 3(1) Shipyard
Amethyst 4(2) Design
Amethyst 5(2) Design
Amethyst 6(2) Design
Amethyst 7(2) Design
JACKUP RIGS - 17
Pride Pennsylvania Working
Ile du Levant Working
GP-19(3) Working
GP-20(3) Working
Pride Alabama Working
Pride Alaska Working
Pride Arkansas Working
Pride Colorado Working
Pride Kansas Shipyard
Pride Mississippi Working
Pride New Mexico Working
Pride Texas Shipyard
Pride California Working
Pride Louisiana Working
Pride Oklahoma Working
Pride Wyoming Working
Pride Utah Working
TENDER-ASSISTED RIGS - 9
Alligator Refurbishment
Barracuda Working
Al Baraka I(4) Working
Ile de Sein Working
Piranha Working
Cormorant Working
Ile de la Martinique Cold Stacked
GP-14(3) Working
GP-18(3) Working
BARGE RIGS - 7
Pride I Working
Pride II Working
GP-10(3) Working
GP-23(3) Working
GP-24(3) Working
Galileo II(3) Working
Bintang Kalimantan Working
(TABLE CONTINUED ON FOLLOWING PAGE)
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<TABLE>
<CAPTION>
BUILT/UPGRADED WATER DRILLING
OR EXPECTED DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN COMPLETION RATING RATING LOCATION
- ------------------------------------- -------------------------- -------------- ------ -------- --------------
<S> <C> <C> <C> <C> <C>
PLATFORM RIGS - 23
Rig 1501E Heavy electrical 1996 N/A 25,000 Gulf of Mexico
Rig 1502E Heavy electrical 1998 N/A 25,000 Gulf of Mexico
Rig 1002E Heavy electrical 1996 N/A 20,000 Gulf of Mexico
Rig 1003E Heavy electrical 1996 N/A 20,000 Gulf of Mexico
Rig 1004E Heavy electrical 1997 N/A 20,000 Gulf of Mexico
Rig 1005E Heavy electrical 1998 N/A 20,000 Gulf of Mexico
Rig 750E Heavy electrical 1992 N/A 16,500 Gulf of Mexico
Rig 751E Heavy electrical 1995 N/A 16,500 Gulf of Mexico
Rig 650E Intermediate electrical 1994 N/A 15,000 Gulf of Mexico
Rig 651E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico
Rig 653E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico
Rig 951 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico
Rig 952 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico
Rig 30 Intermediate mechanical 1986 N/A 15,000 Gulf of Mexico
Rig 100 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico
Rig 110 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico
Rig 130 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico
Rig 170 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico
Rig 200 Intermediate mechanical 1993 N/A 15,000 Gulf of Mexico
Rig 210 Intermediate mechanical 1996 N/A 15,000 Gulf of Mexico
Rig 220 Intermediate mechanical 1995 N/A 15,000 Gulf of Mexico
Rig 14 Light mechanical 1994 N/A 10,000 Gulf of Mexico
Rig 15 Light mechanical 1994 N/A 10,000 Gulf of Mexico
</TABLE>
RIG NAME STATUS
- ------------------------------------- -------------
PLATFORM RIGS - 23
Rig 1501E Working
Rig 1502E Working
Rig 1002E Working
Rig 1003E Working
Rig 1004E Working
Rig 1005E Working
Rig 750E Working
Rig 751E Working
Rig 650E Working
Rig 651E Working
Rig 653E Working
Rig 951 Working
Rig 952 Working
Rig 30 Stacked
Rig 100 Available
Rig 110 Stacked
Rig 130 Working
Rig 170 Stacked
Rig 200 Available
Rig 210 Working
Rig 220 Working
Rig 14 Working
Rig 15 Stacked
- ------------
(1) Currently under construction. See "Business -- General -- Amethyst Joint
Ventures" and "-- PRIDE AFRICA Joint Venture."
(2) To be constructed pursuant to arrangements with Petrobras. The Company is
currently negotiating shipyard contracts for the construction of these rigs.
See "Business -- General -- Amethyst Joint Ventures."
(3) Operated but not owned by the Company.
(4) Owned by a joint venture in which the Company has a 12.5% interest.
DRILLSHIPS. The PRIDE AFRICA, which is currently under construction, is an
ultra-deepwater self-propelled drillship that will be positioned over a drill
site through the use of a computer-controlled thruster (dynamic positioning)
system. Drillships normally require water depths of at least 200 feet to conduct
operations. Drillships are suitable for deepwater drilling in moderate weather
environments and in remote locations because of their mobility and large
load-carrying capacity.
SEMISUBMERSIBLE RIGS. The Company's 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, is below the water surface during drilling operations. The rig is
"semisubmerged," 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.
JACKUP RIGS. The 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 its legs and the
operating environment. Moving a rig from one drill site to another involves
lowering the hull 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.
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TENDER-ASSISTED RIGS. The Company's tender-assisted rigs are generally
non-self-propelled barges moored alongside a platform and containing 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.
BARGE RIGS. The Company operates barge rigs on Lake Maracaibo, Venezuela
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 Nigeria, the Company operates a posted "swamp" barge rig. The rig is held
on location by legs or posts that are jacked down into the sea floor before
commencement of work.
PLATFORM RIGS. The Company's 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. Platform
rigs often provide drilling and horizontal reentry services using portable top
drives, enhanced pumps and solids control equipment for drilling fluids, as well
as workover services.
LAND-BASED RIGS
The following table sets forth, as of March 1, 1998, certain information
concerning the Company's land-based rig fleet:
LAND-BASED RIGS
COUNTRY TOTAL DRILLING WORKOVER
- ------------------------------------- ----- -------- --------
SOUTH AMERICA -- 215
Argentina*...................... 148 38 110
Venezuela....................... 47 14 33
Colombia........................ 20 14 6
AFRICA/MIDDLE EAST -- 9
Algeria......................... 4 4 --
Libya........................... 2 1 1
Oman............................ 2 2 --
Bahrain......................... 1 1 --
OTHER -- 13.......................... 13 4 9
----- --- ---
Total Land Rigs............ 237 78 159
===== === ===
- ------------
* Includes seven rigs to be deployed to Bolivia.
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.
7
<PAGE>
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, jackup rigs, tender-
assisted 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 down-hole pumps in an oil well or replacing defective
tubing in a gas well. The Company provides the rigs, equipment and crews for
these maintenance services, which are performed on both oil and gas wells but
which are more often required on oil wells. Many of the Company's rigs also have
pumps and tanks that can be used for circulating fluids into and out of the
well. Typically, maintenance jobs are performed on a series of wells in
geographic proximity and require little, if any, revenue-generating equipment
other than a rig.
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.
ENGINEERING SERVICES
The Company believes that its engineering and design expertise has become
an important factor in the growth and success of its business. The Company
employs a technical staff dedicated to industry research and development and to
designing specialized drilling equipment to fulfill specific customer
requirements. The engineering staff has designed and managed the fabrication of
many rigs in the Company's offshore rig fleet and is actively involved in the
Company's newbuild projects. The Company also employs 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 South
America, the Gulf of Mexico and Africa/Middle East.
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.
8
<PAGE>
CUSTOMERS
The Company provides services for large multinational oil and gas
companies, government-owned oil and gas companies and independent operators.
During 1997, PDVSA accounted for approximately 14% of the Company's consolidated
revenues. No other customer accounted for more than 10% of the Company's
consolidated revenues.
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 dayrate
(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 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 U.S. dollars or freely convertible foreign currency. 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 that could have a material
adverse effect upon its results of operations and financial condition. There can
be no assurances, however, that the local monetary authorities in the countries
in which the Company operates will not implement exchange controls in the
future.
SEASONALITY
In general, the Company's business activities are not significantly
affected by seasonal fluctuations. The Company's rigs are located in
geographical areas that are not subject to severe weather that would halt
operations for prolonged periods.
EMPLOYEES
The Company currently employs approximately 8,400 employees. Approximately
1,600 of the employees are located in the United States and 6,800 are located
abroad. Hourly rig crew members constitute the vast majority of employees. None
of the Company's U.S. employees are represented by a collective bargaining unit.
Many of the Company's international employees are subject to industry-wide labor
contracts within their respective countries. Management believes that the
Company's employee relations are good.
SEGMENT INFORMATION
Information with respect to revenues, earnings from operations and
identifiable assets attributable to the Company's industry segments and
geographic areas of operations for the last three fiscal years is
9
<PAGE>
presented in Note 13 of the Notes to Consolidated Financial Statements included
in Part II, Item 8, of this report.
OTHER CONSIDERATIONS
INDUSTRY CONDITIONS
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. 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. 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 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.
RISKS RELATED TO 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
Company's marketing plans for such rigs and could jeopardize the contracts under
which the Company plans to operate such rigs.
ACQUISITION-RELATED RISKS
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
10
<PAGE>
continue to identify attractive acquisition opportunities, negotiate acceptable
acquisition terms, obtain financing for acquisitions on satisfactory terms or
successfully acquire identified targets. The ability of the Company to pursue
acquisition opportunities may be affected by the limitations on its financing
flexibility imposed by the Company's current financing arrangements. 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 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.
LEVERAGE AND DEBT COVENANTS
As of December 31, 1997, the Company had approximately $523.9 million in
long-term indebtedness, net of current portion, approximately $52.5 million of
which was represented by subordinated debentures that are convertible into
Common Stock at a conversion price of $12.25 per share. 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
principal of and interest on its indebtedness and will not be available for
other purposes, (ii) covenants contained in the Company's existing financing
arrangements 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, 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.
OPERATING RISKS AND INSURANCE
The Company's operations are subject to the many hazards inherent in the
oilfield services industry. Contract drilling and well servicing require the use
of heavy equipment and exposure to hazardous conditions, which may subject the
Company to liability claims by employees, customers and third parties. These
hazards can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company's offshore fleet is also subject to
hazards inherent in marine operations, either while on site or during
mobilization, such as capsizing, sinking and damage from severe weather
conditions. In certain instances, contractual indemnification of customers or
others is required of the Company. The Company maintains workers' compensation
insurance for its employees and other insurance coverage for normal business
risks, including general liability insurance. Although the Company believes its
insurance coverages to be adequate and in accordance with industry practice
against normal risks in its operations, there can be no assurance that any
insurance protection will be sufficient or effective under all circumstances or
against all hazards to which the Company may be subject. The occurrence of a
significant event against which the Company is not fully insured, or of a number
of lesser events against which the Company is insured, but subject to
substantial deductibles, could materially and adversely affect the Company's
operations and financial condition. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future at rates or on
terms it considers reasonable or acceptable.
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
11
<PAGE>
applicable to the Company's operations include those with respect to
containment, disposal and controlling the discharge of hazardous oilfield waste
and other non-hazardous waste material into the environment, requiring removal
and cleanup under certain circumstances, or otherwise relating to the protection
of the environment. Laws and regulations protecting the environment have become
more stringent in recent years and may in certain circumstances impose strict
liability, rendering a party liable for environmental damage without regard to
negligence or fault on the part of such party. Such laws and regulations may
expose the Company to liability for the conduct of, or conditions caused by,
others or for acts of the Company which were in compliance with all applicable
laws at the time such acts were performed. The application of these requirements
or the adoption of new requirements could have a material adverse effect on the
Company. In addition, the modification of existing laws or regulations or the
adoption of new laws or regulations curtailing exploratory or development
drilling for oil and gas for economic, environmental or other reasons could have
a material adverse effect on the Company's operations by limiting future
contract drilling opportunities.
ITEM 2. PROPERTY
The Company's property consists primarily of offshore mobile and land-based
drilling rigs, well servicing rigs and ancillary equipment, most of which are
owned by the Company. Certain rigs are operated by the Company pursuant to joint
venture arrangements or operating agreements. The Company also owns and operates
transport and winch trucks, pumps, generators, power swivels and similar
ancillary equipment. The Company owns approximately 750 vehicles and leases
approximately 75 others.
The corporate office in Houston, Texas occupies approximately 34,600 square
feet of leased space under a lease that expires in February 2005. In Argentina,
the Company leases 4,500 square feet of office space in Buenos Aires and owns
five operating bases and leases three others. In Venezuela, the Company leases
two operating bases with an office facility at one. In Colombia, the Company
leases office space in Bogota and two operating bases. In France, the Company
leases approximately 18,000 square feet of office space. Shore-based operations
for the Company's Gulf of Mexico operations are conducted from its owned
facility in Houma, Louisiana. The shore facility is located on the Intracoastal
waterway and provides direct access to the Gulf of Mexico.
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely involved in litigation incidental to its business,
which often involves claims for significant monetary amounts, some of which
would not be covered by insurance. In the opinion of management, none of the
existing litigation will have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1997.
12
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and descriptions set forth certain information as of
March 1, 1998 with respect to the executive officers of the Company. Officers
are elected annually by the Board of Directors and serve until their successors
are chosen or until their resignation or removal.
NAME AGE POSITION
- --------------------- --- -------------------------------------------------
Ray H. Tolson........ 63 Chairman of the Board and Chief Executive Officer
Paul A. Bragg........ 42 President and Chief Operating Officer
James W. Allen....... 54 Senior Vice President -- Operations
Gerard Godde......... 55 Senior Vice President -- Forasol Operations
John O'Leary......... 42 Vice President -- International Marketing
Steven R. Tolson..... 40 Vice President -- U.S. Operations -- Offshore
Robert W. Randall.... 55 Vice President -- General Counsel and Secretary
Earl W. McNiel....... 39 Vice President and Chief Financial Officer
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. (now
ENSCO International Inc.) ("ENSCO"), an oilfield services company, from 1983
through 1987.
JAMES W. ALLEN joined the Company in January 1993 as its Vice
President -- International Operations. In February 1996, he was named Senior
Vice President -- Operations. From 1988 through 1992, Mr. Allen was an
independent business consultant and managed private investments. From 1984 to
1988, he was Vice President Latin America for ENSCO. Mr. Allen has 29 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.
JOHN O'LEARY was named Vice President -- International Marketing in March
1997 in connection with the Forasol transaction. Mr. O'Leary had 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.
STEVEN R. TOLSON was named Vice President -- U.S. Operations -- Offshore in
February 1997. Mr. Tolson has held various management and engineering positions
with the Company since 1994. Prior to 1994, Mr. Tolson held various engineering
positions with Conoco Inc. Ray Tolson is Steven Tolson's father.
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.
EARL W. MCNIEL has been Vice President and Chief Financial Officer of the
Company since February 1997. He joined the Company in September 1994 as its
Chief Accounting Officer. From 1990 to 1994, Mr. McNiel served as Chief
Financial Officer of several publicly owned waste management companies. From
1987 to 1990, he was employed by ENSCO as Manager, Finance.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "PDE." Prior to September 10, 1997, the Common Stock traded on The
Nasdaq Stock Market's National Market under the symbol "PRDE." As of March 12,
1998, there were 2,004 shareholders of record of the Common Stock. The following
table sets forth the range of high and low sales prices of the Common Stock for
the periods shown:
PRICE
----------------------
HIGH LOW
------- -----------
1996
First Quarter........................ $14 3/8 $ 9 1/8
Second Quarter....................... 18 13 5/8
Third Quarter........................ 16 1/4 11 5/8
Fourth Quarter....................... 23 1/4 13 1/8
1997
First Quarter........................ $24 $ 16 3/4
Second Quarter....................... 24 16 11/16
Third Quarter........................ 36 3/4 23
Fourth Quarter....................... 37 1/4 20 5/8
The Company has not paid any cash dividends on the Common Stock since
becoming a publicly held corporation in September 1988. The Company currently
has a policy of retaining all available earnings for the development and growth
of its business and does not anticipate paying dividends on the Common Stock at
any time in the foreseeable future. The ability of the Company to pay cash
dividends in the future is restricted by the Company's $100 million secured
credit facility and covenants contained in the indenture governing $325 million
principal amount of Senior Notes. The desirability of paying such dividends
could also be materially affected by U.S. and foreign tax considerations.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial information as of December
31, 1997 and 1996, and for each of the years in the three years in the period
ended December 31, 1997, has been derived from the audited consolidated
financial statements of the Company included elsewhere herein. This information
should be read in conjunction with such consolidated financial statements and
the notes thereto. The selected consolidated financial information as of
December 31, 1995, 1994 and 1993, and for each of the years in the two years in
the period ended December 31, 1994, 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 included herein. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 127,099 $ 182,336 $ 263,599 $ 407,174 $ 699,788
Operating costs...................... 100,305 139,653 187,203 292,599 458,861
Depreciation and amortization........ 6,407 9,550 16,657 29,065 58,661
Selling, general and
administrative..................... 17,572 25,105 32,418 45,368 73,881
---------- ---------- ---------- ---------- -----------
Earnings from operations............. 2,815 8,028 27,321 40,142 108,385
Other income (expense) net(1)........ 504 106 (4,898) (9,323) 47,249
---------- ---------- ---------- ---------- -----------
Earnings before income taxes(1)...... 3,319 8,134 22,423 30,819 155,634
Income tax provision (benefit)(2).... (2,621) 1,920 7,064 8,091 51,639
---------- ---------- ---------- ---------- -----------
Net earnings(1)(2)................... $ 5,940 $ 6,214 $ 15,359 $ 22,728 $ 103,995
========== ========== ========== ========== ===========
Net earnings per share(1)(2)(3)
Basic........................... $ .37 $ .30 $ .63 $ .85 $ 2.42
========== ========== ========== ========== ===========
Diluted......................... $ .36 $ .30 $ .61 $ .77 $ 2.16
========== ========== ========== ========== ===========
Weighted average shares
outstanding(3)
Basic........................... 16,133 20,418 24,551 26,719 43,036
Diluted......................... 16,360 20,650 25,128 33,755 49,143
BALANCE SHEET DATA (AS OF DECEMBER
31):
Working capital...................... $ 21,758 $ 26,640 $ 31,302 $ 62,722 $ 103,733
Property and equipment, net.......... 62,823 139,899 178,488 375,249 1,171,647
Total assets......................... 109,981 205,193 257,605 542,062 1,541,501
Long-term debt, net of current
portion............................ 200 42,096 61,136 106,508 435,100
Convertible subordinated
debentures......................... -- -- -- 80,500 52,500
Shareholders' equity................. 69,126 111,385 131,239 201,797 685,157
</TABLE>
- ------------
(1) Other income (expense) net, earnings before income taxes and net earnings
for the year ended December 31, 1997 include a pretax gain on the
divestiture of the Company's U.S. land-based well servicing business of
$83,553,000. The gain was partially offset by non-recurring charges totaling
$4,182,000, net of estimated income taxes, relating principally to the
induced conversion of $28,000,000 principal amount of the Company's
convertible subordinated debentures. Excluding such non-recurring items, net
earnings for the year ended December 31, 1997 were $54,724,000, or $1.16 per
share.
(2) 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.
(3) Net earnings per share for the years ended December 31, 1997, 1996, 1995,
1994 and 1993 and weighted average shares outstanding as of such dates have
been restated to comply with the requirements of Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements as of December 31, 1997 and
1996, and for the years ended December 31, 1997, 1996 and 1995, included
elsewhere herein. 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. As a result of its recent acquisition
activity, the Company expects to continue to experience revenue growth.
International drilling and well servicing activity is 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 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 PDVSA, the
Venezuelan national oil company.
o In April 1996, the Company acquired Quitral-Co S.A.I.C.
("Quitral-Co") from Perez Companc S.A. and other shareholders. The
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 operated by Quitral-Co were combined with the Company's
existing land-based operations in those countries. The Company has
further expanded international operations by deploying more than 40
rigs from its former U.S. land-based fleet, primarily to Argentina and
Venezuela, and by acquiring four rigs from an Argentina competitor.
o In October 1996, the Company expanded its Colombian operations to 20
rigs through the acquisition of Ingeser de Colombia, S.A.
("Ingeser"), 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.
o In March 1997, the Company completed the Forasol acquisition, adding
two semisubmersible rigs, three jackup rigs, seven tender-assisted
rigs, four barge rigs and 29 land-based rigs operating in various
locations in South America, North Africa, the Middle East and
Southeast Asia.
o In May 1997, the Company purchased 13 mat-supported jackup drilling
rigs, 11 of which are currently operating in the Gulf of Mexico, one
of which is currently operating in West Africa and one of which is
being mobilized to Malaysia.
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial information
of the Company by operating segment for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
United States land.............. $ 113,115 42.9% $ 117,142 28.8% $ 16,485 2.4%
United States offshore.......... 49,595 18.8 57,450 14.1 135,281 19.3
International land.............. 100,889 38.3 218,562 53.7 385,590 55.1
International offshore.......... -- -- 14,020 3.4 162,432 23.2
---------- --------- ---------- --------- ---------- ---------
Total revenues............. $ 263,599 100.0% $ 407,174 100.0% $ 699,788 100.0%
========== ========= ========== ========= ========== =========
Earnings from operations:
United States land.............. $ 7,906 28.9% $ 7,808 19.5% $ 519 .5%
United States offshore.......... 6,785 24.9 6,983 17.4 40,965 37.8
International land.............. 12,630 46.2 23,372 58.2 42,500 39.2
International offshore.......... -- -- 1,979 4.9 24,401 22.5
---------- --------- ---------- --------- ---------- ---------
Total earnings from
operations.............. $ 27,321 100.0% $ 40,142 100.0% $ 108,385 100.0%
========== ========= ========== ========= ========== =========
</TABLE>
1997 COMPARED WITH 1996
REVENUES. Revenues for 1997 increased $292.6 million, or 72%, as compared
to 1996. This increase was due primarily to the expansion of the Company's Gulf
of Mexico and international operations as follows: (i) $201.3 million was
related to the operations acquired in the Forasol acquisition in March 1997,
(ii) $70.2 million was related to the operations of the mat-supported jackup
rigs acquired in May 1997 and (iii) $50.0 million was related to the incremental
full-year effect of the operations acquired in the April 1996 acquisition of
Quitral-Co. The remaining increase in revenue was due to the net addition of
five land-based drilling rigs and two barge rigs in South America combined with
increased contract drilling dayrates from ongoing operations. This increase was
partially offset by a reduction of $100.0 million in revenue related to the
divestiture of the Company's domestic land-based well servicing operations.
OPERATING COSTS. Operating costs for 1997 increased $166.3 million, or
64%, as compared to 1996. This increase was due primarily to the acquisitions
and asset purchases discussed above as follows: (i) $130.4 million was related
to the operations acquired in the Forasol acquisition in March 1997, (ii) $30.1
million was related to the operations of the mat-supported jackup rigs acquired
in May 1997 and (iii) $20.0 million was related to the incremental full-year
effect of the operations acquired in the April 1996 acquisition of Quitral-Co.
The remaining increase in operating costs was due to the net addition of four
land-based drilling rigs and two barge rigs in South America combined with
increased labor costs from ongoing operations in Venezuela. This increase in
operating costs was partially offset by a reduction of $90.0 million related to
the divestiture of the Company's domestic land-based well servicing operations.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1997
increased $26.0 million, or 93%, compared to 1996, primarily as a result of the
acquisitions of Forasol, Quitral-Co and the mat-supported jackup rigs, and
depreciation of new, refurbished and upgraded rigs placed in service during the
year, which increase was partially offset by the sale of the Company's domestic
land-based well servicing operations.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs in 1997 increased approximately $28.5 million, or 63%, as compared to
1996, primarily as a result of the acquisitions of Forasol, Quitral-Co and the
mat-supported jackup rigs, which increase was partially offset by the sale of
the Company's domestic land-based well servicing operations. As a percentage of
revenues, total selling, general and administrative costs decreased from 11.1%
for 1996 to 10.5% for 1997.
OTHER INCOME (EXPENSE). Other income (expense) resulted in income of $47.0
million in 1997 as compared to expense of $9.0 million in 1996. Other income and
expense included interest income, interest
17
<PAGE>
expense, net gains or losses from sale of assets, minority interests, foreign
exchange gains or losses and other sources. The Company incurred a gain of $83.6
million from the sale of its domestic land-based well servicing operations in
February 1997. This gain was partially offset by a charge of approximately $4.0
million relating to the induced conversion of $28.0 million of the Company's
6 1/4% convertible subordinated debentures and other charges. Interest expense
for 1997 increased $21 million, or 61%, compared to 1996. This increase was due
primarily to the issuance of $325 million in Senior Notes by the Company in May
1997. During 1997 the Company capitalized approximately $6.0 million in interest
expense related to its capital expenditures, as compared to approximately $2.0
million in 1996.
INCOME TAX PROVISION (BENEFIT). The Company's consolidated effective
income tax rate for 1997 was approximately 33%, as compared to approximately 26%
for 1996. The increase in the effective tax rate resulted from the effects of
(i) certain non-deductible amounts, primarily $3.7 million of costs related to
induced conversion of convertible subordinated debentures, (ii) an estimated
effective combined U.S. federal and state income tax rate of 36% on the gain
from the sale of the Company's U.S. land-based well servicing operations and
(iii) an estimated effective income tax rate of 29% on ongoing operations.
1996 COMPARED WITH 1995
REVENUES. Revenues for 1996 increased $143.6 million, or 54%, as compared
to 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 12 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 1996 increased $105.4 million, or
56%, as compared to 1995. Of this increase, $94.0 million was a result of
expansion of the Company's international operations and $3.0 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 1996
increased $12.4 million, or 74%, as compared to 1995, primarily as a result of
the Quitral-Co acquisition and additional expansion of the Company's
international and domestic offshore assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for 1996 increased $13.0 million, or 40%, as compared to 1995,
primarily due to the inclusion of such costs for Quitral-Co. During 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 11% for 1995.
EARNINGS FROM OPERATIONS. Earnings from operations for 1996 increased by
$12.8 million, or 47%, as compared to 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 1996 included net gains
from asset sales, foreign exchange transactions and other sources. Other income
(expense) for 1995 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 1996 from $740,000 for
1995 due to an increase in cash available for investment. Interest expense for
1996 increased by $7.4 million over 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 1996 and 1995,
the Company capitalized $1.9 million and $250,000, respectively, of interest
expense in connection with construction projects.
18
<PAGE>
INCOME TAX PROVISION (BENEFIT). The Company's consolidated effective
income tax rate for 1996 was approximately 26%, as compared to approximately 32%
for 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $121.2 million and $62.7 million at
December 31, 1997 and 1996, respectively. The Company's current ratio was 1.6 at
both December 31, 1997 and December 31, 1996.
In March 1997, the Company entered into a revolving credit facility with a
group of banks (as amended and restated in December 1997, the "Credit
Facility") 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. 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 Credit Facility terminates in December 2000.
Borrowings under the Credit Facility bear interest at a variable rate based on
either the prime rate or LIBOR.
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.
In May 1997, the Company issued $325.0 million of 9 3/8% Senior Notes due
May 1, 2007 (the "Senior Notes"). Interest on the Senior Notes is payable
semiannually on May 1 and November 1 of each year, commencing November 1, 1997.
The Senior Notes are not redeemable prior to May 1, 2002, after which they will
be redeemable, in whole or in part, at the option of the Company at redemption
prices starting at 104.688% and declining to 100% by May 1, 2005. In the event
the Company consummates a public equity 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 $108.3 million principal amount of the Senior
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.
The Indenture governing the Senior Notes (as amended and supplemented, the
"Indenture") contains provisions which limit 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.
A newly organized, special purpose subsidiary of the Company is
participating in joint ventures to construct, own and operate six Amethyst-class
dynamically positioned semisubmersible drilling rigs. The rigs will be operated
under charter and service contracts with Petrobras having initial terms of six
to eight years. The total estimated cost to construct, equip and mobilize the
six rigs is approximately $1 billion, approximately 90% of which is expected to
be provided from the proceeds of project finance obligations of the ventures
without recourse to the joint venture participants. Delivery of the rigs is
expected during late 1999 and 2000. The Company estimates that its total equity
investment in the project will be approximately $30 million, which will
represent a 30% ownership interest.
A subsidiary of the Company has entered into a joint venture to construct,
own and operate the PRIDE AFRICA, an ultra-deepwater drillship currently under
construction in South Korea. The PRIDE AFRICA, which will be capable of
operating in water depths of up to 10,000 feet, is contracted to work for Elf
Exploration Angola for a term of five years. It is anticipated that the PRIDE
AFRICA will commence operations in mid-1999. The joint venture has entered into
a financing arrangement with a group of banks providing that, upon delivery of
the drillship, approximately 80% of the estimated construction cost of $235
million will be
19
<PAGE>
financed by loans that are without recourse to the joint venture participants.
The Company estimates that its total equity investment in the project will be
approximately $12.0 million, which will represent a 51% ownership interest.
The Company has obtained a commitment from a group of banks to provide up
to $110.0 million in loans to finance its acquisition of certain equipment to be
installed on the PRIDE AFRICA. The loans will be secured by such equipment and
will bear interest at a rate of LIBOR plus 1.25% per annum. The Company has
agreed to sell such equipment to the joint venture formed to construct, own and
operate the rig on or before the date Elf Exploration Angola accepts delivery of
the rig under the charter, which is anticipated to be mid-1999, and expects to
repay such loan from such sales proceeds. The joint venture intends to draw on
its financing arrangement described above to finance its payment to the Company.
The Company has filed a "shelf" registration statement under the
Securities Act pursuant to which it may issue up to $500.0 million of securities
consisting of any combination of debt securities, Common Stock and Preferred
Stock. Management believes that the cash generated from the Company's
operations, together with borrowings under the Credit Facility and issuances of
securities pursuant to the shelf registration statement, will be adequate to
fund the rig construction discussed above and the Company's normal ongoing
capital expenditure, working capital and debt service requirements.
The Company is active in reviewing possible expansion and acquisition
opportunities relating to all of its business segments. While the Company has no
definitive agreements to acquire additional equipment other than those discussed
above, suitable opportunities may arise in the future. The timing, size or
success of any acquisition effort and the associated potential capital
commitments are unpredictable. From time to time, the Company has one or more
bids outstanding for contracts that could require significant capital
expenditures and mobilization costs. The Company expects to fund acquisitions
and project opportunities primarily through a combination of working capital,
cash flow from operations and full or limited recourse debt or equity financing.
ACCOUNTING MATTERS
The Company will adopt Statement of Financial Accounting Standards
("FAS") No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits," FAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information," and FAS No. 130 "Reporting Comprehensive
Income" for the year ended December 31, 1998. The Company does not anticipate
that the adoption of these disclosure standards will have a material impact on
its consolidated financial statements.
YEAR 2000 MATTERS
Year 2000 issues result from the inability of computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways; typically, the year 2000 is represented as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business. The Company is
in the process of implementing new financial reporting, operational reporting
and computer systems. The first phase of implementation was completed in
February 1998. The remaining phases are scheduled for implementation and
completion within the next two years. In addition, the Company is assessing the
use of less critical software systems and various types of equipment. The
Company is using both internal and external resources to complete tasks and
perform testing necessary to address year 2000 issues. The Company believes that
the potential impact, if any, of these systems not being year 2000 compliant
will at most require employees to manually complete otherwise automated tasks or
calculations and that it should not affect the Company's ability to continue
drilling or sales activities.
The Company has initiated formal communication with its significant
suppliers, business partners and customers to determine the extent to which the
Company is vulnerable to those third parties' failure to correct their own year
2000 issues. There can be no assurances that the systems of other companies on
which the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride International, Inc.:
We have audited the consolidated balance sheet of Pride International, Inc.
and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, changes in the shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pride
International, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 16, 1998
21
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents....... $ 73,539 $ 10,310
Short-term investments.......... 856 460
Trade receivables, net.......... 194,973 99,531
Parts and supplies.............. 26,899 27,642
Deferred income taxes........... 2,252 1,778
Other current assets............ 35,691 16,686
------------ ------------
Total current assets....... 334,210 156,407
------------ ------------
PROPERTY AND EQUIPMENT, AT COST...... 1,273,327 514,903
ACCUMULATED DEPRECIATION............. (101,680) (139,654)
------------ ------------
Net property and
equipment.............. 1,171,647 375,249
------------ ------------
OTHER ASSETS
Investments in and advances to
affiliates..................... 9,092 --
Goodwill and other intangibles,
net............................ 3,623 3,134
Other assets.................... 22,929 7,272
------------ ------------
Total other assets......... 35,644 10,406
------------ ------------
$ 1,541,501 $ 542,062
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................ $ 101,318 $ 31,918
Accrued expenses................ 58,412 25,785
Short-term borrowings........... 21,055 3,300
Current portion of long-term
debt........................... 39,356 32,682
Current portion of long-term
lease obligations.............. 10,336 --
------------ ------------
Total current
liabilities............ 230,477 93,685
------------ ------------
OTHER LONG-TERM LIABILITIES.......... 28,911 12,134
LONG-TERM DEBT, net of current
portion............................ 435,100 106,508
LONG-TERM LEASE OBLIGATIONS, net of
current portion.................... 36,275 --
CONVERTIBLE SUBORDINATED
DEBENTURES......................... 52,500 80,500
DEFERRED INCOME TAXES................ 72,313 47,438
MINORITY INTEREST.................... 768 --
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value;
100,000,000 shares authorized;
50,097,120 and 28,571,876
shares issued and 50,042,900
and 28,517,656 shares
outstanding, respectively...... 1 1
Paid-in capital................. 522,946 143,581
Treasury stock, at cost......... (191) (191)
Retained earnings............... 162,401 58,406
------------ ------------
Total shareholders'
equity................. 685,157 201,797
------------ ------------
$ 1,541,501 $ 542,062
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
REVENUES............................. $ 699,788 $ 407,174 $ 263,599
OPERATING COSTS...................... 458,861 292,599 187,203
---------- ---------- ----------
Gross Margin.................... 240,927 114,575 76,396
DEPRECIATION AND AMORTIZATION........ 58,661 29,065 16,657
SELLING, GENERAL AND
ADMINISTRATIVE....................... 73,881 45,368 32,418
---------- ---------- ----------
EARNINGS FROM OPERATIONS............. 108,385 40,142 27,321
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Other income.................... 77,844 1,902 638
Interest income................. 3,773 2,410 740
Interest expense................ (34,368) (13,635) (6,276)
---------- ---------- ----------
Total other income
(expense), net.......... 47,249 (9,323) (4,898)
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES......... 155,634 30,819 22,423
INCOME TAX PROVISION................. 51,639 8,091 7,064
---------- ---------- ----------
NET EARNINGS......................... $ 103,995 $ 22,728 $ 15,359
========== ========== ==========
NET EARNINGS PER SHARE
Basic........................... $ 2.42 $ .85 $ .63
Diluted......................... $ 2.16 $ .77 $ .61
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic........................... 43,036 26,719 24,551
Diluted......................... 49,143 33,755 25,128
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY TOTAL
---------------- PAID-IN STOCK RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL AT COST EARNINGS EQUITY
------ ------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1994............ 24,028 $ 1 $ 91,256 $ (191) $ 20,319 $ 111,385
Net earnings....................... -- -- -- -- 15,359 15,359
Issuance of common stock in
connection with acquisition...... 525 -- 3,279 -- -- 3,279
Exercise of stock options.......... 256 -- 739 -- -- 739
Tax benefit of non-qualified stock
options.......................... -- -- 477 -- -- 477
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1995............ 24,809 1 95,751 (191) 35,678 131,239
Net earnings....................... -- -- -- -- 22,728 22,728
Issuance of common stock in public
offerings, net of offering
costs............................ 3,450 -- 45,641 -- -- 45,641
Issuance of common stock in
connection with acquisition...... 4 -- 29 -- -- 29
Exercise of stock options.......... 255 -- 1,338 -- -- 1,338
Tax benefit of non-qualified stock
options.......................... -- -- 822 -- -- 822
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1996............ 28,518 1 143,581 (191) 58,406 201,797
Net earnings....................... -- -- -- -- 103,995 103,995
Issuance of common stock in public
offerings, net of offering
costs............................ 7,257 -- 168,400 -- -- 168,400
Issuance of common stock in
connection with acquisition...... 11,099 -- 172,422 -- -- 172,422
Issuance of common stock in
connection with conversion of
debentures....................... 2,286 -- 27,463 -- -- 27,463
Exercise of stock options.......... 883 -- 6,138 -- -- 6,138
Tax benefit of non-qualified stock
options.......................... -- -- 4,942 -- -- 4,942
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1997............ 50,043 $ 1 $522,946 $ (191) $162,401 $ 685,157
====== ====== ======== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
OPERATING ACTIVITIES
Net earnings.................... $ 103,995 $ 22,728 $ 15,359
Adjustments to reconcile net
earnings to net cash provided
by operating activities --
Depreciation and
amortization............ 58,661 29,065 16,657
Gain on sale of assets..... (83,845) (815) (1,544)
Effect of exchange rates... 3,736 (437) (142)
Deferred tax provision..... 13,692 5,882 4,602
Changes in assets and
liabilities, net of
effects of
acquisitions --
Trade receivables..... (37,963) (16,438) (4,493)
Parts and supplies.... 743 (2,303) (2,866)
Other assets.......... (11,696) (2,330) (1,914)
Accounts payable...... 38,886 (735) 119
Accrued expenses and
other.............. (25,645) (13,400) 1,391
----------- ----------- -----------
Net cash
provided by
operating
activities.... 60,564 21,217 27,169
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of net assets of
acquired entities, including
acquisition costs, less cash
acquired...................... (369,432) (119,067) (8,144)
Purchases of property and
equipment..................... (268,307) (61,711) (40,636)
Proceeds from dispositions of
property and equipment........ 131,536 14,438 6,862
Proceeds from sales of
short-term investments........ 836 6,047 1,250
Purchases of short-term
investments................... (686) (1,045) (360)
Other........................... -- (733) (485)
----------- ----------- -----------
Net cash used in
investing
activities.... (506,053) (162,071) (41,513)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of common
stock......................... 168,400 45,641 --
Proceeds from exercise of stock
options....................... 6,138 1,338 739
Proceeds from issuance of
convertible subordinated
debentures.................... -- 77,585 --
Proceeds from debt borrowings... 533,145 89,362 27,535
Reduction of debt............... (198,965) (72,066) (10,410)
Other........................... -- 9 (195)
----------- ----------- -----------
Net cash
provided by
financing
activities.... 508,718 141,869 17,669
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 63,229 1,015 3,325
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 10,310 9,295 5,970
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 73,539 $ 10,310 $ 9,295
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Pride International, Inc. (the "Company") is a Louisiana corporation
which was organized in 1988 as the successor to a company originally
incorporated in 1968. The accompanying consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications have been made to prior year amounts to conform with the
current year presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments having maturities
of three months or less at the date of purchase to be cash equivalents.
SHORT-TERM INVESTMENTS
Short-term investments include marketable securities, which in the case of
debt instruments have maturities in excess of three months but less than one
year at the date of purchase, are classified as available for sale and are
carried at the lower of cost or market value. There were no material differences
between cost and fair market value as of December 31, 1997 and 1996.
PARTS AND SUPPLIES
Parts and supplies consist of spare rig parts and supplies held for use in
operations and are valued at the lower of weighted average cost or market value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are capitalized
and depreciated over the respective asset's useful life. Maintenance and repair
costs are charged to expense as incurred. When assets are sold or retired, the
remaining costs and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in income.
For financial reporting purposes, depreciation of property and equipment is
provided using the straight line method based upon expected useful lives of each
class of assets. Estimated useful lives of the assets for financial reporting
purposes are as follows:
YEARS
---------
Rigs and rig equipment............... 5-25
Transportation equipment............. 3-7
Buildings and improvements........... 10-20
Furniture and fixtures............... 5
Rigs and rig equipment have salvage values ranging from $150,000 to
$8,000,000 with such values not exceeding 10% of the cost of the rig.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the cost in excess of fair value of the net assets of
businesses acquired and is being amortized using the straight line method over
15 years. Other intangible assets represent costs allocated to service
contracts, employment contracts and covenants not to compete acquired in
business acquisitions. Other intangible assets are being amortized using the
straight line method over their estimated useful lives, which range from three
to ten years.
26
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenue as services are performed based upon
contracted day rates and the number of operating days during the period.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the difference between the financial statement and the tax bases of
assets and liabilities using enacted tax rates.
FOREIGN CURRENCY TRANSLATION
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." The Company's Venezuelan operations are in a "highly
inflationary" economy resulting in the use of the U.S. dollar as the functional
currency. Therefore, certain assets of these operations are translated at
historical exchange rates and all translation gains or losses are reflected in
the period's results of operations. In the other countries in which the Company
operates the local currency is considered the functional currency. Translation
of assets and liabilities in those countries is made at the prevailing exchange
rate as of the balance sheet date. Revenues and expenses are translated at the
average rate of exchange during the period.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in U.S.
Government securities and other high quality financial instruments. By policy,
the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of major
integrated and government-owned international oil companies as well as smaller
independent oil and gas producers. Management believes the credit quality of its
customers is generally high. The Company has in place insurance to cover certain
exposure in its foreign operations and provides allowances for potential credit
losses when necessary.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. While it is believed that such estimates are reasonable,
actual results could differ from those estimates.
CONDITIONS AFFECTING ONGOING OPERATIONS
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 influenced by oil and gas prices, expectations
about future prices, the cost of producing and delivering oil and gas,
government regulations and local and international political and economic
conditions. 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.
STOCK-BASED COMPENSATION
The Company accounts for compensation cost for stock option plans in
accordance with Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees."
27
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1997 and 1996 consisted of the
following:
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
(IN THOUSANDS)
Land................................. $ 2,812 $ 3,462
Rigs and rig equipment............... 1,170,783 445,220
Transportation equipment............. 12,612 17,570
Buildings............................ 8,374 10,984
Other................................ 828 1,757
Construction-in-progress............. 77,918 35,910
------------ ------------
1,273,327 514,903
Accumulated depreciation and
amortization....................... (101,680) (139,654)
------------ ------------
Net property and equipment...... $ 1,171,647 $ 375,249
============ ============
As of December 31, 1997, construction-in-progress included approximately
$38,000,000 of costs related to the acquisition and refurbishment of a
tender-assisted rig and a drillship, $15,000,000 of costs related to the
construction or refurbishment of three offshore platform rigs and three
land-based drilling and workover rigs and $17,000,000 of costs related to the
refurbishment of certain newly-acquired offshore jackup drilling rigs.
Construction-in-progress as of December 31, 1996 included approximately
$21,000,000 of costs related to the acquisition or refurbishment of 11
land-based drilling rigs, $5,400,000 of costs related to upgrading the rig fleet
and equipment acquired from Quitral-Co S.A.I.C. ("Quitral-Co") and $6,400,000
of costs related to the construction of an offshore platform workover rig.
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. For the years ended December
31, 1997, 1996 and 1995, total interest incurred was $40,018,000, $15,550,000
and $6,526,000, respectively, of which $5,650,000, $1,915,000 and $250,000,
respectively, was capitalized.
During the years ended December 31, 1997, 1996 and 1995, maintenance and
repair costs included in operating costs on the accompanying consolidated
statement of operations were $51,429,000, $32,698,000 and $20,776,000,
respectively.
3. ACQUISITIONS AND DISPOSITIONS
In May 1997, the Company acquired 13 mat-supported jackup drilling rigs
(the "Jackup Rigs") for approximately $269,000,000 in cash. The acquisition
was financed through the sale of Senior Notes and common stock, which was
completed concurrently with the acquisition.
In March 1997, the Company acquired the operating subsidiaries of
Forasol-Foramer N.V. (collectively, "Forasol") for aggregate consideration of
$285,644,000, consisting of $113,222,000 in cash and 11,099,191 shares of common
stock valued at $172,422,000, based on the approximate market value of the
common stock immediately prior to the date of the agreement of $15.50 per share.
28
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assets acquired and liabilities assumed in the Forasol acquisition,
based on the Company's preliminary purchase price allocation, were as follows:
ASSETS (LIABILITIES)
---------------------
(IN THOUSANDS)
Cash and cash equivalents............ $ 13,438
Trade receivables.................... 56,831
Deferred income taxes................ 2,012
Other current assets................. 18,624
Property and equipment............... 369,527
Investments in affiliates............ 9,431
Other assets......................... 5,227
Accounts payable..................... (30,514)
Accrued expenses..................... (57,053)
Short-term borrowings................ (15,354)
Long-term debt....................... (31,361)
Long-term lease obligations.......... (35,514)
Other long-term liabilities.......... (4,805)
Deferred income taxes................ (12,721)
Minority interest.................... (2,124)
---------------------
Net assets acquired............. $ 285,644
=====================
In February 1997, the Company sold substantially all of the assets used in
its U.S. land-based well servicing operations for $135,650,000 in cash. After
federal and state income taxes of approximately $42,100,000, repayment of
$3,877,000 of indebtedness collateralized by certain of the assets sold and
$65,000 of interest accrued thereon, and repayment of $3,960,000 of lease
payments on transferred assets subject to operating leases, the net proceeds to
the Company were $85,648,000. The Company recognized a pretax gain on the sale
of $83,553,000, which amount is included in other income on the accompanying
consolidated statement of operations.
In November 1996, the Company acquired three land-based drilling rigs and
other support assets from another contractor in Argentina for $8,900,000 cash.
In October 1996, the Company acquired all of the outstanding capital stock
of Ingeser de Colombia, S.A. ("Ingeser") for aggregate consideration of
$5,500,000, consisting of $4,000,000 cash and a contingent note payable to the
sellers for $1,500,000. Based on the debt assumed and the working capital
position of Ingeser, the transaction was valued at approximately $12,000,000.
Ingeser operates seven drilling rigs and six workover rigs in the Republic of
Colombia.
In April 1996, the Company acquired all of the outstanding capital stock of
Quitral-Co for an aggregate purchase price of $140,000,000, consisting of
$110,000,000 in cash and a $30,000,000 installment note payable to the selling
shareholders. In connection with the acquisition of Quitral-Co, the Company paid
a commission of $310,000 to a director of the Company.
29
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assets acquired and liabilities assumed in the Quitral-Co acquisition
were as follows:
ASSETS (LIABILITIES)
--------------------
(IN THOUSANDS)
Cash and cash equivalents............ $ 5,564
Short-term investments............... 2,851
Trade receivables.................... 35,189
Parts and supplies................... 15,618
Deferred income taxes................ 1,300
Other current assets................. 3,814
Property and equipment............... 161,420
Other assets......................... 2
Accounts payable..................... (21,710)
Accrued expenses..................... (23,462)
Long-term debt....................... (13,936)
Deferred income taxes................ (26,650)
--------------------
Net assets acquired............. $140,000
====================
Each of the acquisitions discussed above was recorded using the purchase
method of accounting. The operating results of each acquisition have been
included in the Company's consolidated results of operations from the date of
acquisition.
Unaudited pro forma results of operations assuming the acquisitions of
Quitral-Co, Forasol and the Jackup Rigs and the sale of the Company's U.S.
land-based well servicing operations had occurred on January 1, 1996, are as
follows:
YEAR ENDED DECEMBER
31,
----------------------
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Revenues............................. $ 755,952 $ 622,712
Net earnings......................... $ 52,050 $ 16,994
Earnings per share
Basic........................... $ 1.12 $ .45
Diluted......................... $ 1.03 $ .45
The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Company that might have occurred
if such transactions had occurred as of January 1, 1996, nor are they indicative
of future results.
4. DEBT
SHORT-TERM BORROWINGS
The Company has agreements with several banks for short-term lines of
credit denominated in U.S. dollars, French francs and Argentine pesos. The
facilities are renewable annually and bear interest at variable rates based on
LIBOR for the U.S. dollar and Argentine peso denominated facilities, and PIBOR
for the French franc denominated facilities. The interest rates on such
borrowings at December 31, 1997 ranged from 6.25% to 9.00%. As of December 31,
1997, $21,055,000 was outstanding under these facilities and $11,445,000 was
available.
30
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consisted of the following:
DECEMBER 31,
----------------------
1997 1996
---------- ----------
(IN THOUSANDS)
Senior Notes......................... $ 325,000 $ --
Collateralized term loans............ 79,009 46,169
Limited-recourse collateralized term
loans................................ 35,210 38,935
Other notes payable
Note payable to sellers......... 11,000 23,000
Eximbank notes payable.......... 6,533 8,900
Notes payable................... 13,667 4,033
Loan obligations to customers... 4,037 --
Acquisition note payable........ -- 3,877
Secured bank facility........... -- 14,276
Credit Facility...................... -- --
---------- ----------
474,456 139,190
Current portion of long-term debt.... 39,356 32,682
---------- ----------
Long-term debt, net of
current portion............ $ 435,100 $ 106,508
========== ==========
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
all its long-term debt approximates fair market value as of December 31, 1997
and 1996.
SENIOR NOTES
In May 1997, the Company issued $325,000,000 of 9 3/8% Senior Notes due May
1, 2007 (the "Senior Notes"). Interest on the Senior Notes is payable
semi-annually on May 1 and November 1 of each year, commencing November 1, 1997.
The Senior Notes are not redeemable prior to May 1, 2002, after which they will
be redeemable, in whole or in part, at the option of the Company at redemption
prices starting at 104.688% and declining to 100% by May 1, 2005. In the event
the Company consummates a public equity 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 Senior
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.
The indenture governing the Senior Notes contains provisions which limit
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.
Net proceeds from the issuance of Senior Notes totaled approximately
$316,600,000, after deducting underwriting discounts and estimated offering
expenses.
COLLATERALIZED TERM LOANS
In April 1996, the Company completed two separate financing arrangements
with lending institutions pursuant to which it borrowed an aggregate amount of
$40,000,000 and an additional $6,500,000 in November 1996. The collateralized
term loans bore interest initially at a floating rate of prime plus 0.5% and are
repayable in monthly installments of principal and interest over a period of
five to six years. In December 1996, the Company elected to convert the interest
on the term loans to a fixed rate basis. As a
31
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
result, the collateralized term loans currently bear interest at fixed rates
ranging from 7.95% to 8.50% per annum. The loans are collateralized by certain
of the Company's domestic offshore rig fleet and ancillary equipment. The loan
agreements include restrictive financial covenants with respect to cash flow
coverage and tangible net worth.
In connection with the March 1997 Forasol acquisition, the Company assumed
certain borrowing arrangements with various banks, including a $20 million bank
loan, payable in semi-annual installments each August and February through 2002.
The loan bears interest at a stated rate of six-month LIBOR plus a margin
ranging from 1.25% to 2.50%. In conjunction with this loan, Forasol
simultaneously entered into an interest rate swap agreement with a notional
amount of $20 million, which fixed the rate of interest on this loan at 7.55%
over the term of the debt agreement. A semisubmersible rig is pledged as
security for this loan. The Company also assumed a $30 million bank loan,
secured by another semisubmersible rig, payable in semi-annual installments
beginning May 1997 through 2003, which bears interest at a rate of LIBOR plus a
margin ranging from 1.00% to 2.00%.
LIMITED-RECOURSE COLLATERALIZED TERM LOANS
During 1994, the Company entered into long-term financing arrangements with
two Japanese trading companies in connection with the construction and operation
of two floating barge rigs. The term loans are collateralized by the barge rigs
and related charter contracts. The loans are being repaid from the proceeds of
the related charter contracts in equal monthly installments of principal and
interest through July 2004. In addition, a portion of contract proceeds is being
held in trust to assure that timely payment of future debt service obligations
is made. At December 31, 1997, $2,435,000 of such contract proceeds, which
amount is included in cash and cash equivalents on the accompanying consolidated
balance sheet, are being held in trust as security for the lenders, and are not
presently available for use by the Company.
OTHER NOTES PAYABLE
Other notes payable consists of an acquisition note payable to sellers,
Eximbank loans for the purchase and import of goods manufactured in the United
States into other countries, notes payable in connection with financed insurance
premiums and miscellaneous loan obligations to customers.
CREDIT FACILITY
In March 1997, the Company entered into a senior secured revolving credit
facility with a group of banks (as amended and restated in December 1997, the
"Credit Facility") under which up to $100 million (including $25 million for
letters of credit) is available. Availability under the Credit Facility is
limited to a borrowing base based on the fair market value of collateral. 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 Credit Facility terminates in
December 2000. Borrowings under the Credit Facility bear interest at a variable
rate based on either the prime rate or LIBOR.
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.
CONVERTIBLE SUBORDINATED DEBENTURES
In January 1996, the Company completed the public sale of $80,500,000
principal amount of 6 1/4% convertible subordinated debentures. The debentures,
which are due February 15, 2006, are convertible into
32
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common stock of the Company at a price of $12.25 per share. The debentures are
redeemable at the option of the Company, in whole or in part, at any time on or
after March 1, 1999, at an initial redemption price of 103.125% of the principal
amount and declining to 100% of the principal amount by February 15, 2002.
Interest is payable semi-annually on February 15 and August 15 of each year,
commencing August 15, 1996.
During 1997, an aggregate of $28,000,000 principal amount of the debentures
was converted into 2,285,712 shares of common stock. In connection therewith,
the Company paid an aggregate of $3,732,000 in cash to induce such conversions.
Such amount has been included in other income in the accompanying consolidated
statement of operations. As of December 31, 1997, the remaining $52,500,000
principal amount of the debentures had a fair value of $108,214,000, based on
quoted market prices.
Future maturities of long-term debt are as follows:
AMOUNT
--------------
(IN THOUSANDS)
1998................................. $ 39,356
1999................................. 26,845
2000................................. 25,206
2001................................. 21,735
2002................................. 16,702
Thereafter........................... 344,612
--------------
Total long-term debt....... $474,456
==============
In addition to the above, subsequent to December 31, 1997, the Company
obtained a commitment from a group of banks to provide up to $110,000,000 in
loans to finance its acquisition of certain equipment to be installed on the
drillship more fully described in Note 11. The loans will be secured by such
equipment and will bear interest at a rate of LIBOR plus 1.25% per annum. The
Company has agreed to sell such equipment to the joint venture formed to
construct, own and operate the drillship on or before the date the customer
accepts delivery of the drillship under the charter, which is anticipated to be
mid-1999, and expects to repay such loan from such sales proceeds.
5. FINANCIAL INSTRUMENTS
The Company's operations are subject to foreign exchange risks principally
related to the Argentine peso, the Venezuelan bolivar, the Colombian peso and
the French franc. The Company attempts to limit its exposure to foreign currency
exchange risks by obtaining contracts providing for payment in U.S. dollars or
freely convertible foreign currency. Moreover, the Company purchases forward
exchange contracts to hedge its French franc denominated expenses. These
contracts are accounted for as hedges to the extent they relate to anticipated
expenses.
Realized and unrealized gains or losses on forward exchange contracts which
are designated as, and are effective as, hedges are deferred and are recognized
in results of operations when expenses are recognized. The cash flows from these
transactions are classified consistent with the cash flows for the transaction
being hedged. Deferred gains and losses are recognized in results of operations
if the hedge is no longer effective.
Gains or losses on forward exchange contracts that are not hedges are
reported in results of operations as exchange rates change.
As of December 31, 1997, the Company had approximately $41,000,000 notional
amount of forward exchange contracts, principally French francs, to buy foreign
currency to hedge anticipated expenses in 1998. The exchange rate on the
contracts ranges from 5.34 to 6.01 French francs to the U.S. dollar. The
33
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exchange rate as of December 31, 1997 was 5.99 French francs to the U.S. dollar.
The fair market value of all forward exchange contracts based on quoted market
prices of comparable instruments was a liability of $2,278,000 as of December
31, 1997. The value of the contracts upon ultimate settlement is dependent upon
actual currency exchange rates at the various maturity dates during 1998. There
were no such contracts outstanding as of December 31, 1996.
6. LEASES
The Company has entered into agreements with a financial institution for
the sale and leaseback of up to $22,000,000 of equipment to be used in the
Company's business. The Company has received aggregate proceeds of $15,900,000
pursuant to these facilities attributable to two offshore platform rigs placed
in service in 1996. The Company has purchase and lease renewal options at
projected future fair market values under the agreements. The leases have been
classified as operating leases for financial statement purposes. The net book
value of the equipment has been removed from the balance sheet and the excess of
funding over such net book value has been deferred and is being amortized as a
reduction of lease expense over the maximum lease term of five years. Rentals on
these transactions total $3,071,000 annually.
In connection with the acquisition of Forasol, the Company assumed capital
lease obligations pursuant to a sale and leaseback agreement of three
tender-assisted rigs. The obligations are payable in semi-annual installments
through October 2002, and bear interest at 7.67%. In October 1997, the lease was
expanded by $11,000,000 in respect of the financing of a new derrick set for a
tender-assisted rig. The additional obligation is repayable in semi-annual
installments through October 2002, and bears interest at 7.80%.
Future maturities of capital lease obligations are as follows:
AMOUNT
--------------
(IN THOUSANDS)
1998................................. $ 11,201
1999................................. 11,201
2000................................. 11,201
2001................................. 11,200
2002................................. 11,200
Thereafter........................... 1,427
--------------
57,430
Less amounts representing interest... (10,819)
--------------
46,611
Current portion of long-term lease
obligations........................ 10,336
--------------
Long-term lease obligations, net
of current portion............ $ 36,275
==============
Rental expense for operating leases for equipment, vehicles and various
facilities of the Company for the years ended December 31, 1997, 1996 and 1995
was $26,760,000, $19,449,000 and $9,503,000, respectively.
34
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The components of the income tax provision were as follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
United States:
Federal:
Current.................... $ 27,221 $ (243) $ 1,650
Deferred................... 6,427 2,762 3,616
--------- --------- ---------
Total -- Federal...... 33,648 2,519 5,266
--------- --------- ---------
State:
Current.................... 1,601 (14) 89
Deferred................... 378 203 201
--------- --------- ---------
Total -- State 1,979 189 290
--------- --------- ---------
Total -- United
States.............. 35,627 2,708 5,556
--------- --------- ---------
Foreign:
Current......................... 9,125 2,466 723
Deferred........................ 6,887 2,917 785
--------- --------- ---------
Total Foreign......... 16,012 5,383 1,508
--------- --------- ---------
Income tax
provision..... $ 51,639 $ 8,091 $ 7,064
========= ========= =========
The difference between the effective federal income tax rate reflected in
the income tax provision and the amounts which would be determined by applying
the statutory federal tax rate to earnings before income taxes is summarized as
follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
U.S. statutory rate.................. 35.0% 34.0% 34.0%
Foreign.............................. (3.1) (8.0) (7.1)
State and local taxes................ 1.3 0.6 1.3
Other................................ -- (0.3) 3.3
--------- --------- ---------
Effective tax rate......... 33.2% 26.3% 31.5%
========= ========= =========
The domestic and foreign components of earnings before income taxes were as
follows:
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---------- --------- ---------
(IN THOUSANDS)
Domestic............................. $ 96,560 $ 8,076 $ 13,302
Foreign.............................. 59,074 22,743 9,121
---------- --------- ---------
Earnings before income
taxes................... $ 155,634 $ 30,819 $ 22,423
========== ========= =========
35
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1997 and 1996 were as follows:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
Deferred tax liabilities:
Depreciation.................... $ 71,524 $ 50,704
Other........................... 2,792 2,085
--------- ---------
Total deferred tax
liabilities............. 74,316 52,789
--------- ---------
Deferred tax assets:
Foreign net operating loss
carryforwards................. (8,256) (3,883)
Insurance claims................ (318) (461)
Other........................... (1,930) (3,291)
--------- ---------
Total deferred tax
assets.................. (10,504) (7,635)
Valuation allowance for deferred
tax assets.................... 6,249 506
--------- ---------
Net deferred tax assets.... (4,255) (7,129)
--------- ---------
Net deferred tax
liability............... $ 70,061 $ 45,660
========= =========
The Company has recognized a valuation allowance as of December 31, 1997
and 1996 for certain foreign net operating loss carryforwards due to
uncertainties regarding the Company's ability to realize such tax benefits. The
change in the valuation allowance is the result of such additional allowance.
Applicable U.S. income taxes have not been provided on approximately
$71,400,000 of undistributed earnings of the Company's foreign subsidiaries. The
Company considers such earnings to be permanently invested outside the U.S.
These earnings could be subject to U.S. income tax if distributed to the Company
as dividends or otherwise. The Company anticipates that foreign tax credits
would substantially reduce the amount of U.S. income tax that would be payable
if these earnings were to be repatriated.
8. NET EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share"("SFAS No. 128"). Accordingly, earnings per
share in the consolidated financial statements has been restated for all periods
presented to comply with the requirements of SFAS No. 128.
In accordance with SFAS No. 128, basic net earnings per share has been
computed based on the weighted average number of shares of common stock
outstanding during the applicable period. Diluted net earnings per share has
been computed based on the weighted average number of shares of common stock and
common stock equivalents outstanding during the period, as if the convertible
subordinated debentures were converted into common stock on the date of sale,
after giving retroactive effect to the elimination of interest expense, net of
income tax effect, applicable to the convertible subordinated debentures.
36
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents information necessary to calculate basic and
diluted net earnings per share:
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---------- --------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net earnings (numerator)............. $ 103,995 $ 22,728 $ 15,359
Interest expense on convertible
subordinated debentures............ 3,700 4,955 --
Income tax effect.................... (1,335) (1,784) --
---------- --------- ---------
Adjusted net earnings
(numerator)................... $ 106,360 $ 25,899 $ 15,359
========== ========= =========
Weighted average shares outstanding
(denominator)...................... 43,036 26,719 24,551
Convertible subordinated
debentures......................... 4,779 6,106 --
Stock options and warrants........... 1,328 932 577
---------- --------- ---------
Adjusted weighted average shares
outstanding (denominator)..... 49,143 33,757 25,128
========== ========= =========
Basic earnings per share... $ 2.42 $ .85 $ .63
========== ========= =========
Diluted earnings per
share................... $ 2.16 $ .77 $ .61
========== ========= =========
9. EMPLOYEE BENEFITS
The Company has a salary deferral plan covering its employees whereby
employees may elect to contribute up to 15% of their annual compensation. The
Company may at its discretion make matching contributions with respect to an
employee's salary contribution of up to $1,000 or 6.00% of compensation,
whichever is less. The Company made matching contributions to the plan for the
years ended December 31, 1997, 1996, and 1995 totaling $817,000, $219,000, and
$229,000, respectively.
In 1993, the Company established a deferred compensation plan providing
officers and key employees with the opportunity to participate in an unfunded
deferred compensation program titled the "401(k) Restoration Plan." The 401(k)
Restoration Plan is a non-qualified plan which allows certain employees to defer
up to 100% of base compensation and bonuses earned.
10. SHAREHOLDERS' EQUITY
COMMON STOCK
In July 1996, the Company completed the public sale of 3,450,000 shares of
common stock, which resulted in net proceeds to the Company of approximately
$45,641,000. Approximately $20,200,000 of such net proceeds was used to repay
outstanding indebtedness, approximately $12,000,000 was used to finance the
construction of two platform rigs for the Company's offshore fleet and
approximately $7,000,000 was used to fund various capital projects for
Quitral-Co, including rig upgrades and expansion of its rig transportation
fleet. The balance of the net proceeds, $6,441,000, was used for general working
capital needs of the Company.
In May 1997, concurrently with the issuance of the Senior Notes, the
Company also sold 4,391,505 shares of common stock in a public offering. Net
proceeds from the public sale of common stock totaled approximately $70,881,000,
after deducting underwriting discounts and estimated offering expenses. Of such
net proceeds, approximately $45,000,000 was used to repay the balance
outstanding under the Credit Facility and approximately $5,000,000 was used to
repay certain other indebtedness. The balance of the proceeds from the offerings
was used for general corporate purposes, including capital projects.
37
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1997, the Company sold 2,865,000 shares of common stock in a
public offering. Net proceeds from the public sale of common stock were
approximately $97,000,000 after deducting underwriting discounts and estimated
offering expenses. The Company used approximately $40,000,000 of such net
proceeds to repay certain indebtedness, including $25,000,000 to repay
borrowings under the Credit Facility, $30,000,000 of such net proceeds to fund
the construction of three land rigs to be deployed in Venezuela and the balance
for general corporate purposes.
STOCK OPTION PLANS
The Company has a Long-Term Incentive Plan which provides for the granting
or awarding of stock options, restricted stock, stock appreciation rights and
stock indemnification rights to officers and other key employees. The number of
shares authorized and reserved for issuance under the Long-Term Incentive Plan
is limited to 13.00% of total issued and outstanding shares, subject to
adjustment in the event of certain changes in the Company's corporate structure
or capital stock. Stock options may be exercised in whole or in part beginning
six months after termination of employment or one year after retirement, total
disability or death of an employee.
In 1993, the shareholders of the Company approved and ratified the 1993
Directors' Stock Option Plan. The purpose of the plan is to afford the Company's
directors who are not full-time employees of the Company or any subsidiary of
the Company an opportunity to acquire a greater proprietary interest in the
Company. A maximum of 200,000 shares of the Company's common stock is to be
available for purchase upon the exercise of options granted pursuant to the 1993
Directors' Stock Option Plan. The exercise price of options is the fair market
value per share on the date the option is granted. Directors' stock options vest
over two years at the rate of 50% per year and expire ten years from date of
grant.
Stock option transactions pursuant to the Long-Term Incentive Plan and the
1993 Directors' Stock Option Plan for the last three years are summarized as
follows:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN 1993 DIRECTORS' PLAN
------------------------------ -----------------------------
PRICE SHARES PRICE SHARES
----------------- ----------- ------------------ ---------
<S> <C> <C> <C> <C>
Outstanding as of
December 31, 1994...... 1,926,350 39,000
Granted.............. $6.875 483,000 $8.375 - $9.125 19,000
Exercised............ $2.25 - $6.875 (256,000) -- --
----------- ---------
Outstanding as of
December 31, 1995...... 2,153,350 58,000
Granted.............. $9.125 - $14.125 924,000 $17.875 12,000
Exercised............ $2.25 - $6.875 (255,200) -- --
----------- ---------
Outstanding as of
December 31, 1996...... 2,822,150 70,000
Granted.............. $17.25 - $22.75 1,849,200 $19.875 - $20.625 32,000
Exercised............ $2.25 - $14.125 (883,479) -- --
----------- ---------
Outstanding as of
December 31, 1997...... 3,787,871 102,000
=========== =========
Exercisable as of
December 31, 1997...... 2,431,449 64,000
=========== =========
</TABLE>
The weighted average fair values per share of options granted during the
years ended December 31, 1997, 1996 and 1995 were $8.60 and $5.12 and $3.05,
respectively. The fair values were estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions for each of
the three years in the period ended December 31, 1997: dividend yield of 0.00%;
volatility of approximately 37.00% for all years; risk free rate of interest
ranging from 6.35% to 6.56%, 5.27% to 6.90% and 5.24% to 6.89%, respectively;
and an expected term of five years for all years.
38
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information on stock options outstanding and
exercisable as of December 31, 1997 pursuant to the Long-term Incentive Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WGTD. AVG. OPTIONS EXERCISABLE
REMAINING -----------------------------
RANGE OF SHARES CONTR. WGTD. AVG. SHARES WGTD. AVG.
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ----------- ---------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.25 - $ 5.00.... 394,750 1.40 $ 2.57 394,750 $ 2.57
$5.01 - $ 7.00.... 1,421,353 7.22 $ 7.44 1,294,071 $ 7.31
$7.01 - $22.75.... 1,971,768 9.23 $19.98 742,628 $18.06
----------- -----------
$2.25 - $22.75.... 3,787,871 7.66 $13.48 2,431,449 $ 9.83
=========== ===========
</TABLE>
The following table summarizes information on stock options outstanding and
exercisable as of December 31, 1997 pursuant to the 1993 Directors' Stock Option
Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WGTD. AVG. OPTIONS EXERCISABLE
REMAINING -----------------------------
RANGE OF SHARES CONTR. WGTD. AVG. SHARES WGTD. AVG.
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ----------- ---------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 4.25 - $10.00... 58,000 6.25 $ 6.28 58,000 $ 6.28
$10.01 -
$20.623......... 44,000 9.02 $19.53 6,000 $17.88
----------- -----------
$ 4.25 -
$20.623......... 102,000 7.45 $12.00 64,000 $ 7.37
=========== ===========
</TABLE>
If the fair value based method of accounting prescribed by SFAS No. 123 had
been applied, the Company's net earnings and earnings per share would
approximate the pro forma amounts indicated below. The effects of applying SFAS
No. 123 in this pro forma disclosure are not indicative of future amounts.
YEAR ENDED DECEMBER
31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS,
EXCEPT
PER SHARE AMOUNTS)
Pro forma net earnings............... $ 97,424 $ 20,658
Pro forma net earnings per share
Basic........................... $ 2.26 $ .77
Diluted......................... $ 2.03 $ .71
11. COMMITMENTS AND CONTINGENCIES
The Company is from time to time involved in litigation incidental to its
business, which at times involves claims for significant monetary amounts, some
of which would not be covered by insurance. In the opinion of management, none
of the Company's existing litigation should have any material adverse effect on
the Company's financial position or results of operations.
The Company's international land rigs are insured, with deductibles of
generally $25,000 per occurrence. Nineteen of the Company's 23 offshore platform
rigs and all of its other offshore rigs are insured with deductibles of $50,000
and $150,000, respectively. Presently, the Company has insurance deductibles of
$100,000 for general liability claims. The Company maintains statutory insurance
coverages on its offshore platform rig workers and its maritime employees, with
deductibles of up to $50,000 per occurrence. Coverages with respect to foreign
operations for workers' compensation and automobile claims are subject to
deductibles of generally $40,000 to $100,000 per occurrence.
As of December 31, 1997 and 1996, the Company had accrued approximately
$4,643,000 and $4,853,000, respectively, for estimated claims liabilities, of
which $3,746,000 and $3,713,000, respectively, was included in current
liabilities and $897,000 and $1,140,000, respectively, was included in other
long-
39
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
term liabilities in the accompanying consolidated balance sheet. As of December
31, 1997, the Company had letters of credit outstanding totaling $8,330,000.
These letters of credit principally guarantee the funding of the Company's share
of insured claims.
During 1997, the Company entered into a joint venture to construct, own and
operate an ultra-deepwater drillship currently under construction in South
Korea. The drillship is contracted to work offshore Angola for a term of five
years. It is anticipated that the drillship will commence operations in mid-
1999. Subsequent to December 31, 1997, the joint venture entered into a
financing arrangement with a group of banks providing that, upon delivery of the
drillship, approximately 80% of the drillship's estimated construction cost of
$235 million will be provided by loans that are without recourse to the joint
venture participants. The Company estimates that its total equity investment in
the project will be approximately $12 million, which will represent a 51%
ownership interest.
Also during 1997, a newly organized special purpose subsidiary of the
Company agreed to participate in joint ventures to construct, own and operate
six Amethyst-class dynamically positioned semisubmersible drilling rigs. The
rigs will be operated under charter and service contracts with initial terms of
six to eight years. The total estimated cost to construct, equip and mobilize
the six rigs is approximately $1 billion, approximately 90% of which is expected
to be provided from the proceeds of project finance obligations of the ventures
without recourse to the joint venture participants. Delivery of the rigs is
expected during late 1999 and 2000. The Company estimates that its total equity
investment in the project will be approximately $30 million, which will
represent a 30% ownership interest.
12. SUPPLEMENTAL FINANCIAL INFORMATION
OTHER CURRENT ASSETS
Other current assets as of December 31, 1997 and 1996 consisted of the
following:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
Other receivables.................... $ 21,376 $ 7,743
Prepaid expenses..................... 14,315 8,943
--------- ---------
Total other current assets...... $ 35,691 $ 16,686
========= =========
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles as of December 31, 1997 and 1996 consisted
of the following:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
Goodwill............................. $ 2,944 $ 2,944
Other intangibles.................... 1,373 2,097
--------- ---------
4,317 5,041
Accumulated amortization............. (694) (1,907)
--------- ---------
Total goodwill and other
intangibles................... $ 3,623 $ 3,134
========= =========
Amortization expense amounted to $198,000, $198,000 and $196,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
40
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER ASSETS
Other assets as of December 31, 1997 and 1996 consisted of the following:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
Prepaid expenses..................... $ 1,156 $ 3,898
Deferred financing costs............. 9,014 1,449
Mobilization costs................... 5,974 --
Other................................ 6,785 1,925
--------- ---------
Total other assets.............. $ 22,929 $ 7,272
========= =========
ACCRUED EXPENSES
Accrued expenses as of December 31, 1997 and 1996 consisted of the
following:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
Insurance............................ $ 3,872 $ 3,713
Payroll.............................. 5,504 7,019
Taxes, other than income............. 10,537 8,826
Foreign social benefits.............. 30,707 3,073
Other................................ 7,792 3,154
--------- ---------
Total accrued expenses.......... $ 58,412 $ 25,785
========= =========
OTHER LONG-TERM LIABILITIES
Other long-term liabilities as of December 31, 1997 and 1996 consisted of
the following:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
Foreign social benefits.............. $ 25,210 $ 9,502
Insurance............................ 897 1,140
Deferred compensation................ 2,583 1,142
Deferred lease benefit............... 221 350
--------- ---------
Total other long-term
liabilities................... $ 28,911 $ 12,134
========= =========
OPERATING EXPENSES
Operating expenses for the years ended December 31, 1997 and 1996 include
gains on insurance recoveries from damaged or destroyed rigs of $1,800,000 and
$1,085,000, respectively. There were no insurance recoveries during the year
ended December 31, 1995.
OTHER INCOME
Other income for the years ended December 31, 1997 included a gain of
$83,553,000 as a result of the sale of substantially all of the Company's assets
used in its U.S. land-based well servicing operations.
Foreign exchange transaction (gains) losses included in other income were
$(3,736,000), $437,000 and $142,000 for the years ended December 31, 1997, 1996
and 1995, respectively.
41
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH FLOW INFORMATION
Cash paid (received) for interest and income taxes during the years ended
December 31, 1997, 1996, and 1995 was as follows:
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
Cash paid (received) during the year
for:
Interest, net of amounts
capitalized................... $ 32,810 $ 11,220 $ 4,316
Income taxes -- U.S. ........... 34,117 (472) 500
Income taxes -- foreign......... 8,433 5,844 16
13. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
<TABLE>
<CAPTION>
UNITED STATES INTERNATIONAL
--------------------- ---------------------
LAND OFFSHORE LAND OFFSHORE TOTAL
-------- --------- -------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
- -------------------------------------
Revenues............................. $ 16,485 $ 135,281 $385,590 $ 162,432 $ 699,788
Earnings from operations............. 519 40,965 42,500 24,401 108,385
Identifiable assets.................. 1,503 395,598 687,789 456,611 1,541,501
Capital expenditures, including
acquisitions....................... 8,465 330,252 132,729 418,538 889,984
Depreciation and amortization........ 818 13,076 33,801 10,966 58,661
1996
- -------------------------------------
Revenues............................. $117,142 $ 57,450 $218,562 $ 14,020 $ 407,174
Earnings from operations............. 7,808 6,983 23,372 1,979 40,142
Identifiable assets.................. 94,559 61,251 331,462 54,790 542,062
Capital expenditures, including
acquisitions....................... 8,666 18,618 211,834 17 239,135
Depreciation and amortization........ 5,738 3,665 12,677 6,985 29,065
1995
- -------------------------------------
Revenues............................. $113,115 $ 49,595 $100,889 $ -- $ 263,599
Earnings from operations............. 7,906 6,785 12,630 -- 27,321
Identifiable assets.................. 77,243 50,978 129,384 -- 257,605
Capital expenditures, including
acquisitions....................... 14,502 15,066 28,940 -- 58,508
Depreciation and amortization........ 5,578 3,091 7,988 -- 16,657
</TABLE>
42
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth certain information with respect to the
Company and its subsidiaries by geographic area:
<TABLE>
<CAPTION>
NORTH SOUTH OTHER
AMERICA AMERICA INTERNATIONAL TOTAL
-------- -------- -------------- -----------
(IN THOUSANDS)
1997
- -------------------------------------
<S> <C> <C> <C> <C>
Revenues............................. $151,766 $451,693 $ 96,329 $ 699,788
Earnings from operations............. 41,484 53,302 13,599 108,385
Identifiable assets.................. 397,101 720,126 424,274 1,541,501
Capital expenditures, including
acquisitions....................... 338,717 119,932 419,366 878,015
Depreciation and amortization........ 13,894 34,478 10,289 58,661
1996
- -------------------------------------
Revenues............................. $174,592 $231,038 $ 1,544 $ 407,174
Earnings from operations............. 14,791 25,799 (448) 40,142
Identifiable assets.................. 155,810 384,165 2,087 542,062
Capital expenditures, including
acquisitions....................... 27,284 211,851 -- 239,135
Depreciation and amortization........ 9,403 19,394 268 29,065
1995
- -------------------------------------
Revenues............................. $162,710 $ 98,382 $ 2,507 $ 263,599
Earnings from operations............. 14,691 12,448 182 27,321
Identifiable assets.................. 128,221 125,939 3,445 257,605
Capital expenditures, including
acquisitions....................... 29,568 28,940 -- 58,508
Depreciation and amortization........ 8,669 7,611 377 16,657
</TABLE>
SIGNIFICANT CUSTOMERS
One customer accounted for approximately 14% of consolidated revenues for
the year ended December 31, 1997 and one customer accounted for approximately
16% and 17% of consolidated revenues for the years ended December 31, 1996 and
1995, respectively. Another customer accounted for approximately 54% of revenues
from domestic offshore operations during 1995. Revenues from such customer and
its affiliates from both land and offshore operations accounted for
approximately 13% of consolidated revenues during such period.
43
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997
<S> <C> <C> <C> <C>
Revenues............................. $131,376 $174,537 $182,908 $210,967
Earnings from operations............. 15,198 26,899 29,947 36,341
Net earnings......................... 57,494 13,053 14,032 19,416
Net earnings per share
Basic........................... 1.82 .29 .30 .40
Diluted......................... 1.49 .27 .28 .37
Weighted average shares outstanding
Basic........................... 31,569 44,884 46,809 48,652
Diluted......................... 39,046 50,293 52,621 54,358
1996
Revenues............................. $ 66,235 $101,989 $115,369 $123,581
Earnings from operations............. 5,358 9,361 11,971 13,452
Net earnings......................... 2,780 4,795 6,879 8,274
Net earnings per share
Basic........................... .11 .19 .24 .29
Diluted......................... .11 .17 .22 .25
Weighted average shares outstanding
Basic........................... 24,846 25,038 28,438 28,516
Diluted......................... 30,345 32,599 35,913 36,124
</TABLE>
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
independent accountants regarding accounting and financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1997.
Certain information with respect to the executive officers of the Company
is set forth under the caption "Executive Officers of the Registrant" in Part
I of the report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are included as part of this report:
(1) Financial Statements:
PAGE
----
Report of Independent Accountants ....................... 21
Consolidated Balance Sheet -- December 31, 1997 and 1996 22
Consolidated Statement of Operations -- Years ended
December 31, 1997, 1996 and 1995 ..................... 23
Consolidated Statement of Changes in Shareholders'
Equity -- Years ended December 31, 1997, 1996 and 1995 24
Consolidated Statement of Cash Flows --
Years ended December 31, 1997, 1996 and 1995 ......... 25
Notes to Consolidated Financial Statements ............. 26
(2) Consolidated Financial Statement Schedules:
All financial statement schedules have been omitted because they are not
applicable or not required, or the information required thereby is included in
the consolidated financial statements or the notes thereto included in this
report.
45
<PAGE>
(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
3.1 -- Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit
3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File
No. 0-16961).
3.2 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File No.
0-16961).
3.3 -- Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-K for the year ended December 31,
1996, File No. 0-16961).
3.4 -- Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8 dated September 8, 1997,
Registration No. 333-35089).
3.5 -- Bylaws of the Company, as amended (incorporated by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-8 dated September 8, 1997, Registration No.
333-35089).
4.1 -- Form of Common Stock Certificate (incorporated by reference to Exhibit 4(b) to the
Company's Registration Statement on Form S-1 dated January 29, 1990, Registration No.
33-33233).
4.2 -- Sale and Financing Contract for Lake Maracaibo Drilling Barge dated November 30, 1994, by
and between Perforaciones Western, C.A., Nittetsu Shoji Co., Ltd. and Marubeni Corporation
(incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, File No. 0-16961).
4.3 -- Supplemental, Amended and Restated Agented Multiple Lender Loan Agreement dated February
9, 1995, by and between Pride Offshore, Inc., the Company and First National Bank of
Commerce, The CIT Group/Equipment Financing, Inc., Argent Bank (incorporated by reference
to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-16961).
4.4 -- Indenture dated as of January 26, 1996 by and between the Company and Marine Midland Bank,
as Trustee, relating to $80,500,000 principal amount of 6 1/4% Convertible Subordinate
Debentures due 2006 (incorporated by reference to Exhibit 4.4 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, File No. 0-16961).
4.5 -- Loan Agreement dated as of April 30, 1996 among The CIT Group/Equipment Financing, Inc.,
as agent, The CIT Group/Equipment Financing, Inc. and The Frost National Bank, as
borrowers, and the Company, Pride Petroleum Services of California, Inc. and Pride
Petroleum Services of Louisiana, Inc. (incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-3 dated June 4, 1996, Registration No.
333-05137).
4.6 -- Loan Agreement dated as of April 30, 1996 among Heller Financial Inc., the Company, Pride
Petroleum Services of California, Inc. and Pride Petroleum Services of Louisiana, Inc.
(incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form
S-3 dated June 4, 1996, Registration No. 333-05137).
4.7 -- Credit Agreement dated as of March 6, 1997 among the Company, each of the banks that are
or may be a party thereto, First National Bank of Commerce, as arranger and syndication
agent, and Wells Fargo Bank (Texas), National Association, as administrative and
documentation agent (incorporated by reference to Exhibit 4.7 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, File No. 0-16961).
46
<PAGE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
*4.8 -- Amended and Restated Credit Agreement dated as of December 22, 1997 among the Company,
each of the banks that are or may be a party thereto, First National Bank of Commerce, as
arranger and syndication agent, and Wells Fargo Bank (Texas), National Association, as
administrative agent and documentation agent.
4.9 -- Indenture, dated as of May 1, 1997, by and between the Company and The Chase Manhattan
Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, File No. 0-16961).
4.10 -- First Supplemental Indenture, dated as of May 1, 1997, by and between the Company and The
Chase Manhattan Bank, as trustee, relating to $325,000,000 principal amount of 9 3/8%
Senior Notes due 2007 (incorporated by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, File No. 0-16961).
The Company is a party to several debt instruments under which the total amount of
securities authorized does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(a) of Item 601(b) of
Regulation S-K, the Company agrees to furnish a copy of such instruments to the Commission
upon request.
+10.1 -- Form of Indemnity Agreement between the Company and certain executive officers and
directors (incorporated by reference to Exhibit 10(g) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233).
+10.2 -- Pride International, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit
4A to the Company's Registration Statement on Form S-8 dated February 6, 1989,
Registration No. 33-26854).
+10.3 -- First Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 dated
September 8, 1997, Registration No. 333-35089).
+10.4 -- Second Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 dated
September 8, 1997, Registration No. 333-35089).
*+10.5 -- Third Amendment to Pride International, Inc. Long-Term Incentive Plan.
+10.6 -- Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated by reference to Exhibit
10(I) to the Company's Registration Statement on Form S-1 dated January 29, 1990,
Registration No. 33-33233).
+10.7 -- Summary of Pride Petroleum Services, Inc. Group Life Insurance and Accidental Death and
Dismemberment Insurance (incorporated by reference to Exhibit 10(j) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233).
+10.8 -- Pride International, Inc. 1993 Directors' Stock Option Plan (incorporated by reference to
Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended December 31,
1992, File No. 0-16961).
+10.9 -- First Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form
S-8 dated September 8, 1997, Registration No. 333-35093).
*+10.10 -- Second Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan.
*+10.11 -- Third Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan.
+10.12 -- Pride Petroleum Services, Inc. 401(k) Restoration Plan (incorporated by reference to
Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31,
1993, File No. 0-16961).
+10.13 -- Pride Petroleum Services, Inc. Employee Stock Purchase Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8 filed June 26, 1996,
Registration No. 333-06825).
*+10.14 -- First Amendment to Pride International, Inc. Employee Stock Purchase Plan.
*+10.15 -- Pride International, Inc. Supplemental Executive Retirement Plan.
47
<PAGE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
*+10.16 -- First Amendment to Pride International, Inc. Supplemental Executive Retirement Plan.
*+10.17 -- Second Amendment to Pride International, Inc. Supplemental Executive Retirement Plan.
10.18 -- Well Drilling and/or Reconditioning Agreement dated May 1, 1994, by and between Lagoven,
S.A. and Perforaciones Western, C.A. (incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, File No.
0-16961).
+10.19 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and Ray H. Tolson (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
+10.20 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and Paul A. Bragg (incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
+10.21 -- Employment/Non-Competition/Confidentiality Agreement dated August 26, 1994, between the
Company and James W. Allen (incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1994, File No.
0-16961).
*+10.22 -- Employment/Non-Competition/Confidentiality Agreement dated October 1,1997, between the
Company and Steven R. Tolson.
*+10.23 -- Employment/Non-Competition/Confidentiality Agreement dated October 1,1997, between the
Company and Robert W. Randall.
*+10.24 -- Employment/Non-Competition/Confidentiality Agreement dated October 1,1997, between the
Company and Earl W. McNiel.
10.25 -- Stock Purchase Agreement dated April 30, 1996 among the Company, Perez Company S.A., Astra
C.A.P.S.A. and others (incorporated by reference to Exhibit 2 to the Company's Current
Report on Form 8-K filed May 15, 1996, File No. 0-16961).
10.26 -- Purchase Agreement, dated as of December 23, 1996, by and between the Company and Dawson
Production Services, Inc. (incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K filed March 7, 1997, File No. 0-16961).
10.27 -- First Amendment to Purchase Agreement, dated as of February 20, 1997, by and between the
Company and Dawson Production Services, Inc. (incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K filed March 7, 1997, File No. 0-16961).
10.28 -- Purchase Agreement dated as of December 16, 1996 by and among the Company, Forasol-Former
N.V. and certain shareholders of Forasol-Foramer N.V. (incorporated by reference to
Appendix A of the Company's Proxy Statement/Prospectus dated January 31, 1997, File No.
0-16961).
10.29 -- Asset Purchase Agreement dated as of February 19, 1997 by and between the Company and
Noble Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble
Drilling (Mexico) Inc. and NN-1 Limited Partnership (incorporated by reference to Exhibit
10.19 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
File No. 0-16961).
10.30 -- First Amendment to Asset Purchase Agreement, dated as of May 7, 1997, by and among Noble
Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble
Drilling (Mexico) Inc., NN-1 Limited Partnership and Mexico Drilling Partners Inc., and
Pride Petroleum Services, Inc., Pride Offshore, Inc. and Forasol S.A. (incorporated by
reference to Exhibit 2.2 of the Company's Current Report on Form 8-K dated May 22, 1997,
File No. 0-16961).
*21 -- Subsidiaries of the Company.
*22 -- Consent of Coopers & Lybrand L.L.P.
*27 -- Financial Data Schedule.
</TABLE>
48
<PAGE>
- ------------
* Filed herewith.
+ Compensatory plan or arrangement
(b) Reports on Form 8-K
In a current Report on Form 8-K filed on November 7, 1997, the Company
announced that it had completed the sale of 2,865,000 shares of common stock to
the public.
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on March 16, 1998.
PRIDE INTERNATIONAL, INC.
By: /s/ RAY H. TOLSON
RAY H. TOLSON
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on March 16, 1998.
SIGNATURE TITLE
- --------------------------------------------------------------------------
/s/RAY H. TOLSON Chairman of the Board, Chief
RAY H. TOLSON Executive Officer and Director
(PRINCIPAL EXECUTIVE OFFICER)
/s/PAUL A. BRAGG President and Chief Operating Officer
PAUL A. BRAGG (PRINCIPAL EXECUTIVE OFFICER)
/s/EARL W. MCNIEL Vice President and Chief Financial
EARL W. MCNIEL Officer (PRINCIPAL FINANCIAL OFFICER)
/s/M. TERRY MAY Chief Accounting Officer
M. TERRY MAY (PRINCIPAL ACCOUNTING OFFICER)
/s/CHRISTIAN J. BOON FALLEUR Director
CHRISTIAN J. BOON FALLEUR
/s/JAMES B. CLEMENT Director
JAMES B. CLEMENT
/s/REMI DORVAL Director
REMI DORVAL
/s/JORGE E. ESTRADA M. Director
JORGE E. ESTRADA M.
/s/RALPH D. MCBRIDE Director
RALPH D. MCBRIDE
/s/THOMAS H. ROBERTS, JR. Director
THOMAS H. ROBERTS, JR.
/s/JAMES T. SNEED Director
JAMES T. SNEED
50
EXHIBIT 4.8
*****************************************************************************
CREDIT AGREEMENT
Dated as of December 22, 1997
among
PETROLEUM SUPPLY COMPANY,
PRIDE INTERNATIONAL HOLDINGS, INC.
RANGER WELL SERVICE, INC.,
PRIDE OFFSHORE, INC.,
RANGER CORPORATION,
as Borrowers,
PRIDE INTERNATIONAL, INC.,
as Guarantor,
FIRST NATIONAL BANK OF COMMERCE,
as Arranger and Syndication Agent,
and
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
as Administrative and Documentation Agent
$100,000,000
OF CREDIT FACILITIES
**************************************************************************
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS................................ 2
Section 1.1 DEFINITIONS................................................ 2
Section 1.2 OTHER DEFINITIONAL PROVISIONS.............................. 22
ARTICLE II
ADVANCES.................................. 22
Section 2.1 ADVANCES................................................... 22
Section 2.2 NOTES...................................................... 23
Section 2.3 REPAYMENT OF ADVANCES...................................... 23
Section 2.4 INTEREST................................................... 23
Section 2.5 BORROWING PROCEDURE........................................ 24
Section 2.6 CONVERSIONS AND CONTINUATIONS.............................. 24
Section 2.7 USE OF PROCEEDS............................................ 25
Section 2.8 COMMITMENT FEE............................................. 25
Section 2.9 VOLUNTARY REDUCTION OR TERMINATION OF COMMITMENTS.......... 25
Section 2.10 MANDATORY PRINCIPAL PAYMENTS............................... 26
Section 2.11 ADMINISTRATIVE FEE......................................... 26
Section 2.12 CO-BORROWERS; JOINT AND SEVERAL LIABILITY.................. 26
ARTICLE III
LETTERS OF CREDIT............................. 31
Section 3.1 LETTERS OF CREDIT.......................................... 31
Section 3.2 PROCEDURE FOR ISSUING LETTERS OF CREDIT.................... 31
Section 3.3 PARTICIPATION BY LENDERS................................... 32
Section 3.4 PAYMENTS CONSTITUTE ADVANCES AND PARENT REIMBURSEMENT
OBLIGATIONS................................................ 32
Section 3.5 LETTER OF CREDIT FEE....................................... 32
Section 3.6 ISSUER'S RESPONSIBILITIES.................................. 33
Section 3.7 LETTER OF CREDIT DOCUMENTS................................. 34
ARTICLE IV
PAYMENTS.................................. 34
Section 4.1 METHOD OF PAYMENT.......................................... 34
Section 4.2 VOLUNTARY PREPAYMENT....................................... 34
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
Section 4.3 MANDATORY PREPAYMENT....................................... 34
Section 4.4 PRO RATA TREATMENT......................................... 35
Section 4.5 NON-RECEIPT OF FUNDS....................................... 35
Section 4.6 WITHHOLDING TAXES.......................................... 35
Section 4.7 WITHHOLDING TAX EXEMPTION.................................. 36
Section 4.8 AUTOMATIC PAYMENT.......................................... 36
ARTICLE V
YIELD PROTECTION; LIMITATIONS ON ADVANCES; CAPITAL ADEQUACY........ 37
Section 5.1 ADDITIONAL COSTS........................................... 37
Section 5.2 LIMITATION ON TYPES OF ADVANCES............................ 38
Section 5.3 ILLEGALITY................................................. 39
Section 5.4 SUBSTITUTE BASE RATE ADVANCES.............................. 39
Section 5.5 COMPENSATION............................................... 39
Section 5.6 CAPITAL ADEQUACY........................................... 40
Section 5.7 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT........... 40
ARTICLE VI
SECURITY.................................. 41
Section 6.1 COLLATERAL................................................. 41
Section 6.2 FURTHER ASSURANCES......................................... 42
Section 6.3 EXISTING LIENS TO CONTINUE................................. 42
Section 6.4 SETOFF..................................................... 42
Section 6.5 OTHER SUBSIDIARIES......................................... 42
ARTICLE VII
CONDITIONS PRECEDENT............................ 43
Section 7.1 INITIAL EXTENSION OF CREDIT................................ 43
Section 7.2 ALL EXTENSIONS OF CREDIT................................... 46
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES....................... 46
Section 8.1 EXISTENCE AND AUTHORITY.................................... 46
Section 8.2 FINANCIAL STATEMENTS....................................... 46
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
Section 8.3 CORPORATE ACTION; NO BREACH................................ 47
Section 8.4 OPERATION OF BUSINESS...................................... 47
Section 8.5 LITIGATION AND JUDGMENTS................................... 47
Section 8.6 RIGHTS IN PROPERTIES; LIENS................................ 47
Section 8.7 ENFORCEABILITY............................................. 48
Section 8.8 APPROVALS.................................................. 48
Section 8.9 DEBT....................................................... 48
Section 8.10 TAXES...................................................... 48
Section 8.11 USE OF PROCEEDS; MARGIN SECURITIES......................... 48
Section 8.12 ERISA...................................................... 48
Section 8.13 DISCLOSURE................................................. 49
Section 8.14 SUBSIDIARIES; FOREIGN AFFILIATES........................... 49
Section 8.15 AGREEMENTS................................................. 49
Section 8.16 COMPLIANCE WITH LAWS....................................... 50
Section 8.17 INVESTMENT COMPANY ACT..................................... 50
Section 8.18 PUBLIC UTILITY HOLDING COMPANY ACT......................... 50
Section 8.19 ENVIRONMENTAL MATTERS...................................... 50
ARTICLE IX
AFFIRMATIVE COVENANTS........................... 50
Section 9.1 REPORTING REQUIREMENTS..................................... 50
Section 9.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS.............. 52
Section 9.3 MAINTENANCE OF PROPERTIES.................................. 52
Section 9.4 TAXES AND CLAIMS........................................... 53
Section 9.5 INSURANCE.................................................. 53
Section 9.6 INSPECTION RIGHTS.......................................... 53
Section 9.7 KEEPING BOOKS AND RECORDS.................................. 53
Section 9.8 COMPLIANCE WITH LAWS AND AGREEMENTS........................ 54
Section 9.9 FURTHER ASSURANCES......................................... 54
Section 9.10 ERISA...................................................... 54
ARTICLE X
NEGATIVE COVENANTS............................. 54
Section 10.1 DEBT....................................................... 54
Section 10.2 LIMITATION ON LIENS........................................ 55
Section 10.3 MERGERS, ACQUISITIONS, ETC................................. 56
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
Section 10.4 RESTRICTED PAYMENTS........................................ 57
Section 10.5 LOANS AND INVESTMENTS...................................... 57
Section 10.6 TRANSACTIONS WITH AFFILIATES............................... 58
Section 10.7 DISPOSITION OF ASSETS...................................... 58
Section 10.8 SALE AND LEASEBACK......................................... 59
Section 10.9 NATURE OF BUSINESS......................................... 59
Section 10.10 ENVIRONMENTAL PROTECTION................................... 59
Section 10.11 ACCOUNTING................................................. 59
ARTICLE XI
FINANCIAL COVENANTS............................ 59
Section 11.1 FUNDED DEBT TO EBITDA...................................... 60
Section 11.2 FUNDED DEBT TO CAPITALIZATION.............................. 60
Section 11.3 COVERAGE RATIO............................................. 60
Section 11.4 TANGIBLE NET WORTH......................................... 60
ARTICLE XII
DEFAULT.................................. 61
Section 12.1 EVENTS OF DEFAULT.......................................... 61
Section 12.2 REMEDIES UPON DEFAULT...................................... 63
Section 12.3 CASH COLLATERAL............................................ 64
Section 12.4 PERFORMANCE BY THE ADMINISTRATIVE AGENT.................... 64
ARTICLE XIII
THE AGENTS................................. 64
Section 13.1 APPOINTMENT, POWERS AND IMMUNITIES......................... 64
Section 13.2 RIGHTS OF AGENTS AS LENDERS................................ 66
Section 13.3 SHARING OF PAYMENTS, ETC................................... 66
SECTION 13.4 INDEMNIFICATION............................................ 67
Section 13.5 INDEPENDENT CREDIT DECISIONS............................... 67
Section 13.6 SEVERAL COMMITMENTS........................................ 68
Section 13.7 SUCCESSOR ADMINISTRATIVE AGENT............................. 68
-iv-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE XIV
GUARANTY.................................. 68
Section 14.1 UNCONDITIONAL GUARANTY..................................... 69
Section 14.2 NO IMPAIRMENT; CUMULATIVE REMEDIES......................... 69
Section 14.3 REMEDIES; SUBORDINATION.................................... 69
Section 14.4 PAYMENT ON DEMAND.......................................... 69
Section 14.5 NO IMPAIRMENT OF OBLIGATIONS............................... 70
ARTICLE XV
MISCELLANEOUS............................... 70
Section 15.1 EXPENSES................................................... 70
SECTION 15.2 INDEMNIFICATION............................................ 71
Section 15.3 LIMITATION OF LIABILITY.................................... 72
Section 15.4 NO FIDUCIARY RELATIONSHIP.................................. 72
Section 15.5 NO WAIVER; CUMULATIVE REMEDIES............................. 72
Section 15.6 SUCCESSORS AND ASSIGNS..................................... 72
Section 15.7 SURVIVAL................................................... 75
Section 15.8 ENTIRE AGREEMENT........................................... 76
Section 15.9 AMENDMENTS, ETC............................................ 76
Section 15.10 MAXIMUM INTEREST RATE...................................... 76
Section 15.11 NOTICES.................................................... 77
Section 15.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS................... 77
Section 15.13 COUNTERPARTS............................................... 78
Section 15.14 SEVERABILITY............................................... 78
Section 15.15 HEADINGS................................................... 78
Section 15.16 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE....... 78
Section 15.17 CONSTRUCTION............................................... 78
Section 15.18 INDEPENDENCE OF COVENANTS.................................. 78
Section 15.19 WAIVER OF JURY TRIAL....................................... 78
Section 15.20 ARBITRATION................................................ 79
Section 15.21 SPECIAL PROVISION.......................................... 80
Section 15.22 REFERENCE TO INDENTURE..................................... 81
-v-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 22, 1997, is among PETROLEUM
SUPPLY COMPANY, a Texas corporation, PRIDE INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, RANGER WELL SERVICE, INC., a Texas corporation, PRIDE
OFFSHORE, INC., a Delaware corporation, RANGER CORPORATION, a Delaware
corporation, each of the Subsidiaries of the Parent Guarantor (defined below) or
any of the foregoing parties that may from time to time become a borrower
hereunder and a signatory hereto pursuant to an Addendum and Assumption
Agreement (hereinafter defined) (each individually, a "BORROWER," and,
collectively, the "BORROWERS"), PRIDE INTERNATIONAL, INC., a Louisiana
corporation (the "PARENT GUARANTOR"), each of the banks or other lending
institutions which is or may from time to time become a signatory hereto or any
successor or permitted assignee thereof (each a "LENDER" and, collectively, the
"LENDERS"), FIRST NATIONAL BANK OF COMMERCE, a national banking association
("FNBC"), as arranger and syndication agent for the Lenders (in such capacity,
together with its successors in such capacity, the "SYNDICATION AGENT"), and
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, a national banking association
("WELLS FARGO"), as administrative and documentation agent for the Lenders and
as issuer of Letters of Credit hereunder (in such capacity, together with its
successors in such capacity, the "ADMINISTRATIVE AGENT").
R E C I T A L S:
The Parent Guarantor (formerly known as Pride Petroleum Services, Inc.),
the Syndication Agent, the Administrative Agent and the Lenders entered into
that certain Credit Agreement dated as of March 6, 1997 (as amended, modified,
or supplemented, the "PRIOR CREDIT AGREEMENT") pursuant to which the Lenders
extended credit to the Parent in the form of revolving credit advances and
letters of credit.
The Prior Credit Agreement was modified to release the Guarantors (as
defined in the Prior Credit Agreement) upon completion of the Senior Notes
transaction and to reduce the amount available thereunder to $15,000,000.
The Borrowers have requested this new revolving credit facility for up
to $100,000,000, which facility is available in the form of Advances and, to the
extent of $25,000,000, standby letters of credit.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows, intending to be legally
bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"AAA" has the meaning specified in SECTION 15.20(B).
<PAGE>
"ADDENDUM AND ASSUMPTION AGREEMENT" means any Addendum and
Assumption Agreement in substantially the form of EXHIBIT "A" hereto to
be executed by each Material Subsidiary of the Parent Guarantor or any
Borrower formed or acquired subsequent to the date hereof, as the same
may be amended, supplemented, or modified from time to time.
"ADDITIONAL COSTS" has the meaning specified in SECTION 5.1.
"ADMINISTRATIVE AGENT" has the meaning specified in the
introductory paragraph hereof.
"ADVANCE" means an advance of funds by the Lenders or any one of
them to the Borrowers pursuant to ARTICLE II or SECTION 3.4.
"ADVANCE REQUEST FORM" means a certificate, in substantially the
form of EXHIBIT "B" hereto, properly completed and signed by the
Borrowers requesting an Advance.
"AFFILIATE" means, as to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, such Person. The term
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or
otherwise; PROVIDED, however, in no event shall any Agent or any Lender
be deemed an Affiliate of the Parent Guarantor, any of the Borrowers,
any of the Subsidiaries, or any of the Foreign Affiliates.
"AGENTS" means, collectively, the Administrative Agent and the
Syndication Agent.
"APPLICABLE RIG ADVANCE RATE" means (a) 50% from the date hereof
through June 30, 1998, and (b) from July 1, 1998 and thereafter, the
percentage indicated therefor in the table set forth below based on the
trailing Funded Debt to EBITDA ratio of the Parent Guarantor and its
Subsidiaries, on a consolidated basis, for the most recently ended
Rolling Period demonstrated by the most recently delivered Compliance
Certificate:
RATIO OF APPLICABLE RIG
FUNDED DEBT TO ADVANCE
EBITDA RATE
Less than 2.50 to 1.00 62.5%
Greater than or equal to
2.50 to 1.00 50.0%
======================== ==============
The Applicable Rig Advance Rate shall be adjusted 10 days after the
Agent receives the Compliance Certificate for the period ending June 30,
1998 which is required to be delivered pursuant to SECTION 9.1(C)
hereof, and 10 days after the Agent receives each Compliance Certificate
delivered thereafter; provided, that, the Parent Guarantor and its
Subsidiaries must maintain the required ratio, on a consolidated basis,
for two consecutive fiscal quarters in
<PAGE>
order for the Applicable Rig Advance Rate to be increased. If the
Borrowers fail to furnish to the Administrative Agent any Compliance
Certificate by the date required by this Agreement, then the 50%
Applicable Rig Advance Rate shall apply at all times after such date for
all determinations of the Borrowing Base made after such date until the
Borrowers furnish the required Compliance Certificate to the
Administrative Agent.
"APPLICABLE FOREIGN ADVANCE RATE" means the percentage of
Eligible Foreign Accounts to be included in the Borrowing Base, as
determined in accordance herewith and calculating the value of those not
payable in Dollars at their Dollar-equivalent using the applicable
Exchange Rate. From the date hereof until March 1, 1998, the Applicable
Foreign Advance Rate for each of the following types of Eligible Foreign
Accounts shall be the percentage indicated therefor in the table set
forth below:
ELIGIBLE FOREIGN APPLICABLE FOREIGN
ACCOUNT ADVANCE RATE
------- ------------
Majors/Nationals 80%
Argentina Accounts 50%
Venezuela Accounts 40%
Colombia Accounts 50%
Other Countries Accounts 30%
======================== ==================
On March 1, 1998 and on each September 1 and March 1 thereafter the
Administrative Agent shall have the right to adjust the Applicable
Foreign Advance Rates for the various types of Eligible Foreign Accounts
and to identify other categories of Eligible Foreign Accounts with
different Applicable Foreign Advance Rates. The adjustment and
determination of the Applicable Foreign Advance Rates shall be made by
the Administrative Agent using its reasonable business judgment, with
the concurrence of the Lenders taking into account such factors and
criteria as Administrative Agent shall reasonably deem relevant. The
above-specified types of Eligible Foreign Accounts are defined below:
"MAJORS/NATIONALS" means accounts receivable of any
Borrower or a Subsidiary that are owing from foreign operations
of major United States petroleum companies, national oil
companies of various jurisdictions, other international oil
companies and other major oil companies that have been
pre-approved by the Administrative Agent at 80% Foreign Advance
Rate, all as identified by the Borrowers on SCHEDULE 1.1A,
together with such other petroleum companies as the
Administrative Agent and the Lenders may approve in writing from
time to time.
"ARGENTINA ACCOUNTS" means accounts receivable of any
Borrower or a Subsidiary that originate or arise in Argentina or
are owed by an Argentina account debtor, other than
Majors/Nationals.
<PAGE>
"VENEZUELA ACCOUNTS" means accounts receivable of any
Borrower or a Subsidiary that originate or arise in Venezuela or
are owed by a Venezuela account debtor, other than
Majors/Nationals.
"COLOMBIA ACCOUNTS" means accounts receivable of any
Borrower or a Subsidiary that originate or arise in Colombia or
are owed by a Colombia account debtor, other than
Majors/Nationals.
"OTHER COUNTRIES ACCOUNTS" means accounts receivable any
Borrower or a Subsidiary that originate or arise in a country
other than the United States, Argentina, Venezuela and Colombia,
or are owed by an account debtor located or domiciled in such
other country, other than Majors/Nationals.
"APPLICABLE LENDING OFFICE" means for each Lender and each Type
of Advance, the lending office of such Lender (or of an Affiliate of
such Lender) designated for such Type of Advance below its name on the
signature pages hereof or such other office of such Lender (or of an
Affiliate of such Lender) as such Lender may from time to time specify
to the Borrowers and the Administrative Agent as the office by which its
Advances of such Type are to be made and maintained.
"APPLICABLE MARGIN" means, for any day, (a) with respect to
Eurodollar Advances, the marginal interest rate over the Eurodollar Rate
that is applicable when any Applicable Rate based on the Eurodollar Rate
is determined under this Agreement, and (b) with respect to Base Rate
Advances, the marginal interest rate over the Base Rate that is
applicable when any Applicable Rate based on the Base Rate is determined
under this Agreement. The Applicable Margin shall be 2.0% for Eurodollar
Advances and 0.50% for Base Rate Advances from the date hereof through
December 31, 1997. Beginning January 1, 1998, the Applicable Margin is
subject to adjustment (upwards or downwards, as appropriate), as
indicated in the table and text set forth below:
<TABLE>
<CAPTION>
S&P/MOODY'S
RATING OF PARENT
RATIO OF GUARANTOR'S APPLICABLE MARGIN APPLICABLE MARGIN
FUNDED DEBT TO UNSECURED FOR EURODOLLAR FOR BASE
EBITDA SENIOR DEBT ADVANCES RATE ADVANCES
<S> <C> <C> <C>
Less than 1.50 to 1.00 BBB-/Baa3 or higher 1.25% 0.50%
Greater than or equal to 1.50 to BB to BB+/ 1.50% 0.50%
1.00, but less than 2.00 to 1.00 Ba2 to Ba3
Greater than or equal to 2.00 to BB-/Ba1 1.75% 0.50%
1.00, but less than 2.50 to 1.00
Greater than or equal to 2.50 to
1.00 B+/B1 2.00% 0.50%
================================ ==================== ==================== ===================
</TABLE>
On January 1, 1998 and on each Quarterly Payment Date thereafter, the
Applicable Margin shall be adjusted to reflect the Applicable Margin
which is the lower of (a) the Applicable Margin prescribed above for the
ratio of the Funded Debt to EBITDA of the Parent Guarantor and its
Subsidiaries, on a consolidated basis, for the most recently ended
Rolling
<PAGE>
Period demonstrated by the most recently delivered Compliance
Certificate, or (b) the Applicable Margin prescribed above for the S&P
and Moody's rating of the Parent Guarantor's unsecured senior debt as of
such date as set forth in the most recently published ratings by S&P and
Moody's then publicly available. In the event of a difference in rating
between S&P and Moody's, the lower rating shall be used, which may
result in a higher Applicable Margin. After each adjustment of the
Applicable Margin in accordance herewith, the new Applicable Margin
shall apply to all Advances made or outstanding thereafter until the
next Quarterly Payment Date that another Applicable Margin is
applicable. Upon the request of the Administrative Agent, the Borrowers
must demonstrate to the reasonable satisfaction of the Administrative
Agent the required applicable ratio in order to obtain an adjustment to
a lower Applicable Margin. If the Borrowers fail to furnish to the
Administrative Agent any Compliance Certificate by the date required by
this Agreement, then the maximum Applicable Margin shall apply at all
times after such date for all Advances made or outstanding after such
date until the Borrowers furnish the required Compliance Certificate to
the Administrative Agent.
"APPLICABLE RATE" means: (i) during the period that an Advance is
a Base Rate Advance, the Base Rate plus the Applicable Margin; and (ii)
during the period that an Advance is a Eurodollar Advance, the
Eurodollar Rate plus the Applicable Margin.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and its assignee and accepted by the
Administrative Agent pursuant to SECTION 15.6, in substantially the form
of EXHIBIT "C" hereto.
"BASE RATE" means as of any date of determination, a rate per
annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal
to the greater of (a) the Prime Rate in effect on such day, or (b) the
sum of the Federal Funds Effective Rate in effect on such day plus 0.5%.
If for any reason the Administrative Agent shall have determined (which
determination shall be PRIMA FACIE correct) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the
inability or failure after diligent effort of the Administrative Agent
to obtain sufficient quotations in accordance with the definition of
Federal Funds Effective Rate, the Base Rate shall be determined without
regard to clause (b) of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no
longer exist. Any change in the Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively, without notice to the Borrowers.
"BASE RATE ADVANCES" means Advances that bear interest based
upon the Base Rate.
"BORROWER" and "BORROWERS" have the meaning specified in the
introductory paragraph.
"BORROWER PLEDGE AGREEMENT" means the Pledge Agreement of each
of the Borrowers who owns capital stock of a Subsidiary in favor of the
Administrative Agent in substantially the form of EXHIBIT "D" hereto, as
the same may be amended, supplemented or modified from time to time.
<PAGE>
"BORROWING BASE" means, at any time, an amount equal to the sum
of (a) 80% of Eligible Domestic Accounts, plus (b) the Applicable
Foreign Advance Rate of each Eligible Foreign Account, plus (c) the
lesser of (i) the amount equal to 50% of the aggregate amount of the
Commitments or (ii) the Applicable Rig Advance Rate, multiplied by the
Fair Market Value of all Eligible Rigs.
"BUSINESS DAY" means (a) any day on which national banks in
Houston, Texas and in San Francisco, California are open for the conduct
of commercial banking business, and (b) with respect to all borrowings,
payments, Conversions, Continuations, Interest Periods, and notices in
connection with each Eurodollar Advance, any day which is a Business Day
described in clause (a) above and which is also a day on which dealings
in Dollar deposits are carried out in the London eurodollar interbank
market.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of
(or other agreement conveying the right to use) real and/or personal
property, which obligations are required to be classified and accounted
for as a capital lease on a balance sheet of such Person under GAAP. For
purposes of this Agreement, the amount of such Capital Lease Obligations
shall be the capitalized amount thereof, determined in accordance with
GAAP.
"CAPITALIZATION" means the sum of Funded Debt plus Net Worth.
"CHANGE IN CONTROL" means either (i) a "change of control" as
defined in the Indenture or (ii) the acquisition by any Person or two or
more Persons acting in concert of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, or any
successor provision thereto) of 50% or more of the voting stock and the
other voting equity interests of the Parent Guarantor.
"CODE" means the Internal Revenue Code of 1986, as amended, and
the regulations promulgated and rulings issued thereunder.
"COLLATERAL" has the meaning specified in SECTION 6.1.
"COMMITMENT" means, as to each Lender, the obligation of such
Lender to make Advances pursuant to SECTION 2.1 and issue or participate
in Letters of Credit pursuant to SECTIONS 3.1 and 3.3 in an aggregate
principal amount at any time outstanding up to but not exceeding the
amount set forth opposite the name of such Lender on the signature pages
hereto under the heading "Commitment", as such amount may be reduced
pursuant to SECTION 2.9, 2.10 or 2.11 or terminated pursuant to SECTION
2.9, SECTION 12.2 or SECTION 15.21.
"COMPLIANCE CERTIFICATE" means a certificate of the president,
chief executive officer, chief financial officer, treasurer or corporate
controller of the Parent Guarantor, in the form of EXHIBIT "E" hereto,
with appropriate completions.
<PAGE>
"CONDITIONAL CONSENT" means the consent, at the request of the
Borrowers or the Administrative Agent, of Lenders consisting of at least
the Required Lenders to a waiver or amendment of SECTIONS 10.1 or 10.3,
or both.
"CONTINGENT LIABILITIES" means, as applied to any Person, those
direct or indirect liabilities of that Person (other than non-monetary
performance obligations) with respect to any Debt, lease, dividend,
letter of credit or other obligation (the "PRIMARY OBLIGATIONS") of
another Person (the "PRIMARY OBLIGOR"), including, without limitation,
any obligation of such Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or
any property constituting direct or indirect security therefor, or (b)
to advance or provide funds (i) for the payment or discharge of any such
primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss in
respect thereof. The amount of any Contingent Liabilities shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Liabilities are
made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the Borrowers
in good faith.
"CONTINUE", "CONTINUATION", and "CONTINUED" shall refer to the
continuation pursuant to SECTION 2.6 of a Eurodollar Advance as a
Eurodollar Advance from one Interest Period to the next Interest Period.
"CONVERT", "CONVERSION", and "CONVERTED" shall refer to a
conversion pursuant to SECTION 2.6 or ARTICLE V of one Type of Advance
into another Type of Advance.
"CONVERTIBLE SUBORDINATED DEBENTURES" means the 6 1/4%
convertible subordinated debentures issued by the Parent Guarantor
pursuant to the terms of that certain Indenture dated June 26, 1996 by
and between the Parent Guarantor and Marine Midland Bank, as trustee.
"COVERAGE RATIO" means, as of any date, the ratio of (a) EBIT for
the Rolling Period then most recently ended on such date, minus
dividends paid on common and preferred stock of the Parent Guarantor and
treasury stock purchases of the Parent Guarantor and its Subsidiaries on
a consolidated basis paid during such period to (b) interest expense of
the Parent Guarantor and its Subsidiaries on a consolidated basis, for
such period, plus the portion of long-term Debt of the Parent Guarantor
and its Subsidiaries, on a consolidated basis, that was scheduled for
repayment during such period.
"DEBT" means as to any Person at any time (without duplication):
(a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, notes, debentures, or
other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts
payable of such Person arising in the ordinary course of business (d)
all Capital Lease Obligations of such Person,
<PAGE>
(e) all Debt Guaranteed by such Person, (f) all obligations secured by a
Lien existing on property owned by such Person, whether or not the
obligations secured thereby have been assumed by such Person or are
non-recourse to the credit of such Person, (g) all Contingent
Liabilities and reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments, and (h) all
liabilities of such Person in respect of unfunded vested benefits under
any Plan.
"DEFAULT" means an Event of Default or the occurrence of an event
or condition which with notice or lapse of time or both would become an
Event of Default.
"DEFAULT RATE" means the lesser of the Maximum Rate or the sum of
the Base Rate in effect from day to day plus 5% per annum.
"DISPUTE" has the meaning specified in SECTION 15.20(A).
"DOLLARS" and "$" mean lawful money of the United States of
America.
"DOMESTIC ACCOUNTS" means all accounts receivable of the
Borrowers and the Domestic Subsidiaries, or any of them, with respect to
which the account debtor is domiciled or doing business in the United
States of America.
"DOMESTIC SUBSIDIARY" means each Subsidiary other than the
Foreign Subsidiaries.
"EBIT" means net income of the Parent Guarantor and its
Subsidiaries, on a consolidated basis (less any non-cash income included
in net income), plus, to the extent that any of the following were
deducted in calculating such net income, interest expense and tax
expenses, but excluding all extraordinary items of income and loss.
"EBITDA" means EBIT, plus, to the extent that any of the
following were deducted in calculating net income, depreciation and
amortization but excluding all extraordinary items of income and loss.
"ELIGIBLE ACCOUNTS" means, at any time, all Domestic Accounts and
Foreign Accounts created in the ordinary course of business that are
acceptable to the Administrative Agent using its reasonable business
judgment and satisfy the following conditions:
(a) The account complies with all applicable laws, rules,
and regulations, including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z of the Board of
Governors of the Federal Reserve System;
(b) The account has been billed and has not been
outstanding for more than 90 days past the original date of
invoice;
(c) The account was created in connection with (i) the
sale of goods by any Borrower or any Subsidiary in the ordinary
course of business and such sale has been consummated and such
goods have been shipped and delivered and received by
<PAGE>
the account debtor, or (ii) the performance of services by such
Borrower or Subsidiary in the ordinary course of business and the
portion of such services billed by such Borrower and its
Subsidiaries have been completed and accepted by the account
debtor;
(d) The account arises from an enforceable contract, the
performance of which has been completed by any Borrower or any
Subsidiary for the portion billed;
(e) The account does not include any progress billings for
which billings the services have not been completed and accepted
by the account debtor;
(f) The account does not arise from the sale of any good
that is on a bill-and-hold, guaranteed sale, sale-or-return, sale
on approval, consignment, or any other repurchase or return
basis;
(g) A Borrower or any Subsidiary has good and indefeasible
title to the account and the account is not subject to any Lien
except Liens in favor of the Administrative Agent and Liens
permitted by SECTION 10.2;
(h) The account does not arise out of a contract with or
order from an account debtor that prohibits or makes void or
unenforceable the grant of a security interest by a Borrower or
any Subsidiary to the Administrative Agent in and to such
account;
(i) The account is not subject to any setoff,
counterclaim, defense, dispute, recoupment, or adjustment other
than normal discounts for prompt payment or contra accounts as
set forth below;
(j) The account debtor is not insolvent or the subject of
any bankruptcy or insolvency proceeding and has not made an
assignment for the benefit of creditors, suspended normal
business operations, dissolved, liquidated, terminated its
existence, ceased to pay its debts as they become due, or
suffered a receiver or trustee to be appointed for any of its
assets or affairs;
(k) The account is not evidenced by chattel paper or an
instrument;
(l) No payment default exists under the account by any
party thereto;
(m) The account debtor has not returned or refused to
retain, or otherwise notified a Borrower or any Subsidiary of any
dispute concerning, or claimed nonconformity of, any of the goods
from the sale of which the account arose;
(n) The account is not owed by an employee or Affiliate of
any Borrower or any Subsidiary;
(o) The account is payable in Dollars by the account
debtor (except with respect to Eligible Foreign Accounts);
<PAGE>
(p) The account shall be ineligible if the account debtor
is domiciled in any country other than the United States of
America, unless the account is an Eligible Foreign Account;
(q) All accounts owed by any account debtor shall be
ineligible if more than 25% of the aggregate balances then
outstanding on accounts owed by such account debtor and its
Affiliates to the Borrowers and the Subsidiaries on a
consolidated basis have been outstanding for more than 90 days
past the dates of their original invoices;
(r) If the aggregate balances then outstanding on accounts
owed by any account debtor and its Affiliates to the Borrowers
and the Subsidiaries on a consolidated basis constitute more than
15% of the total accounts receivable of the Borrowers and the
Subsidiaries on a consolidated basis, then the portion of the
accounts owed by such account debtor in excess of the 15%
concentration limit shall be ineligible;
(s) The account shall be ineligible if the account debtor
is the United States of America or any department, agency, or
instrumentality thereof subject to the Federal Assignment of
Claims Act of 1940, as amended ("FACA"), and the FACA shall not
have been complied with.
The amount of the Eligible Accounts owed by an account debtor to
a Borrower or any Subsidiary shall be reduced by the amount of all
"contra accounts," past due credits and other obligations which are owed
by such Borrower or any Subsidiary to such account debtor.
"ELIGIBLE ASSIGNEE" means any commercial bank, savings and loan
association, savings bank, finance company, insurance company, mutual
fund, or other financial institution (whether a corporation,
partnership, or other entity) acceptable to the Administrative Agent.
"ELIGIBLE RIGS" means, at any time, all Rigs then owned by (and
in the possession or under the control of) any Borrower or any Domestic
Subsidiary, in which the Administrative Agent has a perfected, first
priority preferred mortgage and Lien, subject to any Liens permitted by
SECTION 10.2 hereof. For purposes of calculating the Borrowing Base
hereunder, the Fair Market Value of Eligible Rigs shall be determined
based on updated annual appraisals conducted pursuant to SECTION 9.1(I).
If at any time the Borrowers fail to furnish to the Administrative Agent
updated appraisals of the Eligible Rigs as required by SECTION 9.1(I)
hereof, then the Fair Market Value of the Eligible Rigs shall be
estimated by the Agents, in their sole discretion, at all times after
such date for all determinations of the Borrowing Base made after such
date until the Borrowers furnish the required appraisal to the
Administrative Agent.
"ELIGIBLE DOMESTIC ACCOUNTS" means all Eligible Accounts that
are Domestic Accounts.
<PAGE>
"ELIGIBLE FOREIGN ACCOUNTS" means all Eligible Accounts that are
Foreign Accounts that (a) constitute Eligible Accounts and (b) (i) are
not subject to an enforceable contractual restrictions of the rights to
assignment of the account thereunder, or (ii) a Borrower or a
Subsidiary, as applicable, has obtained written consent to the
assignment of the rights to payment thereunder from the account debtor.
"ENVIRONMENTAL LAWS" means any and all United States of America
federal, state, and local laws, regulations, and requirements pertaining
to health, safety, or the environment.
"ENVIRONMENTAL LIABILITIES" means all liabilities, obligations,
responsibilities, remedial actions, losses, damages, punitive damages,
consequential damages, treble damages, costs, expenses, fines,
penalties, sanctions, and interest arising from environmental, health or
safety conditions or the release or threatened release of a Hazardous
Material into the environment, resulting from the past, present, or
future operations of any Borrower or any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA AFFILIATE" means any corporation or trade or business
which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as any Borrower or is under
common control (within the meaning of Section 414(c) of the Code) with
any Borrower.
"EURODOLLAR ADVANCES" means Advances the interest rates on which
are determined on the basis of the rates referred to in the definition
of "Eurodollar Rate" in this SECTION 1.1.
"EURODOLLAR RATE" means, for any Eurodollar Advance for any
Interest Period therefor, an interest rate per annum determined by the
Administrative Agent by DIVIDING: (i) the rate per annum (rounded
upwards, if necessary, to the nearest 1/16th of 1%) determined by the
Administrative Agent at or before 11:00 a.m. (London time) (or as soon
thereafter as practicable) two Business Days before the first day of
such Interest Period to be the rate of interest at which Dollar deposits
in immediately available funds having a term comparable to such Interest
Period and in an amount comparable to the principal amount of such
Eurodollar Advance are offered to Administrative Agent in the London
interbank eurodollar market for delivery on the first day of such
Interest Period; by (ii) Statutory Reserves.
"EXCHANGE RATE" means and refers to the nominal rate of exchange
available to Agent in a chosen foreign exchange market for the purchase
by the Administrative Agent at 11:00 a.m., Houston, Texas time, three
Business Days prior to any date of determination, expressed as the
number of units of such currency per one Dollar.
"EXISTING CREDITS" means all existing letters of credit issued
under and pursuant to the Prior Credit Agreement, which letters of
credit are described on SCHEDULE 1.1(B) to this Agreement.
<PAGE>
"EVENT OF DEFAULT" has the meaning specified in SECTION 12.1.
"FAIR MARKET VALUE" means the price at which such Rig could be
sold by a willing seller to a willing purchaser in an arms-length
transaction upon fair and reasonable terms, as such price shall be
determined by methodology substantially similar to that used in the
initial appraisal delivered by Borrowers pursuant to SECTION 7.1(A)(20)
of this Agreement.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average of the rate on overnight Federal Funds transactions with members
of the Federal Reserve System arranged by Federal Funds brokers, as
published on the next succeeding Business Day by the Federal Reserve
Bank of New York, New York, or if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day
of such transactions received by the Administrative Agent from three
Federal Funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"FINAL CONSENT" means either (a) a written consent or
reaffirmation of the Required Lenders (without giving effect to the
percentages held by the Nonconsenting Lenders requesting an Opt-Out
Request) to the request for waiver or amendment granted in the
Conditional Consent that is provided after knowledge of the
Nonconsenting Lenders under the Conditional Consent, or (b) a
Conditional Consent after which no Opt-Out Request is made.
"FNBC" has the meaning specified in the introductory paragraph
hereof.
"FOREIGN ACCOUNTS" means all accounts receivable of the Parent
Guarantor, the Borrowers and the Subsidiaries, or any of them, with
respect to which the account debtor is domiciled and operates in any
country other than the United States of America and all accounts
receivable of any Foreign Subsidiary.
"FOREIGN AFFILIATE" means any Person in which any Borrower or any
Subsidiary has an equity or ownership interest equal to or less than 50%
and which is organized under the laws of any jurisdiction outside the
United States of America.
"FOREIGN SUBSIDIARY" means any Subsidiary which is organized
under the laws of any jurisdiction outside of the United States of
America.
"FUNDED DEBT" means, at any particular time, the sum of the
following, calculated on a consolidated basis for the Parent Guarantor
and its Subsidiaries in accordance with GAAP:
(a) all obligations for borrowed money (whether as a direct
obligor on a promissory note, bond, debenture or other
similar instrument, as a reimbursement obligor with
respect to an issued letter of credit or similar
instrument, as an obligor under a Guarantee of borrowed
money, or as any other type of direct or contingent
obligor), including but not limited to senior bank debt,
senior notes and subordinated debt, but excluding
obligations of the Parent Guarantor pursuant to the
Convertible Subordinated Debentures
<PAGE>
and Limited Recourse Debt of the Parent Guarantor and its
Subsidiaries PLUS (but without duplication)
(b) all Capital Lease Obligations (other than the interest
component of such obligations).
"GAAP" means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards
Board and/or their respective successors and which are applicable in the
circumstances as of the date in question. Accounting principles are
applied on a "consistent basis" when the accounting principles applied
in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt
of any other Person and, without limiting the generality of the
foregoing, any obligation for such Debt of such Person (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement conditions
or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"GUARANTEE" used as a verb has a corresponding meaning.
"GUARANTEED OBLIGATIONS" means all of the Obligations (excluding
the Parent Obligations), including any and all post-petition interest
and expenses (including reasonable attorneys' fees) whether or not
allowed under any bankruptcy, insolvency, or other similar law.
"GUARANTOR SECURITY AGREEMENT" means the security agreement of
the Parent Guarantor in favor of the Administrative Agent in
substantially the form of EXHIBIT "F" hereto, as the same may be
amended, supplemented, or modified from time to time.
"HAZARDOUS MATERIAL" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
and polychlorinated biphenyls.
"INDENTURE" means that certain Indenture dated as of May 1, 1997,
between the Parent Guarantor and The Chase Manhattan Bank, as trustee,
as supplemented by that certain First
<PAGE>
Supplemental Indenture dated as of May 1, 1997 and The Chase Manhattan
Bank, as trustee, as the same may be amended, modified, or supplemented
from time to time.
"INTEREST PERIOD" means with respect to any Eurodollar Advances,
each period commencing on the date such Advances are made or Converted
from Base Rate Advances or, in the case of each subsequent, successive
Interest Period applicable to a Eurodollar Advance, the last day of the
next preceding Interest Period with respect to such Advance, and ending
on the numerically corresponding day in the first, second, third or
sixth calendar month thereafter, as the Borrowers may select as provided
in SECTION 2.5 or 2.6 hereof, except that each such Interest Period
which commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month. Notwithstanding the
foregoing: (a) each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business
Day (or, if such succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (b) any Interest
Period which would otherwise extend beyond the Termination Date shall
end on the Termination Date; (c) no more than five Interest Periods for
Eurodollar Advances shall be in effect at the same time; (d) no Interest
Period for any Eurodollar Advances shall have a duration of less than
one month and, if the Interest Period for any Eurodollar Advances would
otherwise be a shorter period, such Advances shall not be available
hereunder; and (e) no Interest Period may extend beyond a principal
repayment date or Commitment reduction date unless, after giving effect
thereto, the aggregate principal amount of the Eurodollar Advances
having Interest Periods that end after such principal repayment date or
Commitment reduction date plus the aggregate principal amount of Base
Rate Advances shall be equal to or less than the Advances to be
outstanding hereunder after such principal payment date or Commitment
reduction date.
"L/C APPLICATION" has the meaning specified in SECTION 3.1.
"L/C DOCUMENTS" has the meaning specified in SECTION 3.1.
"LENDER" and "LENDERS" have the meanings specified in the
introductory paragraph hereof.
"LETTER OF CREDIT" means any Existing Credit, any Parent Letter
of Credit or any letter of credit issued by the Administrative Agent for
the liability of the Parent Guarantor, a Borrower or a Subsidiary
pursuant to ARTICLE III.
"LETTER OF CREDIT LIABILITIES" means, at any time, the aggregate
face amounts of all outstanding Letters of Credit.
"LETTER OF CREDIT REQUEST FORM" means a certificate, in
substantially the form of EXHIBIT "G" hereto, properly completed and
signed by the Parent Guarantor or the Borrowers, as applicable,
requesting the issuance of a Letter of Credit.
<PAGE>
"LIEN" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of law, or
otherwise.
"LIMITED RECOURSE DEBT" of a Person means Debt of such Person
under the terms of which the recourse of the holder of such Debt is
effectively limited to specified assets securing such Debt on terms
acceptable to the Administrative Agent, in its sole discretion.
"LOAN DOCUMENTS" means this Agreement and all promissory notes,
security agreements, pledge agreements, assignments, letters of credit,
guaranties, L/C Documents, and other instruments, documents, and
agreements executed and delivered pursuant to or in connection with this
Agreement, as such instruments, documents, and agreements may be
amended, modified, renewed, extended, or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" means (a) any material adverse effect
on (i) the business, condition (financial or otherwise), operations,
prospects, or properties of the Parent Guarantor and its Subsidiaries
taken as a whole, (ii) the ability of the Parent Guarantor and its
Subsidiaries, taken as a whole, to carry out their business, or (iii)
the ability of the Parent Guarantor and its Subsidiaries, taken as a
whole, to perform the obligations under the Notes, this Agreement and
the other Loan Documents in accordance with their respective
obligations; or (b) an Event of Default hereunder.
"MATERIAL SUBSIDIARY" means any Domestic Subsidiary of the
Parent Guarantor or any Borrower.
"MAXIMUM RATE" means, at any time, the maximum rate of interest
under applicable law that the Lenders may charge the Borrowers. The
Maximum Rate shall be calculated in a manner that takes into account any
and all fees, payments, and other charges in respect of the Loan
Documents that constitute interest under applicable law. Each change in
any interest rate provided for herein based upon the Maximum Rate
resulting from a change in the Maximum Rate shall take effect without
notice to the Borrowers at the time of such change in the Maximum Rate.
For purposes of determining the Maximum Rate under Texas law, the
applicable rate ceiling shall be the applicable rate ceiling described
in, and computed in accordance with, the Ship Mortgage Act and Article
5069-1D.001, Vernon's Texas Civil Statutes.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the
Borrowers or any ERISA Affiliate and which is covered by Title IV of
ERISA.
"NET PROCEEDS" from any issuance, sale or other disposition of
any shares of equity securities (or any securities convertible or
exchangeable for any such shares, or any rights, warrants, or options to
subscribe for or purchase any such shares) means the amount equal to (a)
the aggregate gross cash proceeds of such issuance, sale or other
disposition, less
<PAGE>
(b) the following: (i) placement agent fees, (ii) underwriting discounts
and commissions, (iii) bank and other lender fees, and (iv) reasonable
legal fees and other reasonable expenses payable by the issuer in
connection with such issuance, sale or other disposition. "NET PROCEEDS"
from any disposition of assets means the amount equal to (a) the
aggregate gross cash proceeds of such disposition, less (b) the
following: (i) sales or other similar taxes paid or payable by the
seller in connection with such disposition, (ii) reasonable broker fees
in connection with such disposition, (iii) reasonable legal fees and
other reasonable expenses payable by the seller in connection with such
disposition and (iv) the amount of any Debt secured by the assets that
must be repaid in connection with such disposition so long as it is a
Debt permitted under this Agreement.
"NET WORTH" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as stockholder's equity on a
consolidated balance sheet of the Parent Guarantor and its Subsidiaries.
"NONCONSENTING LENDER" means a Lender that does not execute a
Conditional Consent.
"NOTES" means promissory notes of the Borrowers payable to the
order of the Lenders, in substantially the form of EXHIBIT "H" hereto,
and all extensions, renewals, replacements, and modifications thereof;
"NOTE" means one of the Notes.
"OBLIGATED PARTY" means any Person who is or becomes party to any
agreement that guarantees or secures payment and performance of the
Obligations or any part thereof.
"OBLIGATIONS" means (a) the Parent Obligations, and (b) all
obligations, indebtedness, and liabilities of the Borrowers to the
Agents and the Lenders, or any of them, arising pursuant to any of the
Loan Documents, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several (including, without
limitation, all of the Borrowers' contingent reimbursement obligations
in respect of Letters of Credit), and all interest accruing thereon and
all attorneys' fees and other expenses incurred in the enforcement or
collection thereof.
"OPERATING LEASE" means any lease (other than a lease
constituting a Capital Lease Obligation) of real or personal property.
"OPT-OUT REQUEST" means a written request of a Nonconsenting
Lender received by the Borrowers and the Administrative Agent not later
than three Business Days after the granting of a Conditional Consent
that requests that the Commitment of such Nonconsenting Lender be
terminated on a date not earlier than 45 Business Days thereafter and
that all Loans of such Nonconsenting Lender be paid in full on such
date.
"PARENT GUARANTOR" is defined in ARTICLE XIV hereof.
"PARENT GUARANTOR PLEDGE AGREEMENT" means the Pledge Agreement of
the Parent Guarantor in favor of the Administrative Agent in
substantially the form of EXHIBIT "I" hereto, as the same may be
amended, supplemented, or modified from time to time.
<PAGE>
"PARENT LETTERS OF CREDIT" has the meaning specified in SECTION
3.1 hereof.
"PARENT OBLIGATIONS" means the Parent Reimbursement Obligations,
interest on the Parent Reimbursement Obligations, Letter of Credit fees
owing by the Parent Guarantor under SECTION 3.5(B), the obligations of
the Parent Guarantor under ARTICLE XIV hereof, and other Indebtedness
(as defined in the Indenture) of the Parent Guarantor relating to this
Agreement and the Loan Documents.
"PARENT REIMBURSEMENT OBLIGATIONS" has the meaning specified in
SECTION 3.4 hereof.
"PAYOR" has the meaning specified in SECTION 4.5.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"PERSON" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental
Authority, or other entity.
"PLAN" means any employee benefit or other plan established or
maintained by the Borrowers or any ERISA Affiliate and which is covered
by Title IV of ERISA.
"PREFERRED SHIP MORTGAGE" means a United States first preferred
ship mortgage executed by each Borrower which owns any of the Rigs in
favor of the Administrative Agent with respect to each of the Rigs and
dated on or about the date hereof, in substantially the form of EXHIBIT
"J" hereto, as the same may be amended, supplemented, or modified from
time to time.
"PRIOR CREDIT AGREEMENT" has the meaning specified in the first
recital hereof.
"PRIME RATE" means at any time the rate of interest most recently
announced within Wells Fargo at its principal office in San Francisco as
its Prime Rate. The Borrowers understand that the Prime Rate may not be
the best or lowest rate or a favored rate, and any statement,
representation or warranty to that effect is expressly disclaimed by the
Agents and the Lenders.
"PRINCIPAL OFFICE" means the principal office of the
Administrative Agent, presently located at 1000 Louisiana, Third Floor,
Houston, Texas 77002.
"PROHIBITED TRANSACTION" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"QUARTERLY PAYMENT DATE" means the first day of each January,
April, July and October of each year, the first of which shall be the
first such day after the date of this Agreement.
"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented
from time to time.
<PAGE>
"REGULATORY CHANGE" means, with respect to any Lender, any
implementation, adoption or change after the date of this Agreement of
United States federal, state, or foreign laws, rules or regulations
(including Regulation D) or the adoption or making after such date of
any interpretations, directives, or requests applying to a class of
lenders including such Lender of or under any United States federal or
state, or any foreign, laws or regulations (whether or not having the
force of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof.
"REGISTER" has the meaning specified in SECTION 14.6(D).
"REPORTABLE EVENT" means any of the events set forth in Section
4043 of ERISA.
"REQUIRED LENDERS" means, at any time while no Advances are
outstanding, two or more Lenders having at least 66-2/3% of the
aggregate amount of the Commitments and, at any time while Advances are
outstanding, two or more Lenders holding at least 66-2/3% of the
outstanding aggregate principal amount of the Advances.
"REQUIRED PAYMENT" has the meaning specified in SECTION 4.5.
"RESTRICTED PAYMENT" means, as to any Person, (a) the declaration
or payment of any dividends or any other payment or distribution (in
cash, property, or obligations) by a Person on account of such Person's
capital stock, other than dividends paid in stock, (b) the redemption,
purchase, retirement, or other acquisition by a Person of any of its
capital stock, or (c) the setting apart of any money for a sinking fund
or other analogous fund for any dividend or other distribution on such
Person's capital stock or for any redemption, purchase, retirement, or
other acquisition of any of such Person's capital stock.
"RIGS" means jack-up drilling units listed on SCHEDULE 1.1C
attached hereto which are documented as vessels under the laws and flag
of the United States of America, together with any and all traveling and
handling equipment, blowout prevention equipment, solids control
equipment, mud mixing equipment, generators, ancillary equipment,
communication equipment, special equipment and all other related
equipment, machinery, spare parts and other property, whether onboard or
ashore, including, without limitation, any and all attachments,
accessories and additions thereto, and all substitutions, replacements,
products and proceeds thereof.
"ROLLING PERIOD" means, for each fiscal quarter of the Parent
Guarantor and its Subsidiaries, such quarter and the three preceding
fiscal quarters.
"S&P" means Standard & Poor's Corporation.
"SALE-LEASEBACK DEBT" means, as to any particular lease entered
into in a Sale-Leaseback Transaction, at any date as of which the amount
thereof is to be determined, the total net amount of rent required to be
paid under such lease during the remaining term thereof, discounted from
the respective due dates thereof to such date at the rate per annum
which would then be used to determine the lease classification under
GAAP. The net amount of rent required to be paid under any such lease
for any such period shall be the
<PAGE>
aggregate amount of the rent payable by the lessee with respect to such
period after excluding amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates, and
similar charges.
"SALE-LEASEBACK TRANSACTION" means any sale by any Borrower or
any of the Subsidiaries to any Person (other than a Borrower or another
of the Subsidiaries) of any property owned by such Borrower or such
Subsidiary if, as part of the same transaction or series of
transactions, any Borrower or any of the Subsidiaries shall lease as
lessee the same property or other substantially equivalent property
which it intends to use for substantially the same purposes.
"SECURITY AGREEMENT" means the Security Agreement of each of the
Borrowers in favor of the Administrative Agent in substantially the form
of EXHIBIT "K" hereto, as the same may be amended, supplemented, or
modified from time to time.
"SENIOR DEBT" means Funded Debt (other than Limited Recourse
Debt, Sale-Leaseback Debt and Guarantees) of the Parent Guarantor and
its Subsidiaries, or any of them, which is not subordinated to any other
Debt.
"SENIOR NOTES" means up to $325,000,000 of 9-3/8% Senior Notes
due 2007 issued by the Parent Guarantor pursuant to the terms of the
Indenture upon the terms and conditions set forth therein.
"SHIP MORTGAGE ACT" has the meaning specified in SECTION
15.10(A).
"STATUTORY RESERVES" means the difference (expressed as a
decimal) of the number one minus the aggregate of the actual reserve
percentages (including, without limitation, any marginal, special,
emergency, or supplemental reserves) expressed as a decimal established
by the Board of Governors of the Federal Reserve System and any other
banking authority to which the Administrative Agent is subject for
Eurocurrency Liabilities (as defined in Regulation D). Such reserve
percentages shall include, without limitation, those imposed under
Regulation D. Eurodollar Advances shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to
such reserve requirements without benefit of or credit for proration,
exceptions or offsets which may be available from time to time to the
Administrative Agent under Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"SUBSIDIARY" means (a) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time owned or controlled, directly or indirectly, through one or more
intermediaries, by a Person, by one or more of the Subsidiaries of such
Person, or by such Person and the Subsidiaries, or both, and (b) any
limited liability company, partnership or other entity (i) of which at
least a majority of the ownership, equity or voting interests is at the
time owned or controlled, directly or indirectly, through one or more
intermediaries, by a Person, by one or more of the Subsidiaries of such
<PAGE>
Person, or by such Person and one or more of its Subsidiaries, or both,
and (ii) which is treated as a subsidiary in accordance with GAAP.
"SYNDICATION AGENT" has the meaning specified in the
introductory paragraph hereof.
"TANGIBLE NET WORTH" means Net Worth, less (a) any amount at
which shares of capital stock of any Person appear as an asset on the
balance sheet of such Person, (b) goodwill, including any amounts,
however designated, that represent the excess of the purchase price paid
for assets or stock over the value assigned thereto, (c) patents,
trademarks, trade names, and copyrights, (d) deferred expenses, (e)
loans and advances to or other obligations owing by any stockholder,
director, officer, partner, or employee of the Parent Guarantor, any
Borrower, any Subsidiary, or any Affiliate of the Parent Guarantor, any
Borrower or any Subsidiary, and (f) all other assets which are properly
classified as intangible assets under GAAP.
"TERMINATION DATE" means 11:00 A.M. Houston, Texas time on (a)
December 22, 2000, or (b) such earlier date on which the Commitments
terminate as provided in this Agreement.
"TYPE" means any type of Advance (i.e., Base Rate Advance or
Eurodollar Advance).
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas.
"WELLS FARGO" has the meaning specified in the introductory
paragraph hereof.
Section 1.2 OTHER DEFINITIONAL PROVISIONS. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Historical financial
results for Forasol-Foramer N.V., a Dutch corporation recently acquired by the
Parent Guarantor and its Subsidiaries, shall be included in the relevant Rolling
Periods for use in calculating compliance with the financial covenants
hereunder. Compliance with SECTIONS 11.1, 11.2 and 11.3 will be tested quarterly
commencing with the quarter ending December 31, 1997. Unless otherwise
specified, all Article and Section references pertain to this Agreement. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. Terms used herein that are defined in the UCC, unless
otherwise defined herein, shall have the meanings specified in the UCC.
ARTICLE II
ADVANCES
Section 2.1 ADVANCES. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make one or more Advances to the
Borrowers from time to time from the date hereof to and including the
Termination Date in an aggregate principal amount at any time outstanding up to
but not exceeding the amount of such Lender's Commitment as then in effect,
PROVIDED that the aggregate amount of all Advances at any time outstanding shall
not exceed, and the Lenders shall not be obligated to make any Advance which
would cause the aggregate amount
<PAGE>
of all outstanding Advances to exceed, the amount equal to (a) the lesser of (i)
the aggregate amount of the Commitments or (ii) the Borrowing Base, minus (b)
the Letter of Credit Liabilities. Subject to the foregoing limitations, and the
other terms and provisions of this Agreement, the Borrowers may borrow, repay,
and reborrow hereunder. The Borrowers may borrow hereunder by means of Base Rate
Advances or Eurodollar Advances and, until the Termination Date, Borrowers may
Convert all or part of one Type of Advance into another Type of Advance or
Continue all or part of any Eurodollar Advance. Advances of each Type made by
each Lender shall be made and maintained at such Lender's Applicable Lending
Office for Advances of such Type.
Section 2.2 NOTES. The obligation of the Borrowers to repay each Lender
for Advances made by such Lender and interest thereon shall be evidenced by a
Note executed by the Borrowers, payable to the order of such Lender, in the
principal amount of such Lender's Commitment as in effect on the date hereof,
and initially dated the date hereof. On any date that a newly formed or acquired
Material Subsidiary becomes a party to this Agreement pursuant to SECTION 6.5
hereof, the Borrowers shall execute new Notes payable to each Lender, in the
principal amount of such Lender's Commitment as in effect on such date.
Section 2.3 REPAYMENT OF ADVANCES. The Borrowers shall repay the unpaid
principal amount of all Advances as provided in SECTIONS 2.9, 2.10, and 4.3 and
on the Termination Date.
Section 2.4 INTEREST. The unpaid principal amount of the Advances shall
bear interest prior to maturity at a varying rate per annum equal from day to
day to the lesser of (a) the Maximum Rate, or (b) the Applicable Rate. Interest
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed (including the first day but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may be. If at
any time the Applicable Rate for any Advance shall exceed the Maximum Rate,
thereby causing the interest accruing on such Advance to be limited to the
Maximum Rate, then any subsequent reduction in the Applicable Rate for such
Advance shall not reduce the rate of interest on such Advance below the Maximum
Rate until the aggregate amount of interest accrued on such Advance equals the
aggregate amount of interest which would have accrued on such Advance if the
Applicable Rate had at all times been in effect. Accrued and unpaid interest on
the Advances shall be due and payable as follows:
(i) in the case of Base Rate Advances, on each Quarterly Payment
Date;
(ii) in the case of each Eurodollar Advance, on the last day of
the Interest Period with respect thereto and, in the case of an Interest
Period greater than three months, at three-month intervals after the
first day of such Interest Period;
(iii) upon the payment or prepayment of any Advance or the
Conversion of any Advance to an Advance of another Type (but only on the
principal amount so paid, prepaid, or Converted); and
(iv) on the Termination Date.
All past due principal and interest shall bear interest at the Default Rate.
Interest payable at the Default Rate shall be payable from time to time on
demand.
<PAGE>
Section 2.5 BORROWING PROCEDURE. The Borrowers shall give the
Administrative Agent notice of each requested Advance, by means of an Advance
Request Form, before 9:00 A.M. San Francisco, California time on the same
Business Day as the requested date of each Base Rate Advance and before 9:00
A.M. San Francisco, California time at least three Business Days before the
requested date of each Eurodollar Advance, specifying: (i) the requested date of
such Advance (which shall be a Business Day), (ii) the amount of such Advance,
(iii) the Type of the Advance, and (iv) in the case of a Eurodollar Advance, the
duration of the Interest Period for such Advance. The Administrative Agent at
its option may accept telephonic requests for Advances, provided that such
acceptance shall not constitute a waiver of the Administrative Agent's right to
delivery of an Advance Request Form in connection with subsequent Advances. Any
telephonic request for an Advance by the Borrowers shall be promptly confirmed
by submission of a properly completed Advance Request Form to the Administrative
Agent. Each Advance shall be in a minimum principal amount of $5,000,000 or such
greater amount which is an integral multiple of $5,000,000. The aggregate
principal amount of Eurodollar Advances having the same Interest Period shall be
at least equal to $5,000,000. The Administrative Agent shall notify each Lender
of the contents of each such notice on the day such notice is received by
Administrative Agent if received by 11:00 a.m. Houston, Texas time on a Business
Day and otherwise on the next succeeding Business Day. Promptly on the date
specified for each Advance hereunder, each Lender will make available to the
Administrative Agent at the Principal Office in immediately available funds, for
the account of the Borrowers, such Lender's pro rata share of each Advance.
After the Administrative Agent's receipt of such funds and subject to the terms
and conditions of this Agreement, the Administrative Agent will make each
Advance available to the Borrowers by depositing the same, in immediately
available funds, in an account of the Borrowers maintained with the
Administrative Agent designated by the Borrowers or by wire transfer in
accordance with written instructions from the Borrowers. All notices by the
Borrowers to the Administrative Agent under this Section shall be irrevocable
and shall be given not later than the time specified above for such notice on
the day which is not less than the number of Business Days specified above for
such notice.
Section 2.6 CONVERSIONS AND CONTINUATIONS. The Borrowers shall have the
right from time to time to Convert all or part of one Type of Advance into
another Type of Advance or to Continue all or part of any Eurodollar Advance by
giving the Administrative Agent written notice (by means of an Advance Request
Form) at least one Business Day before Conversion into a Base Rate Advance, and
at least three Business Days before Conversion into or Continuation of a
Eurodollar Advance, specifying: (i) the Conversion or Continuation date, (ii)
the amount of the Advance to be Converted or Continued, (iii) in the case of
Conversions, the Type of Advance to be Converted into, and (iv) in the case of a
Continuation of or Conversion into a Eurodollar Advance, the duration of the
Interest Period applicable thereto; provided that (a) Eurodollar Advances may
only be Converted on the last day of the Interest Period, (b) except for
Conversions to Base Rate Advances, no Conversions shall be made while a Default
has occurred and is continuing and no Continuations of any Eurodollar Advances
shall be made while a Default has occurred and is continuing, unless such
Conversion or Continuation has been approved by Required Lenders, and (c) the
aggregate principal amount of Eurodollar Advances having the same Interest
Period shall be at least equal to $5,000,000. All notices given under this
Section shall be irrevocable and shall be given not later than 9:00 A.M. San
Francisco, California time on the day which is not less than the number of
Business Days specified above for such notice. If the Borrowers shall fail to
give the Administrative Agent the notice as specified above for Continuation or
Conversion of a Eurodollar Advance prior to the end of the Interest Period with
respect thereto, such Eurodollar Advance shall automatically be
<PAGE>
Converted into a Base Rate Advance on the last day of the Interest Period for
such Eurodollar Advance.
Section 2.7 USE OF PROCEEDS. The proceeds of Advances shall be used by
the Borrowers and their Subsidiaries for working capital in the ordinary course
of business, for general corporate purposes, to refinance existing Debt, and to
finance all or a portion of the purchase price for acquisitions permitted by
SECTION 10.3 hereof.
Section 2.8 COMMITMENT FEE. The Borrowers agree, jointly and severally,
to pay to the Administrative Agent for the account of each Lender a commitment
fee on the daily average unused amount of such Lender's Commitment at the rate
of 0.375% per annum based on a 360 day year and the actual number of days
elapsed. For the purpose of calculating the commitment fee hereunder, the
Commitments shall be deemed utilized by the amount of all outstanding Advances
and Letter of Credit Liabilities. Accrued commitment fees shall be payable in
arrears on each Quarterly Payment Date and on the Termination Date.
Section 2.9 VOLUNTARY REDUCTION OR TERMINATION OF COMMITMENTS. The
Borrowers shall have the right to terminate in whole or reduce in part to
$75,000,000 the unused portion of the Commitments upon at least five Business
Days prior notice (which notice shall be irrevocable) to the Administrative
Agent specifying the effective date thereof, whether a termination or reduction
is being made, and the amount of any partial reduction, provided that each
partial reduction shall be in a minimum amount of $5,000,000 or such greater
amount which is an integral multiple of $5,000,000 and the Borrowers shall,
jointly and severally, simultaneously prepay the amount by which the unpaid
principal amount of the Advances exceeds the Commitments (after giving effect to
such notice) plus accrued and unpaid interest on the principal amount so
prepaid. The Commitments may not be reinstated after they have been terminated
or reduced.
Section 2.10 MANDATORY PRINCIPAL PAYMENTS. Within 365 days of the date
of each sale of assets permitted hereunder (other than sales of inventory in the
ordinary course of business) by any Borrower or any Subsidiary resulting in Net
Proceeds which, when aggregated with the Net Proceeds from all other such
permitted sales of assets in the same fiscal year, exceed $5,000,000, and which
are not reinvested in or used to purchase assets of equivalent value and
usefulness during such 365-day period (i) the Commitments shall automatically
reduce by the amount of the Net Proceeds from the sale of assets occurring on
such date, and (ii) such Borrower shall simultaneously prepay the amount by
which the unpaid principal amount of the Advances exceeds the Commitments (after
giving effect to such reduction) plus accrued and unpaid interest on the
principal amount so prepaid.
Section 2.11 ADMINISTRATIVE FEE. The Parent Guarantor has agreed to pay
to the Administrative Agent, solely for its own account, an annual
administrative fee as separately agreed between the Parent Guarantor and the
Administrative Agent under the Prior Credit Agreement. The Parent Guarantor
acknowledges that such obligation shall continue under this Agreement.
Section 2.12 CO-BORROWERS; JOINT AND SEVERAL LIABILITY.
(a) Each Borrower acknowledges and agrees that it has determined
independently that, in light of the conduct of the business of Borrowers
as an integrated operation and a common enterprise that requires
financing on a basis permitting the availability of credit to
<PAGE>
each Borrower, it will benefit specifically, directly and materially
from the advances of credit contemplated by Lenders' financing and that
the value of the consideration it is receiving from the Advances made
hereunder is reasonably worth at least the sum at which it is taken by
such Borrower.
(b) It is expressly agreed and understood by each Borrower that
Agents and Lenders shall have no responsibility to inquire into the
apportionment, allocation, or disposition of any Advances made to
Borrowers. All Advances are to be made for the collective account of
Borrowers.
(c) Each Borrower hereby jointly, severally, irrevocably and
unconditionally guarantees to Agents and Lenders the full and prompt
payment of each of the obligations under the Loan Documents by each
other Borrower and the performance by each other Borrower of such
Borrower's obligations hereunder and thereunder and shall fully and
promptly perform all of the Obligations (other than the Parent
Obligations), and agrees, as a primary obligation, to indemnify Agents
and Lenders on demand for and against any loss incurred by Agents and
Lenders as a result of any voidable, unenforceable, or ineffective
provision herein or in any of the Loan Documents, for any reason
whatsoever, whether or not known to Agents any Lender, or any person,
firm or entity, the amount of such loss being in the amount to which
Agents and Lenders would otherwise have been entitled to recover from
Borrowers. This is a guaranty of payment and of performance and not of
collection.
(d) Each Borrower consents and agrees that Agents and Lenders
may, at any time and from time to time, without notice or demand, except
as otherwise required herein, whether before or after any actual or
purported termination, repudiation or revocation of any of the Loan
Documents, including this Agreement, by any one or more Borrowers, and
without affecting the enforceability or continuing effectiveness hereof
as to each Borrower, agree with one or more Borrowers or any other
person, firm or entity to: (i) supplement, restate, compromise, modify,
amend, increase, decrease, extend, discharge, renew, accelerate or
otherwise change the time for payment or the terms of the Obligations or
any part thereof, including any increase or decrease of the rate(s) of
interest thereon; (ii) supplement, restate, modify, amend, increase,
decrease or waive, or enter into or give any agreement, approval or
consent with respect to, the Obligations or any part thereof, or any of
the Loan Documents or any additional security or guarantees, or any
condition, covenant, default, remedy, right, representation or term
thereof or thereunder; (iii) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan
Documents or the Obligations or any part thereof; (iv) accept partial
payments on the Obligations; (v) receive and hold additional security or
guarantees for the Obligations or any part thereof; (vi) release,
reconvey, terminate, waive, abandon, fail to perfect, subordinate,
exchange, substitute, transfer or enforce any security or guarantees,
and apply any security and direct the order or manner of the sale
thereof as Agents in their sole and absolute discretion may determine;
(vii) release any person, firm or entity from any personal liability
with respect to the Obligations or any part thereof; (viii) settle,
discharge, release on terms satisfactory to the Agents and the Lenders
or by operation of applicable laws or otherwise liquidate or enforce any
Obligations and any security therefor or guaranty thereof in any manner,
consent to the transfer of any security and bid and purchase at any
sale; (ix) consent to the merger, change or any other restructuring or
termination of the corporate existence of any Borrower and
<PAGE>
correspondingly restructure the Obligations, and any such merger,
change, restructuring or termination shall not affect the liability of
any Borrower or the continuing effectiveness hereof, or the
enforceability hereof with respect to all or any part of the
Obligations, or (x) take or refrain from taking any other action as
Agents and Lenders, in their sole and absolute discretion, may elect, or
any or some of the foregoing.
(e) Agents and Lenders may enforce this Agreement independently
as to each Borrower and the Parent Guarantor and independently of any
other remedy or security Agents and Lenders at any time may have or hold
in connection with the Obligations or the Loan Documents, or both, and
it shall not be necessary for Agents and Lenders to marshal assets in
favor of any Borrower or any other person, firm or entity or to proceed
upon or against or exhaust any security or remedy before proceeding to
enforce this Agreement. Each Borrower and the Parent Guarantor expressly
waives any right to require Agents and Lenders to marshal assets in
favor of any Borrower, the Parent Guarantor or any other person, firm or
entity or to proceed against the Parent Guarantor, any other Borrower or
any collateral provided by any person, firm or entity, and agrees that
Agents and Lenders may proceed against the Parent Guarantor, one or more
Borrowers or any Collateral in such order as it shall determine in its
sole and absolute discretion.
(f) If any Borrower makes a payment in respect of the Obligations
(other than the Parent Obligations), it shall have the rights of
contribution and reimbursement set forth below against the other
Borrowers, and shall be indemnified as set forth below; PROVIDED that no
Borrower shall enforce its rights to any payment by exercising its
rights of contribution, reimbursement or indemnification unless and
until all the Obligations shall have been paid in full. Each Borrower
waives any right of subrogation, contribution, reimbursement, and other
rights of indemnity it may have against the Parent Guarantor.
(g) If any Borrower makes a payment in respect of the Obligations
(other than the Parent Obligations) that is greater than its Pro Rata
Percentage (hereinafter defined) of the Obligations (other than the
Parent Obligations), calculated as of the date such payment is made, the
Borrower making such payment shall have the right to receive from each
of the other Borrowers, and the other Borrowers jointly and severally
agree to pay to such Borrower, when permitted by paragraph (f) above, an
amount such that the net payments made by the Borrowers in respect of
the Obligations (other than the Parent Obligations) shall be shared
among the Borrowers pro rata in proportion to their respective Pro Rata
Percentages of the Obligations (other than the Parent Obligations). The
Borrowers hereby jointly and severally indemnify each of the other
Borrowers and jointly and severally agree to hold each of them harmless
from and against any and all amounts which any such Borrower shall ever
be required to pay in respect of the Obligations (other than the Parent
Obligations) in excess of such Borrower's respective Pro Rata Percentage
of the Obligations (other than the Parent Obligations). Notwithstanding
anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of any Borrower that shall accrue
pursuant to this Agreement shall be paid nor shall it be deemed owed
pursuant to this Agreement or any Loan Documents unless and until all of
the Obligations (other than the Parent Obligations) shall be paid in
full. As used herein, the term "PRO RATA PERCENTAGE" shall mean, for
each Borrower, the percentage derived by dividing (a) the amount by
which
<PAGE>
the fair saleable value of its assets on December 22, 1997 exceeds its
liabilities (such excess for each Borrower, its "NET WORTH"), by (b) the
Net Worth of all of the Borrowers.
(h) Agents and Lenders may file a separate action or actions
against any Borrower, whether such action is brought or prosecuted with
respect to any security or against any other person, firm or entity, or
whether any other person, firm or entity is joined in any such action or
actions. Each Borrower agrees that Agents and Lenders and any Borrower
and any affiliate of any Borrower may deal with each other in connection
with the Obligations or otherwise, or alter any contracts or agreements
now or hereafter existing between any of them, in any manner whatsoever,
all without in any way altering or affecting the continuing efficacy of
this Agreement.
(i) Agents and Lenders' rights hereunder shall be reinstated and
revived, and the enforceability of this Agreement shall continue, with
respect to any amount at any time paid on account of the Obligations
that thereafter shall be required to be restored or returned by Agents
and Lenders, all as though such amount had not been paid. The rights of
Agents and Lenders created or granted herein and the enforceability of
this Agreement at all times shall remain effective to cover the full
amount of all the Obligations even though the Obligations, including any
part thereof or any other security or guaranty therefor, may be or
hereafter may become invalid or otherwise unenforceable as against the
Parent Guarantor or any Borrower and whether or not the Parent Guarantor
or any other Borrower shall have any personal liability with respect
thereto.
(j) To the maximum extent permitted by applicable law, the Parent
Guarantor and each Borrower expressly waives any and all defenses now or
hereafter arising or asserted by reason of (i) any disability or other
defense of the Parent Guarantor or any other Borrower with respect to
the Obligations, (ii) the unenforceability or invalidity of any security
or guaranty for the Obligations or the lack of perfection or continuing
perfection or failure of priority of any security for the Obligations,
(iii) the cessation for any cause whatsoever of the liability of the
Parent Guarantor or any other Borrower (other than by reason of the full
payment and performance of all Obligations), (iv) any failure of Agents
and Lenders to marshal assets in favor of the Parent Guarantor, any
Borrower or any other person, firm or entity, (v) any failure of Agents
and Lenders to give notice of sale or other disposition of Collateral to
the Parent Guarantor, any Borrower or any other person, firm or entity
or any defect in any notice that may be given in connection with any
sale or disposition of collateral, (vi) any failure of Agents and
Lenders to comply with applicable law in connection with the sale or
other disposition of any Collateral or other security for any
Obligation, including any failure of Agents and Lenders to conduct a
commercially reasonable sale or other disposition of any Collateral or
other security for any Obligation, (vii) any act or omission of Agents
and Lenders or others that directly or indirectly results in or aids the
discharge or release of any of the Parent Guarantor, any Borrower, or
the Obligations or any security or guaranty therefor by operation of law
or otherwise, (viii) any law which provides that the obligation of a
surety or guarantor must neither be larger in amount nor in other
respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal
obligation, (ix) any failure of Agents and Lenders to file or enforce a
claim in any bankruptcy or other proceeding with respect to any person,
firm or entity, (x) the election by Agents and Lenders of the
<PAGE>
application or non-application of Section 1111(b)(2) of the Federal
Bankruptcy Code, (xi) any extension of credit or the grant of any lien
under Section 364 of the Federal Bankruptcy Code, (xii) any use of cash
collateral under Section 363 of the Federal Bankruptcy Code, (xiii) any
agreement or stipulation with respect to the provision of adequate
protection in any bankruptcy proceeding of any person, firm or entity,
(xiv) the avoidance of any lien in favor of Agents and Lenders for any
reason, or (xv) any action taken by Agents and Lenders that is
authorized by this Agreement or any Loan Document. Until such time, if
any, as all of the Obligations have been paid and performed in full and
no portion of any commitment of Agents and Lenders to the Parent
Guarantor or any Borrower under any Loan Document remains in effect, no
Borrower shall have any right of subrogation, contribution,
reimbursement or indemnity, and each Borrower expressly waives any right
to enforce any remedy that Agents and Lenders now has or hereafter may
have against any other person, firm or entity and waives the benefit of,
or any right to participate in, any Collateral now or hereafter held by
Agents and Lenders. The Parent Guarantor and each Borrower expressly
waive all presentments, demands for payment or performance, notices of
nonpayment, notices of intent to accelerate, notices of acceleration and
notices of nonperformance, protests, notices of protest, notices of
dishonor and all other notices or demands of any kind or nature
whatsoever with respect to the Obligations, and all notices of
acceptance of this Agreement or of the existence, creation or incurring
of new or additional Obligations.
(k) To the fullest extent permitted by applicable law, each
Borrower expressly waives any suretyship defenses to the enforcement of
this Agreement or any rights of Agents and Lenders created or granted
hereby or to the recovery by any such person, firm or entity, including
the Parent Guarantor, against any Borrower, or any other person, firm or
entity liable therefor of any deficiency after a judicial or nonjudicial
foreclosure or sale, even though such a foreclosure or sale may impair
the subrogation rights of Borrowers and may preclude Borrowers from
obtaining reimbursement or contribution from the other Borrowers. Each
Borrower expressly waives any defenses or benefits that may be derived
pursuant to or from Rule 31 of the Texas Rules of Civil Procedure,
Section 17.001 of the Civil Practice and Remedies Code and Chapter 34 of
the Texas Business and Commerce Code, as amended, or comparable
provisions of the laws of any other jurisdiction, and all other
suretyship defenses it otherwise might or would have under Texas law or
other applicable law.
(l) The Parent Guarantor and each Borrower warrant and agree that
each of the waivers and consents set forth in this SECTION 2.12 are made
after consultation with legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving
rise to any defense or right waived may diminish, destroy or otherwise
adversely affect rights which the Parent Guarantor or such Borrower
otherwise may have against the Parent Guarantor, the other Borrowers,
Agents and Lenders or others, or against Collateral, and that, under the
circumstances, the waivers and consents herein given are reasonable and
not contrary to public policy or law. If any of the waivers or consents
herein are determined to be contrary to any applicable law or public
policy, such waivers and consents shall be effective to the maximum
extent permitted by law.
(m) Each Borrower represents and warrants to Agents and Lenders
that (i) such Borrower has established adequate means of obtaining from
the other Borrowers on a
<PAGE>
continuing basis financial and other information pertaining to the
business, operations, and condition (financial and otherwise) of the
other Borrowers, and their property, and (ii) such Borrower now is and
hereafter will be completely familiar with the business, operations and
condition (financial and otherwise) of the other Borrowers, and their
property. Each Borrower hereby waives and relinquishes any duty on the
part of Agents and Lenders to disclose to such Borrower any matter, fact
or thing relating to the business, operations or condition (financial or
otherwise) of the other Borrowers, or the property of the other
Borrowers, whether now or hereafter known by Agents and Lenders during
the term of this Agreement.
ARTICLE III
LETTERS OF CREDIT
Section 3.1 LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, the Administrative Agent agrees to issue, (i) at the request of
the Borrowers, one or more standby Letters of Credit for the account of any
Borrower or any Subsidiary and (ii) at the request of the Parent Guarantor, one
or more standby Letters of Credit for the account of the Parent Guarantor
(collectively, the "PARENT LETTERS OF CREDIT") from time to time from the date
hereof to and including the Termination Date; PROVIDED, HOWEVER, that the
outstanding Letter of Credit Liabilities shall not at any time exceed, and the
Administrative Agent shall not be obligated to issue any Letter of Credit which
would cause the outstanding Letter of Credit Liabilities to exceed, an amount
equal to (a) the least of (1) $25,000,000, (2) the aggregate amount of the
Commitments or (3) the Borrowing Base, minus (b) the outstanding Advances. Each
Letter of Credit may be issued for the account of or used by the Parent
Guarantor, any Borrower or any Subsidiary, but the Borrowers shall have full
liability for each Letter of Credit other than the Parent Letters of Credit, for
which the Borrowers shall have no liability. Each Letter of Credit shall have an
expiration date that does not extend beyond the Termination Date, shall be
payable in Dollars, shall have a minimum face amount of $50,000, must support a
transaction that is entered into in the ordinary course of the Parent
Guarantor's, any Borrower's or a Subsidiary's business, must support a
transaction or purpose approved by the Administrative Agent in the exercise of
its reasonable business judgment, must be reasonably satisfactory in form and
substance to the Administrative Agent, and shall be issued pursuant to such
documents and instruments (including, without limitation, the Administrative
Agent's standard application for issuance of standby letters of credit, as the
case may be, as then in effect [each an "L/C APPLICATION"]) as the
Administrative Agent may require (collectively, the "L/C DOCUMENTS"). However,
the form of L/C Application may be changed by the Administrative Agent from time
to time without notice to the Borrowers or the Lenders.
Section 3.2 PROCEDURE FOR ISSUING LETTERS OF CREDIT. Each Letter of
Credit shall be issued on at least four Business Days prior notice from the
Parent Guarantor or the Borrowers, as applicable, to the Administrative Agent by
means of a Letter of Credit Request Form describing the transaction proposed to
be supported thereby and specifying (a) the requested date of issuance (which
shall be a Business Day), (b) the face amount of the Letter of Credit, (c) the
<PAGE>
expiration date of the Letter of Credit, (d) the name and address of the
beneficiary, and (e) the name and address of the account party (which shall be
the Parent Guarantor, a Borrower or a Subsidiary of a Borrower), (f) the purpose
for which such Letter of Credit will be used, and (g) the form of the draft and
any other documents required to be presented at the time of any drawing (such
notice to set forth the exact wording of such documents or to attach copies
thereof). The Administrative Agent shall notify each Lender of the contents of
each such notice on the day such notice is received by Administrative Agent if
received by 11:00 a.m. Houston, Texas time on a Business Day and otherwise on
the next succeeding Business Day.
Section 3.3 PARTICIPATION BY LENDERS. Immediately upon the
Administrative Agent's issuance of any Letter of Credit on or after the date
hereof, the Administrative Agent shall be deemed to have sold and transferred to
each other Lender and each other Lender shall be deemed irrevocably and
unconditionally to have purchased and received from the Administrative Agent,
without recourse or warranty, an undivided interest and participation (to the
extent of such Lender's pro rata share of the Commitments) in such Letter of
Credit and all applicable rights of the Administrative Agent in such Letter of
Credit. The Administrative Agent shall provide to each other Lender a copy of
each Letter of Credit issued on or after the date hereof, promptly after
issuance.
Section 3.4 PAYMENTS CONSTITUTE ADVANCES AND PARENT REIMBURSEMENT
OBLIGATIONS. Each payment by the Administrative Agent pursuant to a drawing
under a Letter of Credit (excluding the Parent Letters of Credit) shall
constitute and be deemed a Base Rate Advance by each Lender to the Borrowers
under such Lender's Note and this Agreement as of the day and time such payment
is made by the Administrative Agent and in the amount of such Lender's pro rata
share of such payment. Each payment by the Administrative Agent pursuant to a
drawing under a Parent Letter of Credit shall constitute and be deemed an
advance of funds by each Lender to the Parent Guarantor as of the day and time
such payment is made by the Administrative Agent and in the amount of such
Lender's pro rata share of such payment. Promptly on the date of each payment by
the Administrative Agent pursuant to a drawing under a Letter of Credit
(including the Parent Letters of Credit) and after receipt of notice from the
Administrative Agent as to the amount of such payment, each Lender will make
available to the Administrative Agent at the Principal Office in immediately
available funds, such Lender's pro rata share of such payment. The Parent
Guarantor agrees to, immediately upon demand by the Administrative Agent,
reimburse the Lenders for the full amount of each payment made by the
Administrative Agent on a Parent Letter of Credit (collectively, the "PARENT
REIMBURSEMENT OBLIGATIONS"). All past due Parent Reimbursement Obligations shall
bear interest at the Default Rate.
Section 3.5 LETTER OF CREDIT FEES.
(a) The Borrowers shall, jointly and severally, pay to the
Administrative Agent for the account of the Lenders a letter of credit
fee in an amount equal to 0.75% per annum on the undrawn amount of each
Letter of Credit (other than Parent Letters of Credit) based upon a year
of 360 days for the period during which such Letter of Credit is
outstanding, payable quarterly in advance on a non-refundable basis on
the date each such Letter of Credit is issued and on each quarterly
anniversary date thereof while such Letter of Credit remains
outstanding. The Borrowers shall, jointly and severally, pay to the
Administrative Agent, solely for its own account, a nonrefundable
issuance and fronting fee for each Letter of Credit (other than Parent
Letters of Credit) in an amount equal to 0.25% per annum of the
<PAGE>
face amount of such Letter of Credit for the period during which such
Letter of Credit is outstanding, calculated on the basis of a year of
360 days and payable on the date each such Letter of Credit is issued.
The Borrowers shall also, jointly and severally, pay to the
Administrative Agent, solely for its own account as issuer of Letters of
Credit, such amendment, transfer, negotiation and other fees as the
Administrative Agent shall charge in accordance with its customary
practices.
(b) The Parent Guarantor shall pay to the Administrative Agent
for the account of the Lenders a letter of credit fee in an amount equal
to 0.75% per annum on the undrawn amount of each Parent Letter of Credit
based upon a year of 360 days for the period during which such Parent
Letter of Credit is outstanding, payable quarterly in advance on a
non-refundable basis on the date each such Parent Letter of Credit is
issued and on each quarterly anniversary date thereof while such Parent
Letter of Credit remains outstanding. The Parent Guarantor shall pay to
the Administrative Agent, solely for its own account, a nonrefundable
issuance and fronting fee for each Parent Letter of Credit in an amount
equal to 0.25% per annum of the face amount of such Parent Letter of
Credit for the period during which such Parent Letter of Credit is
outstanding, calculated on the basis of a year of 360 days and payable
on the date each such Parent Letter of Credit is issued. The Parent
Guarantor shall also pay to the Administrative Agent, solely for its own
account as issuer of Letters of Credit, such amendment, transfer,
negotiation and other fees as the Administrative Agent shall charge in
accordance with its customary practices.
Section 3.6 ISSUER'S RESPONSIBILITIES. The Administrative Agent agrees
with each Lender that it will exercise and give the same care and attention to
each Letter of Credit as it gives to its other letters of credit. Each Lender,
the Parent Guarantor, and each Borrower agree that, in paying any draft or draw
under any Letter of Credit, the Administrative Agent has no responsibility to
obtain any document (other than any documents expressly required by the
respective Letter of Credit) or to ascertain or inquire as to any document's
validity, enforceability, sufficiency, accuracy or genuineness or the authority
of any Person delivering it. Neither the Administrative Agent nor any of its
representatives, directors, officers, employees, attorneys or agents shall be
liable to any Lender, the Parent Guarantor, any Borrower or any Subsidiary for
any Letter of Credit's use or for any beneficiary's acts or omissions. The
Administrative Agent shall have no liability to the Parent Guarantor, any
Borrower or any Lender for any action, inaction, error, delay or omission taken
or suffered by the Administrative Agent or any of its representatives,
directors, officers, employees, attorneys or agents in connection with any
Letter of Credit, applicable draws, drafts or documents, or the transmission,
dispatch or delivery of any related message or advice, if done, taken or made in
accordance with the L/C Documents.
Section 3.7 LETTER OF CREDIT DOCUMENTS. Certain additional provisions
regarding the obligations, liabilities, rights, remedies and agreements of the
Parent Guarantor, the Borrowers and the Administrative Agent relative to the
Letters of Credit shall be set forth in the L/C Documents. The terms of this
Agreement shall control any express conflict between the terms of this Agreement
and the terms of any L/C Application. Omission of any term shall not be
construed as an express conflict.
<PAGE>
ARTICLE IV
PAYMENTS
Section 4.1 METHOD OF PAYMENT. All payments of principal, interest, and
other amounts to be made by the Borrowers under this Agreement and the other
Loan Documents shall be made to the Administrative Agent at the Principal Office
in Dollars and immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 A.M., Houston, Texas time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). The Borrowers shall, at the time of making each such payment, specify to
the Administrative Agent the sums payable by the Borrowers under this Agreement
and the other Loan Documents to which such payment is to be applied (and in the
event the Borrowers fail to so specify, or if an Event of Default has occurred
and is continuing, the Administrative Agent may apply such payment to the
Obligations (other than the Parent Obligations) in such order and manner as it
may elect in its sole discretion, subject to SECTION 4.4 hereof). Each payment
received by the Administrative Agent under this Agreement or any other Loan
Document for the account of a Lender shall be paid promptly to such Lender, in
immediately available funds, for the account of such Lender's Applicable Lending
Office. Whenever any payment under this Agreement or any other Loan Document
shall be stated to be due on a day that is not a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of the payment of interest and
commitment fee, as the case may be.
Section 4.2 VOLUNTARY PREPAYMENT. The Borrowers may, upon at least three
Business Days' prior notice to the Administrative Agent prepay the Advances in
whole at any time or from time to time in part without premium or penalty,
provided that Eurodollar Advances prepaid on other than the last day of the
Interest Period for such Advances must also be accompanied by payment to the
Administrative Agent for the account of each Lender the amounts required under
SECTION 5.5 hereof. All notices under this Section shall be irrevocable and
shall be given not later than 11:00 A.M. Houston, Texas time on the day which is
not less than the number of Business Days specified above for such notice.
Section 4.3 MANDATORY PREPAYMENT. If at any time the amount equal to the
sum of (i) the outstanding principal amount of the Advances, plus (ii) the
Letter of Credit Liabilities exceeds the Borrowing Base, the Borrowers shall,
jointly and severally, promptly prepay the outstanding Advances by the amount of
the excess plus accrued and unpaid interest on the amount so prepaid or, if no
Advances are outstanding, the Borrowers shall immediately pledge to the
Administrative Agent cash or cash equivalent investments acceptable to the
Administrative Agent in an amount equal to the excess as security for the
Obligations.
Section 4.4 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each Advance shall be made by the Lenders under SECTION 2.1 or
deemed made by the Lenders under SECTION 3.4, each payment of the commitment fee
under SECTION 2.8 and each letter of credit fee under SECTION 3.5 shall be made
for the account of the Lenders, each termination or reduction of the Commitments
under SECTIONS 2.9 and 2.10 shall be applied to the Commitments of the Lenders,
and each Letter of Credit shall be deemed participated in by the Lenders, pro
rata according to the amounts of their respective Commitments; (b) the making,
Conversion, and Continuation of
<PAGE>
Advances of a particular Type (other than Conversions provided for by SECTION
5.4) shall be made pro rata among the Lenders holding Advances of such Type
according to the amounts of their respective Commitments; (c) each payment and
prepayment of principal of or interest on Advances by the Borrowers of a
particular Type shall be made to the Administrative Agent for the account of the
Lenders holding Advances of such Type pro rata in accordance with the respective
unpaid principal amounts of such Advances held by such Lenders; and (d) Interest
Periods for Advances of a particular Type shall be allocated among the Lenders
holding Advances of such Type pro rata according to the respective principal
amounts held by such Lenders.
Section 4.5 NON-RECEIPT OF FUNDS. Unless the Administrative Agent shall
have been notified by a Lender or the Borrowers (the "PAYOR") prior to the date
on which such Lender is to make payment to the Administrative Agent of the
proceeds of an Advance to be made by it hereunder or the Borrowers are to make a
payment to the Administrative Agent for the account of one or more of the
Lenders, as the case may be (such payment being herein called the "REQUIRED
PAYMENT"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date and, if the Payor has
not in fact made the Required Payment to the Administrative Agent, the recipient
of such payment shall, on demand, pay to the Administrative Agent the amount
made available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by the Administrative
Agent until the date the Administrative Agent recovers such amount at a rate per
annum equal to (a) the Federal Funds Effective Rate for such period if the
recipient is a Lender or (b) the Applicable Rate for such period if the
recipients are the Borrowers.
Section 4.6 WITHHOLDING TAXES. All payments by the Borrowers of
principal of and interest on the Advances and of all fees and other amounts
payable under any Loan Document are payable without deduction for or on account
of any present or future taxes, duties or other charges levied or imposed by the
United States of America or by the government of any jurisdiction outside the
United States of America or by any political subdivision or taxing authority of
or in any of the foregoing through withholding or deduction with respect to any
such payments. If any such taxes, duties or other charges are so levied or
imposed, the Borrowers will, jointly and severally, pay additional interest or
will, jointly and severally, make additional payments in such amounts so that
every net payment of principal of and interest on the Advances and of all other
amounts payable by it under any Loan Document, after withholding or deduction
for or on account of any such present or future taxes, duties or other charges,
will not be less than the amount provided for herein or therein, provided that
the Borrowers shall have no obligation to pay such additional amounts to any
Lender to the extent that such taxes, duties, or other charges are levied or
imposed by reason of the failure of such Lender to comply with the provisions of
SECTION 4.7. The Borrowers shall furnish promptly to the Administrative Agent
for distribution to each affected Lender, as the case may be, official receipts
evidencing any such withholding or reduction.
Section 4.7 WITHHOLDING TAX EXEMPTION. Each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrowers and the Administrative Agent two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive payments
from the Borrowers under any Loan Document without deduction or withholding of
any United States
<PAGE>
federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further
undertakes to deliver to Borrowers and the Administrative Agent two additional
copies of such form (or a successor form) on or before the date such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the
Borrowers or the Administrative Agent, in each case certifying that such Lender
is entitled to receive payments from the Borrowers under any Loan Document
without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrowers and the Administrative Agent
that it is not capable of receiving such payments without any deduction or
withholding of United States federal income tax.
Section 4.8 AUTOMATIC PAYMENT. In addition to the payment methods
provided in ARTICLE IV hereof, the Administrative Agent shall have the right to
automatically debit the account of Pride Offshore, Inc., Account No. 4311845432,
for the payment of principal, interest, fees and other amounts to be made by the
Borrowers under this Agreement and the other Loan Documents. In the event such
automatic debit results in an overdraft, such overdraft shall be deemed to be an
Advance, if available, under this Agreement, or if an Advance is not made
hereunder, the Borrowers shall immediately deposit sufficient funds into such
operating account to cover such overdraft.
ARTICLE V
YIELD PROTECTION; LIMITATIONS ON ADVANCES; CAPITAL ADEQUACY
Section 5.1 ADDITIONAL COSTS.
(a) The Borrowers shall, jointly and severally, pay directly to
each Lender from time to time such amounts as such Lender may determine
to be necessary to compensate it for any costs incurred by such Lender
which such Lender determines are attributable to its making or
maintaining of any Eurodollar Advances hereunder or its obligation to
make such Advances hereunder, or any reduction in any amount receivable
by such Lender hereunder in respect of any such Advances or such
obligation (such increases in costs and reductions in amounts receivable
being herein called "ADDITIONAL COSTS"), resulting from any Regulatory
Change which:
(i) changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Note in respect of any
Eurodollar Advances (other than taxes imposed on the overall net
income of such Lender or its Applicable Lending Office for any
Eurodollar Advances by the jurisdiction in which such Lender has
its principal office or such Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating
to any extensions of credit or other assets of, or any deposits
with or other liabilities or commitments of, such Lender
<PAGE>
(including any Eurodollar Advances or any deposits referred to in
the definition of "Eurodollar Rate" in SECTION 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement
or its Note or any of such extensions of credit or liabilities or
commitments.
Each Lender will notify the Borrowers (with a copy to the Administrative
Agent) of any event occurring after the date of this Agreement which
will entitle such Lender to compensation pursuant to this SECTION 5.1(A)
as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation, and will designate a different
Applicable Lending Office for Eurodollar Advances if such designation
will avoid the need for, or reduce the amount of, such compensation and
will not, in the sole opinion of such Lender, violate any law, rule, or
regulation or be in any way disadvantageous to such Lender, provided
that such Lender shall have no obligation to so designate an Applicable
Lending Office located outside the United States of America. Each Lender
will furnish to the Borrowers, within 120 days after the occurrence of
the event resulting in Additional Costs, a certificate setting forth the
basis and the amount of each request of such Lender for compensation
under this SECTION 5.1(A). If any Lender requests compensation from the
Borrowers under this SECTION 5.1(A), the Borrowers may, by notice to
such Lender (with a copy to Administrative Agent), suspend the
obligation of such Lender to make or Continue making, or Convert
Advances into, Eurodollar Advances until the Regulatory Change giving
rise to such request ceases to be in effect (in which case the
provisions of SECTION 5.4 hereof shall be applicable) and may convert
any Eurodollar Advance into a Base Rate Advance, subject to the
provisions of SECTION 5.5.
(b) Without limiting the effect of the foregoing provisions of
this SECTION 5.1, in the event that, by reason of any Regulatory Change,
any Lender either (i) incurs Additional Costs based on or measured by
the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on Eurodollar Advances is
determined as provided in this Agreement or a category of extensions of
credit or other assets of such Lender which includes Eurodollar Advances
or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if such Lender so
elects by notice to the Borrowers the obligation of such Lender to make
or Continue making, or Convert Advances into, Eurodollar Advances
hereunder shall be suspended until such Regulatory Change ceases to be
in effect (in which case the provisions of SECTION 5.4 hereof shall be
applicable).
(c) Determinations and allocations by any Lender for purposes of
this SECTION 5.1 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Advances or of making or maintaining
Advances or on amounts receivable by it in respect of Advances, and of
the additional amounts required to compensate such Lender in respect of
any Additional Costs, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
Section 5.2 LIMITATION ON TYPES OF ADVANCES. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Advances for any
Interest Period therefor:
<PAGE>
(a) The Administrative Agent determines using its reasonable
business judgment (which determination shall be conclusive) that
quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Rate" in SECTION 1.1 hereof are not being
provided in the relative amounts or for the relative maturities for
purposes of determining the rate of interest for such Advances as
provided in this Agreement; or
(b) Required Lenders determine using their reasonable business
judgment (which determination shall be conclusive) that the relevant
rates of interest referred to in the definition of "Eurodollar Rate" in
SECTION 1.1 hereof on the basis of which the rate of interest for such
Advances for such Interest Period is to be determined do not accurately
reflect the cost to the Lenders of making or maintaining such Advances
for such Interest Period;
then the Administrative Agent shall give the Borrowers prompt notice thereof
specifying relevant amounts or periods, and so long as such condition remains in
effect, the Lenders shall be under no obligation to make additional Eurodollar
Advances or to Convert Base Rate Advances into Eurodollar Advances and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Advances, either prepay such Eurodollar Advances or
Convert such Eurodollar Advances into Base Rate Advances in accordance with the
terms of this Agreement.
Section 5.3 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar
Advances hereunder or (b) maintain Eurodollar Advances hereunder, then such
Lender shall promptly notify the Borrowers (with a copy to the Administrative
Agent) thereof and such Lender's obligation to make or maintain Eurodollar
Advances and to Convert Base Rate Advances into Eurodollar Advances hereunder
shall be suspended until such time as such Lender may again make and maintain
Eurodollar Advances (in which case the provisions of SECTION 5.4 hereof shall be
applicable).
Section 5.4 SUBSTITUTE BASE RATE ADVANCES. If the obligation of any
Lender to make Eurodollar Advances shall be suspended pursuant to SECTION 5.1 or
5.3 hereof, all Advances which would be otherwise made by such Lender as
Eurodollar Advances shall be made instead as Base Rate Advances and all Advances
which would otherwise be Converted into Eurodollar Advances shall be Converted
instead into (or shall remain as) Base Rate Advances (and, if an event referred
to in SECTION 5.1(B) or 5.3 hereof has occurred and such Lender so requests by
notice to the Borrowers (with a copy to the Administrative Agent), all
Eurodollar Advances of such Lender then outstanding shall be automatically
Converted into Base Rate Advances on the date specified by such Lender in such
notice) and, to the extent that Eurodollar Advances are so made as (or Converted
into) Base Rate Advances, all payments and prepayments of principal which would
otherwise be applied to such Lender's Eurodollar Advances shall be applied
instead to its Base Rate Advances.
Section 5.5 COMPENSATION. The Borrowers shall, jointly and severally,
pay to the Administrative Agent for the account of each Lender, upon the request
of such Lender through the Administrative Agent, such amount or amounts as shall
be sufficient (in the reasonable opinion of such Lender) to compensate it for
any actual loss, cost, or expense (other than loss of profit) incurred by it as
a result of:
<PAGE>
(a) Any payment, prepayment or Conversion of a Eurodollar Advance
for any reason (including, without limitation, the acceleration of
outstanding Advances pursuant to SECTION 12.2) on a date other than the
last day of an Interest Period for such Advance; or
(b) Any failure by the Borrowers for any reason (including,
without limitation, the failure of any conditions precedent specified in
ARTICLE VII to be satisfied) to borrow, Convert, Continue, or prepay a
Eurodollar Advance on the date for such borrowing, Conversion,
Continuation, or prepayment, specified in the relevant notice of
borrowing, Conversion, Continuation, or prepayment under this Agreement.
Such compensation shall equal an amount equal to the excess, if any, of (i) the
amount of interest which otherwise would have accrued on the principal amount so
paid or Converted or not borrowed for the period from the date of such payment,
Conversion, or failure to borrow to the last day of the Interest Period for such
Advance (or, in the case of a failure to borrow, the Interest Period for such
Advance which would have commenced on the date specified for such borrowing) at
the applicable rate of interest for such Advance provided for herein over (ii)
the interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading lenders and amounts comparable
to such principal amount and with maturities comparable to such period. Each
Lender which requests compensation under this SECTION 5.5 shall provide to the
Borrowers, at the time of the request, a calculation of the compensation
requested, together with a description of the method of calculation.
Section 5.6 CAPITAL ADEQUACY. If after the date hereof, any Lender shall
have determined that any Regulatory Change or compliance by such Lender (or its
parent) with any guideline, request, or directive regarding capital adequacy
(whether or not having the force of law) of any such central bank or other
Governmental Authority, has or would have the effect of reducing the rate of
return on such Lender's (or its parent's) capital as a consequence of its
obligations hereunder or the transactions contemplated hereby to a level below
that which such Lender (or its parent) could have achieved but for such
Regulatory Change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within 10 Business Days after demand by
such Lender (with a copy to the Administrative Agent), the Borrowers shall,
jointly and severally, pay to such Lender (or its parent) such additional amount
or amounts as will compensate such Lender for such reduction. Each Lender will
furnish to the Borrowers, within 120 days after such Lender actually incurs such
reduction in its rate of return, a certificate of such Lender claiming
compensation under this Section and setting forth the basis and the additional
amount or amounts to be paid to it hereunder. Each such certificate shall be
conclusive, provided that the determination of such amount or amounts is made on
a reasonable basis. In determining such amount or amounts, such Lender may use
any reasonable averaging and attribution methods.
Section 5.7 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. If as a
result of any Regulatory Change there shall be imposed, modified, or deemed
applicable any tax, reserve, special deposit, or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder or the Commitments to issue or participate in Letters of Credit
hereunder, and the result shall be to increase the cost to the Administrative
Agent or any Lender of issuing, maintaining or participating in any Letter of
Credit or its Commitment to issue or participate in Letters of Credit hereunder
or reduce any amount receivable by the Administrative
<PAGE>
Agent or any Lender hereunder in respect of any Letter of Credit (which increase
in cost, or reduction in amount receivable, shall be the result of the
Administrative Agent's or such Lender's reasonable allocation of the aggregate
of such increases or reductions resulting from such event), then, upon demand by
the Administrative Agent or such Lender, the Borrowers, jointly and severally,
agree to pay the Administrative Agent or such Lender, as the case may be, from
time to time as specified by the Administrative Agent or such Lender, as the
case may be, such additional amounts as shall be sufficient to compensate the
Administrative Agent or such Lender for such increased costs or reductions in
amount. Each Lender will furnish to the Borrowers, within 180 days after such
Lender actually incurs such increase in cost or reduction in amount receivable,
a certificate of such Lender claiming compensation under this Section and
setting forth the basis and the additional amount or amounts to be paid to it
hereunder. Each such certificate shall be conclusive, provided that the
determination of such amount or amounts is made on a reasonable basis.
ARTICLE VI
SECURITY
Section 6.1 COLLATERAL. The Parent Guarantor and each Borrower hereby
acknowledge, agree and confirm that, as continuing security for the full and
complete payment and performance of the Obligations and the Guaranteed
Obligations, the Parent Guarantor and each Borrower has executed and delivered
or will execute and deliver the documents described below covering the property
and collateral described in this SECTION 6.1 (which, together with any other
property and collateral which may now or hereafter secure the Obligations or any
part thereof, is sometimes herein called the "COLLATERAL"):
(a) a security agreement granting to the Administrative Agent,
for the pro rata benefit of the Lenders, a first priority security
interest in all of the Parent Guarantor's or such Borrower's accounts,
accounts receivable, inventory, chattel paper, documents, instruments
and general intangibles, whether now owned or hereafter acquired, and
all products and proceeds thereof, to the extent provided in such
security agreement.
(b) a pledge agreement, granting to the Administrative Agent, for
the pro rata benefit of the Lenders, a first priority security interest,
to the extent provided in the pledge agreement, in (a) all of the Parent
Guarantor's or such Borrower's shares of capital stock and other equity
interests of each Domestic Subsidiary, whether now owned or hereafter
acquired by the Parent Guarantor or such Borrower, and (b) 66% of the
shares of voting stock and other voting equity interests and all of the
shares of non-voting preferred stock and other non-voting equity
interests of each direct Foreign Subsidiary, whether now owned or
hereafter acquired by the Parent Guarantor or such Borrower.
(c) a first preferred ship mortgage, granting to the
Administrative Agent, for the pro rata benefit of the Lenders, a first
priority security interest, to the extent provided in the preferred ship
mortgage, lien and mortgage in and to all of the Rigs.
Section 6.2 FURTHER ASSURANCES. The Parent Guarantor and each Borrower
shall execute and cause to be executed such further documents and instruments,
including without limitation
<PAGE>
Uniform Commercial Code financing statements, as the Administrative Agent, in
its sole discretion, deems necessary or desirable to create, evidence, preserve,
and perfect its liens and security interest in the Collateral.
Section 6.3 EXISTING LIENS TO CONTINUE. The Parent Guarantor and each
Borrower hereby acknowledges, agrees and confirms that the Liens previously
granted to the Administrative Agent, for the benefit of the Lenders, shall
continue and survive the execution and delivery of this Agreement, and all of
the rights granted to the Administrative Agent pursuant to the security
documents shall also continue and survive the execution and delivery of this
Agreement and the other Loan Documents executed in connection herewith;
provided, however, that to the extent there is any conflict, of whatever nature,
between the conditions, terms and provisions of the security documents and this
Agreement and the other Loan Documents executed in connection herewith, this
Agreement and such new Loan Documents shall govern, prevail and control any such
conflict or inconsistency.
Section 6.4 SETOFF. If an Event of Default shall have occurred and be
continuing, each Lender shall have the right to set off and apply against the
Obligations in such manner as such Lender may determine, at any time and without
notice to the Parent Guarantor or the Borrowers, any and all deposits (general
or special, time or demand, provisional or final) or other sums at any time
credited by or owing from such Lender to the Parent Guarantor or any Borrower
whether or not the Obligations are then due. Each Lender agrees to promptly
notify the Administrative Agent after any such setoff and application. The
rights and remedies of the Lenders hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which the
Lenders may have.
Section 6.5 OTHER SUBSIDIARIES. Within 10 Business Days of becoming a
Material Subsidiary, each Person which hereafter becomes a Material Subsidiary
shall execute and deliver to the Administrative Agent (a) an Addendum and
Assumption Agreement in form and substance satisfactory to the Administrative
Agent, pursuant to which such Material Subsidiary becomes a Borrower and assumes
the Obligations applicable to a Borrower arising under this Agreement, (b) new
Notes payable to each Lender in the principal amount of such Lender's Commitment
as in effect on the date such Note is executed, (c) an addendum to the Security
Agreement in form and substance satisfactory to the Administrative Agent,
pursuant to which such Material Subsidiary grants to the Administrative Agent,
for the pro rata benefit of the Lenders, a first priority security interest in
all of such Material Subsidiary's personal property of the types described in
SECTION 6.1(A), whether now owned or hereafter acquired, and all products and
proceeds thereof, and (d) an addendum to the Borrower Pledge Agreement, if
applicable, in form and substance satisfactory to the Administrative Agent,
pursuant to which such Material Subsidiary grants to the Administrative Agent,
for the pro rata benefit of the Lenders, a first priority security interest in
(i) all of the capital stock and other equity interests of each other Material
Subsidiary, whether now owned or hereafter acquired by such Material Subsidiary,
and (ii) 66% of the shares of voting stock and other voting equity interests and
all of the shares of non-voting preferred stock and other non-voting equity
interests of each direct Foreign Subsidiary, whether now owned or hereafter
acquired by such Material Subsidiary, (e) such further documents and instruments
(including without limitation Uniform Commercial Code financing statements,
stock certificates and stock powers) as the Administrative Agent in its sole
discretion deems necessary or desirable to create, evidence, preserve, and
perfect its Liens in the Collateral, and (f) such legal opinions, corporate and
partnership documents and certificates as
<PAGE>
Administrative Agent or its counsel may require in connection with the documents
executed and delivered pursuant to this Section. In addition, if the Material
Subsidiary is a Subsidiary of the Parent Guarantor, then the Parent Guarantor
hereby agrees to execute and deliver an amendment to the Parent Guarantor Pledge
Agreement, in form and substance satisfactory to the Administrative Agent,
pursuant to which the Parent Guarantor grants to the Administrative Agent, for
the pro rata benefit of the Lenders, a first priority security interest in all
of the capital stock and other equity interests of such Material Subsidiary.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 INITIAL EXTENSION OF CREDIT. The obligation of the Lenders
to make the initial Advance or issue the initial Letter of Credit hereunder is
subject to the satisfaction in full of each of the following conditions
precedent:
(a) The Administrative Agent shall have received on or before the
day of such Advance or Letter of Credit all of the following, each dated
(unless otherwise indicated) the date hereof, in form and substance
satisfactory to the Administrative Agent:
(1) RESOLUTIONS. Resolutions of the Board of Directors of
the Parent Guarantor and each Borrower certified by the Secretary
or an Assistant Secretary of such Person which authorize the
execution, delivery, and performance by such Person of this
Agreement and the other Loan Documents to which such Person is or
is to be a party;
(2) INCUMBENCY CERTIFICATE. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of the
Parent Guarantor and each Borrower certifying the names of the
officers of such Person authorized to sign this Agreement and
each of the other Loan Documents to which such Person is or is to
be a party (including the certificates contemplated herein)
together with specimen signatures of such officers;
(3) ARTICLES OF INCORPORATION. The articles or certificate
of incorporation of the Parent Guarantor and each Borrower,
certified by the Secretary or Assistant Secretary of such Person;
(4) BYLAWS. The bylaws of the Parent Guarantor and each
Borrower certified by the Secretary or an Assistant Secretary of
such Person;
(5) GOVERNMENTAL CERTIFICATES. Certificates of the
appropriate governmental officials of the respective states of
incorporation of the Parent Guarantor and each Borrower as to the
existence and good standing of such Persons and certificates of
the appropriate governmental officials of each state where any
such Persons own property, conduct business or employ any Persons
as to the
<PAGE>
qualification and good standing of such Persons, respectively,
in such jurisdictions, each dated within 10 days prior to the
date hereof.
(6) NOTES. The Note of each Lender executed by each
Borrower;
(7) BORROWER SECURITY AGREEMENT. The Security Agreement
executed by each Borrower;
(8) GUARANTOR SECURITY AGREEMENT. The Guarantor Security
Agreement executed by the Parent Guarantor;
(9) BORROWER PLEDGE AGREEMENT. The Borrower Pledge
Agreement executed by the required Borrowers;
(10) PARENT GUARANTOR PLEDGE AGREEMENT. The Parent
Guarantor Pledge Agreement executed by the Parent Guarantor.
(11) FINANCING STATEMENTS. Uniform Commercial Code
financing statements executed by the Parent Guarantor and each
Borrower and covering such Collateral as the Administrative
Agent may request;
(12) STOCK CERTIFICATES. Original certificates
representing all shares of stock of Domestic Subsidiaries pledged
pursuant to the Borrower Pledge Agreement and the Parent
Guarantor Pledge Agreement, together with original stock powers
duly executed in blank;
(13) L/C DOCUMENTS. With respect to issuance of any Letter
of Credit, all applicable L/C Documents, if any, as required by
SECTION 3.1;
(14) INSURANCE POLICIES. Copies of certificate of
insurance with respect to all insurance policies required by
SECTION 9.5;
(15) UCC SEARCHES. The results of Uniform Commercial Code
searches showing all financing statements and other documents or
instruments on file against the Parent Guarantor and each
Borrower in the office of the Secretary of State of the State of
Texas and such other jurisdictions as the Administrative Agent
may request, each such search to be as of a date no more than 10
days prior to the date hereof;
(16) OPINION OF COUNSEL. A favorable opinion of legal
counsel to the Parent Guarantor and the Borrowers, as to such
matters as the Administrative Agent may reasonably request;
(17) COMPLIANCE CERTIFICATE. An initial short-form
Compliance Certificate as of September 30, 1997, based on a pro
forma calculation of the financial covenants set forth in ARTICLE
XI hereof, executed by the president, chief executive officer,
chief financial officer or corporate controller of the Parent
Guarantor;
<PAGE>
(18) BORROWING BASE REPORT. A Borrowing Base Report, based
on a calculation of Eligible Accounts as of October 31, 1997 and
the most recent appraisal provided with respect to the Rigs, in
substantially the form of EXHIBIT "M" hereto, certified by the
president, chief financial officer or corporate controller of
the Parent Guarantor;
(19) SOLVENCY CERTIFICATE. A certificate, in form and
substance satisfactory to the Agent, executed by the chief
financial officer of the Parent Guarantor and each Borrower as to
the solvency of the Parent Guarantor and such Borrower;
(20) APPRAISALS. Appraisals, satisfactory to the Agents in
their sole discretion, of the fair market value of the Rigs
performed by a qualified appraisal firm satisfactory to the
Agents;
(21) MATERIAL ADVERSE EFFECT. No change in the operations,
business, or properties of the Parent Guarantor or any Borrower
which would likely result in a Material Adverse Effect shall have
occurred; and
(22) PREFERRED FLEET MORTGAGE. A Preferred Fleet Mortgage
executed by Pride Offshore, Inc. with respect to each Rig, in
substantially the form of EXHIBIT J hereto; and
(23) CERTIFICATE OF NO LIENS. A Certificate of No Liens
with respect to each Rig pursuant to ss.31323 of the Ship
Mortgage Act (as hereinafter defined) evidencing that such Rig is
not subject to any Lien (other than Permitted Liens).
(b) DUE DILIGENCE. The due diligence review of the Parent
Guarantor, the Borrowers and the Subsidiaries by the Lenders and the
Agents shall have been completed and the results thereof shall be
satisfactory to the Agents and the Lenders in all respects, such review
to include without limitation a review of and satisfaction with
three-year financial projections, a pro-forma post-closing balance
sheet, insurance coverage, contingent liabilities, material contracts
and corporate legal structure.
Section 7.2 ALL EXTENSIONS OF CREDIT. The obligation of the Lenders to
make any Advance or issue any Letter of Credit (including the initial Advance
and the initial Letter of Credit) is subject to the following additional
conditions precedent:
(a) REQUEST FOR ADVANCE OR LETTER OF CREDIT. The Administrative
Agent shall have received in accordance with SECTION 2.5 or 3.2, as the
case may be, an Advance Request Form or Letter of Credit Request Form
dated the date of such Advance or Letter of Credit and executed by an
authorized officer of the Borrowers;
(b) L/C DOCUMENTS. With respect to any Letter of Credit,
Administrative Agent shall have received all applicable L/C Documents as
required by SECTION 3.1;
(c) NO DEFAULT. No Default shall have occurred and be continuing,
or would result from such Advance or Letter of Credit; and
<PAGE>
(d) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties contained in ARTICLE VIII hereof and in the other Loan
Documents shall be true and correct in all material aspects on and as of
the date of such Advance with the same force and effect as if such
representations and warranties had been made on and as of such date.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement, the
Parent Guarantor and each Borrower represent and warrant to the Agents and the
Lenders that:
Section 8.1 EXISTENCE AND AUTHORITY. The Parent Guarantor, each Borrower
and each Subsidiary (a) is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization; (b) has all
requisite power and authority to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
Each of the Parent Guarantor and each Borrower has the power and authority to
execute, deliver, and perform its obligations under this Agreement and the other
Loan Documents to which it is or may become a party.
Section 8.2 FINANCIAL STATEMENTS. The Parent Guarantor has delivered to
the Administrative Agent audited consolidated financial statements of the Parent
Guarantor and its Subsidiaries as at and for the fiscal year ended December 31,
1996 and unaudited consolidated financial statements of the Parent Guarantor and
its Subsidiaries for the nine-month period ended September 30, 1997. Such
financial statements are true and correct, have been prepared in accordance with
GAAP, and fairly and accurately present, on a consolidated basis, the financial
condition of the Parent Guarantor and its Subsidiaries as of the respective
dates indicated therein and the results of operations for the respective periods
indicated therein. Neither the Parent Guarantor nor any of its Subsidiaries has
any contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments, or unrealized or anticipated losses from any unfavorable
commitments that are material with respect to the Parent Guarantor and its
Subsidiaries taken as a whole, except as referred to or reflected in such
financial statements. There has been no material adverse change in the business,
condition (financial or otherwise), operations, prospects, or properties of the
Parent Guarantor, any Borrower or any of the Subsidiaries since the effective
date of the most recent consolidated financial statements referred to in this
Section.
Section 8.3 CORPORATE ACTION; NO BREACH. The execution, delivery, and
performance by the Parent Guarantor and each Borrower of this Agreement and the
other Loan Documents to which they are party and compliance with the terms and
provisions hereof and thereof, have been duly authorized by all requisite
corporate and partnership action on the part of each such Person and do not and
will not (a) violate or conflict with, or result in a breach of, or require any
consent under (i) the articles of incorporation, certificate of incorporation,
bylaws, partnership agreement or other organizational documents of any such
Person, (ii) any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or (iii) any
material
<PAGE>
agreement or instrument to which any such Person is a party or by which any of
them or any of their property is bound or subject, or (b) constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien (except as provided in ARTICLE VI) upon any of the revenues or
assets of any such Person.
Section 8.4 OPERATION OF BUSINESS. Each Borrower and each of the
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted, and none of the Borrowers or the Subsidiaries is in violation
of any valid rights of others with respect to any of the foregoing, the
violation of which could have a Material Adverse Effect.
Section 8.5 LITIGATION AND JUDGMENTS. Except as disclosed on SCHEDULE
8.5 hereto, there is no action, suit, investigation, or proceeding before or by
any Governmental Authority or arbitrator pending, or to the knowledge of the
Parent Guarantor or any Borrower, threatened against or affecting the Parent
Guarantor, any Borrower, any Subsidiary, or any Foreign Affiliate that would, if
adversely determined, have a Material Adverse Effect. On the date hereof, there
are no outstanding judgments against the Parent Guarantor, any Borrower or any
Subsidiary.
Section 8.6 RIGHTS IN PROPERTIES; LIENS. The Parent Guarantor, each
Borrower and each Subsidiary have good and marketable title to or valid
leasehold interests in their respective properties and assets, real and
personal, including the properties, assets, and leasehold interests reflected in
the financial statements described in SECTION 8.2, and none of the properties,
assets, or leasehold interests of the Parent Guarantor, any Borrower or any
Subsidiary is subject to any Lien, except as permitted by SECTION 10.2.
Section 8.7 ENFORCEABILITY. This Agreement constitutes, and the other
Loan Documents when delivered, shall constitute legal, valid, and binding
obligations of the Parent Guarantor and each Borrower, enforceable against such
Persons, respectively, in accordance with their respective terms, except as
limited by (i) bankruptcy, insolvency, or other laws of general application
relating to the enforcement of creditors' rights, and (ii) general principles of
equity, whether applied in a proceeding in equity or at law.
Section 8.8 APPROVALS. No authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Parent
Guarantor or any Borrower of this Agreement and the other Loan Documents to
which the Parent Guarantor or such Borrower is or may become a party or the
validity or enforceability thereof, except for authorizations, approvals,
consents, filings and registrations which have been made or obtained and for
filing of any financing statements or similar instruments in connection with any
of the Collateral.
Section 8.9 DEBT. The Parent Guarantor, the Borrowers and the
Subsidiaries have no Debt, except as disclosed on SCHEDULE 8.9 hereto or
otherwise permitted by SECTION 10.1 hereof.
Section 8.10 TAXES. The Parent Guarantor, each Borrower and each
Subsidiary have filed all tax returns (federal, state, and local) required to be
filed, including all income, franchise, employment, property, and sales tax
returns, except for any state or local tax returns the nonfiling
<PAGE>
of which will not have a Material Adverse Effect. The Parent Guarantor, each
Borrower and each Subsidiary have paid all of their respective liabilities for
taxes, assessments, governmental charges, and other levies that are due and
payable, except for any state or local taxes, assessments, governmental charges
and levies which are not known by the Parent Guarantor, any Borrower or any
Subsidiary to be due and payable if the nonpayment thereof will not have a
Material Adverse Effect. Neither the Parent Guarantor nor any Borrower knows of
any pending investigation of the Parent Guarantor, any Borrower or any
Subsidiary by any taxing authority or of any pending but unassessed tax
liability of the Parent Guarantor, any Borrower or any Subsidiary that could
reasonably be expected to have a Material Adverse Effect.
Section 8.11 USE OF PROCEEDS; MARGIN SECURITIES. None of the Parent
Guarantor, the Borrowers or the Subsidiaries is engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations G, T,
U, or X of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Advance will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying margin
stock.
Section 8.12 ERISA. The Parent Guarantor, each Borrower and each
Subsidiary are in compliance in all material respects with all applicable
provisions of ERISA and the non-compliance with which could reasonably be
expected to have a Material Adverse Effect. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan
that could reasonably be expected to have a Material Adverse Effect. No notice
of intent to terminate a Plan has been filed, nor has any Plan been terminated
that could reasonably be expected to have a Material Adverse Effect. No
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings. Neither the Parent Guarantor nor any
Borrower nor any ERISA Affiliate has completely or partially withdrawn from a
Multiemployer Plan. Each Borrower and each ERISA Affiliate have met their
minimum funding requirements under ERISA with respect to all of their Plans, and
the present value of all vested benefits under each Plan do not exceed the fair
market value of all Plan assets allocable to such benefits, as determined on the
most recent valuation date of the Plan and in accordance with ERISA. Neither the
Parent Guarantor nor any Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC under ERISA that could reasonably be expected to have a
Material Adverse Effect.
Section 8.13 DISCLOSURE. No written statement, information, report,
representation, or warranty made by the Parent Guarantor or any Borrower in this
Agreement or in any other Loan Document or furnished to any Agent or any Lender
in connection with this Agreement or any of the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not materially
misleading. There is no fact known to the Parent Guarantor or any Borrower
(other than matters of a economic nature affecting business generally) which has
a Material Adverse Effect, or which is likely to in the future have a Material
Adverse Effect that has not been disclosed in writing to the Administrative
Agent.
Section 8.14 SUBSIDIARIES; FOREIGN AFFILIATES. On the date hereof, the
Parent Guarantor and the Borrowers have no Subsidiaries other than those listed
on SCHEDULE 8.14 hereto, and SCHEDULE 8.14 (a) sets forth the jurisdiction of
incorporation or organization of each Subsidiary, (b) sets forth the percentage
of the Parent Guarantor's, such Borrower's or such Subsidiary's ownership
<PAGE>
of the outstanding voting stock or other ownership or equity interests of each
Subsidiary, and (c) designates the Foreign Subsidiaries. All of the outstanding
capital stock of each Subsidiary has been validly issued, is fully paid, and is
nonassessable. Borrowers shall, from time to time as necessary, deliver to the
Administrative Agent an updated SCHEDULE 8.14 to this Agreement, together with a
certificate of an authorized officer of Borrowers certifying that the
information set forth in such schedule is true, correct, and complete as of such
date.
Section 8.15 AGREEMENTS. None of the Parent Guarantor, any Borrower or
any of the Subsidiaries is a party to any indenture, loan, or credit agreement,
or to any lease or other agreement or instrument, or subject to any charter or
corporate restriction which could have a Material Adverse Effect. None of the
Parent Guarantor, any Borrower or any of the Subsidiaries is in default in any
material respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party.
Section 8.16 COMPLIANCE WITH LAWS. None of the Parent Guarantor, the
Borrowers, the Subsidiaries or, to the best of the Borrowers' and the Parent
Guarantor's knowledge, the Foreign Affiliates is in violation in any material
respect of any law, rule, regulation, order, or decree of any Governmental
Authority or arbitrator, except to the extent that the failure to comply
therewith will not have a Material Adverse Effect.
Section 8.17 INVESTMENT COMPANY ACT. None of the Parent Guarantor, the
Borrowers or the Subsidiaries is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
Section 8.18 PUBLIC UTILITY HOLDING COMPANY ACT. None of the Parent
Guarantor, the Borrowers or the Subsidiaries is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 8.19 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 8.19
hereto, (a) there are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the Parent
Guarantor, any Borrower or any Subsidiary that could reasonably be expected to
give rise to any Environmental Liabilities of the Parent Guarantor, any Borrower
or any Subsidiary which could reasonably be expected to have a Material Adverse
Effect, and (b) no Lien arising under any Environmental Law has attached to any
property or revenues of the Parent Guarantor, any Borrower or any Subsidiary.
ARTICLE IX
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder, and
the Parent Guarantor covenants and agrees that, so long as the Guaranteed
Obligations or any part thereof are outstanding, such Person will perform and
observe each of the following applicable affirmative covenants, unless the
Required Lenders (or the Administrative Agent with the consent of the Required
Lenders) shall otherwise consent in writing:
<PAGE>
Section 9.1 REPORTING REQUIREMENTS. The Parent Guarantor and the
Borrowers will furnish to the Administrative Agent and each Lender:
(a) ANNUAL CONSOLIDATED AND CONSOLIDATING FINANCIAL STATEMENTS.
As soon as available, and in any event within 90 days after the end of
each fiscal year of the Parent Guarantor, beginning with the fiscal year
ending December 31, 1997, (i) a copy of the Parent Guarantor's annual
report on Form 10-K as filed with the Securities and Exchange Commission
and a copy of the annual audited financial report of the Parent
Guarantor and its Subsidiaries for such fiscal year containing, on a
consolidated basis, balance sheets and statements of operations,
stockholders' equity, and cash flows as at the end of such fiscal year
and for the 12-month period ending immediately before such date, in each
case setting forth in comparative form the figures for the preceding
fiscal year, all in reasonable detail and audited and certified by, and
accompanied by the unqualified opinion of, independent certified public
accountants of recognized standing acceptable to the Administrative
Agent, to the effect that such report has been prepared in accordance
with GAAP and presents fairly the consolidated financial condition and
results of operations of the Parent Guarantor and its Subsidiaries at
the date and for the periods indicated therein, and (ii) consolidating
financial statements of the Parent Guarantor and its Subsidiaries,
containing a balance sheet and statement of operations, all in
reasonable detail;
(b) QUARTERLY CONSOLIDATED AND CONSOLIDATING FINANCIAL
STATEMENTS. As soon as available, and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Parent Guarantor, (i) a copy of an unaudited financial report of the
Parent Guarantor and its Subsidiaries as of the end of such fiscal
quarter and for the portion of the fiscal year then ended on Form 10-Q
as filed with the Securities and Exchange Commission, containing, on a
consolidated basis, balance sheets and statements of operations and cash
flows, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, all in reasonable
detail and certified by the chief financial officer or corporate
controller of the Parent Guarantor to have been prepared in accordance
with GAAP and to fairly and accurately present (subject to year-end
audit adjustments) the financial condition and results of operations of
the Parent Guarantor and its Subsidiaries, on a consolidated basis, at
the date and for the periods indicated therein, and (ii) consolidating
financial statements of the Parent Guarantor and its Subsidiaries,
containing a balance sheet and statement of operations, all in
reasonable detail;
(c) COMPLIANCE CERTIFICATE. Concurrently with the delivery of
each of the financial statements referred to in subsections 9.1(a) and
(b), a Compliance Certificate;
(d) NOTICE OF LITIGATION. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting the Parent Guarantor, any
Borrower, any Subsidiary or any Foreign Affiliate which, if determined
adversely to the Parent Guarantor, such Borrower, such Subsidiary, or
such Foreign Affiliate which could have a Material Adverse Effect;
(e) NOTICE OF DEFAULT. As soon as possible and in any event
within five days after the Parent Guarantor, any Borrower, any
Subsidiary or any Foreign Affiliate obtains knowledge or becomes aware
of the occurrence of any Default, a written notice setting forth
<PAGE>
the details of such Default and the action that Borrowers and such other
Person have taken and propose to take with respect thereto;
(f) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as possible and in
any event within five days after the Parent Guarantor, any Borrower, any
Subsidiary or any Foreign Affiliate obtains knowledge or becomes aware
of the occurrence of any matter that could have a Material Adverse
Effect, written notice of such matter;
(g) NOTICE OF CHANGE IN REPRESENTATION OR WARRANTY. As soon as
possible and in any event within five days after the Parent Guarantor,
any Borrower, any Subsidiary or any Foreign Affiliate obtains knowledge
or becomes aware of any change in any material fact or circumstance
represented or warranted in any of the Loan Documents, written notice of
such change;
(h) BORROWING BASE REPORT. As soon as available, and in any event
within 45 days after the end of each calendar month, a Borrowing Base
Report, in substantially the form of EXHIBIT "M" hereto, certified by
the president, chief executive officer, chief financial officer or
corporate controller of the Borrowers, together with an accounts
receivable aging report in form and detail satisfactory to the
Administrative Agent showing all accounts receivable of the Borrowers
and the Subsidiaries divided into domestic and international categories
and aged in 30-day intervals; and
(i) UPDATED APPRAISALS. By December 31, 1997 and on the last day
of each 12-month period thereafter, updated rig and equipment appraisals
for the Borrowers' Rigs conducted by an appraisal firm satisfactory to
the Agents, in their discretion.
(j) GENERAL INFORMATION. Promptly, such other information
concerning the Parent Guarantor, any Borrower, any Subsidiary or any
Foreign Affiliate as any Agent or any Lender may from time to time
reasonably request.
All financial statements and reports, including Borrowing Base Reports, required
to be delivered under this Section shall be due on the Business Day immediately
following the specified due date if the specified due date is not a Business
Day.
Section 9.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. The Parent
Guarantor and each Borrower will preserve and maintain, and will cause each
Subsidiary to preserve and maintain, its corporate or partnership existence and
all of its leases, privileges, licenses, permits, franchises, qualifications,
agreements and rights that are necessary or desirable in the ordinary conduct of
its business. The Parent Guarantor and each Borrower will conduct, and will
cause each Subsidiary, and will use its best efforts to cause each Foreign
Affiliate to conduct, its business in an orderly and efficient manner in
accordance with good business practices.
Section 9.3 MAINTENANCE OF PROPERTIES. The Parent Guarantor and each
Borrower will maintain, keep, and preserve, and cause each Subsidiary, and will
use its best efforts to cause each Foreign Affiliate to maintain, keep, and
preserve, in good working order and condition, all of its properties (tangible
and intangible) which are useful in any material respect in the proper conduct
of its business or are necessary in the proper conduct of its business.
<PAGE>
Section 9.4 TAXES AND CLAIMS. The Parent Guarantor and each Borrower
will pay or discharge, and will cause each Subsidiary to pay or discharge, at or
before the date on which penalties attach the following which, if unpaid, would
become a Lien on its Property: (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (b) all lawful claims for labor, material, and supplies, which, if
unpaid, might become a Lien upon any of its property; PROVIDED, however, that
none of the Parent Guarantor, the Borrowers or the Subsidiaries shall be
required to pay or discharge any tax, levy, assessment, or governmental charge
or any claim for labor, material, or supplies which is being contested in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves have been established.
Section 9.5 INSURANCE. Each Borrower will maintain, and will cause each
of the Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general geographic areas in which the Borrowers and the
Subsidiaries operate, provided that in any event each Borrower will maintain and
cause each Subsidiary to maintain workmen's compensation insurance, property
insurance, comprehensive general liability insurance, and products liability
insurance reasonably satisfactory to the Administrative Agent. Each insurance
policy covering Collateral shall name the Administrative Agent as loss payee and
shall provide that such policy will not be cancelled or reduced without 15 days
prior written notice to the Administrative Agent.
Section 9.6 INSPECTION RIGHTS. At any reasonable time during normal
business hours and from time to time, the Parent Guarantor and each Borrower
each will permit, and will cause each Subsidiary, and will use its best efforts
to cause each Foreign Affiliate to permit, representatives of the Administrative
Agent and each Lender to examine, copy, and make extracts from its books and
records, to visit and inspect its properties, and to discuss its business,
operations, and financial condition with its officers, employees, and
independent certified public accountants. Without in any way limiting the
foregoing, the Administrative Agent may conduct (or cause a third party to
conduct) annual audits of the Collateral and appraisals of equipment collateral
at the expense of the Borrowers. Such audits may be performed by the
Administrative Agent's in-house audit and asset management review staff. The
Borrowers agree, jointly and severally, to pay to the Administrative Agent on
demand all reasonable fees, charges and out-of-pocket expenses of the
Administrative Agent in connection with each such audit. Notwithstanding the
foregoing, the cost of equipment and rig appraisals more frequently than every
12-months (provided no Default then exists) will be borne by the Lenders.
Section 9.7 KEEPING BOOKS AND RECORDS. The Parent Guarantor and each
Borrower will maintain, and will cause each Subsidiary, and will use its best
efforts to cause each Foreign Affiliate to maintain, proper books of record and
account in which full, true, and correct entries in conformity with GAAP shall
be made of all dealings and transactions in relation to its business and
activities; provided, however, that the Foreign Subsidiaries and the Foreign
Affiliates shall be permitted to maintain day-to-day books of record and account
in accordance with local statutory accounting practices rather than GAAP.
Section 9.8 COMPLIANCE WITH LAWS AND AGREEMENTS. The Parent Guarantor
and each Borrower will comply, and will cause each Subsidiary to comply, in all
material respects with all
<PAGE>
applicable laws, rules, regulations, orders, and decrees of any Governmental
Authority or arbitrator and all material agreements, contracts, and instruments
binding on it or affecting its properties or business.
Section 9.9 FURTHER ASSURANCES. The Parent Guarantor and each Borrower
will, and will cause each Subsidiary, and will use its best efforts to cause
each Foreign Affiliate to, execute and deliver such further agreements and
instruments and take such further action as may be reasonably requested by the
Administrative Agent to carry out the provisions and purposes of this Agreement
and the other Loan Documents and to create, preserve, and perfect the Liens of
the Administrative Agent in the Collateral.
Section 9.10 ERISA. Each Borrower will comply, and will cause each
Subsidiary to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability for failure to comply with the requirements of ERISA.
ARTICLE X
NEGATIVE COVENANTS
Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder, and
the Parent Guarantor covenants and agrees that, so long as the Guaranteed
Obligations or any part thereof are outstanding, such Person will perform and
observe each of the following applicable negative covenants, unless the Required
Lenders (or the Administrative Agent with the consent of the Required Lenders)
shall otherwise consent in writing:
Section 10.1 DEBT. The Parent Guarantor and Borrowers will not incur,
create, assume, or permit to exist, or permit any Subsidiary to incur, create,
assume, or permit to exist, any Debt, except:
(a) Debt to the Lenders hereunder;
(b) Debt (other than Debt related to the Senior Notes described
in subsection (c) below) existing on the date hereof and described on
SCHEDULE 8.9 hereto, provided that any such Debt indicated on SCHEDULE
8.9 as "Debt to be Repaid" shall have been repaid on or before the date
of the initial Advance hereunder;
(c) Debt incurred in connection with the Senior Notes and the
Indenture;
(d) Demand intercompany Debt among the Parent Guarantor, the
Borrowers and their Subsidiaries;
(e) Debt incurred in connection with the upgrades of the PRIDE
TEXAS, the PRIDE KANSAS, the PRIDE PENNSYLVANIA, the PIRANHA and the ILE
DE SEIN drillset in an amount not to
<PAGE>
exceed $120,000,000 in the aggregate at any time outstanding; provided
that no Default or Event of Default has occurred, is continuing or would
result from any such borrowings;
(f) Senior Debt (other than Debt described in subsections (a)
through (e) above) in an amount not to exceed $20,000,000 in the
aggregate at any time outstanding;
(g) Limited Recourse Debt and Sale-Leaseback Debt (other than the
Debt otherwise permitted under this SECTION 10.1) of the Parent
Guarantor, the Borrowers and the Subsidiaries, or any of them, in an
amount not to exceed $100,000,000 in the aggregate at any time
outstanding; and
(h) Guarantees by the Parent Guarantor, the Borrowers and the
Subsidiaries existing on the date hereof and described on SCHEDULE 8.9
hereto, and Guarantees by the Parent Guarantor, the Borrowers and the
Subsidiaries, or any of them, in an amount not to exceed $15,000,000 in
the aggregate at any time.
Section 10.2 LIMITATION ON LIENS. The Parent Guarantor and the Borrowers
will not incur, create, assume, or permit to exist, or permit any Subsidiary to
incur, create, assume, or permit to exist, any Lien upon any of its property,
assets, or revenues, whether now owned or hereafter acquired, except:
(a) Liens in favor of the Administrative Agent pursuant to the
Loan Documents;
(b) Liens disclosed on SCHEDULE 10.2 hereto, provided that any
such Liens indicated on SCHEDULE 10.2 as a "Lien to be Released" shall
have been released or provision satisfactory to the Agents for the
release of such Liens shall have been made on or before the date of the
initial Advance hereunder;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that do
not (individually or in the aggregate) materially affect the value of
the assets encumbered thereby or materially impair the ability of the
Parent Guarantor, the Borrowers or the Subsidiaries to use such assets
in their respective businesses, and none of which is violated in any
material respect by existing or proposed structures or land use;
(d) Liens for taxes, assessments, or other governmental charges
which are not delinquent or which are being contested in good faith and
for which adequate reserves have been established;
(e) Liens of landlords (for any location where a landlord's
waiver is not required under the Loan Documents), mechanics,
materialmen, warehousemen, carriers, or other similar statutory Liens
securing obligations that (i) are not yet due and are incurred in the
ordinary course of business or (ii) are being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate
reserves have been established in accordance with GAAP;
<PAGE>
(f) Liens resulting from good faith deposits to secure payments
of workmen's compensation, unemployment insurance or other social
security programs or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, or contracts (other than for
payment of Debt), or leases made in the ordinary course of business, or
arising from litigation which are effectively stayed from execution and
would not otherwise constitute a Default or cause an Event of Default;
(g) Liens on specific assets securing the Debt permitted by
SECTION 10.1(E), provided that such liens do not encumber any assets
other than the specific assets for which such Debt was incurred.
(h) Liens on specified assets securing any Limited Recourse Debt
permitted by SECTION 10.1(G);
(i) Liens on any assets which are the subject of a Sale-Leaseback
Transaction, securing the Sale-Leaseback Debt resulting therefrom,
provided such Sale-Leaseback Debt is permitted by SECTION 10.1(G); and
(j) Liens securing any purchase money Senior Debt permitted by
SECTION 10.1(F), provided that such Liens do not encumber any property
other than the property for which such purchase money was incurred.
Section 10.3 MERGERS, ACQUISITIONS, ETC. The Parent Guarantor and the
Borrowers will not, and will not permit any Subsidiary to, become a party to a
merger or consolidation, or purchase or otherwise acquire all or substantially
all of the assets of any Person or any shares or other evidence of beneficial
ownership of any Person, or wind-up, dissolve, or liquidate; provided, however,
that (a) the Parent Guarantor, any Borrower or any Subsidiary shall be permitted
to become a party to a merger or consolidation or acquire all or any part of the
assets of any Person or any shares or other beneficial ownership of any Person,
so long as (i) no Default is existing or would result therefrom, (ii) the
Borrowers have given the Administrative Agent at least 20 days prior notice of
such merger, consolidation or acquisition, (iii) the Borrowers have provided to
the Lenders calculations demonstrating the pro forma compliance with all
financial and other covenants contained herein, after giving effect to such
merger, consolidation or acquisition, based on the most recently delivered
financial statements, (iv) the total cash and non-cash consideration paid and
Debt assumed or incurred by the Parent Guarantor, any Borrower or any Subsidiary
in connection with all such mergers, consolidations or acquisitions shall not
exceed $50,000,000 in the aggregate for any fiscal year, and (v) the Parent
Guarantor, such Borrower or such Subsidiary, as the case may be, is the
surviving corporation in such merger or consolidation.
Section 10.4 RESTRICTED PAYMENTS. The Borrowers will not make and will
not permit any Subsidiary to make, any Restricted Payment; provided, however,
that the Subsidiaries shall be permitted to declare and pay dividends to the
Borrowers or the Parent Guarantor, and the Borrowers shall be permitted to
declare and pay dividends to the Parent Guarantor.
Section 10.5 LOANS AND INVESTMENTS. The Parent Guarantor and the
Borrowers will not make, and will not permit any Subsidiary to make, any
advance, loan, extension of credit, or capital
<PAGE>
contribution to or investment in, or purchase, or permit any Subsidiary to
purchase, any stock, bonds, notes, debentures, or other securities of, any
Person, except:
(a) readily marketable direct obligations of the United States of
America or any agency thereof with maturities of one year or less from
the date of acquisition;
(b) certificates of deposit with maturities of one year or less
from the date of acquisition issued by any commercial bank operating in
the United States of America having capital and surplus in excess of
$50,000,000;
(c) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest rating categories
of S&P or Moody's;
(d) debt securities which shall have one of the two highest
ratings from S&P or Moody's and which mature within one year from the
date of acquisition;
(e) investments in eurodollars placed through any financial
institution having combined capital, surplus, and undivided profits of
not less than $100,000,000;
(f) repurchase agreements with any financial institution having
combined capital, surplus, and undivided profits of not less than
$100,000,000 for U.S. Government obligations maturing in less than 10
days;
(g) investments in daily money market mutual funds having assets
greater than $200,000,000 and limited in holdings to assets of the types
described in subsections (a), (b) and (c) of this Section;
(h) equity contributions, loans, and advances among the Parent
Guarantor, the Borrowers, their Subsidiaries, and their Foreign
Affiliates; provided that the aggregate outstanding amount of equity
contributions, loans, and advances to its Foreign Affiliates does not
exceed $60,000,000;
(i) payroll advances made in the ordinary course of business;
(j) accounts receivable in the ordinary course of business;
(k) loans and advances made by the Parent Guarantor, any
Borrower, any Subsidiary or any Foreign Affiliate to their respective
officers and employees in the ordinary course of business not to exceed
$1,000,000 in the aggregate outstanding at any time;
(l) demand deposits at Brown Brothers Harriman & Co. or banks
with capital surplus and undivided profits of at least $100,000,000 and
whose deposits are insured by the Federal Deposit Insurance Corporation,
maintained by the Parent Guarantor, any Borrower or any Subsidiary in
the ordinary course of business for the purpose of paying operating
expenses; and
<PAGE>
(m) short-term investments made in accordance with the investment
guideline policy dated effective April 24, 1990 and revised through the
date hereof, a true and correct copy of which has been delivered to the
Administrative Agent.
Section 10.6 TRANSACTIONS WITH AFFILIATES. The Parent Guarantor and
Borrowers will not enter into, and will not permit any Subsidiary and will use
its best efforts to not permit any Foreign Affiliate to enter into, any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate of the Parent
Guarantor, such Borrower, such Subsidiary or such Foreign Affiliate, except in
the ordinary course of and pursuant to the reasonable requirements of the Parent
Guarantor's, such Borrower's, such Subsidiary's or such Foreign Affiliate's
business and upon fair and reasonable terms no less favorable to the Parent
Guarantor, such Borrower, such Subsidiary or such Foreign Affiliate than would
be obtained in a comparable arm's-length transaction with a Person not an
Affiliate of the Parent Guarantor, such Borrower, such Subsidiary or such
Foreign Affiliate.
Section 10.7 DISPOSITION OF ASSETS. Subject to the provisions of SECTION
10.1(D), SECTION 10.5(H), and SECTION 10.5(I) the Parent Guarantor and the
Borrowers will not sell, lease, assign, transfer, or otherwise dispose of any of
their assets, and will not permit any Subsidiary to do so with any of its
assets, except (a) dispositions of inventory and entry into and performance of
drilling contracts and bareboat charters in the ordinary course of business, (b)
dispositions of equipment and fixtures having a fair market value not to exceed
$50,000,000 in the aggregate during any fiscal year of the Parent Guarantor and
the Borrowers, (c) dispositions of assets from one Borrower to another Borrower,
provided, that any security interest of the Lenders in such asset is not
affected by such disposition, (d) dispositions and transfers of assets among
Foreign Subsidiaries of the Borrowers and the Parent Guarantor, (e) dispositions
of assets (other than assets which constitute Collateral for the Obligations)
from a Borrower to the Parent Guarantor or to a Foreign Affiliate or a Foreign
Subsidiary of the Parent Guarantor or a Borrower (taken in the aggregate with
all prior dispositions made after September 30, 1997), provided, that the
aggregate book value of assets disposed of pursuant to this subsection (e) shall
not exceed 20% of the aggregate book value of the total assets of the Borrowers,
as set forth on the most recently delivered quarterly financial statements, and
(f) dispositions and transfers of assets from the Parent Guarantor to any
Borrower.
Section 10.8 SALE AND LEASEBACK. The Parent Guarantor and the Borrowers
will not enter into, and will not permit any Subsidiary to enter into, any
Sale-Leaseback Transaction unless the amount of Sale-Leaseback Debt resulting
therefrom, plus the aggregate of all other Sale-Leaseback Debt then existing,
does not exceed the amount permitted by SECTION 10.1(G).
Section 10.9 NATURE OF BUSINESS. The Parent Guarantor and the Borrowers
will not, and will not permit any Subsidiary to, engage in any business
substantially different than the businesses in which they are engaged as of the
date hereof.
Section 10.10 ENVIRONMENTAL PROTECTION. The Parent Guarantor and the
Borrowers will not, and will not permit any Subsidiary to, (a) use (or permit
any tenant to use) any of their respective properties or assets for the
handling, processing, storage, transportation, or disposal of any Hazardous
Material in violation of any Environmental Law that the violation of which could
reasonably be expected to have a Material Adverse Effect, (b) generate any
Hazardous Material in violation of any Environmental Law that the violation of
which could reasonably be expected to have
<PAGE>
a Material Adverse Effect, (c) conduct any activity that causes a release or
threatened release of any Hazardous Material that could reasonably be expected
to have a Material Adverse Effect, or (d) otherwise conduct any activity or use
any of their respective properties or assets in any manner that is likely to
violate any Environmental Law that the violation of which could reasonably be
expected to have a Material Adverse Effect or create any Environmental
Liabilities for which the Parent Guarantor, any Borrower or any Subsidiary would
be responsible that could reasonably be expected to have a Material Adverse
Effect.
Section 10.11 ACCOUNTING. The Parent Guarantor and the Borrowers will
not, and will not permit any Subsidiary to, change its fiscal year or make any
change (a) in accounting treatment or reporting practices, except as required by
GAAP and disclosed to the Administrative Agent, or (b) in tax reporting
treatment, except as required by law and disclosed to the Administrative Agent.
ARTICLE XI
FINANCIAL COVENANTS
Each Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder, and
the Parent Guarantor covenants and agrees that, so long as the Guaranteed
Obligations or any part thereof are outstanding, such Person will perform and
observe each of the following applicable financial covenants, unless the
Required Lenders (or the Administrative Agent with the consent of the Required
Lenders) shall otherwise consent in writing:
Section 11.1 FUNDED DEBT TO EBITDA. The Parent Guarantor and the
Borrowers will not permit the ratio of their Funded Debt, as of the date hereof
and as of each fiscal quarter thereafter, to EBITDA, on a consolidated basis,
for the most recent Rolling Period then ended, to exceed (a) 4.00 to 1.00 for
each determination made during the period from and including the date hereof to
and including the fiscal quarter ending June 30, 1998, and (b) 3.50 to 1.00 for
each fiscal quarter ending thereafter.
Section 11.2 FUNDED DEBT TO CAPITALIZATION. The Parent Guarantor and the
Borrowers will not permit the ratio of Funded Debt to Capitalization, on a
consolidated basis, as of the end of each fiscal quarter, for the most recent
Rolling Period, to exceed (a) 0.55 for each determination made during the period
from and including the date hereof to and including the fiscal quarter ending
December 31, 1997, (b) 0.50 for each determination made during the period from
and including January 1, 1998 to and including the fiscal quarter ending
September 30, 1999, and (c) 0.45 for each fiscal quarter ending thereafter.
Section 11.3 COVERAGE RATIO. The Parent Guarantor and the Borrowers will
maintain, on a consolidated basis, at all times (measured at the end of each
fiscal quarter), a Coverage Ratio of (a) not less than 1.35 to 1.00 for each
determination made during the period from and including the date hereof to and
including the fiscal quarter ending December 31, 1998 and(b) 1.50 to 1.00 for
each fiscal quarter ending thereafter.
<PAGE>
Section 11.4 TANGIBLE NET WORTH. The Parent Guarantor and the Borrowers
will at all times maintain or cause to be maintained, on a consolidated basis,
Tangible Net Worth in an amount not less than the sum of (a) $620,000,000, plus
(b) 75% of net income, after provision for income taxes, of the Parent
Guarantor, the Borrowers and the Subsidiaries (without any deduction for
losses), for each fiscal quarter of the Borrowers ended through the date of
determination beginning with the fiscal quarter ended December 31, 1997, plus
(c) 100% of the Net Proceeds received by the Parent Guarantor, any Borrower
or any Subsidiary from any issuance, sale or other disposition of any shares of
capital stock or other equity securities of the Borrowers of any class (or any
securities convertible or exchangeable for any such shares, or any rights,
warrants, or options to subscribe for or purchase any such shares) after the
date of this Agreement.
ARTICLE XII
DEFAULT
Section 12.1 EVENTS OF DEFAULT. Each of the following shall be deemed an
"EVENT OF DEFAULT":
(a) Any Borrower shall fail to pay any installment of principal
or interest on any of the Notes, any fees, or any other portion of the
Obligations (other than the Parent Obligations) when due.
(b) The Parent Guarantor shall fail to pay any portion of the
Parent Obligations or the Guaranteed Obligations.
(c) Any representation or warranty made or deemed made by any
Borrower or any Obligated Party (or any of their respective officers) in
any Loan Document or in any certificate, report, notice, or financial
statement furnished at any time in connection with this Agreement shall
be false, misleading, or erroneous in any material respect when made or
deemed to have been made.
(d) Any Borrower or any Obligated Party shall (i) fail to
perform, observe, or comply with any of the affirmative covenants
contained in ARTICLE IX hereof (other than those in SECTIONS 9.1(E) and
9.1(F)) and such failure shall remain unremedied for 15 days after its
occurrence, or (ii) fail to perform, observe, or comply with any other
covenants contained in this Agreement.
(e) Any Borrower or any Obligated Party shall fail to perform,
observe, or comply with any (i) affirmative covenant, agreement, or term
contained in any other Loan Document (except those described in
subsections (a) and (c) of this Section) and such failure shall remain
unremedied for 15 days after its occurrence, or (ii) negative or
prohibitive covenant, agreement, or term contained in any other Loan
Document.
(f) Any Borrower, any Subsidiary, or any Obligated Party shall
commence a voluntary proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect
<PAGE>
or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or a substantial part of its
property or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall generally fail to pay its debts as
they become due or shall take any corporate action to authorize any of
the foregoing.
(g) An involuntary proceeding shall be commenced against any
Borrower, any Subsidiary, or any Obligated Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under
any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official for it or a substantial part of its
property, and such involuntary proceeding shall remain undismissed and
unstayed for a period of 60 days.
(h) Any Borrower, any Subsidiary, or any Obligated Party shall
fail to discharge or stay within a period of 30 days after the
commencement thereof any attachment, sequestration, or similar
proceeding or proceedings involving an aggregate amount in excess of
$5,000,000 (exclusive of any amounts covered by applicable insurance,
subject to a customary deductible consistent with the requirements of
SECTION 9.5)against any of its assets or properties.
(i) A final judgment or judgments for the payment of money in
excess of $2,500,000 (exclusive of any amounts covered by applicable
insurance, subject to a customary deductible consistent with the
requirements of SECTION 9.5) in the aggregate shall be rendered by a
court or courts against any Borrower, any Subsidiary, or any Obligated
Party (other than in connection with any Limited Recourse Debt) and the
same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
30 days from the date of entry thereof and the relevant Borrower, the
relevant Subsidiary, or the relevant Obligated Party shall not, within
said period of 30 days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal.
(j) (i) Any Borrower, any Subsidiary, or any Obligated Party
shall fail to pay when due, after any applicable grace periods, any
principal of or interest on any Debt in excess of $1,000,000 in the
aggregate (other than the Obligations and any Limited Recourse Debt), or
(ii) the maturity of any such Debt shall have been accelerated, or (iii)
any such Debt shall have been required to be prepaid prior to the stated
maturity thereof, or (iv) any event shall have occurred that permits
(or, with the giving of notice or lapse of time or both, would permit)
any holder or holders of such Debt or any Person acting on behalf of
such holder or holders to accelerate the maturity thereof or require any
such prepayment.
(k) This Agreement or any other Loan Document shall cease to be
in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
any Borrower, any Subsidiary, any Obligated Party or any of their
respective shareholders, or any Borrower, any Subsidiary, or any
Obligated Party shall deny that it has any further liability or
obligation under any of the Loan Documents, or any lien or security
interest created by the Loan Documents shall for any reason cease to be
a valid,
<PAGE>
first priority perfected security interest in and lien upon any of the
Collateral purported to be covered thereby.
(l) Any of the following events shall occur or exist with respect
to any Borrower, any Obligated Party or any ERISA Affiliate: (i) any
Prohibited Transaction involving any Plan; (ii) any Reportable Event
with respect to any Plan; (iii) filing under Section 4041 of ERISA of a
notice of intent to terminate any Plan or the termination of any Plan;
(iv) any event or circumstance that might constitute grounds entitling
the PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA from
a Multiemployer Plan or the reorganization, insolvency, or termination
of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, have
subjected or could in the reasonable opinion of the Required Lenders
subject any Borrower or any Obligated Party to any tax, penalty, or
other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise
(or any combination thereof) which in the aggregate could reasonably be
expected to have a Material Adverse Effect.
(m) Any Change in Control shall occur.
(n) Any Borrower, any Subsidiary, or any Obligated Party, or any
of their properties, revenues, or assets in excess of $1,000,000 in the
aggregate, shall become subject to an order of forfeiture, seizure, or
divestiture and the same shall not have been discharged within 30 days
from the date of entry thereof.
Section 12.2 REMEDIES UPON DEFAULT. If any Event of Default shall occur
and be continuing, the Administrative Agent may, with the consent of the
Required Lenders (and if directed by the Required Lenders, shall), do any one or
more of the following: (a) declare, upon written notice to the Borrowers or the
Parent Guarantor, the Obligations or any part thereof to be immediately due and
payable, and the same shall thereupon become immediately due and payable,
without demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers, (b) terminate, upon written notice to the Borrowers, the Commitments,
but without notice to any Subsidiary or any other Obligated Party, (c) reduce
any claim to judgment, (d) foreclose or otherwise enforce any Lien granted to
the Administrative Agent for the benefit of itself and the Lenders to secure
payment and performance of the Obligations, and (e) exercise any and all rights
and remedies afforded by the laws of the State of Texas or any other
jurisdiction, by any of the Loan Documents, by equity, or otherwise; provided,
however, that upon the occurrence of an Event of Default under SECTION 12.1(F)
or SECTION 12.1(G), the Commitments of the Lenders shall automatically
terminate, and the Obligations shall become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by each
Borrower and the Parent Guarantor.
Section 12.3 CASH COLLATERAL. If any Event of Default shall occur and be
continuing, the Borrowers agree, jointly and severally, to, if requested by the
Administrative Agent or the Required
<PAGE>
Lenders, immediately deposit with and pledge to the Administrative Agent cash or
cash equivalent investments satisfactory to the Administrative Agent in its sole
and absolute discretion in an amount equal to the outstanding Letter of Credit
Liabilities as security for the Obligations, and the Administrative Agent may
retain, as additional Collateral for the payment of the Obligations with respect
to the Letters of Credit, any amounts received upon foreclosure, or in lieu of
foreclosure, through offset, as proceeds of any Collateral or otherwise.
Section 12.4 PERFORMANCE BY THE ADMINISTRATIVE AGENT. If the Parent
Guarantor or any Borrower shall fail to perform any covenant or agreement
contained in any of the Loan Documents, the Administrative Agent may perform or
attempt to perform such covenant or agreement on behalf of the Borrowers. In
such event, each Borrower agrees, jointly and severally, to, at the request of
the Administrative Agent, promptly pay any amount expended by the Administrative
Agent in connection with such performance or attempted performance to the
Administrative Agent, together with interest thereon at the Default Rate from
and including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that neither the Administrative Agent nor any Lender shall have any
liability or responsibility for the performance of any obligation of the Parent
Guarantor or any Borrower under this Agreement or any other Loan Document.
ARTICLE XIII
THE AGENTS
Section 13.1 APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite
the various transactions contemplated by this Agreement, the Lenders hereby
irrevocably appoint and authorize (1) Wells Fargo to act as their Administrative
Agent hereunder and under each of the other Loan Documents and (2) FNBC to act
as their Syndication Agent hereunder. Wells Fargo consents to such appointment
and agrees to perform the duties of the Administrative Agent as specified
herein. FNBC consents to such appointment and the Agents agree, in consultation
with the Borrowers, to select a syndicate of Lenders to participate in the
Commitments. The Lenders authorize and direct the Administrative Agent to take
such action in their name and on their behalf under the terms and provisions of
the Loan Documents and to exercise such rights and powers thereunder as are
specifically delegated to or required of the Administrative Agent for the
Lenders, together with such rights and powers as are reasonably incidental
thereto. The Administrative Agent is hereby expressly authorized to act as the
Administrative Agent on behalf of itself and the other Lenders:
(a) To receive on behalf of each of the Lenders any payment of
principal, interest, fees or other amounts paid pursuant to this
Agreement and the Notes and to distribute to each Lender its pro rata
share of all payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the
Loan Documents;
(c) To act as nominee for and on behalf of the Lenders in and
under the Loan Documents;
<PAGE>
(d) To arrange for the means whereby the funds of the Lenders are
to be made available to the Borrowers;
(e) To distribute to the Lenders information, requests, notices,
payments, prepayments, documents and other items received from the
Borrowers, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrowers, the other Obligated
Parties, and other Persons, all requests, demands, approvals, notices,
and consents received from the Lenders;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Lender all rights and remedies of Lenders upon the
occurrence of any Event of Default;
(h) To accept, execute, and deliver the Guarantor Security
Agreement, the Security Agreement, the Borrower Pledge Agreement, the
Parent Guarantor Pledge Agreement and any other security documents as
the secured party; and
(i) To take such other actions as may be requested by Required
Lenders.
Neither the Administrative Agent nor any of its Affiliates, officers,
directors, employees, attorneys, or agents shall be liable for any action taken
or omitted to be taken by any of them hereunder or otherwise in connection with
this Agreement or any of the other Loan Documents except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Administrative Agent (i) may treat the payee of any Note
as the holder thereof until the Administrative Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form satisfactory
to the Administrative Agent; (ii) shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be a
trustee or fiduciary for any Lender; (iii) shall not be required to initiate any
litigation or collection proceedings hereunder or under any other Loan Document
except to the extent requested by Required Lenders; (iv) shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement or any other Loan Document, or any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, enforceability, or sufficiency of this Agreement or any
other Loan Document or any other document referred to or provided for herein or
therein or for any failure by any Person to perform any of its obligations
hereunder or thereunder; (v) may consult with legal counsel (including counsel
for the Borrowers), independent public accountants, and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants, or
experts; and (vi) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate, or other instrument or
writing believed by it to be genuine and signed or sent by the proper party or
parties. As to any matters not expressly provided for by this Agreement, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by
Required Lenders, and such instructions of Required Lenders and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders;
PROVIDED, however, that the Administrative Agent shall not be required to take
any action which exposes the
<PAGE>
Administrative Agent to personal liability or which is contrary to this
Agreement or any other Loan Document or applicable law.
Section 13.2 RIGHTS OF AGENTS AS LENDERS. With respect to its
Commitment, the Advances made by it and the Note issued to it, Wells Fargo in
its capacity as a Lender hereunder and FNBC in its capacity as a Lender
hereunder shall each have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the
Administrative Agent or the Syndication Agent, as the case may be, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent and the Syndication Agent, each in its individual capacity.
Each Agent and its Affiliates may (without having to account therefor to any
Lender) accept deposits from, lend money to, act as trustee under indentures of,
provide merchant banking services to, and generally engage in any kind of
business with the Borrowers, any of their Subsidiaries, any other Obligated
Party, and any other Person who may do business with or own securities of any
Borrower, any Subsidiary, or any other Obligated Party, all as if it were not
acting as the Administrative Agent or the Syndication Agent and without any duty
to account therefor to the Lenders.
Section 13.3 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment of any principal of or interest on any Advance made by it under this
Agreement or payment of any other obligation under the Loan Documents then owed
by any Borrower or any other Obligated Party to such Lender, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Lender shall promptly purchase from the other Lenders participations in the
Advances held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of the other Lenders in accordance with its
pro rata portion thereof. To such end, all of the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if all or any portion of such excess payment is thereafter rescinded or must
otherwise be restored. Each Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any Lender so purchasing a
participation in the Advances made by the other Lenders may exercise all rights
of setoff, banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Advances to the
Borrowers in the amount of such participation. Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrowers.
SECTION 13.4 INDEMNIFICATION. THE LENDERS HEREBY AGREE TO INDEMNIFY EACH
AGENT FROM AND HOLD EACH AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED
UNDER SECTIONS 15.1 AND 15.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWERS UNDER SECTIONS 15.1 AND 15.2), RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY
BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH AGENT IN ANY WAY RELATING
TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO
BE
<PAGE>
TAKEN BY SUCH AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED,
FURTHER, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE
EXTENT CAUSED BY SUCH AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE LENDERS THAT
EACH AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF
SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), AND
DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY AGENT. WITHOUT
LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH LENDER AGREES TO REIMBURSE
EACH AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE BASIS
OF THE COMMITMENTS) OF ANY AND ALL OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS'
FEES) INCURRED BY SUCH AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION,
DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER
THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN
RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT
THAT SUCH AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY THE BORROWERS OR ANY
OTHER OBLIGATED PARTY.
Section 13.5 INDEPENDENT CREDIT DECISIONS. Each Lender agrees that it
has independently and without reliance on any Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrowers' decision to enter into this Agreement and
that it will, independently and without reliance upon any Agent or any other
Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. Neither of the Agents shall be required to keep itself informed as to
the performance or observance by the Borrowers or any Obligated Party of this
Agreement or any other Loan Document or to inspect the properties or books of
the Borrowers or any Obligated Party. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or under the other Loan Documents, neither of
the Agents shall have any duty or responsibility to provide any Lender with any
credit or other financial information concerning the affairs, financial
condition or business of the Borrowers or any Obligated Party (or any of their
Affiliates) which may come into the possession of any Agent or any of its
Affiliates.
Section 13.6 SEVERAL COMMITMENTS. The Commitments and other obligations
of the Lenders under this Agreement are several. The default by any Lender in
making an Advance in accordance with its Commitment shall not relieve the other
Lenders of their obligations under this Agreement. In the event of any default
by any Lender in making any Advance, each nondefaulting Lender shall be
obligated to make its Advance but shall not be obligated to advance the amount
which the defaulting Lender was required to advance hereunder. In no event shall
any Lender be required to advance an amount or amounts which shall in the
aggregate exceed such Lender's Commitment. No Lender shall be responsible for
any act or omission of any other Lender.
<PAGE>
Section 13.7 SUCCESSOR ADMINISTRATIVE AGENT. Subject to the appointment
and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the
Lenders and the Borrowers and the Administrative Agent may be removed at any
time with or without cause by Required Lenders. Upon any such resignation or
removal, Required Lenders will have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by Required Lenders and shall have accepted such appointment within 30
days after the retiring Administrative Agent's giving of notice of resignation
or the Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized under the laws
of the United States of America or any State thereof and having combined capital
and surplus of at least $100,000,000. Upon the acceptance of its appointment as
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all rights, powers, privileges,
immunities, and duties of the resigning or removed Administrative Agent, and the
resigning or removed Administrative Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents. After any
Administrative Agent's resignation or removal as Administrative Agent, the
provisions of this ARTICLE XIII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was the
Administrative Agent.
ARTICLE XIV
GUARANTY
The Parent Guarantor hereby irrevocably and unconditionally guarantees
to the Agents and the Lenders the full and prompt payment and performance of the
Guaranteed Obligations, such Guarantee (the "PARENT GUARANTY") being upon the
following terms:
Section 14.1 UNCONDITIONAL GUARANTY. The Parent Guaranty shall be an
absolute, continuing, irrevocable, and unconditional guaranty of payment and
performance, and not a guaranty of collection, and the Parent Guarantor shall
remain liable on its obligations hereunder until the payment and performance in
full of the Guaranteed Obligations. No set-off, counterclaim, recoupment,
reduction, or diminution of any obligation, or any defense of any kind or nature
which any Borrower may have against any Agent, any Lender or any other party, or
which the Parent Guarantor may have against any Borrower, any Agent, any Lender
or any other party, shall be available to, or shall be asserted by, the Parent
Guarantor against any Agent, any Lender or any subsequent holder of the
Guaranteed Obligations or any part thereof or against payment of the Guaranteed
Obligations or any part thereof.
Section 14.2 NO IMPAIRMENT; CUMULATIVE REMEDIES. If the Parent Guarantor
becomes liable for any indebtedness owing by Borrower to any Agent or any Lender
by endorsement or otherwise, other than under this Parent Guaranty, such
liability shall not be in any manner impaired or affected hereby, and the rights
of the Agents and the Lenders hereunder shall be cumulative of any and all other
rights that any of them may ever have against the Parent Guarantor. The exercise
by any Agent or any Lender of any right or remedy hereunder or under any other
instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy.
<PAGE>
Section 14.3 REMEDIES; SUBORDINATION. In the event of default by any
Borrower in payment or performance of the Guaranteed Obligations, or any part
thereof, when such Guaranteed Obligations becomes due, whether by its terms, by
acceleration, or otherwise, the Parent Guarantor agrees to promptly pay the
amount due thereon to the Administrative Agent, for the pro rata benefit of the
Lenders, without notice or demand in lawful currency of the United States of
America and it shall not be necessary for any Agent or any Lender, in order to
enforce such payment by the Parent Guarantor, first to institute suit or exhaust
its remedies against any Borrower or others liable on such Guaranteed
Obligations, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Obligations. Notwithstanding anything
to the contrary contained herein, the Parent Guarantor hereby irrevocably
subordinates to the prior indefeasible payment in full of the Guaranteed
Obligations, any and all rights the Parent Guarantor may now or hereafter have
under any agreement or at law or in equity (including, without limitation, any
law subrogating the Parent Guarantor to the rights of the Agents and the
Lenders) to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from any Borrower or any other party liable for
payment of any or all of the Guaranteed Obligations for any payment made by the
Parent Guarantor under or in connection with the Parent Guaranty or otherwise.
Section 14.4 PAYMENT ON DEMAND. If acceleration of the time for payment
of any amount payable by any Borrower under the Guaranteed Obligations is stayed
upon the insolvency, bankruptcy, or reorganization of such Borrower, all such
amounts otherwise subject to acceleration under the terms of the Guaranteed
Obligations shall nonetheless be payable by the Parent Guarantor hereunder
forthwith on demand by the Administrative Agent.
Section 14.5 NO IMPAIRMENT OF OBLIGATIONS. The Parent Guarantor hereby
agrees that its obligations under this Parent Guaranty shall not be released,
discharged, diminished, impaired, reduced, or affected for any reason or by the
occurrence of any event, including, without limitation, one or more of the
following events, whether or not with notice to or the consent of the Parent
Guarantor: (a) the taking or accepting of collateral as security for any or all
of the Guaranteed Obligations or the release, surrender, exchange, or
subordination of any collateral now or hereafter securing any or all of the
Guaranteed Obligations; (b) the full or partial release of any other guarantor
from liability for any or all of the Guaranteed Obligations; (c) any disability
of any Borrower, or the dissolution, insolvency, or bankruptcy of any Borrower,
the Parent Guarantor, or any other party at any time liable for the payment of
any or all of the Guaranteed Obligations; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Obligations or any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Guaranteed Obligations; (e)
any adjustment, indulgence, forbearance, waiver, or compromise that may be
granted or given by any Agent or any Lender to any Borrower, the Parent
Guarantor, or any other party ever liable for any or all of the Guaranteed
Obligations; (f) any neglect, delay, omission, failure, or refusal of any Agent
or any Lender to take or prosecute any action for the collection of any of the
Guaranteed Obligations or to foreclose or take or prosecute any action in
connection with any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Obligations; (g) the
unenforceability or invalidity of any or all of the Guaranteed Obligations or of
any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Obligations; (h) any payment by any
Borrower or any other party to any Agent or any Lender is held to constitute a
preference under applicable bankruptcy or insolvency law or if for any other
reason any Agent or
<PAGE>
any Lender is required to refund any payment or pay the amount thereof to
someone else; (i) the settlement or compromise of any of the Guaranteed
Obligations; (j) the non-perfection of any security interest or lien securing
any or all of the Guaranteed Obligations; (k) any impairment of any collateral
securing any or all of the Guaranteed Obligations; (l) the failure of any Agent
or any Lender to sell any collateral securing any or all of the Guaranteed
Obligations in a commercially reasonable manner or as otherwise required by law;
(m) any change in the corporate existence, structure, or ownership of any
Borrower; or (n) any other circumstance which might otherwise constitute a
defense available to, or discharge of, any Borrower or the Parent Guarantor.
ARTICLE XV
MISCELLANEOUS
Section 15.1 EXPENSES. The Borrowers hereby agree, jointly and
severally, to pay on demand: (a) all reasonable costs and out-of-pocket expenses
of the Agents in connection with the preparation, negotiation, execution, and
delivery of this Agreement and the other Loan Documents and any and all
amendments, modifications, renewals, extensions, and supplements thereof and
thereto, including, without limitation, the reasonable fees and expenses of
legal counsel for the Agents, (b) all reasonable costs and out-of-pocket
expenses of the Agents and the Lenders, or any of them in connection with any
Default and the enforcement of this Agreement or any other Loan Document,
including, without limitation, the reasonable fees and expenses of legal counsel
for the Agents and the Lenders, or any of them, (c) all transfer, stamp,
documentary, or other similar taxes, assessments, or charges levied by any
Governmental Authority in respect of this Agreement or any of the other Loan
Documents, (d) all reasonable costs, out-of-pocket expenses, assessments, and
other charges incurred in connection with any filing, registration, recording,
or perfection of any security interest or Lien contemplated by this Agreement or
any other Loan Document, and (e) all other reasonable costs and out-of-pocket
expenses incurred by the Agents in connection with this Agreement or any other
Loan Document, including, without limitation, all fees, costs, out-of-pocket
expenses, and other charges incurred in connection with performing or obtaining
any audit or appraisal in respect of the Collateral.
SECTION 15.2 INDEMNIFICATION. EACH BORROWER HEREBY JOINTLY AND SEVERALLY
AGREES TO INDEMNIFY EACH AGENT AND EACH LENDER AND EACH AFFILIATE THEREOF AND
THEIR RESPECTIVE PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS,
AND PARTICIPANTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, INTEREST, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), AND AMOUNTS
PAID IN SETTLEMENT, OTHER THAN OBLIGATIONS OF THE PARENT GUARANTOR THAT, IN
ACCORDANCE WITH THE INDENTURE WOULD CONSTITUTE A GUARANTEE OF INDEBTEDNESS (AS
DEFINED IN THE INDENTURE) OF THE PARENT GUARANTOR, TO WHICH ANY OF THEM MAY
BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF
ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN
DOCUMENTS, (C) ANY BREACH BY ANY BORROWER OF ANY REPRESENTATION, WARRANTY,
<PAGE>
COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE
PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF ANY BORROWER OR ANY SUBSIDIARY, (E) THE USE OR PROPOSED USE OF ANY
LETTER OF CREDIT, (F) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED
ON ANY AGENT OR ANY LENDER OR ANY OF THEIR RESPECTIVE CORRESPONDENTS IN RESPECT
OF ANY LETTER OF CREDIT, OR (G) ANY INVESTIGATION, LITIGATION, OR OTHER
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE FOREGOING; PROVIDED,
HOWEVER THAT NO PERSON TO BE INDEMNIFIED HEREUNDER SHALL HAVE THE RIGHT TO BE
INDEMNIFIED FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITING
ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS
SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND
EXPENSES (INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE
OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.
Section 15.3 LIMITATION OF LIABILITY. None of the Agents, Lenders, or
any Affiliate, officer, director, employee, attorney, partner, or agent thereof
shall have any liability with respect to, and each Borrower hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by such
Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. Each Borrower
hereby waives, releases, and agrees not to sue any Agent or any Lender or any of
their respective Affiliates, partners, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents.
Section 15.4 NO FIDUCIARY RELATIONSHIP. The relationship between the
Borrowers and each Lender with respect to the Loan Documents and the
transactions governed thereby is solely that of debtor and creditor, and neither
any Agent nor any Lender has any fiduciary or other special relationship with
any Borrower with respect to the Loan Documents and the transactions governed
thereby, and no term or condition of any of the Loan Documents shall be
construed so as to deem the relationship between any Borrower and any Lender
with respect to the Loan Documents and the transactions governed thereby to be
other than that of debtor and creditor.
Section 15.5 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
any Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and
<PAGE>
remedies provided for in this Agreement and the other Loan Documents are
cumulative and not exclusive of any rights and remedies provided by law.
Section 15.6 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. No
Borrower shall be permitted to assign or transfer any of its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all of the Lenders. Any Lender may sell
participations to one or more banks or other institutions in or to all
or a portion of its rights and obligations under this Agreement and the
other Loan Documents (including, without limitation, all or a portion of
its Commitments, the Advances owing to it and its share of Letter of
Credit Liabilities); PROVIDED, however, that (i) such Lender's
obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the Borrowers for
the performance of such obligations, (iii) such Lender shall remain the
holder of its Note for all purposes of this Agreement, (iv) the
Borrowers shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents, and (v) such Lender shall not
sell a participation that conveys to the participant the right to vote
or give or withhold consents under this Agreement or any other Loan
Document, other than the right to vote upon or consent to (A) any
increase of such Lender's Commitment, (B) any reduction of the principal
amount of, or interest to be paid on, the Advances of such Lender, (C)
any reduction of any commitment fee or other amount payable to such
Lender under any Loan Document, (D) any postponement of any date for the
payment of any amount payable in respect of the Advances of such Lender,
or (E) any material release of Collateral other than releases
contemplated in the Loan Documents as in effect on the date hereof and
releases upon full payment and performance of the Obligations and
termination of the Commitments. Such participants shall have no rights
under the Loan Documents, other than certain voting rights as provided
above. Subject to the following, each Lender may obtain (on behalf of
its participants) the benefits of ARTICLE V with respect to all
participations in its part of the Obligations outstanding from time to
time. If a participant is entitled to the benefits of ARTICLE V or a
Lender grants rights to its participants to vote or give or withhold
consents respecting the matters described above, then that Lender must
include a voting mechanism in the relevant participation agreement
whereby a majority of its portion of the Obligations (whether held by it
or participated) shall control the vote for all of that Lender's portion
of the Obligations. Except in the case of the sale of a participating
interest to another Lender, the relevant participation agreement shall
prohibit the participant from transferring, pledging, assigning, selling
participations in, or otherwise encumbering its portion of the
Obligations.
(b) Each Borrower and each of the Lenders agree that any Lender
may at any time assign to one or more Eligible Assignees all, or a
proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation,
its Commitment, Advances and Letter of Credit Liabilities); PROVIDED,
however, that (i) each such assignment shall be of a consistent, and not
a varying, percentage of all of the assigning Lender's rights and
obligations under this Agreement and the other Loan Documents, (ii)
except in the case of an assignment of all of a Lender's rights and
obligations
<PAGE>
under this Agreement and the other Loan Documents, the amount of the
Commitment of the assigning Lender being assigned pursuant to each
assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than
$5,000,000, and the amount of the Commitment of the assigning Lender
remaining after each such assignment shall in no event be less than
$5,000,000, and (iii) the parties to each such assignment shall execute
and deliver to the Administrative Agent for its acceptance and recording
in the Register (as defined below), an Assignment and Acceptance,
together with the Note subject to such assignment, and a processing and
recordation fee of $3,500. Upon such execution, delivery, acceptance,
and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least 10
Business Days after the execution thereof, or, if so specified in such
Assignment and Acceptance, the date of acceptance thereof by the
Administrative Agent, (x) the assignee thereunder shall be a party
hereto as a "Lender" and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and
under the Loan Documents and (y) the Lender that is an assignor
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this
Agreement and the other Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
Lender's rights and obligations under the Loan Documents, such Lender
shall cease to be a party thereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender that is an assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties, or
representations made in or in connection with the Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency,
or value of the Loan Documents or any other instrument or document
furnished pursuant thereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of any Borrower or any Obligated Party or the
performance or observance by any Borrower or any Obligated Party of its
obligations under the Loan Documents; (iii) such assignee confirms that
it has received a copy of the other Loan Documents, together with copies
of the financial statements referred to in SECTION 8.2 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon any Agent or such assignor and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents; (v) such assignee confirms that
it is an Eligible Assignee; (vi) such assignee appoints and authorizes
the Administrative Agent to take such action as agent on its behalf and
exercise such powers under the Loan Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations
which by the terms of the Loan Documents are required to be performed by
it as a Lender.
<PAGE>
(d) The Administrative Agent may maintain at its Principal Office
a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Advances
owing to, each Lender from time to time (the "REGISTER"). The entries in
the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrowers, the Agents, and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder
for all purposes under the Loan Documents. The Register shall be
available for inspection by any Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and assignee representing that it is an Eligible
Assignee, together with any Note subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of EXHIBIT "C" hereto and all
requirements set forth in this Section have been satisfied, (i) accept
such Assignment and Acceptance, (ii) record the information contained
therein in the Register, if any, and (iii) give prompt written notice
thereof to the Borrowers. Within five Business Days after its receipt of
such notice, the Borrowers shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note a new Note
payable to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance and,
if the assigning Lender has retained a Commitment, a new Note payable to
the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder (each such promissory note shall constitute a
"Note" for purposes of the Loan Documents). Such new Notes shall be in
an aggregate face amount of the surrendered Note, shall be dated the
effective date of such Assignment and Acceptance, and shall otherwise be
in substantially the form of EXHIBIT "C" hereto.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section, disclose to the assignee or participant or proposed assignee or
participant, subject to the confidentiality agreements between the
Borrowers and the Lenders, any information relating to the Borrowers,
the Subsidiaries or the Foreign Affiliates furnished to such Lender by
or on behalf of the Borrowers, the Subsidiaries or the Foreign
Affiliates.
Section 15.7 SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by any Agent or any Lender or any closing shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them. Without prejudice to the survival of any other obligation of the
Borrowers hereunder, the obligations of the Borrowers under SECTIONS 15.1, and
15.2 shall survive repayment of the Notes and termination of the Commitments and
the Letters of Credit.
Section 15.8 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS,
<PAGE>
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
Section 15.9 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Loan Document to which any Borrower is a
party, nor any consent to any departure by any Borrower therefrom, shall in any
event be effective unless the same shall be agreed or consented to in writing by
Required Lenders (or Administrative Agent with the consent of Required Lenders)
and the Borrowers, and each such waiver, amendment, or consent shall be
effective only in the specific instance and for the specific purpose for which
given; PROVIDED, that no amendment, waiver, or consent shall, unless in writing
and signed by all of the Lenders and the Borrowers, do any of the following: (a)
increase or reinstate Commitments of the Lenders or subject the Lenders to any
additional obligations; (b) reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder (except any fees payable to any
Agent solely for its account as specified herein or in any other document); (c)
change the Borrowing Base or the Termination Date or postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder (except any fees payable to any Agent solely for its
account as specified herein or in any other document); (d) waive any of the
conditions specified in ARTICLE VII; (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes or the
number of Lenders which shall be required for the Lenders or any of them to take
any action under this Agreement; (f) change any provision contained in this
SECTION 15.9; or (g) release any Collateral, except for dispositions permitted
herein. Notwithstanding anything to the contrary contained in this Section, no
amendment, waiver, or consent shall be made with respect to ARTICLE XIII hereof
without the prior written consent of the Administrative Agent.
Section 15.10 MAXIMUM INTEREST RATE.
(a) SHIP MORTGAGE ACT. The collateral covered in each Preferred
Ship Mortgage and the Obligations covered by this Agreement, the Notes
and other Loan Documents is or will be secured by a "Preferred Mortgage"
on the Rigs within the meaning of ss.31322 of 46 U.S.C. ss.31301 et.
seq. (the "SHIP MORTGAGE ACT"), and the regulations promulgated
thereunder. If, for any reason, the provisions of ss.31322 of the Ship
Mortgage Act shall be found not to exempt any and all interest and other
charges contracted for, charged, taken, received or reserved in
connection with the Obligations covered by this Agreement, the Notes,
and other Loan Documents from any limitations otherwise applicable, then
the provisions of SUBSECTION 15.10(B) shall apply, but otherwise the
provision of ss.31322 of the Ship Mortgage Act shall be applicable.
(b) NO USURY. No provision of this Agreement or any other Loan
Document shall require the payment or the collection of interest in
excess of the maximum amount permitted by applicable law. If any excess
of interest in such respect is hereby provided for, or shall be
adjudicated to be so provided, in any Loan Document or otherwise in
connection with this loan transaction, the provisions of this Section
shall govern and prevail and neither the Borrowers nor the sureties,
guarantors, successors, or assigns of the Borrowers shall be obligated
to pay the excess amount of such interest or any other excess sum paid
for the use,
<PAGE>
forbearance, or detention of sums loaned pursuant hereto. In the event
any Lender ever receives, collects, or applies as interest any such sum,
such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the
principal of the indebtedness; and, if the principal has been paid in
full, any remaining excess shall forthwith be paid to the Borrowers. In
determining whether or not the interest paid or payable exceeds the
Maximum Rate, each Borrower and each Lender shall, to the extent
permitted by applicable law, (a) characterize any non-principal payment
as an expense, fee, or premium rather than as interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount
of interest throughout the entire contemplated term of the indebtedness
evidenced by the Notes so that interest for the entire term does not
exceed the Maximum Rate.
Section 15.11 NOTICES. All notices and other communications provided for
in this Agreement and the other Loan Documents shall be given in writing and
telecopied, mailed by certified mail return receipt requested, or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof; or, as to any party at such other address as shall
be designated by such party in a notice to the other party given in accordance
with this Section. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid; PROVIDED, however, notices to the
Administrative Agent pursuant to ARTICLE II and ARTICLE III shall not be
effective until received by the Administrative Agent.
Section 15.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST THE
BORROWERS UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. EACH BORROWER HEREBY
IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B)
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. EACH BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 15.11.
NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL AFFECT THE RIGHT OF
ANY AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF ANY AGENT OR ANY LENDER TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY BORROWER OR WITH RESPECT TO ANY OF THEIR RESPECTIVE
PROPERTY IN COURTS IN OTHER JURISDICTIONS. ANY ACTION OR PROCEEDING BY ANY
BORROWER AGAINST ANY
<PAGE>
AGENT OR ANY LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS COUNTY,
TEXAS.
Section 15.13 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 15.14 SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 15.15 HEADINGS. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 15.16 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The
provisions of Chapter 346 of the Texas Finance Code (Vernon's Texas Fin. Code
Ann.) are specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other Loan Documents or to the transactions
contemplated hereby.
Section 15.17 CONSTRUCTION. The Parent Guarantor, each Borrower, each
Agent and each Lender acknowledge that each of them has had the benefit of legal
counsel of its own choice and has been afforded an opportunity to review this
Agreement and the other Loan Documents with its legal counsel and that this
Agreement and the other Loan Documents shall be construed as if jointly drafted
by the parties hereto.
Section 15.18 INDEPENDENCE OF COVENANTS. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 15.19 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, PARENT GUARANTOR AND EACH BORROWER HEREBY IRREVOCABLY AND
EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY
OR THE ACTIONS OF ANY AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF.
Section 15.20 ARBITRATION. Upon the demand of any party, any Dispute
shall be resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Agreement. A "DISPUTE" shall mean any action,
dispute, claim or controversy of any kind, whether in contract or tort,
statutory or common law, legal or equitable, now existing or hereafter arising
under or in connection with, or in any way pertaining to, any of the Loan
Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the
<PAGE>
foregoing arising in connection with the exercise of any self-help, ancillary or
other remedies pursuant to any of the Loan Documents. Any party may by summary
proceedings bring an action in court to compel arbitration of a Dispute. Any
party who fails or refuses to submit to arbitration following a lawful demand by
any other party shall bear all costs and expenses incurred by such other party
in compelling arbitration of any Dispute.
(a) GOVERNING RULES. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Texas selected by
the AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(b) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(c) ARBITRATOR QUALIFICATIONS AND POWERS AWARDS. Arbitrators must be
active members of the Texas State Bar with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of Texas, (ii) may grant any
remedy or relief that a court of the state of Texas could order or grant within
the scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(d) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall
<PAGE>
not have the power to make any award which is not supported by substantial
evidence or which is based on legal error, (ii) an award shall not be binding
upon the parties unless the findings of fact are supported by substantial
evidence and the conclusions of law are not erroneous under the substantive law
of the state of Texas, and (iii) the parties shall have in addition to the
grounds referred to in the Federal Arbitration Act for vacating, modifying or
correcting an award the right to judicial review of (A) whether the findings of
fact rendered by the arbitrators are supported by substantial evidence, and (B)
whether the conclusions of law are erroneous under the substantive law of the
state of Texas. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of Texas.
(e) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provisions most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
Section 15.21 SPECIAL PROVISION. Notwithstanding any other provision in
this Agreement, no waiver or amendment to SECTIONS 10.1 or 10.3, or both, shall
be effective until both a Conditional Consent and a Final Consent related
thereto are received, it being understood and agreed that each Lender (other
than any Nonconsenting Lender that has given an Opt-Out Request) shall be
entitled to give or withhold its consent to the Final Consent that is the
subject of a Conditional Consent and that the result may be that consent is not
given for the requested waiver or amendment of SECTIONS 10.1 or 10.3, or both.
Failure of the Administrative Agent to receive a Conditional Consent or a Final
Consent within 10 Business Days of requesting the same shall be deemed a
rejection of the request and any Opt-Out Request shall be deemed revoked. If a
Final Consent is given after one or more Opt-Out Requests, each Borrower agrees
to, and the Lenders consent to, terminate the Commitment of each Nonconsenting
Lender and repay its Loans in full as required in the Opt-Out Request, but
without premium, penalty or breakage costs, and on the date its Commitment is
terminated and its Loan are paid in full, each Nonconsenting Lender that
provided an Opt-Out Request shall no longer be a "Lender" hereunder, and the
participation in all Letters of Credit shall be redistributed among all of the
remaining Lenders in accordance with the remaining Commitments.
Section 15.22 REFERENCE TO INDENTURE. Nothing in this Agreement or any
Loan Document is intended to constitute a Guarantee (within the meaning of the
Indenture) of or in respect of any Indebtedness (as defined in the Indenture) of
the Parent Guarantor by any Borrower, its being acknowledged and agreed that (a)
a pledge of assets by any Borrower to secure any Indebtedness of the Parent
Guarantor for which such Borrower is not otherwise liable shall not be
considered a Guarantee of or in respect of Indebtedness of the Parent Guarantor,
and (b) the agreements contained in this Section are made by the Agents and the
Lenders upon the express representation that the covenants and agreements herein
contained by the Borrower and the Parent Guarantor do not violate the provisions
of the Indenture.
<PAGE>
[Balance of Page Left Blank Intentionally.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWERS:
PETROLEUM SUPPLY COMPANY
By: /s/ LEROY F. GUIDRY
Leroy F. Guidry
Treasurer
Address for Notices:
5847 San Felipe St., Suite 3300
Houston, Texas 77057
Fax No.: 713/789-1430
Telephone No.: 713/789-1400
Attention: Robert W. Randall
PRIDE INTERNATIONAL HOLDINGS, INC.
By: /s/ LEROY F. GUIDRY
Leroy F. Guidry
Treasurer
Address for Notices:
5847 San Felipe St., Suite 3300
Houston, Texas 77057
Fax No.: 713/789-1430
Telephone No.: 713/789-1400
Attention: Robert W. Randall
<PAGE>
RANGER WELL SERVICE, INC.
By: /s/ LEROY F. GUIDRY
Leroy F. Guidry
Treasurer
Address for Notices:
5847 San Felipe St., Suite 3300
Houston, Texas 77057
Fax No.: 713/789-1430
Telephone No.: 713/789-1400
Attention: Robert W. Randall
PRIDE OFFSHORE, INC.
By: /s/ LEROY F. GUIDRY
Leroy F. Guidry
Treasurer
Address for Notices:
5847 San Felipe St., Suite 3300
Houston, Texas 77057
Fax No.: 713/789-1430
Telephone No.: 713/789-1400
Attention: Robert W. Randall
<PAGE>
RANGER CORPORATION
By: /s/ LEROY F. GUIDRY
Leroy F. Guidry
Treasurer
Address for Notices:
5847 San Felipe St., Suite 3300
Houston, Texas 77057
Fax No.: 713/789-1430
Telephone No.: 713/789-1400
Attention: Robert W. Randall
GUARANTOR:
PRIDE INTERNATIONAL, INC.
By: /s/ EARL W. MCNIEL
Earl W. McNiel
Vice President
Address for Notices:
5847 San Felipe St., Suite 3300
Houston, Texas 77057
Fax No.: 713/789-1430
Telephone No.: 713/789-1400
Attention: Robert W. Randall
<PAGE>
AGENTS AND LENDERS:
FIRST NATIONAL BANK OF COMMERCE,
as Syndication Agent and as a Lender
COMMITMENT By:/s/ JOEY MAXWELL
Joey Maxwell
$30,000,000 Assistant Vice President
Address for Notices:
201 St. Charles Ave., 28th Floor
New Orleans, Louisiana 70160
Fax No.: (504) 623-1316
Telephone No.: (504) 623-1361
Attention: Joey Maxwell
Principal Office and Applicable Lending
Office for Base Rate Advances and
Eurodollar Advances:
201 St. Charles Ave., 28th Floor
New Orleans, Louisiana 70160
Fax No.: (504) 623-1316
Telephone No.: (504) 623-1361
Attention: Joey Maxwell
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, as Administrative
Agent and a Lender
COMMITMENT By: /s/ FRANK W. SCHAGEMAN
Frank W. Schageman
$30,000,000 Vice President
<PAGE>
Address for Notices and Applicable Lending Office for
Base Rate Advances and Eurodollar Advances:
1000 Louisiana, Third Floor
Houston, Texas 77002
Fax No.: (713) 250-7912
Telephone No.: (713) 250-4352
Attention: Frank W. Schageman and
Sally F. Weir
<PAGE>
HIBERNIA NATIONAL BANK
COMMITMENT By:/s/ LYNDSAY JOBE
Lyndsay Jobe
$15,000,000 Senior Vice President
Address for Notices and Applicable Lending Office
for Base Rate Advances and Eurodollar Advances:
P.O. Box 61540
New Orleans, Louisiana 70161
Fax No.: (504) 533-5434
Telephone No.: (504) 533-5458
Attention: John Benoit
<PAGE>
THE FUJI BANK, LIMITED -HOUSTON
AGENCY
COMMITMENT By:/s/ NATE ELLIS
Name: Nate Ellis
$15,000,000 Title: Vice President & Manager
Address for Notices:
One Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Fax No.: (713) 759-0717
Telephone No.: (713) 650-7856
Attention: Michelle Olivier
Lending Office for Base Rate Advances and
Eurodollar Rate Advances:
One Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Fax No.: (713) 759-0717
Telephone No.: (713) 650-7856
Attention: Michelle Olivier
<PAGE>
per pro BROWN BROTHERS HARRIMAN & CO.
COMMITMENT By:/s/ W. CARTER SULLIVAN III
W. Carter Sullivan III
$10,000,000 Senior Manager
Address for Notices and Applicable Lending
Office for Base Rate Advances and Eurodollar
Advances:
59 Wall Street
New York, New York 10005-2818
Fax No.: (212) 493-7280
Telephone No.: (212) 493-7901
Attention: Jeffrey C. Lockwood
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT SECTION
"A" Addendum and Assumption Agreement 1.1; 6.5
"B" Advance Request Form 1.1; 2.5
"C" Assignment and Acceptance 1.1; 15.6
"D" Borrower Pledge Agreement 1.1; 6.1(b); 7.1(a)(9)
"E" Compliance Certificate 1.1; 9.1(c)
"F" Guarantor Security Agreement 1.1; 6.1(a); 7.1(a)(8)
"G" Letter of Credit Request Form 1.1; 3.2
"H" Form of Note 1.1; 2.2
"I" Parent Guarantor Pledge Agreement 1.1; 6.1(b); 7.1(a)(10)
"J" Preferred Ship Mortgage 1.1; 6.1(c); 7.1(a)(22)
"K" Security Agreement 1.1; 6.1(a); 7.1(a)(7)
"L" L/C Application for Standby Letters of Credit 1.1; 3.1
"M" Borrowing Base Report 7.1(a)(18); 9.1(h)
INDEX TO SCHEDULES
SCHEDULE DESCRIPTION OF EXHIBIT SECTION
1.1a Approved Majors/Nationals for Borrowing
Base Purposes 1.1
1.1b Existing Credits 1.1
1.1c List of Rigs
8.5 Existing Litigation 8.5
8.9 Existing Debt (including Contingent Liabilities
and Guaranties) 8.9
8.14 Subsidiaries and Foreign Affiliates 8.14
8.19 Environmental Matters 8.19
10.2 Existing Liens 10.2
EXHIBIT 10.5
PRIDE INTERNATIONAL, INC.
LONG-TERM INCENTIVE PLAN
THIRD AMENDMENT
Pride International, Inc. (the "Company") having previously
established the Pride International, Inc. Long-Term Incentive Plan, as amended
by the First Amendment thereto effective March 29, 1995, and by the Second
Amendment thereto effective May 22, 1997 (the "Plan"), and having reserved the
right under Article XIV thereof to amend the Plan, does hereby amend Section 2.6
of the Plan in its entirety to read as follows:
1. Section 2.6 is amended in its entirety to read as follows:
"2.6 "Fair Market Value" means, as of the date an Option or SAR is
granted hereunder, (i) if the shares of Common Stock are listed on the New
York Stock Exchange, then the final closing sales price per share of
Common Stock as reported on New York Stock Exchange Composite Trading
Listings, or a similar report selected by the Company, on that date, or,
if there shall have been no such sale so reported on that date, on the
last preceding date on which such a sale was so reported, (ii) if the
shares of Common Stock are listed on a national securities exchange other
than the New York Stock Exchange, the mean between the highest and lowest
sales price per share of Common Stock on the primary such national
securities exchange on that date, or, if there shall have been no such
sale so reported on that date, on the last preceding date on which such a
sale was so reported, (iii) if the shares of Common Stock are not so
listed but are quoted in the NASDAQ National Market System, the mean
between the highest and lowest sales price per share of Common Stock on
the NASDAQ National Market System on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on
which such a sale was so reported, (iv) if the Common Stock is not so
listed or quoted, the mean between the closing bid and asked price on that
date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by
NASDAQ, or, if not reported by NASDAQ, by the National Quotation Bureau,
Inc., or (v) if none of the above are applicable, the fair market value of
a share of Common Stock as determined in good faith by the Committee."
<PAGE>
This Amendment shall be effective as of February 26, 1998.
PRIDE INTERNATIONAL, INC.
By /s/ ROBERT W. RANDALL
Robert W. Randall, Vice President
ATTEST:
/s/ FRIDA A. MARTINEZ
-2-
EXHIBIT 10.10
PRIDE INTERNATIONAL, INC.
1993 DIRECTORS'
STOCK OPTION PLAN
SECOND AMENDMENT
Pride International, Inc. (the "Company") having previously
established the Pride International, Inc. 1993 Directors' Stock Option Plan, as
amended by the First Amendment thereto effective May 22, 1997 (the "Plan"), and
having reserved the right under Section XVIII thereof to amend the Plan, does
hereby amend the Plan as follows:
1. Effective as of January 14, 1998, the references in Sections
4.1 and 11.1 of the Plan to Section 9.4 of the Plan are hereby amended so that
such references are now to Section 9.2 of the Plan.
2. Section 5.3 of the Plan is hereby amended in its entirety,
effective as of January 14, 1998, to read as follows:
"5.3 Upon the exercise of an Option granted hereunder, the Company
shall cause the purchased Shares to be issued only when it shall have
received the full purchase price for the Shares in cash; provided,
however, that in lieu of cash, the optionee may, if and to the extent the
terms of such Option so provide and to the extent permitted by applicable
law, exercise an Option in whole or in part by delivering to the Company
shares of the Company's common stock (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu
thereof) owned by such holder having a Fair Market Value equal to the cash
exercise price applicable to that portion of the Option being exercised by
the delivery of such shares. The Fair Market Value of the shares so
delivered shall be determined as of the date immediately preceding the
date on which the Option is exercised, or as may be required in order to
comply with or to conform to the requirements of any applicable laws or
regulations. "Fair Market Value" means, as of a particular date, (i) if
the shares of common stock are listed on the New York Stock Exchange, then
the final closing sales price per share of common stock as reported on New
York Stock Exchange Composite Trading Listings, or a similar report
selected by the Company, on that date, or, if there shall have been no
such sale so reported on that date, on the last preceding date on which
such a sale was so reported, (ii) if the shares of common stock are listed
on a national securities exchange other than the New York Stock Exchange,
the mean between the highest and lowest sales price per share of common
stock on the primary such national securities exchange on that date, or,
-1-
<PAGE>
if there shall have been no such sale so reported on that date, on the
last preceding date on which such a sale was so reported, (iii) if the
shares of common stock are not so listed but are quoted in the NASDAQ
National Market System, the mean between the highest and lowest sales
price per share of common stock on the NASDAQ National Market System on
that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported,
(iv) if the common stock is not so listed or quoted, the mean between the
closing bid and asked price on that date, or, if there are no quotations
available for such date, on the last preceding date on which such
quotations shall be available, as reported by NASDAQ, or, if not reported
by NASDAQ, by the National Quotation Bureau, Inc., or (v) if none of the
above are applicable, the fair market value of a share of common stock as
determined in good faith by the Committee."
3. Article IX of the Plan is hereby amended in its entirety,
effective as of January 14, 1998, to read as follows:
"9.1 Subject to Article XXII hereof and the maximum number of Shares
which may be purchased pursuant to the exercise of Options granted under
the Plan as set forth in Section 2.1, the Board of Directors or the
Executive Committee thereof may, at any time but not more frequently than
once during each calendar year, grant discretionary Options to any
Director or Directors of the Company who satisfy the eligibility
requirements of Article IV. The number of Options granted and the number
of Shares for which the Options are granted shall be such number as is
determined by the Board of Directors or the Executive Committee thereof,
at a price per Share determined as of the date of grant pursuant to
Section 5.1. The time or times at which such Options are granted, the
number of Options granted, and the number of Shares for which the Options
are granted shall be in the sole discretion of the Board of Directors or
the Executive Committee thereof.
9.2 A Director shall be ineligible to receive a grant provided for
in Section 9.1 unless, as of the date of such grant, the Director (i) is
not otherwise a full-time Employee of the Company or any Subsidiary, as
such terms are hereinafter defined, and (ii) has not been a full-time
Employee of the Company or any Subsidiary for any part of the preceding
fiscal year.
9.3 In the event that the number of Shares available for Options
under the Plan is insufficient to make all grants hereby specified on the
applicable date, then all Directors who are entitled to a grant on such
date shall share ratably in the number of Shares then available for grant
under the Plan."
-2-
<PAGE>
4. This Amendment shall be effective as of the dates set forth
above.
PRIDE INTERNATIONAL, INC.
By /s/ ROBERT W. RANDALL
Robert W. Randall, Vice President
ATTEST:
/s/ FRIDA A. MARTINEZ
-3-
EXHIBIT 10.11
PRIDE INTERNATIONAL, INC.
1993 DIRECTORS'
STOCK OPTION PLAN
THIRD AMENDMENT
Pride International, Inc. (the "Company") having previously
established the Pride Petroleum Services, Inc. 1993 Directors' Stock Option Plan
effective February 22, 1993, as thereafter amended effective May 22, 1997 and
December 4, 1997 (the "Plan"), and having reserved the right under Section XVIII
thereof to amend the Plan, does hereby amend Section 2.1 of the Plan in its
entirety to read as follows, subject to shareholder approval:
"2.1 The total number of shares of common stock of the Company which
may be purchased pursuant to the exercise of Options granted under the
Plan shall not exceed, in the aggregate, two hundred thousand (200,000)
shares of common stock, no par value, of the Company (the 'Shares')."
This Amendment shall be effective as of February 26, 1998.
PRIDE INTERNATIONAL, INC.
By: /s/ ROBERT W. RANDALL
Robert W. Randall, Vice President
ATTEST:
/s/ FRIDA A. MARTINEZ
EXHIBIT 10.14
PRIDE PETROLEUM SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
FIRST AMENDMENT
Pride Petroleum Services, Inc. (the "Company") having previously
established the Pride Petroleum Services, Inc. Employee Stock Purchase Plan
effective July 1, 1996 (the "Plan"), and having reserved the right under Section
19 thereof to amend the Plan, does hereby amend the Plan to document the change
in the Company's name from Pride Petroleum Services, Inc. to Pride
International, Inc., effective as of May 22, 1997, as follows:
1. The name of the Plan is hereby changed to the "Pride
International, Inc. Employee Stock Purchase Plan."
2. Section 1 of the Plan is hereby amended in its entirety to read
as follows:
"1. PURPOSE
The Pride International, Inc. Employee Stock Purchase Plan (the
"Plan") is designed to encourage and assist all employees of Pride
International, Inc., a Louisiana corporation ("Pride") and Subsidiaries
(as defined in Section 4) (hereinafter collectively referred to as the
"Company"), where permitted by applicable laws and regulations, to acquire
an equity interest in Pride through the purchase of shares of common
stock, no par value, of Pride ("Common Stock"). It is intended that this
Plan shall constitute an "employee stock purchase plan" within the meaning
of Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code")."
PRIDE INTERNATIONAL, INC.
By /s/ ROBERT W. RANDALL
ATTEST:
/s/ FRIDA A. MARTINEZ
EXHIBIT 10.15
PRIDE PETROLEUM SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SECTION 1
PURPOSES OF PLAN, EFFECTIVE DATE AND DEFINITIONS
1.1 PURPOSE. The purpose of the Pride Petroleum Services, Inc.
Supplemental Executive Retirement Plan (the "Plan") is to provide specified
benefits to a select group of management and highly compensated employees of
Pride Petroleum Services, Inc. (the "Company") who contribute materially to the
continued growth, development and future business success of the Company. The
Plan shall be an unfunded, deferred compensation arrangement.
1.2 EFFECTIVE DATE. The Plan shall be effective as of January 1, 1996.
1.3 DEFINITIONS. For purposes of this Plan, the following phrases or
terms shall have the indicated meanings unless otherwise clearly apparent from
the context.
(a) "Annual Salary" means the Participant's base annual salary,
excluding any and all bonuses received during such year.
(b) "Beneficiary" means the person or persons designated by a
Participant to receive the benefits which are payable under the Plan
upon or after the death of the Participant.
(c) "Committee" means the Compensation Committee of the Company
established by its Board of Directors.
(d) "Company" means Pride Petroleum Services, Inc., a Louisiana
corporation.
(e) "Employee" means any person who is employed by the Company on
a regular, full-time basis determined by the personnel rules and
practices of the Company.
(f) "Employment Agreement" means the agreement entered into
between a Participant and the Company which sets forth the terms of the
Participant's employment with the Company.
(g) "Mandatory Retirement Age" means the date a Participant
attains age 65, or such other later date as specified by the Company's
Board of Directors.
(h) "Normal Retirement Age" means the date designated by the
Committee for each Participant as each Participant is chosen for
participation in this Plan.
1
<PAGE>
(i) "Participant" means an Employee who satisfies the eligibility
requirements of participate in this Plan.
SECTION 2
ADMINISTRATION OF THE PLAN
2.1 COMMITTEE POWERS. The Committee shall have full power and authority
to interpret the provisions of the Plan and may from time to time establish
rules for the administration of the Plan that are not inconsistent with the
provisions and purposes of the Plan.
2.2 COMMITTEE ACTION. A majority of the members of the Committee shall
constitute a quorum for the transaction of business. All action taken by the
Committee at a meeting shall be by the vote of a majority of those present at
such meeting, but any action may be taken by the Committee without a meeting
upon written consent signed by a majority of the members of the Committee.
2.3 COMMITTEE DETERMINATIONS CONCLUSIVE. All determinations of the
Committee shall be final, binding and conclusive upon all persons. The
determination of the Committee as to any disputed question arising under the
Plan, including questions of construction and interpretation, shall be final,
binding and conclusive upon all persons. Without limiting the generality of the
foregoing, the determination of the Committee as to whether a Participant has
terminated his employment and the date thereof, or the cause to which
termination of employment is attributable, shall be final, binding and
conclusive upon all persons.
2.4 COMMITTEE LIABILITY. No member of the Committee shall be liable for
any act done or determination made in good faith.
SECTION 3
ELIGIBILITY
3.1 ELIGIBILITY. Only certain Employees who are approved by the Company
Compensation Committee and who, individually and collectively, constitute a
select group of management or highly compensated employees shall participate in
this Plan.
SECTION 4
BENEFITS
4.1 NORMAL RETIREMENT BENEFIT. In the event a Participant retires after
he attains his Normal Retirement Age of Mandatory Retirement Age, the Company
shall pay or cause to be paid to the Participant a benefit ("Normal Retirement
Benefit") equal to 2.5% of the Participant's final Annual Salary multiplied by
the number of full years of the Participant's employment with the Company. The
Normal Retirement Benefit shall be limited to 40% of the Participant's final
Annual Salary and shall be paid in monthly installments for a period of ten (10)
years, beginning on the first day of the month next following the Participant's
retirement.
2
<PAGE>
4.2 EARLY RETIREMENT BENEFIT. If a Participant has received the approval
of the Committee for early retirement under this Plan and such Participant
retires after attaining the age of 58 and after attaining at least 16 years of
continuous employment with the Company ("Early Retirement Age"), the Company
shall pay or cause to be paid to the Participant a benefit ("Early Retirement
Benefit") equal to 2.5% of the Participant's final annual salary multiplied by
the number of full years of the Participant's employment with the Company. The
Early Retirement Benefit shall be limited to 40% of the Participant's final
annual salary and shall be paid in monthly installments for a period of ten (10)
years, beginning on the first day of the month next following the Participant's
retirement.
4.3 FORFEITURE. Unless otherwise provided under the terms of this Plan,
a Participant shall forfeit all benefits payable under this Plan if such
Participant's employment with the Company is terminated for any reason prior to
attaining Normal Retirement Age or, if approved by the Committee for early
retirement, prior to attaining Early Retirement Age.
4.4 CHANGE IN CONTROL. Notwithstanding anything herein to the contrary,
if a "Change in Control" (as such term is defined in the Participant's
Employment Agreement) occurs, such Participant's accrued benefit to date (as set
forth in Section 4.1) shall immediately become fully vested and shall be paid to
the Participant in one lump sum at such time as he is separated from the
Company.
4.5 DEATH. If a Participant dies after the payment of benefits under
this Plan has commenced, the remainder of the benefit shall be paid to the
Participant's designated Beneficiary, provided, the present value of the
remaining benefit may be paid, at the discretion of the Committee and with the
consent of the Participant's Beneficiary, in one lump sum paid to the
Participant's Beneficiary at the time of death.
If a Participant dies prior to the commencement of benefits under this
Plan, but after the Participant has attained Early Retirement Age and while
still employed by the Company, the Participant's benefit shall be paid in full
to the Participant's designated Beneficiary in monthly installments for a period
of ten (10) years. The present value of the benefit may be paid, at the
discretion of the Committee, but with the consent of the Participant's
Beneficiary, in one lump sum at the time of death. If a Participant dies prior
to attaining Early Retirement Age, such Participant shall receive no benefit
pursuant to this Section.
4.6 TOTAL AND PERMANENT DISABILITY. If a Participant is totally and
permanently disabled prior to the commencement of the payment of any benefits
hereunder, the Company shall pay or cause to be paid to the Participant a
benefit ("Disability Benefit") equal to 2.5% of the Participant's final annual
salary multiplied by the number of full years of the Participant's employment
with the Company. The Disability Benefit shall be limited to 40% of the
Participant's final annual salary and shall be paid in monthly installments for
a period of ten (10) years, beginning on the first day of the month next
following the Participant's becoming totally and permanently disabled.
3
<PAGE>
4.7 CONDITIONS FOR PAYMENT OF BENEFITS. Notwithstanding anything herein
to the contrary, benefits payable under this Plan shall be paid to a Participant
only so long as the Participant abides by the confidentiality and noncompete
provisions of such Participant's Employment Agreement throughout the entire
benefit payment period.
4.8 BENEFICIARY DESIGNATIONS. The person or persons to whom the benefits
under this Plan are to be paid upon a Participant's death shall be the person or
persons designated by the Participant to receive benefits under the procedure
established by the Committee for designating Beneficiaries. In the event no
valid designation of a Beneficiary exists at the time of a Participant's death,
the benefit provided for in this Section shall be payable to the Participant's
estate. This provision enabling each Participant to designate one or more
beneficiaries shall constitute a nontestamentary payment provision covered by
Section 450 of the Texas Probate Code. Any payment made by the Company in good
faith and in accordance with the provision of this Plan shall fully discharge
the Company from all further obligations with respect to such payment.
4.9 PAYMENTS TO MINORS AND INCOMPETENTS. Should the Participant become
incompetent or should the Participant designate a beneficiary who is a minor or
incompetent, the Company shall be authorized to pay such funds to a parent or
guardian of the estate of such minor or incompetent, or directly to such minor
or incompetent, whichever manner the Committee shall determine in its sole
discretion.
4.10 WITHHOLDING OF TAXES. The Company paying benefits hereunder shall
deduct from the amount of all benefits paid under the Plan any taxes required to
be withheld by the Federal or any state of local government.
SECTION 5
SOURCE OF BENEFITS
5.1 BENEFITS PAYABLE FROM GENERAL ASSETS. Amounts payable hereunder
shall be paid exclusively from the general assets of the Company, and no person
entitled to payment hereunder shall have any claim, right, security interest, or
other interest in any fund, trust, account, insurance contract, or asset of the
Company which may be looked to for such payment. The Company's liability for the
payment of benefits hereunder shall be evidenced only by this Plan.
SECTION 6
RIGHTS OF PARTICIPANTS
6.1 LIMITATION OF RIGHTS. Nothing in this Plan shall be construed to:
(a) Limit in any way the right of the Company to terminate a
Participant's employment with the Company at any time;
4
<PAGE>
(b) Give a Participant or any other person any interest in any
fund or in any specific asset or assets of the Company; or
(c) Be evidenced of any agreement of understanding, express or
implied, that the Company will employ a Participant in any particular
position or at any particular rate of remuneration.
6.2 NONALIENATION OF BENEFITS. No right or benefit under the Plan shall
be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber
or charge the same will be void. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts, liabilities or torts of
the person entitled to such benefits. If any Participant or beneficiary
hereunder shall become bankrupt or attempt to anticipate, alienate, assign,
sell, pledge, encumber or charge any right of benefit hereunder, or if any
creditor shall attempt to subject the same to a writ of garnishment, attachment,
execution, sequestration or any other form of process or involuntary lien or
seizure, then such right or benefit shall be held by the Company for the sole
benefit of the Participant or the beneficiary, his or her spouse, children or
other dependents, or any of them in such manner and in such proportion as the
Committee shall deem proper, free and clear of the claims of any other party
whatsoever.
6.3 PREREQUISITES TO BENEFITS. No Participant, or any person claiming
through a Participant, shall have any right or interest in the Plan or any
benefits hereunder unless and until all the terms, conditions and provisions of
the Plan that affect such Participant or such other person shall have been
complied with as specified herein. The Participant shall complete such forms and
furnish such information as the Committee may require in the administration of
the Plan.
SECTION 7
CLAIM PROCEDURE
7.1 FILING ORIGINAL CLAIM. Any person who believes he has been
wrongfully denied benefits under the Plan may submit a written claim for
benefits to the Committee. If any portion of the claim for benefits is denied,
the Committee shall give notice stating the reason for the denial, a reference
to the Plan provision, regulation, procedure, determination or other matter on
which the denial was based, a description of any additional information or
materials necessary to complete the claims procedure, and an explanation of this
review procedure. This notice shall be sent to the address stated on the
Employee's claim within a reasonable period of time after receipt of claim.
7.2 APPEAL TO COMMITTEE. Any Employee, former Employee, or beneficiary
of either, who has been denied a benefit under the Plan by a decision of the
Committee shall be entitled to request the Committee to give further
consideration to his claim by filing with the Committee a written request for a
review of the decision of denial. Such request, together with a written
statement of the reasons why the claimant believes his claim should be allowed,
shall be filed with the Commission no later than 60 days after receipt of the
written notification of the denial of the claim
5
<PAGE>
for benefits. The Committee shall consider a claim as promptly as practicable
and will attempt to make its decision within 60 days of receipt of the request
for review, and no later than 120 days after the date.
SECTION 8
MISCELLANEOUS
8.1 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors of the
Company may amend or terminate this Plan at any time.
8.2 RELIANCE UPON INFORMATION. The Board of Directors of the Company and
the Committee may rely upon any information supplied to them by any officer of
the Company, the Company's legal counsel or by the Company's independent public
accountants in connection with the administration of the Plan, and shall not be
liable for any decision or action in reliance thereon.
8.3 GOVERNING LAW. The place of administration of the Plan shall be
conclusively deemed to be within the State of Texas; and the validity,
construction, interpretation and effect of the Plan and all rights of any and
all persons having or claiming to have any interest in the Plan shall be
governed by the laws of the State of Texas to the extent such laws are not
preempted by federal law.
8.4 SEVERABILITY. All provisions herein are severable and in the event
any one of them shall be held invalid by any court of competent jurisdiction,
the Plan shall be interpreted as if such invalid provision was not contained
herein.
8.5 HEADINGS. The headings of the sections of this Plan are inserted for
convenience only and shall not be deemed to constitute a part of this Plan.
8.6 NONWAIVER. Failure on the part of any party in any one or more
instances to enforce any of its rights which arise in connection with this Plan
or to insist upon the strict performance of any of its terms, conditions, or
covenants of this Plan shall not be construed as a waiver or a relinquishment
for the future of any such rights, terms, conditions, or covenants. No waiver of
any condition of this Plan shall be valid unless it is in writing.
8.7 PLAN OF FILE. The Company shall place this Plan on file in the
office of its principal place of business.
8.8 NOTICES. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Notices
delivered personally shall be deemed communicated as of actual receipt; mailed
notices shall be deemed communicated as of three (3) days after mailing.
6
<PAGE>
Executed this 22nd day of December, 1995.
PRIDE PETROLEUM SERVICES, INC.
ATTEST:
/s/ROBERT W. RANDALL By:/s/RAY H. TOLSON
Robert W. Randall Ray H. Tolson
Secretary President
7
EXHIBIT 10.16
PRIDE PETROLEUM SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FIRST AMENDMENT
Pride Petroleum Services, Inc. (the "Company"), having previously
established the Pride Petroleum Services, Inc. Supplemental Executive Retirement
Plan, effective January 1, 1996, (the "Plan"), and having reserved the right
under Section 8.1 thereof to amend the Plan, does hereby amend the Plan to
document the change in the Company's name from Pride Petroleum Services, Inc. to
Pride International, Inc., effective as of May 22, 1997, as follows:
1. The name of the Plan is hereby changed to the "Pride International,
Inc. Supplemental Executive Retirement Plan."
2. Section 1.1 of the Plan is hereby amended in its entirety to read as
follows:
"1.1 PURPOSE. The purpose of the Pride International, Inc.
Supplemental Executive Retirement Plan (the "Plan") is to provide
specified benefits to a select group of management and highly compensated
employees of Pride International, Inc. (the "Company") who contribute
materially to the continued growth, development and future business
success of the Company. The Plan shall be an unfunded, deferred
compensation arrangement."
3. Section 1.3 (d) of the Plan is hereby amended in its entirety to
read as follows:
"(d) "Company" means Pride International, Inc. and its successors."
-1-
<PAGE>
IN WITNESS WHEREOF, Pride International, Inc. has caused these
presents to be executed by its duly authorized officers in a number of copies,
all of which shall constitute one and the same instrument, which may be
sufficiently evidenced by any executed copy hereof, this 22nd day of September,
1997, but effective as of the date herein stated.
PRIDE INTERNATIONAL, INC.
By /s/ ROBERT W. RANDALL
ATTEST:
/s/ FRIDA A. MARTINEZ
-2-
EXHIBIT 10.17
PRIDE INTERNATIONAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SECOND AMENDMENT
Pride International, Inc. (the "Company"), having previously
established the Pride International, Inc. Supplemental Executive Retirement
Plan, effective January 1, 1996 (the "Plan"), and having reserved the right
under Section 8.1 thereof to amend the Plan, does hereby amend the Plan,
effective as of January 1, 1998, as follows:
1. Section 1.1 of the Plan is hereby amended in its entirety to read as
follows:
"1.1 PURPOSE. The purpose of the Pride International, Inc.
Supplemental Executive Retirement Plan (the "Plan") is to provide
specified benefits to a select group of management and highly
compensated employees of Pride International, Inc. (the "Company")
and its Affiliates who contribute materially to the continued
growth, development and future business success of the Company. The
Plan shall be an unfunded, deferred compensation arrangement."
2. Section 1.3(e) of the Plan is hereby amended in its entirety to read
as follows:
"(e) 'Employee' means any person who is employed by the
Company or an Affiliate on a regular full-time basis determined by
the personnel rules and practices of the Company or Affiliate, as
applicable."
3. Section 1.3 of the Plan is hereby amended by adding the following
paragraphs to the end thereof:
"(j) 'Affiliate' means any corporation which has adopted this
Plan and the shares of which are owned or controlled, directly or
indirectly, by the Company represent fifty percent (50%), or more,
of the voting power of the issued and outstanding capital stock of
such corporation.
-1-
<PAGE>
(k) 'Employer' means the Company and each Affiliate which has
adopted or which adopts this Plan with the approval of the Board of
Directors of the Company."
4. Section 4.1 of the Plan is hereby amended in its entirety to read as
follows:
"4.1 NORMAL RETIREMENT BENEFIT. In the event a Participant
retires after he attains his Normal Retirement Age or Mandatory
Retirement Age, the Company shall pay or cause to be paid to the
Participant, or in the event (i) the Company does not pay or (ii)
the Company and the Employer who employed the Participant agree that
the Employer will pay, then the Employer who employed the
Participant shall pay to the Participant, a benefit ("Normal
Retirement Benefit") equal to 2.5% of the Participant's final Annual
Salary multiplied by the number of full years of the Participant's
employment with the Employer. The Normal Retirement Benefit shall be
limited to 40% of the Participant's final Annual Salary and shall be
paid in monthly installments for a period of ten (10) years,
beginning on the first day of the month next following the
Participant's retirement."
5. Section 4.2 of the Plan is hereby amended in its entirety to read as
follows:
"4.2 EARLY RETIREMENT BENEFIT. If a Participant has received
the approval of the Committee for early retirement under this Plan
and such Participant retires after attaining the age of 58 and after
attaining at least 16 years of continuous employment with the
Employer ("Early Retirement Age"), the Company shall pay or cause to
be paid to the Participant, or in the event (i) the Company does not
pay or (ii) the Company and the Employer who employed the
Participant agree that the Employer will pay, then the Employer who
employed the Participant shall pay to the Participant, a benefit
("Early Retirement Benefit") equal to 2.5% of the Participant's
final Annual Salary multiplied by the number of full years of the
Participant's employment with the Employer. The Early Retirement
Benefit shall be limited to 40% of the Participant's final Annual
Salary and shall be paid in monthly installments for a period of ten
(10) years, beginning on the first day of the month next following
the Participant's retirement."
6. Section 4.6 of the Plan is hereby amended in its entirety to read as
follows:
"4.6 TOTAL AND PERMANENT DISABILITY. If a Participant is
totally and permanently disabled prior to the commencement of the
payment of any benefits hereunder, the Company shall pay or cause to
be paid to the Participant, or in the event (i) the Company does not
pay or (ii) the Company and the Employer who employed the
Participant agree that the Employer will pay, then the Employer who
employed the Participant shall pay to the Participant, a benefit
("Disability Benefit") equal to 2.5% of the Participant's final
Annual Salary multiplied by the number of full years of the
Participant's
-2-
<PAGE>
employment with the Employer. The Disability Benefit shall be
limited to 40% of the Participant's final Annual Salary and shall be
paid in monthly installments for a period of ten (10) years,
beginning on the first day of the month next following the
Participant's becoming totally and permanently disabled."
7. The term "Company" shall be replaced by the term "Employer" in each
place that it appears in Sections 1.3(f), 4.3, 4.4, 4.5, 4.8, 4.9, 4.10, 5.1,
6.1, 6.2, and 8.7 of the Plan.
8. Section 8.2 of the Plan is hereby amended in its entirety to read as
follows:
"8.2 RELIANCE UPON INFORMATION. The Board of Directors of the
Company and the Committee may rely upon any information supplied to
them by any officer of the Employer, the Employer's legal counsel or
by the Employer's independent public accountants in connection with
the administration of the Plan, and shall not be liable for any
decision or action in reliance thereon."
IN WITNESS WHEREOF, Pride International, Inc. has caused these
presents to be executed by its duly authorized officers in a number of copies,
all of which shall constitute one and the same instrument, which may be
sufficiently evidenced by any executed copy hereof, this 1st day of January,
1998, but effective as of the date herein stated.
PRIDE INTERNATIONAL, INC.
By /s/ ROBERT W. RANDALL
ATTEST:
/s/ FRIDA A. MARTINEZ
-3-
EXHIBIT 10.22
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
STEVEN R. TOLSON
EFFECTIVE OCTOBER 1, 1997
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE NO.
<S> <C>
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS . . . . . . . . . . . . . . 2
1.01 Effect of Prior Agreements . . . . . . . . . . . . . . . . . . . . . 2
II. DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.01 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Executive/Officer/Employee . . . . . . . . . . . . . . . . . . . . . 3
2.03 Office/Position/Title. . . . . . . . . . . . . . . . . . . . . . 3
2.04 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.05 Change in Control. . . . . . . . . . . . . . . . . . . . . . . . 3
2.06 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.07 Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
III. EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.01 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02 Best Efforts and other Employment of Executive. . . . . . . . . . 7
3.03 Term of Employment. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.04 Compensation and Benefits. . . . . . . . . . . . . . . . . . . . . . 7
3.05 Termination Without Change in Control. . . . . . . . . . . . . . . . 8
IV. CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.01 Extension of Employment Period. . . . . . . . . . . . . . . . . . . 11
4.02 Change in Control Termination Payments & Benefits. . . . . . . . . . 11
4.03 Voluntary Resignation Upon Change in Control. . . . . . . . . . . . . 12
V. NON-COMPETITION AND CONFIDENTIALITY. . . . . . . . . . . . . . . . . . 12
5.01 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.02 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.03 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.04 Geographical Area . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.05 Company Remedies For Violation of Non-Competition or
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . 14
5.06 Termination of Benefits For Violation of Non-Competition and
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . 15
VI. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.01 Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.02 Income, Excise and Other Tax Liability. . . . . . . . . . . . . . . 16
6.03 Payment of Benefits Upon Termination for Cause. . . . . . . . . . . . . 16
6.04 Non-Exclusive Agreement. . . . . . . . . . . . . . . . . . . . . . . . 17
6.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.06 Non-Alienation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.07 Entire Agreement: Amendment. . . . . . . . . . . . . . . . . . . . . 17
6.08 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 17
6.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.13 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: October 1, 1997
COMPANY/EMPLOYER: Pride International, Inc.,
A Louisiana corporation
San Felipe Plaza, Suite 3300
5847 San Felipe
Houston, Texas 77057
EXECUTIVE/EMPLOYEE Steven R. Tolson
22103 Mission Hills Lane
Katy, Texas 77450
This Agreement is made as of the date first above written and to become
effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable resource of
the Company and the Company desires to be assured of the continued services of
Executive;
WHEREAS, the Company desires to obtain assurances that Executive will
devote his best efforts to his employment with the Company and will not enter
into competition with the Company in its business as now conducted and to be
conducted, or solicit customers or other employees of the Company to terminate
their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he acknowledges
that his talents and services to the Company are of a special, unique, unusual
and extraordinary character and are of particular and peculiar benefit and
importance to the Company;
WHEREAS, the Company is concerned that in the event of a possible or
threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive assurances
as to the continuation of his employment status and responsibilities in such
event;
WHEREAS, the Company further desires to assure Executive that, if a
possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in
<PAGE>
connection therewith, Executive would be in a secure position to consider and
participate in such transaction as objectively as possible in the best interests
of the Company and to this end desires to protect Executive from any direct or
implied threat to his financial well-being;
WHEREAS, Executive is willing to continue to serve as such but desires
assurances that in the event of such a change in control he will continue to
have the employment status and responsibilities he could reasonably expect
absent such event and, that in the event this turns out not to be the case, he
will have fair and reasonable severance protection on the basis of his service
to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01 EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and any of its subsidiaries and Executive are hereby
amended, modified and superseded by this Agreement insofar as future
employment, compensation, non-competition, confidentiality, accrual or
payments of any form of compensation or benefits from the Company are
concerned. This Agreement does not release or relieve Company from its
liability or obligation with respect to any compensation, payments, or
benefits already accrued to Executive, nor to any vesting of benefits or
other rights which are attributable to length of employment, seniority
or other such matters. This Agreement does not relieve Executive of any
prior non-competition or confidentiality obligations and agreements and
the same are hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective Date
hereof.
<PAGE>
II. DEFINITION OF TERMS.
2.01 COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes any
subsidiary or affiliate of the Company to the extent it is carrying on
any portion of the business of the Company or a business similar to that
being conducted by the Company.
2.02 EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Steven R.
Tolson.
2.03 OFFICE/POSITION/TITLE. The Office, Position and Title for which the
Executive is employed is that of Vice President-U.S. Operations,
Offshore of the Company and carries with it the duties,
responsibilities, rights, benefits and privileges presently held by the
Executive, or as may reasonably be assigned to the Executive as are
customary and usual for such position.
2.04 EFFECTIVE DATE. This Agreement becomes effective and binding as of
October 1, 1997.
2.05 CHANGE IN CONTROL. The term "Change in Control" of the Company shall
mean, and shall be deemed to have occurred on the date of the first to
occur of any of the following:
a. there occurs a Change in Control of the Company of the nature
that would be required to be reported in response to item 6(e)
of Schedule 14A of Regulation 14A or Item 1 of Form 8(k)
promulgated under the Securities Exchange Act of 1934 as in
effect on the date of this Agreement, or if neither item
remains in effect, any regulations issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934 which serve similar purposes;
b. any "person" {as such term is used in Sections 12(d) and 14(d)(2)
of the Securities Exchange Act of 1934} is or becomes a
beneficial owner, directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities;
c. the individuals who were members of the Board of Directors of the
Company immediately prior to a meeting of the shareholders of the
Company involving a contest for the election of Directors shall
not constitute a majority of the Board of Directors following
such election;
<PAGE>
d. the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a
basis whereby less than fifty percent (50%) of the total voting
power of the surviving corporation is represented by shares held
by former shareholders of the Company prior to such merger or
consolidation;
e. the Company shall have sold, transferred or exchanged all, or
substantially all, of its assets to another corporation or other
entity or person.
2.06 TERMINATION. The term "termination" shall mean termination, prior to the
expiration of the Employment Period, of the employment of the Executive
with the Company {including death and disability (as described below)}
for any reason other than cause (as described below) or voluntary
resignation (as described below). Termination includes "Constructive
Termination" as described below. Termination includes non-renewal or
failure to extend this Agreement at the end of any employment term,
except for cause.
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under the
Company's long-term disability plan. If no such plan exists on
the Effective Date of this Agreement, the term "disability"
means physical or mental incapacity as determined by a doctor
jointly selected by the Executive and the Board of Directors of
the Company qualifying the Executive for long-term disability
under reasonable employment standards.
b. The term "cause" means: (i) the willful and continued failure
of the Executive substantially to perform his duties with the
Company (other than any failure due to physical or mental
incapacity) after a demand for substantial performance is
delivered to him by the Board of Directors which specifically
identifies the manner in which the Board believes he has not
substantially performed his duties, (ii) willful misconduct
materially and demonstrably injurious to the Company, or (iii)
material violation of the covenant not to compete (except after
termination under the Change in Control provisions and
confidentiality provisions hereof). No act or failure to act by
the Executive shall be considered "willful" unless done or
omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Company. The unwillingness of the Executive to
accept any or all of a change in the nature or scope of his
position, authorities or duties, a reduction in his total
compensation or benefits, or other action by or request of the
Company in respect of his position, authority, or
responsibility that is contrary to this Agreement, may not be
considered by the Board of Directors to be a failure to perform
or misconduct by the Executive. Notwithstanding the foregoing,
the Executive shall not be deemed to
<PAGE>
have been terminated for cause for purposes of this Agreement
unless and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths (3/4ths) of
the entire Board of Directors of the Company at a meeting of the
Board of Directors called and held (after reasonable notice to
the Executive and an opportunity for the Executive and his
counsel to be heard before the Board) for the purpose of
considering whether the Executive has been guilty of such a
willful failure to perform or such willful misconduct as
justifies termination for cause hereunder, finding that in the
good faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars thereof.
c. The term "Constructive Termination" means any circumstance by
which the actions of the Company either reduce or change
Executive's title, position, duties, responsibilities or
authority to such an extent or in such a manner as to relegate
Executive to a position not substantially similar to that
which he presently holds; would degrade, embarrass or otherwise
make it unreasonable for Executive to remain in the employment
of the Company; and includes violation of the employment
provisions and conditions of this Agreement.
d. The resignation of the Executive shall be deemed "voluntary" if
it is for any reason other than one or more of the following:
(i) the Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) any significant adverse change in the nature or scope of
the Executive's position, authorities or duties from those
described in this Agreement;
(iii) any reduction in the Executive's total compensation or
benefits from that provided in the Compensation and
Benefits Section hereof;
(iv) the material breach by the Company of any other provision
of this Agreement;
(v) any action by the Company which would constitute
Constructive Termination; and
(vi) non-renewal or failure to extend any employment term,
contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and benefits
provided in the "Termination Payments and Benefits" Section hereof shall not be
deemed or treated by the Company
<PAGE>
as the termination of the Executive's employment or the forfeiture of his
participation, award, or eligibility, for the purpose of any plan, practice or
agreement of the Company referred to in the Compensation and Benefits Section
hereof.
2.07 CUSTOMER. The term "Customer" includes all persons, firms or entities
that are purchasers or end-users of services or products offered,
provided, developed, designed, sold or leased by the Company during the
relevant time periods, and all persons, firms or entities which control,
or which are controlled by, the same person, firm or entity which
controls such purchase.
III. EMPLOYMENT.
3.01 EMPLOYMENT. Except as otherwise provided in this Agreement, the Company
hereby agrees to continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, for the Term of
Employment ("Employment Period") herein specified. During the Employment
Period, Executive shall exercise such position and authority and perform
such responsibilities as are commensurate with the position and
authority being exercised and duties being performed by the Executive
immediately prior to the Effective Date of this Agreement, which
services shall be performed at the location where the Executive was
employed immediately prior to the Effective Date of this Agreement or at
such other location as the Company may reasonably require.
3.02 BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and
talents, perform all of the duties that may be required of and
from him pursuant to the express and implicit terms hereof, to
the reasonable satisfaction of the Company. Such duties shall
be rendered at Houston, Texas, and such other place or places
within or outside the State of Texas as the Company shall in
good faith require or as the interest, needs, business, or
opportunities of the Company shall require.
b. Executive shall devote his normal and regular business time,
attention and skill to the business and interests of the
Company, and the Company shall be entitled to all of the
benefits, profits or other issue arising from or incident to
all work, services and advice of Executive performed for the
Company. Such employment shall be considered "full time"
employment. Executive shall have the right to make investments
in businesses which engage in activities other than those
engaged by the Company. Executive shall also have the right to
devote such incidental and immaterial amounts of his time which
are not required for the full and faithful performance of his
duties hereunder to any outside activities and businesses which
are not being engaged in by the Company and which shall not
otherwise interfere with the performance of his duties
hereunder. Executive shall have the right to make investments
in the manner and to the extent authorized and set forth in the
Non-Competition Section of this Agreement.
<PAGE>
3.03 TERM OF EMPLOYMENT. ("Employment Period"). Executive's regular
employment (no Change in Control being presently contemplated) will
commence on the Effective Date of this Agreement and will be for a term
of two (2) years ending at 12:00 o'clock midnight September 30, 1999;
thereafter, the Term of Employment of Executive will be automatically
extended for successive terms of one (1) year each commencing October 1,
1999, and on October 1st of each year thereafter, unless Company or
Executive gives written notice to the other that employment will not be
renewed or continued after the next scheduled expiration date which is
not less than one (1) year after the date that the notice of non-renewal
was given. All extended employment terms will be considered to be within
the Employment Period while Executive is employed with the Company.
3.04 COMPENSATION AND BENEFITS. During the Employment Period the Executive
shall receive the following compensation and benefits:
a. He shall receive an annual base salary which is not less than his
annual base salary, with the opportunity for increases, from time
to time thereafter, which are in accordance with the Company's
regular executive compensation practices ("annual base salary").
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors. Executive's
current annual base salary is $105,000.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other
incentive compensation plans which provide opportunities to
receive compensation in addition to his annual base salary
which are the greater of: (i) the opportunities provided by the
Company for Executives with comparable duties, or (ii) the
opportunities under any such plans in which he was
participating immediately prior to the Effective Date of this
Agreement.
c. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he will be entitled to
receive and participate in exempt employee benefits (including,
but not limited to, medical, life, health, accident and
disability insurance and disability benefits) and prerequisites
which are the greater of: (i) the employee benefits and
prerequisites provided by the Company to Executives with
comparable duties, or (ii) the employee benefits and
prerequisites to which he was entitled or in which he
participated immediately prior to the Effective Date of this
Agreement.
d. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he will be entitled to
continue to accrue credited service for retirement benefits and
to be entitled to receive retirement benefits under and
pursuant to the terms of the Company's qualified retirement
plan for exempt employees, the Company's supplemental executive
retirement plan, and any successor or other retirement plan or
agreement in effect on the Effective Date of this Agreement in
respect of his retirement, whether or not a qualified
<PAGE>
plan or agreement, so that his aggregate monthly retirement
benefit from all such plans and agreements (regardless when he
begins to receive such benefit) will be not less than it would be
had all such plans and agreements in effect immediately prior to
the Effective Date of this Agreement continued to be in effect
without change until and after he begins to receive such
benefits.
e. Paid vacations each year to the same extent as he is presently
receiving or the benefits provided to Executives with comparable
duties whichever is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Committee.
3.05 TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right
to terminate Executive at any time during the Employment Period
(including any extended term). Should the Company choose not to renew or
extend the Employment Period of this Employment Agreement or choose to
terminate the Executive, during or at the end of, the Employment Period,
or in the event of death or disability of the Executive, if the
termination is not after a Change in Control and is not for cause, the
Company shall, within thirty (30) days following such termination, pay
and provide to the Executive (or his Executor, Administrator or Estate
in the event of death, as soon as reasonably practical):
a. An amount equal to one (1) full year of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the salary
in effect on the Date of Termination (but not less than the
highest annual base salary paid to the Executive during any of
the three (3) years immediately preceding his Date of
Termination). There shall be deducted only such amounts as may
be required by law to be withheld for taxes and other
applicable deductions.
b. The Company shall provide to Executive and his immediate family
(at no cost to the Executive) for a period of one (1) full year
following the Date of Termination, life, health, accident and
disability insurance which are not less than the highest benefits
furnished to the Executive and his immediate family during the
term of this Agreement.
c. An amount equal to the target award for the Executive under the
Company's annual bonus plan for the fiscal year in which
termination occurs, provided that if the Executive has deferred
his award for such year under a Company plan, the payment due the
Executive under this subparagraph shall be paid in accordance
with the terms of the deferral or as specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to the
Executive the amount and value of his entire plan account and
interest under any retirement plan, employee benefit plan,
investment plan or stock ownership plan, if any
<PAGE>
exists on the Date of Termination, and all employer contributions
made or payable to any such plan for his account prior to the end
of the month in which Termination occurs shall be deemed vested
and payable to him. Such payment or distribution shall be in
accordance with the elections made by the Executive in respect of
distributions in accordance with the plan as if the Executive's
employment in the Company terminated at the end of the month in
which Termination occurs.
e. All stock options and awards to which the Executive is entitled
will immediately vest and the time for exercising any option will
be as specified in the plan as if the Executive were still
employed by the Company; provided however if the immediate
vesting of all benefits under the plan is not permitted by the
plan, then the benefits will be vested only to the extent
authorized or permitted by the plan.
f. If Executive elects to treat the termination as retirement, on
the Date of Termination the Executive shall be deemed to have
retired from the Company and he shall be entitled at that time,
or at such later time as he may elect consistent with the terms
of any applicable plan or benefit to all benefits of such
retirement plan or benefit. Executive may treat the termination
as termination other than "retirement" if Executive so elects
and may defer "retirement" to a later date if permitted by any
applicable plan.
g. The "Compensation and Benefits" Section hereof shall be
applicable in determining the payments and benefits due the
Executive under this Section and if Termination occurs after a
reduction in all or part of the Executive's total compensation
or benefits, the lump sum severance allowance and other
compensation and benefits payable to him pursuant to this
Section shall be based upon his compensation and benefits
before the reduction.
h. If any provision of this Section cannot, in whole or in part,
be implemented and carried out under the terms of the
applicable compensation, benefit or other plan or arrangement
of the Company because the Executive has ceased to be an actual
employee of the Company, because he has insufficient or reduced
credited service based upon his actual employment by the
Company, because the plan or arrangement has been terminated or
amended after the Effective Date of this Agreement, or for any
other reason, the Company itself shall pay or otherwise provide
the equivalent of such rights, benefits and credits for such
benefits to the Executive, his dependents, beneficiaries and
estate as if Executive's employment had not been terminated.
i. All life, health, hospitalization, medical and accident benefits
available to Executive's spouse and dependents shall continue for
the same term as the Executive's benefits. If the Executive dies,
all benefits will be provided for a term of one (1) year (or two
(2) years after a Change in Control) after the date of death of
the Executive.
<PAGE>
j. The Company's obligation under this Section to continue to pay
or provide health care, life, accident and disability insurance
to the Executive, the Executive's spouse and Executive's
dependents, during the remainder of the Employment Period shall
be reduced when and to the extent any of such benefits are paid
or provided to the Executive by another employer, provided that
the Executive shall have all rights afforded to retirees to
convert group insurance coverage to the individual insurance
coverage as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart from
this subparagraph, the Executive shall have and be subject to
no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or interpreted,
to be an amendment to any compensation, benefit or other plan to the Company. To
the extent the Company's performance under this Section includes the performance
of the Company's obligations to the Executive under any other plan or under
another agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are discharged under
this Agreement, are discharged, surrendered, or released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01 EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of two (2) years following the Effective Date of the
Change in Control and will expire at 12:00 o'clock midnight on the last
day of the month following two (2) years after the Change in Control.
Thereafter, the employment period will be extended for successive terms
of one (1) year each, unless terminated, all in the manner specified in
the Term of Employment Section pertaining to regular employment.
4.02 CHANGE IN CONTROL TERMINATION PAYMENTS AND BENEFITS. In the event the
Executive is terminated within two (2) years following a Change in
Control, the Executive will receive the payments and benefits specified
in the "Termination without Change in Control" Section in the same time
and manner therein specified except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a. will be paid
based upon a multiple of two (2) years ( instead of one (1)
year).
b. Life, health, accident and disability insurance specified in
Section 3.05b. will be provided until (i) Executive becomes
reemployed and receives similar benefits from a new employer or
(ii) two (2) years after the Date of Termination, whichever is
earlier.
c. An amount equal to two (2) times the maximum award that the
Executive
<PAGE>
could receive under the Company's Annual Bonus Plan for the
fiscal year in which the termination occurs, instead of the
benefits provided in Section 3.05c.
d. All other rights and benefits specified in Section 3.05.
4.03 VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive
voluntarily resigns his employment within six (6) months after a Change
in Control (whether or not Company may be alleging the right to
terminate employment for cause), he will receive the same payments,
compensation and benefits as if he had been terminated on the date of
resignation after Change in Control.
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01 CONSIDERATION.The base salary awarded to the Executive and to be paid to
the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and the
amount to be paid to Executive in the event of the termination of
employment of Executive, voluntarily, involuntarily, or under a Change
of Control, under Section 3.05a and 4.02a hereof constitute payment, in
part, for the Non-Competition and Confidentiality of the Executive. It
is contracted, stipulated and agree that fifteen percent (15%) of such
amount paid and to be paid to the Executive shall constitute the
consideration for the Non-Competition and Confidentiality Agreement set
forth herein.
5.02 NON-COMPETITION. Executive acknowledges that his employment with the
Company has in the past and will, of necessity, provide him with
specialized knowledge which, if used in competition with the Company
could cause serious harm to the Company. Accordingly, the Executive
agrees that during his employment with the Company and for a period of
one (1) year after he is no longer employed by the Company (unless his
employment is terminated after a Change in Control, in which event there
will be no covenant not to compete and the provisions of the covenant
not to compete herein contained will terminate on the date of
termination of Executive) Executive will not, directly or indirectly,
either as an individual, proprietor, stockholder {other than as a holder
of up to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in accordance with
the automated quotation system of the National Association of Securities
Dealers}, partner, officer, employee or otherwise:
a. work for, become an employee of, invest in, provide consulting
services or in any way engage in any business which provides,
produces, leases or sells products or services of the same or
similar type provided, produced, leased or sold by the Company
and with regard to which Executive was engaged, or over which
Executive had direct or indirect supervision or control, within
one (1) year preceding the Executive's termination of
employment, in any area where the Company provided, produced,
leased or sold such products or services at any time during the
one (1) year preceding such termination of employment; or
<PAGE>
b. provide, sell, offer to sell, lease, offer to lease, or solicit
any orders for any products or services which the Company
provided and with regard to which the Executive had direct or
indirect supervision or control, within one (1) year preceding
Executive's termination of employment, to or from any person,
firm or entity which was a customer for such products or
services of the Company during the one (1) year preceding such
termination from whom the Company had solicited business during
such one (1) year; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to (i) leave his or her employment
or position with the Company or (ii) compete with the business of
the Company, or (iii) violate the terms of any employment,
non-competition or similar agreement with the Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or otherwise,
use, utilize or benefit from the services of any officer,
director, employee or any other individual holding a position
with the Company within two (2) years after the Date of
Termination of employment of Executive with the Company or
within two (2) years after such officer, director, employee or
individual terminated employment with the Company, whichever
occurs earlier.
5.03 CONFIDENTIALITY. Executive acknowledges that his employment with the
Company has in the past and will, of necessity, provide him with
specialized knowledge which, if used in competition with the Company, or
divulged to others, could cause serious harm to the Company.
Accordingly, Executive will not at any time during or after his
employment by the Company, directly or indirectly, divulge, disclose or
communicate to any person, firm or corporation in any manner whatsoever
any information concerning any matter affecting or relating to the
Company or the business of the Company . While engaged as an employee of
the Company, Executive may only use information concerning any matters
affecting or relating to the Company or the business of the Company for
a purpose which is necessary to the carrying out of the Executive's
duties as an employee of the Company, and Executive may not make use of
any information of the Company after he is no longer an employee of the
Company. Executive agrees to the foregoing without regard to whether all
of the foregoing matters will be deemed confidential, material or
important, it being stipulated by the parties that all information,
whether written or otherwise, regarding the Company's business,
including, but not limited to, information regarding customers, customer
lists, costs, prices, earnings, products, services, formulae,
compositions, machines, equipment, apparatus, systems, manufacturing
procedures, operations, potential acquisitions, new location plans,
prospective and executed contracts and other business arrangements, and
sources of supply, is PRIMA FACIE presumed to be important, material and
confidential information of the Company for the purposes of this
Agreement, except to the extent that such information may be otherwise
lawfully and readily available to the general public. Executive further
agrees that he will, upon termination of his employment with the
Company, return to the Company all books, records, lists and other
written, typed or printed materials, whether furnished by the Company or
prepared by Executive, which contain any
<PAGE>
information relating to the Company's business, and Executive agrees
that he will neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
Executive will not be liable for any breach of these confidentiality
provisions unless the same constitutes a material detriment to the
Company, or due to the nature of the information divulged and the manner
in which it was divulged and the person to whom it was divulged would
likely cause damage to the Company or constitute a material detriment to
the Company.
5.04 GEOGRAPHICAL AREA. The geographical area within which the
non-competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the Company's
present offices, (ii) any of the Company's present rig yards, and (iii)
any additional location where the Company, as of the date of any action
taken in violation of the non-competition covenants of this Agreement,
has an office, a rig yard, or definitive plans to locate an office or a
rig yard. Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another county and the Company is not then doing
business in that other county, there will be no territorial limitations
extending into such other county.
5.05 COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY
AGREEMENT. Without limiting the right of the Company to pursue all other
legal and equitable rights available to it for violation of any of the
covenants made by Executive herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which give
them a peculiar value;
b. because of the business of the Company, the restrictions agreed
to by Executive as to time and area contained in this Agreement
are reasonable; and
c. the injury suffered by the Company by a violation of any covenant
in this Agreement resulting from loss of profits created by the
competitive use of such skills, experience and contacts and
otherwise will be difficult to calculate in damages in an action
at law and cannot fully compensate the Company for any violation
of any covenant in this Agreement, accordingly:
(i) the Company shall be entitled to injunctive relief to
prevent violations of such covenants or continuing
violations thereof and to prevent Executive from rendering
any services to any person, firm or entity in breach of
such covenant and to prevent Executive from divulging any
confidential information; and
(ii) compliance with this Agreement is a condition precedent to
the Company's obligation to make payments of any nature to
Executive.
<PAGE>
5.06 TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If Executive's termination was not after a Change in
Control and if Executive shall be materially violating the
Confidentiality and/or Non-Competition Agreement or any agreement he may
have signed as an employee of the Company, Executive agrees that after
receipt of written notice he shall continue such action and that there
shall be no obligation on the part of the Company to provide any
payments or benefits (other than payments or benefits already earned or
accrued) described in the Termination of Rights and Benefits Section
hereof, subject to the provisions of Section 6.01 hereof. There will be
no withholding of benefits or payments if the termination occurred after
a Change in Control and Executive will not be bound by the
non-competition provisions if terminated while the Change in Control
provisions hereof are applicable.
VI. GENERAL.
6.01 ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a
Change in Control, or under other circumstances even when a Change in
Control has not occurred, the Board of Directors or an shareholder of
the Company may then cause or attempt to cause the Company to refuse to
comply with its obligations under this Agreement, or may cause or
attempt to cause the Company to institute, or may institute, litigation
seeking to have this Agreement declared unenforceable, or may take, or
attempt to take, other action to deny Executive the benefits intended
under this Agreement; or actions may be taken to enforce the
non-competition or confidentiality provisions of this Agreement. In
these circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that the Executive not be required to
incur the legal fees and expenses associated with the protection or
enforcement of his rights under this Agreement by litigation or other
legal action because such costs would substantially detract from the
benefits intended to be extended to Executive hereunder, nor be bound to
negotiate any settlement of his rights hereunder under threat of
incurring such costs. Accordingly, if at any time after the Effective
Date of this Agreement, it should appear to Executive that the Company
is or has acted contrary to or is failing or has failed to comply with
any of its obligations under this Agreement for the reason that it
regards this Agreement to be void or unenforceable, that Executive has
violated the terms of this Agreement, or for any other reason, or that
the Company has purported to terminate his employment for cause or is in
the course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other person takes
any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny,
diminish or to recover from Executive the benefits provided or intended
to be provided to him hereunder, and Executive has acted in good faith
to perform his obligations under this Agreement, the Company irrevocably
authorizes Executive from time to time to retain counsel of his choice
at the expense of the Company to represent him in connection with the
protection and enforcement of his rights hereunder, including, without
limitation, representation in connection with termination of his
employment or withholding of benefits or payments contrary to this
Agreement or with the initiation or defense of any litigation or any
other legal action, whether by or against Executive or the Company or
any Director, Officer, Shareholder or other person affiliated with the
Company, in any jurisdiction. Company is not authorized to withhold the
periodic payments of attorneys' fees and
<PAGE>
expenses hereunder based upon any belief or assertion by the Company
that Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was not
acting in good faith and has violated this Agreement, Executive will be
liable to the Company for reimbursement of amounts paid due to
Executive's actions not based on good faith and in violation of this
Agreement. The reasonable fees and expenses of counsel selected from
time to time by Executive as hereinabove provided shall be paid or
reimbursed to Executive by the Company, on a regular, periodic basis
within thirty (30) days after presentation by Executive of a statement
or statements prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of One Hundred Fifty
Thousand Dollars ($150,000).
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and
will pay all income tax liability by virtue of any payments made to
Executive under this Agreement, as if the same were earned and paid in
the normal course of business and not the result of a Change in Control
and not otherwise triggered by the "golden parachute" or excess payment
provisions of the Internal Revenue Code of the United States, which
would cause additional tax liability to be imposed. If any additional
income tax, excise or other taxes are imposed on any amount or payment
in the nature of compensation paid or provided to or on behalf of
executive, the Company shall "gross up" Executive for such tax liability
by paying to Executive an amount sufficient so that after payment of all
such taxes so imposed Executive's position on an after-tax basis is what
it would have been had no such additional taxes been imposed. Executive
will cooperate with the Company to minimize the tax consequences to the
Executive and to the Company so long as the actions proposed to be taken
by the Company do not cause any additional tax consequences to Executive
and do not prolong or delay the time that payments are to be made, or
the amount of payments to be made, unless the Executive consents, in
writing, to any delay or deferment of payment.
6.03 PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of
Executive is for cause and not after a Change in Control, the Company
will have the right to withhold all payments (except those specified in
Section 6.01); provided however that if a final judgment is entered
finding that cause did not exist for termination, the Company will pay
all benefits to Executive to which he would have been entitled had the
termination not been for cause, plus interest on all amounts withheld
from Executive at the rate specified for judgments under Article
5069-1.05 V.A.T.S., but not less than ten percent (10%) per annum. If
the termination for cause occurs after a Change in Control, the Company
shall have not right to suspend or withhold payments to Executive under
any provision of this Agreement until or unless a final judgment is
entered upholding the Company's determination that the termination was
for cause, in which event Executive will be liable to the Company for
all amounts paid, plus interest at the rate allowed for judgments under
Article 5069-1.05 V.A.T.S.
6.04 NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein
are not intended to exclude or limit Executive's participation in other
benefits available to executive personnel generally, or to preclude or
limit other compensation or benefits as may be authorized by the Board
of Directors of the Company at any time, or to limit or reduce any
compensation or benefits to which Executive would be entitled but for
this Agreement.
<PAGE>
6.05 NOTICES. Notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall either be personally
delivered by hand or sent by: (i) Registered or Certified Mail, Return
Receipt Requested, postage prepaid, properly packaged, addressed and
deposited in the United States Postal System; (ii) via facsimile
transmission if the receiver acknowledges receipt; or (iii) via Federal
Express or other expedited delivery service provided that acknowledgment
of receipt is received and retained by the deliverer and furnished to
the sender, if to Executive, at the last address he has filed, in
writing, with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06 NON-ALIENATION. Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts
provided under this Agreement, and no payments or benefits due hereunder
shall be assignable in anticipation of payment either by voluntary or
involuntary acts or by operation of law. So long as Executive lives, no
person, other than the parties hereto, shall have any rights under or
interest in this Agreement or the subject matter hereof. Upon the death
of Executive, his Executors, Administrators, Devisees and Heirs, in that
order, shall have the right to enforce the provisions hereof.
6.07 ENTIRE AGREEMENT: AMENDMENT.This Agreement constitutes the entire
agreement of the parties with respect of the subject matter hereof. No
provision of this Agreement may be amended, waived, or discharged except
by the mutual written agreement of the parties. The consent of any other
person(s) to any such amendment, waiver or discharge shall not be
required.
6.08 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns, by operation
of law or otherwise, including, without limitation, any corporation or
other entity or persons which shall succeed (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company, and the Company will
require any successor, by agreement in form and substance satisfactory
to Executive, expressly to assume and agree to perform this Agreement.
Except as otherwise provided herein, this Agreement shall be binding
upon and inure to the benefit of Executive and his legal
representatives, heirs and assigns, provided however, that in the event
of Executive's death prior to payment or distribution of all amounts,
distributions and benefits due him hereunder, each such unpaid amount
and distribution shall be paid in accordance with this Agreement to the
person or persons designated by Executive to the Company to receive such
payment or distribution and in the event Executive has made no
applicable designation, to his Estate. If the Company should split,
divide or otherwise become more than one entity, all liability and
obligations of the Company shall be the joint and several liability and
obligation of all of the parts.
6.09 GOVERNING LAW. Except to the extent required to be governed by the laws
of the State of Louisiana because the Company is incorporated under the
laws of said State, the validity, interpretation and enforcement of this
Agreement shall be governed by the laws of the State of Texas.
<PAGE>
6.10 VENUE. To the extent permitted by applicable State and Federal law,
venue for all proceedings hereunder will be in Harris County, Texas.
6.11 HEADINGS. The headings in this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of
this Agreement.
6.12 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
6.13 PARTIAL INVALIDITY. In the event that any part, portion or Section of
this Agreement is found to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be binding upon the
parties hereto and the Agreement will be construed to give meaning to
the remaining provisions of this Agreement in accordance with the intent
of this Agreement.
6.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but all of
which together constitute one and the same instrument.
IN WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors and the Compensation Committee,
the Company has caused these presents to be executed in its name and on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
EXECUTED in multiple originals and/or counterparts as of the Effective
Date.
/s/ STEVEN R. TOLSON
STEVEN R. TOLSON
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
BY:/s/ RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
EXHIBIT 10.23
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
ROBERT W. RANDALL
EFFECTIVE OCTOBER 1, 1997
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE NO.
<S> <C>
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS . . . . . . . . . . . . . . . . . . . 2
1.01 Effect of Prior Agreements . . . . . . . . . . . . . . . . . . . . ..... . . 2
II. DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . .... . 3
2.01 Company . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . ... 3
2.02 Executive/Officer/Employee. . . . . . . . . . . . . . . . . . . . . . ...... 3
2.03 Office/Position/Title. . . . . . . . . . . . . . . . . . . . . . . . . .. 3
2.04 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.05 Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 3
2.06 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ 4
2.07 Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... 6
III. EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ . 6
3.01 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 6
3.02 Best Efforts and other Employment of Executive. . . .. . . . . .............. 7
3.03 Term of Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . ... 7
3.04 Compensation and Benefits. . . . . . . . . . . . . . . . . . . . . . . . .... 7
3.05 Termination Without Change in Control. . . . . . . . . . . . . .............. 8
IV. CHANGE IN CONTROL. . . . . . . . . . .. . . . . . . ................... . . . 11
4.01 Extension of Employment Period. . . . . . .. . . . . . . . . . . ............ 11
4.02 Change in Control Termination Payments & Benefits. . . . . . . . . . . .. . . 11
4.03 Voluntary Resignation Upon Change in Control. . . . . . . . . . . ..... . . . 12
V. NON-COMPETITION AND CONFIDENTIALITY. . . . . . . . . .................... . . 12
5.01 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . 12
5.02 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 12
5.03 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 13
5.04 Geographical Area . . . . . . . . . . . . . . . . . . . . . . . . . . .... . 14
5.05 Company Remedies For Violation of Non-Competition or
Confidentiality Agreement . . . . . . . . . . . . . . . . . . ....... 14
5.06 Termination of Benefits For Violation of Non-Competition and
Confidentiality Agreement. . . . . . . . . . . . . . . ....... . . . . 15
VI. GENERAL . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . ...... . . 15
6.01 Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . ....... . . 15
6.02 Income, Excise and Other Tax Liability. . . . . . . . . . . . . . ...... 16
6.03 Payment of Benefits Upon Termination for Cause. . . . .......... . . . . . . . 16
6.04 Non-Exclusive Agreement. . . . . .. . . . ... . . . . . . . . ..... . . . . . 17
6.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... . . 17
6.06 Non-Alienation . . . . . . . . . . . . . . .. . . . . . . . ........... . . . 17
6.07 Entire Agreement: Amendment. . . . . . . . . . . . . . . . .......... . . . . 17
6.08 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . 18
6.10 Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . 18
6.11 Headings. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ...... . 18
6.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... . 18
6.13 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . ...... 18
6.14 Counterparts . . . . . . . . . . . . . . . . . . . . ........... . . . . . . 18
</TABLE>
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: October 1, 1997
COMPANY/EMPLOYER: Pride International, Inc.,
A Louisiana corporation
San Felipe Plaza, Suite 3300
5847 San Felipe
Houston, Texas 77057
EXECUTIVE/EMPLOYEE Robert W. Randall
14621 Westway Lane
Houston, Texas 77077
This Agreement is made as of the date first above written and to become
effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable resource of
the Company and the Company desires to be assured of the continued services of
Executive;
WHEREAS, the Company desires to obtain assurances that Executive will
devote his best efforts to his employment with the Company and will not enter
into competition with the Company in its business as now conducted and to be
conducted, or solicit customers or other employees of the Company to terminate
their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he acknowledges
that his talents and services to the Company are of a special, unique, unusual
and extraordinary character and are of particular and peculiar benefit and
importance to the Company;
WHEREAS, the Company is concerned that in the event of a possible or
threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive assurances
as to the continuation of his employment status and responsibilities in such
event;
WHEREAS, the Company further desires to assure Executive that, if a
possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in
<PAGE>
connection therewith, Executive would be in a secure position to consider and
participate in such transaction as objectively as possible in the best interests
of the Company and to this end desires to protect Executive from any direct or
implied threat to his financial well-being;
WHEREAS, Executive is willing to continue to serve as such but desires
assurances that in the event of such a change in control he will continue to
have the employment status and responsibilities he could reasonably expect
absent such event and, that in the event this turns out not to be the case, he
will have fair and reasonable severance protection on the basis of his service
to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01 EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and any of its subsidiaries and Executive are hereby
amended, modified and superseded by this Agreement insofar as future
employment, compensation, non-competition, confidentiality, accrual or
payments of any form of compensation or benefits from the Company are
concerned. This Agreement does not release or relieve Company from its
liability or obligation with respect to any compensation, payments, or
benefits already accrued to Executive, nor to any vesting of benefits or
other rights which are attributable to length of employment, seniority
or other such matters. This Agreement does not relieve Executive of any
prior non-competition or confidentiality obligations and agreements and
the same are hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective Date
hereof.
<PAGE>
II. DEFINITION OF TERMS.
2.01 COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes any
subsidiary or affiliate of the Company to the extent it is carrying on
any portion of the business of the Company or a business similar to that
being conducted by the Company.
2.02 EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Robert W.
Randall.
2.03 OFFICE/POSITION/TITLE. The Office, Position and Title for which the
Executive is employed is that of Vice President, General Counsel and
Secretary of the Company and carries with it the duties,
responsibilities, rights, benefits and privileges presently held by the
Executive, or as may reasonably be assigned to the Executive as are
customary and usual for such position.
2.04 EFFECTIVE DATE. This Agreement becomes effective and binding as of
October 1, 1997.
2.05 CHANGE IN CONTROL. The term "Change in Control" of the Company shall
mean, and shall be deemed to have occurred on the date of the first to
occur of any of the following:
a. there occurs a Change in Control of the Company of the nature
that would be required to be reported in response to item 6(e)
of Schedule 14A of Regulation 14A or Item 1 of Form 8(k)
promulgated under the Securities Exchange Act of 1934 as in
effect on the date of this Agreement, or if neither item remains
in effect, any regulations issued by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 which
serve similar purposes;
b. any "person" {as such term is used in Sections 12(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or becomes a
beneficial owner, directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities;
c. the individuals who were members of the Board of Directors of
the Company immediately prior to a meeting of the shareholders
of the Company involving a contest for the election of Directors
shall not constitute a majority of the Board of Directors
following such election;
<PAGE>
d. the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on
a basis whereby less than fifty percent (50%) of the total
voting power of the surviving corporation is represented by
shares held by former shareholders of the Company prior to such
merger or consolidation;
e. the Company shall have sold, transferred or exchanged all, or
substantially all, of its assets to another corporation or other
entity or person.
2.06 TERMINATION. The term "termination" shall mean termination, prior to
the expiration of the Employment Period, of the employment of the
Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below. Termination
includes non-renewal or failure to extend this Agreement at the end
of any employment term, except for cause.
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under the
Company's long-term disability plan. If no such plan exists
on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive and
the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
b. The term "cause" means: (i) the willful and continued failure
of the Executive substantially to perform his duties with the
Company (other than any failure due to physical or mental
incapacity) after a demand for substantial performance is
delivered to him by the Board of Directors which specifically
identifies the manner in which the Board believes he has not
substantially performed his duties, (ii) willful misconduct
materially and demonstrably injurious to the Company, or
(iii) material violation of the covenant not to compete
(except after termination under the Change in Control
provisions and confidentiality provisions hereof). No act or
failure to act by the Executive shall be considered "willful"
unless done or omitted to be done by him not in good faith
and without reasonable belief that his action or omission was
in the best interest of the Company. The unwillingness of the
Executive to accept any or all of a change in the nature or
scope of his position, authorities or duties, a reduction in
his total compensation or benefits, or other action by or
request of the Company in respect of his position, authority,
or responsibility that is contrary to this Agreement, may not
be considered by the Board of Directors to be a failure to
perform or misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed
<PAGE>
to have been terminated for cause for purposes of this
Agreement unless and until there shall have been delivered to
him a copy of a resolution, duly adopted by a vote of
three-fourths (3/4ths) of the entire Board of Directors of the
Company at a meeting of the Board of Directors called and held
(after reasonable notice to the Executive and an opportunity
for the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the Executive
has been guilty of such a willful failure to perform or such
willful misconduct as justifies termination for cause
hereunder, finding that in the good faith opinion of the Board
of Directors the Executive has been guilty thereof and
specifying the particulars thereof.
c. The term "Constructive Termination" means any circumstance by
which the actions of the Company either reduce or change
Executive's title, position, duties, responsibilities or
authority to such an extent or in such a manner as to relegate
Executive to a position not substantially similar to that which
he presently holds; would degrade, embarrass or otherwise make
it unreasonable for Executive to remain in the employment of the
Company; and includes violation of the employment provisions and
conditions of this Agreement.
d. The resignation of the Executive shall be deemed "voluntary" if
it is for any reason other than one or more of the following:
(i) the Executive's resignation or retirement is requested
by the Company other than for cause;
(ii) any significant adverse change in the nature or scope of
the Executive's position, authorities or duties from
those described in this Agreement;
(iii) any reduction in the Executive's total compensation or
benefits from that provided in the Compensation and
Benefits Section hereof;
(iv) the material breach by the Company of any other
provision of this Agreement;
(v) any action by the Company which would constitute
Constructive Termination; and
(vi) non-renewal or failure to extend any employment term,
contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and benefits
provided in the "Termination Payments and Benefits" Section hereof shall not be
deemed or treated by the Company
<PAGE>
as the termination of the Executive's employment or the forfeiture of his
participation, award, or eligibility, for the purpose of any plan, practice or
agreement of the Company referred to in the Compensation and Benefits Section
hereof.
2.07 CUSTOMER. The term "Customer" includes all persons, firms or entities
that are purchasers or end-users of services or products offered,
provided, developed, designed, sold or leased by the Company during
the relevant time periods, and all persons, firms or entities which
control, or which are controlled by, the same person, firm or entity
which controls such purchase.
III. EMPLOYMENT.
3.01 EMPLOYMENT. Except as otherwise provided in this Agreement, the
Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the Company,
for the Term of Employment ("Employment Period") herein specified.
During the Employment Period, Executive shall exercise such position
and authority and perform such responsibilities as are commensurate
with the position and authority being exercised and duties being
performed by the Executive immediately prior to the Effective Date of
this Agreement, which services shall be performed at the location
where the Executive was employed immediately prior to the Effective
Date of this Agreement or at such other location as the Company may
reasonably require.
3.02 BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and
talents, perform all of the duties that may be required of
and from him pursuant to the express and implicit terms
hereof, to the reasonable satisfaction of the Company. Such
duties shall be rendered at Houston, Texas, and such other
place or places within or outside the State of Texas as the
Company shall in good faith require or as the interest,
needs, business, or opportunities of the Company shall
require.
b. Executive shall devote his normal and regular business time,
attention and skill to the business and interests of the
Company, and the Company shall be entitled to all of the
benefits, profits or other issue arising from or incident to
all work, services and advice of Executive performed for the
Company. Such employment shall be considered "full time"
employment. Executive shall have the right to make
investments in businesses which engage in activities other
than those engaged by the Company. Executive shall also have
the right to devote such incidental and immaterial amounts of
his time which are not required for the full and faithful
performance of his duties hereunder to any outside activities
and businesses which are not being engaged in by the Company
and which shall not otherwise interfere with the performance
of his duties hereunder. Executive shall have the right to
make investments in the manner and to the extent authorized
and set forth in the Non-Competition Section of this
Agreement.
<PAGE>
3.03 TERM OF EMPLOYMENT. ("Employment Period"). Executive's regular
employment (no Change in Control being presently contemplated) will
commence on the Effective Date of this Agreement and will be for a
term of two (2) years ending at 12:00 o'clock midnight September 30,
1999; thereafter, the Term of Employment of Executive will be
automatically extended for successive terms of one (1) year each
commencing October 1, 1999, and on October 1st of each year
thereafter, unless Company or Executive gives written notice to the
other that employment will not be renewed or continued after the next
scheduled expiration date which is not less than one (1) year after
the date that the notice of non-renewal was given. All extended
employment terms will be considered to be within the Employment
Period while Executive is employed with the Company.
3.04 COMPENSATION AND BENEFITS. During the Employment Period the Executive
shall receive the following compensation and benefits:
a. He shall receive an annual base salary which is not less than
his annual base salary with the opportunity for increases,
from time to time thereafter, which are in accordance with
the Company's regular executive compensation practices.
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors. Executive's
annual base salary as of the date hereof is $145,000.00.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his
existing participation, in annual bonus, stock option and
other incentive compensation plans which provide
opportunities to receive compensation in addition to his
annual base salary which are the greater of: (i) the
opportunities provided by the Company for Executives with
comparable duties, or (ii) the opportunities under any such
plans in which he was participating immediately prior to the
Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he will be entitled to
receive and participate in exempt employee benefits
(including, but not limited to, medical, life, health,
accident and disability insurance and disability benefits)
and prerequisites which are the greater of: (i) the employee
benefits and prerequisites provided by the Company to
Executives with comparable duties, or (ii) the employee
benefits and prerequisites to which he was entitled or in
which he participated immediately prior to the Effective Date
of this Agreement.
d. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he will be entitled to
continue to accrue credited service for retirement benefits
and to be entitled to receive retirement benefits under and
pursuant to the terms of the Company's qualified retirement
plan for exempt employees, the Company's supplemental
executive retirement plan, and any successor or other
retirement plan or agreement in effect on the Effective Date
of this Agreement in respect of his retirement, whether or
not a qualified
<PAGE>
plan or agreement, so that his aggregate monthly retirement
benefit from all such plans and agreements (regardless when
he begins to receive such benefit) will be not less than it
would be had all such plans and agreements in effect
immediately prior to the Effective Date of this Agreement
continued to be in effect without change until and after he
begins to receive such benefits.
e. Paid vacations each year to the same extent as he is
presently receiving or the benefits provided to Executives
with comparable duties whichever is greater.
f. Participation in all other executive incentive stock and
benefit plans approved by the Committee.
3.05 TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment Period
(including any extended term). Should the Company choose not to renew
or extend the Employment Period of this Employment Agreement or
choose to terminate the Executive, during or at the end of, the
Employment Period, or in the event of death or disability of the
Executive, if the termination is not after a Change in Control and is
not for cause, the Company shall, within thirty (30) days following
such termination, pay and provide to the Executive (or his Executor,
Administrator or Estate in the event of death, as soon as reasonably
practical):
a. An amount equal to one (1) full year of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding his
Date of Termination). There shall be deducted only such
amounts as may be required by law to be withheld for taxes
and other applicable deductions.
b. The Company shall provide to Executive and his immediate
family (at no cost to the Executive) for a period of one (1)
full year following the Date of Termination, life, health,
accident and disability insurance which are not less than the
highest benefits furnished to the Executive and his immediate
family during the term of this Agreement.
c. An amount equal to the target award for the Executive under
the Company's annual bonus plan for the fiscal year in which
termination occurs, provided that if the Executive has
deferred his award for such year under a Company plan, the
payment due the Executive under this subparagraph shall be
paid in accordance with the terms of the deferral or as
specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to
the Executive the amount and value of his entire plan account
and interest under any retirement plan, employee benefit
plan, investment plan or stock ownership plan, if any
<PAGE>
exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive in respect of distributions
in accordance with the plan as if the Executive's employment
in the Company terminated at the end of the month in which
Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will be
vested only to the extent authorized or permitted by the
plan.
f. If Executive elects to treat the termination as retirement,
on the Date of Termination the Executive shall be deemed to
have retired from the Company and he shall be entitled at
that time, or at such later time as he may elect consistent
with the terms of any applicable plan or benefit. Executive
may treat the termination as termination other than
"retirement" if Executive so elects and may defer
"retirement" to a later date if permitted by any applicable
plan.
g. The "Compensation and Benefits" Section hereof shall be
applicable in determining the payments and benefits due the
Executive under this Section and if Termination occurs after
a reduction in all or part of the Executive's total
compensation or benefits, the lump sum severance allowance
and other compensation and benefits payable to him pursuant
to this Section shall be based upon his compensation and
benefits before the reduction.
h. If any provision of this Section cannot, in whole or in part,
be implemented and carried out under the terms of the
applicable compensation, benefit or other plan or arrangement
of the Company because the Executive has ceased to be an
actual employee of the Company, because he has insufficient
or reduced credited service based upon his actual employment
by the Company, because the plan or arrangement has been
terminated or amended after the Effective Date of this
Agreement, or for any other reason, the Company itself shall
pay or otherwise provide the equivalent of such rights,
benefits and credits for such benefits to the Executive, his
dependents, beneficiaries and estate as if Executive's
employment had not been terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents shall
continue for the same term as the Executive's benefits. If
the Executive dies, all benefits will be provided for a term
of one (1) year (or two (2) years after a Change in Control)
after the date of death of the Executive.
<PAGE>
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent any
of such benefits are paid or provided to the Executive by
another employer, provided that the Executive shall have all
rights afforded to retirees to convert group insurance
coverage to the individual insurance coverage as, to the
extent of, and whenever his group insurance coverage under
this Section is reduced or expires. Apart from this
subparagraph, the Executive shall have and be subject to no
obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or interpreted,
to be an amendment to any compensation, benefit or other plan to the Company. To
the extent the Company's performance under this Section includes the performance
of the Company's obligations to the Executive under any other plan or under
another agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are discharged under
this Agreement, are discharged, surrendered, or released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01 EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of two (2) years following the Effective Date of
the Change in Control and will expire at 12:00 o'clock midnight on
the last day of the month following two (2) years after the Change in
Control. Thereafter, the employment period will be extended for
successive terms of one (1) year each, unless terminated, all in the
manner specified in the Term of Employment Section pertaining to
regular employment.
4.02 CHANGE IN CONTROL TERMINATION PAYMENTS AND BENEFITS. In the event the
Executive is terminated within two (2) years following a Change in
Control, the Executive will receive the payments and benefits
specified in the "Termination without Change in Control" Section in
the same time and manner therein specified except as amended and
modified hereby:
a. The salary and benefits specified in Section 3.05a. will be
paid based upon a multiple of two (2) years ( instead of one
(1) year).
b. Life, health, accident and disability insurance specified in
Section 3.05b. will be provided until (i) Executive becomes
reemployed and receives similar benefits from a new employer
or (ii) two (2) years after the Date of Termination,
whichever is earlier.
c. An amount equal to two (2) times the maximum award that the
Executive
<PAGE>
could receive under the Company's Annual Bonus Plan for the
fiscal year in which the termination occurs, instead of the
benefits provided in Section 3.05c.
d. All other rights and benefits specified in Section 3.05.
4.03 VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive
voluntarily resigns his employment within six (6) months after a
Change in Control (whether or not Company may be alleging the right
to terminate employment for cause), he will receive the same
payments, compensation and benefits as if he had been terminated on
the date of resignation after Change in Control.
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01 CONSIDERATION.The base salary awarded to the Executive and to be paid
to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination of
employment of Executive, voluntarily, involuntarily, or under a
Change of Control, under Section 3.05a and 4.02a hereof constitute
payment, in part, for the Non-Competition and Confidentiality of the
Executive. It is contracted, stipulated and agree that fifteen
percent (15%) of such amount paid and to be paid to the Executive
shall constitute the consideration for the Non-Competition and
Confidentiality Agreement set forth herein.
5.02 NON-COMPETITION. Executive acknowledges that his employment with the
Company has in the past and will, of necessity, provide him with
specialized knowledge which, if used in competition with the Company
could cause serious harm to the Company. Accordingly, the Executive
agrees that during his employment with the Company and for a period
of one (1) year after he is no longer employed by the Company (unless
his employment is terminated after a Change in Control, in which
event there will be no covenant not to compete and the provisions of
the covenant not to compete herein contained will terminate on the
date of termination of Executive) Executive will not, directly or
indirectly, either as an individual, proprietor, stockholder {other
than as a holder of up to one percent (1%) of the outstanding shares
of a corporation whose shares are listed on a stock exchange or
traded in accordance with the automated quotation system of the
National Association of Securities Dealers}, partner, officer,
employee or otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct or
indirect supervision or control, within one (1) year
preceding the Executive's termination of employment, in any
area where the Company provided, produced, leased or sold
such products or services at any time during the one (1) year
preceding such termination of employment; or
<PAGE>
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive had
direct or indirect supervision or control, within one (1)
years preceding Executive's termination of employment, to or
from any person, firm or entity which was a customer for such
products or services of the Company during the three (3)
years preceding such termination from whom the Company had
solicited business during such one (1) year; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to (i) leave his or her
employment or position with the Company or (ii) compete with
the business of the Company, or (iii) violate the terms of
any employment, non-competition or similar agreement with the
Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of any
officer, director, employee or any other individual holding a
position with the Company within two (2) years after the Date
of Termination of employment of Executive with the Company or
within two (2) years after such officer, director, employee
or individual terminated employment with the Company,
whichever occurs earlier.
5.03 CONFIDENTIALITY. Executive acknowledges that his employment with the
Company has in the past and will, of necessity, provide him with
specialized knowledge which, if used in competition with the Company,
or divulged to others, could cause serious harm to the Company.
Accordingly, Executive will not at any time during or after his
employment by the Company, directly or indirectly, divulge, disclose
or communicate to any person, firm or corporation in any manner
whatsoever any information concerning any matter affecting or
relating to the Company or the business of the Company . While
engaged as an employee of the Company, Executive may only use
information concerning any matters affecting or relating to the
Company or the business of the Company for a purpose which is
necessary to the carrying out of the Executive's duties as an
employee of the Company, and Executive may not make use of any
information of the Company after he is no longer an employee of the
Company. Executive agrees to the foregoing without regard to whether
all of the foregoing matters will be deemed confidential, material or
important, it being stipulated by the parties that all information,
whether written or otherwise, regarding the Company's business,
including, but not limited to, information regarding customers,
customer lists, costs, prices, earnings, products, services,
formulae, compositions, machines, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other business
arrangements, and sources of supply, is PRIMA FACIE presumed to be
important, material and confidential information of the Company for
the purposes of this Agreement, except to the extent that such
information may be otherwise lawfully and readily available to the
general public. Executive further agrees that he will, upon
termination of his employment with the Company, return to the Company
all books, records, lists and other written, typed or printed
materials, whether furnished by the Company or prepared by Executive,
which contain any
<PAGE>
information relating to the Company's business, and Executive agrees
that he will neither make nor retain any copies of such materials
after termination of employment. Notwithstanding any of the
foregoing, Executive will not be liable for any breach of these
confidentiality provisions unless the same constitutes a material
detriment to the Company, or due to the nature of the information
divulged and the manner in which it was divulged and the person to
whom it was divulged would likely cause damage to the Company or
constitute a material detriment to the Company.
5.04 GEOGRAPHICAL AREA. The geographical area within which the
non-competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the Company's
present offices, (ii) any of the Company's present rig yards, and
(iii) any additional location where the Company, as of the date of
any action taken in violation of the non-competition covenants of
this Agreement, has an office, a rig yard, or definitive plans to
locate an office or a rig yard. Notwithstanding the foregoing, if the
two hundred (200) mile radius extends into another county and the
Company is not then doing business in that other county, there will
be no territorial limitations extending into such other county.
5.05 COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY
AGREEMENT.Without limiting the right of the Company to pursue all
other legal and equitable rights available to it for violation of any
of the covenants made by Executive herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the business of the Company, the restrictions
agreed to by Executive as to time and area contained in this
Agreement are reasonable; and
c. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience and
contacts and otherwise will be difficult to calculate in
damages in an action at law and cannot fully compensate the
Company for any violation of any covenant in this Agreement,
accordingly:
(i) the Company shall be entitled to injunctive relief to
prevent violations of such covenants or continuing
violations thereof and to prevent Executive from
rendering any services to any person, firm or entity in
breach of such covenant and to prevent Executive from
divulging any confidential information; and
(ii) compliance with this Agreement is a condition precedent
to the Company's obligation to make payments of any
nature to Executive.
<PAGE>
5.06 TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If Executive's termination was not after a Change in
Control and if Executive shall be materially violating the
Confidentiality and/or Non-Competition Agreement or any agreement he
may have signed as an employee of the Company, Executive agrees that
after receipt of written notice he shall continue such action and
that there shall be no obligation on the part of the Company to
provide any payments or benefits (other than payments or benefits
already earned or accrued) described in the Termination of Rights and
Benefits Section hereof, subject to the provisions of Section 6.01
hereof. There will be no withholding of benefits or payments if the
termination occurred after a Change in Control and Executive will not
be bound by the non-competition provisions if terminated while the
Change in Control provisions hereof are applicable.
VI. GENERAL.
6.01 ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a
Change in Control, or under other circumstances even when a Change in
Control has not occurred, the Board of Directors or an shareholder of
the Company may then cause or attempt to cause the Company to refuse
to comply with its obligations under this Agreement, or may cause or
attempt to cause the Company to institute, or may institute,
litigation seeking to have this Agreement declared unenforceable, or
may take, or attempt to take, other action to deny Executive the
benefits intended under this Agreement; or actions may be taken to
enforce the non-competition or confidentiality provisions of this
Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the parties that the
Executive not be required to incur the legal fees and expenses
associated with the protection or enforcement of his rights under
this Agreement by litigation or other legal action because such costs
would substantially detract from the benefits intended to be extended
to Executive hereunder, nor be bound to negotiate any settlement of
his rights hereunder under threat of incurring such costs.
Accordingly, if at any time after the Effective Date of this
Agreement, it should appear to Executive that the Company is or has
acted contrary to or is failing or has failed to comply with any of
its obligations under this Agreement for the reason that it regards
this Agreement to be void or unenforceable, that Executive has
violated the terms of this Agreement, or for any other reason, or
that the Company has purported to terminate his employment for cause
or is in the course of doing so, or is withholding payments or
benefits, or is threatening to withhold payments or benefits,
contrary to this Agreement, or in the event that the Company or any
other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation or other legal action
designed to deny, diminish or to recover from Executive the benefits
provided or intended to be provided to him hereunder, and Executive
has acted in good faith to perform his obligations under this
Agreement, the Company irrevocably authorizes Executive from time to
time to retain counsel of his choice at the expense of the Company to
represent him in connection with the protection and enforcement of
his rights hereunder, including, without limitation, representation
in connection with termination of his employment or withholding of
benefits or payments contrary to this Agreement or with the
initiation or defense of any litigation or any other legal action,
whether by or against Executive or the Company or any Director,
Officer, Shareholder or other person affiliated with the Company, in
any jurisdiction. Company is not authorized to withhold the periodic
payments of attorneys' fees and
<PAGE>
expenses hereunder based upon any belief or assertion by the Company
that Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was not
acting in good faith and has violated this Agreement, Executive will
be liable to the Company for reimbursement of amounts paid due to
Executive's actions not based on good faith and in violation of this
Agreement. The reasonable fees and expenses of counsel selected from
time to time by Executive as hereinabove provided shall be paid or
reimbursed to Executive by the Company, on a regular, periodic basis
within thirty (30) days after presentation by Executive of a
statement or statements prepared by such counsel in accordance with
its customary practices, up to a maximum aggregate amount of One
Hundred Fifty Thousand Dollars ($150,000).
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for
and will pay all income tax liability by virtue of any payments made
to Executive under this Agreement, as if the same were earned and
paid in the normal course of business and not the result of a Change
in Control and not otherwise triggered by the "golden parachute" or
excess payment provisions of the Internal Revenue Code of the United
States, which would cause additional tax liability to be imposed. If
any additional income tax, excise or other taxes are imposed on any
amount or payment in the nature of compensation paid or provided to
or on behalf of executive, the Company shall "gross up" Executive for
such tax liability by paying to Executive an amount sufficient so
that after payment of all such taxes so imposed Executive's position
on an after-tax basis is what it would have been had no such
additional taxes been imposed. Executive will cooperate with the
Company to minimize the tax consequences to the Executive and to the
Company so long as the actions proposed to be taken by the Company do
not cause any additional tax consequences to Executive and do not
prolong or delay the time that payments are to be made, or the amount
of payments to be made, unless the Executive consents, in writing, to
any delay or deferment of payment.
6.03 PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of
Executive is for cause and not after a Change in Control, the Company
will have the right to withhold all payments (except those specified
in Section 6.01); provided however that if a final judgment is
entered finding that cause did not exist for termination, the Company
will pay all benefits to Executive to which he would have been
entitled had the termination not been for cause, plus interest on all
amounts withheld from Executive at the rate specified for judgments
under Article 5069-1.05 V.A.T.S., but not less than ten percent (10%)
per annum. If the termination for cause occurs after a Change in
Control, the Company shall have not right to suspend or withhold
payments to Executive under any provision of this Agreement until or
unless a final judgment is entered upholding the Company's
determination that the termination was for cause, in which event
Executive will be liable to the Company for all amounts paid, plus
interest at the rate allowed for judgments under Article 5069-1.05
V.A.T.S.
6.04 NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein
are not intended to exclude or limit Executive's participation in
other benefits available to executive personnel generally, or to
preclude or limit other compensation or benefits as may be authorized
by the Board of Directors of the Company at any time, or to limit or
reduce any compensation or benefits to which Executive would be
entitled but for this Agreement.
<PAGE>
6.05 NOTICES. Notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall either be
personally delivered by hand or sent by: (i) Registered or Certified
Mail, Return Receipt Requested, postage prepaid, properly packaged,
addressed and deposited in the United States Postal System; (ii) via
facsimile transmission if the receiver acknowledges receipt; or (iii)
via Federal Express or other expedited delivery service provided that
acknowledgment of receipt is received and retained by the deliverer
and furnished to the sender, if to Executive, at the last address he
has filed, in writing, with the Company, or if to the Company, to its
Corporate Secretary at its principal executive offices.
6.06 NON-ALIENATION. Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts
provided under this Agreement, and no payments or benefits due
hereunder shall be assignable in anticipation of payment either by
voluntary or involuntary acts or by operation of law. So long as
Executive lives, no person, other than the parties hereto, shall have
any rights under or interest in this Agreement or the subject matter
hereof. Upon the death of Executive, his Executors, Administrators,
Devisees and Heirs, in that order, shall have the right to enforce
the provisions hereof.
6.07 ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect of the subject matter hereof.
No provision of this Agreement may be amended, waived, or discharged
except by the mutual written agreement of the parties. The consent of
any other person(s) to any such amendment, waiver or discharge shall
not be required.
6.08 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors and assigns, by
operation of law or otherwise, including, without limitation, any
corporation or other entity or persons which shall succeed (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the
Company, and the Company will require any successor, by agreement in
form and substance satisfactory to Executive, expressly to assume and
agree to perform this Agreement. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of
Executive and his legal representatives, heirs and assigns, provided
however, that in the event of Executive's death prior to payment or
distribution of all amounts, distributions and benefits due him
hereunder, each such unpaid amount and distribution shall be paid in
accordance with this Agreement to the person or persons designated by
Executive to the Company to receive such payment or distribution and
in the event Executive has made no applicable designation, to his
Estate. If the Company should split, divide or otherwise become more
than one entity, all liability and obligations of the Company shall
be the joint and several liability and obligation of all of the
parts.
6.09 GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of said State, the validity, interpretation and
enforcement of this Agreement shall be governed by the laws of the
State of Texas.
<PAGE>
6.10 VENUE. To the extent permitted by applicable State and Federal law,
venue for all proceedings hereunder will be in Harris County, Texas.
6.11 HEADINGS. The headings in this Agreement are inserted for convenience
of reference only and shall not affect the meaning or interpretation
of this Agreement.
6.12 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
6.13 PARTIAL INVALIDITY. In the event that any part, portion or Section of
this Agreement is found to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be binding
upon the parties hereto and the Agreement will be construed to give
meaning to the remaining provisions of this Agreement in accordance
with the intent of this Agreement.
6.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but all
of which together constitute one and the same instrument.
IN WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors and the Compensation Committee,
the Company has caused these presents to be executed in its name and on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
EXECUTED in multiple originals and/or counterparts as of the Effective Date.
/s/ ROBERT W. RANDALL
ROBERT W. RANDALL
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
BY:/s/ RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
EXHIBIT 10-24
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
EARL W. McNIEL
EFFECTIVE OCTOBER 1, 1997
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE NO.
<S> <C>
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS . . . . . . . . . . . . . . 2
1.01 Effect of Prior Agreements . . . . . . . . . . . . . . . . . . . . . 2
II. DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.01 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Executive/Officer/Employee . . . . . . . . . . . . . . . . . . . . . 3
2.03 Office/Position/Title. . . . . . . . . . . . . . . . . . . . . . 3
2.04 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.05 Change in Control. . . . . . . . . . . . . . . . . . . . . . . . 3
2.06 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.07 Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
III. EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 6
3.01 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.02 Best Efforts and other Employment of Executive. . . . . . . . . . 7
3.03 Term of Employment. . . . . . . . . . . . . . . . . . . . . . . . 7
3.04 Compensation and Benefits. . . . . . . . . . . . . . . . . . . . . 7
3.05 Termination Without Change in Control. . . . . . . . . . . . . . . .. 8
IV. CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.01 Extension of Employment Period. . . . . . . . . . . . . . . . . . . 11
4.02 Change in Control Termination Payments & Benefits. . . . . . . . . . 11
4.03 Voluntary Resignation Upon Change in Control. . . . . . . . . . . . . 12
V. NON-COMPETITION AND CONFIDENTIALITY. . . . . . . . . . . . . . . . . . 12
5.01 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12
5.02 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . .. 12
5.03 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.04 Geographical Area . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.05 Company Remedies For Violation of Non-Competition or
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . 14
5.06 Termination of Benefits For Violation of Non-Competition and
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . 15
VI. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.01 Enforcement Costs . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.02 Income, Excise and Other Tax Liability. . . . . . . . . . . . . . . 16
6.03 Payment of Benefits Upon Termination for Cause. . . . . . . . . . . . . 16
6.04 Non-Exclusive Agreement. . . . . . . . . . . . . . . . . . . . . . . .. 17
6.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.06 Non-Alienation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.07 Entire Agreement: Amendment. . . . . . . . . . . . . . . . . . . . . 17
6.08 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 17
6.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.13 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: October 1, 1997
COMPANY/EMPLOYER: Pride International, Inc.,
A Louisiana corporation
San Felipe Plaza, Suite 3300
5847 San Felipe
Houston, Texas 77057
EXECUTIVE/EMPLOYEE Earl W. McNiel
1423 Stependale
Katy, Texas 77450
This Agreement is made as of the date first above written and to become
effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable resource of
the Company and the Company desires to be assured of the continued services of
Executive;
WHEREAS, the Company desires to obtain assurances that Executive will
devote his best efforts to his employment with the Company and will not enter
into competition with the Company in its business as now conducted and to be
conducted, or solicit customers or other employees of the Company to terminate
their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he acknowledges
that his talents and services to the Company are of a special, unique, unusual
and extraordinary character and are of particular and peculiar benefit and
importance to the Company;
WHEREAS, the Company is concerned that in the event of a possible or
threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive assurances
as to the continuation of his employment status and responsibilities in such
event;
WHEREAS, the Company further desires to assure Executive that, if a
possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in
<PAGE>
connection therewith, Executive would be in a secure position to consider and
participate in such transaction as objectively as possible in the best interests
of the Company and to this end desires to protect Executive from any direct or
implied threat to his financial well-being;
WHEREAS, Executive is willing to continue to serve as such but desires
assurances that in the event of such a change in control he will continue to
have the employment status and responsibilities he could reasonably expect
absent such event and, that in the event this turns out not to be the case, he
will have fair and reasonable severance protection on the basis of his service
to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01 EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and any of its subsidiaries and Executive are hereby
amended, modified and superseded by this Agreement insofar as future
employment, compensation, non-competition, confidentiality, accrual or
payments of any form of compensation or benefits from the Company are
concerned. This Agreement does not release or relieve Company from its
liability or obligation with respect to any compensation, payments, or
benefits already accrued to Executive, nor to any vesting of benefits or
other rights which are attributable to length of employment, seniority
or other such matters. This Agreement does not relieve Executive of any
prior non-competition or confidentiality obligations and agreements and
the same are hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective Date
hereof.
<PAGE>
II. DEFINITION OF TERMS.
2.01 COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes any
subsidiary or affiliate of the Company to the extent it is carrying on
any portion of the business of the Company or a business similar to that
being conducted by the Company.
2.02 EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Earl W.
McNiel.
2.03 OFFICE/POSITION/TITLE. The Office, Position and Title for which the
Executive is employed is that of Vice President and Chief Financial
Officer of the Company and carries with it the duties, responsibilities,
rights, benefits and privileges presently held by the Executive, or as
may reasonably be assigned to the Executive as are customary and usual
for such position.
2.04 EFFECTIVE DATE. This Agreement becomes effective and binding as of
October 1, 1997.
2.05 CHANGE IN CONTROL. The term "Change in Control" of the Company shall
mean, and shall be deemed to have occurred on the date of the first to
occur of any of the following:
a. there occurs a Change in Control of the Company of the nature
that would be required to be reported in response to item 6(e)
of Schedule 14A of Regulation 14A or Item 1 of Form 8(k)
promulgated under the Securities Exchange Act of 1934 as in
effect on the date of this Agreement, or if neither item
remains in effect, any regulations issued by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934 which serve similar purposes;
b. any "person" {as such term is used in Sections 12(d) and 14(d)(2)
of the Securities Exchange Act of 1934} is or becomes a
beneficial owner, directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities;
c. the individuals who were members of the Board of Directors of the
Company immediately prior to a meeting of the shareholders of the
Company involving a contest for the election of Directors shall
not constitute a majority of the Board of Directors following
such election;
<PAGE>
d. the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a
basis whereby less than fifty percent (50%) of the total voting
power of the surviving corporation is represented by shares held
by former shareholders of the Company prior to such merger or
consolidation;
e. the Company shall have sold, transferred or exchanged all, or
substantially all, of its assets to another corporation or other
entity or person.
2.06 TERMINATION. The term "termination" shall mean termination, prior to the
expiration of the Employment Period, of the employment of the Executive
with the Company {including death and disability (as described below)}
for any reason other than cause (as described below) or voluntary
resignation (as described below). Termination includes "Constructive
Termination" as described below. Termination includes non-renewal or
failure to extend this Agreement at the end of any employment term,
except for cause.
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under the
Company's long-term disability plan. If no such plan exists on
the Effective Date of this Agreement, the term "disability"
means physical or mental incapacity as determined by a doctor
jointly selected by the Executive and the Board of Directors of
the Company qualifying the Executive for long-term disability
under reasonable employment standards.
b. The term "cause" means: (i) the willful and continued failure
of the Executive substantially to perform his duties with the
Company (other than any failure due to physical or mental
incapacity) after a demand for substantial performance is
delivered to him by the Board of Directors which specifically
identifies the manner in which the Board believes he has not
substantially performed his duties, (ii) willful misconduct
materially and demonstrably injurious to the Company, or (iii)
material violation of the covenant not to compete (except after
termination under the Change in Control provisions and
confidentiality provisions hereof). No act or failure to act
by the Executive shall be considered "willful" unless done or
omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Company. The unwillingness of the Executive to
accept any or all of a change in the nature or scope of his
position, authorities or duties, a reduction in his total
compensation or benefits, or other action by or request of the
Company in respect of his position, authority, or
responsibility that is contrary to this Agreement, may not be
considered by the Board of Directors to be a failure to perform
or misconduct by the Executive. Notwithstanding the foregoing,
the Executive shall not be deemed to
<PAGE>
have been terminated for cause for purposes of this Agreement
unless and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths (3/4ths) of
the entire Board of Directors of the Company at a meeting of the
Board of Directors called and held (after reasonable notice to
the Executive and an opportunity for the Executive and his
counsel to be heard before the Board) for the purpose of
considering whether the Executive has been guilty of such a
willful failure to perform or such willful misconduct as
justifies termination for cause hereunder, finding that in the
good faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars thereof.
c. The term "Constructive Termination" means any circumstance by
which the actions of the Company either reduce or change
Executive's title, position, duties, responsibilities or
authority to such an extent or in such a manner as to relegate
Executive to a position not substantially similar to that
which he presently holds; would degrade, embarrass or otherwise
make it unreasonable for Executive to remain in the employment
of the Company; and includes violation of the employment
provisions and conditions of this Agreement.
d. The resignation of the Executive shall be deemed "voluntary" if
it is for any reason other than one or more of the following:
(i) the Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) any significant adverse change in the nature or scope of
the Executive's position, authorities or duties from those
described in this Agreement;
(iii) any reduction in the Executive's total compensation or
benefits from that provided in the Compensation and
Benefits Section hereof;
(iv) the material breach by the Company of any other provision
of this Agreement;
(v) any action by the Company which would constitute
Constructive Termination; and
(vi) non-renewal or failure to extend any employment term,
contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and benefits
provided in the "Termination Payments and Benefits" Section hereof shall not be
deemed or treated by the Company
<PAGE>
as the termination of the Executive's employment or the forfeiture of his
participation, award, or eligibility, for the purpose of any plan, practice or
agreement of the Company referred to in the Compensation and Benefits Section
hereof.
2.07 CUSTOMER. The term "Customer" includes all persons, firms or entities
that are purchasers or end-users of services or products offered,
provided, developed, designed, sold or leased by the Company during the
relevant time periods, and all persons, firms or entities which control,
or which are controlled by, the same person, firm or entity which
controls such purchase.
III. EMPLOYMENT.
3.01 EMPLOYMENT. Except as otherwise provided in this Agreement, the Company
hereby agrees to continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, for the Term of
Employment ("Employment Period") herein specified. During the Employment
Period, Executive shall exercise such position and authority and perform
such responsibilities as are commensurate with the position and
authority being exercised and duties being performed by the Executive
immediately prior to the Effective Date of this Agreement, which
services shall be performed at the location where the Executive was
employed immediately prior to the Effective Date of this Agreement or at
such other location as the Company may reasonably require.
3.02 BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and
talents, perform all of the duties that may be required of and
from him pursuant to the express and implicit terms hereof, to
the reasonable satisfaction of the Company. Such duties shall
be rendered at Houston, Texas, and such other place or places
within or outside the State of Texas as the Company shall in
good faith require or as the interest, needs, business, or
opportunities of the Company shall require.
b. Executive shall devote his normal and regular business time,
attention and skill to the business and interests of the
Company, and the Company shall be entitled to all of the
benefits, profits or other issue arising from or incident to
all work, services and advice of Executive performed for the
Company. Such employment shall be considered "full time"
employment. Executive shall have the right to make investments
in businesses which engage in activities other than those
engaged by the Company. Executive shall also have the right to
devote such incidental and immaterial amounts of his time which
are not required for the full and faithful performance of his
duties hereunder to any outside activities and businesses which
are not being engaged in by the Company and which shall not
otherwise interfere with the performance of his duties
hereunder. Executive shall have the right to make investments
in the manner and to the extent authorized and set forth in the
Non-Competition Section of this Agreement.
<PAGE>
3.03 TERM OF EMPLOYMENT. ("Employment Period"). Executive's regular
employment (no Change in Control being presently contemplated) will
commence on the Effective Date of this Agreement and will be for a term
of two (2) years ending at 12:00 o'clock midnight September 30, 1999;
thereafter, the Term of Employment of Executive will be automatically
extended for successive terms of one (1) year each commencing October 1,
1999, and on October 1st of each year thereafter, unless Company or
Executive gives written notice to the other that employment will not be
renewed or continued after the next scheduled expiration date which is
not less than one (1) year after the date that the notice of non-renewal
was given. All extended employment terms will be considered to be within
the Employment Period while Executive is employed with the Company.
3.04 COMPENSATION AND BENEFITS. During the Employment Period the Executive
shall receive the following compensation and benefits:
a. He shall receive an annual base salary which is not less than his
annual base salary, with the opportunity for increases, from time
to time thereafter, which are in accordance with the Company's
regular executive compensation practices ("annual base salary").
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors. Executive's
current annual base salary is $110,000.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other
incentive compensation plans which provide opportunities to
receive compensation in addition to his annual base salary
which are the greater of: (i) the opportunities provided by the
Company for Executives with comparable duties, or (ii) the
opportunities under any such plans in which he was
participating immediately prior to the Effective Date of this
Agreement.
c. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he will be entitled to
receive and participate in exempt employee benefits (including,
but not limited to, medical, life, health, accident and
disability insurance and disability benefits) and prerequisites
which are the greater of: (i) the employee benefits and
prerequisites provided by the Company to Executives with
comparable duties, or (ii) the employee benefits and
prerequisites to which he was entitled or in which he
participated immediately prior to the Effective Date of this
Agreement.
d. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he will be entitled to
continue to accrue credited service for retirement benefits and
to be entitled to receive retirement benefits under and
pursuant to the terms of the Company's qualified retirement
plan for exempt employees, the Company's supplemental executive
retirement plan, and any successor or other retirement plan or
agreement in effect on the Effective Date of this Agreement in
respect of his retirement, whether or not a qualified
<PAGE>
plan or agreement, so that his aggregate monthly retirement
benefit from all such plans and agreements (regardless when he
begins to receive such benefit) will be not less than it would be
had all such plans and agreements in effect immediately prior to
the Effective Date of this Agreement continued to be in effect
without change until and after he begins to receive such
benefits.
e. Paid vacations each year to the same extent as he is presently
receiving or the benefits provided to Executives with comparable
duties whichever is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Committee.
3.05 TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right
to terminate Executive at any time during the Employment Period
(including any extended term). Should the Company choose not to renew or
extend the Employment Period of this Employment Agreement or choose to
terminate the Executive, during or at the end of, the Employment Period,
or in the event of death or disability of the Executive, if the
termination is not after a Change in Control and is not for cause, the
Company shall, within thirty (30) days following such termination, pay
and provide to the Executive (or his Executor, Administrator or Estate
in the event of death, as soon as reasonably practical):
a. An amount equal to one (1) full year of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the salary
in effect on the Date of Termination (but not less than the
highest annual base salary paid to the Executive during any of
the three (3) years immediately preceding his Date of
Termination). There shall be deducted only such amounts as may
be required by law to be withheld for taxes and other
applicable deductions.
b. The Company shall provide to Executive and his immediate family
(at no cost to the Executive) for a period of one (1) full year
following the Date of Termination, life, health, accident and
disability insurance which are not less than the highest benefits
furnished to the Executive and his immediate family during the
term of this Agreement.
c. An amount equal to the target award for the Executive under the
Company's annual bonus plan for the fiscal year in which
termination occurs, provided that if the Executive has deferred
his award for such year under a Company plan, the payment due the
Executive under this subparagraph shall be paid in accordance
with the terms of the deferral or as specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to the
Executive the amount and value of his entire plan account and
interest under any retirement plan, employee benefit plan,
investment plan or stock ownership plan, if any
<PAGE>
exists on the Date of Termination, and all employer contributions
made or payable to any such plan for his account prior to the end
of the month in which Termination occurs shall be deemed vested
and payable to him. Such payment or distribution shall be in
accordance with the elections made by the Executive in respect of
distributions in accordance with the plan as if the Executive's
employment in the Company terminated at the end of the month in
which Termination occurs.
e. All stock options and awards to which the Executive is entitled
will immediately vest and the time for exercising any option will
be as specified in the plan as if the Executive were still
employed by the Company; provided however if the immediate
vesting of all benefits under the plan is not permitted by the
plan, then the benefits will be vested only to the extent
authorized or permitted by the plan.
f. If Executive elects to treat the termination as retirement, on
the Date of Termination the Executive shall be deemed to have
retired from the Company and he shall be entitled at that time,
or at such later time as he may elect consistent with the terms
of any applicable plan or benefit. Executive may treat the
termination as termination other than "retirement" if Executive
so elects and may defer "retirement" to a later date if
permitted by any applicable plan.
g. The "Compensation and Benefits" Section hereof shall be
applicable in determining the payments and benefits due the
Executive under this Section and if Termination occurs after a
reduction in all or part of the Executive's total compensation
or benefits, the lump sum severance allowance and other
compensation and benefits payable to him pursuant to this
Section shall be based upon his compensation and benefits
before the reduction.
h. If any provision of this Section cannot, in whole or in part,
be implemented and carried out under the terms of the
applicable compensation, benefit or other plan or arrangement
of the Company because the Executive has ceased to be an actual
employee of the Company, because he has insufficient or reduced
credited service based upon his actual employment by the
Company, because the plan or arrangement has been terminated or
amended after the Effective Date of this Agreement, or for any
other reason, the Company itself shall pay or otherwise provide
the equivalent of such rights, benefits and credits for such
benefits to the Executive, his dependents, beneficiaries and
estate as if Executive's employment had not been terminated.
i. All life, health, hospitalization, medical and accident benefits
available to Executive's spouse and dependents shall continue
for the same term as the Executive's benefits. If the Executive
dies, all benefits will be provided for a term of one (1) year
(or two (2) years after a Change in Control) after the date of
death of the Executive.
<PAGE>
j. The Company's obligation under this Section to continue to pay
or provide health care, life, accident and disability insurance
to the Executive, the Executive's spouse and Executive's
dependents, during the remainder of the Employment Period shall
be reduced when and to the extent any of such benefits are paid
or provided to the Executive by another employer, provided that
the Executive shall have all rights afforded to retirees to
convert group insurance coverage to the individual insurance
coverage as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart from
this subparagraph, the Executive shall have and be subject to
no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or interpreted,
to be an amendment to any compensation, benefit or other plan to the Company. To
the extent the Company's performance under this Section includes the performance
of the Company's obligations to the Executive under any other plan or under
another agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are discharged under
this Agreement, are discharged, surrendered, or released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01 EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of two (2) years following the Effective Date of the
Change in Control and will expire at 12:00 o'clock midnight on the last
day of the month following two (2) years after the Change in Control.
Thereafter, the employment period will be extended for successive terms
of one (1) year each, unless terminated, all in the manner specified in
the Term of Employment Section pertaining to regular employment.
4.02 CHANGE IN CONTROL TERMINATION PAYMENTS AND BENEFITS. In the event the
Executive is terminated within two (2) years following a Change in
Control, the Executive will receive the payments and benefits specified
in the "Termination without Change in Control" Section in the same time
and manner therein specified except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a. will be paid
based upon a multiple of two (2) years ( instead of one (1)
year).
b. Life, health, accident and disability insurance specified in
Section 3.05b. will be provided until (i) Executive becomes
reemployed and receives similar benefits from a new employer or
(ii) two (2) years after the Date of Termination, whichever is
earlier.
c. An amount equal to two (2) times the maximum award that the
Executive
<PAGE>
could receive under the Company's Annual Bonus Plan for the
fiscal year in which the termination occurs, instead of the
benefits provided in Section 3.05c.
d. All other rights and benefits specified in Section 3.05.
4.03 VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive
voluntarily resigns his employment within six (6) months after a Change
in Control (whether or not Company may be alleging the right to
terminate employment for cause), he will receive the same payments,
compensation and benefits as if he had been terminated on the date of
resignation after Change in Control.
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01 CONSIDERATION.The base salary awarded to the Executive and to be paid to
the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and the
amount to be paid to Executive in the event of the termination of
employment of Executive, voluntarily, involuntarily, or under a Change
of Control, under Section 3.05a and 4.02a hereof constitute payment, in
part, for the Non-Competition and Confidentiality of the Executive. It
is contracted, stipulated and agree that fifteen percent (15%) of such
amount paid and to be paid to the Executive shall constitute the
consideration for the Non-Competition and Confidentiality Agreement set
forth herein.
5.02 NON-COMPETITION. Executive acknowledges that his employment with the
Company has in the past and will, of necessity, provide him with
specialized knowledge which, if used in competition with the Company
could cause serious harm to the Company. Accordingly, the Executive
agrees that during his employment with the Company and for a period of
one (1) year after he is no longer employed by the Company (unless his
employment is terminated after a Change in Control, in which event there
will be no covenant not to compete and the provisions of the covenant
not to compete herein contained will terminate on the date of
termination of Executive) Executive will not, directly or indirectly,
either as an individual, proprietor, stockholder {other than as a holder
of up to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in accordance with
the automated quotation system of the National Association of Securities
Dealers}, partner, officer, employee or otherwise:
a. work for, become an employee of, invest in, provide consulting
services or in any way engage in any business which provides,
produces, leases or sells products or services of the same or
similar type provided, produced, leased or sold by the Company
and with regard to which Executive was engaged, or over which
Executive had direct or indirect supervision or control, within
one (1) year preceding the Executive's termination of
employment, in any area where the Company provided, produced,
leased or sold such products or services at any time during the
one (1) year preceding such termination of employment; or
<PAGE>
b. provide, sell, offer to sell, lease, offer to lease, or solicit
any orders for any products or services which the Company
provided and with regard to which the Executive had direct or
indirect supervision or control, within one (1) year preceding
Executive's termination of employment, to or from any person,
firm or entity which was a customer for such products or
services of the Company during the one (1) year preceding such
termination from whom the Company had solicited business during
such one (1) year; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to (i) leave his or her employment
or position with the Company or (ii) compete with the business of
the Company, or (iii) violate the terms of any employment,
non-competition or similar agreement with the Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or otherwise,
use, utilize or benefit from the services of any officer,
director, employee or any other individual holding a position
with the Company within two (2) years after the Date of
Termination of employment of Executive with the Company or
within two (2) years after such officer, director, employee or
individual terminated employment with the Company, whichever
occurs earlier.
5.03 CONFIDENTIALITY. Executive acknowledges that his employment with the
Company has in the past and will, of necessity, provide him with
specialized knowledge which, if used in competition with the Company, or
divulged to others, could cause serious harm to the Company.
Accordingly, Executive will not at any time during or after his
employment by the Company, directly or indirectly, divulge, disclose or
communicate to any person, firm or corporation in any manner whatsoever
any information concerning any matter affecting or relating to the
Company or the business of the Company . While engaged as an employee of
the Company, Executive may only use information concerning any matters
affecting or relating to the Company or the business of the Company for
a purpose which is necessary to the carrying out of the Executive's
duties as an employee of the Company, and Executive may not make use of
any information of the Company after he is no longer an employee of the
Company. Executive agrees to the foregoing without regard to whether all
of the foregoing matters will be deemed confidential, material or
important, it being stipulated by the parties that all information,
whether written or otherwise, regarding the Company's business,
including, but not limited to, information regarding customers, customer
lists, costs, prices, earnings, products, services, formulae,
compositions, machines, equipment, apparatus, systems, manufacturing
procedures, operations, potential acquisitions, new location plans,
prospective and executed contracts and other business arrangements, and
sources of supply, is PRIMA FACIE presumed to be important, material and
confidential information of the Company for the purposes of this
Agreement, except to the extent that such information may be otherwise
lawfully and readily available to the general public. Executive further
agrees that he will, upon termination of his employment with the
Company, return to the Company all books, records, lists and other
written, typed or printed materials, whether furnished by the Company or
prepared by Executive, which contain any
<PAGE>
information relating to the Company's business, and Executive agrees
that he will neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
Executive will not be liable for any breach of these confidentiality
provisions unless the same constitutes a material detriment to the
Company, or due to the nature of the information divulged and the manner
in which it was divulged and the person to whom it was divulged would
likely cause damage to the Company or constitute a material detriment to
the Company.
5.04 GEOGRAPHICAL AREA. The geographical area within which the
non-competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the Company's
present offices, (ii) any of the Company's present rig yards, and (iii)
any additional location where the Company, as of the date of any action
taken in violation of the non-competition covenants of this Agreement,
has an office, a rig yard, or definitive plans to locate an office or a
rig yard. Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another county and the Company is not then doing
business in that other county, there will be no territorial limitations
extending into such other county.
5.05 COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY
AGREEMENT.Without limiting the right of the Company to pursue all other
legal and equitable rights available to it for violation of any of the
covenants made by Executive herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which give
them a peculiar value;
b. because of the business of the Company, the restrictions agreed
to by Executive as to time and area contained in this Agreement
are reasonable; and
c. the injury suffered by the Company by a violation of any covenant
in this Agreement resulting from loss of profits created by the
competitive use of such skills, experience and contacts and
otherwise will be difficult to calculate in damages in an action
at law and cannot fully compensate the Company for any violation
of any covenant in this Agreement, accordingly:
(i) the Company shall be entitled to injunctive relief to
prevent violations of such covenants or continuing
violations thereof and to prevent Executive from rendering
any services to any person, firm or entity in breach of
such covenant and to prevent Executive from divulging any
confidential information; and
(ii) compliance with this Agreement is a condition precedent to
the Company's obligation to make payments of any nature to
Executive.
<PAGE>
5.06 TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If Executive's termination was not after a Change in
Control and if Executive shall be materially violating the
Confidentiality and/or Non-Competition Agreement or any agreement he may
have signed as an employee of the Company, Executive agrees that after
receipt of written notice he shall continue such action and that there
shall be no obligation on the part of the Company to provide any
payments or benefits (other than payments or benefits already earned or
accrued) described in the Termination of Rights and Benefits Section
hereof, subject to the provisions of Section 6.01 hereof. There will be
no withholding of benefits or payments if the termination occurred after
a Change in Control and Executive will not be bound by the
non-competition provisions if terminated while the Change in Control
provisions hereof are applicable.
VI. GENERAL.
6.01 ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a
Change in Control, or under other circumstances even when a Change in
Control has not occurred, the Board of Directors or an shareholder of
the Company may then cause or attempt to cause the Company to refuse to
comply with its obligations under this Agreement, or may cause or
attempt to cause the Company to institute, or may institute, litigation
seeking to have this Agreement declared unenforceable, or may take, or
attempt to take, other action to deny Executive the benefits intended
under this Agreement; or actions may be taken to enforce the
non-competition or confidentiality provisions of this Agreement. In
these circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that the Executive not be required to
incur the legal fees and expenses associated with the protection or
enforcement of his rights under this Agreement by litigation or other
legal action because such costs would substantially detract from the
benefits intended to be extended to Executive hereunder, nor be bound to
negotiate any settlement of his rights hereunder under threat of
incurring such costs. Accordingly, if at any time after the Effective
Date of this Agreement, it should appear to Executive that the Company
is or has acted contrary to or is failing or has failed to comply with
any of its obligations under this Agreement for the reason that it
regards this Agreement to be void or unenforceable, that Executive has
violated the terms of this Agreement, or for any other reason, or that
the Company has purported to terminate his employment for cause or is in
the course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other person takes
any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny,
diminish or to recover from Executive the benefits provided or intended
to be provided to him hereunder, and Executive has acted in good faith
to perform his obligations under this Agreement, the Company irrevocably
authorizes Executive from time to time to retain counsel of his choice
at the expense of the Company to represent him in connection with the
protection and enforcement of his rights hereunder, including, without
limitation, representation in connection with termination of his
employment or withholding of benefits or payments contrary to this
Agreement or with the initiation or defense of any litigation or any
other legal action, whether by or against Executive or the Company or
any Director, Officer, Shareholder or other person affiliated with the
Company, in any jurisdiction. Company is not authorized to withhold the
periodic payments of attorneys' fees and
<PAGE>
expenses hereunder based upon any belief or assertion by the Company
that Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was not
acting in good faith and has violated this Agreement, Executive will be
liable to the Company for reimbursement of amounts paid due to
Executive's actions not based on good faith and in violation of this
Agreement. The reasonable fees and expenses of counsel selected from
time to time by Executive as hereinabove provided shall be paid or
reimbursed to Executive by the Company, on a regular, periodic basis
within thirty (30) days after presentation by Executive of a statement
or statements prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of One Hundred Fifty
Thousand Dollars ($150,000).
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and
will pay all income tax liability by virtue of any payments made to
Executive under this Agreement, as if the same were earned and paid in
the normal course of business and not the result of a Change in Control
and not otherwise triggered by the "golden parachute" or excess payment
provisions of the Internal Revenue Code of the United States, which
would cause additional tax liability to be imposed. If any additional
income tax, excise or other taxes are imposed on any amount or payment
in the nature of compensation paid or provided to or on behalf of
executive, the Company shall "gross up" Executive for such tax liability
by paying to Executive an amount sufficient so that after payment of all
such taxes so imposed Executive's position on an after-tax basis is what
it would have been had no such additional taxes been imposed. Executive
will cooperate with the Company to minimize the tax consequences to the
Executive and to the Company so long as the actions proposed to be taken
by the Company do not cause any additional tax consequences to Executive
and do not prolong or delay the time that payments are to be made, or
the amount of payments to be made, unless the Executive consents, in
writing, to any delay or deferment of payment.
6.03 PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of
Executive is for cause and not after a Change in Control, the Company
will have the right to withhold all payments (except those specified in
Section 6.01); provided however that if a final judgment is entered
finding that cause did not exist for termination, the Company will pay
all benefits to Executive to which he would have been entitled had the
termination not been for cause, plus interest on all amounts withheld
from Executive at the rate specified for judgments under Article
5069-1.05 V.A.T.S., but not less than ten percent (10%) per annum. If
the termination for cause occurs after a Change in Control, the Company
shall have not right to suspend or withhold payments to Executive under
any provision of this Agreement until or unless a final judgment is
entered upholding the Company's determination that the termination was
for cause, in which event Executive will be liable to the Company for
all amounts paid, plus interest at the rate allowed for judgments under
Article 5069-1.05 V.A.T.S.
6.04 NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein
are not intended to exclude or limit Executive's participation in other
benefits available to executive personnel generally, or to preclude or
limit other compensation or benefits as may be authorized by the Board
of Directors of the Company at any time, or to limit or reduce any
compensation or benefits to which Executive would be entitled but for
this Agreement.
<PAGE>
6.05 NOTICES. Notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall either be personally
delivered by hand or sent by: (i) Registered or Certified Mail, Return
Receipt Requested, postage prepaid, properly packaged, addressed and
deposited in the United States Postal System; (ii) via facsimile
transmission if the receiver acknowledges receipt; or (iii) via Federal
Express or other expedited delivery service provided that acknowledgment
of receipt is received and retained by the deliverer and furnished to
the sender, if to Executive, at the last address he has filed, in
writing, with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06 NON-ALIENATION. Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts
provided under this Agreement, and no payments or benefits due hereunder
shall be assignable in anticipation of payment either by voluntary or
involuntary acts or by operation of law. So long as Executive lives, no
person, other than the parties hereto, shall have any rights under or
interest in this Agreement or the subject matter hereof. Upon the death
of Executive, his Executors, Administrators, Devisees and Heirs, in that
order, shall have the right to enforce the provisions hereof.
6.07 ENTIRE AGREEMENT: AMENDMENT.This Agreement constitutes the entire
agreement of the parties with respect of the subject matter hereof. No
provision of this Agreement may be amended, waived, or discharged except
by the mutual written agreement of the parties. The consent of any other
person(s) to any such amendment, waiver or discharge shall not be
required.
6.08 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns, by operation
of law or otherwise, including, without limitation, any corporation or
other entity or persons which shall succeed (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company, and the Company will
require any successor, by agreement in form and substance satisfactory
to Executive, expressly to assume and agree to perform this Agreement.
Except as otherwise provided herein, this Agreement shall be binding
upon and inure to the benefit of Executive and his legal
representatives, heirs and assigns, provided however, that in the event
of Executive's death prior to payment or distribution of all amounts,
distributions and benefits due him hereunder, each such unpaid amount
and distribution shall be paid in accordance with this Agreement to the
person or persons designated by Executive to the Company to receive such
payment or distribution and in the event Executive has made no
applicable designation, to his Estate. If the Company should split,
divide or otherwise become more than one entity, all liability and
obligations of the Company shall be the joint and several liability and
obligation of all of the parts.
6.09 GOVERNING LAW. Except to the extent required to be governed by the laws
of the State of Louisiana because the Company is incorporated under the
laws of said State, the validity, interpretation and enforcement of this
Agreement shall be governed by the laws of the State of Texas.
<PAGE>
6.10 VENUE. To the extent permitted by applicable State and Federal law,
venue for all proceedings hereunder will be in Harris County, Texas.
6.11 HEADINGS. The headings in this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of
this Agreement.
6.12 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
6.13 PARTIAL INVALIDITY. In the event that any part, portion or Section of
this Agreement is found to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be binding upon the
parties hereto and the Agreement will be construed to give meaning to
the remaining provisions of this Agreement in accordance with the intent
of this Agreement.
6.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but all of
which together constitute one and the same instrument.
IN WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors and the Compensation Committee,
the Company has caused these presents to be executed in its name and on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
EXECUTED in multiple originals and/or counterparts as of the Effective
Date.
/s/ EARL W. McNIEL
EARL W. McNIEL
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
BY:/s/ RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
EXHIBIT 21
SUBSIDIARIES OF PRIDE INTERNATIONAL, INC.
STATE OR OTHER JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
- ---------- -----------------------------
Petroleum Supply Company Texas
Pride Offshore, Inc. Delaware
Ranger Well Service Texas
Ranger Corporation Delaware
Pride International Holdings, Inc. Delaware
Pride Drilling, Inc. Texas
Pride International Management Company Delaware
Forwest Inc. Texas
Pride International Ltd. British Virgin Islands
Pride South America Ltd. British Virgin Islands
Pride International, C.A. Venezuela
Pride Cyprus Ltd. Cyprus
Pride Limassol Ltd. Cyprus
Pride International JSC Russia
Pride International, S.A. Argentina
Perforaciones Quitral-Co. de Venezuela, S.A. Venezuela
Pride Peru S.A. Peru
Ingeser de Colombia, S.A. British Virgin Islands
Pride Global Ltd. British Virgin Islands
SE Pacific Drilling Ltd. British Virgin Islands
Westville Management Corporation British Virgin Islands
Utah Drilling Limited British Virgin Islands
Pride International Personnel, Ltd. British Virgin Islands
-1-
<PAGE>
STATE OR OTHER JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
- ---------- -----------------------------
Pride U.S. Personnel, Ltd. British Virgin Islands
Pride-Forasol-Foramer Ltd. British Virgin Islands
Dupont Maritime Ltd. British Virgin Islands
Durand Maritime Ltd. British Virgin Islands
Martin Maritime Limited Bahamas
Sonamer Limited Bahamas
Forasub, B.V. The Netherlands
Forasol, S.A. France
Forinter Ltd. Jersey
Foramer S.A. France
Al Jazirah Forasol Drilling Corporation Liberia
Basafojagu (HS) Inc. Liberia
Caland Boren B.V. The Netherlands
Compagnie Monegasque De Services Comoser s.a.m. Monaco
Dayana Finance S.A. Panama
Drilling Labor Services PTE Ltd. Singapore
Foracasp CEI
Foradel SDN B.H.D. Malaysia
Forafels Inc. Panama
Forarom sri Romania
Forasol Drilling (West Africa) Ltd. Abuja
Forasol Arabia Limited Saudi Arabia
Foratex Inc. Texas
C.A. Foravep Venezuela
Hispano Americana de Petroleos S.A. HAPSA Argentina
-2-
<PAGE>
STATE OR OTHER JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
- ---------- -----------------------------
Horwell S.A. France
Internationale de Travaux et de Materiel (I.T.M.)France
National Drilling & Services Co., L.L.C. Oman
S.B.M. France France
Societe Maritime De Services SOMASER France
Dupont Maritime Ltd. Liberia
Inter-Drill Limited Bahamas Bahamas
Gisor Limited United Kingdom
Foramac Drilling Limited United Kingdom
-3-
EXHIBIT 22
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Pride International, Inc. (formerly Pride Petroleum Services,
Inc.) on Form S-8 (Registration Nos. 33-26854, 33-44823, 333-06823, 333-06825,
333-27661, 333-35089 and 333-35093) and on Form S-3 (Registration Nos. 33-62425
and 333-21385) of our report dated March 16, 1998 on our audits of the
consolidated financial statements of Pride International, Inc. as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET OF PRIDE INTERNATIONAL, INC. AS OF DECEMBER
31, 1997 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 73,539
<SECURITIES> 856
<RECEIVABLES> 194,973
<ALLOWANCES> (1,963)
<INVENTORY> 26,899
<CURRENT-ASSETS> 37,943
<PP&E> 1,273,327
<DEPRECIATION> (101,680)
<TOTAL-ASSETS> 1,541,501
<CURRENT-LIABILITIES> 230,477
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 685,156
<TOTAL-LIABILITY-AND-EQUITY> 1,541,501
<SALES> 699,788
<TOTAL-REVENUES> 699,788
<CGS> 458,861
<TOTAL-COSTS> 591,403
<OTHER-EXPENSES> (81,617)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,368
<INCOME-PRETAX> 155,634
<INCOME-TAX> 51,639
<INCOME-CONTINUING> 103,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,995
<EPS-PRIMARY> 2.42
<EPS-DILUTED> 2.16
</TABLE>
