UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-13289
PRIDE INTERNATIONAL, 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 OFFICES) (ZIP CODE)
(713) 789-1400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practical date.
Outstanding as of August 10, 1999
Common Stock, no par value 56,162,440
<PAGE>
PRIDE INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1999 and December 31, 1998.................. 2
Consolidated Statement of Operations for the three months ended June 30, 1999
and 1998......................................................................... 3
Consolidated Statement of Operations for the six months ended June 30, 1999 and
1998............................................................................. 4
Consolidated Statement of Cash Flows for the six months ended June 30, 1999 and
1998............................................................................. 5
Notes to Unaudited Consolidated Financial Statements.................................. 6
Report of Independent Accountants..................................................... 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk....................... 17
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds....................................... 18
Item 4. Submission of Matters to a Vote of Security Holders............................. 18
Item 6. Exhibits and Reports on Form 8-K................................................ 18
Signatures ................................................................................ 19
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIDE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ................................. $ 176,889 $ 86,540
Trade receivables, net .................................... 155,122 187,351
Parts and supplies ........................................ 29,153 29,161
Deferred income taxes ..................................... 5,281 1,320
Prepaid expenses and other current assets ................. 63,775 65,410
----------- -------------
Total current assets ................................. 430,220 369,782
----------- -------------
PROPERTY AND EQUIPMENT, net ..................................... 1,847,848 1,725,787
----------- -------------
OTHER ASSETS
Investments in and advances to affiliates ................. 47,547 48,582
Other assets .............................................. 65,264 48,016
----------- -------------
Total other assets ................................... 112,811 96,598
----------- -------------
$ 2,390,879 $ 2,192,167
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .......................................... $ 124,876 $ 151,514
Accrued expenses .......................................... 97,742 79,794
Short-term borrowings ..................................... 3,382 16,522
Current portion of long-term debt ......................... 21,792 27,452
Current portion of long-term lease obligations ............ 10,133 9,897
----------- -------------
Total current liabilities ............................ 257,925 285,179
----------- -------------
OTHER LONG-TERM LIABILITIES ..................................... 59,550 48,987
LONG-TERM DEBT, net of current portion .......................... 890,869 630,520
LONG-TERM LEASE OBLIGATIONS, net of current portion ............. 44,570 50,148
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES ...................... 52,480 52,480
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES ................. 211,123 237,327
DEFERRED INCOME TAXES ........................................... 79,303 101,302
MINORITY INTEREST ............................................... 23,767 22,822
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value; 100,000,000 shares authorized;
55,169,539 and 50,437,261 shares issued and 55,115,319
and 50,383,041 shares outstanding, respectively ...... 1 1
Paid-in capital ........................................... 573,992 523,674
Treasury stock, at cost ................................... (191) (191)
Retained earnings ......................................... 197,490 239,918
----------- -------------
Total shareholders' equity ........................... 771,292 763,402
----------- -------------
$ 2,390,879 $ 2,192,167
=========== =============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
2
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
------------------------
1999 1998
--------- ---------
REVENUES ......................................... $ 168,083 $ 219,186
OPERATING COSTS .................................. 123,666 137,442
--------- ---------
Gross margin ............................... 44,417 81,744
DEPRECIATION AND AMORTIZATION .................... 23,107 19,084
SELLING, GENERAL AND ADMINISTRATIVE .............. 17,126 19,895
--------- ---------
EARNINGS FROM OPERATIONS ......................... 4,184 42,765
--------- ---------
OTHER INCOME (EXPENSE)
Other expense, net ......................... (11) (393)
Interest income ............................ 1,015 1,765
Interest expense ........................... (14,931) (12,357)
--------- ---------
Total other income (expense), net ..... (13,927) (10,985)
--------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES .............. (9,743) 31,780
INCOME TAX PROVISION (BENEFIT) ................... (2,888) 7,264
--------- ---------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN .... (6,855) 24,516
EXTRAORDINARY GAIN ............................... 3,884 --
--------- ---------
NET EARNINGS (LOSS) .............................. $ (2,971) $ 24,516
========= =========
NET EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY GAIN:
Basic ...................................... $ (.13) $ .49
Diluted .................................... $ (.13) $ .43
NET EARNINGS (LOSS) PER SHARE AFTER
EXTRAORDINARY GAIN:
Basic ...................................... $ (.06) $ .49
Diluted .................................... $ (.06) $ .43
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ...................................... 51,098 50,087
Diluted .................................... 51,098 61,351
The accompanying notes are an integral part of
the consolidated financial statements.
3
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
--------- ---------
REVENUES ......................................... $ 321,902 $ 432,872
OPERATING COSTS .................................. 237,778 273,935
RESTRUCTURING COSTS .............................. 12,817 --
--------- ---------
Gross margin ............................... 71,307 158,937
DEPRECIATION AND AMORTIZATION .................... 46,499 37,899
SELLING, GENERAL AND ADMINISTRATIVE .............. 39,019 40,752
RESTRUCTURING COSTS .............................. 25,700 --
--------- ---------
EARNINGS (LOSS) FROM OPERATIONS .................. (39,911) 80,286
--------- ---------
OTHER INCOME (EXPENSE)
Other income (expense), net ................ 565 (559)
Interest income ............................ 2,259 3,064
Interest expense ........................... (27,490) (22,828)
--------- ---------
Total other income (expense), net ..... (24,666) (20,323)
--------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES .............. (64,577) 59,963
INCOME TAX PROVISION (BENEFIT) ................... (18,265) 14,013
--------- ---------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN .... (46,312) 45,950
EXTRAORDINARY GAIN ............................... 3,884 --
--------- ---------
NET EARNINGS (LOSS) .............................. $ (42,428) $ 45,950
========= =========
NET EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY GAIN:
Basic ...................................... $ (.91) $ .92
Diluted .................................... $ (.91) $ .83
NET EARNINGS (LOSS) PER SHARE AFTER
EXTRAORDINARY GAIN:
Basic ...................................... $ (.84) $ .92
Diluted .................................... $ (.84) $ .83
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ...................................... 50,752 50,073
Diluted .................................... 50,752 58,331
The accompanying notes are an integral part of
the consolidated financial statements.
4
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) .............................................. $ (42,428) $ 45,950
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities -
Depreciation and amortization ............................... 46,499 37,899
Discount amortization on zero coupon convertible subordinated
debentures ............................................. 5,636 1,821
Gain on sale of assets ...................................... (492) (173)
Deferred tax provision (benefit) ............................ (25,960) 6,659
Minority interest ........................................... 945 (77)
Extraordinary gain .......................................... (6,825) --
Changes in assets and liabilities:
Trade receivables ...................................... 32,229 (10,091)
Parts and supplies ..................................... 8 (6,276)
Prepaid expenses and other current assets .............. 1,635 (9,309)
Other assets ........................................... (12,542) (3,955)
Accounts payable ....................................... (26,638) 5,678
Accrued expenses ....................................... 17,948 (2,301)
Other liabilities ...................................... 10,563 14,506
--------- ---------
Net cash provided by operating activities.......... 578 80,331
--------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment .............................. (265,933) (249,442)
Proceeds from sales of property and equipment .................... 97,974 2,417
Investments in affiliates ........................................ 1,035 (14,964)
--------- ---------
Net cash used in investing activities ............. (166,924) (261,989)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock ........................... 25,000 --
Proceeds from exercise of stock options .......................... 303 601
Proceeds from issuance of convertible subordinated debentures .... -- 223,100
Proceeds from debt borrowings .................................... 425,838 80,044
Reduction of debt ................................................ (194,446) (61,134)
--------- ---------
Net cash provided by financing activities ......... 256,695 242,611
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .............................. 90,349 60,953
CASH AND CASH EQUIVALENTS, beginning of period ......................... 86,540 74,395
--------- ---------
CASH AND CASH EQUIVALENTS, end of period ............................... $ 176,889 $ 135,348
========= =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
5
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. GENERAL
The unaudited consolidated financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
of Pride International, Inc. (the "Company") included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. Certain
reclassifications have been made to prior year amounts to conform with the
current year presentation.
In the opinion of management, the unaudited consolidated financial
information included herein reflects all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the
interim periods presented. The results of operations for the interim periods
presented herein are not necessarily indicative of the results to be expected
for a full year or any other interim period.
2. DEBT
LONG-TERM DEBT
Long-term debt as of June 30, 1999 and December 31, 1998 consisted of
the following:
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
(IN THOUSANDS)
9 3/8% Senior Notes due 2007 ......................... $325,000 $ 325,000
10% Senior Notes due 2009 ............................ 200,000 --
Drillship construction loans ......................... 297,263 158,866
Collateralized term loans ............................ 32,095 70,558
Limited-recourse collateralized term loans ........... 28,911 31,112
Senior convertible note .............................. 21,250 21,250
Other notes payable .................................. 8,142 12,186
Bank credit facility ................................. -- 39,000
-------- ------------
912,661 657,972
Current portion of long-term debt .................... 21,792 27,452
-------- ------------
Long-term debt, net of current portion ...... $890,869 $ 630,520
======== ============
In connection with the construction of two new ultra-deepwater drillships,
the PRIDE AFRICA and the PRIDE ANGOLA, the Company and the two joint venture
companies in which the Company has a 51% interest have entered into financing
arrangements with a group of banks that are providing approximately $400 million
of the drillships' total estimated construction cost of $470 million. The loans
with respect to the PRIDE AFRICA have become non-recourse to the joint venture
participants, and the loans with respect to the PRIDE ANGOLA will become
non-recourse upon commencement of operations of the drillship. During the
construction of the PRIDE ANGOLA, the lenders could have recourse to the Company
with respect to an aggregate of up to $200 million of such loans. As of June 30,
1999, $164.5 million was outstanding under the non-recourse loans for the PRIDE
AFRICA and $132.8 million was outstanding under the construction period loans
for the PRIDE ANGOLA. The Company estimates that its total equity investment in
the joint ventures will be approximately $38 million. The Company can give no
assurance, however, that additional capital will not be required to complete
construction of the PRIDE ANGOLA.
In May 1999, the Company completed the public sale of $200 million
principal amount of 10% Senior Notes due June 1, 2009. Interest on the notes is
payable semi-annually on June 1 and December 1 of each year. The notes are not
redeemable prior to June 1, 2004, after which they will be redeemable, in whole
or in part, at the option of the Company at redemption prices starting at 105%
of the principal amount and declining to 100% by June 1, 2007. In the event the
Company consummates a qualified equity offering on or prior to June 1, 2002, the
Company may use all or a portion of the proceeds to redeem up to 33% of the
principal amount of the notes at a redemption price equal to 110% of the
aggregate principal amount thereof, together with accrued and unpaid interest to
the date of redemption. The notes contain provisions that limit the ability of
the Company and its subsidiaries, with certain exceptions, to pay dividends or
make other restricted payments; incur additional debt or issue preferred stock;
create or permit to exist liens; incur dividend or other payment restrictions
affecting subsidiaries; consolidate, merge or transfer all or substantially all
its assets; sell assets; enter into transactions with affiliates and engage in
sale and leaseback transactions.
6
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. SALE-LEASEBACK TRANSACTION
In February 1999, the Company completed the sale and leaseback of a
semisubmersible drilling rig, pursuant to which it received $97 million in cash.
The net book value of the rig has been removed from the balance sheet and the
excess of funding over the net book value of the rig has been deferred and is
being amortized as a reduction of lease expense over the lease term. The lease
is for a term of 13.5 years, and the Company has options to purchase the rig at
the end of eight and one-half years and at the end of the lease term. Annual
rentals on the rig range from $11.7 milliom to $15.9 million.
4. EQUITY INVESTMENT
In June 1999, the Company issued approximately 4.7 million shares of
common stock to a private investment firm for $25 million in cash and the
delivery of approximately $77 million principal amount at maturity of the
Company's Zero Coupon Convertible Subordinated Debentures Due 2018 that the
investment firm had previously acquired. Those debentures had an accreted value
of approximately $31.8 million. In connection with the cancellation of the
debentures, the Company recognized an extraordinary gain of $3.9 million, net of
income taxes. In July 1999, the Company issued an additional 1.0 million shares
to the investment firm for $12.5 million cash. The investment firm has agreed to
invest an additional $12.5 million cash in the common equity of one of the
Company's unconsolidated affiliates. The investment firm's $12.5 million
investment in the affiliate will be exchangeable after three years (or earlier
in certain events) at the investment firm's option for an additional
approximately 1.0 million shares of the Company's common stock. The Company will
have the option to purchase the stock of the affiliate for cash or the Company's
common stock once the affiliate stock becomes exchangeable for the Company's
common stock.
5. RESTRUCTURING CHARGES
During the three month period ended March 31, 1999, the Company
implemented a restructuring plan to address the recent dramatic decline in
drilling and workover activity. The restructuring consists of regional base
consolidations, down-sizing of administrative staffs and other reductions in
personnel and has resulted in a pretax charge of $38.5 million for current and
future cash expenditures. Charges include the cost of involuntary employee
termination benefits, including severance, wage continuation, medical and other
benefits, facility closures and other costs in connection with the restructuring
plan. The Company paid approximately $24.8 million of such cost attributed
primarily to involuntary employee termination benefits during the six months
ended June 30, 1999 (of which $15.4 million was paid in the second quarter). It
is the opinion of management that the remaining $13.7 million provision is
adequate to cover the future costs attributable to the restructuring.
6. INCOME TAXES
The Company's consolidated effective income tax rate for the six months
ended June 30, 1999 was approximately 28.3%, as compared to approximately 23.4%
for the corresponding period in 1998. The increase in the effective tax rate for
the six months ended June 30, 1999 resulted primarily from the tax effect of the
restructuring costs, and associated net losses, being recorded in higher
effective tax rate jurisdictions.
7. NET EARNINGS PER SHARE
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 debt 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 debt.
7
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table presents information necessary to calculate basic and
diluted net earnings (loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net earnings (loss) before extraordinary gain .... $ (6,855) $ 24,516 $(46,312) $ 45,950
Extraordinary gain ............................... 3,884 -- 3,884 --
-------- -------- -------- --------
Net earnings (loss) after extraordinary gain ..... (2,971) 24,516 (42,428) 45,950
Interest expense on convertible debt ............. 4,110 2,749 8,172 3,615
Income tax effect ................................ (1,438) (989) (2,860) (1,301)
-------- -------- -------- --------
Adjusted net earnings (loss) after
extraordinary gain .................... $ (299) $ 26,276 $(37,116) $ 48,264
======== ======== ======== ========
Weighted average shares outstanding .............. 51,098 50,087 50,752 50,073
Convertible subordinated debentures .............. 12,856 10,258 11,998 7,287
Stock options and warrants ....................... 268 1,006 1,177 971
-------- -------- -------- --------
Adjusted weighted average shares outstanding 64,222 61,351 63,927 58,331
======== ======== ======== ========
Basic net earnings (loss) per share:
Before extraordinary gain ........ $ (.13) $ .49 $ (.91) $ .92
======== ======== ======== ========
After extraordinary gain ......... $ (.06) $ .49 $ (.84) $ .92
======== ======== ======== ========
Diluted net earnings (loss) per share . $ (.06) $ .43 $ (.84) $ .83
======== ======== ======== ========
</TABLE>
As a result of net losses for the three months and the six months ended
June 30, 1999, all common stock equivalents have been excluded from the
calculation of earnings (loss) per share because their effect is antidilutive
for those periods.
The Company will become obligated to purchase its zero coupon convertible
subordinated debentures, at the option of the holders, in whole or in part, on
April 24, 2003, 2008 and 2013. The Company has the option to purchase the
debentures for cash, common stock or a combination thereof. The Company does not
anticipate using common stock to satisfy any such future purchase obligation.
8. COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income", which establishes standards for reporting
and display of comprehensive income and its components in a full set of
financial statements. Comprehensive income includes all changes in a company's
equity, except those resulting from investments by and distributions to owners.
There was no difference between comprehensive income (loss) and net earnings
(loss) for the three or six month periods ended June 30, 1999 and 1998.
9. COMMITMENTS AND CONTINGENCIES
The Company is routinely 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 will have a material adverse effect on the
Company's financial position, results of operations or cash flows.
8
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. SEGMENT INFORMATION
The following table sets forth selected consolidated financial information
of the Company by operating segment for the periods indicated (operating costs
include restructuring costs):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------------------- -----------------------------------------
1999 1998 1999 1998
------------------- ------------------- ------------------- -------------------
(IN MILLIONS, EXCEPT PERCENTAGES) (IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
International land ..... $ 59.6 35.5 % $ 102.0 46.5 % $ 126.8 39.4 % $ 210.6 48.7 %
International offshore . 85.1 50.6 69.6 31.8 143.3 44.5 129.3 29.9
United States offshore . 23.4 13.9 47.6 21.7 51.8 16.1 92.9 21.4
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues ...... 168.1 100.0 219.2 100.0 321.9 100.0 432.8 100.0
-------- -------- -------- -------- -------- -------- -------- --------
OPERATING COSTS:
International land ..... 44.0 35.6 76.4 55.5 107.1 42.8 153.9 56.2
International offshore . 64.7 52.3 35.5 25.8 106.1 42.3 69.1 25.2
United States offshore . 15.0 12.1 25.6 18.7 37.4 14.9 50.9 18.6
-------- -------- -------- -------- -------- -------- -------- --------
Total operating costs 123.7 100.0 137.5 100.0 250.6 100.0 273.9 100.0
-------- -------- -------- -------- -------- -------- -------- --------
GROSS MARGIN:
International land ..... 15.6 35.1 25.6 31.4 19.7 27.7 56.7 35.7
International offshore . 20.4 46.1 34.1 41.7 37.2 52.1 60.2 37.9
United States offshore . 8.4 18.8 22.0 26.9 14.4 20.2 42.0 26.4
-------- -------- -------- -------- -------- -------- -------- --------
Total gross margin .. $ 44.4 100.0 % $ 81.7 100.0 % $ 71.3 100.0 % $ 158.9 100.0 %
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride International, Inc.:
We have reviewed the accompanying consolidated balance sheet of Pride
International, Inc. as of June 30, 1999, and the related consolidated statements
of operations for the three-month and six-month periods ended June 30, 1999 and
1998, and the related consolidated statement of cash flows for the six-month
periods ended June 30, 1999 and 1998. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, and the
related consolidated statements of operations, changes in shareholders' equity,
and cash flows for the year then ended (not presented herein); and in our report
dated March 30, 1999, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
balance sheet as of December 31, 1998 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
PricewaterhouseCoopers LLP
Houston, Texas
August 13, 1999
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis in conjunction with
our unaudited consolidated financial statements as of June 30, 1999 and for the
three-month and six-month periods ended June 30, 1999 and 1998 included
elsewhere herein, and with our Annual Report on Form 10-K for the year ended
December 31, 1998. The following information contains forward-looking
statements. Please read "Forward-Looking Statements" for a discussion of
limitations inherent in such statements.
GENERAL
Pride is a leading international provider of contract drilling and related
services, operating both offshore and on land. Currently, we operate a global
fleet of 305 rigs, including three semisubmersible rigs, 17 jackup rigs, seven
tender-assisted rigs, four barge rigs, 23 offshore platform rigs and 251
land-based drilling and workover rigs. We operate in more than 20 countries and
marine provinces. The significant diversity of our rig fleet and areas of
operations enables us to provide a broad range of services and to take advantage
of market upturns while reducing our exposure to sharp downturns in any
particular market sector or geographic region.
Most recently, we have focused on increasing the size of our fleet capable
of drilling in deeper waters. We are currently adding to our fleet two
ultra-deepwater drillships, the PRIDE AFRICA (recently constructed and now in
transit to its first job) and the PRIDE ANGOLA (currently under construction),
which are expected to commence operations under long-term contracts in the fall
of 1999 and in early 2000, respectively, and four fourth-generation
Amethyst-class semisubmersible rigs, which also are committed under long-term
contracts and are expected to be delivered in mid-2000.
OUTLOOK
With industry conditions at depressed levels, management anticipates that
we will experience a continuation of relatively low dayrates and utilization in
the near term. We expect our aggregate dayrates and utilization to continue to
decrease as higher margin long-term contracts now ongoing expire. In addition,
we currently have five jackup rigs and 16 platform rigs idle in the Gulf of
Mexico, where our contracts have traditionally been and continue to be
short-term. We are continuing to experience weakness in our land drilling and
workover operations in South America, particularly Venezuela, where
private-sector exploration and production activity levels have been reduced. As
a result, we expect to realize substantially less revenue from the assets
working in these areas in the near term than in corresponding periods in 1998.
Our operating costs will not, however, decrease proportionately. This revenue
decrease will adversely affect our results of operations for at least the near
term, substantially reducing our cash flows, EBITDA and earnings and likely
resulting in losses in 1999 and potentially beyond. Due to the short-term nature
of many of our contracts and the unpredictable nature of oil and gas prices,
which affect the demand for drilling activity, we cannot predict the extent of
such adverse change accurately. Despite recent improvements in oil and gas
commodity prices, the duration of this market downturn cannot be accurately
predicted. Management anticipates that drilling markets will remain depressed
for at least the balance of 1999, and possibly longer, but believes the
long-term outlook for the industry and for us is favorable.
The deteriorating industry conditions over the latter part of 1998 and the
first half of 1999 have led us to reduce our workforce significantly. In the
first quarter 1999, we recorded charges of $28.9 million, net of income taxes,
for current and future cash expenditures related to a company-wide restructuring
plan implemented to address the dramatic decline in drilling and workover
activity. We expect the restructuring to result in annual cost savings in excess
of $25 million.
11
<PAGE>
RESULTS OF OPERATIONS
We have presented in the following table selected consolidated financial
information by operating segment for the periods indicated. Operating costs for
the three and six-month periods ended June 30, 1999 include restructuring
charges.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
(IN MILLIONS, EXCEPT PERCENTAGES) (IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
International land ..... $ 59.6 35.5 % $102.0 46.5 % $126.8 39.4 % $210.6 48.7 %
International offshore . 85.1 50.6 69.6 31.8 143.3 44.5 129.3 29.9
United States offshore . 23.4 13.9 47.6 21.7 51.8 16.1 92.9 21.4
------ ------ ------ ------ ------ ------ ------ ------
Total revenues ...... 168.1 100.0 219.2 100.0 321.9 100.0 432.8 100.0
------ ------ ------ ------ ------ ------ ------ ------
OPERATING COSTS:
International land ..... 44.0 35.6 76.4 55.5 107.1 42.8 153.9 56.2
International offshore . 64.7 52.3 35.5 25.8 106.1 42.3 69.1 25.2
United States offshore . 15.0 12.1 25.6 18.7 37.4 14.9 50.9 18.6
------ ------ ------ ------ ------ ------ ------ ------
Total operating costs 123.7 100.0 137.5 100.0 250.6 100.0 273.9 100.0
------ ------ ------ ------ ------ ------ ------ ------
GROSS MARGIN:
International land ..... 15.6 35.1 25.6 31.4 19.7 27.7 56.7 35.7
International offshore . 20.4 46.1 34.1 41.7 37.2 52.1 60.2 37.9
United States offshore . 8.4 18.8 22.0 26.9 14.4 20.2 42.0 26.4
------ ------ ------ ------ ------ ------ ------ ------
Total gross margin .. $ 44.4 100.0% $ 81.7 100.0% $ 71.3 100.0% $158.9 100.0%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998.
REVENUES. Revenues for the three months ended June 30, 1999 decreased
$51.1 million, or 23.3%, as compared to the corresponding period in 1998. Of
this decrease, $42.4 million was a result of significantly reduced rig
utilization of our international land-based fleet in Argentina, Colombia and
Venezuela. Revenues from our United States offshore operations decreased $24.2
million due to the continuation of low dayrates and utilization of our Gulf of
Mexico jackup and platform rigs. These revenue decreases were partially offset
by a $15.5 million increase in revenues attributable to our international
offshore operations, primarily due to the addition of the semisubmersible rig
AMETHYST 1 in October 1998 and increased utilization for several of our other
international offshore rigs.
OPERATING COSTS. Operating costs for the three months ended June 30, 1999
decreased $13.8 million, or 10.0%, as compared to the corresponding period in
1998. Operating costs attributable to our international land-based operations
decreased $32.4 million as a result of lower rig utilization, as discussed
above. Operating costs attributable to our United States offshore operations
decreased $10.6 million due to lower rig utilization, as discussed above.
International offshore operating costs increased by $29.2 million, which is
attributable to the addition of the AMETHYST 1 and increased utilization as
discussed above.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the three
months ended June 30, 1999 increased $4.0 million, or 21.1%, as compared to the
corresponding period in 1998, primarily due to the expansion of our fleet.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended June 30, 1999 decreased $2.8 million, or
13.9%, as compared to the corresponding period in 1998, primarily as a result of
the base consolidations and down-sizing of administrative staff undertaken in
the first quarter of 1999.
OTHER INCOME (EXPENSE). Other income (expense) for the three months ended
June 30, 1999 increased $2.9 million, or 26.8%, as compared to the corresponding
period in 1998, primarily as a result of an increase in interest expense of $2.6
million due to increased borrowings. During the three months ended June 30,
1999, we capitalized $7.3 million of interest expense in connection with
construction projects, as compared to $2.4 million for the three months ended
June 30, 1998.
INCOME TAX PROVISION. Our consolidated effective income tax rate for the
three months ended June 30, 1999 was approximately 29.6%, as compared to
approximately 22.9% for the corresponding period in 1998. The increase in the
effective income tax rate for the
12
<PAGE>
three months ended June 30, 1999 resulted primarily from the tax effect of the
net losses being recorded in higher effective tax rate jurisdictions.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998.
REVENUES. Revenues for the six months ended June 30, 1999 decreased $110.9
million, or 25.6%, as compared to the corresponding period in 1998. Of this
decrease, $83.8 million was a result of significantly reduced rig utilization of
our international land-based fleet in Argentina, Colombia and Venezuela.
Revenues from our United States offshore operations decreased $41.1 million due
to the continuation of low dayrates and utilization of our Gulf of Mexico jackup
and platform rigs. These revenue decreases were offset by a $14.0 million
increase in revenues attributable to our international offshore operations,
primarily due to the addition of the AMETHYST 1 in October 1998 and increased
utilization for several of our other international offshore rigs.
OPERATING COSTS. Operating costs for the six months ended June 30, 1999
decreased $23.3 million, or 8.5%, as compared to the corresponding period in
1998. Of this decrease, $55.7 million was attributable to lower rig utilization
for our international land-based rigs, as discussed above, partially offset by
$8.9 million of non-recurring costs, primarily employee termination benefits, in
connection with the restructuring of such operations. Operating costs
attributable to our United States offshore operations decreased $13.5 million
due to lower rig utilization as discussed above. Operating costs for our
international offshore operations increased by $37.0 million, $3.9 million of
which represents non-recurring restructuring charges, primarily employee
termination benefits, in connection with the restructuring of such operations,
and $33.1 million of which is attributable to the addition of the AMETHYST 1 and
increased rig utilization, as discussed above.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$8.6 million, or 22.7%, for the six months ended June 30, 1999 as compared to
the corresponding period in 1998, primarily due to the expansion of our
international offshore assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased $1.7 million, or 4.3%, for the six months ended June 30, 1999
as compared to the corresponding period in 1998, primarily because of the base
consolidations and downsizing of the administrative staff, which was offset by
the non-recurring costs of this restructuring incurred in the first quarter of
1999.
OTHER INCOME (EXPENSE). Other income (expense) for the six months ended
June 30, 1999 increased $4.3 million, or 21.4 %, over the corresponding period
in 1998, primarily as a result of an increase in interest expense of $4.7
million due to increased borrowings. During the six months ended June 30, 1999,
we capitalized $14.9 million of interest expense in connection with construction
projects, as compared to $5.8 million for the six months ended June 30, 1998.
INCOME TAX PROVISION. Our consolidated effective income tax rate for the
six months ended June 30, 1999 was approximately 28.3% as compared to
approximately 23.4% for the corresponding period in 1998. The increase in the
effective income tax rate for the six months ended June 30, 1999 resulted
primarily from the tax effect of the restructuring costs, and associated net
losses, being recorded in higher effective tax rate jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
We had working capital of $172.3 million and $84.6 million as of June 30,
1999 and December 31, 1998, respectively. Our current ratio was 1.7 as of June
30, 1999 and 1.3 as of December 31, 1998. The increase in the current ratio was
attributable primarily to the net increase in cash and cash equivalents from our
capital transactions in February, May and June 1999 described below and a
decrease in short-term borrowings.
During the six months ended June 30, 1999, our capital expenditures
primarily consisted of approximately $210 million attributable to the PRIDE
AFRICA and the PRIDE ANGOLA, approximately $12 million attributable to certain
other construction and refurbishment projects begun in 1998 and approximately
$20 million of other enhancement and sustaining capital expenditures.
We expect to spend approximately $75 million during the remainder of 1999
to complete construction of the PRIDE AFRICA and the PRIDE ANGOLA and
approximately $10 million for other enhancement and sustaining capital
expenditures.
13
<PAGE>
We have a senior secured revolving credit facility with a group of banks
under which up to $50 million (including $30 million for letters of credit) is
available. Availability under the credit facility is limited to a borrowing base
based on the value of collateral. The credit facility is collateralized by our
accounts receivable, inventory and other assets and those of our domestic
subsidiaries, two-thirds of the stock of our foreign subsidiaries, the stock of
our 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 our ability to incur additional indebtedness,
create liens, enter into mergers and consolidations, pay cash dividends on our
capital stock, make acquisitions, sell assets or change our business without
prior consent of the lenders. Under the credit facility, we must maintain
certain financial ratios, including (a) funded debt to EBITDA, (b) funded debt
to capitalization, (c) adjusted EBITDA to debt service and (d) minimum tangible
net worth. As of June 30, 1999, there were approximately $13 million of letters
of credit and no advances outstanding under the credit facility.
In connection with the construction of two new ultra-deepwater drillships,
the PRIDE AFRICA and the PRIDE ANGOLA, we and the two joint venture companies in
which we have a 51% interest have entered into financing arrangements with a
group of banks that are providing approximately $400 million of the drillships'
total estimated construction cost of $470 million. The loans with respect to the
PRIDE AFRICA have become non-recourse to the joint venture participants, and the
loans with respect to the PRIDE ANGOLA will become non-recourse upon
commencement of operations of the drillship. During the construction of the
PRIDE ANGOLA, the lenders could have recourse to us with respect to an aggregate
of up to $200 million of such loans. As of June 30, 1999, $164.5 million was
outstanding under the non-recourse loans for the PRIDE AFRICA and $132.8 million
was outstanding under the construction period loans for the PRIDE ANGOLA. We
estimate that our total equity investment in the joint ventures will be
approximately $38 million. We can give no assurance, however, that additional
capital will not be required to complete construction of the PRIDE ANGOLA.
A joint venture company in which we have a 30% interest has entered into a
financing arrangement with a group of foreign lenders to provide up to $240
million of the $360 million estimated cost of two Amethyst-class semisubmersible
rigs under construction in South Korea. Previous equity contributions by us and
our joint venture partner will provide an additional $20 million of such cost.
Pride has provided the lenders with certain commitments and guarantees,
including (a) a commitment (not exceeding $30 million) to provide 30% of the
funds needed to complete the rigs if third-party funding cannot be obtained by
October 30, 1999; (b) a guarantee of payment of up to $32.4 million of the
loans; (c) a guarantee of cost overruns of up to an aggregate of $6 million; (d)
a guarantee of the cost of the two rigs in excess of related refund guarantees
supporting their construction contracts and (e) certain other financial and
operating-related guarantees.
In addition, the joint venture has received a guarantee from the United
States Maritime Administration ("MARAD") of obligations for both construction
period and mortgage period financing relating to the construction of two
Amethyst-class semisubmersible rigs under construction in the United States. The
MARAD guarantee covers approximately $300 million of the estimated $340 million
cost of the vessels. The joint venture has completed the construction period
financing and has engaged a placement agent for the mortgage period financing.
In connection with the MARAD financing, Pride has agreed to guarantee payment of
up to $20.5 million of late delivery penalties that are accruing and may become
payable under the charter and service contracts related to these two rigs.
The joint venture had contracts with Petroleo Brasilerio S.A., or
Petrobras, to provide two additional deepwater rigs and originally intended to
build two additional rigs. Construction contracts with respect to those two rigs
were terminated, however, after the shipyard at which the rigs were to be
constructed filed for protection from its creditors. Petrobras has canceled the
charter and service contracts for those two rigs.
In February 1999, we completed the sale and leaseback of the
semisubmersible rig AMETHYST 1, pursuant to which we received $97 million in
cash. The lease is for a maximum term of 13.5 years, and we have options to
purchase the rig at the end of eight and one-half years and at the end of the
lease term. Annual rentals for the rig range from $11.7 million to $15.9
million.
In June 1999, we issued a total of approximately 4.7 million shares of our
common stock to two funds managed by First Reserve Corporation for $25 million
in cash and the delivery of approximately $77 million principal amount at
maturity of our Zero Coupon Convertible Subordinated Debentures Due 2018 that
First Reserve had previously acquired. Those debentures had an accreted value of
approximately $31.8 million. In connection with the cancellation of the
debentures, we recognized an extraordinary gain of $3.9
14
<PAGE>
million. In July 1999, we issued an additional 1.0 million shares to the two
funds for $12.5 million cash. First Reserve has agreed to invest an additional
$12.5 million cash in the common equity of the Amethyst joint venture company.
First Reserve's $12.5 million investment in the affiliate will be exchangeable
after three years (or earlier in certain events) at First Reserve's option for
an additional 1.0 million shares of our common stock. We will have the option to
purchase the stock of the affiliate for cash or our common stock once the
affiliate stock becomes exchangeable for our common stock.
In May 1999, we completed the public sale of $200 million principal amount
of 10% Senior Notes due June 1, 2009. The notes contain provisions that limit
our ability and the ability of our subsidiaries, with certain exceptions, to pay
dividends or make other restricted payments; incur additional debt or issue
preferred stock; create or permit to exist liens; incur dividend or other
payment restrictions affecting subsidiaries; consolidate, merge or transfer all
or substantially all our assets; sell assets; enter into transactions with
affiliates and engage in sale and leaseback transactions.
Management believes that the cash and cash equivalents on hand, together
with the cash generated from our operations and borrowings under the credit
facility, will be adequate to fund normal expected capital expenditures, working
capital and debt service requirements for the forseeable future.
From time to time, we may review possible expansion and acquisition
opportunities relating to our business segments. While we have no definitive
agreements to acquire additional equipment, suitable opportunities may arise in
the future. The timing, size or success of any acquisition effort and the
associated potential capital commitments are unpredictable. From time to time,
we have one or more bids outstanding for contracts that could require
significant capital expenditures and mobilization costs. We expect 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.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included in this Quarterly Report on Form 10-Q that address
activities, events or developments that the we expect, project, believe or
anticipate will or may occur in the future are forward-looking statements. These
include such matters as:
o 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)
o repayment of debt
o expansion and other development trends in the contract drilling industry
o business strategies
o expansion and growth of operations
o utilization rates and contract rates for rigs and
o future operating results and financial condition
We have based these statements on assumptions and analyses made by our
management 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. These statements are subject to a number
of assumptions, risks and uncertainties, including:
o general economic and business conditions
o prices of oil and gas and industry expectations about future prices
o foreign exchange controls and currency fluctuations
o the business opportunities (or lack thereof) that may be presented to and
pursued by us and
o changes in laws or regulations
Most of these factors are beyond our control. We caution you that forward-
looking statements are not guarantees of future performance and that actual
results or developments may differ materially from those projected in these
statements.
15
<PAGE>
YEAR 2000 ISSUE
BACKGROUND. The "Year 2000" problem refers to the inability of certain
computer systems and other equipment with embedded chips or processors to
correctly interpret dates after December 31, 1999. Business systems that are not
Year 2000 compliant would not be able to correctly process some date-sensitive
data or, in extreme situations, could cause the entire system to be disabled.
OVERALL GOALS AND OBJECTIVES. Our goal is to have all of our significant
systems functioning properly with respect to the Year 2000 problem and to
develop contingency plans in the event of disruptions caused by the Year 2000
problem before December 31, 1999. We have established a global task force of key
employees at each location to ensure the goal is met. We expect that we will
upgrade or replace a majority of our existing significant systems during this
process. The task force will also develop the contingency plans as required.
These overall goals and objectives are referred to as our "Year 2000 Project
Plan."
YEAR 2000 PROJECT PLAN. The phases of our Year 2000 Project Plan
include:
o identifying, inventorying and assigning priorities to existing
significant systems
o determining and implementing the new Year 2000 compliant systems
that will be used throughout the company
o assessing all remaining Year 2000 risks
o resolving and correcting remaining Year 2000 problems with upgrades
or replacements
o testing the Year 2000 upgrades or replacements
o conducting Year 2000 surveys of significant customers, suppliers and
business partners
o developing and testing Year 2000 contingency plans
Currently, each phase is in various stages of completion. We estimate that
our Year 2000 Project Plan is at least 85% complete.
BUSINESS SYSTEMS. Part of the Year 2000 Project Plan includes performing
an inventory of each drilling rig's critical systems. We are in the process of
fully developing and evaluating this inventory, and compiling written
documentation regarding compliance. We believe that most of our rigs are Year
2000 compliant, but a full assessment is currently being performed. At this
time, we are not able to reasonably assess a likely worst case Year 2000
scenario related to our drilling rigs.
In addition, we are implementing an enterprise resource planning system
("ERP") primarily for accounting and purchasing systems. The ERP system is 95%
operational and is Year 2000 compliant. We expect to complete the conversion to
the new ERP system by October 31, 1999.
KEY BUSINESS PARTNERS. We have initiated communication with our key
business partners to seek Year 2000 readiness assurances and to determine the
extent to which their failure to correct their own Year 2000 problems could
affect us. Our key business partners include suppliers whose critical function
is to provide drilling rig equipment essential to the operation of a rig. In the
event replacement parts that we do not have in inventory are required for a rig
and we are unsuccessful in purchasing the equipment from our suppliers, the rig
could experience idle time resulting in loss of revenue.
Key business partners also include our customers. Any disruption in the
revenue stream generated by our customers could impact our cash flow, results of
operations and financial position. Other key business partners also include
strategic suppliers whose critical function is to provide systems that are Year
2000 compliant and consultants who can advise and assist us in the
implementation of the systems. Any Year 2000 problems with these systems could
affect us adversely in terms of lost time or even loss of revenues.
We cannot guarantee that any Year 2000 problems in other key business
partners' systems on which we rely will be timely
16
<PAGE>
resolved, nor can we inspect the companies' Year 2000 efforts or independently
verify their representations to us. In addition, we cannot predict the effect on
our business operations from the failure of systems owned by others, from the
delivery of inaccurate information from other companies or from the inability of
their systems to interface with our systems. Accordingly, we cannot guarantee
that other companies' failure to resolve their Year 2000 problems would not have
a material adverse effect on us. We are, however, in the process of
assessing these risks.
COSTS. As of August 10, 1999, we had incurred approximately $10 million in
costs primarily for the new ERP system, new hardware, new software licenses and
outside consultants. Such equipment and systems, including the new ERP system,
which were planned for installation regardless of Year 2000 considerations, are
Year 2000 compliant. We estimate that we will incur approximately $3.5 million
of such additional costs during the remainder of 1999.
RISKS. Our expectations regarding the Year 2000 are subject to
uncertainties that could affect our results of operations or financial
condition. Success depends on many factors, some of which are outside our
control. Despite reasonable efforts, we cannot assure that we will not
experience any disruptions or otherwise be adversely affected by Year 2000
problems. While we presently do not expect any catastrophic failures of any of
our systems, we cannot provide any assurances that such failures will not occur.
CONTINGENCY PLANS. We are developing contingency plans for systems and
certain processes that are highly and moderately critical to the business
operations. The contingency plans will encompass alternative courses of action,
with limited reliance on computer software and hardware, in the event that
certain of our systems or processes are not Year 2000 compliant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks arising from the use of financial
instruments in the ordinary course of business. These risks arise primarily as a
result of potential changes in the fair market value of financial instruments
that would result from adverse fluctuation in interest rates and foreign
currency exchange rates as discussed below. We entered into these instruments
other than for trading purposes.
INTEREST RATE RISK. We are exposed to interest rate risk through our
convertible and fixed rate long-term debt. The fair market value of fixed rate
debt will increase as prevailing interest rates decrease. The fair value of our
long-term debt is estimated based on quoted market prices where applicable, or
based on the present value of expected cash flows relating to the debt
discounted at rates currently available to us for long-term borrowings with
similar terms and maturities. The estimated fair value of our long-term debt as
of June 30, 1999 was approximately $1.15 billion, which is less that its
carrying value of $1.19 billion. A hypothetical 10% decrease in interest rates
would increase the fair market value of our long-term debt by approximately
$50.6 million.
FOREIGN CURRENCY EXCHANGE RATE RISK. We operate in a number of
international areas and are involved in transactions denominated in currencies
other than U.S. dollars, which expose us to foreign exchange rate risk. We
utilize forward exchange contracts, local currency borrowings and the payment
structure of customer contracts to selectively hedge our exposure to exchange
rate fluctuations in connection with monetary assets, liabilities and cash flows
denominated in certain foreign currencies. A hypothetical 10% decrease in the
U.S. dollar relative to the value of all foreign currencies as of June 30, 1999
would result in an approximate $1.0 million decrease in the fair value of our
forward exchange contracts. We do not hold or issue forward exchange contracts
or other derivative financial instruments for speculative purposes.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The information set forth under the caption "Liquidity and Capital
Resources" in "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations" regarding the issuance in June 1999 of
4,681,146 shares of our common stock to two funds managed by First Reserve
Corporation for consideration consisting of $25,000,000 in cash and the delivery
of our Zero Coupon Convertible Subordinated Debentures Due 2018 having an
aggregate principal amount at maturity of $77,082,000 is incorporated by
reference in response to this item. In our opinion, this issuance is exempt from
registration under the Securities Act of 1933 by virtue of Section 4(2) thereof
in that such transaction did not involve any public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of shareholders was held in Houston, Texas on May 25,
1999 for the purpose of voting on the proposal described below. Proxies for the
meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act
of 1934 and there was no solicitation in opposition to management's
solicitation.
Shareholders ratified the appointment of PricewaterhouseCoopers LLP as our
independent accountants for 1999 by the following vote:
Shares voted "For".................38,385,389
Shares voted "Against".................73,897
Shares "Abstaining"....................63,210
Shares not voted...................11,904,177
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
- ---- ---------------------------------------
3.1 - Bylaws, as amended on July 14, 1999
10.1 - Securities Purchase Agreement, dated as of May 5, 1999 (the "Purchase
Agreement"), between Pride International, Inc. (the "Company") and
First Reserve Fund VIII, Limited Partnership ("First Reserve")
(incorporated by reference to exhibit 10.2 of the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1999 (File
No. 1-13289)).
10.2 - Letter Agreement dated June 4, 1999 between the Company and First
Reserve, amending the Purchase Agreement.
10.3 - Letter Agreement dated June 18, 1999 between the Company and First
Reserve, amending the Purchase Agreement.
10.4 - Letter Agreement dated June 21, 1999 between the Company and First
Reserve, amending the Purchase Agreement.
10.5 - Letter Agreement dated July 14, 1999 between the Company and First
Reserve, amending the Purchase Agreement.
10.6 - Shareholders Agreement, dated as of June 21, 1999 (the "Shareholders
Agreement"), between the Company and First Reserve.
10.7 - Letter Agreement dated June 21, 1999 between the Company and First
Reserve, amending the Shareholders Agreement.
15.1 - Awareness Letter of PricewaterhouseCoopers LLP
27 - Financial Data Schedule
(b) Reports on Form 8-K
In a Current Report on Form 8-K filed on May 25, 1999, we reported
pursuant to Item 5 of Form 8-K that we had entered into an Underwriting
Agreement dated May 21, 1999 with Salomon Smith Barney Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation relating to our offering of $200
million aggregate principal amount of 10% Senior Notes due 2009. We also filed
pursuant to Item 7 of Form 8-K the underwriting agreement, the indenture and the
form of supplemental indenture under which the notes were issued and the
Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
on Form T-1 of The Chase Manhattan Bank, as indenture trustee.
18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
PRIDE INTERNATIONAL, INC.
By: EARL W. MCNIEL
(EARL W. MCNIEL)
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Date: August 13, 1999
19
EXHIBIT 3.1
AMENDED AS OF JULY 14, 1999
BYLAWS
OF
PRIDE INTERNATIONAL, INC.
SECTION 1.
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be
located at 5847 San Felipe, Suite 3300, Houston, Texas 77057.
1.2 ADDITIONAL OFFICES. The Corporation may have such offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
SECTION 2.
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Unless otherwise required by law or these Bylaws,
all meetings of the shareholders shall be held at the principal office of the
Corporation or at such other place, within or without the State of Louisiana, as
may be designated by the Board of Directors.
2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the shareholders
shall be held at the time specified by the Board of Directors in each year.
Notice of the annual meeting must state the purpose thereof and the business to
be conducted thereat shall be limited to such purpose or purposes.
2.3 ELECTION OF DIRECTORS. Directors shall be elected at the annual
meeting in 1993 and at the annual meetings in every fifth calendar year
thereafter. Any shareholder may nominate a person to serve as director only by
complying with the proceedings set forth in the Restated Articles of the
Corporation.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called by the Chairman of the Board, the President
or the Board of Directors. At any time upon the written request of any
shareholder or group of shareholders holding in the aggregate at least eighty
percent (80%) of the Total Voting Power, as that term is defined in Article V of
the Restated Articles of Incorporation (the "Total Voting Power"), the Secretary
shall call a special meeting of
1
<PAGE>
shareholders to be held at the registered office of the Corporation at such time
as the Secretary may fix, not less than fifteen nor more than sixty days after
the receipt of said request, and if the Secretary shall neglect or refuse to fix
such time or to give notice of the meeting, the shareholder or shareholders
making the request may do so. Such request must state the specific purpose or
purposes of the proposed special meeting, and the business to be conducted
thereat shall be limited to such purpose or purposes.
2.5 NOTICE OF MEETINGS. Except as otherwise provided by law, the
authorized person or persons calling a shareholders' meeting shall cause written
notice of the time, place and purpose of the meeting to be given to all
shareholders entitled to vote at such meeting at least ten days and not more
than sixty days prior to the day fixed for the meeting.
2.6 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list of
shareholders entitled to vote, arranged alphabetically and certified by the
Secretary or by the agent of the Corporation having charge of transfers of
shares, showing the number and class of shares held by each such shareholder on
the record date for the meeting, shall be produced on the request of any
shareholder.
2.7 QUORUM. At all meetings of shareholders, the holders of a majority of
the Total Voting Power shall constitute a quorum, except that at any meeting the
notice of which sets forth any matter that, by law or specified percentage in
excess of a majority of the Total Voting Power of the Corporation, the holders
of that specified percentage shall constitute a quorum.
2.8 VOTING. When a quorum is present at any meeting, the vote of the
holders of a majority of the Voting Power (as defined in Article V of the
Restated Articles of Incorporation) present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which, by express provision of law or the Restated Articles of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Directors
shall be elected by plurality vote.
2.9 PROXIES. At any meeting of the shareholders, every shareholder having
the right to vote shall be entitled to vote in person or by proxy appointed by
an instrument in writing subscribed by such shareholder and bearing a date not
more than eleven months prior to the meeting, unless the instrument provides for
a longer period, but in no case will an outstanding proxy be valid for longer
than three years from the date of its execution and in no case may a proxy be
voted at a meeting called pursuant to La. R.S. 12:138 unless it is executed and
dated by the shareholder within 30 days of the date of such meeting. The person
appointed as proxy need not be a shareholder of the Corporation.
2.10 ADJOURNMENTS. Adjournments of any annual or special meeting of
shareholders may be taken without new notice being given unless a new record
date is fixed for the adjourned meeting,
2
<PAGE>
but any meeting at which directors are to be elected shall be adjourned only
from day to day until such directors shall have been elected.
2.11 WITHDRAWAL. If a quorum is present or represented at a duly organized
meeting, such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum as fixed in Section 2.7 of these Bylaws, or the refusal of any
shareholders present to vote.
2.12 LACK OF QUORUM. If a meeting cannot be organized because a quorum has
not attended, those present may adjourn the meeting to such time and place as
they may determine, subject, however, to the provisions of Section 2.10 hereof.
In the case of any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less than a quorum as
fixed in Section 2.7 hereof, shall nevertheless constitute a quorum for the
purpose of electing directors.
2.13 PRESIDING OFFICER. The Chairman of the Board, or in his absence, the
President, shall preside at all shareholders' meetings.
SECTION 3.
DIRECTORS
3.1 NUMBER. All of the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by a Board of Directors
of eight (8) natural persons, provided that, if after proxy materials for any
meeting of shareholders at which directors are to be elected are mailed to
shareholders any person or persons named therein to be nominated at the
direction of the Board of Directors becomes unable or unwilling to serve, the
foregoing number of authorized directors shall be automatically reduced by a
number equal to the number of such persons unless the Board of Directors, by a
majority vote of the entire Board, selects an additional nominee or nominees.
The Board of Directors may, by a two-thirds vote, amend this Section 3.1 to
increase or decrease the number of directors, provided that no amendment to this
Section to decrease the number of directors shall shorten the term of any
incumbent director. The members of the Board of Directors shall be elected for
terms of five years and shall hold office until their successors are elected and
qualified. No director need be a shareholder.
3.2 POWERS. The Board may exercise all such powers of the Corporation and
do all such lawful acts and things which are not by law, the Restated Articles
of Incorporation or these Bylaws directed or required to be done by the
shareholders.
3.3 VACANCIES. Except as otherwise provided in the Restated Articles of
Incorporation or these Bylaws (a) the office of a director shall become vacant
if he dies, resigns or is removed from office and (b) the Board of Directors may
declare vacant the office of a director if he (i) is interdicted or adjudicated
an incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole opinion of the
Board
3
<PAGE>
of Directors becomes incapacitated by illness or other infirmity so that he is
unable to perform his duties for a period of six months or longer, or (iv)
ceases at any time to have the qualifications required by law, the Restated
Articles of Incorporation or these Bylaws.
3.4 FILLING VACANCIES. In the event of a vacancy (including any vacancy
resulting from an increase in the authorized number of directors, or from
failure of the shareholders to elect the full number of authorized directors)
the remaining directors, even though not constituting a quorum, may, by a vote
of at least two-thirds of such remaining directors, fill any vacancy on the
Board for an unexpired term, provided that the shareholders shall have the
right, at any special meeting called for the purpose prior to such action by the
Board, to fill the vacancy.
SECTION 4.
COMPENSATION OF DIRECTORS
Directors as such, shall receive such compensation for their services as
may be fixed by resolution of the Board of Directors and shall receive their
actual expenses of attendance, if any, for each regular or special meeting of
the Board; provided that nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 5.
MEETINGS OF THE BOARD
5.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be held
at such place within or without the State of Louisiana as a majority of the
directors may from time to time appoint.
5.2 INITIAL MEETINGS. The first meeting of each newly elected Board shall
be held immediately following the shareholders' meeting at which the Board is
elected and at the same place as such meeting, and no notice of such first
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting.
5.3 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be held on
such dates as the Board may fix from time to time. Notice of regular meetings of
the Board of Directors shall be required, but no special form of notice or time
of notice shall be necessary.
5.4 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be called
by the President on two days notice given to each director, either personally or
by telephone, mail or by telegram. Special meetings shall be called by the
President or Secretary in like manner and on like notice on the written request
of one-third of the directors and if the President and Secretary fail or refuse,
or are unable to call a meeting within 24 hours to call a meeting when
requested, then the directors making the request may call the meeting on two
days' written notice given to each director. The notice of a special meeting of
directors need not state its purpose or purposes, but if the notice
4
<PAGE>
states a purpose or purposes, and does not state as a further purpose to
consider such other business as may properly come before the meeting, the
business to be conducted at the special meeting shall be limited to the purpose
or purposes stated in the notice.
5.5 WAIVER OF NOTICE. Directors present at any regular or special meeting
shall be deemed to have received due, or to have waived, notice thereof,
provided that a director who participates in a meeting by telephone (as
permitted by Section 5.9 hereof) shall not be deemed to have received or waived
due notice if, at the beginning of the meeting, he objects to the transaction
because the meeting is not lawfully called.
5.6 QUORUM. A majority of the Board shall be necessary to constitute a
quorum for the transaction of business, and except as otherwise provided by law
or the Restated Articles of Incorporation or these Bylaws, the acts of a
majority of the directors present at a meeting at which a quorum is present
shall be the acts of the Board. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
5.7 WITHDRAWAL. If a quorum is present when the meeting is convened, the
directors present may continue to do business, taking action by vote of a
majority of a quorum as fixed in Section 5.6 hereof, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
as fixed in Section 5.6 hereof or the refusal of any director present to vote.
5.8 ACTION BY CONSENT. Any action which may be taken at a meeting of the
Board or any committee thereof, may be taken by a consent in writing signed by
all of the directors or by all members of the committee, as the case may be, and
filed with the records of proceedings of the Board or committee.
5.9 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. Members of the Board
may participate at and be present at any meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment if
all persons participating in such meeting can hear and communicate with each
other.
SECTION 6.
COMMITTEES OF THE BOARD
6.1 DESIGNATION. The Board may designate one or more committees, each
committee to consist of two or more of the directors of the Corporation (and one
or more directors may be named as alternate members to replace any absent or
disqualified regular members), which, to the extent provided by resolution of
the Board or the Bylaws, shall have and may exercise the powers of the Board in
the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to documents. Such
committee or committees shall have such name or names as may be stated in the
Bylaws, or as may be determined, from time
5
<PAGE>
to time, by the Board. Any vacancy occurring in any such committee shall be
filled by the Board, but the President may designate another director to serve
on the committee pending action by the Board. Each such member of a committee
shall hold office during the term of the Board constituting it, unless otherwise
ordered by the Board.
SECTION 7.
REMOVAL OF BOARD MEMBER
Any director or the entire Board of Directors may be removed at any time,
but only for cause, by the affirmative vote of not less than eighty percent
(80%) of the Total Voting Power, provided that the removal may only be effected
at a meeting of shareholders called for that purpose. The shareholders at such
meeting may proceed to elect a successor or successors for the unexpired term of
the director or directors removed. Except as provided in the Articles of
Incorporation and in this Section 7, directors shall not be subject to removal.
SECTION 8.
NOTICES
8.1 FORM OF DELIVERY. Whenever under the provisions of law, the Restated
Articles of Incorporation or these Bylaws notice is required to be given to any
shareholder or director, it shall not be construed to mean personal notice
unless otherwise specifically provided in the Restated Articles of Incorporation
or these Bylaws, but said notice may be given by mail, addressed to such
shareholder or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notices shall be deemed to have
been given at the time they are deposited in the United States mail. Notice to a
director pursuant to Section 5.4 hereof may also be given personally or by
telephone or telegram sent to his address as it appears on the records of the
Corporation.
8.2 WAIVER. Whenever any notice is required to be given by law, the
Restated Articles of Incorporation or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto. In addition, notice
shall be deemed to have been given to, or waived by, any shareholder or director
who attends a meeting of shareholders or directors in person, or is represented
at such meeting by proxy, without protesting at the commencement of the meeting
the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 9.
OFFICERS
9.1 DESIGNATIONS. The officers of the Corporation shall be chosen by the
directors and shall be a Chief Executive Officer, a President, a Secretary and a
Treasurer. The directors may elect one or more Vice Presidents. Any two offices
may be held by one person, provided that no person
6
<PAGE>
holding more than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by two officers.
9.2 ADDITIONAL DESIGNATIONS. The Board of Directors may appoint such other
officers as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
9.3 TERM OF OFFICE. The officers of the Corporation shall hold office at
the pleasure of the Board of Directors.
9.4 THE PRESIDENT. The President shall have general and active management
of the business of the Corporation. If a Chairman of the Board of Directors has
not been elected or is incapacitated, the President, if a director, shall
preside at all meetings of the Board.
9.5 THE VICE-PRESIDENTS. The Vice-Presidents (if any) in the order
specified by the Board or, if not so specified, in the order of their seniority
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President, and shall perform such other duties as the
President or the Board of Directors shall prescribe.
9.6 THE SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose. He shall give,
or cause to be given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may be prescribed
by the Board or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation, if any, and affix the same to any
instrument requiring it.
9.7 THE TREASURER. The Treasurer shall have the custody of the corporate
funds and shall keep or cause to be kept full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
He shall keep a proper accounting of all receipts and disbursements and shall
disburse the funds of the Corporation only for proper corporate purposes or as
may be ordered by the Board and shall render to the President and the Board at
the regular meetings of the Board, or whenever they may require it, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation.
SECTION 10.
STOCK
10.1 CERTIFICATES. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by the Chief Executive Officer or a
President or a Vice President and the Secretary or an Assistant Secretary
evidencing the holder's name, the number and class (and series, if any) of
7
<PAGE>
shares owned by him, containing such information as required by law and bearing
the seal of the Corporation. If any stock certificate is manually signed by a
transfer agent or registrar other than the Corporation itself or an employee of
the Corporation, the signature of any such officer may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
10.2 MISSING CERTIFICATES. The President or any Vice President may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the officers of the
Corporation shall, unless dispensed with by the President, as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative to advertise
or give the Corporation a bond in such sum as is appropriate as indemnity any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
10.3 TRANSFERS. Upon surrender to the Corporation or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
SECTION 11.
DETERMINATION OF SHAREHOLDERS
11.1 RECORD DATE. For the purpose of determining shareholders entitled to
notice of and to vote at a meeting, or to receive a dividend, or to receive or
exercise subscription or other rights, or to participate in a reclassification
of stock, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a record date for
determination of shareholders for such purpose, such date to be not more than
sixty days and, if fixed for the purpose of determining shareholders entitled to
notice of and to vote at a meeting, not less than ten days, prior to the date on
which the action requiring the determination of shareholders is to be taken.
11.2 REGISTERED SHAREHOLDERS. Except as otherwise provided by law, the
Corporation, and its directors, officers and agents, may recognize and treat a
person registered on its records as the owner of shares, as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares, and
8
<PAGE>
rights under this Section shall not be affected by any actual or constructive
notice which the Corporation, or any of its directors, officers or agents, may
have to the contrary.
SECTION 12.
MISCELLANEOUS
12.1 DIVIDENDS. Except as otherwise provided by law or the Restated
Articles of Incorporation, dividends upon the stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting. Dividends
may be paid in cash, in property, or in shares of stock.
12.2 CHECKS. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate. Signatures of the
authorized signatories may be by facsimile.
12.3 YEAR. The fiscal Corporation will be a calendar year.
12.4 SEAL. The Board of Directors may adopt a corporate seal, which seal
shall have inscribed thereon the name of the Corporation. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise. Failure to affix the seal shall not, however, affect the validity of
any instrument.
12.5 GENDER. All pronouns and variations thereof used in these Bylaws
shall be deemed to refer to the masculine, feminine or neuter gender, singular
or plural, as the identity of the person, persons, entity or entities referred
to require.
SECTION 13.
INDEMNIFICATION
13.1 DEFINITIONS. As used in this Section:
(a) The term "Expenses" shall mean any expenses or costs (including,
without limitation, attorneys' fees, judgments, punitive or exemplary
damages, fines and amounts paid in settlement). If any of the foregoing
amounts paid on behalf of Indemnitee are not deductible by Indemnitee for
federal or state income tax purposes, the Corporation will reimburse
Indemnitee for his tax liability with respect thereto by paying to
Indemnitee an amount which, after taking into account taxes on such
amount, equals Indemnitee's incremental tax liability.
(b) The term "Claim" shall mean any threatened, pending or completed
claim, action, suit or proceeding, whether civil, criminal, administrative
or investigative and
9
<PAGE>
whether made judicially or extra-judicially, or any separate issue or
matter therein, as the context requires.
(c) The term "Determining Body" shall mean (i) those members of the
Board of Directors who are not named as parties to the Claim for which
indemnification is being sought ("Impartial Directors"), if there are at
least three Impartial Directors, or (ii) a committee of at least three
directors appointed by the Board of Directors (regardless whether the
members of the Board of Directors voting on such appointment are Impartial
Directors) and composed of Impartial Directors or (iii) if there are fewer
than three Impartial Directors or if the Board of Directors or a committee
appointed thereby so directs (regardless of whether the members thereof
are Impartial Directors), independent legal counsel, which may be the
regular outside counsel of the Corporation.
(d) The term "Indemnitee" shall mean each director and officer and
each former director and officer of the Corporation, of any subsidiary of
the Corporation or of Pride Oil Well Service Company, a Texas corporation
(the "Predecessor Corporation") and any subsidiary of the Predecessor
Corporation.
(e) The "Standard of Conduct" shall mean conduct by an Indemnitee
with respect to which a Claim is asserted which conduct he reasonably
believed to be in, or not opposed to, the best interest of the
Corporation, and, in the case of a Claim which is a criminal action or
proceeding, conduct that the Indemnitee had no reasonable cause to believe
was unlawful. The termination of any Claim by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that Indemnitee did not meet the
Standard of Conduct.
13.2 INDEMNITY.
(a) To the extent any Expenses incurred by Indemnitee are in excess
of the amounts reimbursed or indemnified pursuant to policies of liability
insurance maintained by the Corporation or its subsidiaries, the
Corporation shall indemnify and hold harmless Indemnitee against any such
Expenses actually and reasonably incurred in connection with any Claim
against Indemnitee (whether as a subject of or party to, or a proposed or
threatened subject of or party to, the Claim) or in which Indemnitee is
involved solely as a witness or person required to give evidence, by
reason of his position
(i) as a director or officer of the Corporation,
(ii) as a (A) director or officer of the Predecessor
Corporation or (B) director or officer of any subsidiary of the
Corporation or the Predecessor Corporation which was a subsidiary of
the Corporation or the Predecessor Corporation when the conduct or
alleged conduct of Indemnitee giving rise to the
10
<PAGE>
Claim occurred or when Indemnitee held the position by reason of
which Indemnitee is required to appear as a witness or give
evidence, or (C) fiduciary with respect to any employee benefit plan
of the Corporation or
(iii) as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other for profit
or not for profit entity or enterprise, if such position is was held
at the request of the Corporation,
whether relating to service in such position before or after the effective
date of this Section 13, if (A) the Indemnitee is successful in his
defense of the Claim on the merits or otherwise or (B) the Indemnitee has
been found by the Determining Body (acting in good faith) to have met the
Standard of Conduct; provided that (1) the amount of Expenses for which
the Corporation shall indemnify Indemnitee may be reduced by the
Determining Body to such amount as it deems proper if it determines in
good faith that the Claim involved the receipt of a personal benefit by
Indemnitee and (2) no indemnification shall be made in respect of any
Claim as to which Indemnitee shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable for willful or intentional misconduct in the performance of his
duty to the Corporation or to have obtained an improper personal benefit,
unless, and only to the extent that, a court shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such Expenses as the court shall deem proper;
and provided further that, if the Claim involves Indemnitee by reason of
his position with an entity or enterprise described in clause (ii) or
(iii) of this Section 13.2(a) and if Indemnitee may be entitled to
indemnification with respect to such Claim from such entity or enterprise,
Indemnitee shall be entitled to indemnification hereunder only (X) if he
has applied to such entity or enterprise for indemnification with respect
to the Claim and (Y) to the extent that indemnification to which he would
be entitled hereunder but for this proviso exceeds the indemnification
paid by such other entity or enterprise.
(b) Promptly upon becoming aware of the existence of any Claim,
Indemnitee shall notify the President of the existence of the Claim, who
shall promptly advise the members of the Board of Directors thereof and
that establishing the Determining Body will be a matter presented at the
next regularly scheduled meeting or at a special meeting of the Board of
Directors. After the Determining Body has been established, the President
shall inform Indemnitee thereof and Indemnitee shall immediately notify
the Determining Body of all facts relevant to the Claim known to such
Indemnitee. Within 60 days of the receipt of such notice and information,
together with such additional information as the Determining Body may
request of Indemnitee, the Determining Body shall report to Indemnitee its
determination whether Indemnitee has met the Standard of Conduct. The
Determining Body may extend the period of time for determining whether the
Standard of Conduct has been met, but in no event shall such period of
time be extended beyond an additional sixty days.
11
<PAGE>
(c) If, after determining that the Standard of Conduct has been met,
the Determining Body obtains facts of which it was not aware at the time
it made such determination, the Determining Body on its own motion, after
notifying the Indemnitee and providing him an opportunity to be heard,
may, on the basis of such facts, revoke such determination, provided that,
in the absence of actual fraud by Indemnitee, no such revocation may be
made later than thirty days after final disposition of the Claim.
(d) Indemnitee shall promptly inform the Determining Body upon his
becoming aware of any relevant facts not theretofore provided by him to
the Determining Body, unless the Determining Body has obtained such facts
by other means.
(e) In the case of any Claim not involving a proposed, threatened or
pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment of the
Determining Body, met the Standard of Conduct, the Corporation may,
in its sole discretion, assume all responsibility for the defense of
the Claim, and, in any event, the Corporation and Indemnitee each
shall keep the other informed as to the progress of the defense of
the Claim, including prompt disclosure of any proposals for
settlement; provided that if the Corporation is a party to the Claim
and Indemnitee reasonably determines that there is a conflict
between the positions of the Corporation and Indemnitee with respect
to the Claim, then Indemnitee shall be entitled to conduct his
defense with counsel of his choice; and provided further that
Indemnitee shall in any event be entitled at his expense to employ
counsel chosen by him to participate in the defense of the Claim;
and
(ii) the Corporation shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Corporation proposes
a settlement of the Claim and such settlement is acceptable to the
person asserting the Claim, or the Corporation believes a settlement
proposed by the person asserting the Claim should be accepted, it
shall inform Indemnitee of the terms of such proposed settlement and
shall fix a reasonable date by which Indemnitee shall respond. If
Indemnitee agrees to such terms, he shall execute such documents as
shall be necessary to make final the settlement. If Indemnitee does
not agree with such terms, Indemnitee may proceed with the defense
of the Claim in any manner he chooses, provided that if Indemnitee
is not successful on the merits or otherwise, the Corporation's
obligation to indemnify such Indemnitee as to any Expenses incurred
following his disagreement shall be limited to the lesser of (A) the
total Expenses incurred by Indemnitee following his decision not to
agree to such proposed settlement or (B) the amount that the
Corporation would have paid pursuant to the terms of the proposed
settlement. If, however, the proposed settlement would impose upon
Indemnitee any requirement to act or refrain from acting that would
materially interfere with the
12
<PAGE>
conduct of Indemnitee's affairs, Indemnitee shall be permitted to
refuse such settlement and proceed with the defense of the Claim, if
he so desires, at the Corporation's expense in accordance with the
terms and conditions of this Section of the Bylaws without regard to
the limitations imposed by the immediately preceding sentence. In
any event, the Corporation shall not be obligated to indemnify
Indemnitee for an amount paid in a settlement that the Corporation
has not approved.
(f) In the case of a Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the
defense of the Claim and to make all decisions with respect thereto, with
counsel of his choice; provided that the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in settlement that
the Corporation has not approved.
(g) After notification to the Corporation of the existence of a
Claim, Indemnitee may from time to time request of the President or, if
the President is a party to the Claim as to which indemnification is being
sought, any officer who is not a party to the Claim and who is designated
by the President (the "Disbursing Officer"), which designation shall be
made promptly after receipt of the initial request, that the Corporation
advance to Indemnitee the Expenses (other than fines, penalties, judgments
or amounts paid in settlement) that he incurs in pursuing a defense of the
Claim prior to the time that the Determining Body determines whether the
Standard of Conduct has been met. The Disbursing Officer shall pay to
Indemnitee the amount requested (regardless of Indemnitee's apparent
ability to repay the funds) upon receipt of an undertaking by or on behalf
of Indemnitee to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation under the
circumstances, provided that if the Disbursing Officer does not believe
such amount to be reasonable, he shall advance the amount deemed by him to
be reasonable and Indemnitee may apply directly to the Determining Body
for the remainder of the amount requested.
(h) After a determination that the Standard of Conduct has been met,
for so long as and to the extent that the Corporation is required to
indemnify Indemnitee under this Section of the Bylaws, the provisions of
subsection (g) shall continue to apply with respect to Expenses incurred
after such time except that (i) no undertaking shall be required of
Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee the
amount of any fines, penalties or judgments against him which have become
final for which the Corporation is obligated to indemnify him or any
amount of indemnification ordered to be paid to him by a court.
(i) Any determination by the Corporation with respect to settlement
of a Claim shall be made by the Determining Body.
13
<PAGE>
(j) The Corporation and Indemnitee shall keep confidential to the
extent permitted by law and their fiduciary obligations all facts and
determinations provided pursuant to or arising out of the operation of
this Section of the Bylaws and the Corporation and Indemnitee shall
instruct its or his agents and employees to do likewise.
(k) Notwithstanding anything contained in these bylaws to the
contrary, and excluding the requirements and limitations of paragraphs
13.2 (a) through 13.2 (i) above, the Corporation shall defend, indemnify
and hold harmless every officer of the Corporation who is, was, or is or
was threatened to be made a party to any threatened, pending or completed
claim, action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he/she (i) is or was (a)
licensed to practice law, (b) employed by the Corporation, and/or (c)
engaged to represent the Corporation in any matter as an attorney in
his/her (1) individual capacity or (2) capacity as an officer of the
Corporation, including, but not limited to, representation with respect to
any joint venture or joint venture company involving the Corporation in
any manner, and (ii) has committed or is alleged to have committed any
negligent act(s), error(s) or omission(s) in rendering legal services at
the request of the Corporation, including, but not limited to, rendering
written or oral legal opinions to third parties, against expenses
(including counsel fees), judgments, fines and amounts paid in settlement
actually incurred by him/her in connection with such claim, action, suit
or proceeding, to the full extent permitted by Louisiana law. For purposes
of this paragraph 13.2 (k), the term "Corporation", shall also include any
direct or indirect wholly-owned subsidiary of the Corporation.
13.3 ENFORCEMENT.
(a) The rights provided by this Section of the Bylaws shall be
enforceable by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights under
this Section of the Bylaws, Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation against, any
and all Expenses actually and reasonably incurred by him in connection
with such proceeding, but only if he prevails therein. If it shall be
determined that Indemnitee is entitled to receive part but not all of the
relief sought, then Indemnitee shall be entitled to be reimbursed for all
Expenses incurred by him in connection with such proceeding if the
indemnification amount to which he is determined to be entitled exceeds
50% of the amount of his claim. Otherwise, the Expenses incurred by
Indemnitee in connection with such judicial adjudication shall be
appropriately prorated.
(c) In any judicial proceeding described in this Section 13.3, the
Corporation shall bear the burden of proving that Indemnitee is not
entitled to Expenses sought with respect to any Claim.
14
<PAGE>
13.4 SAVING CLAUSE. If any provision of this Section of the Bylaws is
determined by a court having jurisdiction over the matter to require the
Corporation to do or refrain from doing any act that is in violation of
applicable law, the court shall be empowered to modify or reform such provision
so that, as modified or reformed, such provision provides the maximum
indemnification permitted by law and such provision, as so modified or reformed,
and the balance of this Section shall be applied in accordance with their terms.
Without limiting the generality of the foregoing, if any portion of this Section
of the Bylaws shall be invalidated on any ground, the Corporation shall
nevertheless indemnify an Indemnitee to the full extent permitted by any
applicable portion of this Section of the Bylaws that shall not have been
invalidated and to the full extent permitted by law with respect to that portion
that has been invalidated.
13.5 NON-EXCLUSIVITY.
(a) The indemnification and payment of Expenses provided by or
granted pursuant to this Section of the Bylaws shall not be deemed
exclusive of any other rights to which Indemnitee is or may become
entitled under any statute, article of incorporation, bylaw, authorization
of shareholders or directors, agreement or otherwise.
(b) It is the intent of the Corporation by this Section of the
Bylaws to indemnify and hold harmless Indemnitee to the fullest extent
permitted by law, so that if applicable law would permit the Corporation
to provide broader indemnification rights than are currently permitted,
the Corporation shall indemnify and hold harmless Indemnitee to the
fullest extent permitted by applicable law notwithstanding that the other
terms of this Section of the Bylaws would provide for lesser
indemnification.
13.6 SUCCESSORS AND ASSIGNS. This Section of the Bylaws shall be binding
upon the Corporation, its successors and assigns and shall inure to the benefit
of Indemnitee's heirs and personal representatives.
13.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify any
person not a director or officer of the Corporation to the extent authorized by
the Board of Directors or a committee of the Board expressly authorized by the
Board of Directors.
SECTION 14.
AMENDMENTS
14.1 ADOPTION OF BYLAWS; AMENDMENTS THEREOF. Bylaws of the Corporation may
be adopted only by (i) a majority of the entire Board of Directors at any time
when there is no Acquiring Entity (as defined in the Restated Articles of
Incorporation) or (ii) both a majority of the entire Board of Directors and a
majority of the Continuing Directors (as defined in the Restated Articles of
Incorporation) at any time when there is an Acquiring Entity. Bylaws may be
amended or repealed only by (i) a majority of the entire Board of Directors at
any time when there is no
15
<PAGE>
Acquiring Entity, (ii) both a majority of the entire Board and a majority of the
Continuing Directors at any time when there is an Acquiring Entity, or (iii) the
affirmative vote of the holders of at least eighty percent (80%) of the Total
Voting Power at any regular or special meeting of shareholders, the notice of
which expressly states that the proposed amendment or repeal is to be considered
at the meeting.
14.2 READOPTION BY BOARD OF DIRECTORS. Any provision of these Bylaws
amended or repealed by the shareholders may be re-amended or re-adopted in the
manner provided in Section 14.1.
14.3 NEW BYLAWS; AMENDMENTS. Any purported amendment to these Bylaws which
would add hereto a matter not covered herein prior to such purported amendment
shall be deemed to constitute the adoption of a Bylaw provision and not an
amendment to the Bylaws.
16
EXHIBIT 10.2
[PRIDE INTERNATIONAL, INC. LETTERHEAD]
June 3, 1999
VIA FAX (303-382-1275)
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp.
1801 California Street
Denver, Colorado 80202
Attention: Thomas R. Denison
Gentlemen:
This letter sets forth certain agreements relating to the Closing of
the transactions provided for in the Securities Purchase Agreement between us
dated as of May 5, 1999 (the "Purchase Agreement"). Capitalized terms used
herein that are not otherwise defined shall have the respective meanings given
them in the Purchase Agreement.
1. The Closing of the transactions provided for in the Purchase Agreement,
other than those subject to the Exchangeable Stock Condition, shall take place
on June 17, 1999 (the "First Closing"). At the First Closing, the Company will
deliver to the Purchaser a certificate or certificates evidencing 4,681,146
shares of Common Stock of the Company in consideration of the payment by the
Purchaser of $25.0 million in cash and Debentures having an aggregate principal
amount at maturity of $77,082,000 (the "First Closing Purchase Price"). Except
for the transactions governed by the Exchangeable Stock Condition and the
fulfillment of that condition, the First Closing shall be in accordance with and
subject to the provisions of Section 2.2 and Articles VI and VII of the Purchase
Agreement.
2. The Closing of the transactions subject to the Exchangeable Stock
Condition (the "Second Closing") shall take place on the tenth business day (or
such later date as the parties shall mutually agree) following the date on which
the Company gives the Purchaser written notice whether clause (i) of the
Exchangeable Stock Condition has been fulfilled. Such notice shall be delivered
to the Purchaser not later than the close of business (Houston time) on July 1,
1999. At the Second Closing, if the Exchangeable Stock Condition shall have been
fulfilled in its entirety, the Company will deliver to the Purchaser
certificates evidencing the shares of Exchangeable Stock in consideration of a
payment by Purchaser of $25.0 million in cash. If the Exchangeable Stock
Condition shall not have been fulfilled in its entirety, at the Second Closing
the Company will deliver to the Purchaser certificates evidencing 2,094,241
shares of Common Stock of the Company in consideration of a payment by Purchaser
of $25.0 million in cash. The Second Closing shall otherwise be governed by the
terms and provisions of Section 2.2 and Articles VI and VII of the Purchase
Agreement, except to the extent required to reflect the occurrence of the First
Closing,
<PAGE>
First Reserve Fund VIII, Limited Partnership
June 3, 1999
Page 2
including without limitation the payment of the First Closing Purchase Price and
the delivery of the related shares of Common Stock. For purposes of Article X of
the Purchase Agreement, the Closing Date shall be deemed to be the date of the
Second Closing.
Except as expressly modified hereby, the Purchase Agreement is
hereby ratified. This letter may be excluded in counterparts, which together
constitute a single agreement. This letter may be delivered by delivery of
facsimile signature pages.
If the foregoing is in accordance with the agreements and
understandings between us, please so indicate by returning a signed counterpart
of this letter.
Very truly yours,
PRIDE INTERNATIONAL, INC.
By:/s/PAUL A. BRAGG
Paul A. Bragg
President and Chief Executive Officer
AGREED TO AND ACCEPTED
AS OF THIS 4TH DAY OF JUNE 1999:
FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP
By: First Reserve GP VIII, L.P.
its General Partner
By: First Reserve Corporation
its General Partner
By:/s/THOMAS R. DENISON
Thomas R. Denison
Managing Director
EXHIBIT 10.3
[PRIDE INTERNATIONAL, INC. LETTERHEAD]
VIA FACSIMILE (303/382-1275) June 18, 1999
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp.
1801 California Street
Denver, Colorado 80202
Attention: Thomas R. Denison
Gentlemen:
This letter sets forth certain agreements relating to an amendment
of the Securities Purchase Agreement between us dated as of May 5, 1999, as
amended by that certain Letter Agreement between us dated June 4, 1999 (as so
amended, the "Purchase Agreement"), and the Closing of the transactions provided
for therein. Capitalized terms used herein that are not otherwise defined shall
have the respective meanings given them in the Purchase Agreement.
1. Pursuant to Section 6.4 of the Purchase Agreement, the obligation
of the Purchaser to effect the Closing of the Shares is subject to the
appointment of one designee of the Purchaser to the Board of Directors of the
Company. The Purchaser hereby agrees that, subject to the prior completion of
the First Closing, such appointment shall instead occur at the Second Closing,
which shall occur no later than July 10, 1999. Notwithstanding the foregoing, at
any time after the First Closing and prior to the date of such appointment, the
Company shall include a designee of the Purchaser in all conference calls or
other meetings of the Board of Directors (including committees thereof) at which
board or committee action is or could be taken, and the Company shall provide to
such designee all materials that it provides to directors of the Company in the
same manner and at the same time as provided to such directors.
2. Section 11.9 of the Purchase Agreement shall be deleted in its
entirety and the following shall be substituted in lieu thereof:
"Except as provided in this Section 11.9, neither of the Purchaser
nor the Company may assign its rights or obligations hereunder;
PROVIDED, HOWEVER, that (i) the Purchaser may assign its rights to
acquire the Shares and/or the Exchangeable Stock to another member
of the First Reserve Group, provided that such assignment shall not
relieve the Purchaser of its obligations hereunder; and (ii) the
Company may assign its obligations to deliver the Shares and/or the
Exchangeable Stock and its rights to receive the Purchase Price
therefor to a wholly owned subsidiary of the Company, provided that
such assignment shall not relieve the Company of its obligations
hereunder."
<PAGE>
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp. -2- June 18, 1999
3. The First Closing shall take place on June 21, 1999. At the First
Closing, the Company or its permitted assignee will deliver to the Purchaser a
certificate or certificates evidencing 4,681,146 shares of Common Stock of the
Company in consideration of the payment by the Purchaser of the First Closing
Purchase Price. Except for the transactions governed by the Exchangeable Stock
Condition and the fulfillment of that condition, the First Closing shall be in
accordance with and subject to the terms and conditions of Section 2.2 and
Articles VI and VII of the Purchase Agreement.
Except as expressly modified hereby, the Purchase Agreement is
hereby ratified. This letter may be executed in counterparts, which together
constitute a single agreement. This letter may be delivered by delivery of
facsimile signature pages.
If the foregoing is in accordance with the agreements and
understandings between us, please so indicate by returning a signed counterpart
of this letter.
Very truly yours,
PRIDE INTERNATIONAL, INC.
By:/s/EARL W. MCNIEL
Earl W. McNiel
Vice President and Chief Financial Officer
AGREED TO AND ACCEPTED
AS OF THIS 18TH DAY OF JUNE 1999:
FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP
By: First Reserve GP VIII, L.P.
its General Partner
By: First Reserve Corporation
its General Partner
By:/s/THOMAS R. DENISON
Thomas R. Denison
Managing Director
EXHIBIT 10.4
[PRIDE INTERNATIONAL, INC. LETTERHEAD]
VIA FACSIMILE (303/382-1275) June 21, 1999
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp.
1801 California Street
Denver, Colorado 80202
Attention: Thomas R. Denison
Gentlemen:
This letter sets forth certain agreements relating to the First
Closing of the transactions provided for in the Securities Purchase Agreement
between us dated as of May 5, 1999, as amended by that certain Letter Agreement
dated June 4, 1999 and that certain Letter Agreement dated June 18, 1999 (as so
amended, the "Purchase Agreement"). Capitalized terms used herein that are not
otherwise defined shall have the respective meanings given them in the Purchase
Agreement.
1. The Company hereby acknowledges and agrees that a condition to
the Purchaser's obligations to consummate the transactions contemplated by the
Purchase Agreement to be effected at the First Closing is the receipt by the
Purchaser of an opinion of British Virgin Islands counsel to the Company in form
and substance satisfactory to the Purchaser substantially to the effect of the
representations of the Company set forth in paragraph 4 hereof. The parties also
agree that the delivery of such opinion shall be a condition to the Purchaser's
obligations to consummate the transactions contemplated by the Purchase
Agreement to be effected at the Second Closing.
2. The Company hereby acknowledges and agrees that, until the
earlier to occur of (i) the receipt by the Purchaser of the opinion set forth in
paragraph 1 hereof and (ii) the exercise by the Purchaser of its right of
rescission pursuant to paragraph 3 hereof, the Purchase Price payable by the
Purchaser to Twin Oaks Financial Ltd. ("Twin Oaks") pursuant to Section 2.1 of
the Purchase Agreement shall remain in the account of Twin Oaks maintained at
Wells Fargo Bank, San Francisco, or an affiliate bank thereof (or, with respect
to the Debentures, in an account mutually acceptable to the Purchaser and the
Company).
3. On and after July 10, 1999, PROVIDED that the Purchaser shall not
have received the opinion set forth in paragraph 1 hereof, the Purchaser shall
have the right to rescind the transactions consummated at the First Closing
without liability by giving notice to the Company in accordance with the terms
of the Purchase Agreement, and upon such rescission, Twin Oaks shall immediately
deliver the Purchase Price to the Purchaser (together with interest thereon from
the date of receipt by the Company of such funds until the date of redelivery of
such funds to the Purchaser at 4.7% per annum) in exchange for the Purchaser's
delivery of the certificates representing the Shares.
4. The Company hereby represents and warrants to the Purchaser that
all of the issued and outstanding capital stock of Twin Oaks has been duly and
effectively issued to Pride International, Inc. and that such stock has been
validly issued and is fully paid and nonassessable. This representation shall be
deemed a representation made by the Company pursuant to the Purchase Agreement.
<PAGE>
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp. -2- June 21, 1999
On the basis of and subject to the foregoing, the parties hereby
agree to consummate the transactions contemplated by the Purchase Agreement to
be effected at the First Closing, the effective date of which consummation shall
be June 21, 1999.
Except to the extent otherwise expressly contemplated hereby, the
Purchase Agreement is hereby ratified and confirmed. This letter may be executed
in multiple counterparts, each of which shall constitute one and the same
instrument. This letter may be delivered by delivery of facsimile signature
pages.
If the foregoing is in accordance with the agreements and
understandings between us, please so indicate by returning a signed counterpart
of this letter.
Very truly yours,
PRIDE INTERNATIONAL, INC.
By:/s/PAUL A. BRAGG
Paul A. Bragg
President and Chief Executive Officer
AGREED TO AND ACCEPTED
AS OF THIS 21ST DAY OF JUNE 1999:
FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP
By: First Reserve GP VIII, L.P.
its General Partner
By: First Reserve Corporation
its General Partner
By:/s/THOMAS R. DENISON
Thomas R. Denison
Managing Director
EXHIBIT 10.5
[PRIDE INTERNATIONAL, INC. LETTERHEAD]
VIA FACSIMILE (303/382-1275) July 14, 1999
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp.
1801 California Street
Denver, Colorado 80202
Attention: Thomas R. Denison
Gentlemen:
This letter sets forth certain agreements relating to an amendment
of the Securities Purchase Agreement between us dated as of May 5, 1999, as
amended by that certain Letter Agreement between us dated June 4, 1999, that
certain Letter Agreement between us dated June 18, 1999 and that certain Letter
Agreement dated June 21, 1999 (as so amended, the "Purchase Agreement"), and the
Closing of the transactions provided for therein. Capitalized terms used herein
that are not otherwise defined shall have the respective meanings given them in
the Purchase Agreement.
1. The Second Closing shall be split into two separate closings. At
the first of the two closings (the "Pride Closing"), the Company will deliver or
cause a wholly owned subsidiary of the Company to deliver to the Purchaser (or
to another member of the First Reserve Group designated by the Purchaser) a
certificate or certificates evidencing 1,047,121 shares of Common Stock of the
Company in consideration of the payment by the Purchaser (or such other member
of the First Reserve Group) of $12.5 million in cash. The Pride Closing shall
take place on July 14, 1999.
At the second of the two closings (the "Amethyst Closing"), the
Company will deliver or cause a wholly owned subsidiary of the Company to
deliver to the Purchaser (or to another member of the First Reserve Group
designated by the Purchaser) certificates evidencing the shares of Exchangeable
Stock in consideration of a payment by Purchaser (or such other member of the
First Reserve Group) of $12.5 million in cash. The Amethyst Closing shall take
place on or before July 30, 1999.
The Second Closing shall otherwise be in accordance with and subject
to the provisions of Section 2.2 and Articles VI and VII of the Purchase
Agreement. The Second Closing shall be deemed to be completed only upon the
completion of the Amethyst Closing. In addition, for purposes of Article X of
the Purchase Agreement, the Closing Date shall be deemed to be the date of the
Amethyst Closing.
<PAGE>
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp. -2- July 14, 1999
2. Pursuant to that certain Letter Agreement dated June 18, 1999,
the Company and the Purchaser agreed that the appointment of one designee of the
Purchaser to the Board of Directors of the Company shall occur at the Second
Closing. The Company and the Purchaser hereby agree that such appointment shall
instead occur effective as of the Pride Closing.
3. The Company and the Purchaser further agree that the Letter
Agreement dated June 21, 1999 relating to the matters set forth in Article 2 of
the Shareholders Agreement between us dated June 21, 1999 terminates effective
immediately upon the completion of the Pride Closing.
Except as expressly modified hereby, the Purchase Agreement is
hereby ratified. This letter may be executed in counterparts, which together
constitute a single agreement. This letter may be delivered by delivery of
facsimile signature pages.
If the foregoing is in accordance with the agreements and
understandings between us, please so indicate by returning a signed counterpart
of this letter.
Very truly yours,
PRIDE INTERNATIONAL, INC.
By:/s/PAUL A. BRAGG
Paul A. Bragg
President and Chief Executive Officer
AGREED TO AND ACCEPTED
AS OF THIS 14TH DAY OF JULY 1999:
FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP
By: First Reserve GP VIII, L.P.
its General Partner
By: First Reserve Corporation
its General Partner
By:/s/THOMAS R. DENISON
Thomas R. Denison
Managing Director
EXHIBIT 10.6
------------------------------------------------------------------------------
SHAREHOLDERS AGREEMENT
AMONG
PRIDE INTERNATIONAL, INC.
AND
FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP
JUNE 21, 1999
------------------------------------------------------------------------------
<PAGE>
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this "AGREEMENT") is entered into this 21st
day of June 1999, is by and among Pride International, Inc., a Louisiana
corporation (the "COMPANY"), and First Reserve Fund VIII, Limited Partnership, a
Delaware limited partnership
("FIRST RESERVE").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement entered
into by and between First Reserve and the Company dated as of May 5, 1999, as
amended by that certain Letter Agreement dated June 4, 1999 and that certain
Letter Agreement dated June 18, 1999 (as so amended, the "PURCHASE AGREEMENT"),
First Reserve received upon consummation of the transactions contemplated by the
Purchase Agreement, shares of Common Stock, no par value, of the Company (the
"COMMON STOCK"); and
WHEREAS, the parties hereto desire to reflect herein the agreements
relating to representation of First Reserve on the Board of the Company
described in Section 5.7 of the Purchase Agreement and to set forth certain
additional agreements among them relating to the First Reserve Group's (as
defined below) acquisition and ownership of Company Securities.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINED TERMS
Section 1.1 DEFINED TERMS. The following capitalized terms when used in
this Agreement shall have the following meanings:
"AFFILIATE" shall have the respective meanings assigned thereto in Rule
405 as presently promulgated under the Securities Act.
"AMETHYST AGREEMENT" shall have the meaning set forth in the Purchase
Agreement.
"BENEFICIAL OWNERSHIP" and "GROUP" shall have the respective meanings
assigned thereto in Rules 13d-3 and 13d-5 as presently promulgated under the
Exchange Act.
"BOARD" means the Board of Directors of the Company.
2
<PAGE>
"COMMON STOCK" has the meaning assigned in the Recitals to this Agreement.
"COMPANY SECURITIES" means, collectively, the Common Stock and any class
or series of the Company's preferred stock, and any other securities, warrants
or options or rights of any nature (whether or not issued by the Company) that
are convertible into, exchangeable for, or exercisable for the purchase of, or
otherwise give the holder thereof any rights in respect of Common Stock, or any
class or series of Company preferred stock that is entitled to vote generally
for the election of directors or otherwise.
"DIRECTOR" means any member of the Board.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FIRST RESERVE GROUP" means, collectively, First Reserve and its
Affiliates; provided, however, that a Person shall not be deemed a member of the
First Reserve Group if the only reason that such Person would be deemed an
Affiliate of First Reserve is because it is (a) a limited partner of First
Reserve, (b) an operating company in which First Reserve (and/or any other fund
or funds similar to First Reserve that is controlled by, controlling or under
common control with First Reserve) has an investment, but in which First Reserve
and such other funds do not, in the aggregate (i) have at least a majority of
the voting power (defined in a manner consistent with the definition of Voting
Power set forth herein with respect to the Company) of the securities of such
operating company, or (ii) the contractual right to designate at least a
majority of the members of the board of directors (or similar governing body) of
such operating company, or (c) an Affiliate of an operating company described in
clause (b) who is not otherwise an Affiliate of the First Reserve Group.
"OWN COMPANY SECURITIES" means from and after the first date upon which
the aggregate amount invested by the First Reserve Group in the Company equals
or exceeds $50 million (regardless of whether, as a result of share repurchases,
dividends or otherwise, the First Reserve Group's investment in the Company
subsequently becomes less than $50 million); PROVIDED, HOWEVER, the First
Reserve Group shall not be deemed to "Own Company Securities" after the date
(after such date on which the First Reserve Group is first deemed to Own Company
Securities) that its aggregate direct or indirect beneficial ownership of
capital stock of the Company constitutes or would be convertible into or
exchangeable for less than 5% of the then outstanding shares of Common Stock.
"PERSON" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or other entity of whatever nature.
"PURCHASE AGREEMENT" shall have the meaning assigned in the Recitals to
this Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the provisions of Article 5 hereof,
as amended, modified or supplemented from time to time.
3
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TERMINATION DATE" means June 21, 2005.
"VOTING POWER" means, at, any measurement date, the total number of votes
that could have been cast in an election of directors of the Company had a
meeting of the stockholders of the Company been duly held based upon a record
date as of the measurement date if all Company Securities then outstanding and
entitled to vote at such meeting were present and voted to the fullest extent
possible at such meeting.
Section 1.2 OTHER DEFINITIONS. Definitions applicable to the Registration
Rights Agreement provisions of this Agreement are found in Article 5 hereof.
Section 1.3 CONSTRUCTION. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter, and
the singular shall include the plural, and vice versa. Except as specified
otherwise, all references to Articles and Sections refer to articles and
sections of this Agreement, and all references to exhibits are to Exhibits
attached to this Agreement, each of which is made a part of this Agreement for
all purposes. The word "including" shall mean "including, without limitation"
unless the context otherwise requires.
ARTICLE 2
BOARD OF DIRECTORS; VOTING
Section 2.1 ELECTION OF DIRECTORS.(a) For so long as First Reserve or any
of the First Reserve Group collectively Own Company Securities, First Reserve
shall have the right (i) to nominate one person for election to the BOARD;
PROVIDED, HOWEVER, that the person nominated shall be a managing director or
other higher official of First Reserve Corporation or otherwise be reasonably
acceptable to the Company, and (ii) (A) to receive all notices, reports and
other communications sent to Directors at the same time they are transmitted to
Directors, and to receive reasonable notice of and to have one representative
attend any meeting of the Company's Board, (B) to consult with and advise
members of senior management of the Company, and (C) upon reasonable notice, to
have access to the books and records of the Company. If at any time more than
one member of the First Reserve Group shall be the owner of Company Securities,
First Reserve shall have the right set forth in subparagraph (i) of this Section
2.1(a) and may delegate (with notice to the Company) any of the rights set forth
in subparagraph (ii) of this Section 2.1(a) to the extent deemed advisable by
First Reserve in order to comply with laws and regulations applicable to the
First Reserve Group and the members thereof. First Reserve hereby designates
William E. Macaulay as its initial nominee for election to the Company's Board.
(b) The Company agrees with First Reserve that the Company will take all
steps necessary to increase the authorized number of members of the Board by one
and to have the person initially designated by First Reserve appointed to the
Company's Board of Directors on the Closing Date (as such term is defined in the
Purchase Agreement). At each subsequent election of directors
4
<PAGE>
at which the term of the nominee of First Reserve as a director of the Company
expires, the Company will nominate the designee of First Reserve for election to
the Company's Board for the succeeding term for which Directors are elected,
will recommend his or her election to the Company's stockholders and otherwise
will use its reasonable best efforts to cause the Company's stockholders to
elect the designee of First Reserve to the Company's Board. The Company shall
use its reasonable best efforts to solicit from its stockholders proxies voted
in favor of such nominee, and shall vote all management proxies in favor of such
nominee, except for such proxies that specifically indicate to the contrary. The
rights set forth in this Section 2.1(a) shall survive until the termination of
this Agreement as provided in Section 6.1 hereof.
(c) In the event that any Director designated pursuant to Section 2.1(a)
for any reason ceases to serve as a member of the Board during his term of
office, First Reserve shall be entitled to designate a successor Director to
fill the vacancy created thereby on the terms and subject to the conditions of
this Section 2.1. If and to the extent that the remaining members of the Board
are entitled to fill vacancies on the Board, upon the occurrence of any vacancy,
the Board will promptly take any actions necessary to fill such vacancies in
accordance with the foregoing provision in order to cause the election of the
nominee of First Reserve.
Section 2.2 NO INCONSISTENT COMPANY ACTIONS. The Company hereby agrees not
to take any action inconsistent with the provisions of Section 2.1.
ARTICLE 3
ACQUISITION AND SALE OF COMPANY SECURITIES
Section 3.1.COMPANY SECURITIES. First Reserve covenants and agrees with
the Company that, without the consent of the Company, except for the Company
Securities acquired pursuant to the Purchase Agreement or any similar agreement
to which the Company and First Reserve (or its Affiliates or designees) are
parties, any Company Securities acquired with the consent of the Company and any
Company Securities issued pursuant to a stock split, stock dividend or
recapitalization with respect to such Company Securities, no member of the First
Reserve Group shall, directly or indirectly, acquire any Company Securities, if
the effect of such acquisition, agreement or other action would be to increase
the aggregate beneficial ownership of Company Securities by the First Reserve
Group by an amount equal to 3% or more of either the Voting Power or the number
of outstanding shares of any class or series of Company Securities.
Section 3.2 DISTRIBUTION OF COMPANY SECURITIES. First Reserve covenants
that it shall not, and that it shall cause each other member of the First
Reserve Group that it controls not to, directly or indirectly, sell, transfer
beneficial ownership of, pledge, hypothecate or otherwise dispose of any Company
Securities, except by conversion, exchange or exercise of such Company
Securities pursuant to their terms in a manner not otherwise in violation of
Section 3.1 or pursuant to:
(a) a bona fide pledge of or the granting of a security interest or
any other lien or encumbrance in such Company Securities to a lender that is not
a member of the First Reserve Group
5
<PAGE>
to secure a bona fide loan for money borrowed made to one or more members of the
First Reserve Group, the foreclosure of such pledge or security interest or any
other lien or encumbrance that may be placed involuntarily upon any Company
Securities, or the subsequent sale or other disposition of such Company
Securities by such lender or its agent;
(b) a transfer, assignment, sale or disposition of such Company
Securities to another member of the First Reserve Group that has signed this
Agreement;
(c) a distribution of Company Securities to any partner of First
Reserve; provided that any distributee that is a member of the First Reserve
Group has signed this Agreement; and provided, further that any arrangements
coordinated or initiated by or on behalf of First Reserve to assist its limited
partners in the sale of Company Securities distributed to them must comply with
the provisions of this Section 3.2;
(d) sales in public offerings registered under the Securities Act;
(e) sales effected in compliance with the provisions of Rule 144
under the Securities Act;
(f) other privately negotiated sales of Company Securities;
(g) upon consummation of or otherwise in connection with a business
combination or similar transaction involving the Company that is approved by the
Board; or
(h) sales in a tender offer open to all holders of Company
Securities.
Notwithstanding anything to the contrary in this Section 3.2, in effecting any
sale, transfer of any beneficial interest in or other disposition of Company
Securities pursuant to Sections 3.2 (c), (d) and (f), above, the members of the
First Reserve Group selling, transferring or disposing such Company Securities
shall, unless the Company consents otherwise, use their reasonable best efforts
to refrain from knowingly selling, transferring or disposing of such number of
Company Securities as represent either the right to acquire or ownership of 5%
or more of the Voting Power to any one Person or group of Persons.
Section 3.3.PROXY SOLICITATIONS. First Reserve agrees that as a
stockholder, the First Reserve Group shall vote or cause to be voted all Company
Securities of which any member of the First Reserve Group is the beneficial
owner with respect to each matter submitted to the Company's stockholders
providing for, involving, expected to facilitate or that could reasonably be
expected to result in a business combination or other change in control of the
Company that has not been approved by the Board (including without limitation
the election or removal of one or more Company directors or one or more nominees
for director proposed by the Board), either (a) in the manner recommended by the
Board, or (b) proportionately with all other holders of Company Securities
voting with respect to such matter (provided, that the First Reserve Group shall
at all times
6
<PAGE>
retain the power to vote for the election of the nominee of First Reserve to the
Company's Board). First Reserve hereby agrees that it and each member of the
First Reserve Group that it controls shall not take any action, or solicit
proxies in any fashion, inconsistent with the provisions of this Section 3.3.
Section 3.4.GROUPS. First Reserve covenants that it shall not, and that no
other member of the First Reserve Group that it controls shall, join a
partnership, limited partnership, syndicate or other group, or otherwise act in
concert with any other Person, for the purpose of acquiring, holding, voting or
disposing of any Company Securities, other than the First Reserve Group itself.
Section 3.5.LIMITATION ON COVENANTS. Notwithstanding any provision to the
contrary in this Agreement, during any period that any person designated by
First Reserve to serve as a Director in accordance with the provisions of
Section 2.1(a) is not serving as a Director as a result of the failure of the
Company or the Board to comply with the terms of this Agreement, or if any such
designee is not elected by the stockholders (and Section 2.1(a) and Section 2.2
are complied with), then the covenants set forth in this Article 3 shall cease
to be effective during such period; PROVIDED, HOWEVER, that if a person
designated by First Reserve ceases to be a Director by reason of death or
resignation, then the provisions of this Section 3.5 shall not apply if the
Board appoints First Reserve's designated replacement to fill any such vacancy
within 15 business days after the Company receives notice of such designation.
The provisions of this Section 3.5 shall be in addition to any other remedies
that First Reserve may have in connection with a breach of the provisions of
Article 2 hereof.
ARTICLE 4
LEGEND AND STOP TRANSFER ORDER
Section 4.1 LEGEND AND STOP TRANSFER ORDER. To assist in effectuating the
provisions of this Agreement, First Reserve hereby consents: (a) to the
placement, on certificates issued with respect to the shares of Common Stock
issued to it pursuant to the Purchase Agreement or otherwise promptly after any
Company Securities become subject to the provisions of this Agreement, of the
following legend on all certificates representing ownership of Company
Securities owned of record by any member of the First Reserve Group or by any
Person where a member of the First Reserve Group is the beneficial owner
thereof, until such shares are sold, transferred or disposed in a manner
permitted hereby to a Person who is not then a member of the First Reserve
Group:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS
OF AN AGREEMENT AMONG, INTER ALIA, PRIDE INTERNATIONAL, INC. AND FIRST
RESERVE FUND VIII, LIMITED PARTNERSHIP, AND MAY NOT BE VOTED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE THEREWITH. COPIES OF THE AGREEMENT ARE ON FILE AT THE OFFICE OF
THE CORPORATE SECRETARY OF PRIDE INTERNATIONAL, INC.
7
<PAGE>
;and (b) to the entry of stop transfer orders with the transfer agent or agents
of Company Securities against the transfer of Company Securities except in
compliance with the requirements of this Agreement, or if the Company acts as
its own transfer agent with respect to any Company Securities, to the refusal by
the Company to transfer any such securities except in compliance with the
requirements of this Agreement. The Company agrees to remove promptly all
legends and stop transfer orders with respect to the transfer of Company
Securities being made to a Person who is not then a member of the First Reserve
Group in compliance with the provisions of this Agreement.
ARTICLE 5
REGISTRATION RIGHTS AGREEMENT
Section 5.1.DEFINED TERMS. The following capitalized terms when used in
this Registration Rights Agreement shall have the following meanings:
"DEMAND REGISTRATION" means a demand registration as defined in Section
5.2(a) hereof.
"EXISTING HOLDERS" means the holders of registerable securities in
accordance with the terms of the Existing Registration Rights Agreements.
"EXISTING REGISTRATION RIGHTS AGREEMENTS" means that certain (i)
Registration Rights Agreement, dated as of September 1, 1993, by and among the
Company and Paul A. Bragg, (ii) Registration Rights Agreement, dated as of March
10, 1997, by and among the Company and Ackermans & van Haaran Group and
Soletanche Group, and (ii) Registration Rights Agreement, dated as of October 1,
1998, by and among the Company and DWC Amethyst N.V.
"HOLDERS" means the holders of the Registrable Securities in accordance
with the terms of this Registration Rights Agreement.
"INDEMNIFIED PARTY" has the meaning set forth in Section 5.3(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section 5.3(c).
"PIGGYBACK REGISTRATION" means a piggyback registration as defined in
Section 5.2(b) hereof.
"PROSPECTUS" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
8
<PAGE>
"REGISTRABLE SECURITIES" means (a) all shares of Common Stock issued to
First Reserve pursuant to the Purchase Agreement and which may be issued upon
exchange of the Exchangeable Stock or otherwise pursuant to the Amethyst
Agreement and (b) any other securities issued by the Company after the date
hereof with respect to such shares of Common Stock by means of exchange,
reclassification, dividend, distribution, split up, combination, subdivision,
recapitalization, merger, spin-off, reorganization or otherwise; provided,
however, that as to any Registrable Securities, such securities shall cease to
constitute Registrable Securities for the purposes of this Registration Rights
Agreement if and when: (i) a Registration Statement with respect to the sale of
such securities shall have been declared effective by the SEC and such
securities shall have been sold pursuant thereto; (ii) such securities shall
have been sold in compliance with of all applicable resale provisions of Rule
144 under the Securities Act; (iii) such securities may be sold by the Holder
thereof in reliance upon Rule 144(k) (or any successor rule) promulgated under
the Securities Act, or (iv) such securities cease to be issued and outstanding
for any reason.
"REGISTRATION STATEMENT" means any registration statement filed by the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Registration Rights Agreement, including the Prospectus included
therein, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission, or any successor
agency thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
Section 5.2.REGISTRATION RIGHTS
(a) DEMAND REGISTRATION. (i) At any time after June 21, 2000, First
Reserve may at any time and from time to time make a written request for
registration under the Securities Act in a firm commitment underwritten public
offering of Registrable Securities owned by them having a good faith estimated
public offering price of at least $20 million (a "DEMAND REGISTRATION");
provided that the Company shall not be obligated to effect more than three
Demand Registration in any 12-month period or more than an aggregate of three
Demand Registrations pursuant to this Section 5.2(a). Such request will specify
the number of shares of Registrable Securities proposed to be sold. Within five
days of such request, the Company shall give written notice of such request to
all other Holders of Registrable Securities and shall include in the
registration in respect of which notice has been given all Registrable
Securities with respect to which the Company has received written requests from
Holders for inclusion therein within ten days after the Company's notice
regarding such registration has been given as provided herein. If Registrable
Securities of other Holders are included in such registration, the Holder or
Holders requesting such Demand Registration may reduce the number of shares of
Registrable Securities initially specified to be included in such registration
in its or their sole discretion; PROVIDED, THAT Registrable Securities having a
good faith estimated public offering price of at least $20 million are included
in such registration. A registration will not count as a Demand Registration
until the Registration Statement
9
<PAGE>
filed pursuant to such registration has been declared effective by the SEC and
remains effective for the period specified in Section 5.2(e)(i).
(ii) The Holder or Holders requesting the Demand Registration
shall select the managing underwriters (including the book running lead managing
underwriters) and any additional investment bankers and managers to be used in
connection with the offering (unless a member of the First Reserve Group is
included among the Holders selling pursuant to such registration, in which case
First Reserve shall select such underwriters, investment bankers and managers);
provided that the lead managing underwriter must be reasonably satisfactory to
the Company.
(iii) Neither the Company nor any of its security holders
(other than the Holders of Registrable Securities in such capacity) shall be
entitled to include any of the Company's securities in a Registration Statement
initiated as a Demand Registration under this Section 5.2(a) without the consent
of First Reserve.
(b) PIGGYBACK REGISTRATION. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock (i) for the Company's own account (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
SEC for transactions traditionally registered on Form S-4 or S-8)) or (ii) for
the account of any of its holders of Common Stock, including without limitation,
the Existing Holders (other than pursuant to a Demand Registration under Section
5.2(a)), then the Company shall give written notice of such proposed filing to
First Reserve as soon as practicable (but in no event later than the earlier to
occur of (i) the tenth day following receipt by the Company of notice of
exercise of other demand registration rights and (ii) 15 days before the filing
date), and such notice shall offer First Reserve the opportunity to register
such number of shares of Registrable Securities as First Reserve may request
within 10 days after receipt by First Reserve of the Company's notice on the
same terms and conditions as the Company's or such holder's Common Stock (a
"PIGGYBACK REGISTRATION"). First Reserve will be permitted to withdraw all or
any part of its Registrable Securities from a Piggyback Registration at any time
prior to the date the Registration Statement filed pursuant to such Piggyback
Registration becomes effective with the SEC.
(c) REDUCTION OF OFFERING. Notwithstanding anything contained
herein, if the Piggyback Registration is an underwritten offering and the lead
managing underwriter of such offering delivers a written opinion to the Company
that the size of the offering that the Company, First Reserve, the Existing
Holders and any other Persons whose securities are proposed to be included in
such offering is such that the offering or the offering price would be
materially and adversely affected, the Company will include in such Piggyback
Registration in the following order of priority (i) first, all of the securities
proposed to be registered by the Company (if the offering is for the account of
the Company), or, if the offering is for the account of the Existing Holders (or
any of them), all of the securities proposed to be registered by such Existing
Holders, (ii) second, all of the Registrable Securities requested by First
Reserve, and (iii) thereafter, the securities proposed to be registered by any
other Persons.
10
<PAGE>
(d) FILINGS; INFORMATION. Whenever First Reserve requests that any
Registrable Securities be registered pursuant to Section 5.2(a) hereof, the
Company will use its reasonable best efforts to effect the registration of such
Registrable Securities and to permit the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, as promptly as is
practicable, and in connection with any such request:
(i) the Company will as expeditiously as possible, but in no
event later than 30 days after receipt of a request to file a registration
statement with respect to such Registrable Securities, prepare and file with the
SEC a Registration Statement on any form for which the Company then qualifies
and which counsel for the Company shall deem appropriate and available for the
sale of the Registrable Securities to be registered thereunder in accordance
with the intended method of distribution thereof and which is reasonably
satisfactory to First Reserve, and use its reasonable best efforts to cause such
Registration Statement to become and remain effective for a period of not less
than 90 days (or such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold); provided that
if at the time the Company receives a request to file a registration statement
with respect to Registrable Securities, the Company is engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required in such registration statement (but would not be required if
such registration statement were not filed) and the board of directors of the
Company determines in good faith that such disclosure would be materially
detrimental to the Company and its stockholders, the Company shall have a period
of not more than 120 days (less the number of days during the previous 12 months
that the use of a Prospectus was suspended pursuant to Section 5.2(d)(vi) and/or
this Section 5.2(d)(i)) within which to file such registration statement
measured from the date of the Company's receipt of First Reserve's request for
registration in accordance with Section 5.2(a) hereof. The filing of a
registration statement may only be deferred once for any potential transaction
or event or related transactions or events that could arise as a result of
negotiations or other activities and any registration statement whose filing has
been deferred as a result shall be filed forthwith if the negotiations or other
activities are disclosed or terminated. In order to defer the filing of a
registration statement pursuant to this Section 5.2(d)(i), the Company shall
promptly, upon determining to seek such deferral, deliver to First Reserve a
certificate signed by the President or Chief Financial Officer of the Company
stating that the Company is deferring such filing pursuant to this Section
5.2(d)(i).
(ii) the Company will prepare and file with the SEC such
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the period set forth in Section 5.2(d)(i) and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement.
(iii) the Company will, if requested, prior to filing a
Registration Statement or any amendment or supplement thereto, furnish to First
Reserve and each applicable managing
11
<PAGE>
underwriter, if any, copies thereof, and thereafter furnish to First Reserve and
each such underwriter, if any, such number of copies of such Registration
Statement, amendment and supplement thereto (in each case including all exhibits
thereto and documents incorporated by reference therein) and the Prospectus
included in such Registration Statement (including each preliminary Prospectus)
as First Reserve or each such underwriter may reasonably request in order to
facilitate the sale of the Registrable Securities.
(iv) After the filing of the Registration Statement, the
Company will promptly notify First Reserve of any stop order issued or, to the
Company's knowledge, threatened to be issued by the SEC and take all reasonable
actions required to prevent the entry of such stop order or to remove it as soon
as possible if entered.
(v) the Company will use its reasonable best efforts to
qualify the Registrable Securities for offer and sale under such other
securities or blue sky laws of such jurisdictions in the United States as First
Reserve reasonably requests; PROVIDED that the Company will not be required to
(A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph 5.2(d)(v), (B)
subject itself to taxation in any such jurisdiction or (C) consent to general
service of process in any such jurisdiction.
(vi) the Company will as promptly as is practicable notify
First Reserve, at any time when a Prospectus is required by law to be delivered
in connection with sales by an underwriter or dealer, of the occurrence of any
event requiring the preparation of a supplement or amendment to such Prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and promptly make available to First
Reserve and to the underwriters any such supplement or amendment. First Reserve
agrees that, upon receipt of any notice from the Company of the occurrence of
any event of the kind described in the preceding sentence, First Reserve will
forthwith discontinue the offer and sale of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until receipt by
First Reserve and the underwriters of the copies of such supplemented or amended
Prospectus and, if so directed by the Company, First Reserve will deliver to the
Company all copies, other than permanent file copies, then in First Reserve's
possession of the most recent Prospectus covering such Registrable Securities at
the time of receipt of such notice. In the event the Company shall give such
notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective as provided in Section 5.2(e)(i) by the
number of days during the period from and including the date of the giving of
such notice to the date when the Company shall make available to First Reserve
such supplemented or amended Prospectus.
(vii) the Company will enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the sale
of such Registrable Securities.
12
<PAGE>
(viii) the Company will furnish to First Reserve and to each
underwriter a signed counterpart, addressed to such underwriter, of an opinion
or opinions of counsel to the Company and a comfort letter or comfort letters
from the Company's independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the managing underwriter reasonably requests.
(ix) the Company will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of 12 months, beginning within three months after the effective date of
the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and regulations
of the SEC thereunder.
(x) the Company will use its reasonable best efforts to cause
all such Registrable Securities to be listed on each securities exchange or
market on which the Common Stock is then listed.
The Company may require First Reserve to furnish promptly in writing to
the Company such information regarding First Reserve, the plan of distribution
of the Registrable Securities and other information as the Company may from time
to time reasonably request or as may be legally required in connection with such
registration.
(e) REGISTRATION EXPENSES. In connection with any Demand
Registration or any Piggyback Registration, the Company shall pay the following
expenses incurred in connection with such registration: (i) filing fees with the
SEC; (ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities); (iii) printing expenses; (iv)
fees and expenses incurred in connection with the listing of the Registrable
Securities; (v) fees and expenses of counsel and independent certified public
accountants for the Company and (vi) the reasonable fees and expenses of any
additional experts retained by the Company in connection with such registration.
In connection with the preparation and filing of a Registration Statement
pursuant to Section 5.2(a), the Company will also pay the reasonable fees and
expenses of a single legal counsel chosen by First Reserve. First Reserve shall
pay any underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities and any other expenses of First Reserve.
(f) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and this
Registration Rights Agreement.
(g) HOLDBACK AGREEMENTS. First Reserve agrees not to effect any
public sale (including a sale pursuant to Rule 144 of the Securities Act) of any
Registrable Securities, or any
13
<PAGE>
securities convertible into or exchangeable or exercisable for such securities,
during the 14 days prior to, and during the 120-day period beginning on, the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which First Reserve participates, other than the
Registrable Securities to be sold pursuant to such registration statement.
Section 5.3.INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless First Reserve, its general partner and the officers and
directors of such general partner, and each Person, if any, who controls First
Reserve within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all losses, claims, damages,
liabilities and expenses arising out or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or prospectus relating to the Registrable Securities or any
preliminary Prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities and expenses are caused by any untrue
statement or omission or alleged untrue statement or omission based upon
information relating to First Reserve or the plan of distribution furnished in
writing to the Company by or on behalf of First Reserve expressly for use
therein; PROVIDED, that the foregoing indemnity with respect to any preliminary
Prospectus shall not inure to the benefit of First Reserve if a copy of the most
current Prospectus at the time of the delivery of the Registrable Securities was
not provided to the purchaser, the Company had previously furnished First
Reserve with a sufficient number of copies of the current Prospectus and such
current Prospectus would have cured the defect giving rise to such loss, claim,
damage or liability. The Company also agrees to indemnify any underwriters of
the Registrable Securities, their officers and directors and each Person who
controls such underwriters on substantially the same basis as that of the
indemnification of First Reserve provided in this Section 5.3(a).
(b) INDEMNIFICATION BY FIRST RESERVE. First Reserve agrees to
indemnify and hold harmless the Company, its officers and directors, and each
Person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to First Reserve, but only with
reference to information relating to First Reserve or the plan of distribution
furnished in writing by or on behalf of First Reserve expressly for use in any
Registration Statement or Prospectus, or any amendment or supplement thereto, or
any preliminary Prospectus. First Reserve also agrees to indemnify and hold
harmless any underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Company provided in this
Section 5.3(b).
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to Section 5.3(a) or
Section 5.3(b), such Person (the "INDEMNIFIED PARTY") shall promptly notify the
Person against whom such indemnity may be sought (the
14
<PAGE>
"INDEMNIFYING PARTY") in writing and the Indemnifying Party shall have the right
to assume the defense of such proceeding and retain counsel reasonably
satisfactory to such Indemnified Party to represent such Indemnified Party and
any others the Indemnifying Party may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such proceeding. In any
such proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Registration Rights Agreement is unavailable to an Indemnified Party in respect
of any losses, claims, damages, liabilities or expenses referred to herein, then
each such Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company and
First Reserve and the underwriters in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities. The
relative fault of the Company and, First Reserve and the underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and First Reserve agree that it would not be just and
equitable if contribution pursuant to this Section 5.3(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
15
<PAGE>
Section 5.4.RULE 144. the Company covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as First Reserve may reasonably request to
the extent required from time to time to enable First Reserve to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC. Upon the request of First Reserve, the Company
will deliver to First Reserve a written statement as to whether it has complied
with such reporting requirements.
Section 5.5.MISCELLANEOUS.
(a) NOTICES. Any notice or other communication required or permitted
under this Registration Rights Agreement shall be in writing or by telex,
telephone or facsimile transmission with subsequent written confirmation, and
may be personally served or sent by United States mail and shall be deemed to
have been given upon receipt by the party notified. For purposes hereof, the
addresses of the parties hereto (until notice of a change thereof is delivered
as provided in this Section 5.5) shall be as set forth opposite each party's
name on the signature page hereof.
(b) TERMINATION. This Registration Rights Agreement will terminate
upon the earlier of (i) the date upon which the Company and First Reserve
mutually agree in writing to terminate this Registration Rights Agreement and
(ii) the first date on which there ceases to be any Registrable Securities.
(c) TRANSFER OF REGISTRATION RIGHTS. The rights of Holders hereunder
may be assigned by Holders to a transferee or assignee of any Registrable
Securities provided that the Company is given written notice at the time of or
within a reasonable time after said transfer, stating the name and address of
such transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned; and provided further that the
registration rights granted by the Company in Section 5.2 may only be
transferred to, and the definition of " Holders" shall only include, transferees
who meet either of the following criteria: such transferee is (i) a holder of
100,000 or more shares of the Registrable Securities before giving effect to the
transfer, (ii) a member of the First Reserve Group, or (iii) a bank, trust
company or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form. To the extent the
rights under Section 5.2(a) of this Agreement are assigned to multiple Holders,
all rights hereunder that may be exercised by the First Reserve Group may only
be exercised by one or more Holders holding 50% or more of the Registrable
Securities in the aggregate.
(d) WAIVERS AND AMENDMENTS; NONCONTRACTUAL REMEDIES; PRESERVATION OF
REMEDIES. This Registration Rights Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the Company and the Holders of a majority of the
Registrable Securities or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising a right, power or
16
<PAGE>
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude a further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise in
respect of any breach of any provision of this Registration Rights Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such breach is based may also
be the subject matter of any other provision of this Registration Rights
Agreement (or of any other agreement between the parties) as to which there is
no breach.
(e) SEVERABILITY. If any provision of this Registration Rights
Agreement or the applicability of any such provision to a person or
circumstances shall be determined by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Registration
Rights Agreement or the application of such provision to Persons or
circumstances other than those for which it is so determined to be invalid and
unenforceable, shall not be affected thereby, and each provision of this
Registration Rights Agreement shall be valid and shall be enforced to the
fullest extent permitted by law. To the extent permitted by applicable law each
party hereto hereby waives any provision or provisions of law which would
otherwise render any provision of this Registration Rights Agreement invalid,
illegal or unenforceable in any respect.
(f) SUCCESSORS AND ASSIGNS. Subject to Section 5.5(c), this
Registration Rights Agreement shall be binding upon and inure to the benefit of
and be enforceable by the successors and assigns of the parties hereto.
(g) OTHER REGISTRATION RIGHTS AGREEMENTS. Without the prior written
consent of First Reserve, the Company will neither enter into any new
registration rights agreements that conflict with the terms of this Registration
Rights Agreement nor permit the exercise of any other registration rights in a
manner that conflicts with the terms of the registration rights granted
hereunder.
ARTICLE 6
MISCELLANEOUS
Section 6.1 TERMINATION. Except as provided in Section 5.5(b) as to the
Registration Rights Agreement (which shall be governed by such Section 5.5(b))
and this Section 6.1, the respective covenants and agreements of First Reserves
and the Company contained in this Agreement will continue in full force and
effect until the earliest to occur of either of the following: (i) the
Termination Date, or (ii) the sale or other disposition in accordance with this
Agreement by the First Reserve Group of Company Securities if after and giving
effect to such sale or other disposition, the First Reserve Group beneficially
owns in the aggregate Company Securities representing less than 5% of the Voting
Power. Upon any termination of this Agreement pursuant
17
<PAGE>
to this Section 6.1 all of the obligations of the Company and First Reserve
hereunder (other than the Registration Rights Agreement) shall terminate.
Section 6.2 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing or by telex, telephone or facsimile
transmission with subsequent written confirmation, and may be personally served
or sent by United States mail and shall be deemed to have been given upon
receipt by the party notified. For purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
Section 6.2) shall be as set forth opposite each party's name on the signature
page hereof.
Section 6.3 WAIVERS AND AMENDMENTS; NONCONTRACTUAL REMEDIES; PRESERVATION
OF REMEDIES. Other than with respect to the provisions of the Registration
Rights Agreement, which shall be governed by Section 5.5(d), this Agreement may
be amended, superseded, canceled, renewed or extended, and the terms hereof may
be waived, only by a written instrument signed by the Company and the holders of
a majority of the Company Securities held by the First Reserve Group or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising a right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, preclude a further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any breach of any provision of
this Agreement (other than the Registration Rights Agreement, which shall be
governed by Section 5.5(d)) shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
breach is based may also be the subject matter of any other provision of this
Agreement (or of any other agreement between the parties) as to which there is
no breach.
Section 6.4 SEVERABILITY. If any provision of this Agreement or the
applicability of any such provision to a person or circumstances shall be
determined by any court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement or the application of such
provision to persons or circumstances other than those for which it is so
determined to be invalid and unenforceable, shall not be affected thereby, and
each provision of this Agreement shall be valid and shall be enforced to the
fullest extent permitted by law. To the extent permitted by applicable law each
party hereto hereby waives any provision or provisions of law which would
otherwise render any provision of this Agreement invalid, illegal or
unenforceable in any respect.
Section 6.5 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts and when so executed shall constitute one
Agreement, notwithstanding that all parties are not signatories to the same
counterpart.
18
<PAGE>
Section 6.6 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such state, without giving effect to
the conflict of laws principles of such state.
Section 6.7 SUCCESSORS AND ASSIGNS. Subject to Section 4, this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
19
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
Address: PRIDE INTERNATIONAL, INC.
5847 San Felipe Road, Suite 3300 By:/s/ PAUL A. BRAGG
Houston, Texas 77057 Paul A. Bragg
Attn: Mr. Paul A. Bragg President and Chief Executive Officer
Fax: 713-789-1430
Address: FIRST RESERVE FUND VIII, LIMITED
600 Travis, Suite 6000 PARTNERSHIP
Houston, Texas 77002
Attn: Ben A. Guill By: First Reserve GP VIII, L.P., its
Fax: 713-224-0771 General Partner
By: First Reserve Corporation, its
General Partner
By:/s/ THOMAS R. DENISON
Thomas R. Denison
Managing Director
20
EXHIBIT 10.7
[PRIDE INTERNATIONAL, INC. LETTERHEAD]
VIA FACSIMILE (303/382-1275) June 21, 1999
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp.
1801 California Street
Denver, Colorado 80202
Attention: Thomas R. Denison
Gentlemen:
This letter sets forth certain agreements relating to the matters
set forth in Article 2 of the Shareholders Agreement between us dated of even
date herewith (the "Shareholders Agreement") entered into in connection with the
Closing of the transactions provided for in the Securities Purchase Agreement
between us dated as of May 5, 1999, as amended by that certain Letter Agreement
between us dated June 4, 1999 and that certain Letter Agreement between us dated
June 18, 1999 (as so amended, the "Purchase Agreement"). Capitalized terms used
herein that are not otherwise defined shall have the respective meanings given
them in the Purchase Agreement.
Notwithstanding the provisions of Article 2 of the Shareholders
Agreement, until the completion of the Second Closing, the terms and conditions
of this letter agreement shall govern the matters set forth in Article 2 of the
Shareholders Agreement. Pursuant to Article 2 of the Shareholders Agreement, the
Company agrees to provide the Purchaser with certain rights with respect to the
nomination and appointment of a Board (as defined in the Shareholders Agreement)
member and participation in Board matters. The Purchaser hereby agrees that,
subject to the prior completion of the First Closing, such appointment shall
instead occur at the Second Closing, which shall occur no later than July 10,
1999. Notwithstanding the foregoing, the parties further agree that at any time
after the First Closing and prior to the date of such appointment, the Company
shall include a designee of the Purchaser in all conference calls or other
meetings of the Board of Directors (including committees thereof) at which board
or committee action is or could be taken, and the Company shall provide to such
designee all materials that it provides to directors of the Company in the same
manner and at the same time as provided to such directors. Upon the completion
of the Second Closing, this letter agreement shall terminate in full and cease
to apply, and the terms and conditions of Article 2 of the Shareholders
Agreement shall govern the matters addressed herein.
<PAGE>
First Reserve Fund VIII, Limited Partnership
c/o First Reserve Corp. -2- June 21, 1999
This letter may be executed in counterparts, which together
constitute a single agreement. This letter may be delivered by delivery of
facsimile signature pages.
If the foregoing is in accordance with the agreements and
understandings between us, please so indicate by returning a signed counterpart
of this letter.
Very truly yours,
PRIDE INTERNATIONAL, INC.
By:/s/PAUL A. BRAGG
Paul A. Bragg
President and Chief Executive Officer
AGREED TO AND ACCEPTED
AS OF THIS 21ST DAY OF JUNE 1999:
FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP
By: First Reserve GP VIII, L.P.
its General Partner
By: First Reserve Corporation
its General Partner
By:/s/THOMAS R. DENISON
Thomas R. Denison
Managing Director
EXHIBIT 15.1
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Pride International, Inc.
Quarterly Report on Form 10-Q
We are aware that our report dated August 13, 1999 on our review of
interim financial information of Pride International, Inc. (the "Company") as of
and for the periods ended June 30, 1999 and 1998 and included in the Company's
quarterly report on Form 10-Q is incorporated by reference in its Registration
Statements on Form S-8 and Form S-3 filed with the Securities and Exchange
Commission: Form S-8 (file no. 33-26854) filed on February 6, 1989; Form S-8
(file no. 33-44823) filed on December 30, 1991; Form S-8 (file no. 333-06823)
and Form S-8 (file no. 333-06825) filed on June 26, 1996; Form S-3 (file no.
333-21385) filed on April 4, 1997; Form S-8 (file no. 333-27661) filed on May
22, 1997; Form S-8 (file no. 333-35089) and Form S-8 (file no. 333-35093) filed
on September 8, 1997, and Form S-3 (file no. 333-44925) filed on March 23, 1998.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of the registration statements prepared or certified by us
within the meanings of Sections 7 and 11 of that Act.
Very truly yours,
PricewaterhouseCoopers LLP
Houston, Texas
August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE PRIDE INTERNATIONAL, INC. UNAUDITED CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 1999 AND THE UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE SIX
MONTH PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 176,889
<SECURITIES> 0
<RECEIVABLES> 155,872
<ALLOWANCES> (750)
<INVENTORY> 29,153
<CURRENT-ASSETS> 430,220
<PP&E> 2,055,139
<DEPRECIATION> (207,291)
<TOTAL-ASSETS> 2,390,879
<CURRENT-LIABILITIES> 257,925
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 771,291
<TOTAL-LIABILITY-AND-EQUITY> 2,390,879
<SALES> 321,902
<TOTAL-REVENUES> 321,902
<CGS> 250,595
<TOTAL-COSTS> 361,813
<OTHER-EXPENSES> (2,824)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,490
<INCOME-PRETAX> (64,577)
<INCOME-TAX> (18,265)
<INCOME-CONTINUING> (46,312)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,884
<CHANGES> 0
<NET-INCOME> (42,428)
<EPS-BASIC> (0.91)
<EPS-DILUTED> (0.91)
</TABLE>
