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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 1-13289
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PRIDE INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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LOUISIANA 76-0069030
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5847 SAN FELIPE, SUITE 3300
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 789-1400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, no par value New York Stock Exchange
Rights to Purchase Preferred Stock New York Stock Exchange
6 1/4% Convertible Subordinated New York Stock Exchange
Debentures due 2006
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X}
The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 18, 1998, based on the closing price on the New York
Stock Exchange on such date, was $334.7 million. (The officers and directors of
the registrant are considered affiliates for the purposes of this calculation.)
The number of shares of the registrant's Common Stock outstanding on March
18, 1999 was 50,426,673.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the Annual
Meeting of Shareholders to be held in May 1999 are incorporated by reference
into Part III of this report.
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business............................. 1
Item 2. Property............................. 11
Item 3. Legal Proceedings.................... 11
Item 4. Submission of Matters to a Vote of
Security Holders................... 11
Executive Officers of the
Registrant......................... 12
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PART II
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Item 5. Market for Registrant's Common Equity
and Related Shareholder Matters.... 13
Item 6. Selected Financial Data.............. 14
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 15
Item 7A Quantitative and Qualitative
Disclosures About Market Risk...... 22
Forward-Looking Statements........... 22
Item 8. Financial Statements and
Supplementary Data................. 23
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 49
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PART III
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Item 10. Directors and Executive Officers of
the Registrant..................... 49
Item 11. Executive Compensation............... 49
Item 12. Security Ownership of Certain
Beneficial Owners and Management... 49
Item 13. Certain Relationships and Related
Transactions....................... 49
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PART IV
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Item 14. Exhibits, Financial Statement
Schedules and Reports on Form
8-K................................ 49
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PART I
ITEM 1. BUSINESS
IN THIS ANNUAL REPORT ON FORM 10-K, WE REFER TO PRIDE INTERNATIONAL, INC.
AND ITS SUBSIDIARIES AS "WE," THE "COMPANY" OR "PRIDE," UNLESS THE CONTEXT
CLEARLY INDICATES OTHERWISE.
GENERAL
Pride is a leading international provider of contract drilling and related
services, operating both offshore and on land. In recent years, we have focused
our growth strategy on the higher margin offshore and international drilling
markets. Offshore and international markets generally have greater profit
potential than domestic land-based markets, primarily as a result of less
competition, higher utilization rates and stronger demand resulting from a
general trend by oil and gas companies to shift expenditures to exploration and
development activities abroad and in the Gulf of Mexico. For these reasons, we
actively sought to diversify beyond our former domestic land-based operations,
which prior to mid-1993 accounted for substantially all of our revenues and
earnings. Since 1993, through a series of strategic transactions, we have
transformed Pride from solely a provider of domestic land-based workover and
related services into a diversified international drilling contractor operating
both offshore and on land.
During 1997 and 1998, we completed the following strategic transactions:
o DIVESTITURE OF U.S. LAND-BASED OPERATIONS. In February 1997, we
completed the divestiture of our domestic land-based well servicing
operations, which included 407 workover rigs operating in Texas,
California, New Mexico and Louisiana, for approximately $136 million.
We retained 14 of our larger land-based rigs for redeployment to
international markets, ten of which have since been redeployed to
South America.
o FORASOL ACQUISITION. In March 1997, we acquired the operating
subsidiaries of Forasol-Foramer N.V. (collectively, "Forasol") for
approximately $113 million in cash and 11 million shares of our common
stock. The transaction provided entry into new international markets
while contributing additional capacity in our existing South American
markets, as well as a deepwater asset base and expertise. Forasol
provided drilling, workover and engineering services in more than 15
countries, including substantial operations in South America, Africa,
the Middle East and Southeast Asia.
o PURCHASE OF JACKUP RIGS. In May 1997, we purchased 13 mat-supported
jackup rigs for approximately $269 million. The purchase of these rigs
positioned us as the second largest operator in the Gulf of Mexico of
mat-supported jackup rigs capable of operating in water depths of 200
feet or greater.
o PURCHASE OF ADDITIONAL OFFSHORE ASSETS. In April 1997, we purchased
and substantially upgraded a tender-assisted rig, which we deployed to
Southeast Asia. In October 1997, we purchased an independent-leg,
cantilevered jackup rig for approximately $35 million. The jackup rig,
capable of operating in water depths of up to 300 feet, is currently
under contract in India.
o BOLIVIAN ACQUISITION. In July 1998, we acquired 60% of a Bolivian
company, Compania Boliviana de Perforacion S.A.M. ("CBP"), in a
joint initiative with the Bolivian national oil company, Yacimientos
Petroliferos Fiscales Bolivianos ("YPFB"). CBP was capitalized
through the contribution of 13 land-based drilling and workover rigs,
oilfield trucks and other related drilling assets by YPFB and $17
million in cash by us.
Currently, we operate a global fleet of 308 rigs, including three
semisubmersible rigs, 17 jackup rigs, nine tender-assisted rigs, five barge
rigs, 23 offshore platform rigs and 251 land-based drilling and workover rigs.
The significant diversity of our rig fleet 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.
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Most recently, we have focused on increasing the size of our fleet capable
of drilling in deeper waters. We are participating in the following offshore rig
acquisition and construction projects:
o AMETHYST 1 PURCHASE. In October 1998, we purchased for approximately
$85 million the AMETHYST 1, a dynamically positioned, self-propelled
semisubmersible drilling rig capable of working in water depths of up
to 4,000 feet. The AMETHYST 1 is currently working offshore Brazil
under a charter and service contract that expires in 2001.
o DRILLSHIP JOINT VENTURES. We have entered into joint ventures to
construct, own and operate the PRIDE AFRICA and the PRIDE ANGOLA, two
ultra-deepwater drillships currently under construction in South
Korea. The drillships, which will be capable of operating in water
depths of up to 10,000 feet, are contracted to work for Elf
Exploration Angola ("Elf Angola") for initial terms of five and
three years, respectively. We expect that the PRIDE AFRICA will
commence operations in mid-1999 and that the PRIDE ANGOLA will
commence operations by early 2000. The joint ventures have entered
into financing arrangements with a group of banks providing that
approximately $400 million of the drillships' total estimated
construction cost of $470 million will be financed by loans that are,
upon delivery of the drillships, without recourse to the joint venture
participants. We estimate that our total equity investment in the
projects will be approximately $38 million, which represents a 51%
ownership interest in each joint venture.
o AMETHYST JOINT VENTURES. We have a 30% equity interest in a joint
venture company organized to construct, own and operate four
Amethyst-class dynamically positioned semisubmersible drilling rigs.
The rigs, which will be larger, enhanced versions of the AMETHYST 1,
are currently under construction at shipyards in South Korea and the
United States. Upon their completion, the rigs will be operated under
charter and service contracts with Petroleo Brasilerio S.A.
("Petrobras") having initial terms of six to eight years. The total
estimated cost to construct, equip and mobilize the four rigs is
approximately $700 million. Delivery of the rigs is expected in
mid-2000. We have made aggregate equity contributions to the joint
venture of approximately $45 million as of December 31, 1998.
The joint venture has contracts with Petrobras to provide two
additional deepwater rigs. The joint venture originally intended to
build two additional Amethyst-class 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. The joint venture partners are currently evaluating
alternatives relating to these two contracts, which include: (a)
chartering other rigs currently available in the market to fulfill the
related Petrobras charter and service contracts, (b) constructing
these two additional Amethyst-class rigs at another shipyard or (c)
undertaking other mutually acceptable means of fulfilling the charter
and service contracts for those two rigs. We can give no assurance,
however, that any of these efforts will be successful.
We intend to continue to pursue expansion of our offshore and international
drilling operations through acquisitions, rig upgrades and redeployment of
assets to active geographic regions, as well as through participation in
strategic new projects such as those described above.
We are a Louisiana corporation with our principal executive offices located
at 5847 San Felipe, Suite 3300, Houston, Texas 77057. Our telephone number at
such address is (713) 789-1400.
OPERATIONS
SOUTH AMERICA
Through a series of acquisitions and the deployment of underutilized
domestic assets, we have significantly expanded our South American operations
and now operate two semisubmersible rigs, three jackup rigs, two tender-assisted
rigs, four floating barge rigs and 230 land-based rigs in the region.
BRAZIL. In September 1997, our semisubmersible rig NYMPHEA began drilling
offshore Brazil for Petrobras. The rig is working under a contract expiring in
2001. In October 1998, we purchased the AMETHYST 1 for approximately $85
million. The rig, which is equipped to provide offshore drilling, subsea well
intervention, well tie-back and related construction services, is currently
working offshore Brazil under a charter and service contract that expires in
2001.
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VENEZUELA. Our offshore fleet in Venezuela includes three jackup rigs, two
tender-assisted rigs and four barge rigs operating on Lake Maracaibo. Two of the
jackup rigs that we operate under contracts expiring in 1999 are owned by
Petroleos de Venezuela, S.A. ("PDVSA"). The other jackup rig is owned by us
and operates under a contract expiring in December 2000. In 1995, we placed two
floating barge rigs into service on Lake Maracaibo that are working under
ten-year contracts with PDVSA. We also operate two other floating barge rigs and
two tender-assisted rigs under management contracts with PDVSA that expire in
2000. Our land-based fleet in Venezuela currently consists of 48 rigs, of which
14 are drilling rigs and 34 are workover rigs.
ARGENTINA. In Argentina, we currently operate 142 land-based rigs, which
we believe represent approximately 50% of the land-based rigs in the Argentine
market. Of these rigs, 36 are drilling rigs and 106 are workover rigs. Argentine
rig operations are generally conducted in remote regions of the country and
require substantial fixed infrastructure and operating support costs. We believe
that our established infrastructure and scale of operations provide us with a
competitive advantage in this market.
COLOMBIA. In Colombia, we currently operate 13 land-based drilling rigs
and eight land-based workover rigs under contracts with the national oil company
and with major international oil operators. We believe we are well positioned to
capitalize on opportunities in Colombia.
BOLIVIA. Demand for rig services has increased in Bolivia as a result of
the privatization of components of the Bolivian national oil company, as well as
significant sales of exploration blocks to private-sector operators. In
addition, exploration activity for natural gas in Bolivia has increased as a
result of the recent construction of a major gas pipeline from Bolivia to
markets in Brazil. In July 1998, we acquired a 60% interest in CBP, which
operates seven land-based drilling and six land-based workover rigs in Bolivia.
In addition, we have recently mobilized three land-based drilling and three
land-based workover rigs from Argentina for jobs in Bolivia.
GULF OF MEXICO
In May 1997, we acquired 13 mat-supported jackup rigs, 11 of which are
currently located in the Gulf of Mexico. The remaining two rigs are located in
West Africa and Southeast Asia. This acquisition positioned us as the second
largest operator in the Gulf of Mexico of mat-supported jackup rigs capable of
operating in water depths of 200 feet or greater.
We also operate a fleet of 23 offshore modular platform rigs in the Gulf of
Mexico. We believe our fleet is one of the most technologically advanced fleets
in the industry.
The recent declines experienced in the offshore drilling markets have had
their greatest impact on demand for our platform and jackup fleets. For further
discussion, please read "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Outlook" in Item 7 of this Report.
OTHER INTERNATIONAL
OFFSHORE. Our semisubmersible rig, SOUTH SEAS DRILLER, is currently
operating offshore South Africa under a contract extending through April 2000,
with a three-well option thereafter. We also operate seven tender-assisted rigs.
The BARRACUDA is currently contracted through May 1999. The ILE DE SEIN is under
contract in Indonesia through the end of 1999, with a one-year option, and the
PIRANHA is contracted in Brunei through the end of November 1999, with a
two-well option. Through a joint venture, we own a 12.5% interest in the
self-erecting tender AL BARAKA I. In addition to our ownership interest, we also
manage the rig. The ALLIGATOR is currently idle. The CORMORANT and the ILE DE LA
MARTINIQUE are stacked. We operate one swamp barge rig, the BINTANG KALIMANTAN,
in Nigeria, which is currently contracted through April 1999.
LAND. We currently operate six land-based rigs in North Africa and four in
the Middle East.
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RIG FLEET
OFFSHORE RIGS
We have presented in the table below information about our offshore rig
fleet as of March 18, 1999:
OFFSHORE RIGS
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BUILT/UPGRADED WATER DRILLING
OR EXPECTED DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN COMPLETION RATING RATING LOCATION
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(feet) (feet)
DRILLSHIPS - 2
Pride Africa(1) Gusto 10,000 1999 10,000 30,000 Korea
Pride Angola(1) Gusto 10,000 1999 10,000 30,000 Korea
SEMISUBMERSIBLE RIGS - 7
Nymphea F&G Pacesetter 1987 1,500 25,000 Brazil
South Seas Driller Aker H-3 1977/1997 1,000 20,000 South Africa
Amethyst 1(2) Amethyst Class 1989 4,000 20,000 Brazil
Amethyst 4(3) Amethyst Class 2000 5,000 25,000 Mississippi
Amethyst 5(3) Amethyst Class 2000 5,000 25,000 Mississippi
Amethyst 6(3) Amethyst Class 2000 5,000 25,000 Korea
Amethyst 7(3) Amethyst Class 2000 5,000 25,000 Korea
JACKUP RIGS - 17
Pride Pennsylvania Independent leg cantilever 1973/1998 300 20,000 India
Ile du Levant Independent leg cantilever 1991 270 20,000 Venezuela
GP-19(4) Independent leg cantilever 1987 150 20,000 Venezuela
GP-20(4) Independent leg cantilever 1987 200 20,000 Venezuela
Pride Alabama Mat-supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Alaska Mat-supported cantilever 1982 250 25,000 Gulf of Mexico
Pride Arkansas Mat-supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Colorado Mat-supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Kansas Mat-supported cantilever 1999 250 25,000 Gulf of Mexico
Pride Mississippi Mat-supported cantilever 1990 200 25,000 Gulf of Mexico
Pride New Mexico Mat-supported cantilever 1982 200 25,000 Gulf of Mexico
Pride Texas Mat-supported cantilever 1999 300 20,000 Gulf of Mexico
Pride California Mat-supported slot 1997 250 20,000 Malaysia
Pride Louisiana Mat-supported slot 1981 250 25,000 Gulf of Mexico
Pride Oklahoma Mat-supported slot 1996 250 20,000 Gulf of Mexico
Pride Wyoming Mat-supported slot 1976 250 25,000 Gulf of Mexico
Pride Utah Mat-supported slot 1990/1998 45 20,000 Nigeria
TENDER-ASSISTED RIGS - 9
Alligator Self-erecting barge 1992/1998 330 20,000 Cabinda
Barracuda Self-erecting barge 1992 330 20,000 Middle East
Al Baraka I(5) Self-erecting barge 1994 650 20,000 Middle East
Ile de Sein Self-erecting barge 1990/1997 450 16,000 Indonesia
Piranha Self-erecting barge 1978/1998 600 20,000 Brunei
Cormorant Converted ship 1991 300 16,400 Angola
Ile de la Martinique Converted ship 1985 400 16,000 UAE
GP-14(4) Tender barge 1985 150 20,000 Venezuela
GP-18(4) Tender barge 1985 150 20,000 Venezuela
BARGE RIGS - 5
Pride I Floating cantilever 1995 150 20,000 Venezuela
Pride II Floating cantilever 1995 150 20,000 Venezuela
GP-24(4) Floating cantilever 1992 150 20,000 Venezuela
Galileo II(4) Floating cantilever 1992/1997 150 20,000 Venezuela
Bintang Kalimantan Posted swamp barge 1995 N/A 16,000 Nigeria
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RIG NAME STATUS
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DRILLSHIPS - 2
Pride Africa(1) Shipyard
Pride Angola(1) Shipyard
SEMISUBMERSIBLE RIGS - 7
Nymphea Working
South Seas Driller Working
Amethyst 1(2) Working
Amethyst 4(3) Shipyard
Amethyst 5(3) Shipyard
Amethyst 6(3) Shipyard
Amethyst 7(3) Shipyard
JACKUP RIGS - 17
Pride Pennsylvania Working
Ile du Levant Working
GP-19(4) Working
GP-20(4) Working
Pride Alabama Available
Pride Alaska Available
Pride Arkansas Working
Pride Colorado Working
Pride Kansas Working
Pride Mississippi Working
Pride New Mexico Working
Pride Texas Available
Pride California Available
Pride Louisiana Working
Pride Oklahoma Stacked
Pride Wyoming Available
Pride Utah Available
TENDER-ASSISTED RIGS - 9
Alligator Available
Barracuda Working
Al Baraka I(5) Working
Ile de Sein Working
Piranha Working
Cormorant Stacked
Ile de la Martinique Stacked
GP-14(4) Working
GP-18(4) Working
BARGE RIGS - 5
Pride I Working
Pride II Working
GP-24(4) Working
Galileo II(4) Working
Bintang Kalimantan Working
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
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WATER DRILLING
BUILT/UPGRADED DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN OR COMPLETION RATING RATING LOCATION
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PLATFORM RIGS - 23
Rig 1501E Heavy electrical 1996 N/A 25,000 Gulf of Mexico
Rig 1502E Heavy electrical 1998 N/A 25,000 Gulf of Mexico
Rig 1002E Heavy electrical 1996 N/A 20,000 Gulf of Mexico
Rig 1003E Heavy electrical 1996 N/A 20,000 Gulf of Mexico
Rig 1004E Heavy electrical 1997 N/A 20,000 Gulf of Mexico
Rig 1005E Heavy electrical 1998 N/A 20,000 Indonesia
Rig 750E Heavy electrical 1992 N/A 16,500 Gulf of Mexico
Rig 751E Heavy electrical 1995 N/A 16,500 Gulf of Mexico
Rig 650E Intermediate electrical 1994 N/A 15,000 Gulf of Mexico
Rig 651E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico
Rig 653E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico
Rig 951 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico
Rig 952 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico
Rig 30 Intermediate mechanical 1986 N/A 15,000 Gulf of Mexico
Rig 100 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico
Rig 110 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico
Rig 130 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico
Rig 170 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico
Rig 200 Intermediate mechanical 1993 N/A 15,000 Gulf of Mexico
Rig 210 Intermediate mechanical 1996 N/A 15,000 Gulf of Mexico
Rig 220 Intermediate mechanical 1995 N/A 15,000 Gulf of Mexico
Rig 14 Light mechanical 1994 N/A 10,000 Gulf of Mexico
Rig 15 Light mechanical 1994 N/A 10,000 Gulf of Mexico
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RIG NAME STATUS
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PLATFORM RIGS - 23
Rig 1501E Working
Rig 1502E Working
Rig 1002E Working
Rig 1003E Working
Rig 1004E Working
Rig 1005E Working
Rig 750E Working
Rig 751E Working
Rig 650E Working
Rig 651E Available
Rig 653E Working
Rig 951 Working
Rig 952 Available
Rig 30 Stacked
Rig 100 Stacked
Rig 110 Stacked
Rig 130 Available
Rig 170 Stacked
Rig 200 Available
Rig 210 Available
Rig 220 Available
Rig 14 Working
Rig 15 Stacked
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(1) Currently under construction. These rigs will be owned by joint ventures in
which we have a 51% interest.
(2) In February 1999, we completed a transaction in which we sold the rig to a
third party and leased the rig back under a charter expiring in 2012.
(3) Currently under construction. These rigs will be owned by a joint venture in
which we have a 30% interest.
(4) Operated but not owned by us.
(5) Owned by a joint venture in which we have a 12.5% interest.
DRILLSHIPS. The PRIDE AFRICA and PRIDE ANGOLA, currently under
construction, are ultra-deepwater self-propelled drillships that can be
positioned over a drill site through the use of a computer-controlled thruster
(dynamic positioning) system. Drillships normally require water depths of at
least 200 feet to conduct operations. Drillships are suitable for deepwater
drilling in moderate weather environments and in remote locations because of
their mobility and large load-carrying capacity.
SEMISUBMERSIBLE RIGS. Our semisubmersible rigs are floating platforms
that, by means of a water ballasting system, can be submerged to a predetermined
depth so that a substantial portion of the lower hulls, or pontoons, are below
the water surface during drilling operations. The rig is "semisubmerged,"
remaining afloat in a position where the lower hull is about 60 to 80 feet below
the water line and the upper deck protrudes well above the surface. This type of
rig maintains its position over the well through the use of either an anchoring
system or a computer-controlled thruster system similar to those described
above.
JACKUP RIGS. The jackup rigs we operate are mobile, self-elevating
drilling platforms equipped with legs that can be lowered to the ocean or lake
floor until a foundation is established to support the drilling platform. The
rig legs may have a lower hull or mat attached to the bottom to provide a more
stable foundation in soft bottom areas. Independent leg rigs are better suited
for harsher or uneven seabed conditions. Jackup rigs are generally subject to a
maximum water depth of approximately 350 to 400 feet, while some jackup rigs may
drill in water depths as shallow as ten feet. The water depth limit of a
particular rig is determined by the length of the rig's legs and the operating
environment. Moving a rig from one drill site to another involves lowering the
hull into the water until it is afloat and then jacking up its legs with the
hull floating on the surface of the water. The hull is then towed to the new
drilling site. A cantilever jackup has a feature that allows the drilling
platform to be extended out from the hull, allowing it to perform drilling or
workover operations over a preexisting platform or structure. Certain cantilever
jackup rigs have "skid-off" capability, which allows the derrick equipment to
be skidded onto an adjacent platform, thereby
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increasing the operational capacity of the rig. Slot type jackup rigs are
configured for drilling operations to take place through a slot in the hull.
Slot type rigs are usually used for exploratory drilling because their
configuration makes them difficult to position over existing platforms or
structures.
TENDER-ASSISTED RIGS. Our tender-assisted rigs are generally
non-self-propelled barges moored alongside a platform and containing crew
quarters, mud pits, mud pumps and power generation systems. The only equipment
transferred to the platform for drilling or workover operations is the derrick
equipment set consisting of the substructure, drillfloor, derrick and drawworks.
As a result, tender-assisted rigs are less hazardous and allow smaller, less
costly platforms to be used for development projects. Self-erecting tenders
carry their own derrick equipment set and have a crane capable of erecting the
derrick on the platform, thereby eliminating the cost associated with a separate
derrick barge and related equipment.
BARGE RIGS. We operate barge rigs on Lake Maracaibo, Venezuela that have
been designed to work in a floating mode with a cantilever feature and a mooring
system that enables the rig to operate in waters up to 150 feet deep. In
Nigeria, we operate a posted swamp barge rig. This rig is held on location by
legs or posts that are jacked down into the sea floor before commencement of
work.
PLATFORM RIGS. Our platform rigs consist of drilling equipment and
machinery arranged in modular packages that are transported to and assembled and
installed on fixed offshore platforms owned by the customer. Fixed offshore
platforms are steel, tower-like structures that stand on the ocean floor, with
the top portion, or platform, above the water level, providing the foundation
upon which the platform rig is placed. Platform rigs are often used to provide
drilling and horizontal reentry services using top drives, enhanced pumps and
solids control equipment for drilling fluids, as well as for workover services.
LAND-BASED RIGS
We have presented in the table below information about our land-based rig
fleet as of March 18, 1999:
LAND-BASED RIGS
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COUNTRY TOTAL DRILLING WORKOVER
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SOUTH AMERICA -- 230
Argentina....................... 142 36 106
Venezuela....................... 48 14 34
Colombia........................ 21 13 8
Bolivia......................... 19 10 9
AFRICA/MIDDLE EAST -- 10
Algeria......................... 4 4 --
Libya........................... 2 1 1
Oman............................ 3 3 --
Bahrain......................... 1 1 --
OTHER -- 11.......................... 11 3 8
----- --- ---
Total Land-Based Rigs...... 251 85 166
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A land-based drilling rig consists of engines, drawworks, a mast
substructure, pumps to circulate the drilling fluid, blowout preventers, drill
string and related equipment. The engines power a rotary table that turns the
drill string, causing the drill bit to bore through the subsurface rock layers.
Rock cuttings are carried to the surface by the circulating drilling fluid. The
intended well depth and the drilling site conditions are the principal factors
that determine the size and type of rig most suitable for a particular drilling
job.
A land-based well servicing rig consists of a mobile carrier, engine,
drawworks and derrick. The primary function of a well servicing rig is to act as
a hoist so that pipe, rods and down-hole equipment can be run into and out of a
well. All of our well servicing rigs can be readily moved between well sites and
between geographic areas of operations.
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SERVICES PROVIDED
DRILLING SERVICES
We provide contract drilling services to oil and gas exploration and
production companies through the use of mobile offshore and land-based drilling
rigs. Generally, land-based rigs and offshore platform rigs operate with crews
of six to 17 persons while semisubmersible rigs, jackup rigs, tender-assisted
rigs and barge rigs operate with crews of 15 to 25 persons. We provide the rig
and drilling crew and are responsible for the payment of operating and
maintenance expenses.
MAINTENANCE AND WORKOVER SERVICES
Maintenance services are required on producing oil and gas wells to ensure
efficient, continuous operation. These services consist of mechanical repairs
necessary to maintain production from the well, such as repairing parted sucker
rods, replacing defective down-hole pumps in an oil well or replacing defective
tubing in a gas well. We provide the rigs, equipment and crews for these
maintenance services, which are performed on both oil and gas wells but which
are more often required on oil wells. Many of our rigs also have pumps and tanks
that can be used for circulating fluids into and out of the well. Typically,
maintenance jobs are performed on a series of wells in geographic proximity to
each other, take less than 48 hours per well to complete and require little, if
any, revenue-generating equipment other than a rig.
In addition to periodic maintenance, producing oil and gas wells
occasionally require major repairs or modifications, called "workovers."
Workover services include the opening of new producing zones in an existing
well, recompletion of a well in which production has declined, drilling out
plugs and packers and the conversion of a producing well to an injection well
during enhanced recovery operations. These extensive workover operations are
normally performed by a well servicing rig with additional specialized accessory
equipment, which may include rotary drilling equipment, mud pumps, mud tanks and
blowout preventers, depending upon the particular type of workover operation.
Most of our rigs are designed and equipped to handle the more complex workover
operations. A workover may last from a few days to several weeks.
ENGINEERING SERVICES
We employ a technical staff dedicated to industry research and development
and to designing specialized drilling equipment to fulfill specific customer
requirements. The engineering staff has designed and managed the fabrication of
several of the rigs in our offshore rig fleet and is actively involved in our
newbuild projects. We also provide turnkey, project management and other
engineering services, which enhance our contract drilling services.
COMPETITION
Competition in the international markets in which we operate ranges from
large multinational competitors offering a wide range of well servicing and
drilling services to smaller, locally owned businesses. We believe that we are
competitive in terms of pricing, performance, equipment, safety, availability of
equipment to meet customer needs and availability of experienced, skilled
personnel in those international areas in which we operate.
Drilling contracts are generally awarded on a competitive bid basis and,
while an operator may consider quality of service and equipment, intense price
competition is the primary factor in determining which contractor, among those
with suitable rigs, is awarded a job. Certain of our competitors have greater
financial resources than us, which may enable them to better withstand periods
of low utilization, to compete more effectively on the basis of price, to build
new rigs or to acquire existing rigs.
CUSTOMERS
We work for large multinational oil and gas companies, government-owned oil
companies and independent oil and gas producers. In 1998, we had two customers,
PDVSA and Perez Companc S.A., that accounted for more than 10% of our
consolidated revenues.
7
<PAGE>
CONTRACTS
Our drilling contracts are awarded through competitive bidding or on a
negotiated basis. The contract terms and rates vary depending on competitive
conditions, the geographical area, the geological formation to be drilled, the
equipment and services to be supplied, the on-site drilling conditions and the
anticipated duration of the work to be performed.
Oil and gas well drilling contracts are carried out on either a dayrate,
footage or turnkey basis. Under dayrate contracts, we charge the customer a
fixed charge per day regardless of the number of days needed to drill the well.
In addition, dayrate contracts usually provide for a reduced day rate (or lump
sum amount) for mobilizing the rig to the well location and for assembling and
dismantling the rig. Under dayrate contracts, we ordinarily bear no part of the
costs arising from down-hole risks (such as time delays for various reasons,
including a stuck or broken drill string or blowouts). Most of our contracts are
on a dayrate basis. Other contracts provide for payment on a footage basis,
whereby we are paid a fixed amount for each foot drilled regardless of the time
required or the problems encountered in drilling the well. We may also enter
into turnkey contracts, whereby we agree to drill a well to a specific depth for
a fixed price and to bear some of the well equipment costs. Compared to dayrate
contracts, footage and turnkey contracts involve a higher degree of risk to us
and, accordingly, normally provide greater profit potential.
In international offshore markets, contracts generally provide for longer
terms than contracts in domestic offshore markets. When contracting abroad, we
are faced with the risks of currency fluctuation and, in certain cases, exchange
controls. Typically, we limit these risks by obtaining contracts providing for
payment in U.S. dollars or freely convertible foreign currency. To the extent
possible, we seek to limit our exposure to potentially devaluating currencies by
matching our acceptance thereof to our expense requirements in such local
currencies. We can give no assurance that we will be able to continue to take
such actions in the future, thereby exposing us to foreign currency fluctuations
that could have a material adverse effect upon our results of operations and
financial condition. Currently, foreign exchange in the countries where we
operate is carried out on a free-market basis. We can give no assurances,
however, that the local monetary authorities in these countries will not
implement exchange controls in the future. Please read "Quantitative and
Qualitative Disclosure About Market Risk."
SEASONALITY
In general, our business activities are not significantly affected by
seasonal fluctuations. Our rigs are located in geographical areas that are not
subject to severe weather that would halt operations for prolonged periods.
EMPLOYEES
We currently employ approximately 7,500 employees. Approximately 1,200 of
our employees are located in the United States and 6,300 are located abroad.
Hourly rig crew members constitute the vast majority of employees. None of our
U.S. employees are represented by a collective bargaining unit. Many of our
international employees are subject to industry-wide labor contracts within
their respective countries. Management believes that our employee relations are
good.
SEGMENT INFORMATION
Information with respect to revenues, earnings from operations and
identifiable assets attributable to our industry segments and geographic areas
of operations for the last three fiscal years is presented in Note 14 to our
Consolidated Financial Statements included in Item 8 of this Report.
RISK FACTORS
LOW OIL AND GAS PRICES HAVE NEGATIVELY AFFECTED OUR FINANCIAL RESULTS AND
MAY CONTINUE TO DO SO IN THE FUTURE.
The profitability of our operations depends significantly upon conditions
in the oil and gas industry and, specifically, the level of ongoing exploration
and production expenditures of oil and gas company customers. The demand for
contract drilling and related services is directly influenced by oil and gas
prices,
8
<PAGE>
expectations about future prices, the cost of producing and delivering oil and
gas, government regulations, local and international political and economic
conditions, as well as the ability of the Organization of Petroleum Exporting
Countries to set and maintain production levels and prices, the level of
production by non-OPEC countries and the policies of the various governments
regarding exploration and development of their oil and gas reserves.
The continuing weakness in worldwide oil and gas prices, which began in the
fourth quarter of 1997, is depressing both offshore drilling activity,
particularly in the U.S. Gulf of Mexico, and international land-based activity.
As product prices have declined, companies exploring for oil and gas have
curtailed or cancelled some of their drilling programs, thereby reducing demand
for drilling services. This reduction in demand has significantly eroded
dayrates and utilization of our rigs, particularly in our offshore Gulf of
Mexico and, to a lesser extent, our onshore South American operations. This
erosion in dayrates and utilization is currently having a negative impact on our
financial results. We expect that current market conditions will continue at
least through 1999 and that these conditions will adversely affect our results
for the year. Please read "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Outlook" in Item 7 of this Report for
further information about how we expect the current business environment to
affect our future financial results.
INTERNATIONAL EVENTS MAY HURT OUR OPERATIONS.
We derive a significant portion of our revenues from international
operations. Risks associated with operating in international markets include the
following:
o foreign exchange restrictions and currency fluctuations
o changes in foreign tax rates
o political instability
o foreign and domestic monetary and tax policies
o expropriation
o nationalization
o nullification or modification of contracts
o war and civil disturbances
Additionally, our ability to compete in international contract drilling
markets may be adversely affected by foreign governmental regulations that favor
or require the awarding of contracts to local contractors or by regulations
requiring foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. Furthermore, our foreign subsidiaries may face
governmentally imposed restrictions from time to time on their ability to
transfer funds to us.
DELAYS OR COST OVERRUNS IN OUR CONSTRUCTION AND REFURBISHMENT PROJECTS
COULD MATERIALLY AFFECT OUR RESULTS OF OPERATIONS.
We have expended, and in 1999 will continue to expend, significant amounts
to complete construction of new rigs, including our two drillships, and, to a
lesser extent, to upgrade and refurbish other rigs. In addition, we have made
and may continue to make equity contributions to the AMETHYST joint ventures,
which are constructing four new semisubmersible rigs. These projects are subject
to the risks of delay or cost overruns inherent in construction projects. These
risks include:
o unforeseen engineering problems
o work stoppages
o weather interference
o unanticipated cost increases
o delays in receipt of necessary equipment
o inability to obtain the requisite permits or approvals
9
<PAGE>
Significant construction cost overruns could have a material adverse effect
on our financial position and cash flows. Significant delays could also have a
material adverse effect on our contract commitments for such rigs.
OUR DEBT ARRANGEMENTS MAY LIMIT OUR FLEXIBILITY IN OBTAINING ADDITIONAL
FINANCING AND IN PURSUING OTHER BUSINESS OPPORTUNITIES.
As of December 31, 1998, we had approximately $970.5 million in long-term
debt, net of current portion. The level of our indebtedness will have several
important effects on our future operations, including:
o a significant portion of our cash flow from operations will be
dedicated to the payment of interest and principal on such debt and
will not be available for other purposes
o covenants contained in our existing debt arrangements require us to
meet financial tests, which may affect our flexibility in planning
for, and reacting to, changes in our business
o our ability to obtain additional financing for working capital,
capital expenditures, acquisitions, general corporate and other
purposes may be limited.
Our ability to meet our debt service obligations and to reduce our total
indebtedness will be dependent upon our future performance, which will be
subject to general economic conditions, industry cycles and financial, business
and other factors affecting our operations, many of which are beyond our
control.
WE ARE SUBJECT TO HAZARDS CUSTOMARY IN THE OILFIELD SERVICE INDUSTRY AND TO
THOSE MORE SPECIFIC TO MARINE OPERATIONS. WE MAY NOT HAVE INSURANCE TO COVER ALL
THESE HAZARDS.
Our operations are subject to the many hazards customary in the oilfield
services industry. Contract drilling and well servicing require the use of heavy
equipment and exposure to hazardous conditions, which may subject us to
liability claims by employees, customers and third parties. These hazards can
cause personal injury or loss of life, severe damage to or destruction of
property and equipment, pollution or environmental damage and suspension of
operations. Our offshore fleet is also subject to hazards inherent in marine
operations, either while on site or during mobilization, such as capsizing,
sinking and damage from severe weather conditions. In certain instances,
contractual indemnification of customers or others is required of us.
We maintain workers' compensation insurance for our employees and other
insurance coverage for normal business risks, including general liability
insurance. Although we believe our insurance coverage to be adequate and in
accordance with industry practice against normal risks in our operations, any
insurance protection may not be sufficient or effective under all circumstances
or against all hazards to which we may be subject. The occurrence of a
significant event against which we are not fully insured, or of a number of
lesser events against which we are insured, but subject to substantial
deductibles, could materially and adversely affect our operations and financial
condition. Moreover, we may not be able to maintain adequate insurance in the
future at rates or on terms we consider reasonable or acceptable.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL LIABILITIES MAY ADVERSELY AFFECT
OUR OPERATIONS.
Many aspects of our operations are subject to numerous governmental
regulations that may relate directly or indirectly to the contract drilling and
well servicing industries, including those relating to the protection of the
environment. Laws and regulations protecting the environment have become more
stringent in recent years and may impose strict liability, rendering us liable
for environmental damage
10
<PAGE>
without regard to negligence or fault on our part. These laws and regulations
may expose us to liability for the conduct of, or conditions caused by, others
or for acts that were in compliance with all applicable laws at the time the
acts were performed. The application of these requirements or the adoption of
new requirements could have a material adverse effect on us. In addition, the
modification of existing laws or regulations or the adoption of new laws or
regulations curtailing exploratory or development drilling for oil and gas could
have a material adverse effect on our operations by limiting future contract
drilling opportunities.
From time to time, certain of our foreign subsidiaries operate in countries
such as Libya and Iran that are subject to sanctions and embargoes imposed by
the U.S. Government. Although these sanctions and embargoes do not prohibit
those subsidiaries from completing existing contracts or from entering into new
contracts to provide drilling services in such countries, they do prohibit us
and our domestic subsidiaries, as well as employees of our foreign subsidiaries
who are U.S. citizens, from participating in or approving any aspect of the
business activities in those countries. These constraints on our ability to have
U.S. persons provide managerial oversight and supervision may adversely affect
the financial or operating performance of such business activities.
ITEM 2. PROPERTY
Our property consists primarily of mobile offshore and land-based drilling
rigs, well servicing rigs and ancillary equipment, most of which we own. We
operate some rigs under joint venture arrangements, operating agreements or
lease agreements. We also own and operate transport and heavy-duty trucks and
other ancillary equipment. We own approximately 775 vehicles and lease
approximately 100 others.
Our corporate office in Houston, Texas occupies approximately 40,000 square
feet of leased space under leases that expire in February 2005. In Argentina, we
lease 4,500 square feet of office space in Buenos Aires and own five operating
bases and lease three others. In Venezuela, we lease two operating bases with an
office facility at one. In Colombia, we lease office space in Bogota and two
operating bases. In France, we lease approximately 18,000 square feet of office
space. Shore-based operations for our Gulf of Mexico operations are conducted
from our owned facility in Houma, Louisiana. The shore facility is located on
the Intracoastal waterway and provides direct access to the Gulf of Mexico.
ITEM 3. LEGAL PROCEEDINGS
We are routinely involved in litigation incidental to our business, which
often involves claims for significant monetary amounts, some of which would not
be covered by insurance. In the opinion of management, none of the existing
litigation will have a material adverse effect on our financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of our security holders during
the fourth quarter of 1998.
11
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
We have presented below information about our executive officers as of
March 18, 1999. Officers are elected annually by the Board of Directors and
serve until their successors are chosen or until their resignation or removal.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------------------- --- -----------------------------------------------------------
<S> <C> <C>
Paul A. Bragg........................ 43 President, Chief Executive Officer and Chief
Operating Officer
James W. Allen....................... 55 Senior Vice President -- Operations
Gerard Godde......................... 56 Vice President -- Business Development
John O'Leary......................... 43 Vice President -- International Marketing
Earl W. McNiel....................... 40 Vice President and Chief Financial Officer
Robert W. Randall.................... 57 Vice President -- General Counsel and Secretary
Steven R. Tolson..................... 41 Vice President -- U.S. Operations -- Offshore
</TABLE>
PAUL A. BRAGG was appointed Chief Executive Officer of Pride in March 1999
upon the retirement of Ray H. Tolson. He has been our President and Chief
Operating Officer since February 1997. He joined Pride in July 1993 as its Vice
President and Chief Financial Officer. From 1988 until he joined Pride, Mr.
Bragg was an independent business consultant and managed private investments. He
previously served as Vice President and Chief Financial Officer of Energy
Service Company, Inc. (now ENSCO International, Inc.) ("ENSCO"), an oilfield
services company, from 1983 through 1987.
JAMES W. ALLEN was named Senior Vice President -- Operations in February
1996. He joined Pride in January 1993 as its Vice President -- International
Operations (Latin America). From 1988 through 1992, Mr. Allen was an independent
business consultant and managed private investments. From 1984 to 1988, he was
Vice President Latin America for ENSCO. Mr. Allen has approximately 30 years of
oilfield experience with several different companies.
GERARD GODDE was appointed Vice President -- Business Development in
September 1998. Mr. Godde joined Pride as a Senior Vice President in March 1997
in connection with the Forasol transaction. Mr. Godde served as Senior Vice
President and Chief Operating Officer of Forasol from April 1996 until September
1998. He was Managing Director of Forasol from 1987 until September 1998. Mr.
Godde joined Forasol in 1968 and has been involved with the management of its
various offshore and land operations in Africa, the Middle East and North
America.
JOHN O'LEARY was named Vice President -- International Marketing in March
1997 in connection with the Forasol transaction. Mr. O'Leary had been Manager,
Marketing and Business Development of Forasol since June 1993, with primary
responsibility for worldwide business development. Mr. O'Leary joined Forasol
S.A. in August 1985.
EARL W. MCNIEL has been Vice President and Chief Financial Officer of Pride
since February 1997. He joined Pride in September 1994 as its Chief Accounting
Officer. From 1990 to 1994, Mr. McNiel served as Chief Financial Officer of
several publicly owned waste management companies. From 1987 to 1990, he was
employed by ENSCO as Manager, Finance.
ROBERT W. RANDALL has been Vice President and General Counsel of Pride
since May 1991. He was elected Secretary in 1993. Prior to 1991, he was Senior
Vice President, General Counsel and Secretary for Tejas Gas Corporation, a
natural gas transmission company.
STEVEN R. TOLSON was named Vice President -- U.S. Operations -- Offshore in
February 1997. Mr. Tolson has held various management and engineering positions
with Pride since 1994. Prior to 1994, Mr. Tolson held various engineering
positions with Conoco Inc.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock is listed on the New York Stock Exchange under the symbol
"PDE." Prior to September 10, 1997, our common stock traded on The Nasdaq
Stock Market under the symbol "PRDE." As of March 18, 1999, there were 1,913
shareholders of record. We have presented in the table below the range of high
and low sales prices of our common stock for the periods shown:
<TABLE>
<CAPTION>
PRICE
-----------------
HIGH LOW
---- ---
<S> <C> <C>
1997
First Quarter........................ $24 3/8 $ 16 1/4
Second Quarter....................... 24 16 1/2
Third Quarter........................ 37 7/16 22 7/8
Fourth Quarter....................... 37 3/4 20
1998
First Quarter........................ $25 1/2 $ 18 1/8
Second Quarter....................... 27 1/2 16 7/16
Third Quarter........................ 17 1/8 7 11/16
Fourth Quarter....................... 12 5/8 6 1/8
</TABLE>
We have not paid any cash dividends on our common stock since becoming a
publicly held corporation in September 1988. We currently have a policy of
retaining all available earnings for the development and growth of our business
and do not anticipate paying dividends on our common stock at any time in the
foreseeable future. Our ability to pay cash dividends in the future is
restricted by the covenants related to our debt. The desirability of paying
dividends could also be materially affected by U.S. and foreign tax
considerations.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
We have derived the following selected consolidated financial information
as of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, from our audited consolidated financial
statements included in this Report. You should read this information in
conjunction with those consolidated financial statements and the notes thereto.
We have derived the selected consolidated financial information as of December
31, 1996, 1995 and 1994, and for each of the years in the two-year period ended
December 31, 1995, from our audited consolidated financial statements that are
not included herein. Please read "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 182,336 $ 263,599 $ 407,174 $ 699,788 $ 835,563
Operating costs...................... 139,653 187,203 292,599 458,861 529,844
Depreciation and amortization........ 9,550 16,657 29,065 58,661 79,931
Selling, general and
administrative..................... 25,105 32,418 45,368 73,881 84,825
---------- ---------- ---------- ------------ ------------
Earnings from operations............. 8,028 27,321 40,142 108,385 140,963
Other income (expense) net(1)........ 106 (4,898) (9,323) 47,249 (38,720)
---------- ---------- ---------- ------------ ------------
Earnings before income taxes(1)...... 8,134 22,423 30,819 155,634 102,243
Income tax provision................. 1,920 7,064 8,091 51,639 24,726
---------- ---------- ---------- ------------ ------------
Net earnings(1)(2)................... $ 6,214 $ 15,359 $ 22,728 $ 103,995 $ 77,517
========== ========== ========== ============ ============
Net earnings per share(1)(2)
Basic........................... $ .30 $ .63 $ .85 $ 2.42 $ 1.55
========== ========== ========== ============ ============
Diluted......................... $ .30 $ .61 $ .77 $ 2.16 $ 1.39
========== ========== ========== ============ ============
Weighted average shares outstanding
Basic........................... 20,418 24,551 26,719 43,036 50,135
Diluted......................... 20,650 25,128 33,755 49,143 60,851
BALANCE SHEET DATA (AS OF DECEMBER
31):
Working capital...................... $ 26,640 $ 31,302 $ 62,722 $ 103,733 $ 84,603
Property and equipment, net.......... 139,899 178,488 375,249 1,171,647 1,725,787
Total assets......................... 205,193 257,605 542,062 1,541,501 2,192,167
Long-term debt, net of current
portion............................ 42,096 61,136 106,508 435,100 630,520
Zero coupon convertible subordinated
debentures......................... -- -- -- -- 237,327
6 1/4% convertible subordinated
debentures......................... -- -- 80,500 52,500 52,480
Shareholders' equity................. 111,385 131,239 201,797 685,157 763,402
</TABLE>
- - ------------
(1) Other income (expense) net, earnings before income taxes and net earnings
for the year ended December 31, 1997 include a pretax gain of $83.6 million
($53.5 million, net of income tax) on the divestiture of our U.S. land-based
well servicing business. The gain was partially offset by non-recurring
charges totaling $4.2 million, net of income taxes, relating principally to
the induced conversion of $28.0 million principal amount of our 6 1/4%
convertible subordinated debentures. Excluding such non-recurring items, net
earnings for the year ended December 31, 1997 were $54.7 million, or $1.16
per share.
(2) Net earnings for the year ended December 31, 1998 include charges totaling
$3.8 million, net of income taxes, related to work force reductions
primarily in response to decreased activity levels.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis in conjunction with
our consolidated financial statements as of December 31, 1998 and 1997, and for
the years ended December 31, 1998, 1997 and 1996, included in this Report. The
following information contains forward-looking statements. Please read
"Forward-Looking Statements" for a discussion of limitations inherent in such
statements.
GENERAL
Our operations have been, and our future results will be, significantly
affected by a series of strategic transactions that have transformed us from
solely a provider of land-based workover and related well services in the United
States into a diversified international drilling contractor operating both
offshore and on land. With the sale of our domestic land-based well servicing
operations in February 1997, we have ceased to provide rig services onshore in
the United States.
Since 1996, we entered into a number of transactions that have
significantly expanded our international and domestic offshore operations,
including the following:
o In April 1996, we acquired Quitral-Co S.A.I.C. ("Quitral-Co") from
Perez Companc S.A. and other shareholders. The 23 land-based drilling
and 57 land-based workover rigs in Argentina and seven land-based
drilling and 23 land-based workover rigs in Venezuela operated by
Quitral-Co were combined with our existing land-based operations in
those countries. We have further expanded international operations by
deploying 35 rigs from our former U.S. land-based fleet primarily to
Argentina and Venezuela and by acquiring four rigs from an Argentine
competitor.
o In October 1996, we expanded our Colombian operations through the
acquisition of Ingeser de Colombia, S.A. ("Ingeser"), which operated
seven land-based drilling rigs and six workover rigs in Colombia.
o In November 1996, we added three land-based drilling rigs and support
assets to our operations in Argentina through the acquisition of the
assets of another contractor.
o In February 1997, we completed the divestiture of our domestic
land-based well servicing operations, which included 407 workover rigs
operating in Texas, California, New Mexico and Louisiana.
o In March 1997, we completed the Forasol acquisition, adding two
semisubmersible rigs, three jackup rigs, seven tender-assisted rigs,
four barge rigs and 29 land-based rigs operating in various locations
in South America, Africa, the Middle East and Southeast Asia.
o In May 1997, we purchased 13 mat-supported jackup drilling rigs, 11 of
which are currently located in the Gulf of Mexico, one of which is
located in West Africa and one of which is located in Southeast Asia.
o In July 1998, we acquired 60% of a Bolivian company, Compania
Boliviana de Perforacion S.A.M. ("CBP"), in a joint initiative with
the Bolivian national oil company, Yacimientos Petroliferos Fiscales
Bolivianos ("YPFB"). CBP was capitalized through the contribution of
13 land-based drilling and workover rigs, oilfield trucks and other
related drilling assets by YPFB and $17 million in cash by us.
o In October 1998, we purchased the AMETHYST 1, a dynamically
positioned, self-propelled semisubmersible drilling rig. The rig is
currently working offshore Brazil under a charter and service contract
that expires in 2001.
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 nine platform rigs idle in the Gulf of
Mexico, where our
15
<PAGE>
contracts have traditionally been and continue to be short-term. Accordingly, we
currently anticipate that our financial results for the next several quarters
will be significantly lower than the results for the same periods in 1998. Due
to the short-term nature of many of our contracts, primarily in the Gulf of
Mexico, 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. The duration of this market downturn also depends on many
factors that cannot be accurately predicted. Management anticipates that the
offshore drilling markets will be unsettled for at least the balance of 1999,
and possibly longer, but remains positive on the long-term outlook for the
industry and for us.
The deteriorating industry conditions over the latter part of 1998 led us
to reduce our workforce significantly. In the fourth quarter of 1998, we
recorded charges totaling $3.8 million, net of income taxes, related to these
workforce reductions. We are continuing to reduce operating costs in 1999
through regional base consolidations, downsizing of administrative staff and
other reductions in personnel throughout the company. In connection with this
effort, we expect to incur additional non-recurring charges in the range of $20
to $25 million during the first quarter of 1999, which are expected to result in
a similar amount of annual cost savings.
RESULTS OF OPERATIONS
We have presented in the following table selected consolidated financial
information by operating segment for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1996 1997 1998
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues:
United States land.............. $ 117,142 28.8% $ 16,485 2.4% $ -- -- %
United States offshore.......... 57,450 14.1 135,281 19.3 160,829 19.2
International land.............. 218,562 53.7 385,590 55.1 401,899 48.1
International offshore.......... 14,020 3.4 162,432 23.2 272,835 32.7
---------- --------- ---------- --------- ---------- ---------
Total revenues............. $ 407,174 100.0% $ 699,788 100.0% $ 835,563 100.0%
========== ========= ========== ========= ========== =========
Operating Costs:
United States land.............. $ 88,955 30.4% $ 12,776 2.8% $ -- -- %
United States offshore.......... 41,755 14.3 72,927 15.9 90,311 17.1
International land.............. 156,833 53.6 276,185 60.2 293,073 55.3
International offshore.......... 5,056 1.7 96,973 21.1 146,460 27.6
---------- --------- ---------- --------- ---------- ---------
Total operating costs...... $ 292,599 100.0% $ 458,861 100.0% $ 529,844 100.0%
========== ========= ========== ========= ========== =========
Gross Margin:
United States land.............. $ 28,187 24.6% $ 3,709 1.5% $ -- -- %
United States offshore.......... 15,695 13.7 62,354 25.9 70,518 23.1
International land.............. 61,729 53.9 109,405 45.4 108,826 35.6
International offshore.......... 8,964 7.8 65,459 27.2 126,375 41.3
---------- --------- ---------- --------- ---------- ---------
Total gross margin......... $ 114,575 100.0% $ 240,927 100.0% $ 305,719 100.0%
========== ========= ========== ========= ========== =========
</TABLE>
1998 COMPARED WITH 1997
REVENUES. Revenues for 1998 increased $135.8 million, or 19%, as compared
to 1997. Of this increase approximately $73.0 million was due to a full year of
operations for the Forasol acquisition completed in March 1997 and the 13
mat-supported jackup rigs acquired in May 1997. Also, during 1998, we placed
four previously idle jackup rigs into service accounting for approximately $53.0
million of the increase. Additionally, $28.0 million of the increase in revenues
is related to increased contract dayrates and utilization for our two
semisubmersible rigs. In South America, we had a 29% increase in average
dayrates,
16
<PAGE>
or approximately $10 million, offset by a 16% decrease in overall utilization,
or approximately $8 million. The remaining decrease, or $16 million, relates to
the sale of our domestic land-based well servicing operations in February 1997.
OPERATING COSTS. Operating costs for 1998 increased $71.0 million, or 15%,
as compared to 1997. Of this increase approximately $52.0 million was due to a
full year of operations for the assets acquired in the Forasol acquisition
completed in March 1997 and the 13 mat-supported jackup rigs acquired in May
1997. We also incurred charges of $3.8 million, net of income taxes, related to
workforce reductions primarily in response to decreased activity levels. Also,
during 1998, we placed four jackup rigs into service accounting for
approximately $20.0 million of the increase. These increases were partially
offset by $12.8 million in reduced costs due to the sale of the domestic
land-based servicing operations.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1998
increased $21.3 million, or 36%, as compared to 1997, primarily as a result of a
full year of depreciation for the Forasol assets acquired in March 1997 and the
13 mat-supported jackup rigs acquired in May 1997 and four jackup rigs placed
into service during 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs in 1998 increased $10.9 million, or 15%, as compared to 1997, primarily as
a result of a full year of operations for the Forasol acquisition completed in
March 1997 and the 13 mat-supported jackup rigs acquired in May 1997. As a
percentage of revenues, total selling, general and administrative costs
decreased to 10.2% for 1998 from 10.6% for 1997.
OTHER INCOME (EXPENSE). Interest expense for 1998 increased $11.4 million,
or 33%, as compared to 1997. This increase is due to higher debt levels in 1998,
resulting primarily from the issuance of $230 million of Zero Coupon
Subordinated Debentures in April 1998, and from recognition of a full year of
interest expense in 1998 on $325 million of 9 3/8% Senior Notes issued in May
1997. During 1998 we capitalized approximately $16.3 million in interest expense
related to capital projects, as compared to approximately $5.7 million in 1997.
INCOME TAX PROVISION (BENEFIT). Our consolidated effective income tax rate
for 1998 was approximately 24%, as compared to approximately 33% for 1997. The
decrease was attributable to the significant increase in income from foreign
operations, which is taxed at lower statutory rates, and the reduction in U.S.
income, which is taxed at a higher statutory rate. In addition, the effective
tax rate for 1997 was significantly impacted by the gain from the sale of our
U.S. land-based well servicing operations, which was taxed at an effective rate
of 36%.
1997 COMPARED WITH 1996
REVENUES. Revenues for 1997 increased $292.6 million, or 72%, as compared
to 1996. This increase was due primarily to the expansion of our Gulf of Mexico
and international operations as follows: (i) $201.3 million was related to the
operations acquired in the Forasol acquisition in March 1997, (ii) $70.2 million
was related to the operations of the mat-supported jackup rigs acquired in May
1997 and (iii) $50.0 million was related to the incremental full-year effect of
the operations acquired in the April 1996 acquisition of Quitral-Co. The
remaining increase in revenue was due to the net addition of five land-based
drilling rigs and two barge rigs in South America combined with increased
contract drilling dayrates from ongoing operations. This increase was partially
offset by a reduction of $100.0 million in revenue related to the divestiture of
our domestic land-based well servicing operations.
OPERATING COSTS. Operating costs for 1997 increased $166.3 million, or
57%, as compared to 1996. This increase was due primarily to the acquisitions
and asset purchases discussed above as follows: (i) $130.4 million was related
to the operations acquired in the Forasol acquisition in March 1997, (ii) $30.1
million was related to the operations of the mat-supported jackup rigs acquired
in May 1997 and (iii) $20.0 million was related to the incremental full-year
effect of the operations acquired in the April 1996 acquisition of Quitral-Co.
The remaining increase in operating costs was due to the net addition of four
land-based drilling rigs and two barge rigs in South America combined with
increased labor costs from ongoing operations in Venezuela. This increase in
operating costs was partially offset by a reduction of $90.0 million related to
the divestiture of our domestic land-based well servicing operations.
17
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1997
increased $29.6 million, or 102%, as compared to 1996, primarily as a result of
the acquisitions of Forasol, Quitral-Co and the mat-supported jackup rigs, and
depreciation of new, refurbished and upgraded rigs placed in service during the
year, which increase was partially offset by the sale of our domestic land-based
well servicing operations.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs in 1997 increased approximately $28.5 million, or 63%, as compared to
1996, primarily as a result of the acquisitions of Forasol, Quitral-Co and the
mat-supported jackup rigs, which increase was partially offset by the sale of
our domestic land-based well servicing operations. As a percentage of revenues,
total selling, general and administrative costs decreased from 11.1% for 1996 to
10.5% for 1997.
OTHER INCOME (EXPENSE). Other income (expense) resulted in income of $47.2
million in 1997 as compared to expense of $9.3 million in 1996. Other income and
expense included interest income, interest expense, net gains or losses from
sale of assets, minority interests, foreign exchange gains or losses and other
sources. We incurred a gain of $83.6 million from the sale of our domestic
land-based well servicing operations in February 1997. This gain was partially
offset by a charge of approximately $3.7 million relating to the induced
conversion of $28.0 million of our 6 1/4% convertible subordinated debentures
and other charges. Interest expense for 1997 increased $20.7 million, or 152%,
as compared to 1996. This increase was due primarily to our issuance of $325
million in senior notes in May 1997. During 1997 we capitalized approximately
$5.7 million in interest expense related to capital projects, as compared to
approximately $2.0 million in 1996.
INCOME TAX PROVISION (BENEFIT). Our consolidated effective income tax rate
for 1997 was approximately 33%, as compared to approximately 26% for 1996. The
increase in the effective tax rate resulted from the effects of (i) certain
non-deductible amounts, primarily $3.7 million of costs related to the induced
conversion of $28.0 million of our 6 1/4% convertible subordinated debentures,
(ii) an estimated effective combined U.S. federal and state income tax rate of
36% on the gain from the sale of our U.S. land-based well servicing operations
and (iii) an estimated effective income tax rate of 29% on ongoing operations.
LIQUIDITY AND CAPITAL RESOURCES
We had net working capital of $84.6 million and $103.7 million at December
31, 1998 and 1997, respectively. Our current ratio was 1.3 and 1.5 at December
31, 1998 and December 31, 1997, respectively.
Capital expenditures in 1998 consisted primarily of the following (in
millions):
<TABLE>
<S> <C>
New Construction..................... $ 313
Enhancements......................... 176
Sustaining........................... 59
Other................................ 7
---------
555
---------
Acquisitions:
AMETHYST 1...................... 85
CPB (60% ownership)............. 17
---------
102
---------
Total 1998 capital
expenditures................. $ 657
=========
</TABLE>
We expect to spend an additional $235 million during 1999 to complete
construction of the PRIDE AFRICA and the PRIDE ANGOLA and an additional $35
million to complete certain other construction and refurbishment projects begun
in 1998. We expect enhancement and sustaining capital expenditures in 1999 to be
substantially lower than in 1998.
In March 1997, we entered into a senior secured revolving credit facility
with a group of banks (as amended and restated, the "Credit Facility") under
which up to $100 million (including $25.0 million for letters of credit) was
initially available. Availability under the Credit Facility is limited to a
borrowing base
18
<PAGE>
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, which was 9.00% at
December 31, 1998.
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 (i) funded debt to EBITDA, (ii) funded debt
to capitalization, (iii) adjusted EBITDA to debt service and (iv) minimum
tangible net worth. As of December 31, 1998, advances totaling $39 million were
outstanding under the Credit Facility. In September 1998, the credit facility
was amended to allow the funding of the equipment loan for the PRIDE AFRICA. In
connection with such amendment, availability under the Credit Facility was
reduced to $50 million. In December 1998, the Credit Facility was further
amended to allow, among other things, (i) the funding of the construction loan
for the PRIDE ANGOLA, (ii) the sale and leaseback of the AMETHYST 1, and (iii)
the giving of certain limited guarantees in connection with the financing of two
of the newbuild Amethyst rigs.
In connection with the construction of two new ultra-deepwater drillships,
the PRIDE AFRICA and the PRIDE ANGOLA, the two joint venture companies in which
we have a 51% interest have entered into financing arrangements with a group of
banks providing that approximately $400 million of the drillships' total
estimated construction cost of $470 million will be financed by loans that are,
upon delivery of the drillships, without recourse to the joint venture
participants. During the construction period, the lenders could have recourse to
us with respect to an aggregate of up to $310 million of such loans. As of
December 31, 1998, $120 million was outstanding under the construction period
loans. 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 drillships.
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 $370 million estimated cost of the two Amethyst rigs under
construction in South Korea. Equity contributions by us and our joint venture
partner have provided $30 million of such cost. We and our joint venture partner
also have committed to find, by October 30, 1999, a third-party funding source
for the remaining $100 million or to fund any shortfall in proportion to our
respective ownership interests. Accordingly, our liability under such commitment
is limited to $30 million. We are pursuing alternative sources for such
financing, but there is no assurance that third-party funds will be obtained. In
addition, we have provided certain other guarantees, including (1) a guarantee
of payment of up to $32.4 million of the loans; (2) a guarantee of cost overruns
of up to an aggregate of $6 million; (3) a guarantee of the cost of the two rigs
in excess of related refund guarantees supporting their construction contracts
and (4) certain other financial and operating-related guarantees.
The financing is structured as separate loans to the subsidiaries of the
joint venture owning the rigs, cross-collateralized and cross-guaranteed, with a
nine-year term. The interest rate for the loans is 12.0% during the construction
period and 11.0% upon commencement of operations. As of December 31, 1998, the
lenders had advanced $94.7 million. Future advances are subject to the
satisfaction of conditions specified in the loan agreements, including
satisfactory progress in the rigs' construction.
In addition, the joint venture has received a commitment from the United
States Maritime Administration ("MARAD") to provide a guarantee of obligations
for both construction period and mortgage period financing relating to the
construction of the two Amethyst 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 engaged an arranger for the
construction period financing and a placement agent for the mortgage period
financing. In connection with the MARAD financing, we have agreed to guarantee
payment of up to $20.5 million of late delivery penalties that are accruing and
may be payable under the charter and service contracts related to these two
rigs.
19
<PAGE>
The joint venture has contracts with Petrobras to provide two additional
deepwater rigs. The joint venture originally intended to build two additional
Amethyst-class 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. The joint venture partners
are currently evaluating alternatives relating to these two contracts, which
include: (a) chartering other rigs currently available in the market to fulfill
the related Petrobras charter and service contracts, (b) constructing these two
additional Amethyst-class rigs at another shipyard or (c) undertaking other
mutually acceptable means of fulfilling the charter and service contracts for
those two rigs. We can give no assurance, however, that any of these efforts
will be successful.
In April 1998, we completed a public sale of zero coupon convertible
subordinated debentures. The net proceeds from the sale, after deducting
underwriting discounts and offering expenses, amounted to approximately $223.1
million. The debentures, which mature on April 24, 2018, are convertible into
our common stock at a conversion rate of 13.794 shares of common stock per
$1,000 principal amount at maturity. At maturity, the amortized aggregate amount
payable under the debentures including accrued original issue discount would be
approximately $588.1 million. The sale of the debentures was pursuant to a
"shelf" registration statement under the Securities Act of 1933 pursuant to
which we may issue up to an additional $270 million of securities consisting of
any combination of our debt securities, common stock and preferred stock.
In October 1998, we purchased the semisubmersible rig AMETHYST 1 for $85
million. The purchase price consisted of $63.7 million in cash, with the balance
financed by a $21.3 million note convertible into our common stock at a
conversion price of $28.50 per share for the first year and decreasing $1.00 per
share annually thereafter until maturity. The convertible note also bears
interest at 6% per annum for the first year and escalates 1% per annum annually
commencing December 1, 1998. The note matures on September 1, 2001, and no
principal payments are required until maturity.
In February 1999, we completed the sale and leaseback of the AMETHYST 1,
pursuant to which we received $97 million in cash. The lease is for a maximum
term of 13 years, and we have options to purchase the rig exercisable at the end
of 8 1/2 years and at the end of the maximum term. Annual rentals on this
transaction range from $11.7 million to $15.9 million. Approximately $40 million
of the proceeds were used to repay the balance outstanding under the Credit
Facility, with the remainder being held for general corporate purposes.
Management believes that the cash generated from our operations, together
with borrowings under the Credit Facility, will be adequate to fund normal
ongoing capital expenditure, working capital and debt service requirements. 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.
ACCOUNTING MATTERS
We have adopted Statement of Financial Accounting Standards ("SFAS") No.
131 "Disclosures about Segments of an Enterprise and Related Information" and
SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement
Benefits" for the year ended December 31, 1998. The adoption of these
disclosure standards did not have a material impact on our consolidated
financial statements.
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.
20
<PAGE>
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
we will use 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 75% complete.
BUSINESS SYSTEMS: OPERATIONAL. 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.
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 resolved, nor can we inspect
the companies' Year 2000 efforts or independently verify their representations
to us. In addition, we cannot foretell 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 March 18, 1999, we had incurred approximately $8 million in
costs primarily for new hardware, new software licenses and outside consultants.
Such equipment and systems, which were planned for installation regardless of
Year 2000 considerations, are Year 2000 compliant. We estimate that we will
incur approximately $5 million of such additional costs in 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
21
<PAGE>
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 7A. 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 fluctuations 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 December 31, 1998 was approximately $818 million, which is less than its
carrying value of $947 million. A hypothetical 10% decrease in interest rates
and a 10% increase in quoted market prices would increase the fair market value
of our long-term debt by approximately $46 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 December 31,
1998 would result in an approximate $3.0 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.
FORWARD-LOOKING STATEMENTS
This Report includes statements that may be deemed to be "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 Report that address activities,
events or developments that we expect, project, believe or anticipate will or
may occur in the future, including such matters as future capital expenditures
and investments in the construction, acquisition and refurbishment of rigs
(including the amount and nature thereof and the timing of completion thereof),
repayment of debt, expansion and other development trends of the contract
drilling industry, business strategies, expansion and growth of operations and
other such matters, are forward-looking statements. These statements are based
on 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.
Such statements are subject to a number of assumptions, risks and uncertainties,
including those discussed herein, general economic and business conditions,
prices of oil and gas, foreign exchange controls and currency fluctuations, the
business opportunities (or lack thereof) that may be presented to and pursued by
us, changes in laws or regulations and other factors, many of which are beyond
our control. Please read "Business -- Risk Factors." We caution prospective
investors that any such statements are not guarantees of future performance and
that actual results or developments may differ materially from those projected
in the forward-looking statements.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride International, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, changes in the shareholders' equity and
cash flows present fairly, in all material respects, the consolidated financial
position of Pride International, Inc. and Subsidiaries as of December 31, 1998
and 1997, and the consolidated results of their operations and cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion expressed above.
PricewaterhouseCoopers
LLP
Houston, Texas
March 30, 1999
23
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents....... $ 86,540 $ 74,395
Trade receivables, net.......... 187,351 194,973
Parts and supplies.............. 29,161 26,899
Deferred income taxes........... 1,320 2,252
Other current assets............ 65,410 35,691
------------ ------------
Total current assets....... 369,782 334,210
------------ ------------
PROPERTY AND EQUIPMENT, net.......... 1,725,787 1,171,647
------------ ------------
OTHER ASSETS
Investments in and advances to
affiliates..................... 48,582 9,092
Goodwill and other intangibles,
net............................ 3,418 3,623
Other assets.................... 44,598 22,929
------------ ------------
Total other assets......... 96,598 35,644
------------ ------------
$ 2,192,167 $ 1,541,501
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable................ $ 151,514 $ 94,736
Accrued expenses................ 79,794 64,994
Short-term borrowings........... 16,522 21,055
Current portion of long-term
debt........................... 27,452 38,890
Current portion of long-term
lease obligations.............. 9,897 10,802
------------ ------------
Total current
liabilities............ 285,179 230,477
------------ ------------
OTHER LONG-TERM LIABILITIES.......... 48,987 28,911
LONG-TERM DEBT, net of current
portion............................ 630,520 428,603
LONG-TERM LEASE OBLIGATIONS, net of
current portion.................... 50,148 42,772
6 1/4% CONVERTIBLE SUBORDINATED
DEBENTURES......................... 52,480 52,500
ZERO COUPON CONVERTIBLE SUBORDINATED
DEBENTURES......................... 237,327 --
DEFERRED INCOME TAXES................ 101,302 72,313
MINORITY INTEREST.................... 22,822 768
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY.................
Common stock, no par value;
100,000,000 shares authorized;
50,437,261 and 50,097,120
shares issued and 50,383,041
and
50,042,900 shares outstanding,
respectively................... 1 1
Paid-in capital................. 523,674 522,946
Treasury stock, at cost......... (191) (191)
Retained earnings............... 239,918 162,401
------------ ------------
Total shareholders'
equity................. 763,402 685,157
------------ ------------
$ 2,192,167 $ 1,541,501
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES............................. $ 835,563 $ 699,788 $ 407,174
OPERATING COSTS...................... 529,844 458,861 292,599
---------- ---------- ----------
Gross Margin.................... 305,719 240,927 114,575
DEPRECIATION AND AMORTIZATION........ 79,931 58,661 29,065
SELLING, GENERAL AND
ADMINISTRATIVE..................... 84,825 73,881 45,368
---------- ---------- ----------
EARNINGS FROM OPERATIONS............. 140,963 108,385 40,142
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Other income.................... 1,206 77,844 1,902
Interest income................. 5,850 3,773 2,410
Interest expense................ (45,776) (34,368) (13,635)
---------- ---------- ----------
Total other income
(expense), net.......... (38,720) 47,249 (9,323)
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES......... 102,243 155,634 30,819
INCOME TAX PROVISION................. 24,726 51,639 8,091
---------- ---------- ----------
NET EARNINGS......................... $ 77,517 $ 103,995 $ 22,728
========== ========== ==========
NET EARNINGS PER SHARE...............
Basic........................... $ 1.55 $ 2.42 $ .85
Diluted......................... $ 1.39 $ 2.16 $ .77
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic........................... 50,135 43,036 26,719
Diluted......................... 60,851 49,143 33,755
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY TOTAL
---------------- PAID-IN STOCK RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL AT COST EARNINGS EQUITY
------ ------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1995............ 24,809 $ 1 $ 95,751 $ (191) $ 35,678 $ 131,239
Net earnings....................... -- -- -- -- 22,728 22,728
Issuance of common stock in public
offerings........................ 3,450 -- 45,641 -- -- 45,641
Issuance of common stock in
connection with acquisition...... 4 -- 29 -- -- 29
Exercise of stock options.......... 255 -- 1,338 -- -- 1,338
Tax benefit of non-qualified stock
options.......................... -- -- 822 -- -- 822
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31,1996............. 28,518 1 143,581 (191) 58,406 201,797
Net earnings....................... -- -- -- -- 103,995 103,995
Issuance of common stock in public
offerings........................ 7,257 -- 168,400 -- -- 168,400
Issuance of common stock in
connection with acquisition...... 11,099 -- 172,422 -- -- 172,422
Issuance of common stock in
connection with conversion of
debentures....................... 2,286 -- 27,463 -- -- 27,463
Exercise of stock options.......... 883 -- 6,138 -- -- 6,138
Tax benefit of non-qualified stock
options.......................... -- -- 4,942 -- -- 4,942
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1997............ 50,043 1 522,946 (191) 162,401 685,157
Net earnings....................... -- -- -- -- 77,517 77,517
Issuance of common stock in
connection with conversion of
debentures....................... 2 -- 20 -- -- 20
Exercise of stock options.......... 338 -- 689 -- -- 689
Tax benefit of non-qualified stock
options.......................... -- -- 19 -- -- 19
------ ------ -------- -------- -------- -------------
BALANCE -- DECEMBER 31, 1998............ 50,383 $ 1 $523,674 $ (191) $239,918 $ 763,402
====== ====== ======== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings.................... $ 77,517 $ 103,995 $ 22,728
Adjustments to reconcile net
earnings to net cash provided
by operating activities --
Depreciation and
amortization............ 79,931 58,661 29,065
Discount amortization on
zero coupon convertible
subordinated
debenture............... 7,327 -- --
Gain on sale of assets..... (2,626) (83,845) (815)
Effect of exchange rates... (2,080) 3,736 (437)
Deferred tax provision..... 34,414 13,692 5,882
Minority interest.......... (59) -- --
Changes in assets and
liabilities, net of
effects of
acquisitions --
Trade receivables..... 7,622 (37,963) (16,438)
Parts and supplies.... (2,262) 743 (2,303)
Other current
assets............. (22,819) -- (2,330)
Other assets.......... (21,721) (11,696) --
Accounts payable...... 4,902 32,304 (735)
Accrued expenses and
other.............. 14,819 (19,063) (13,400)
----------- ----------- -----------
Net cash
provided by
operating
activities.... 174,965 60,564 21,217
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of net assets of
acquired entities, including
acquisition costs, less cash
acquired...................... (17,000) (360,412) (119,067)
Purchases of property and
equipment..................... (574,257) (268,307) (61,711)
Proceeds from dispositions of
property and equipment........ 14,948 131,536 14,438
Proceeds from sales of
short-term investments........ -- 836 6,047
Investments in affiliates....... (44,906) (9,020) --
Purchases of short-term
investments................... -- (686) (1,045)
----------- ----------- -----------
Net cash used in
investing
activities.... (621,215) (506,053) (161,338)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of common
stock......................... -- 168,400 45,641
Proceeds from exercise of stock
options....................... 689 6,138 1,338
Proceeds from minority interest
owners........................ 22,113 -- --
Proceeds from issuance of
convertible subordinated
debentures.................... 223,080 -- 77,585
Proceeds from debt borrowings... 372,886 533,145 89,362
Reduction of debt............... (160,393) (198,965) (72,066)
Other........................... 20 856 (724)
----------- ----------- -----------
Net cash
provided by
financing
activities.... 458,395 509,574 141,136
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 12,145 64,085 1,015
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 74,395 10,310 9,295
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 86,540 $ 74,395 $ 10,310
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Pride International, Inc. (the "Company") is a Louisiana corporation
which was organized in 1988 as the successor to a company originally
incorporated in 1968. The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned and majority-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments having maturities
of three months or less at the date of purchase to be cash equivalents.
PARTS AND SUPPLIES
Parts and supplies consist of spare rig parts and supplies held for use in
operations and are valued at the lower of weighted average cost or estimated
market value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are capitalized
and depreciated over the respective asset's useful life. Maintenance and repair
costs are charged to expense as incurred. When assets are sold or retired, the
remaining costs and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in income.
For financial reporting purposes, depreciation of property and equipment is
provided using primarily the straight line method based upon expected useful
lives of each class of assets. Estimated useful lives of the assets for
financial reporting purposes are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Rigs and rig equipment............... 5-25
Transportation equipment............. 3-7
Buildings and improvements........... 10-20
Furniture and fixtures............... 5
</TABLE>
Rigs and rig equipment have salvage values ranging from $150,000 to
$8,000,000 with such values not exceeding 10% of the acquisition cost of the
rig.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the cost in excess of fair value of the net assets of
companies acquired and is being amortized using the straight line method over
ten to fifteen years. Other intangible assets represent costs allocated to
service contracts, employment contracts, covenants not to compete and client
lists acquired in business acquisitions. Other intangible assets are being
amortized using the straight line method over their estimated useful lives,
which range from three to ten years.
REVENUE RECOGNITION
The Company recognizes revenue as services are performed based upon
contracted day rates and the number of operating days during the period.
Revenues from turnkey contracts are generally recognized upon completion.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax liabilities and assets
28
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are determined based on the difference between the financial statement and the
tax bases of assets and liabilities using enacted tax rates in effect for the
year in which the asset is recovered or the liability is settled.
FOREIGN CURRENCY TRANSLATION
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign
Currency Translation." The Company's Venezuelan and certain other foreign
operations are in a "highly inflationary" economy resulting in the use of the
U.S. dollar as the functional currency. Therefore, certain assets of this
operation are translated at historical exchange rates and all translation gains
or losses are reflected in the period's results of operations. In the other
countries in which the Company operates, the local currency is considered the
functional currency. Translation of assets and liabilities in these countries is
made at the prevailing exchange rate as of the balance sheet date. Revenues and
expenses are translated at the average rate of exchange on a monthly basis and
the resulting gain or loss is included in the results of operations. To mitigate
the effect of fluctuations in exchange rates, the Company utilizes a protective
hedge program which is designed to hedge certain identifiable assets and
obligations, primarily French denominated expenditures.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in U.S.
Government securities and in other high quality financial instruments. By
policy, the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of major
integrated and government-owned international oil companies as well as smaller
independent oil and gas producers. Management believes the credit quality of its
customers is generally high. The Company has in place insurance to cover certain
exposure in its foreign operations and provides allowances for potential credit
losses when necessary.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. While it is believed that such estimates are reasonable,
actual results could differ from those estimates.
CONDITIONS AFFECTING ONGOING OPERATIONS
The Company's current business and operations are substantially dependent
upon conditions in the oil and gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. The demand for contract
drilling and related services is influenced by oil and gas prices, expectations
about future prices, the cost of producing and delivering oil and gas,
government regulations and local and international political and economic
conditions. There can be no assurance that current levels of exploration and
production expenditures of oil and gas companies will be maintained or that
demand for the Company's services will reflect the level of such activities.
STOCK-BASED COMPENSATION
Pursuant to APB No. 25, the Company measures the compensation cost, if any,
associated with stock compensation transactions using the intrinsic value
method.
29
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, was issued by the Financial Accounting Standards Board to
establish accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 requires that an entity recognize those
instruments at fair value. The standard is effective for fiscal years beginning
after June 15, 1999. This pronouncement is not anticipated to have a material
effect on the Company's financial position, results of operations or cash flows.
2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1998 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
(IN THOUSANDS)
Land................................. $ 3,248 $ 2,812
Rigs and rig equipment............... 1,419,372 1,170,783
Transportation equipment............. 16,747 12,612
Buildings............................ 10,806 8,374
Other................................ 630 828
Construction-in-progress............. 440,487 77,918
------------ ------------
1,891,290 1,273,327
Accumulated depreciation and
amortization....................... (165,503) (101,680)
------------ ------------
Net property and equipment...... $ 1,725,787 $ 1,171,647
============ ============
</TABLE>
As of December 31, 1998, construction-in-progress was primarily
attributable to the construction of two drillships, the refurbishment of four
offshore jackup drilling rigs, the refurbishment of sixteen land-based drilling
and workover rigs and upgrades of the Company's computer systems. As of December
31, 1997, construction-in-progress was primarily attributable to the acquisition
and refurbishment of a tender-assisted barge and a drillship, the construction
and refurbishment of three platform offshore rigs and three land-based drilling
and workover rigs and the refurbishment of certain newly acquired offshore
jackup drilling rigs.
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. For the years ended December
31, 1998, 1997 and 1996, total interest incurred was $62,139,000, $40,018,000
and $15,550,000, respectively, of which $16,363,000, $5,650,000 and $1,915,000,
respectively, was capitalized.
During the years ended December 31, 1998, 1997 and 1996, maintenance and
repair costs included in operating costs on the accompanying consolidated
statement of operations were $61,699,000, $51,429,000 and $32,698,000,
respectively.
3. ACQUISITIONS AND DISPOSITIONS
In October 1998, the Company purchased for $85 million the AMETHYST 1, a
dynamically positioned, self-propelled semisubmersible drilling rig.
In July 1998, the Company acquired 60% of a Bolivian company, Compania
Boliviana de Perforacion S.A.M. ("CBP"), pursuant to a joint initiative with
the Bolivian national oil company, Yacimientos Petroliferos Fiscales Bolivianos
("YPFB"). CBP was capitalized through the contribution of 13 land-based
drilling and workover rigs, oilfield trucks and other related drilling assets by
YPFB and $17 million of cash by the Company.
30
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, the Company acquired 13 mat-supported jackup drilling rigs
(the "Jackup Rigs") for approximately $269,000,000 in cash. The acquisition
was financed through the sale of Senior Notes (as defined below) and common
stock, which was completed concurrently with the acquisition.
In March 1997, the Company acquired the operating subsidiaries of
Forasol-Foramer N.V. (collectively, "Forasol") for aggregate consideration of
$285,644,000, consisting of $113,222,000 in cash and 11,099,191 shares of common
stock valued at $172,422,000, based on the approximate market value of the
common stock immediately prior to the date of the agreement of $15.50 per share.
The assets acquired and liabilities assumed in the Forasol acquisition were
as follows:
<TABLE>
<CAPTION>
ASSETS (LIABILITIES)
----------------------
<S> <C>
(IN THOUSANDS)
Cash and cash equivalents............ $ 13,438
Trade receivables.................... 56,831
Deferred income taxes................ 2,012
Other current assets................. 18,624
Property and equipment............... 369,527
Investments in affiliates............ 9,431
Other assets......................... 5,227
Accounts payable..................... (30,514)
Accrued expenses..................... (57,053)
Short-term borrowings................ (15,354)
Long-term debt....................... (31,361)
Long-term lease obligations.......... (35,514)
Other long-term liabilities.......... (4,805)
Deferred income taxes................ (12,721)
Minority interest.................... (2,124)
----------------------
Net assets acquired............. $285,644
======================
</TABLE>
In February 1997, the Company sold substantially all of the assets used in
its U.S. land-based well servicing operations for $135,650,000 in cash. After
federal and state income taxes of approximately $42,100,000, repayment of
$3,877,000 of indebtedness collateralized by certain of the assets sold and
$65,000 of interest accrued thereon, and repayment of $3,960,000 of lease
payments on transferred assets subject to operating leases, the net proceeds to
the Company were $85,648,000. The Company recognized a pretax gain on the sale
of $83,553,000, which amount is included in other income on the accompanying
consolidated statement of operations.
Unaudited pro forma results of operations assuming the acquisitions of
Forasol and the Jackup Rigs and the sale of the Company's U.S. land-based well
servicing operations had occurred on January 1, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
----------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C>
Revenues............................. $755,952
Net earnings......................... $ 52,050
Earnings per share
Basic........................... $ 1.12
Diluted......................... $ 1.03
</TABLE>
31
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Company that might have occurred
if such transactions had occurred as of January 1, 1997, nor are they indicative
of future results.
4. DEBT
SHORT-TERM BORROWINGS
The Company has agreements with several banks for short-term lines of
credit denominated in U.S. dollars, French francs and Argentine pesos. The
facilities are renewable annually and bear interest at variable rates based on
LIBOR for the U.S. dollar and Argentine peso denominated facilities, and PIBOR
for the French franc denominated facilities. The interest rates on such
borrowings at December 31, 1998 range from 5.57% to 11.00%. As of December 31,
1998, $16,522,000 was outstanding under these facilities and $30,996,000 was
available.
LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Senior Notes......................... $ 325,000 $ 325,000
Collateralized term loans............ 70,558 79,009
Limited-recourse collateralized term
loans.............................. 31,112 35,210
Senior convertible note.............. 21,250 --
Drillship construction loans......... 158,866 --
Other notes payable:
Note payable to sellers......... -- 11,000
Eximbank notes payable.......... 5,396 6,533
Notes payable................... 3,881 6,704
Loan obligations to customers... 2,909 4,037
Revolving credit facility............ 39,000 --
---------- ----------
657,972 467,493
Current portion of long-term debt.... 27,452 38,890
---------- ----------
Long-term debt, net of current
portion........................ $ 630,520 $ 428,603
========== ==========
</TABLE>
SENIOR NOTES
In May 1997, the Company issued $325,000,000 of 9 3/8% Senior Notes due May
1, 2007 (the "Senior Notes"). Interest on the Senior Notes is payable
semi-annually on May 1 and November 1 of each year. The Senior Notes are not
redeemable prior to May 1, 2002, after which they will be redeemable, in whole
or in part, at the option of the Company at redemption prices starting at
104.688% and declining to 100% by May 1, 2005. In the event the Company
consummates a public equity offering on or prior to May 1, 2000, the Company at
its option may use all or a portion of the proceeds from such public equity
offering to redeem up to $108,333,000 principal amount of the Senior Notes at a
redemption price equal to 109.375% of the aggregate principal amount thereof,
together with accrued and unpaid interest to the date of redemption. As of
December 31, 1998, the outstanding principal amount of the Senior Notes had a
fair value of approximately $303,200,000.
The indenture governing the Senior Notes contains provisions which limit
the ability of the Company and its subsidiaries to incur additional
indebtedness, create liens, enter into mergers and consolidations, pay cash
dividends on its capital stock, make acquisitions, sell assets or change its
business.
32
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COLLATERALIZED TERM LOANS
In April 1996, the Company completed two separate financing arrangements
with lending institutions pursuant to which it borrowed an aggregate amount of
$40,000,000 and an additional $6,500,000 in November 1996. The collateralized
term loans bore interest initially at a floating rate of prime plus 0.5% and are
repayable in monthly installments of principal and interest over a period of
five to six years. In December 1996, the Company elected to convert the interest
on the term loans to a fixed rate basis. As a result, the collateralized term
loans currently bear interest at fixed rates ranging from 7.95% to 8.50% per
annum. The loans are collateralized by certain of the Company's domestic
offshore rig fleet and ancillary equipment. The loan agreement includes
restrictive financial covenants with respect to cash flow coverage and tangible
net worth.
In connection with the March 1997 Forasol acquisition, the Company assumed
certain borrowing arrangements with various banks, including a $20 million bank
loan, payable in semi-annual installments beginning August 1995 through 2002.
The loan bears interest at a stated rate of six-month LIBOR plus a margin
ranging from 1.25% to 2.50%. In conjunction with this loan, the Company
simultaneously entered into an interest rate swap agreement which fixed the rate
of interest on this loan at 7.55% over the term of the debt agreement. A
semisubmersible rig is pledged as security for this loan. The Company also
assumed a $30 million bank loan, secured by another semisubmersible rig, payable
in semi-annual installments beginning May 1997 through 2003, which bears
interest at a rate of six-month LIBOR plus a margin ranging from 1.00% to 2.00%,
depending on the day rate earned and the amount outstanding under the facility
as it relates the market value of the rig.
LIMITED-RECOURSE COLLATERALIZED TERM LOANS
The limited-recourse collateralized term loans are collateralized by two of
the Company's drilling/workover barge rigs and related charter contracts. The
loans are being repaid from the proceeds of the related charter contracts in
equal monthly installments of principal and interest through July 2004. In
addition, a portion of contract proceeds is being held in trust to assure that
timely payment of future debt service obligations is made. At December 31, 1998,
$2,435,000 of such contract proceeds, which amount is included in cash and cash
equivalents on the accompanying consolidated balance sheet, are being held in
trust as security for the lenders, and are not presently available for use by
the Company.
SENIOR CONVERTIBLE NOTE
In connection with the purchase of the AMETHYST 1 in October 1998, the
Company issued to the seller a $21.3 million senior note convertible into common
stock at a conversion price of $28.50 per share during the first year and
decreasing $1.00 per share annually thereafter until maturity. The senior
convertible note bears interest at 6% per annum for the first year and escalates
1% per annum thereafter until maturity. Interest is payable semi-annually on
December 1 and June 1 of each year commencing December 1, 1998. The note matures
on September 1, 2001 and no principal payments are required until maturity.
DRILLSHIP CONSTRUCTION LOANS
During 1998, the Company entered into two separate financing arrangements
with a group of banks to provide up to $310 million in loans to acquire certain
equipment currently being installed on the PRIDE AFRICA and PRIDE ANGOLA, two
ultra-deepwater drillships under construction referred to in Note 2. The loans
are secured by such equipment and bear interest at a rate of LIBOR plus 1.25%
per annum, which was 6.53% at December 31, 1998.
The Company has also utilized $40 million in certain short-term borrowings
to acquire equipment also currently being installed on the two drillships. Upon
acceptance (as defined) of this acquired equipment, these short-term borrowings
will be repaid out of a portion of the drillship construction loans discussed
above.
33
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has agreed to sell such equipment to the two joint ventures
formed to construct, own and operate the drillships on or before the date of
acceptance by the operator of the drillships, which is anticipated to be
mid-1999 for the PRIDE AFRICA and early 2000 for the PRIDE ANGOLA. Through the
two joint ventures in which the Company has a 51% ownership interest, the
Company has arranged a commitment from a group of banks for long-term financing
of the acquisition of the two drillships. The proceeds from that financing will
be used to repay the drillship construction loans. Accordingly, the Company has
classified these drillship construction loans and related short-term borrowings
as long-term.
OTHER NOTES PAYABLE
Other notes payable consists of an acquisition note payable to sellers,
Eximbank loans for the purchase and import of goods manufactured in the United
States into other countries, notes payable in connection with financed insurance
premiums and miscellaneous loan obligations to customers.
REVOLVING CREDIT FACILITY
The Company maintains a revolving credit facility with a group of banks
(the "Credit Facility") which provides for availability of up to $50 million
(including $25 million for letters of credit). Availability under the Credit
Facility is limited to a borrowing base based on the value of collateral. The
Credit Facility is collateralized by the accounts receivable, inventory and
intangibles of the Company and its domestic subsidiaries, two-thirds of the
stock of the Company's foreign subsidiaries, the stock of the Company's domestic
subsidiaries and certain other assets. The Credit Facility terminates December
2000. Borrowings under the Credit Facility bear interest at a variable rate
based on either the prime rate or LIBOR and was 9.00% at December 31, 1998.
The Credit Facility limits the ability of the Company and its subsidiaries
to incur additional indebtedness, create liens, enter into mergers and
consolidations, pay cash dividends on the Company's capital stock, make
acquisitions, sell assets or change its business without prior consent of the
lenders. Under the Credit Facility, the Company must maintain certain financial
ratios, including (i) funded debt to pro forma EBITDA, (ii) funded debt to
capitalization, (iii) adjusted EBITDA to debt service and (iv) minimum tangible
net worth.
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES
In January 1996, the Company completed the public sale of $80,500,000
principal amount of 6 1/4% convertible subordinated debentures. The debentures,
which are due February 15, 2006, are convertible into common stock of the
Company at a price of $12.25 per share. The debentures are redeemable at the
option of the Company, in whole or in part, at any time on or after March 1,
1999, at an initial redemption price of 103.125% of the principal amount and
declining to 100% of the principal amount by February 15, 2002. Interest is
payable semi-annually on February 15 and August 15 of each year, commencing
August 15, 1996.
During 1997, an aggregate of $28,000,000 principal amount of the debentures
were converted into 2,285,712 shares of common stock. In connection therewith,
the Company paid an aggregate of $3,732,000 in cash to induce such conversions.
Such amount has been included in other income in the accompanying consolidated
statement of operations for 1997. In addition, $917,000 of deferred offering
costs associated with the debentures converted has been charged against
additional paid-in capital in the accompanying consolidated balance sheet at
December 31, 1997. As of December 31, 1998, the outstanding principal amount of
the debentures had a fair value of approximately $43,600,000.
34
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of long-term debt and convertible subordinated debentures
are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
<S> <C>
(IN THOUSANDS)
1999................................. $ 27,452
2000................................. 85,112
2001................................. 62,616
2002................................. 35,503
2003................................. 31,174
Thereafter........................... 416,115
--------------
Total long-term debt............ $657,972
==============
</TABLE>
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES
In April 1998, the Company completed a public sale of zero coupon
convertible subordinated debentures. The net proceeds to the Company in
connection with the sale, after deducting underwriting discounts and offering
expenses, amounted to approximately $223,100,000. The issue price of $391.06 for
each debenture represents a yield to maturity of 4.75% per annum (computed on a
semiannual bond equivalent basis) calculated from the issue date. The
debentures, which mature on April 24, 2018, are convertible into common stock of
the Company at a conversion rate of 13.794 shares of common stock per $1,000
principal amount at maturity. At the maturity date, the aggregate amount payable
would be $588,145,000. The Company will become obligated to purchase the
debentures, at the option of the holders, in whole or in part, on April 24,
2003, 2008 and 2013 at a price per debenture of $494.52, $625.35 and $790.79,
respectively, settled either in cash, common stock or a combination thereof at
the option of the Company. On or subsequent to April 24, 2003, the debentures
are redeemable at the option of the Company, in whole or in part, for cash at a
price equal to the issue price plus accrued original issue discount to the date
of redemption. As of December 31, 1998, the outstanding principal amount of the
debentures had a fair value of approximately $139,700,000.
5. LEASES
The Company has entered into agreements with a financial institution for
the sale and leaseback of certain equipment used in the Company's business. The
Company has received aggregate proceeds of $15,900,000 pursuant to these
facilities attributable to two offshore platform rigs placed in service in 1996.
The Company has purchase and lease renewal options at projected future fair
market values under the agreements. The leases have been classified as operating
leases for financial statement purposes. The net book value of the equipment has
been removed from the balance sheet and the excess of funding over such net book
value has been deferred and is being amortized as a reduction of lease expense
over the maximum lease term of five years. Rentals on these transactions total
$3,071,000 annually.
Rental expense for operating leases for equipment, vehicles and various
facilities of the Company for the years ended December 31, 1998, 1997 and 1996
were $21,191,000, $26,760,000 and $19,449,000, respectively.
In connection with the acquisition of Forasol, the Company assumed a
capital lease obligation pursuant to a sale and leaseback agreement of three
tender-assisted rigs. The obligation is payable in semiannual installments
through October 2002, and bears interest at 7.67%. In October 1997, the lease
was increased by $11,000,000 attributable to the financing of a new derrick set
for a tender-assisted rig. The obligation is repayable in semiannual
installments through October 2002, and bears interest at 7.80%.
35
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of capital lease obligations are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
<S> <C>
(IN THOUSANDS)
1999................................. $ 14,466
2000................................. 14,466
2001................................. 14,466
2002................................. 14,466
2003................................. 4,315
Thereafter........................... 12,113
--------------
74,292
Less amounts representing interest... (14,247)
--------------
Total capital lease obligations...... 60,045
Current portion of long-term lease
obligations........................ 9,897
--------------
Long-term lease obligations, net of
current portion.................... $ 50,148
==============
</TABLE>
6. FINANCIAL INSTRUMENTS
The Company's operations are subject to foreign exchange risk principally
related to the Argentine peso, the French franc and the Venezuelan bolivar. The
Company attempts to mitigate its exposure to foreign currency exchange risks in
Argentina and Venezuela by matching the local currency component of its
contracts to the amount of operating costs transacted in the local currency.
Moreover, the Company purchases forward exchange contracts to hedge its French
franc denominated expenses. These contracts are accounted for as hedges to the
extent they relate to anticipated expenses.
Realized and unrealized gains or losses on forward exchange contracts which
are designated as, and are effective as, hedges are deferred and are recognized
in results of operations when the related expenses are recognized. The cash
flows from these transactions are classified with the cash flows for the
transaction being hedged. Deferred gains and losses are recognized in results of
operations if the hedge is no longer effective.
As of December 31, 1998 and 1997, the Company had approximately $30 million
and $41 million, respectively, in forward exchange contracts to buy foreign
currency to hedge anticipated expenses. The fair market value of all forward
exchange contracts based on quoted market prices of comparable instruments was a
liability of $1,977,000 as of December 31, 1998 and a receivable of $2,278,000
as of December 31, 1997. The value of the contracts upon ultimate settlement is
dependent upon actual currency exchange rates at the various maturity dates.
36
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
United States
Federal:
Current.................... $ (23,888) $ 27,221 $ (243)
Deferred................... 28,322 6,427 2,762
---------- --------- ---------
Total -- Federal...... 4,434 33,648 2,519
---------- --------- ---------
State:
Current.................... -- 1,601 (14)
Deferred................... -- 378 203
---------- --------- ---------
Total -- State........ -- 1,979 189
---------- --------- ---------
Total -- United
States............. -- 35,627 2,708
---------- --------- ---------
Foreign taxes
Current......................... 14,200 9,125 2,466
Deferred........................ 6,092 6,887 2,917
---------- --------- ---------
Total -- Foreign...... 20,292 16,012 5,383
---------- --------- ---------
Income tax
provision.......... $ 24,726 $ 51,639 $ 8,091
========== ========= =========
</TABLE>
The difference between the effective federal income tax rate reflected in
the income tax provision and the amounts which would be determined by applying
the statutory federal tax rate to earnings before income taxes is summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
U.S. statutory rate.................. 35.0% 35.0% 34.0%
Foreign.............................. (14.9) (3.1) (8.0)
State and local taxes................ -- 1.3 0.6
Other................................ 4.1 -- (0.3)
--------- --------- ---------
Effective tax rate......... 24.2% 33.2% 26.3%
========= ========= =========
</TABLE>
The domestic and foreign components of earnings before income taxes were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Domestic............................. $ 3,312 $ 96,560 $ 8,076
Foreign.............................. 98,931 59,074 22,743
---------- ---------- ---------
Earnings before income
taxes................... $ 102,243 $ 155,634 $ 30,819
========== ========== =========
</TABLE>
37
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax liabilities:
Depreciation.................... $ 96,833 $ 71,524
Other........................... 7,939 2,792
---------- ----------
Total deferred tax
liabilities............. 104,772 74,316
---------- ----------
Deferred tax assets:
Foreign net operating loss
carryforwards................. (7,322) (8,256)
Insurance claims................ -- (318)
Bad debts....................... (53) (71)
Other........................... (3,664) (1,859)
---------- ----------
Total deferred tax
assets.................. (11,039) (10,504)
Valuation allowance for deferred
tax assets.................... 6,249 6,249
---------- ----------
Net deferred tax assets.... (4,790) (4,255)
---------- ----------
Net deferred tax
liability............... $ 99,982 $ 70,061
========== ==========
</TABLE>
Applicable U.S. income taxes have not been provided on approximately
$145,000,000 of undistributed earnings of the Company's foreign subsidiaries.
The Company considers such earnings to be permanently invested outside the U.S.
These earnings could be subject to U.S. income tax if distributed to the Company
as dividends or otherwise. The Company anticipates that foreign tax credits
would reduce certain portions of the U.S. income tax that would be payable if
these earnings were to be repatriated.
The Company has recognized a valuation allowance as of December 31, 1998
and 1997 for certain foreign net operating loss carryforwards due to
uncertainties regarding the Company's ability to realize such tax benefits.
8. 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 subordinated debentures.
38
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents information necessary to calculate basic and
diluted net earnings per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
--------- ---------- ---------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net earnings......................... $ 77,517 $ 103,995 $ 22,728
Interest expense on convertible
subordinated debentures............ 11,337 3,700 4,955
Income tax effect.................... (4,081) (1,335) (1,784)
--------- ---------- ---------
Adjusted net income.................. $ 84,773 $ 106,360 $ 25,899
========= ========== =========
Weighted average shares
outstanding........................ 50,135 43,036 26,719
Convertible debt..................... 10,401 4,779 6,104
Stock options and warrants........... 315 1,328 932
--------- ---------- ---------
Adjusted weighted average shares
outstanding................... 60,851 49,143 33,755
========= ========== =========
Basic earnings per share... $ 1.55 $ 2.42 $ .85
========= ========== =========
Diluted earnings per
share................... $ 1.39 $ 2.16 $ .77
========= ========== =========
</TABLE>
As described in Note 4, 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.
9. EMPLOYEE BENEFITS
The Company has a salary deferral plan covering its employees whereby
employees may elect to contribute up to 15% of their annual compensation. The
Company may at its discretion make matching contributions with respect to an
employee's salary contribution of up to $1,000 or 6.00% of compensation,
whichever is less. The Company made matching contributions to the plan for the
years ended December 31, 1998, 1997 and 1996 totaling $1,600,000, $817,000 and
$219,000, respectively.
In 1993, the Company established a deferred compensation plan providing
officers and key employees with the opportunity to participate in an unfunded
deferred compensation program titled the "401(k) Restoration Plan." The 401(k)
Restoration Plan is a non-qualified plan which allows certain employees to defer
up to 100% of base compensation and bonuses earned. The majority of
contributions are invested in mutual funds which are recorded at market value.
The fair market value of the securities and the corresponding deferred
compensation liability at December 31, 1998 and 1997 was $7,345,000 and
$4,300,000, respectively.
10. SHAREHOLDERS' EQUITY
COMMON STOCK
In July 1996, the Company completed the public sale of 3,450,000 shares of
common stock, which resulted in net proceeds to the Company of approximately
$45,641,000. In May 1997, the Company sold 4,391,505 shares of common stock to
the public, which resulted in net proceeds to the Company of approximately
$70,881,000. In November 1997, the Company sold 2,865,000 shares of common stock
to the public, which resulted in net proceeds to the Company of approximately
$97,500,000.
39
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' RIGHTS PLAN
On September 9, 1998, the Board of Directors of the Company adopted a
shareholder rights plan and declared a dividend of one preferred share purchase
right ("Right") for each share of the Company's common stock outstanding on
September 30, 1998. Each Right initially entitled its holder to purchase 1/100th
of a share of the Company's Series A Junior Participating Preferred Stock for
$50.00, subject to adjustment. The Rights generally will not become exercisable
until 10 days after a public announcement that a person or group has acquired
15% or more of the Company's common stock (thereby becoming an "Acquiring
Person") or the commencement of a tender or exchange offer upon consummation of
which such person or group would own 15% or more of the Company's common stock
(the earlier of such dates being called the "Distribution Date"). Rights will
be issued with all shares of the Company's common stock issued from September
30, 1998 to the Distribution Date. Until the Distribution Date, the Rights will
be evidenced by the certificates representing the Company's common stock and
will be transferrable only with the Company's common stock. If any person or
group becomes an Acquiring Person, each Right, other than Rights beneficially
owned by the Acquiring Person (which will thereupon become void), will
thereafter entitle its holder to purchase, at the Rights' then current exercise
price, shares of the Company's common stock having a market value of two times
the exercise price of the Right. If, after a person or group has become an
Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its assets or earning power are sold,
each Right (other than Rights owned by an Acquiring Person which will have
become void) will entitle its holder to purchase, at the Rights' then current
exercise price, that number of shares of common stock of the person with whom
the company has engaged in the foregoing transaction (or its parent) which at
the time of such transaction will have a market value of two times the exercise
price of the Right. After any person or group has become an Acquiring Person,
the Company's Board of Directors may, under certain circumstances, exchange each
Right (other than Rights of the Acquiring Person) for shares of the Company's
common stock having a value equal to the difference between the market value of
the shares of the Company's common stocks receivable upon exercise of the Right
and the exercise price of the Right. The Company will generally be entitled to
redeem the Rights for $.01 per Right at any time until 10 days after a public
announcement that a 15% position has been acquired. The Rights expire on
September 9, 2008.
STOCK OPTION PLANS
The Company has a Long-Term Incentive Plan which provides for the granting
or awarding of stock options, restricted stock, stock appreciation rights and
stock indemnification rights to officers and other key employees. The number of
shares authorized and reserved for issuance under the Long-Term Incentive Plan
is limited to 13% of total issued and outstanding shares, subject to adjustment
in the event of certain changes in the Company's corporate structure of capital
stock. Stock options may be exercised within six months of termination of
employment or one year after retirement, total disability or death of an
employee.
In 1993, the shareholders of the Company approved and ratified the 1993
Directors' Stock Option Plan. The purpose of the plan is to afford the Company's
directors who are not full-time employees of the Company or any subsidiary of
the Company an opportunity to acquire a greater proprietary interest in the
Company. A maximum of 400,000 shares of the Company's common stock are to be
available for purchase upon the exercise of options granted pursuant to the 1993
Directors' Stock Option Plan. The exercise price of options is the fair market
value per share on the date the option is granted. Directors' stock options vest
over two years at the rate of 50% per year and expire ten years from date of
grant.
40
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option transactions pursuant to the Long-Term Incentive Plan and the
1993 Directors' Stock Option Plan (the "Plans") for the last three years are
summarized as follows:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN 1993 DIRECTORS' PLAN
---------------------------- ------------------------------
PRICE SHARES PRICE SHARES
----------------- --------- ------------------- ---------
<S> <C> <C> <C> <C>
Outstanding as of
December 31, 1995...... 2,153,350 58,000
Granted.............. $9.125 - $14.125 924,000 $17.875 12,000
Exercised............ $2.25 - $9.13 (255,200) -- --
Forfeited............ -- -- -- --
--------- ---------
Outstanding as of
December 31, 1996...... 2,822,150 70,000
Granted.............. $17.25 - $22.75 1,835,200 $19.895 - $20.625 32,000
Exercised............ $2.25 - $14.125 (869,479) -- --
Forfeited............ -- -- -- --
--------- ---------
Outstanding as of
December 31, 1997...... 3,787,871 102,000
Granted.............. $8.00 - $10.44 2,024,040 $19.44 97,998
Exercised............ $2.25 - $14.00 (404,652) -- --
Forfeited............ $14.13 - $22.75 (20,000) -- --
--------- ---------
Outstanding as of
December 31, 1998...... 5,387,259 199,998
========= =========
Exercisable as of
December 31, 1998...... 3,126,467 86,000
========= =========
</TABLE>
The weighted average fair values per share of options granted during the
years ended December 31, 1998, 1997 and 1996 were $4.36, $8.60 and $5.12,
respectively. The fair values were estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions: dividend
yield of 0.00%; volatility of 45.12%; risk free rate of interest ranging from
5.16% to 6.90%; and an expected term of five years.
The following table summarizes information on stock options outstanding and
exercisable at December 31, 1998 pursuant to the Long-Term Incentive Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- - ------------------ ----------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
$ 2.25 - $ 5.00... 51,000 4.35 $ 4.75 50,490 $ 4.75
$ 5.01 - $12.00... 3,391,459 8.25 $ 8.34 1,825,037 $ 7.88
$12.01 - $22.75... 1,944,800 8.24 $ 20.00 1,250,940 $ 18.75
----------- -----------
$ 2.25 - $22.75... 5,387,259 8.20 $ 12.51 3,126,467 $ 12.18
=========== ===========
</TABLE>
41
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information on stock options outstanding and
exercisable at December 31, 1998 pursuant to the 1993 Directors' Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- - ------------------ ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 4.25 - $10.00... 58,000 5.25 $ 6.28 58,000 $ 6.28
$10.01 - $20.66... 141,998 8.73 $19.47 28,000 $19.18
----------- -----------
$ 4.25 - $20.66... 199,998 7.72 $15.64 86,000 $10.48
=========== ===========
</TABLE>
If the fair value based method of accounting prescribed by SFAS No. 123 had
been applied, the Company's net income and earnings per share would approximate
the pro forma amounts indicated below. The effects of applying SFAS No. 123 in
this pro forma disclosure are not indicative of future amounts.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
--------- ---------- ---------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net earnings......................... $ 74,654 $ 100,416 $ 21,999
Net earnings per share
Basic........................... $ 1.49 $ 2.33 $ 0.82
Diluted......................... $ 1.35 $ 2.09 $ 0.75
</TABLE>
11. 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 any material adverse effect on the
Company's financial position, results of operations or cash flows.
DRILLSHIP JOINT VENTURES
The Company has entered into joint ventures to construct, own and operate
the PRIDE AFRICA and the PRIDE ANGOLA, two ultra-deepwater drillships currently
under construction in South Korea. The drillships are contracted to work
offshore Angola for initial terms of five and three years, respectively. The
PRIDE AFRICA is expected to commence operations in mid-1999, and the PRIDE
ANGOLA is expected to commence operations by early 2000. The joint ventures have
entered into financing arrangements with a group of banks providing that
approximately $400 million of the drillships' total estimated construction cost
of $470 million will be financed by loans that are, upon delivery of the
drillships, without recourse to the joint venture participants. During the
construction period, the lenders could have recourse to the Company with respect
to an aggregate of up to $310 million of such loans. The Company estimates that
its total equity investment in the joint ventures will be approximately $38
million, which represents a 51% interest in each joint venture. There can be no
assurance, however, that additional capital will not be required to complete the
drillships.
AMETHYST JOINT VENTURES
The Company has a 30% equity interest in a joint venture company organized
to construct, own and operate four Amethyst-class dynamically positioned
semisubmersible drilling rigs. The rigs are currently under construction at
shipyards in South Korea and the United States. Upon their completion, the rigs
will be operated under charter and service contracts with Petroleo Brasilerio
S.A. having initial terms of six to eight years. The total estimated cost to
construct, equip and mobilize the four rigs is approximately
42
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$700 million. Delivery of the rigs is expected in mid 2000. As of December 31,
1998, the Company had made aggregate equity contributions to the joint venture
of approximately $45 million.
The joint venture company has entered into a financing arrangement with a
group of foreign lenders to provide up to $240 million of the $370 million
estimated cost of the two Amethyst rigs under construction in South Korea.
Equity contributions by the Company and its joint venture partner have provided
$30 million of such cost. The Company and its joint venture partner also have
committed to find, by October 30, 1999, a third-party funding source for the
remaining $100 million estimated cost or to fund any shortfall in proportion to
their respective ownership interests. Accordingly, the Company's liability under
such commitment is limited to $30 million. The Company is pursuing alternative
sources for such financing, but there is no assurance that third-party funds
will be obtained. In addition, the Company has provided certain other
guarantees, including (1) a guarantee of payment of up to $32.4 million of the
loans; (2) a guarantee of cost overruns of up to $6 million; (3) a guarantee of
the cost of the two rigs in excess of related refund guarantees supporting their
construction contracts and (4) certain other financial and operating-related
guarantees.
The financing is structured as separate loans to the subsidiaries of the
joint venture owning the rigs, cross-collateralized and cross-guaranteed, with a
nine-year term. The interest rate for the loans is 12.0% during the construction
period and 11.0% upon commencement of operations. As of December 31, 1998, the
lenders had advanced $94.7 million. Future advances are subject to the
satisfaction of conditions specified in the loan agreements, including
satisfactory progress in the rigs' construction.
In addition, the joint venture has received a commitment from the United
States Maritime Administration ("MARAD") to provide a guarantee of obligations
for both construction period and mortgage period financing relating to the
construction of the two Amethyst 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 engaged an arranger for the
construction period financing and a placement agent for the mortgage period
financing. In connection with the MARAD financing, the Company has agreed to
guarantee payment of up to $20.5 million of late delivery penalties that are
accruing and may be payable under the charter and service contracts related to
these two rigs.
12. SUBSEQUENT EVENT
In February 1999, the Company completed the sale and leaseback of the
semisubmersible rig AMETHYST I, 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 maximum term of 13 years and the Company has options to purchase
the rig at the end of eight years and at the end of the maximum term. Rentals on
the rig range from $11.7 to $15.9 million annually.
43
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUPPLEMENTAL FINANCIAL INFORMATION
OTHER CURRENT ASSETS
Other current assets as of December 31, 1998 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Income tax receivable................ $ 23,888 --
Receivable from affiliate............ 6,522 --
Other receivables.................... 24,418 21,376
Deferred mobilization costs.......... 821 --
Prepaid expenses..................... 9,761 14,315
--------- ---------
Total other current assets...... $ 65,410 $ 35,691
========= =========
</TABLE>
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles as of December 31, 1998 and 1997 consisted
of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Goodwill............................. $ 2,944 $ 2,944
Other intangibles.................... 1,373 1,373
--------- ---------
4,317 4,317
--------- ---------
Accumulated amortization............. (899) (694)
--------- ---------
Total goodwill and other
intangibles................... $ 3,418 $ 3,623
========= =========
</TABLE>
Amortization expense amounted to $205,000, $198,000 and $198,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
OTHER ASSETS
Other assets as of December 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Prepaid expenses..................... $ 798 $ 1,156
Deferred financing costs............. 18,088 9,014
Deferred mobilization costs.......... 3,349 5,974
Employee savings plan................ 7,646 2,583
Other................................ 14,717 4,202
--------- ---------
Total other assets.............. $ 44,598 $ 22,929
========= =========
</TABLE>
44
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED EXPENSES
Accrued expenses as of December 31, 1998 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Insurance............................ $ 1,111 $ 3,872
Payroll.............................. 15,087 5,504
Taxes, other than income............. 10,347 10,537
Foreign social benefits and
vacation........................... 29,069 30,707
Interest............................. 6,705 6,582
Other................................ 17,475 7,792
--------- ---------
Total accrued expenses.......... $ 79,794 $ 64,994
========= =========
</TABLE>
OTHER LONG-TERM LIABILITIES
Other long-term liabilities as of December 31, 1998 and 1997 consisted of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Foreign social benefits.............. $ 21,743 $ 25,210
Insurance............................ 43 897
Deferred compensation................ 7,646 2,583
Deferred mobilization revenue........ 19,555 221
--------- ---------
Total other long-term
liabilities................... $ 48,987 $ 28,911
========= =========
</TABLE>
OPERATING EXPENSES
Operating expenses for the years ended December 31, 1997 and 1996 include
gains on insurance recoveries from damaged or destroyed rigs of $1,800,000 and
$1,085,000, respectively.
OTHER INCOME
Other income for the year ended December 31, 1997 included a gain of
$83,553,000 as a result of the sale of substantially all of the Company's assets
used in its U.S. land-based well servicing operations.
Foreign exchange transaction (gains) losses included in other income were
$(395,000), $(3,736,000) and $437,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
CASH FLOW INFORMATION
Cash paid (received) for interest and income taxes during the years ended
December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash paid (received) during the year
for:
Interest, net of amounts
capitalized................... $ 45,776 $ 32,810 $ 11,220
Income taxes -- U.S............. (10,042) 34,117 (472)
Income taxes -- foreign......... 8,616 8,433 5,844
Capital expenditures in accounts
payable.............................. 51,876 11,845 2,706
</TABLE>
45
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The Company is a leading provider of contract drilling and related
services, operating both offshore and on land. The Company has significant
operations offshore in the Gulf of Mexico and in South America and significant
land-based operations in South America. The Company also operates in South
Africa, the Middle East and in Asia.
The Company reports its operations by geographic area and land-based and
offshore operations.
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
<TABLE>
<CAPTION>
UNITED STATES INTERNATIONAL
--------------------- ----------------------
LAND OFFSHORE LAND OFFSHORE TOTAL
-------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
1998
<S> <C> <C> <C> <C> <C>
Revenues............................. $ -- $ 160,829 $401,899 $ 272,835 $ 835,563
Earnings from operations............. -- 40,446 18,014 82,503 140,963
Segment assets....................... -- 423,858 588,273 1,180,036 2,192,167
Capital expenditures, including
acquisitions....................... -- 122,281 140,888 394,757 657,926
Depreciation and amortization........ -- 20,233 34,895 24,803 79,931
<CAPTION>
1997
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 16,485 $ 135,281 $385,590 $ 162,432 $ 699,788
Earnings from operations............. 519 40,965 42,500 24,401 108,385
Segment assets....................... 1,503 395,598 519,327 625,073 1,541,501
Capital expenditures, including
acquisitions....................... 8,465 330,252 132,729 418,538 889,984
Depreciation and amortization........ 818 13,076 33,801 10,966 58,661
<CAPTION>
1996
<S> <C> <C> <C> <C> <C>
Revenues............................. $117,142 $ 57,450 $218,562 $ 14,020 $ 407,174
Earnings from operations............. 7,808 6,983 23,372 1,979 40,142
Segment assets....................... 94,559 61,251 331,462 54,790 542,062
Capital expenditures, including
acquisitions....................... 8,666 18,618 211,834 17 239,135
Depreciation and amortization........ 5,738 3,665 12,677 6,985 29,065
</TABLE>
46
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth certain information with respect to the
Company and its subsidiaries by geographic area:
<TABLE>
<CAPTION>
UNITED SOUTH OTHER
STATES AMERICA INTERNATIONAL TOTAL
---------- -------- -------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
1998
- - -------------------------------------
<S> <C> <C> <C> <C>
Revenues............................. $ 160,829 $455,837 $ 218,897 $ 835,563
Earnings from operations............. 40,446 30,993 69,524 140,963
Long-lived assets.................... 392,675 596,411 833,299 1,822,385
Capital expenditures, including
acquisitions....................... 122,281 147,788 387,857 657,926
Depreciation and amortization........ 20,233 38,149 21,549 79,931
<CAPTION>
1997
- - -------------------------------------
<S> <C> <C> <C> <C>
Revenues............................. $ 151,766 $451,693 $ 96,329 $ 699,788
Earnings from operations............. 41,484 53,302 13,599 108,385
Long-lived assets.................... 359,198 374,371 473,722 1,207,291
Capital expenditures, including
acquisitions....................... 338,717 119,932 431,335 889,984
Depreciation and amortization........ 13,894 34,478 10,289 58,661
<CAPTION>
1996
- - -------------------------------------
<S> <C> <C> <C> <C>
Revenues............................. $ 174,592 $231,038 $ 1,544 $ 407,174
Earnings from operations............. 14,791 25,799 (448) 40,142
Long-lived assets.................... 60,637 325,018 -- 385,655
Capital expenditures, including
acquisitions....................... 27,284 211,851 -- 239,135
Depreciation and amortization........ 9,403 19,394 268 29,065
</TABLE>
SIGNIFICANT CUSTOMERS
Two customers accounted for approximately 14% and 11% of consolidated
revenues for the year ended December 31, 1998 and one customer accounted for
approximately 14% and 16% of consolidated revenues for the years ended December
31, 1997 and 1996, respectively.
47
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998
Revenues............................. $213,686 $219,186 $209,964 $192,727
Earnings from operations............. 37,521 42,765 38,582 22,095
Net earnings......................... 21,434 24,516 20,808 10,759
Net earnings per share
Basic........................... .43 .49 .42 .21
Diluted......................... .40 .43 .37 .21
Weighted average common shares
outstanding
Basic........................... 50,058 50,087 50,101 50,291
Diluted......................... 55,312 61,351 63,008 63,732
1997
Revenues............................. $131,376 $174,537 $182,908 $210,967
Earnings from operations............. 15,198 26,899 29,947 36,341
Net earnings......................... 57,494 13,053 14,032 19,416
Net earnings per share
Basic........................... 1.82 .29 .30 .40
Diluted......................... 1.49 .27 .28 .37
Weighted average common shares
outstanding
Basic........................... 31,569 44,884 46,809 48,652
Diluted......................... 39,046 50,293 52,621 54,358
</TABLE>
48
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
independent accountants regarding accounting and financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act") within 120 days of the end of the Company's
fiscal year on December 31, 1998.
Information with respect to the executives officers of the Company is set
forth under the caption "Executive Officers of the Registrant" in Part I of
the report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are included as part of this report:
(1) Financial Statements:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent
Accountants.................... 23
Consolidated Balance Sheet --
December 31, 1998 and 1997.... 24
Consolidated Statement of
Operations --
Years ended December 31, 1998,
1997, and 1996................. 25
Consolidated Statement of
Changes in Shareholders'
Equity --
Years ended December 31, 1998,
1997, and 1996................. 26
Consolidated Statement of Cash
Flows --
Years ended December 31, 1998,
1997 and 1996.................. 27
Notes to Consolidated Financial
Statements..................... 28
</TABLE>
(2) Consolidated Financial Statement Schedules:
All financial statement schedules have been omitted because they are not
applicable or not required, or the information required thereby is included in
the consolidated financial statements or the notes thereto included in this
Report.
49
<PAGE>
(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
3.1 -- Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit
3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File
Nos. 0-16961 and 1-13289).
3.2 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File
Nos. 0-16961 and 1-13289).
3.3 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.3
to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File
Nos. 0-16961 and 1-13289).
3.4 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-8 dated September 8, 1997, Registration
No. 333-35089).
3.5 -- Amendment to Restated Articles of Incorporation of the Company (incorporated by reference
to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1998, File No. 1-13289).
3.6 -- Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.6 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998,
File No. 1-13289).
*4.1 -- Form of Common Stock Certificate.
4.2 -- Rights Agreement dated as of September 9, 1998 between the Company and American Stock
Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 1 to the
Company's Current Report on Form 8-K dated September 10, 1998, File No. 1-13289).
4.3 -- Amended and Restated Credit Agreement dated as of December 22, 1997 among the Company,
each of the banks that are or may be a party thereto, Bank One, Louisiana, N.A. (formerly
named First National Bank of Commerce), as arranger and syndication agent, and Wells Fargo
Bank (Texas), National Association, as administrative agent and documentation agent
(incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, File No. 1-13289).
4.4 -- First Amendment to Credit Agreement dated as of April 24, 1998 among the Company, certain
of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of
Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National
Association, as administrative and documentation agent, and the lenders named therein
(incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1998, File No. 1-13289).
4.5 -- Second Amendment to Credit Agreement dated as of September 17, 1998 among the Company,
certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank
of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National
Association, as administrative and documentation agent, and the lenders named therein
(incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1998, File No. 1-13289).
*4.6 -- Third Amendment to Credit Agreement dated as of December 21, 1998 among the Company,
certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank
of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National
Association, as administrative and documentation agent, and the lenders named therein.
4.7 -- Indenture, dated as of May 1, 1997, by and between the Company and The Chase Manhattan
Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289).
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
4.8 -- First Supplemental Indenture, dated as of May 1, 1997, by and between the Company and The
Chase Manhattan Bank, as trustee, relating to $325,000,000 principal amount of 9 3/8%
Senior Notes due 2007 (incorporated by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289).
4.9 -- Indenture, dated as of April 1, 1998, between the Company and Marine Midland Bank, as
Trustee, relating to subordinated debt securities (incorporated by reference to Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998, File No. 1-13289).
4.10 -- First Supplemental Indenture, dated as of April 24, 1998, between the Company and Marine
Midland Bank, as Trustee, relating to Zero Coupon Convertible Subordinated Debentures Due
2018 (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998, File No. 1-13289).
</TABLE>
The Company is a party to several debt instruments under which the total amount
of securities authorized does not exceed 10% of the total assets of the Company
and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Regulation S-K, the Company agrees to furnish a copy of such
instruments to the Commission upon request.
<TABLE>
<C> <S>
10.1 -- Form of Indemnity Agreement between the Company and certain executive officers and
directors (incorporated by reference to Exhibit 10(g) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233).
10.2 -- Pride International, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit
4A to the Company's Registration Statement on Form S-8 dated February 6, 1989,
Registration No. 33-26854).
10.3 -- First Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 dated
September 8, 1997, Registration No. 333-35089).
10.4 -- Second Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 dated
September 8, 1997, Registration No. 333-35089).
10.5 -- Third Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-13289).
10.6 -- Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated by reference to Exhibit
10(i) to the Company's Registration Statement on Form S-1 dated January 29, 1990,
Registration No. 33-33233).
10.7 -- Summary of Pride Petroleum Services, Inc. Group Life Insurance and Accidental Death and
Dismemberment Insurance (incorporated by reference to Exhibit 10(j) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233).
10.8 -- Pride International, Inc. 1993 Directors' Stock Option Plan (incorporated by reference to
Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended December 31,
1992, File Nos. 0-16961 and 1-13289).
10.9 -- First Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form
S-8 dated September 8, 1997, Registration No. 333-35093).
10.10 -- Second Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, File No. 1-13289).
*10.11 -- Third Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan.
10.12 -- Pride Petroleum Services, Inc. 401(k) Restoration Plan (incorporated by reference to
Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31,
1993, File Nos. 0-16961 and 1-13289).
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
10.13 -- Pride Petroleum Services, Inc. Employee Stock Purchase Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8 filed June 26, 1996,
Registration No. 333-06825).
10.14 -- First Amendment to Pride International, Inc. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-13289).
10.15 -- Pride International, Inc. Supplemental Executive Retirement Plan (incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 1-13289).
10.16 -- First Amendment to Pride International, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, File No. 1-13289).
10.17 -- Second Amendment to Pride International, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, File No. 1-13289).
10.18 -- Pride International, Inc. 1998 Long-Term Incentive Plan (incorporated by reference to
Appendix A to the Company's Proxy Statement on Schedule 14A for the 1998 Annual Meeting of
Shareholders of the Company, File No. 1-13289).
*10.19 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the
Company and Paul A. Bragg.
*10.20 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the
Company and James W. Allen.
*10.21 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the
Company and John C.G. O'Leary.
*10.22 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the
Company and Steven R. Tolson.
*10.23 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the
Company and Robert W. Randall.
*10.24 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the
Company and Earl W. McNiel.
10.25 -- Purchase Agreement dated as of December 16, 1996 by and among the Company, Forasol-Former
N.V. and certain shareholders of Forasol-Foramer N.V. (incorporated by reference to
Appendix A of the Company's Proxy Statement/Prospectus dated January 31, 1997, File Nos.
0-16961 and 1-13289).
10.26 -- Asset Purchase Agreement dated as of February 19, 1997 by and between the Company and
Noble Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble
Drilling (Mexico) Inc. and NN-1 Limited Partnership (incorporated by reference to Exhibit
10.19 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
File Nos. 0-16961 and 1-13289).
10.27 -- First Amendment to Asset Purchase Agreement, dated as of May 7, 1997, by and among Noble
Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble
Drilling (Mexico) Inc., NN-1 Limited Partnership and Mexico Drilling Partners Inc., and
Pride Petroleum Services, Inc., Pride Offshore, Inc. and Forasol S.A. (incorporated by
reference to Exhibit 2.2 of the Company's Current Report on Form 8-K dated May 22, 1997,
File Nos. 0-16961 and 1-13289).
*21 -- Subsidiaries of the Company.
*23 -- Consent of PricewaterhouseCoopers LLP
*27 -- Financial Data Schedule.
</TABLE>
- - ------------
* Filed herewith.
Compensatory plan or arrangement
(b) Reports on Form 8-K
None.
52
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
HOUSTON, STATE OF TEXAS, ON MARCH 31, 1999.
PRIDE INTERNATIONAL, INC.
By: /s/ PAUL A. BRAGG
PAUL A. BRAGG
PRESIDENT, CHIEF EXECUTIVE OFFICER,
CHIEF OPERATING OFFICER AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES INDICATED ON MARCH 31, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- - --------------------------------------------------------------------------
<C> <S>
/s/ JAMES B. CLEMENT Chairman of the Board and Director
JAMES B. CLEMENT
/s/ PAUL A. BRAGG President, Chief Executive Officer,
PAUL A. BRAGG Chief Operating Officer, and
(PRINCIPAL EXECUTIVE OFFICER) Director
/s/ EARL W. MCNIEL Vice President and Chief Financial
EARL W. MCNIEL Officer
(PRINCIPAL FINANCIAL OFFICER)
/s/ M. TERRY MAY Chief Accounting Officer
M. TERRY MAY
(PRINCIPAL ACCOUNTING OFFICER)
/s/ CHRISTIAN J. BOON FALLEUR Director
CHRISTIAN J. BOON FALLEUR
/s/ REMI DORVAL Director
REMI DORVAL
/s/ JORGE E. ESTRADA M. Director
JORGE E. ESTRADA M.
/s/ RALPH D. MCBRIDE Director
RALPH D. MCBRIDE
/s/ THOMAS H. ROBERTS, JR. Director
THOMAS H. ROBERTS, JR.
/s/ JAMES T. SNEED Director
JAMES T. SNEED
</TABLE>
53
EXHIBIT 4.1
COMMON STOCK NO PAR VALUE
RIGHTS ATTACHED TO THIS CERTIFICATE
DESCRIBED ON REVERSE
NUMBER SHARES
PC
[GRAPHIC]
CUSIP 741932 10 7
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF LOUISIANA CERTAIN DEFINITIONS
PRIDE INTERNATIONAL, INC.
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Pride
International, Inc., transferable on the books of the Corporation in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued and
shall be held subject to all the provisions of the Articles of
Incorporation and By-Laws of the Corporation as from time to time amended,
to all of which the holder by acceptance hereof assents. This Certificate
is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
[PRIDE LOGO]
[SEAL]
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
PRESIDENT AND CHIEF EXECUTIVE OFFICER SECRETARY
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
American Bank Note Company
<PAGE>
PRIDE INTERNATIONAL, INC.
The Corporation will furnish to any shareholder on request and without
charge a full statement of the designations, relative rights, preferences and
limitations of the shares of each class of stock authorized to be issued and of
each series of each class, and a full statement of the authority of the board of
directors to establish other series and to fix the relative rights, preferences
and limitations of the shares of any class or series by amendment of the
Corporation's Articles of Incorporation. Such request may be made to the
Corporation in Houston, Texas or to the Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT
MIN ACT--___________Custodian___________
TEN ENT -- as tenants by the (Cust) (Minor)
entireties
under Uniform Gifts to Minors
JT TEN -- as joint tenants
with right of Act _________________________
survivorship and not (State)
as tenants in common
Additional abbreviations may also be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
/----------------------------/ -------------------------------------------------
- - --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
_________________________________________________________________________ Shares
of the Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
- - --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated, _______________________
X_____________________________________
(Signature)
NOTICE:
THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE ----
CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER. X_____________________________________
(Signature)
================================================================================
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN "ELIGIBLE GUARANTOR INSTITUTION" AS
DEFINED IN RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
- - --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
================================================================================
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between Pride International, Inc. (the
"Company") and American Stock Transfer & Trust Company (the "Rights Agent")
dated as of September 9, 1998 as it may from time to time be supplemented or
amended (the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be redeemed, may be exchanged, may expire or may be evidenced by
separate
<PAGE>
certificates and will no longer be evidenced by this certificate. The Company
will mail to the holder of this certificate a copy of the Rights Agreement, as
in effect on the date of mailing, without charge promptly after receipt of a
written request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS, WAS
OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), AND CERTAIN TRANSFEREES THEREOF,
WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
EXHIBIT 4.6
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
December 21, 1998, is by and among PETROLEUM SUPPLY COMPANY, PRIDE INTERNATIONAL
HOLDINGS, INC., RANGER WELL SERVICE, INC., PRIDE OFFSHORE, INC., and RANGER
CORPORATION (each individually, a "BORROWER," and, collectively, the
"BORROWERS"), PRIDE INTERNATIONAL, INC., (the "PARENT GUARANTOR"), each of the
Lenders (as defined in the below-mentioned Credit Agreement) signatory hereto,
BANK ONE, LOUISIANA, N.A. (formerly known as FIRST NATIONAL BANK OF COMMERCE),
as arranger and syndication agent for the Lenders (in such capacity, together
with its successors in such capacity, the "SYNDICATION AGENT"), and WELLS FARGO
BANK (TEXAS), NATIONAL ASSOCIATION, as administrative and documentation agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "ADMINISTRATIVE AGENT") and as issuer of Letters of Credit.
R E C I T A L S:
WHEREAS, the Borrowers, the Parent Guarantor, the Agents, and the Lenders
signatory hereto entered into a Credit Agreement, dated as of December 22, 1997
(as amended as of April 24, 1998 and September 17, 1998, the "CREDIT
AGREEMENT"), pursuant to which the Lenders made available to the Borrowers a
revolving credit facility;
WHEREAS, the Borrowers have requested that the Lenders and the Agents
agree to amend the Credit Agreement to amend the definition of Funded Debt and
to permit the incurrence of (i) certain Debt in connection with the
construction, equipping and mobilization of the PRIDE ANGOLA ultra-deepwater
drillship; (ii) Guarantees; (iii) Sale-Leaseback Debt relating to the PRIDE
TEXAS and PRIDE KANSAS; and (iv) certain Sale-Leaseback Debt relating to the
AMETHYST 1;
WHEREAS, to induce the Agents and the Required Lenders to enter into this
Amendment, the Borrowers have agreed to pay an amendment fee to those Lenders
executing this Amendment by 5:00 p.m. Houston, Texas time on December 21, 1998
and to modify certain definitions and covenants found in the Credit Agreement;
WHEREAS, the Required Lenders and the Agents are willing to amend the
Credit Agreement as hereinafter provided; and
WHEREAS, the Borrowers, the Parent Guarantor, the Lenders and the Agents
now desire to amend the Credit Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 1
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meaning as in the
Credit Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.1 ADDITIONAL DEFINITIONS. Section 1.1 is amended by adding the
following definitions in alphabetical order:
"AMETHYST 1 LEASE" means Sale-Leaseback Debt of the Parent Guarantor
or one of the Subsidiaries approved by the Administrative Agent that is
incurred by March 31, 1999, not to exceed $100,000,000 in aggregate
principal amount, for a term of at least 13.5 years with an early buyout
option at eight and one half years (the indicative all-inclusive implicit
interest rate quoted to the Parent Guarantor is 9.25% per annum), copies
of which AMETHYST 1 Lease and related documents will be delivered to the
Administrative Agent and its counsel for approval before execution.
"CIC LOAN" means Limited Recourse Debt, not to exceed $205,000,000
in aggregate principal amount, to be issued in the future that will be
used to repay the PRIDE ANGOLA Construction Loan.
"MITSUBISHI GUARANTEES" means the guarantees (described on Schedule
1.1) issued by the Parent Guarantor in connection with the financing of
Amethyst Financial Corporation, a foreign affiliate of the Parent
Guarantor, pursuant to the Mitsubishi Loan Documents.
"MITSUBISHI LOAN DOCUMENTS" means the (i) Loan Agreement dated
December 19, 1998 among Petrodrill Six Limited, Mitsubishi Corporation
(UK) PLC as Facility Agent and Security Agent (the "Petrodrill Agents")
and the lenders party thereto and (ii) the Loan Agreement dated December
19, 1998 among Petrodrill Seven Limited, the Petrodrill Agents and the
lenders party thereto, and related documents, copies of which Loan
Agreements and related documents have been delivered to the Administrative
Agent and its counsel.
"PRIDE ANGOLA CONSTRUCTION LOAN" means the Debt, not to exceed
$205,000,000 in aggregate principal amount, incurred or to be incurred by
the Parent Guarantor, pursuant to the PRIDE ANGOLA Loan Documents, the
purpose of which PRIDE ANGOLA Construction Loan is to provide financing to
construct, equip and mobilize the ultra-deepwater drillship PRIDE ANGOLA
before delivery.
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 2
<PAGE>
"PRIDE ANGOLA LOAN DOCUMENTS" means the Loan Agreement among
Compagnie Financiere de CIC et de l'Union Europeene, as Arranger, Facility
Agent and Security Trustee and the banks and financial institutions that
are "lenders" thereunder and related documents on terms similar to those
contained in the PRIDE AFRICA Loan Documents, copies of which Loan
Agreement and related documents have been delivered to the Administrative
Agent and its counsel.
"TEXAS/KANSAS LEASES" means Sale-Leaseback Debt of the Parent
Guarantor or one of its Subsidiaries approved by the Administrative Agent
that is incurred by March 31, 1999, not to exceed $80,000,000, with a
seven year term in the transaction arranged by BTM Capital, copies of
which Texas/Kansas Leases and related documents will be delivered to the
Administrative Agent and its counsel for approval before execution.
"WORKING" means that a Rig has operated under a drilling contract no
less than 15 days of the 30 days prior to the date of the most recently
delivered Borrowing Base Report upon fair and reasonable terms including
day rate no less favorable than could be obtained in an arm's length
transaction.
Section 2.2 DEFINITIONAL AMENDMENTS. Section 1.1 is further amended by:
(a) amending the definition of "Applicable Margin" as follows:
(i) by adding the following sentence at the end thereof:
"Until the Quarterly Payment Date first occurring after Debt
evidenced by the PRIDE AFRICA OFE Loan and the PRIDE ANGOLA
Construction Loan have been repaid in full with proceeds of Limited
Recourse Debt and satisfactory proof of such repayment is received
by the Administrative Agent, each Applicable Margin found in the
above table shall be increased by 0.50% and such increase shall
apply to all Advances until the Quarterly Payment Date first
mentioned in this Sentence;" and
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 3
<PAGE>
deleting the existing table therefrom and inserting the following table in
lieu thereof:
<TABLE>
<CAPTION>
S&P/MOODY'S
RATING OF PARENT
RATIO OF GUARANTOR'S APPLICABLE MARGIN APPLICABLE MARGIN
FUNDED DEBT TO UNSECURED FOR EURODOLLAR FOR BASE
EBITDA SENIOR DEBT ADVANCES RATE ADVANCES
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than 1.50 to 1.00 BBB-/Baa3 or higher 1.50% 0.75%
Greater than or equal to 50 to BB to BB+/ 1.75% 0.75%
1.00, but less than 2.00 1.00 Ba1 to Ba2
Greater than or equal to 2.00 to BB-/Ba3 2.00% 0.75%
1.00, but less than 2.50 to 1.00
Greater than or equal to 2.50 to B+/B1 2.25% 0.75%
1.00
======================================================================================
</TABLE>
(b) deleting the definition of "Applicable Rig Advance Rate" and
replacing it with the following:
"'Applicable Rig Advance Rate' means 50 percent;"
(c) amending the definition of "Borrowing Base" by adding the
following words after the word "Rigs" in the last line thereof: "that are
Working";
(d) amending the definition of "Coverage Ratio" by:
(i) deleting the reference to "EBIT" and inserting in lieu
thereof a reference to "EBITDA"; and
(ii) adding to clause (b) after the word "expense" found on
the third line the following parenthetical: "(excluding, however,
non-cash interest expense attributable to the Zero Coupon
Debentures)";
(e) by deleting from the definition of "Eligible Rigs" the reference
to "Section 10.2" and inserting in lieu thereof a reference to "Section
10.2(c), (d), (e) or (f)";
(f) deleting from the definition in clause (a) of "Funded Debt" the
words "the PRIDE AFRICA OFE Loan";
(g) by amending the definition of "Rigs" by inserting the following
in the first line thereof after the word "hereto:"
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 4
<PAGE>
"and all other drilling units in which Lien is granted by the
Administrative Agent for the PRO RATa benefit of the Lenders
pursuant to Loan Documents satisfactory to the Administrative
Agent;"
Section 2.3 AMENDMENT TO SECTION 10.1. Section 10.1 is amended by:
(a) deleting from clause (e) the reference to "$120,000,000" and
inserting in lieu thereof a reference to $40,000,000;"
(b) adding the following at the end of clause (f): "PLUS the PRIDE
ANGOLA Construction Loan;"
(c) adding the following at the end of clause (g): "PLUS the
AMEYTHST 1 Lease, the CIC Loan (once the Administrative Agent finds, in
writing, that the terms thereof are acceptable and the CIC Loan
constitutes Limited Recourse Debt) and the Texas/Kansas Leases;" and
(d) adding the following at the end of clause (h): "PLUS the
"Mitsubishi Guarantees."
Section 2.4 AMENDMENT TO SECTION 2.8. Section 2.8 is amended by deleting
the reference to "0.375%" and inserting in lieu thereof a reference to "0.625%."
Section 2.5 AMENDMENT TO SECTION 11.1. Section 11.1 is amended by deleting
therefrom clauses (a) and (b) and substituting the following in lieu thereof:
"the following:
ROLLING PERIOD ENDING REQUIRED RATIO
3/31/99 4.25x to 1.0
6/30/99 4.50x to 1.0
9/30/99 4.75x to 1.0
12/31/99 4.75x to 1.0
3/31/00 3.75x to 1.0
6/30/00 3.50x to 1.0
and thereafter 3.50x to 1.0"
Section 2.6 AMENDMENT TO SECTION 11.2. Section 11.2 is amended by deleting
therefrom clauses (a), (b) and (c) and substituting the following therefor:
"(a) 0.60 for each determination made during the period to and
including December 31, 1999 and (b) 0.50 for each quarter ending
after December 31, 1999."
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 5
<PAGE>
Section 2.7 AMENDMENT TO SECTION 11.3. Section 11.3 is amended by deleting
therefrom the references to "1.35" and "1.50" and inserting in lieu thereof a
reference to "2.0".
Section 2.8 AMENDMENTS TO SECTION 12.1. Section 12.1 is amended by thereto
two new clauses, reading as follows:
"(p) failure of the Parent Guarantor to comply with the Guarantees.
"(q) the PRIDE ANGOLA Construction Loan shall not be repaid with
proceeds of the CIC Loan or the Parent Guarantor released from all
liability thereunder by March 31, 2000.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 NECESSARY DOCUMENTATION. This Amendment shall be effective
when the Administrative Agent shall have received this Amendment executed by the
Borrowers, the Agent, the Parent Guarantor and the Required Lenders. The Parent
Guarantor shall have paid to the Administrative Agent an amendment fee equal to
0.50% times the Commitments to be shared PRO RATA by the Lenders executing this
Amendment by 5:00 p.m. on December 21, 1998. The Administrative Agent, upon
receipt of the amendment fees, shall promptly distribute the PRO RATA shares of
the Amendment fee to the Lenders entitled thereto.
Section 3.2 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in the Credit Agreement shall be true and correct in all
material respects on and as of the date hereof with the same force and effect as
if such representations and warranties had been made on and as of such date.
ARTICLE IV
MISCELLANEOUS
Section 4.1 RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. Except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Credit Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. The representations and warranties
contained herein and in all other Loan Documents, as amended hereby, shall be
true and correct in all material respects as of, and as if made on, the date
hereof. The Borrower, the Banks and the Agents agree that the Credit Agreement
as amended hereby shall continue to be legal, valid, binding and enforceable in
accordance with its terms, except as the enforceability thereof may be affected
by general principles of equity or creditors' rights.
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 6
<PAGE>
Section 4.2 SPECIAL REPRESENTATION. Each of the Parent Guarantor and each
Borrower represents and warrants to the Agents and the Lenders that (a) the
recourse of the holders of the CIC Loan (after the period of the PRIDE ANGOLA
Construction Loan) is effectively limited to the Foreign Affiliate that is the
obligor thereunder and to the security of the assets of such Foreign Affiliate
and (b) the maximum exposure reasonably expected under the Mitsubishi Guarantees
is $74,200,000.
Section 4.3 ADDITIONAL COVENANT. Each of the Parent Guarantor and each
Borrower agrees (a) during the term of the Agreement, to continue to cause all
Eligible Accounts that are Domestic Accounts to be directed to a Parent
Guarantor or a Borrower bank account maintained at the Syndication Agent; (b) to
pledge as Collateral at least three Eligible Rigs that are Working no later than
the delivery date of the January 31, 1999 Borrowing Base Report; (c) during the
term of the Agreement, upon the request of the Administrative Agent, to cause
all Eligible Accounts that are Foreign Accounts to be directed to a Parent
Guarantor or a Borrower bank account maintained at the Administrative Agent; and
(d) to permit, at the expense of the Parent Guarantor and the Borrowers, an
examination, no later than January 31, 1999, of Eligible Accounts by the
Administrative Agent or a third-party selected by the Administrative Agent.
Section 4.4 REFERENCE TO THE CREDIT AGREEMENT. Each of the Loan Documents,
including the Credit Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Credit Agreement as amended hereby, are hereby
amended so that any reference in such Loan Documents to the Credit Agreement
shall mean a reference to the Credit Agreement as amended hereby.
Section 4.5 SEVERABILITY. Any provisions of this Amendment held by court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
Section 4.6 APPLICABLE LAW. This Amendment and all other Loan Documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Texas and the applicable laws of the United States of
America.
Section 4.7 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Lenders, the Agents, the Parent Guarantor and
the Borrowers and their respective successors and assigns.
Section 4.8 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
but all of which when taken together shall constitute one and the same
instrument. Facsimile signatures shall be effective for all purposes.
Section 4.9 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 7
<PAGE>
Section 4.10 NO ORAL AGREEMENTS. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 4.11 DETERMINATION OF CERTAIN DEBT AS LIMITED RECOURSE DEBT. The
Administrative Agent hereby designates the CIC Loan (effective after repayment
of the PRIDE ANGOLA Construction Loan or release of the Parent Guarantor from
all liability thereunder) as Limited Recourse Debt for purposes of the Credit
Agreement.
[Balance of this page intentionally left blank.]
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWERS:
PETROLEUM SUPPLY COMPANY
By:/s/EARL W. MCNIEL
_______________________________
Name:Earl W. McNiel
Title:
PRIDE INTERNATIONAL HOLDINGS, INC.
By:/s/EARL W. MCNIEL
________________________________
Name:Earl W. McNiel
Title:
RANGER WELL SERVICE, INC.
By:/s/EARL W. MCNIEL
________________________________
Name:Earl W. McNiel
Title:
PRIDE OFFSHORE, INC.
By:/s/EARL W. MCNIEL
________________________________
Name:Earl W. McNiel
Title:
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 9
<PAGE>
RANGER CORPORATION
By:/s/EARL W. MCNIEL
________________________________
Name:Earl W. McNiel
Title:
PARENT GUARANTOR:
PRIDE INTERNATIONAL, INC.
By:/s/EARL W. MCNIEL
________________________________
Earl W. McNiel
Vice President
AGENTS AND LENDERS:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, as Administrative
Agent and a Lender
By:/s/F. SCHAGEMAN
________________________________
Frank W. Schageman
Vice President
BANK ONE, LOUISIANA, N.A.
as Syndication Agent and as a Lender
By:/S/ J. KENNETH LE DOUX
________________________________
Name: J. Kenneth Le Doux
Title:Vice President
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 10
<PAGE>
HIBERNIA NATIONAL BANK
By:/s/ B.ROSS
________________________________
Name:B. Ross
Title:Senior Vice President
THE FUJI BANK, LIMITED -HOUSTON
AGENCY
By:/s/ RAYMOND VENTURA
________________________________
Name:Raymond Ventura
Title:Vice President and Manager
per pro BROWN BROTHERS HARRIMAN & CO.
By:/s/ KATHRYN C. GEORGE
________________________________
Name:Kathryn C. George
Title:Senior Manager
THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 11
EXHIBIT 10.11
PRIDE INTERNATIONAL, INC.
1993 DIRECTORS'
STOCK OPTION PLAN
THIRD AMENDMENT
Pride International, Inc. (the "Company") having previously
established the Pride Petroleum Services, Inc. 1993 Directors' Stock Option Plan
effective February 22, 1993, as thereafter amended effective May 22, 1997 and
December 4, 1997 (the "Plan"), and having reserved the right under Section XVIII
thereof to amend the Plan, does hereby amend Section 2.1 of the Plan in its
entirety to read as follows, subject to shareholder approval:
"2.1 The total number of shares of common stock of the Company which
may be purchased pursuant to the exercise of Options granted under the
Plan shall not exceed, in the aggregate, four hundred thousand (400,000)
shares of common stock, no par value, of the Company (the 'Shares')."
This Amendment shall be effective as of February 26, 1998.
PRIDE INTERNATIONAL, INC.
By: /s/ ROBERT W. RANDALL
Robert W. Randall, Vice President
ATTEST:
/s/ FRIDA A. MARTINEZ
Frida A. Martinez
EXHIBIT 10.19
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
PAUL A. BRAGG
EFFECTIVE FEBRUARY 5, 1999
<PAGE>
INDEX
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.................................6
1.01 Effect of Prior Agreements......................................6
II. DEFINITION OF TERMS...................................................6
2.01 Company.........................................................6
2.02 Executive/Officer/Employee......................................6
2.03 Office/Position/Title...........................................6
2.04 Effective Date..................................................6
2.05 Change in Control...............................................7
2.06 Termination.....................................................7
2.07 Customer........................................................9
III. EMPLOYMENT..........................................................10
3.01 Employment.....................................................10
3.02 Best Efforts And Other Employment Of Executive.................10
3.03 Term Of Employment.............................................10
3.04 Compensation And Benefits......................................11
3.05 Termination Without Change In Control..........................12
IV. CHANGE IN CONTROL....................................................14
4.01 Extension Of Employment Period.................................14
4.02 Change In Control Termination Payments & Benefits..............15
4.03 Voluntary Resignation Upon Change In Control...................15
V. NON-COMPETITION AND CONFIDENTIALITY...................................15
5.01 Consideration..................................................15
5.02 Non-Competition................................................16
5.03 Confidentiality................................................17
5.04 Geographical Area..............................................18
5.05 Company Remedies For Violation Of Non-Competition
Or Confidentiality Agreement............................18
5.06 Termination Of Benefits For Violation Of Non-
Competition And Confidentiality.....................19
Page 2 of 23
<PAGE>
VI. GENERAL.............................................................19
6.01 Enforcement Costs...............................................20
6.02 Income, Excise or Other Tax Liability...........................20
6.03 Payment Of Benefits Upon Termination For Cause..................20
6.04 Non-Exclusive Agreement.........................................21
6.05 Notices.........................................................21
6.06 Non-Alienation..................................................21
6.07 Entire Agreement: Amendment.....................................22
6.08 Successors And Assigns..........................................22
6.09 Governing Law...................................................22
6.10 Venue...........................................................22
6.11 Headings........................................................22
6.12 Severability....................................................22
6.13 Partial Invalidity..............................................22
6.14 Counterparts....................................................23
Page 3 of 23
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: FEBRUARY 5, 1999
COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation
5847 San Felipe, Suite 3300 Houston, Texas 77057
EXECUTIVE/EMPLOYEE: Paul A. Bragg
5435 Vanderbilt
Houston, Texas 77005
This Agreement is made as of the date first above written and to
become effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable
resource of the Company and the Company desires to be assured of the continued
services of Executive;
WHEREAS, the Company desires to obtain assurances that Executive
will devote his best efforts to his employment with the Company and will not
enter into competition with the Company in its business as now conducted and to
be conducted, or solicit customers or other employees of the Company to
terminate their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he
acknowledges that his talents and services to the Company are of a special,
unique, unusual and extraordinary character and are of particular and peculiar
benefit and importance to the Company;
Page 4 of 23
<PAGE>
WHEREAS, the Company is concerned that in the event of a possible
or threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive with
assurances as to the continuation of his employment status and responsibilities
in such event;
WHEREAS, the Company further desires to assure Executive that, if
a possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to this end
desires to protect Executive from any direct or implied threat to his financial
well-being;
WHEREAS, Executive is willing to continue to serve as such but
desires assurances that in the event of such a change in control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, that in the event this turns out not to be the
case, he will have fair and reasonable severance protection on the basis of his
service to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
Page 5 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and Executive are hereby amended, modified and
superseded by this Agreement insofar as future employment,
compensation, non- competition, confidentiality, accrual of
payments or any form of compensation or benefits from the Company
are concerned. This Agreement does not release or relieve Company
from its liability or obligation with respect to any compensation,
payments, or benefits already accrued to Executive, nor to any
vesting of benefits or other rights which are attributable to
length of employment, seniority or other such matters. This
agreement does not relieve Executive of any prior non-competition
or confidentiality obligations and agreements and the same are
hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective
Date hereof.
II. DEFINITION OF TERMS.
2.01. COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes
any subsidiary or affiliate of the Company to the extent it is
carrying on any portion of the business of the Company or a
business similar to that being conducted by the Company.
2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means
Paul A. Bragg.
2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which
the Executive is employed is that of President and Chief Operating
Officer of the Company and carries with it the duties,
responsibilities, rights, benefits and privileges presently held
by the Executive, or as may reasonably be assigned to the
Executive as are customary and usual for such position.
2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of
February 5, 1999.
Page 6 of 23
<PAGE>
2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company
shall mean, and shall be deemed to have occurred on the date of
the first to occur of any of the following:
a. there occurs a Change in Control of the Company of the
nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A or Item 1
of Form 8(k) promulgated under the Securities Exchange Act
of 1934 as in effect on the date of this Agreement, or if
neither item remains in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar
purposes;
b. any "person" {as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or
becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
c. the individuals who were members of the Board of Directors
of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election;
d. the Company shall have merged into or consolidated with
another corporation, or merged another corporation into
the Company, on a basis whereby less than fifty percent
(50%) of the total voting power of the surviving
corporation is represented by shares held by former
shareholders of the Company prior to such merger or
consolidation; or
e. the Company shall have sold, transferred or exchanged all,
or substantially all, of its assets to another corporation
or other entity or person.
2.06. TERMINATION. The term "termination" shall mean termination, prior
to the expiration of the Employment Period, of the employment of
the Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below.
Termination includes non-renewal or failure to extend this
Agreement at the end of any employment term, except for cause.
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under
the Company's long-term disability plan. If no such plan
exists on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive
and the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
b. The term "cause" means: (i) the willful and continued
failure of the Executive substantially to perform his
duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board
of Directors which specifically identifies the manner in
which the Board believes he has not substantially
performed his duties, (ii) willful misconduct materially
and demonstrably injurious to the Company or (iii)
material violation of the covenant not to compete (except
after termination under the Change in Control provisions
hereof and confidentiality provisions hereof.) No act or
failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in
good faith and without reasonable belief that his action
or omission was in the best interest of the Company. The
unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities
or duties, a reduction in his total compensation or
benefits, or other action by or at request of the Company
in respect of his position, authority, or responsibility
that is contrary to this Agreement, may not be considered
by the Board of Directors to be a failure to perform or
misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause for purposes of this Agreement unless
and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths of
the entire Board of Directors of the Company at a meeting
of the Board of Directors called and held (after
reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the
Executive has been guilty of such a willful failure to
perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good
faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars
thereof.
c. The term "Constructive Termination" means any circumstance
by which the actions of the Company either reduce or
change Executive's title, position, duties,
responsibilities or authority to such an extent or in such
a manner as to relegate Executive to a position not
substantially similar to that which he presently holds;
would degrade, embarrass or otherwise make it unreasonable
for Executive
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to remain in the employment of the Company; and includes
violation of the employment provisions and conditions of
this Agreement.
d. The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more
of the following:
(i) The Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) Any significant adverse change in the nature or
scope of the Executive's position, authorities or
duties from those described in this Agreement;
(iii) Any reduction in the Executive's total compensation
or benefits from that provided in the Compensation
and Benefits Section hereof;
(iv) The material breach by the Company of any other
provision of this Agreement;
(v) Any action by the Company which would constitute
Constructive Termination; or
(vi) Non-renewal or failure to extend any employment
term, contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and
benefits provided in the "Termination Payments and Benefits"
Section hereof shall not be deemed or treated by the Company as
the termination of the Executive's employment or the forfeiture of
his participation, award, or eligibility, for the purpose of any
plan, practice or agreement of the Company referred to in the
Compensation and Benefits Section hereof.
2.07. CUSTOMER. The term "Customer" includes all persons, firms or
entities that are purchasers or end-users of services or products
offered, provided, developed, designed, sold or leased by the
Company during the relevant time periods, and all persons, firms
or entities which control, or which are controlled by, the same
person, firm or entity which controls such purchase.
III. EMPLOYMENT.
3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the
Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the
Company, for the
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<PAGE>
Term of Employment ("Employment Period") herein specified. During
the Employment Period, Executive shall exercise such position and
authority and perform such responsibilities as are commensurate
with the position and authority being exercised and duties being
performed by the Executive immediately prior to the Effective Date
of this Agreement, which services shall be performed at the
location where the Executive was employed immediately prior to the
Effective Date of this Agreement or at such other location as the
Company and Executive may agree.
3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience
and talents, perform all of the duties that may be
required of and from him pursuant to the express and
implicit terms hereof, to the reasonable satisfaction of
the Company. Such duties shall be rendered at Houston,
Texas, and such other place or places within or without
the State of Texas as the Company and Executive shall
agree.
b. Executive shall devote his normal and regular business
time, attention and skill to the business and interests of
the Company, and the Company shall be entitled to all of
the benefits, profits or other issue arising from or
incident to all work, services and advice of Executive
performed for the Company. Such employment shall be
considered "full time" employment. Executive shall have
the right to make investments in businesses which engage
in activities other than those engaged by the Company.
Executive shall also have the right to devote such
incidental and immaterial amount of his time which are not
required for the full and faithful performance of his
duties hereunder to any outside activities and businesses
which are not being engaged in by the Company and which
shall not otherwise interfere with the performance of his
duties hereunder. Executive shall have the right to make
investments in the manner and to the extent authorized and
set forth in the Non-Competition Section of this
Agreement.
3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular
employment (no Change in Control being presently contemplated)
will commence on the Effective Date of this Agreement and will be
for a term of two (2) years ending at 12:00 o'clock midnight
February 4, 2001; thereafter, the Term of Employment of Executive
will be automatically extended for successive terms of one (1)
year each commencing February 5, 2001, and on February 5 of each
year thereafter, unless Company or Executive gives
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<PAGE>
written notice to the other that employment will not be renewed or
continued after the next scheduled expiration date which is not
less than one year after the date that the notice of non-renewal
was given. All extended employment terms will be considered to be
within the Employment Period while Executive is employed with the
Company.
3.04. COMPENSATION AND BENEFITS. During the Employment Period the
Executive shall receive the following compensation and benefits:
a. He shall receive an annual base salary of not less than his annual
base salary which is $334,000.00, with the opportunity for
increases, from time to time thereafter, which are in accordance
with the Company's regular executive compensation practices.
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other incentive
compensation plans which provide opportunities to receive
compensation in addition to his annual base salary which are the
greater of: (i) the opportunities provided by the Company for
Executives with comparable duties, or (ii) the opportunities under
any such plans in which he was participating immediately prior to
the Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to receive and
participate in salaried employee benefits including, but not
limited to: medical, life, health, accident and disability
insurance and disability benefits and prerequisites which are the
greater of: (i) the employee benefits and prerequisites provided
by the Company to Executives with comparable duties and (ii) the
employee benefits and prerequisites to which he was entitled or in
which he participated immediately prior to the Effective Date of
this Agreement.
d. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to continue to accrue
credited service for retirement benefits and to be entitled to
receive retirement benefits under and pursuant to the terms of the
Company's qualified retirement plan for salaried employees, the
Company's supplemental executive retirement plan, and any
successor or other retirement plan or agreement in effect on the
Effective Date of this Agreement with respect to his retirement,
whether or not a qualified plan or agreement, so that his
aggregate monthly retirement benefit from all such plans and
agreements (regardless when he begins to receive such benefit)
will be not less than it would be had all such plans and
agreements were in effect immediately prior to the Effective Date
of this
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<PAGE>
Agreement and continued to be in effect without change until and
after he begins to receive such benefits.
e. Paid vacations each year and use of a Company car or a car
allowance to the same extent as he is presently receiving or the
benefits provided to Executives with comparable duties whichever
is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Compensation Committee
3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment
Period (including any extended term). Should the Company choose
not to renew or extend the Employment period of this Employment
Agreement or choose to terminate the Executive during, or at the
end of, the Employment Period, or in the event of death or
disability of the Executive, if the termination is not after a
Change in Control and is not for cause, the Company shall, within
thirty (30) days following such termination, pay and provide to
the Executive (or his Executor, Administrator or Estate in the
event of death, as soon as reasonably practical):
a. An amount equal to two full years of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding
his Date of Termination). There shall be deducted only
such amounts as may be required by law to be withheld for
taxes and other applicable deductions.
b. The Company shall provide to Executive for a period of two
(2) full years following the Date of Termination, life,
health, accident and disability insurance. These benefits
are not to be less than the highest benefits furnished to
the Executive during the term of this Agreement.
c. An amount equal to two (2) times the target award for the
Executive under the Company's annual bonus plan for the
fiscal year in which termination occurs, provided that if
the Executive has deferred his award for such year under a
Company plan, the payment due the Executive under this
subparagraph shall be paid in accordance with the terms of
the deferral or as specified by the Executive.
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<PAGE>
d. The Company shall pay, distribute and otherwise provide to
the Executive the amount and value of his entire plan
account and interest under any retirement plan, employee
benefit plan, investment plan or stock ownership plan, if
any exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive with respect to
distributions in accordance with the plan as if the
Executive's employment with the Company terminated at the
end of the month in which Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will
be vested only to the extent authorized or permitted by
the plan.
f. If Executive elects to treat the termination as retirement
then on the Date of Termination, the Executive shall be
deemed to have retired from the Company. At that time, or
at such later time as he may elect consistent with the
terms of any applicable plan or benefit, in order to
receive benefits or avoid or minimize any applicable early
pension reduction provisions, he shall be entitled to
commence to receive total combined qualified and
non-qualified retirement benefits to which he is entitled
hereunder; or, his total non-qualified retirement benefit
hereunder if under the terms of the Company's qualified
retirement plan for salaried employees he is not entitled
to a qualified benefit. Executive may treat the
termination as termination other than "retirement" if
Executive so elects and may defer "retirement" to a later
date if permitted by any applicable plan.
g. The "Compensation and Benefits" section hereof shall be
applicable in determining the payments and benefits due
the Executive under this section and if Termination occurs
after a reduction in all or part of the Executive's total
compensation or benefits, the lump sum severance allowance
and other compensation and benefits payable to him
pursuant to this section shall be based upon his
compensation and benefits before the reduction.
h. If any provision of this Section cannot, in whole or in
part, be implemented and carried out under the terms of
the applicable compensation, benefit or other plan or
arrangement of the Company
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<PAGE>
because the Executive has ceased to be an actual employee
of the Company, due to insufficient or reduced credited
service based upon his actual employment by the Company or
because the plan or arrangement has been terminated or
amended after the Effective Date of this Agreement, or for
any other reason, the Company itself shall pay or
otherwise provide the equivalent of such rights, benefits
and credits for such benefits to the Executive, his
dependents, beneficiaries and estate as if Executive's
employment had not been terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents
shall continue for the same term as the Executive's
benefits. If the Executive dies, all benefits will be
provided for a term of two (2) years {or three (3) years
if after a change in control} after the date of death of
the Executive.
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent
any of such benefits are paid or provided to the Executive
by another employer, provided that the Executive shall
have all rights afforded to retirees to convert group
insurance coverage to the individual insurance coverage
as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart
from this subparagraph, the Executive shall have and be
subject to no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or
interpreted, to be an amendment to any compensation, benefit or
other plan to the Company. To the extent the Company's performance
under this Section includes the performance of the Company's
obligations to the Executive under any other plan or under another
agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are
discharged under this Agreement, are discharged, surrendered, or
released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended
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<PAGE>
for a term of three (3) years following the Effective Date of the
Change in Control and will expire at 12:00 o'clock midnight on the
last day of the month following three (3) years after the Change
in Control. Thereafter, the Employment Period will be extended for
successive terms of one (1) year each, unless terminated, all in
the manner specified in the Term of Employment Section pertaining
to regular employment.
4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS.
In the event the Executive is terminated within three (3) years
following a Change in Control, the Executive will receive the
payments and benefits specified in the "Termination without Change
in Control" Section in the same time and manner therein specified
except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a will be
paid based upon a multiple of three (3) years {instead of
two (2) years}.
b. Life, health, accident and disability insurance specified
in Section 3.05b will be provided until: (i) Executive
becomes reemployed and receives similar benefits from a
new employer, or (ii) three (3) years after the Date of
Termination, whichever is earlier.
c. An amount equal to three (3) times the maximum award that
the Executive could receive under the Company's Annual
Bonus Plan for the fiscal year in which the termination
occurs, instead of the benefits provided in Section
3.05(c) hereof.
d. All other rights and benefits specified in Section 3.05.
4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the
Executive voluntarily resigns his employment within twelve (12)
months after a Change in Control (whether or not Company may be
alleging the right to terminate employment for cause), he will
receive the same payments, compensation and benefits as if he had
been terminated on the date of resignation after Change in
Control.
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01. CONSIDERATION. The base salary awarded to the Executive and to be
paid to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination
of employment of Executive, voluntarily, involuntarily, or under a
Change in Control, under Sections 3.05a and 4.02a hereof
constitute payment, in part, for the Non-Competition and
Confidentiality of the Executive. It is contracted, stipulated and
agreed that
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<PAGE>
fifteen percent (15%) of such amount paid and to be paid to the
Executive shall constitute the consideration for the
Non-Competition and Confidentiality Agreement set forth herein.
5.02. NON-COMPETITION. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company could cause serious harm to the Company. Accordingly, the
Executive agrees that during his employment with the Company and
for a period of two (2) years after he is no longer employed by
the Company (unless his employment is terminated after a Change in
Control, in which event there will be no covenant not to compete
and the provisions of the covenant not to compete herein contained
will terminate on the date of termination of the Executive) the
Executive will not, directly or indirectly, either as an
individual, proprietor, stockholder {other than as a holder of up
to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in
accordance with the automated quotation system of the National
Association of Securities Dealers}, partner, officer, employee or
otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct
or indirect supervision or control, within three (3) years
preceding the Executive's termination of employment, in
any area where the Company provided, produced, leased or
sold such products or services at any time during the
three (3) years preceding such termination of employment,
or
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive
had direct or indirect supervision or control, within
three (3) years preceding Executive's termination of
employment, to or from any person, firm or entity which
was a customer for such products or services of the
Company during the three (3) years preceding such
termination from whom the Company had solicited business
during such three (3) years; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to: (i) leave his or her
employment or position with the Company, (ii) compete with
the business of the Company, or (iii) violate the terms of
any employment, non-competition or similar agreement with
the Company; or
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<PAGE>
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of
any officer, director, employee or any other individual
holding a position with the Company within two (2) years
after the Date of Termination of employment of Executive
with the Company or within two (2) years after such
officer, director, employee or individual terminated
employment with the Company, whichever occurs earlier.
5.03. CONFIDENTIALITY. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company, or divulged to others, could cause serious harm to the
Company. Accordingly, Executive will not at any time during or
after his employment by the Company, directly or indirectly,
divulge, disclose or communicate to any person, firm or
corporation (in any manner whatsoever) any information concerning
any matter affecting or relating to the Company or the business of
the Company. While engaged as an employee of the Company, the
Executive may only use information concerning any matters
affecting or relating to the Company or the business of the
Company for a purpose which is necessary to the carrying out of
the Executive's duties as an employee of the Company, and the
Executive may not make use of any information of the Company after
he is no longer an employee of the Company. The Executive agrees
to the foregoing without regard to whether all of the foregoing
matters will be deemed confidential, material or important, it
being stipulated by the parties. All information, whether written
or otherwise, regarding the Company's business, including, but not
limited to, information regarding customers, customer lists,
costs, prices, earnings, products, services, formulae,
compositions, machinery, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other
business arrangements, and sources of supply, is PRIMA FACIE
presumed to be important, material and confidential information of
the Company for the purposes of this Agreement, except to the
extent that such information may be otherwise lawfully and readily
available to the general public. The Executive further agrees that
he will, upon termination of his employment with the Company,
return to the Company all books, records, lists and other written,
typed or printed materials, whether furnished by the Company or
prepared by the Executive, which contain any information relating
to the Company's business, and the Executive agrees that he will
neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
the Executive will not be liable for any breach of these
confidentiality provisions unless the same constitutes a material
detriment to the Company, or due to the nature of the
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<PAGE>
information divulged and the manner in which it was divulged and
the person to whom it was divulged would likely cause damage to
the Company or constitute a material detriment to the Company.
5.04. GEOGRAPHICAL AREA. The geographical area within which the non-
competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the
Company's present offices, (ii) any of the Company's present rig
yards, and (iii) any additional location where the Company, as of
the date of any action taken in violation of the non- competition
covenants of this Agreement, has an office, a rig yard, or
definitive plans to locate an office or a rig yard.
Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another country and the Company is not then
doing business in that other country, there will be no territorial
limitations extending into such other country.
5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR
CONFIDENTIALITY AGREEMENT. Without limiting the right of the
Company to pursue all other legal and equitable rights available
to it for violation of any of the covenants made by the Executive
herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the nature of the business of the Company, the
restrictions agreed to by Executive as to time and area
contained in this Agreement are reasonable; and
a. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience
and contacts that otherwise will make it difficult to
calculate in damages in an action at law and cannot fully
compensate the Company for any violation of any covenant
in this Agreement, accordingly,
(i) the Company shall be entitled to injunctive relief
to prevent violations of such covenants or
continuing violations thereof and to prevent
Executive from rendering any services to any
person, firm or entity in breach of such covenant
and to prevent Executive from divulging any
confidential information, and
(ii) compliance with this Agreement is a condition
precedent to the Company's obligation to make
payments of any nature to the
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Executive.
5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If the Executive's termination was not after a
Change in Control and if the Executive shall have materially
violated the Confidentiality and/or Non-Competition Agreement or
any agreement he may have signed as an employee of the Company,
the Executive agrees that there shall be no obligation on the part
of the Company to provide any payments or benefits (other than
payments or benefits already earned or accrued) described in the
Termination of Rights and Benefits Section hereof, subject to the
provisions of Section 6.01 hereof. There will be no withholding of
benefits or payments if the termination occurred after a Change in
Control and the Executive will not be bound by the non-competition
provisions if terminated while the Change in Control provisions
hereof are applicable.
VI. GENERAL.
6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence
of a Change in Control, or under other circumstances even when a
Change in Control has not occurred, the Board of Directors or a
stockholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny Executive the benefits intended under this
Agreement; or actions may be taken to enforce the non-competition
or confidentiality provisions of this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that Executive not be required to
incur the legal fees and expenses associated with the protection
or enforcement of his rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the benefits intended to be extended to Executive hereunder
nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time
after the Effective Date of this Agreement, it should appear to
the Executive that the Company is or has acted contrary to or is
failing or has failed to comply with any of its obligations under
this Agreement for the reason that it regards this Agreement to be
void or unenforceable, that Executive has violated the terms of
this Agreement, or for any other reason, or that the Company has
purported to terminate his employment for cause or is in the
course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable,
or institutes any litigation or other legal action designed to
deny, diminish or to
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recover from Executive the benefits provided or intended to be
provided to him hereunder, and the Executive has acted in good
faith to perform his obligations under this Agreement, the Company
irrevocably authorizes Executive from time to time to retain
counsel of his choice at the expense of the Company to represent
him in connection with the protection and enforcement of his
rights hereunder including, without limitation, representation in
connection with termination of his employment or withholding of
benefits or payments contrary to this Agreement or with the
initiation or defense of any litigation or any other legal action,
whether by or against the Executive or the Company or any
Director, Officer, stockholder or other person affiliated with the
Company, in any jurisdiction. Company is not authorized to
withhold the periodic payments of attorney's fees and expenses
hereunder based upon any belief or assertion by the Company that
Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was
not acting in good faith and has violated this Agreement,
Executive will be liable to the Company for reimbursement of
amounts paid due to Executive's actions not based on good faith
and in violation of this Agreement. The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company, on a regular, periodic basis within thirty (30) days
after presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of $250,000.00.
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable
for and will pay all income tax liability by virtue of any
payments made to the Executive under this Agreement, as if the
same were earned and paid in the normal course of business and not
the result of a Change in Control and not otherwise triggered by
the "golden parachute" or excess payment provisions of the
Internal Revenue Code of the United States, which would cause
additional tax liability to be imposed. If any additional income
tax, excise or other taxes are imposed on any amount or payment in
the nature of compensation paid or provided to or on behalf of
Executive, the Company shall "gross up" Executive for such tax
liability by paying to Executive an amount sufficient so that
after payment of all such taxes so imposed, Executive's position
on an after-tax basis is what it would have been had no such
additional taxes been imposed. Executive will cooperate with the
company to minimize the tax consequences to the Executive and to
the Company so long as the actions proposed to be taken by the
Company do not cause any additional tax consequences to the
Executive and do not prolong or delay the time that payments are
to be made, or the amount of payments to be made, unless the
Executive consents, in writing, to any delay or deferment of
payment.
Page 19 of 23
<PAGE>
6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the
termination of the Executive is for cause and not after a Change
in Control, the Company will have the right to withhold all
payments (except those specified in Sections 6.01); provided,
however, that if a final judgment is entered finding that cause
did not exist for termination, the Company will pay all benefits
to the Executive to which he would have been entitled had the
termination not been for cause, plus interest on all amounts
withheld from the Executive at the rate specified for judgments
under Article 5069-1.05 V.A.T.S. but not less than ten percent
(10%) per annum. If the termination for cause occurs after a
Change in Control, the Company shall have no right to suspend or
withhold payments to the Executive under any provision of this
Agreement until or unless a final judgment is entered upholding
the Company's determination that the termination was for cause, in
which event the Executive will be liable to the Company for all
amounts paid, plus interest at the rate allowed for judgments
under Article 5069-1.05 V.A.T.S.
6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to
herein are not intended to exclude or limit Executive's
participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits
as may be authorized by the Board of Directors of the Company at
any time, or to limit or reduce any compensation or benefits to
which Executive would be entitled but for this Agreement.
6.05. NOTICES. Notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall
either be personally delivered by hand or sent by: (i) Registered
or Certified Mail, return receipt requested, postage prepaid,
properly packaged, addressed and deposited in the United States
Postal System, (ii) by facsimile transmission if the receiver
acknowledges receipt; (iii) by Federal Express or other expedited
delivery service provided that acknowledgement of receipt is
received and retained by the deliverer and furnished to the
sender, if to the Executive, at the last address he has filed in
writing with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06. NON-ALIENATION. The Executive shall not have any right to pledge
hypothecate, anticipate, or in any way create a lien upon any
amounts provided under this Agreement, and no payments or benefits
due hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts or by operation of law. So
long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject ,matter hereof. Upon the death of the Executive,
his Executors, Administrators, devisees and heirs, in that order,
shall have the right to enforce the provisions hereof.
Page 20 of 23
<PAGE>
6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof. No provision of this Agreement may be amended, waived, or
discharged except by the mutual written agreement of the parties.
The consent of any other persons to any such amendment, waiver or
discharge shall not be required.
6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by
operation of law or otherwise including, without limitation, any
corporation or other entity or persons which shall succeed
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any successor,
by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement. Except as
otherwise provided herein this Agreement shall be binding upon and
inure to the benefit of the Executive and his legal
representatives, heirs, and assigns, provided however, that in the
event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each
such unpaid amount and distribution shall be paid in accordance
with this Agreement to the person or persons designated by
Executive, to the Company, to receive such payment or distribution
and in the event Executive has made no applicable designation, to
his Estate. If the Company should split, divide or otherwise
become more than one entity, all liability and obligations of the
Company shall be the joint and several liability and obligation of
all of the parts.
6.09. GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of the State of Louisiana, the validity,
interpretation and enforcement of this Agreement shall be governed
by the laws of the State of Texas.
6.10. VENUE. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County,
Texas.
6.11. HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.12. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
6.13. PARTIAL INVALIDITY. In the event that any part, portion or section
of this
Page 21 of 23
<PAGE>
Agreement is found to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be binding upon
the parties hereto and the Agreement will be construed to give
meaning to the remaining provisions of this Agreement in according
with the intent of this Agreement.
6.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but
all of which together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors and the Compensation
Committee, the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Executed in multiple originals and/or counterparts as of the
Effective Date.
\s\PAUL A. BRAGG
PAUL A. BRAGG
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
By: RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
ATTEST:
By: FRIDA A. MARTINEZ
Frida A. Martinez
Assistant Secretary
Page 23 of 23
EXHIBIT 10.20
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
JAMES W. ALLEN
EFFECTIVE FEBRUARY 5, 1999
<PAGE>
INDEX
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6
1.01 Effect of Prior Agreements......................................6
II. DEFINITION OF TERMS...................................................6
2.01 Company.........................................................6
2.02 Executive/Officer/Employee......................................6
2.03 Office/Position/Title...........................................6
2.04 Effective Date..................................................6
2.05 Change in Control...............................................7
2.06 Termination.....................................................7
2.07 Customer........................................................9
III. EMPLOYMENT...........................................................9
3.01 Employment.....................................................10
3.02 Best Efforts And Other Employment Of Executive.................10
3.03 Term Of Employment.............................................10
3.04 Compensation And Benefits......................................11
3.05 Termination Without Change In Control..........................12
IV.CHANGE IN CONTROL.....................................................15
4.01 Extension Of Employment Period.................................15
4.02 Change In Control Termination Payments & Benefits..............15
4.03 Voluntary Resignation Upon Change In Control...................15
V. NON-COMPETITION AND CONFIDENTIALITY...................................16
5.01 Consideration..................................................16
5.02 Non-Competition................................................16
5.03 Confidentiality................................................17
5.04 Geographical Area..............................................18
5.05 Company Remedies For Violation Of Non-Competition
Or Confidentiality Agreement............................18
5.06 Termination Of Benefits For Violation Of Non-
Competition And Confidentiality.....................19
<PAGE>
VI. GENERAL.............................................................19
6.01 Enforcement Costs...............................................20
6.02 Income, Excise or Other Tax Liability...........................20
6.03 Payment Of Benefits Upon Termination For Cause..................20
6.04 Non-Exclusive Agreement.........................................21
6.05 Notices.........................................................21
6.06 Non-Alienation..................................................21
6.07 Entire Agreement: Amendment.....................................22
6.08 Successors And Assigns..........................................22
6.09 Governing Law...................................................22
6.10 Venue...........................................................22
6.11 Headings........................................................22
6.12 Severability....................................................23
6.13 Partial Invalidity..............................................23
6.14 Counterparts....................................................23
Page 3 of 23
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: FEBRUARY 5, 1999
COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation
5847 San Felipe, Suite 3300 Houston, Texas 77057
EXECUTIVE/EMPLOYEE: James W. Allen
11842 Riverview
Houston, Texas 77077
This Agreement is made as of the date first above written and to
become effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable
resource of the Company and the Company desires to be assured of the continued
services of Executive;
WHEREAS, the Company desires to obtain assurances that Executive
will devote his best efforts to his employment with the Company and will not
enter into competition with the Company in its business as now conducted and to
be conducted, or solicit customers or other employees of the Company to
terminate their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he
acknowledges that his talents and services to the Company are of a special,
unique, unusual and extraordinary character and are of particular and peculiar
benefit and importance to the Company;
Page 4 of 23
<PAGE>
WHEREAS, the Company is concerned that in the event of a possible
or threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive with
assurances as to the continuation of his employment status and responsibilities
in such event;
WHEREAS, the Company further desires to assure Executive that, if
a possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to this end
desires to protect Executive from any direct or implied threat to his financial
well-being;
WHEREAS, Executive is willing to continue to serve as such but
desires assurances that in the event of such a change in control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, that in the event this turns out not to be the
case, he will have fair and reasonable severance protection on the basis of his
service to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
Page 5 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and Executive are hereby amended, modified and
superseded by this Agreement insofar as future employment,
compensation, non- competition, confidentiality, accrual of
payments or any form of compensation or benefits from the Company
are concerned. This Agreement does not release or relieve Company
from its liability or obligation with respect to any compensation,
payments, or benefits already accrued to Executive, nor to any
vesting of benefits or other rights which are attributable to
length of employment, seniority or other such matters. This
agreement does not relieve Executive of any prior non-competition
or confidentiality obligations and agreements and the same are
hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective
Date hereof.
II. DEFINITION OF TERMS.
2.01. COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes
any subsidiary or affiliate of the Company to the extent it is
carrying on any portion of the business of the Company or a
business similar to that being conducted by the Company.
2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means
James W. Allen.
2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which
the Executive is employed is that of Senior Vice President of
Operations-Worldwide of the Company and carries with it the
duties, responsibilities, rights, benefits and privileges
presently held by the Executive, or as may reasonably be assigned
to the Executive as are customary and usual for such position.
2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of
Page 6 of 23
<PAGE>
February 5, 1999.
2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company
shall mean, and shall be deemed to have occurred on the date of
the first to occur of any of the following:
a. there occurs a Change in Control of the Company of the
nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A or Item 1
of Form 8(k) promulgated under the Securities Exchange Act
of 1934 as in effect on the date of this Agreement, or if
neither item remains in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar
purposes;
b. any "person" {as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or
becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
c. the individuals who were members of the Board of Directors
of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election;
d. the Company shall have merged into or consolidated with
another corporation, or merged another corporation into
the Company, on a basis whereby less than fifty percent
(50%) of the total voting power of the surviving
corporation is represented by shares held by former
shareholders of the Company prior to such merger or
consolidation; or
e. the Company shall have sold, transferred or exchanged all,
or substantially all, of its assets to another corporation
or other entity or person.
2.06. TERMINATION. The term "termination" shall mean termination, prior
to the expiration of the Employment Period, of the employment of
the Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below.
Termination includes non-renewal or failure to extend this
Agreement at the end of any employment term, except for cause.
Page 7 of 23
<PAGE>
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under
the Company's long-term disability plan. If no such plan
exists on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive
and the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
b. The term "cause" means: (i) the willful and continued
failure of the Executive substantially to perform his
duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board
of Directors which specifically identifies the manner in
which the Board believes he has not substantially
performed his duties, (ii) willful misconduct materially
and demonstrably injurious to the Company or (iii)
material violation of the covenant not to compete (except
after termination under the Change in Control provisions
hereof and confidentiality provisions hereof.) No act or
failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in
good faith and without reasonable belief that his action
or omission was in the best interest of the Company. The
unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities
or duties, a reduction in his total compensation or
benefits, or other action by or at request of the Company
in respect of his position, authority, or responsibility
that is contrary to this Agreement, may not be considered
by the Board of Directors to be a failure to perform or
misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause for purposes of this Agreement unless
and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths of
the entire Board of Directors of the Company at a meeting
of the Board of Directors called and held (after
reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the
Executive has been guilty of such a willful failure to
perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good
faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars
thereof.
c. The term "Constructive Termination" means any circumstance
by which the actions of the Company either reduce or
change Executive's title, position, duties,
responsibilities or authority to such an extent or in such
a manner as to relegate Executive to a position
Page 8 of 23
<PAGE>
not substantially similar to that which he presently
holds; would degrade, embarrass or otherwise make it
unreasonable for Executive to remain in the employment of
the Company; and includes violation of the employment
provisions and conditions of this Agreement.
d. The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more
of the following:
(i) The Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) Any significant adverse change in the nature or
scope of the Executive's position, authorities or
duties from those described in this Agreement;
(iii) Any reduction in the Executive's total compensation
or benefits from that provided in the Compensation
and Benefits Section hereof;
(iv) The material breach by the Company of any other
provision of this Agreement;
(v) Any action by the Company which would constitute
Constructive Termination; or
(vi) Non-renewal or failure to extend any employment
term, contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and
benefits provided in the "Termination Payments and Benefits"
Section hereof shall not be deemed or treated by the Company as
the termination of the Executive's employment or the forfeiture
of his participation, award, or eligibility, for the purpose of
any plan, practice or agreement of the Company referred to in the
Compensation and Benefits Section hereof.
2.07. CUSTOMER. The term "Customer" includes all persons, firms or
entities that are purchasers or end-users of services or products
offered, provided, developed, designed, sold or leased by the
Company during the relevant time periods, and all persons, firms
or entities which control, or which are controlled by, the same
person, firm or entity which controls such purchase.
III. EMPLOYMENT.
3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the
Page 9 of 23
<PAGE>
Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the
Company, for the Term of Employment ("Employment Period") herein
specified. During the Employment Period, Executive shall exercise
such position and authority and perform such responsibilities as
are commensurate with the position and authority being exercised
and duties being performed by the Executive immediately prior to
the Effective Date of this Agreement, which services shall be
performed at the location where the Executive was employed
immediately prior to the Effective Date of this Agreement or at
such other location as the Company and Executive may agree.
3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience
and talents, perform all of the duties that may be
required of and from him pursuant to the express and
implicit terms hereof, to the reasonable satisfaction of
the Company. Such duties shall be rendered at Houston,
Texas, and such other place or places within or without
the State of Texas as the Company and Executive shall
agree.
b. Executive shall devote his normal and regular business
time, attention and skill to the business and interests of
the Company, and the Company shall be entitled to all of
the benefits, profits or other issue arising from or
incident to all work, services and advice of Executive
performed for the Company. Such employment shall be
considered "full time" employment. Executive shall have
the right to make investments in businesses which engage
in activities other than those engaged by the Company.
Executive shall also have the right to devote such
incidental and immaterial amount of his time which are not
required for the full and faithful performance of his
duties hereunder to any outside activities and businesses
which are not being engaged in by the Company and which
shall not otherwise interfere with the performance of his
duties hereunder. Executive shall have the right to make
investments in the manner and to the extent authorized and
set forth in the Non-Competition Section of this
Agreement.
3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular
employment (no Change in Control being presently contemplated)
will commence on the Effective Date of this Agreement and will be
for a term of two (2) years ending at 12:00 o'clock midnight
February 4, 2001; thereafter, the Term of Employment of Executive
will be automatically extended for
Page 10 of 23
<PAGE>
successive terms of one (1) year each commencing February 5, 2001,
and on February 5 of each year thereafter, unless Company or
Executive gives written notice to the other that employment will
not be renewed or continued after the next scheduled expiration
date which is not less than one year after the date that the
notice of non-renewal was given. All extended employment terms
will be considered to be within the Employment Period while
Executive is employed with the Company.
3.04. COMPENSATION AND BENEFITS. During the Employment Period the
Executive shall receive the following compensation and benefits:
a. He shall receive an annual base salary of not less than
his annual base salary which is $285,000.00, with the
opportunity for increases, from time to time thereafter,
which are in accordance with the Company's regular
executive compensation practices. Executive's salary will
be reviewed at least annually by the Compensation
Committee of the Board of Directors.
b. To the extent that such plans exist immediately prior to
the Effective Date of this Agreement, he shall be eligible
to participate on a reasonable basis, and to continue his
existing participation, in annual bonus, stock option and
other incentive compensation plans which provide
opportunities to receive compensation in addition to his
annual base salary which are the greater of: (i) the
opportunities provided by the Company for Executives with
comparable duties, or (ii) the opportunities under any
such plans in which he was participating immediately prior
to the Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he shall be entitled to
receive and participate in salaried employee benefits
including, but not limited to: medical, life, health,
accident and disability insurance and disability benefits
and prerequisites which are the greater of: (i) the
employee benefits and prerequisites provided by the
Company to Executives with comparable duties and (ii) the
employee benefits and prerequisites to which he was
entitled or in which he participated immediately prior to
the Effective Date of this Agreement.
d. To the extent such plans exist immediately prior to the
Effective Date of this Agreement, he shall be entitled to
continue to accrue credited service for retirement
benefits and to be entitled to receive retirement benefits
under and pursuant to the terms of the Company's qualified
retirement plan for salaried employees, the Company's
supplemental
Page 11 of 23
<PAGE>
executive retirement plan, and any successor or other
retirement plan or agreement in effect on the Effective
Date of this Agreement with respect to his retirement,
whether or not a qualified plan or agreement, so that his
aggregate monthly retirement benefit from all such plans
and agreements (regardless when he begins to receive such
benefit) will be not less than it would be had all such
plans and agreements were in effect immediately prior to
the Effective Date of this Agreement and continued to be
in effect without change until and after he begins to
receive such benefits.
e. Paid vacations each year and use of a Company car or a car
allowance to the same extent as he is presently receiving
or the benefits provided to Executives with comparable
duties whichever is greater.
f. Participation in all other executive incentive stock and
benefit plans approved by the Compensation Committee
3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment
Period (including any extended term). Should the Company choose
not to renew or extend the Employment period of this Employment
Agreement or choose to terminate the Executive during, or at the
end of, the Employment Period, or in the event of death or
disability of the Executive, if the termination is not after a
Change in Control and is not for cause, the Company shall, within
thirty (30) days following such termination, pay and provide to
the Executive (or his Executor, Administrator or Estate in the
event of death, as soon as reasonably practical):
a. An amount equal to two full years of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding
his Date of Termination). There shall be deducted only
such amounts as may be required by law to be withheld for
taxes and other applicable deductions.
b. The Company shall provide to Executive for a period of two
(2) full years following the Date of Termination, life,
health, accident and disability insurance. These benefits
are not to be less than the highest benefits furnished to
the Executive during the term of this Agreement.
Page 12 of 23
<PAGE>
c. An amount equal to two (2) times the target award for the
Executive under the Company's annual bonus plan for the
fiscal year in which termination occurs, provided that if
the Executive has deferred his award for such year under a
Company plan, the payment due the Executive under this
subparagraph shall be paid in accordance with the terms of
the deferral or as specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to
the Executive the amount and value of his entire plan
account and interest under any retirement plan, employee
benefit plan, investment plan or stock ownership plan, if
any exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive with respect to
distributions in accordance with the plan as if the
Executive's employment with the Company terminated at the
end of the month in which Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will
be vested only to the extent authorized or permitted by
the plan.
f. If Executive elects to treat the termination as retirement
then on the Date of Termination, the Executive shall be
deemed to have retired from the Company. At that time, or
at such later time as he may elect consistent with the
terms of any applicable plan or benefit, in order to
receive benefits or avoid or minimize any applicable early
pension reduction provisions, he shall be entitled to
commence to receive total combined qualified and
non-qualified retirement benefits to which he is entitled
hereunder; or, his total non-qualified retirement benefit
hereunder if under the terms of the Company's qualified
retirement plan for salaried employees he is not entitled
to a qualified benefit. Executive may treat the
termination as termination other than "retirement" if
Executive so elects and may defer "retirement" to a later
date if permitted by any applicable plan.
g. The "Compensation and Benefits" section hereof shall be
applicable in determining the payments and benefits due
the Executive under this section and if Termination occurs
after a reduction in all or part of the Executive's total
compensation or benefits, the lump sum
Page 13 of 23
<PAGE>
severance allowance and other compensation and benefits
payable to him pursuant to this section shall be based
upon his compensation and benefits before the reduction.
h. If any provision of this Section cannot, in whole or in
part, be implemented and carried out under the terms of
the applicable compensation, benefit or other plan or
arrangement of the Company because the Executive has
ceased to be an actual employee of the Company, due to
insufficient or reduced credited service based upon his
actual employment by the Company or because the plan or
arrangement has been terminated or amended after the
Effective Date of this Agreement, or for any other reason,
the Company itself shall pay or otherwise provide the
equivalent of such rights, benefits and credits for such
benefits to the Executive, his dependents, beneficiaries
and estate as if Executive's employment had not been
terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents
shall continue for the same term as the Executive's
benefits. If the Executive dies, all benefits will be
provided for a term of two (2) years {or three (3) years
if after a change in control} after the date of death of
the Executive.
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent
any of such benefits are paid or provided to the Executive
by another employer, provided that the Executive shall
have all rights afforded to retirees to convert group
insurance coverage to the individual insurance coverage
as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart
from this subparagraph, the Executive shall have and be
subject to no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or
interpreted, to be an amendment to any compensation, benefit or
other plan to the Company. To the extent the Company's performance
under this Section includes the performance of the Company's
obligations to the Executive under any other plan or under another
agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which
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<PAGE>
are discharged under this Agreement, are discharged, surrendered,
or released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of three (3) years following the Effective
Date of the Change in Control and will expire at 12:00 o'clock
midnight on the last day of the month following three (3) years
after the Change in Control. Thereafter the Employment Period will
be extended for successive terms of one (1) year each, unless
terminated, all in the manner specified in the Term of Employment
Section pertaining to regular employment.
4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS.
In the event the Executive is terminated within three (3) years
following a Change in Control, the Executive will receive the
payments and benefits specified in the "Termination without Change
in Control" Section in the same time and manner therein specified
except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a will be
paid based upon a multiple of three (3) years {instead of
two (2) years}.
b. Life, health, accident and disability insurance specified
in Section 3.05b will be provided until: (i) Executive
becomes reemployed and receives similar benefits from a
new employer, or (ii) three (3) years after the Date of
Termination, whichever is earlier.
c. An amount equal to three (3) times the maximum award that
the Executive could receive under the Company's Annual
Bonus Plan for the fiscal year in which the termination
occurs, instead of the benefits provided in Section
3.05(c) hereof.
d. All other rights and benefits specified in Section 3.05.
4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the
Executive voluntarily resigns his employment within twelve (12)
months after a Change in Control (whether or not Company may be
alleging the right to terminate employment for cause), he will
receive the same payments, compensation and benefits as if he had
been terminated on the date of resignation after Change in
Control.
Page 15 of 23
<PAGE>
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01. CONSIDERATION. The base salary awarded to the Executive and to be
paid to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination
of employment of Executive, voluntarily, involuntarily, or under a
Change in Control, under Sections 3.05a and 4.02a hereof
constitute payment, in part, for the Non-Competition and
Confidentiality of the Executive. It is contracted, stipulated and
agreed that fifteen percent (15%) of such amount paid and to be
paid to the Executive shall constitute the consideration for the
Non-Competition and Confidentiality Agreement set forth herein.
5.02. NON-COMPETITION. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company could cause serious harm to the Company. Accordingly, the
Executive agrees that during his employment with the Company and
for a period of two (2) years after he is no longer employed by
the Company (unless his employment is terminated after a Change in
Control, in which event there will be no covenant not to compete
and the provisions of the covenant not to compete herein contained
will terminate on the date of termination of the Executive) the
Executive will not, directly or indirectly, either as an
individual, proprietor, stockholder {other than as a holder of up
to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in
accordance with the automated quotation system of the National
Association of Securities Dealers}, partner, officer, employee or
otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct
or indirect supervision or control, within three (3) years
preceding the Executive's termination of employment, in
any area where the Company provided, produced, leased or
sold such products or services at any time during the
three (3) years preceding such termination of employment,
or
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive
had direct or indirect supervision or control, within
three (3) years preceding Executive's termination of
employment, to or from any person, firm or entity which
was a
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<PAGE>
customer for such products or services of the Company
during the three (3) years preceding such termination from
whom the Company had solicited business during such three
(3) years; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to: (i) leave his or her
employment or position with the Company, (ii) compete with
the business of the Company, or (iii) violate the terms of
any employment, non-competition or similar agreement with
the Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of
any officer, director, employee or any other individual
holding a position with the Company within two (2) years
after the Date of Termination of employment of Executive
with the Company or within two (2) years after such
officer, director, employee or individual terminated
employment with the Company, whichever occurs earlier.
5.03. CONFIDENTIALITY. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company, or divulged to others, could cause serious harm to the
Company. Accordingly, Executive will not at any time during or
after his employment by the Company, directly or indirectly,
divulge, disclose or communicate to any person, firm or
corporation (in any manner whatsoever) any information concerning
any matter affecting or relating to the Company or the business of
the Company. While engaged as an employee of the Company, the
Executive may only use information concerning any matters
affecting or relating to the Company or the business of the
Company for a purpose which is necessary to the carrying out of
the Executive's duties as an employee of the Company, and the
Executive may not make use of any information of the Company after
he is no longer an employee of the Company. The Executive agrees
to the foregoing without regard to whether all of the foregoing
matters will be deemed confidential, material or important, it
being stipulated by the parties. All information, whether written
or otherwise, regarding the Company's business, including, but not
limited to, information regarding customers, customer lists,
costs, prices, earnings, products, services, formulae,
compositions, machinery, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other
business arrangements, and sources of supply, is PRIMA FACIE
presumed to be important, material and confidential information of
the Company for the purposes of this Agreement, except to the
extent that such information may be otherwise lawfully and readily
available to the general
Page 17 of 23
<PAGE>
public. The Executive further agrees that he will, upon
termination of his employment with the Company, return to the
Company all books, records, lists and other written, typed or
printed materials, whether furnished by the Company or prepared by
the Executive, which contain any information relating to the
Company's business, and the Executive agrees that he will neither
make nor retain any copies of such materials after termination of
employment. Notwithstanding any of the foregoing, the Executive
will not be liable for any breach of these confidentiality
provisions unless the same constitutes a material detriment to the
Company, or due to the nature of the information divulged and the
manner in which it was divulged and the person to whom it was
divulged would likely cause damage to the Company or constitute a
material detriment to the Company.
5.04. GEOGRAPHICAL AREA. The geographical area within which the non-
competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the
Company's present offices, (ii) any of the Company's present rig
yards, and (iii) any additional location where the Company, as of
the date of any action taken in violation of the non- competition
covenants of this Agreement, has an office, a rig yard, or
definitive plans to locate an office or a rig yard.
Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another country and the Company is not then
doing business in that other country, there will be no territorial
limitations extending into such other country.
5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR
CONFIDENTIALITY AGREEMENT. Without limiting the right of the
Company to pursue all other legal and equitable rights available
to it for violation of any of the covenants made by the Executive
herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the nature of the business of the Company, the
restrictions agreed to by Executive as to time and area
contained in this Agreement are reasonable; and
c. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience
and contacts that otherwise will make it difficult to
calculate in damages in an action at law and cannot fully
compensate the Company for any violation of any covenant
in this Agreement, accordingly,
Page 18 of 23
<PAGE>
(i) the Company shall be entitled to injunctive relief
to prevent violations of such covenants or
continuing violations thereof and to prevent
Executive from rendering any services to any
person, firm or entity in breach of such covenant
and to prevent Executive from divulging any
confidential information, and
(ii) compliance with this Agreement is a condition
precedent to the Company's obligation to make
payments of any nature to the Executive.
5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If the Executive's termination was not after a
Change in Control and if the Executive shall have materially
violated the Confidentiality and/or Non-Competition Agreement or
any agreement he may have signed as an employee of the Company,
the Executive agrees that there shall be no obligation on the part
of the Company to provide any payments or benefits (other than
payments or benefits already earned or accrued) described in the
Termination of Rights and Benefits Section hereof, subject to the
provisions of Section 6.01 hereof. There will be no withholding of
benefits or payments if the termination occurred after a Change in
Control and the Executive will not be bound by the non-competition
provisions if terminated while the Change in Control provisions
hereof are applicable.
VI. GENERAL.
6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence
of a Change in Control, or under other circumstances even when a
Change in Control has not occurred, the Board of Directors or a
stockholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny Executive the benefits intended under this
Agreement; or actions may be taken to enforce the non-competition
or confidentiality provisions of this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that Executive not be required to
incur the legal fees and expenses associated with the protection
or enforcement of his rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the benefits intended to be extended to Executive hereunder
nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time
after the Effective Date of this Agreement, it should appear to
the Executive that the Company is or has acted contrary
Page 19 of 23
<PAGE>
to or is failing or has failed to comply with any of its
obligations under this Agreement for the reason that it regards
this Agreement to be void or unenforceable, that Executive has
violated the terms of this Agreement, or for any other reason, or
that the Company has purported to terminate his employment for
cause or is in the course of doing so, or is withholding payments
or benefits, or is threatening to withhold payments or benefits,
contrary to this Agreement, or in the event that the Company or
any other person takes any action to declare this Agreement void
or unenforceable, or institutes any litigation or other legal
action designed to deny, diminish or to recover from Executive the
benefits provided or intended to be provided to him hereunder, and
the Executive has acted in good faith to perform his obligations
under this Agreement, the Company irrevocably authorizes Executive
from time to time to retain counsel of his choice at the expense
of the Company to represent him in connection with the protection
and enforcement of his rights hereunder including, without
limitation, representation in connection with termination of his
employment or withholding of benefits or payments contrary to this
Agreement or with the initiation or defense of any litigation or
any other legal action, whether by or against the Executive or the
Company or any Director, Officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Company is not
authorized to withhold the periodic payments of attorney's fees
and expenses hereunder based upon any belief or assertion by the
Company that Executive has not acted in good faith or has violated
this Agreement. If Company subsequently establishes that Executive
was not acting in good faith and has violated this Agreement,
Executive will be liable to the Company for reimbursement of
amounts paid due to Executive's actions not based on good faith
and in violation of this Agreement. The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company, on a regular, periodic basis within thirty (30) days
after presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of $250,000.00.
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable
for and will pay all income tax liability by virtue of any
payments made to the Executive under this Agreement, as if the
same were earned and paid in the normal course of business and not
the result of a Change in Control and not otherwise triggered by
the "golden parachute" or excess payment provisions of the
Internal Revenue Code of the United States, which would cause
additional tax liability to be imposed. If any additional income
tax, excise or other taxes are imposed on any amount or payment in
the nature of compensation paid or provided to or on behalf of
Executive, the Company shall "gross up" Executive for such tax
liability by paying to Executive an amount sufficient so that
after payment of all such taxes so imposed,
Page 20 of 23
<PAGE>
Executive's position on an after-tax basis is what it would have
been had no such additional taxes been imposed. Executive will
cooperate with the company to minimize the tax consequences to the
Executive and to the Company so long as the actions proposed to be
taken by the Company do not cause any additional tax consequences
to the Executive and do not prolong or delay the time that
payments are to be made, or the amount of payments to be made,
unless the Executive consents, in writing, to any delay or
deferment of payment.
6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the
termination of the Executive is for cause and not after a Change
in Control, the Company will have the right to withhold all
payments (except those specified in Sections 6.01); provided,
however, that if a final judgment is entered finding that cause
did not exist for termination, the Company will pay all benefits
to the Executive to which he would have been entitled had the
termination not been for cause, plus interest on all amounts
withheld from the Executive at the rate specified for judgments
under Article 5069-1.05 V.A.T.S. but not less than ten percent
(10%) per annum. If the termination for cause occurs after a
Change in Control, the Company shall have no right to suspend or
withhold payments to the Executive under any provision of this
Agreement until or unless a final judgment is entered upholding
the Company's determination that the termination was for cause, in
which event the Executive will be liable to the Company for all
amounts paid, plus interest at the rate allowed for judgments
under Article 5069-1.05 V.A.T.S.
6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to
herein are not intended to exclude or limit Executive's
participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits
as may be authorized by the Board of Directors of the Company at
any time, or to limit or reduce any compensation or benefits to
which Executive would be entitled but for this Agreement.
6.05. NOTICES. Notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall
either be personally delivered by hand or sent by: (i) Registered
or Certified Mail, return receipt requested, postage prepaid,
properly packaged, addressed and deposited in the United States
Postal System, (ii) by facsimile transmission if the receiver
acknowledges receipt; (iii) by Federal Express or other expedited
delivery service provided that acknowledgement of receipt is
received and retained by the deliverer and furnished to the
sender, if to the Executive, at the last address he has filed in
writing with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06. NON-ALIENATION. The Executive shall not have any right to pledge
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<PAGE>
hypothecate, anticipate, or in any way create a lien upon any
amounts provided under this Agreement, and no payments or benefits
due hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts or by operation of law. So
long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject ,matter hereof. Upon the death of the Executive,
his Executors, Administrators, devisees and heirs, in that order,
shall have the right to enforce the provisions hereof.
6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof. No provision of this Agreement may be amended, waived, or
discharged except by the mutual written agreement of the parties.
The consent of any other persons to any such amendment, waiver or
discharge shall not be required.
6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by
operation of law or otherwise including, without limitation, any
corporation or other entity or persons which shall succeed
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any successor,
by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement. Except as
otherwise provided herein this Agreement shall be binding upon and
inure to the benefit of the Executive and his legal
representatives, heirs, and assigns, provided however, that in the
event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each
such unpaid amount and distribution shall be paid in accordance
with this Agreement to the person or persons designated by
Executive, to the Company, to receive such payment or distribution
and in the event Executive has made no applicable designation, to
his Estate. If the Company should split, divide or otherwise
become more than one entity, all liability and obligations of the
Company shall be the joint and several liability and obligation of
all of the parts.
6.09. GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of the State of Louisiana, the validity,
interpretation and enforcement of this Agreement shall be governed
by the laws of the State of Texas.
6.10. VENUE. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County,
Texas.
6.11. HEADINGS. The headings in this Agreement are inserted for
convenience
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<PAGE>
of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.12. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
6.13. PARTIAL INVALIDITY. In the event that any part, portion or section
of this Agreement is found to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be
binding upon the parties hereto and the Agreement will be
construed to give meaning to the remaining provisions of this
Agreement in according with the intent of this Agreement.
6.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but
all of which together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors and the Compensation
Committee, the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Executed in multiple originals and/or counterparts as of the
Effective Date.
\s\JAMES W. ALLEN
JAMES W. ALLEN
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
By: RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
ATTEST:
By: FRIDA A. MARTINEZ
Frida A. Martinez
Assistant Secretary
Page 23 of 23
EXHIBIT 10.21
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
JOHN C.G. O'LEARY
EFFECTIVE FEBRUARY 5, 1999
<PAGE>
INDEX
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6
1.01 Effect of Prior Agreements......................................6
II. DEFINITION OF TERMS...................................................6
2.01 Company.........................................................6
2.02 Executive/Officer/Employee......................................6
2.03 Office/Position/Title...........................................6
2.04 Effective Date..................................................6
2.05 Change in Control...............................................7
2.06 Termination.....................................................7
2.07 Customer........................................................9
III. EMPLOYMENT..........................................................10
3.01 Employment.....................................................10
3.02 Best Efforts And Other Employment Of Executive.................10
3.03 Term Of Employment.............................................10
3.04 Compensation And Benefits......................................11
3.05 Termination Without Change In Control..........................12
IV.CHANGE IN CONTROL.....................................................14
4.01 Extension Of Employment Period.................................14
4.02 Change In Control Termination Payments & Benefits..............15
4.03 Voluntary Resignation Upon Change In Control...................15
V. NON-COMPETITION AND CONFIDENTIALITY...................................15
5.01 Consideration..................................................15
5.02 Non-Competition................................................16
5.03 Confidentiality................................................17
5.04 Geographical Area..............................................18
5.05 Company Remedies For Violation Of Non-Competition
Or Confidentiality Agreement............................18
5.06 Termination Of Benefits For Violation Of Non-
Competition And Confidentiality.....................19
Page 2 of 23
<PAGE>
VI. GENERAL.............................................................19
6.01 Enforcement Costs...............................................20
6.02 Income, Excise or Other Tax Liability...........................20
6.03 Payment Of Benefits Upon Termination For Cause..................20
6.04 Non-Exclusive Agreement.........................................21
6.05 Notices.........................................................21
6.06 Non-Alienation..................................................21
6.07 Entire Agreement: Amendment.....................................21
6.08 Successors And Assigns..........................................22
6.09 Governing Law...................................................22
6.10 Venue...........................................................22
6.11 Headings........................................................22
6.12 Severability....................................................22
6.13 Partial Invalidity..............................................22
6.14 Counterparts....................................................23
Page 3 of 23
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: FEBRUARY 5, 1999
COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation
5847 San Felipe, Suite 3300 Houston, Texas 77057
EXECUTIVE/EMPLOYEE: John C. G. O'Leary
755 Marchmont
Houston, Texas 77024
This Agreement is made as of the date first above written and to
become effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable
resource of the Company and the Company desires to be assured of the continued
services of Executive;
WHEREAS, the Company desires to obtain assurances that Executive
will devote his best efforts to his employment with the Company and will not
enter into competition with the Company in its business as now conducted and to
be conducted, or solicit customers or other employees of the Company to
terminate their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he
acknowledges that his talents and services to the Company are of a special,
unique, unusual and extraordinary character and are of particular and peculiar
benefit and importance to the Company;
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WHEREAS, the Company is concerned that in the event of a possible
or threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive with
assurances as to the continuation of his employment status and responsibilities
in such event;
WHEREAS, the Company further desires to assure Executive that, if
a possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to this end
desires to protect Executive from any direct or implied threat to his financial
well-being;
WHEREAS, Executive is willing to continue to serve as such but
desires assurances that in the event of such a change in control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, that in the event this turns out not to be the
case, he will have fair and reasonable severance protection on the basis of his
service to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality;
WHEREAS, the Company has previously entered into a Severance
Agreement with Executive dated March 11, 1997 ("Severance Agreement");
WHEREAS, the Company and Executive desire to terminate the
Severance Agreement and replace it with this Agreement; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
Page 5 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and Executive are hereby amended, modified and
superseded by this Agreement insofar as future employment,
compensation, non- competition, confidentiality, accrual of
payments or any form of compensation or benefits from the Company
are concerned. This Agreement does not release or relieve Company
from its liability or obligation with respect to any compensation,
payments, or benefits already accrued to Executive, nor to any
vesting of benefits or other rights which are attributable to
length of employment, seniority or other such matters. This
agreement does not relieve Executive of any prior non-competition
or confidentiality obligations and agreements and the same are
hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective
Date hereof. The Severance Agreement is hereby terminated with no
liability to the Company.
II. DEFINITION OF TERMS.
2.01. COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes
any subsidiary or affiliate of the Company to the extent it is
carrying on any portion of the business of the Company or a
business similar to that being conducted by the Company.
2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means
John C.G. O'Leary.
2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which
the Executive is employed is that of Vice President-Worldwide
Marketing of the Company and carries with it the duties,
responsibilities, rights, benefits and privileges presently held
by the Executive, or as may reasonably be assigned to the
Executive as are customary and usual for such position.
2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of
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<PAGE>
February 5, 1999.
2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company
shall mean, and shall be deemed to have occurred on the date of
the first to occur of any of the following:
a. there occurs a Change in Control of the Company of the
nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A or Item 1
of Form 8(k) promulgated under the Securities Exchange Act
of 1934 as in effect on the date of this Agreement, or if
neither item remains in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar
purposes;
b. any "person" {as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or
becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
c. the individuals who were members of the Board of Directors
of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election;
d. the Company shall have merged into or consolidated with
another corporation, or merged another corporation into
the Company, on a basis whereby less than fifty percent
(50%) of the total voting power of the surviving
corporation is represented by shares held by former
shareholders of the Company prior to such merger or
consolidation; or
e. the Company shall have sold, transferred or exchanged all,
or substantially all, of its assets to another corporation
or other entity or person.
2.06. TERMINATION. The term "termination" shall mean termination, prior
to the expiration of the Employment Period, of the employment of
the Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below.
Termination includes non-renewal or failure to extend this
Agreement at the end of any employment term, except for cause.
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<PAGE>
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under
the Company's long-term disability plan. If no such plan
exists on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive
and the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
b. The term "cause" means: (i) the willful and continued
failure of the Executive substantially to perform his
duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board
of Directors which specifically identifies the manner in
which the Board believes he has not substantially
performed his duties, (ii) willful misconduct materially
and demonstrably injurious to the Company or (iii)
material violation of the covenant not to compete (except
after termination under the Change in Control provisions
hereof and confidentiality provisions hereof.) No act or
failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in
good faith and without reasonable belief that his action
or omission was in the best interest of the Company. The
unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities
or duties, a reduction in his total compensation or
benefits, or other action by or at request of the Company
in respect of his position, authority, or responsibility
that is contrary to this Agreement, may not be considered
by the Board of Directors to be a failure to perform or
misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause for purposes of this Agreement unless
and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths of
the entire Board of Directors of the Company at a meeting
of the Board of Directors called and held (after
reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the
Executive has been guilty of such a willful failure to
perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good
faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars
thereof.
c. The term "Constructive Termination" means any circumstance
by which the actions of the Company either reduce or
change Executive's title, position, duties,
responsibilities or authority to such an extent or in such
a manner as to relegate Executive to a position
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<PAGE>
not substantially similar to that which he presently
holds; would degrade, embarrass or otherwise make it
unreasonable for Executive to remain in the employment of
the Company; and includes violation of the employment
provisions and conditions of this Agreement.
d. The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more
of the following:
(i) The Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) Any significant adverse change in the nature or
scope of the Executive's position, authorities or
duties from those described in this Agreement;
(iii) Any reduction in the Executive's total compensation
or benefits from that provided in the Compensation
and Benefits Section hereof;
(iv) The material breach by the Company of any other
provision of this Agreement;
(v) Any action by the Company which would constitute
Constructive Termination; or
(vi) Non-renewal or failure to extend any employment
term, contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and
benefits provided in the "Termination Payments and Benefits"
Section hereof shall not be deemed or treated by the Company as
the termination of the Executive's employment or the forfeiture of
his participation, award, or eligibility, for the purpose of any
plan, practice or agreement of the Company referred to in the
Compensation and Benefits Section hereof.
2.07. CUSTOMER. The term "Customer" includes all persons, firms or
entities that are purchasers or end-users of services or products
offered, provided, developed, designed, sold or leased by the
Company during the relevant time periods, and all persons, firms
or entities which control, or which are controlled by, the same
person, firm or entity which controls such purchase.
III. EMPLOYMENT.
3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the
Company hereby agrees to continue the Executive in its employ, and
the
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<PAGE>
Executive hereby agrees to remain in the employ of the Company,
for the Term of Employment ("Employment Period") herein specified.
During the Employment Period, Executive shall exercise such
position and authority and perform such responsibilities as are
commensurate with the position and authority being exercised and
duties being performed by the Executive immediately prior to the
Effective Date of this Agreement, which services shall be
performed at the location where the Executive was employed
immediately prior to the Effective Date of this Agreement or at
such other location as the Company and Executive may agree.
3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience
and talents, perform all of the duties that may be
required of and from him pursuant to the express and
implicit terms hereof, to the reasonable satisfaction of
the Company. Such duties shall be rendered at Houston,
Texas, and such other place or places within or without
the State of Texas as the Company and Executive shall
agree.
b. Executive shall devote his normal and regular business
time, attention and skill to the business and interests of
the Company, and the Company shall be entitled to all of
the benefits, profits or other issue arising from or
incident to all work, services and advice of Executive
performed for the Company. Such employment shall be
considered "full time" employment. Executive shall have
the right to make investments in businesses which engage
in activities other than those engaged by the Company.
Executive shall also have the right to devote such
incidental and immaterial amount of his time which are not
required for the full and faithful performance of his
duties hereunder to any outside activities and businesses
which are not being engaged in by the Company and which
shall not otherwise interfere with the performance of his
duties hereunder. Executive shall have the right to make
investments in the manner and to the extent authorized and
set forth in the Non-Competition Section of this
Agreement.
3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular
employment (no Change in Control being presently contemplated)
will commence on the Effective Date of this Agreement and will be
for a term of two (2) years ending at 12:00 o'clock midnight
February 4, 2001; thereafter, the Term of Employment of Executive
will be automatically extended for successive terms of one (1)
year each commencing February 5, 2001, and on
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<PAGE>
February 5 of each year thereafter, unless Company or Executive
gives written notice to the other that employment will not be
renewed or continued after the next scheduled expiration date
which is not less than one year after the date that the notice of
non-renewal was given. All extended employment terms will be
considered to be within the Employment Period while Executive is
employed with the Company.
3.04. COMPENSATION AND BENEFITS. During the Employment Period the
Executive shall receive the following compensation and benefits:
a. He shall receive an annual base salary of not less than his annual
base salary which is $217,000.00, with the opportunity for
increases, from time to time thereafter, which are in accordance
with the Company's regular executive compensation practices.
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other incentive
compensation plans which provide opportunities to receive
compensation in addition to his annual base salary which are the
greater of: (i) the opportunities provided by the Company for
Executives with comparable duties, or (ii) the opportunities under
any such plans in which he was participating immediately prior to
the Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to receive and
participate in salaried employee benefits including, but not
limited to: medical, life, health, accident and disability
insurance and disability benefits and prerequisites which are the
greater of: (i) the employee benefits and prerequisites provided
by the Company to Executives with comparable duties and (ii) the
employee benefits and prerequisites to which he was entitled or in
which he participated immediately prior to the Effective Date of
this Agreement.
d. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to continue to accrue
credited service for retirement benefits and to be entitled to
receive retirement benefits under and pursuant to the terms of the
Company's qualified retirement plan for salaried employees, the
Company's supplemental executive retirement plan, and any
successor or other retirement plan or agreement in effect on the
Effective Date of this Agreement with respect to his retirement,
whether or not a qualified plan or agreement, so that his
aggregate monthly retirement benefit from all such plans and
agreements (regardless when he begins to receive such benefit)
will be not less than it would be had all such plans and
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<PAGE>
agreements were in effect immediately prior to the Effective Date
of this Agreement and continued to be in effect without change
until and after he begins to receive such benefits.
e. Paid vacations each year and use of Company cars to the same
extent as he is presently receiving or the benefits provided to
Executives with comparable duties whichever is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Compensation Committee
3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment
Period (including any extended term). Should the Company choose
not to renew or extend the Employment period of this Employment
Agreement or choose to terminate the Executive during, or at the
end of, the Employment Period, or in the event of death or
disability of the Executive, if the termination is not after a
Change in Control and is not for cause, the Company shall, within
thirty (30) days following such termination, pay and provide to
the Executive (or his Executor, Administrator or Estate in the
event of death, as soon as reasonably practical):
a. An amount equal to two full years of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding
his Date of Termination). There shall be deducted only
such amounts as may be required by law to be withheld for
taxes and other applicable deductions.
b. The Company shall provide to Executive for a period of two
(2) full years following the Date of Termination, life,
health, accident and disability insurance. These benefits
are not to be less than the highest benefits furnished to
the Executive during the term of this Agreement.
c. An amount equal to two (2) times the target award for the
Executive under the Company's annual bonus plan for the
fiscal year in which termination occurs, provided that if
the Executive has deferred his award for such year under a
Company plan, the payment due the Executive under this
subparagraph shall be paid in accordance with the terms of
the deferral or as specified by the Executive.
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<PAGE>
d. The Company shall pay, distribute and otherwise provide to
the Executive the amount and value of his entire plan
account and interest under any retirement plan, employee
benefit plan, investment plan or stock ownership plan, if
any exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive with respect to
distributions in accordance with the plan as if the
Executive's employment with the Company terminated at the
end of the month in which Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will
be vested only to the extent authorized or permitted by
the plan.
f. If Executive elects to treat the termination as retirement
then on the Date of Termination, the Executive shall be
deemed to have retired from the Company. At that time, or
at such later time as he may elect consistent with the
terms of any applicable plan or benefit, in order to
receive benefits or avoid or minimize any applicable early
pension reduction provisions, he shall be entitled to
commence to receive total combined qualified and
non-qualified retirement benefits to which he is entitled
hereunder; or, his total non-qualified retirement benefit
hereunder if under the terms of the Company's qualified
retirement plan for salaried employees he is not entitled
to a qualified benefit. Executive may treat the
termination as termination other than "retirement" if
Executive so elects and may defer "retirement" to a later
date if permitted by any applicable plan.
g. The "Compensation and Benefits" section hereof shall be
applicable in determining the payments and benefits due
the Executive under this section and if Termination occurs
after a reduction in all or part of the Executive's total
compensation or benefits, the lump sum severance allowance
and other compensation and benefits payable to him
pursuant to this section shall be based upon his
compensation and benefits before the reduction.
h. If any provision of this Section cannot, in whole or in
part, be implemented and carried out under the terms of
the applicable
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<PAGE>
compensation, benefit or other plan or arrangement of the
Company because the Executive has ceased to be an actual
employee of the Company, due to insufficient or reduced
credited service based upon his actual employment by the
Company or because the plan or arrangement has been
terminated or amended after the Effective Date of this
Agreement, or for any other reason, the Company itself
shall pay or otherwise provide the equivalent of such
rights, benefits and credits for such benefits to the
Executive, his dependents, beneficiaries and estate as if
Executive's employment had not been terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents
shall continue for the same term as the Executive's
benefits. If the Executive dies, all benefits will be
provided for a term of two (2) years {or three (3) years
if after a change in control} after the date of death of
the Executive.
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent
any of such benefits are paid or provided to the Executive
by another employer, provided that the Executive shall
have all rights afforded to retirees to convert group
insurance coverage to the individual insurance coverage
as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart
from this subparagraph, the Executive shall have and be
subject to no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or
interpreted, to be an amendment to any compensation, benefit or
other plan to the Company. To the extent the Company's performance
under this Section includes the performance of the Company's
obligations to the Executive under any other plan or under another
agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are
discharged under this Agreement, are discharged, surrendered, or
released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
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Employment Period shall be immediately and without further action
extended for a term of three (3) years following the Effective
Date of the Change in Control and will expire at 12:00 o'clock
midnight on the last day of the month following three (3) years
after the Change in Control. Thereafter, the Employment Period
will be extended for successive terms of one (1) year each, unless
terminated, all in the manner specified in the Term of Employment
Section pertaining to regular employment.
4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS.
In the event the Executive is terminated within three (3) years
following a Change in Control, the Executive will receive the
payments and benefits specified in the "Termination without Change
in Control" Section in the same time and manner therein specified
except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a will be
paid based upon a multiple of three (3) years {instead of
two (2) years}.
b. Life, health, accident and disability insurance specified
in Section 3.05b will be provided until: (i) Executive
becomes reemployed and receives similar benefits from a
new employer, or (ii) three (3) years after the Date of
Termination, whichever is earlier.
c. An amount equal to three (3) times the maximum award that
the Executive could receive under the Company's Annual
Bonus Plan for the fiscal year in which the termination
occurs, instead of the benefits provided in Section
3.05(c) hereof.
d. All other rights and benefits specified in Section 3.05.
4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the
Executive voluntarily resigns his employment within twelve (12)
months after a Change in Control (whether or not Company may be
alleging the right to terminate employment for cause), he will
receive the same payments, compensation and benefits as if he had
been terminated on the date of resignation after Change in
Control.
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01. CONSIDERATION. The base salary awarded to the Executive and to be
paid to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination
of employment of Executive, voluntarily, involuntarily, or under a
Change in Control, under Sections 3.05a and 4.02a hereof
constitute payment, in part, for the Non-Competition and
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Confidentiality of the Executive. It is contracted, stipulated and
agreed that fifteen percent (15%) of such amount paid and to be
paid to the Executive shall constitute the consideration for the
Non-Competition and Confidentiality Agreement set forth herein.
5.02. NON-COMPETITION. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company could cause serious harm to the Company. Accordingly, the
Executive agrees that during his employment with the Company and
for a period of two (2) years after he is no longer employed by
the Company (unless his employment is terminated after a Change in
Control, in which event there will be no covenant not to compete
and the provisions of the covenant not to compete herein contained
will terminate on the date of termination of the Executive) the
Executive will not, directly or indirectly, either as an
individual, proprietor, stockholder {other than as a holder of up
to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in
accordance with the automated quotation system of the National
Association of Securities Dealers}, partner, officer, employee or
otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct
or indirect supervision or control, within three (3) years
preceding the Executive's termination of employment, in
any area where the Company provided, produced, leased or
sold such products or services at any time during the
three (3) years preceding such termination of employment,
or
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive
had direct or indirect supervision or control, within
three (3) years preceding Executive's termination of
employment, to or from any person, firm or entity which
was a customer for such products or services of the
Company during the three (3) years preceding such
termination from whom the Company had solicited business
during such three (3) years; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to: (i) leave his or her
employment or position with the Company, (ii) compete with
the business of the Company, or (iii) violate the terms of
any employment, non-competition or similar
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agreement with the Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of
any officer, director, employee or any other individual
holding a position with the Company within two (2) years
after the Date of Termination of employment of Executive
with the Company or within two (2) years after such
officer, director, employee or individual terminated
employment with the Company, whichever occurs earlier.
5.03. CONFIDENTIALITY. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company, or divulged to others, could cause serious harm to the
Company. Accordingly, Executive will not at any time during or
after his employment by the Company, directly or indirectly,
divulge, disclose or communicate to any person, firm or
corporation (in any manner whatsoever) any information concerning
any matter affecting or relating to the Company or the business of
the Company. While engaged as an employee of the Company, the
Executive may only use information concerning any matters
affecting or relating to the Company or the business of the
Company for a purpose which is necessary to the carrying out of
the Executive's duties as an employee of the Company, and the
Executive may not make use of any information of the Company after
he is no longer an employee of the Company. The Executive agrees
to the foregoing without regard to whether all of the foregoing
matters will be deemed confidential, material or important, it
being stipulated by the parties. All information, whether written
or otherwise, regarding the Company's business, including, but not
limited to, information regarding customers, customer lists,
costs, prices, earnings, products, services, formulae,
compositions, machinery, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other
business arrangements, and sources of supply, is PRIMA FACIE
presumed to be important, material and confidential information of
the Company for the purposes of this Agreement, except to the
extent that such information may be otherwise lawfully and readily
available to the general public. The Executive further agrees that
he will, upon termination of his employment with the Company,
return to the Company all books, records, lists and other written,
typed or printed materials, whether furnished by the Company or
prepared by the Executive, which contain any information relating
to the Company's business, and the Executive agrees that he will
neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
the Executive will not be liable for any breach of these
confidentiality provisions unless the same
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constitutes a material detriment to the Company, or due to the
nature of the information divulged and the manner in which it was
divulged and the person to whom it was divulged would likely cause
damage to the Company or constitute a material detriment to the
Company.
5.04. GEOGRAPHICAL AREA. The geographical area within which the non-
competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the
Company's present offices, (ii) any of the Company's present rig
yards, and (iii) any additional location where the Company, as of
the date of any action taken in violation of the non- competition
covenants of this Agreement, has an office, a rig yard, or
definitive plans to locate an office or a rig yard.
Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another country and the Company is not then
doing business in that other country, there will be no territorial
limitations extending into such other country.
5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR
CONFIDENTIALITY AGREEMENT. Without limiting the right of the
Company to pursue all other legal and equitable rights available
to it for violation of any of the covenants made by the Executive
herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the nature of the business of the Company, the
restrictions agreed to by Executive as to time and area
contained in this Agreement are reasonable; and
a. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience
and contacts that otherwise will make it difficult to
calculate in damages in an action at law and cannot fully
compensate the Company for any violation of any covenant
in this Agreement, accordingly,
(i) the Company shall be entitled to injunctive relief
to prevent violations of such covenants or
continuing violations thereof and to prevent
Executive from rendering any services to any
person, firm or entity in breach of such covenant
and to prevent Executive from divulging any
confidential information, and
(ii) compliance with this Agreement is a condition
precedent to the
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Company's obligation to make payments of any nature
to the Executive.
5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If the Executive's termination was not after a
Change in Control and if the Executive shall have materially
violated the Confidentiality and/or Non-Competition Agreement or
any agreement he may have signed as an employee of the Company,
the Executive agrees that there shall be no obligation on the part
of the Company to provide any payments or benefits (other than
payments or benefits already earned or accrued) described in the
Termination of Rights and Benefits Section hereof, subject to the
provisions of Section 6.01 hereof. There will be no withholding of
benefits or payments if the termination occurred after a Change in
Control and the Executive will not be bound by the non-competition
provisions if terminated while the Change in Control provisions
hereof are applicable.
VI. GENERAL.
6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence
of a Change in Control, or under other circumstances even when a
Change in Control has not occurred, the Board of Directors or a
stockholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny Executive the benefits intended under this
Agreement; or actions may be taken to enforce the non-competition
or confidentiality provisions of this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that Executive not be required to
incur the legal fees and expenses associated with the protection
or enforcement of his rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the benefits intended to be extended to Executive hereunder
nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time
after the Effective Date of this Agreement, it should appear to
the Executive that the Company is or has acted contrary to or is
failing or has failed to comply with any of its obligations under
this Agreement for the reason that it regards this Agreement to be
void or unenforceable, that Executive has violated the terms of
this Agreement, or for any other reason, or that the Company has
purported to terminate his employment for cause or is in the
course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable,
or
Page 19 of 23
<PAGE>
institutes any litigation or other legal action designed to deny,
diminish or to recover from Executive the benefits provided or
intended to be provided to him hereunder, and the Executive has
acted in good faith to perform his obligations under this
Agreement, the Company irrevocably authorizes Executive from time
to time to retain counsel of his choice at the expense of the
Company to represent him in connection with the protection and
enforcement of his rights hereunder including, without limitation,
representation in connection with termination of his employment or
withholding of benefits or payments contrary to this Agreement or
with the initiation or defense of any litigation or any other
legal action, whether by or against the Executive or the Company
or any Director, Officer, stockholder or other person affiliated
with the Company, in any jurisdiction. Company is not authorized
to withhold the periodic payments of attorney's fees and expenses
hereunder based upon any belief or assertion by the Company that
Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was
not acting in good faith and has violated this Agreement,
Executive will be liable to the Company for reimbursement of
amounts paid due to Executive's actions not based on good faith
and in violation of this Agreement. The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company, on a regular, periodic basis within thirty (30) days
after presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of $250,000.00.
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable
for and will pay all income tax liability by virtue of any
payments made to the Executive under this Agreement, as if the
same were earned and paid in the normal course of business and not
the result of a Change in Control and not otherwise triggered by
the "golden parachute" or excess payment provisions of the
Internal Revenue Code of the United States, which would cause
additional tax liability to be imposed. If any additional income
tax, excise or other taxes are imposed on any amount or payment in
the nature of compensation paid or provided to or on behalf of
Executive, the Company shall "gross up" Executive for such tax
liability by paying to Executive an amount sufficient so that
after payment of all such taxes so imposed, Executive's position
on an after-tax basis is what it would have been had no such
additional taxes been imposed. Executive will cooperate with the
company to minimize the tax consequences to the Executive and to
the Company so long as the actions proposed to be taken by the
Company do not cause any additional tax consequences to the
Executive and do not prolong or delay the time that payments are
to be made, or the amount of payments to be made, unless the
Executive consents, in writing, to any delay or deferment of
payment.
Page 20 of 23
<PAGE>
6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the
termination of the Executive is for cause and not after a Change
in Control, the Company will have the right to withhold all
payments (except those specified in Sections 6.01); provided,
however, that if a final judgment is entered finding that cause
did not exist for termination, the Company will pay all benefits
to the Executive to which he would have been entitled had the
termination not been for cause, plus interest on all amounts
withheld from the Executive at the rate specified for judgments
under Article 5069-1.05 V.A.T.S. but not less than ten percent
(10%) per annum. If the termination for cause occurs after a
Change in Control, the Company shall have no right to suspend or
withhold payments to the Executive under any provision of this
Agreement until or unless a final judgment is entered upholding
the Company's determination that the termination was for cause, in
which event the Executive will be liable to the Company for all
amounts paid, plus interest at the rate allowed for judgments
under Article 5069-1.05 V.A.T.S.
6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to
herein are not intended to exclude or limit Executive's
participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits
as may be authorized by the Board of Directors of the Company at
any time, or to limit or reduce any compensation or benefits to
which Executive would be entitled but for this Agreement.
6.05. NOTICES. Notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall
either be personally delivered by hand or sent by: (i) Registered
or Certified Mail, return receipt requested, postage prepaid,
properly packaged, addressed and deposited in the United States
Postal System, (ii) by facsimile transmission if the receiver
acknowledges receipt; (iii) by Federal Express or other expedited
delivery service provided that acknowledgement of receipt is
received and retained by the deliverer and furnished to the
sender, if to the Executive, at the last address he has filed in
writing with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06. NON-ALIENATION. The Executive shall not have any right to pledge
hypothecate, anticipate, or in any way create a lien upon any
amounts provided under this Agreement, and no payments or benefits
due hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts or by operation of law. So
long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject ,matter hereof. Upon the death of the Executive,
his Executors, Administrators, devisees and heirs, in that order,
shall have the right to enforce the provisions hereof.
Page 21 of 23
<PAGE>
6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof. No provision of this Agreement may be amended, waived, or
discharged except by the mutual written agreement of the parties.
The consent of any other persons to any such amendment, waiver or
discharge shall not be required.
6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by
operation of law or otherwise including, without limitation, any
corporation or other entity or persons which shall succeed
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any successor,
by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement. Except as
otherwise provided herein this Agreement shall be binding upon and
inure to the benefit of the Executive and his legal
representatives, heirs, and assigns, provided however, that in the
event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each
such unpaid amount and distribution shall be paid in accordance
with this Agreement to the person or persons designated by
Executive, to the Company, to receive such payment or distribution
and in the event Executive has made no applicable designation, to
his Estate. If the Company should split, divide or otherwise
become more than one entity, all liability and obligations of the
Company shall be the joint and several liability and obligation of
all of the parts.
6.09. GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of the State of Louisiana, the validity,
interpretation and enforcement of this Agreement shall be governed
by the laws of the State of Texas.
6.10. VENUE. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County,
Texas.
6.11. HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.12. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
6.13. PARTIAL INVALIDITY. In the event that any part, portion or section
of this
Page 22 of 23
<PAGE>
Agreement is found to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be binding upon
the parties hereto and the Agreement will be construed to give
meaning to the remaining provisions of this Agreement in according
with the intent of this Agreement.
6.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but
all of which together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors and the Compensation
Committee, the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Executed in multiple originals and/or counterparts as of the
Effective Date.
\s\JOHN C.G. O'LEARY
JOHN C.G. O'LEARY
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
By: RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
ATTEST:
By: FRIDA A. MARTINEZ
Frida A. Martinez
Assistant Secretary
Page 23 of 23
EXHIBIT 10.22
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
STEVEN R. TOLSON
EFFECTIVE FEBRUARY 5, 1999
<PAGE>
INDEX
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6
1.01 Effect of Prior Agreements......................................6
II. DEFINITION OF TERMS...................................................6
2.01 Company.........................................................6
2.02 Executive/Officer/Employee......................................6
2.03 Office/Position/Title...........................................6
2.04 Effective Date..................................................6
2.05 Change in Control...............................................7
2.06 Termination.....................................................7
2.07 Customer........................................................9
III. EMPLOYMENT..........................................................10
3.01 Employment.....................................................10
3.02 Best Efforts And Other Employment Of Executive.................10
3.03 Term Of Employment.............................................10
3.04 Compensation And Benefits......................................11
3.05 Termination Without Change In Control..........................12
IV.CHANGE IN CONTROL.....................................................14
4.01 Extension Of Employment Period.................................14
4.02 Change In Control Termination Payments & Benefits..............15
4.03 Voluntary Resignation Upon Change In Control...................15
V. NON-COMPETITION AND CONFIDENTIALITY...................................15
5.01 Consideration..................................................15
5.02 Non-Competition................................................16
5.03 Confidentiality................................................17
5.04 Geographical Area..............................................18
5.05 Company Remedies For Violation Of Non-Competition
Or Confidentiality Agreement............................18
5.06 Termination Of Benefits For Violation Of Non-
Competition And Confidentiality.....................19
Page 2 of 23
<PAGE>
VI. GENERAL.............................................................19
6.01 Enforcement Costs...............................................20
6.02 Income, Excise or Other Tax Liability...........................20
6.03 Payment Of Benefits Upon Termination For Cause..................20
6.04 Non-Exclusive Agreement.........................................21
6.05 Notices.........................................................21
6.06 Non-Alienation..................................................21
6.07 Entire Agreement: Amendment.....................................21
6.08 Successors And Assigns..........................................22
6.09 Governing Law...................................................22
6.10 Venue...........................................................22
6.11 Headings........................................................22
6.12 Severability....................................................22
6.13 Partial Invalidity..............................................22
6.14 Counterparts....................................................23
Page 3 of 23
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: FEBRUARY 5, 1999
COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation
5847 San Felipe, Suite 3300 Houston, Texas 77057
EXECUTIVE/EMPLOYEE: Steven R. Tolson
301 Maple Valley
Houston, Texas 77056
This Agreement is made as of the date first above written and to
become effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable
resource of the Company and the Company desires to be assured of the continued
services of Executive;
WHEREAS, the Company desires to obtain assurances that Executive
will devote his best efforts to his employment with the Company and will not
enter into competition with the Company in its business as now conducted and to
be conducted, or solicit customers or other employees of the Company to
terminate their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he
acknowledges that his talents and services to the Company are of a special,
unique, unusual and extraordinary character and are of particular and peculiar
benefit and importance to the Company;
Page 4 of 23
<PAGE>
WHEREAS, the Company is concerned that in the event of a possible
or threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive with
assurances as to the continuation of his employment status and responsibilities
in such event;
WHEREAS, the Company further desires to assure Executive that, if
a possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to this end
desires to protect Executive from any direct or implied threat to his financial
well-being;
WHEREAS, Executive is willing to continue to serve as such but
desires assurances that in the event of such a change in control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, that in the event this turns out not to be the
case, he will have fair and reasonable severance protection on the basis of his
service to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
Page 5 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and Executive are hereby amended, modified and
superseded by this Agreement insofar as future employment,
compensation, non- competition, confidentiality, accrual of
payments or any form of compensation or benefits from the Company
are concerned. This Agreement does not release or relieve Company
from its liability or obligation with respect to any compensation,
payments, or benefits already accrued to Executive, nor to any
vesting of benefits or other rights which are attributable to
length of employment, seniority or other such matters. This
agreement does not relieve Executive of any prior non-competition
or confidentiality obligations and agreements and the same are
hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective
Date hereof.
II. DEFINITION OF TERMS.
2.01. COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes
any subsidiary or affiliate of the Company to the extent it is
carrying on any portion of the business of the Company or a
business similar to that being conducted by the Company.
2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means
Steven R. Tolson.
2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which
the Executive is employed is that of Vice President, Domestic
Operations-Offshore of the Company and carries with it the duties,
responsibilities, rights, benefits and privileges presently held
by the Executive, or as may reasonably be assigned to the
Executive as are customary and usual for such position.
2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of
February 5, 1999.
Page 6 of 23
<PAGE>
2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company
shall mean, and shall be deemed to have occurred on the date of
the first to occur of any of the following:
a. there occurs a Change in Control of the Company of the
nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A or Item 1
of Form 8(k) promulgated under the Securities Exchange Act
of 1934 as in effect on the date of this Agreement, or if
neither item remains in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar
purposes;
b. any "person" {as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or
becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
c. the individuals who were members of the Board of Directors
of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election;
d. the Company shall have merged into or consolidated with
another corporation, or merged another corporation into
the Company, on a basis whereby less than fifty percent
(50%) of the total voting power of the surviving
corporation is represented by shares held by former
shareholders of the Company prior to such merger or
consolidation; or
e. the Company shall have sold, transferred or exchanged all,
or substantially all, of its assets to another corporation
or other entity or person.
2.06. TERMINATION. The term "termination" shall mean termination, prior
to the expiration of the Employment Period, of the employment of
the Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below.
Termination includes non-renewal or failure to extend this
Agreement at the end of any employment term, except for cause.
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under
the Company's long-term disability plan. If no such plan
exists on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive
and the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
Page 7 of 23
<PAGE>
b. The term "cause" means: (i) the willful and continued
failure of the Executive substantially to perform his
duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board
of Directors which specifically identifies the manner in
which the Board believes he has not substantially
performed his duties, (ii) willful misconduct materially
and demonstrably injurious to the Company or (iii)
material violation of the covenant not to compete (except
after termination under the Change in Control provisions
hereof and confidentiality provisions hereof.) No act or
failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in
good faith and without reasonable belief that his action
or omission was in the best interest of the Company. The
unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities
or duties, a reduction in his total compensation or
benefits, or other action by or at request of the Company
in respect of his position, authority, or responsibility
that is contrary to this Agreement, may not be considered
by the Board of Directors to be a failure to perform or
misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause for purposes of this Agreement unless
and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths of
the entire Board of Directors of the Company at a meeting
of the Board of Directors called and held (after
reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the
Executive has been guilty of such a willful failure to
perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good
faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars
thereof.
c. The term "Constructive Termination" means any circumstance
by which the actions of the Company either reduce or
change Executive's title, position, duties,
responsibilities or authority to such an extent or in such
a manner as to relegate Executive to a position not
substantially similar to that which he presently holds;
would degrade, embarrass or otherwise make it unreasonable
for Executive
Page 8 of 23
<PAGE>
to remain in the employment of the Company; and includes
violation of the employment provisions and conditions of
this Agreement.
d. The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more
of the following:
(i) The Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) Any significant adverse change in the nature or
scope of the Executive's position, authorities or
duties from those described in this Agreement;
(iii) Any reduction in the Executive's total compensation
or benefits from that provided in the Compensation
and Benefits Section hereof;
(iv) The material breach by the Company of any other
provision of this Agreement;
(v) Any action by the Company which would constitute
Constructive Termination; or
(vi) Non-renewal or failure to extend any employment
term, contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and
benefits provided in the "Termination Payments and Benefits"
Section hereof shall not be deemed or treated by the Company as
the termination of the Executive's employment or the forfeiture of
his participation, award, or eligibility, for the purpose of any
plan, practice or agreement of the Company referred to in the
Compensation and Benefits Section hereof.
2.07. CUSTOMER. The term "Customer" includes all persons, firms or
entities that are purchasers or end-users of services or products
offered, provided, developed, designed, sold or leased by the
Company during the relevant time periods, and all persons, firms
or entities which control, or which are controlled by, the same
person, firm or entity which controls such purchase.
III. EMPLOYMENT.
3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the
Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the
Company, for the Term of Employment ("Employment Period") herein
specified. During the
Page 9 of 23
<PAGE>
Employment Period, Executive shall exercise such position and
authority and perform such responsibilities as are commensurate
with the position and authority being exercised and duties being
performed by the Executive immediately prior to the Effective Date
of this Agreement, which services shall be performed at the
location where the Executive was employed immediately prior to the
Effective Date of this Agreement or at such other location as the
Company and Executive may agree.
3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience
and talents, perform all of the duties that may be
required of and from him pursuant to the express and
implicit terms hereof, to the reasonable satisfaction of
the Company. Such duties shall be rendered at Houston,
Texas, and such other place or places within or without
the State of Texas as the Company and Executive shall
agree.
b. Executive shall devote his normal and regular business
time, attention and skill to the business and interests of
the Company, and the Company shall be entitled to all of
the benefits, profits or other issue arising from or
incident to all work, services and advice of Executive
performed for the Company. Such employment shall be
considered "full time" employment. Executive shall have
the right to make investments in businesses which engage
in activities other than those engaged by the Company.
Executive shall also have the right to devote such
incidental and immaterial amount of his time which are not
required for the full and faithful performance of his
duties hereunder to any outside activities and businesses
which are not being engaged in by the Company and which
shall not otherwise interfere with the performance of his
duties hereunder. Executive shall have the right to make
investments in the manner and to the extent authorized and
set forth in the Non-Competition Section of this
Agreement.
3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular
employment (no Change in Control being presently contemplated)
will commence on the Effective Date of this Agreement and will be
for a term of two (2) years ending at 12:00 o'clock midnight
February 4, 2001; thereafter, the Term of Employment of Executive
will be automatically extended for successive terms of one (1)
year each commencing February 5, 2001, and on February 5 of each
year thereafter, unless Company or Executive gives written notice
to the other that employment will not be renewed or continued
Page 10 of 23
<PAGE>
after the next scheduled expiration date which is not less than
one year after the date that the notice of non-renewal was given.
All extended employment terms will be considered to be within the
Employment Period while Executive is employed with the Company.
3.04. COMPENSATION AND BENEFITS. During the Employment Period the
Executive shall receive the following compensation and benefits:
a. He shall receive an annual base salary of not less than his annual
base salary which is $165,000.00, with the opportunity for
increases, from time to time thereafter, which are in accordance
with the Company's regular executive compensation practices.
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other incentive
compensation plans which provide opportunities to receive
compensation in addition to his annual base salary which are the
greater of: (i) the opportunities provided by the Company for
Executives with comparable duties, or (ii) the opportunities under
any such plans in which he was participating immediately prior to
the Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to receive and
participate in salaried employee benefits including, but not
limited to: medical, life, health, accident and disability
insurance and disability benefits and prerequisites which are the
greater of: (i) the employee benefits and prerequisites provided
by the Company to Executives with comparable duties and (ii) the
employee benefits and prerequisites to which he was entitled or in
which he participated immediately prior to the Effective Date of
this Agreement.
d. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to continue to accrue
credited service for retirement benefits and to be entitled to
receive retirement benefits under and pursuant to the terms of the
Company's qualified retirement plan for salaried employees, the
Company's supplemental executive retirement plan, and any
successor or other retirement plan or agreement in effect on the
Effective Date of this Agreement with respect to his retirement,
whether or not a qualified plan or agreement, so that his
aggregate monthly retirement benefit from all such plans and
agreements (regardless when he begins to receive such benefit)
will be not less than it would be had all such plans and
agreements were in effect immediately prior to the Effective Date
of this Agreement and continued to be in effect without change
until and after he
Page 11 of 23
<PAGE>
begins to receive such benefits.
e. Paid vacations each year and use of Company cars to the same
extent as he is presently receiving or the benefits provided to
Executives with comparable duties whichever is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Compensation Committee
3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment
Period (including any extended term). Should the Company choose
not to renew or extend the Employment period of this Employment
Agreement or choose to terminate the Executive during, or at the
end of, the Employment Period, or in the event of death or
disability of the Executive, if the termination is not after a
Change in Control and is not for cause, the Company shall, within
thirty (30) days following such termination, pay and provide to
the Executive (or his Executor, Administrator or Estate in the
event of death, as soon as reasonably practical):
a. An amount equal to two full years of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding
his Date of Termination). There shall be deducted only
such amounts as may be required by law to be withheld for
taxes and other applicable deductions.
b. The Company shall provide to Executive for a period of two
(2) full years following the Date of Termination, life,
health, accident and disability insurance. These benefits
are not to be less than the highest benefits furnished to
the Executive during the term of this Agreement.
c. An amount equal to two (2) times the target award for the
Executive under the Company's annual bonus plan for the
fiscal year in which termination occurs, provided that if
the Executive has deferred his award for such year under a
Company plan, the payment due the Executive under this
subparagraph shall be paid in accordance with the terms of
the deferral or as specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to
the
Page 12 of 23
<PAGE>
Executive the amount and value of his entire plan account
and interest under any retirement plan, employee benefit
plan, investment plan or stock ownership plan, if any
exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive with respect to
distributions in accordance with the plan as if the
Executive's employment with the Company terminated at the
end of the month in which Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will
be vested only to the extent authorized or permitted by
the plan.
f. If Executive elects to treat the termination as retirement
then on the Date of Termination, the Executive shall be
deemed to have retired from the Company. At that time, or
at such later time as he may elect consistent with the
terms of any applicable plan or benefit, in order to
receive benefits or avoid or minimize any applicable early
pension reduction provisions, he shall be entitled to
commence to receive total combined qualified and
non-qualified retirement benefits to which he is entitled
hereunder; or, his total non-qualified retirement benefit
hereunder if under the terms of the Company's qualified
retirement plan for salaried employees he is not entitled
to a qualified benefit. Executive may treat the
termination as termination other than "retirement" if
Executive so elects and may defer "retirement" to a later
date if permitted by any applicable plan.
g. The "Compensation and Benefits" section hereof shall be
applicable in determining the payments and benefits due
the Executive under this section and if Termination occurs
after a reduction in all or part of the Executive's total
compensation or benefits, the lump sum severance allowance
and other compensation and benefits payable to him
pursuant to this section shall be based upon his
compensation and benefits before the reduction.
h. If any provision of this Section cannot, in whole or in
part, be implemented and carried out under the terms of
the applicable compensation, benefit or other plan or
arrangement of the Company because the Executive has
ceased to be an actual employee of the
Page 13 of 23
<PAGE>
Company, due to insufficient or reduced credited service
based upon his actual employment by the Company or because
the plan or arrangement has been terminated or amended
after the Effective Date of this Agreement, or for any
other reason, the Company itself shall pay or otherwise
provide the equivalent of such rights, benefits and
credits for such benefits to the Executive, his
dependents, beneficiaries and estate as if Executive's
employment had not been terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents
shall continue for the same term as the Executive's
benefits. If the Executive dies, all benefits will be
provided for a term of two (2) years {or three (3) years
if after a change in control} after the date of death of
the Executive.
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent
any of such benefits are paid or provided to the Executive
by another employer, provided that the Executive shall
have all rights afforded to retirees to convert group
insurance coverage to the individual insurance coverage
as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart
from this subparagraph, the Executive shall have and be
subject to no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or
interpreted, to be an amendment to any compensation, benefit or
other plan to the Company. To the extent the Company's performance
under this Section includes the performance of the Company's
obligations to the Executive under any other plan or under another
agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are
discharged under this Agreement, are discharged, surrendered, or
released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of three (3) years following the Effective
Date of the Change in
Page 14 of 23
<PAGE>
Control and will expire at 12:00 o'clock midnight on the last day
of the month following three (3) years after the Change in
Control. Thereafter the Employment Period will be extended for
successive terms of one (1) year each, unless terminated, all in
the manner specified in the Term of Employment Section pertaining
to regular employment.
4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS.
In the event the Executive is terminated within three (3) years
following a Change in Control, the Executive will receive the
payments and benefits specified in the "Termination without Change
in Control" Section in the same time and manner therein specified
except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a will be
paid based upon a multiple of three (3) years {instead of
two (2) years}.
b. Life, health, accident and disability insurance specified
in Section 3.05b will be provided until: (i) Executive
becomes reemployed and receives similar benefits from a
new employer, or (ii) three (3) years after the Date of
Termination, whichever is earlier.
c. An amount equal to three (3) times the maximum award that
the Executive could receive under the Company's Annual
Bonus Plan for the fiscal year in which the termination
occurs, instead of the benefits provided in Section
3.05(c) hereof.
d. All other rights and benefits specified in Section 3.05.
4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the
Executive voluntarily resigns his employment within twelve (12)
months after a Change in Control (whether or not Company may be
alleging the right to terminate employment for cause), he will
receive the same payments, compensation and benefits as if he had
been terminated on the date of resignation after Change in
Control.
V. NON-COMPETITION AND CONFIDENTIALITY.
5.01. CONSIDERATION. The base salary awarded to the Executive and to be
paid to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination
of employment of Executive, voluntarily, involuntarily, or under a
Change in Control, under Sections 3.05a and 4.02a hereof
constitute payment, in part, for the Non-Competition and
Confidentiality of the Executive. It is contracted, stipulated and
agreed that fifteen percent (15%) of such amount paid and to be
paid to the Executive
Page 15 of 23
<PAGE>
shall constitute the consideration for the Non-Competition and
Confidentiality Agreement set forth herein.
5.02. NON-COMPETITION. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company could cause serious harm to the Company. Accordingly, the
Executive agrees that during his employment with the Company and
for a period of two (2) years after he is no longer employed by
the Company (unless his employment is terminated after a Change in
Control, in which event there will be no covenant not to compete
and the provisions of the covenant not to compete herein contained
will terminate on the date of termination of the Executive) the
Executive will not, directly or indirectly, either as an
individual, proprietor, stockholder {other than as a holder of up
to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in
accordance with the automated quotation system of the National
Association of Securities Dealers}, partner, officer, employee or
otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct
or indirect supervision or control, within three (3) years
preceding the Executive's termination of employment, in
any area where the Company provided, produced, leased or
sold such products or services at any time during the
three (3) years preceding such termination of employment,
or
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive
had direct or indirect supervision or control, within
three (3) years preceding Executive's termination of
employment, to or from any person, firm or entity which
was a customer for such products or services of the
Company during the three (3) years preceding such
termination from whom the Company had solicited business
during such three (3) years; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to: (i) leave his or her
employment or position with the Company, (ii) compete with
the business of the Company, or (iii) violate the terms of
any employment, non-competition or similar agreement with
the Company; or
Page 16 of 23
<PAGE>
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of
any officer, director, employee or any other individual
holding a position with the Company within two (2) years
after the Date of Termination of employment of Executive
with the Company or within two (2) years after such
officer, director, employee or individual terminated
employment with the Company, whichever occurs earlier.
5.03. CONFIDENTIALITY. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company, or divulged to others, could cause serious harm to the
Company. Accordingly, Executive will not at any time during or
after his employment by the Company, directly or indirectly,
divulge, disclose or communicate to any person, firm or
corporation (in any manner whatsoever) any information concerning
any matter affecting or relating to the Company or the business of
the Company. While engaged as an employee of the Company, the
Executive may only use information concerning any matters
affecting or relating to the Company or the business of the
Company for a purpose which is necessary to the carrying out of
the Executive's duties as an employee of the Company, and the
Executive may not make use of any information of the Company after
he is no longer an employee of the Company. The Executive agrees
to the foregoing without regard to whether all of the foregoing
matters will be deemed confidential, material or important, it
being stipulated by the parties. All information, whether written
or otherwise, regarding the Company's business, including, but not
limited to, information regarding customers, customer lists,
costs, prices, earnings, products, services, formulae,
compositions, machinery, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other
business arrangements, and sources of supply, is PRIMA FACIE
presumed to be important, material and confidential information of
the Company for the purposes of this Agreement, except to the
extent that such information may be otherwise lawfully and readily
available to the general public. The Executive further agrees that
he will, upon termination of his employment with the Company,
return to the Company all books, records, lists and other written,
typed or printed materials, whether furnished by the Company or
prepared by the Executive, which contain any information relating
to the Company's business, and the Executive agrees that he will
neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
the Executive will not be liable for any breach of these
confidentiality provisions unless the same constitutes a material
detriment to the Company, or due to the nature of the information
divulged and the manner in which it was divulged and the person
Page 17 of 23
<PAGE>
to whom it was divulged would likely cause damage to the Company
or constitute a material detriment to the Company.
5.04. GEOGRAPHICAL AREA. The geographical area within which the non-
competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the
Company's present offices, (ii) any of the Company's present rig
yards, and (iii) any additional location where the Company, as of
the date of any action taken in violation of the non- competition
covenants of this Agreement, has an office, a rig yard, or
definitive plans to locate an office or a rig yard.
Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another country and the Company is not then
doing business in that other country, there will be no territorial
limitations extending into such other country.
5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR
CONFIDENTIALITY AGREEMENT. Without limiting the right of the
Company to pursue all other legal and equitable rights available
to it for violation of any of the covenants made by the Executive
herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the nature of the business of the Company, the
restrictions agreed to by Executive as to time and area
contained in this Agreement are reasonable; and
a. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience
and contacts that otherwise will make it difficult to
calculate in damages in an action at law and cannot fully
compensate the Company for any violation of any covenant
in this Agreement, accordingly,
(i) the Company shall be entitled to injunctive relief
to prevent violations of such covenants or
continuing violations thereof and to prevent
Executive from rendering any services to any
person, firm or entity in breach of such covenant
and to prevent Executive from divulging any
confidential information, and
(ii) compliance with this Agreement is a condition
precedent to the Company's obligation to make
payments of any nature to the Executive.
Page 18 of 23
<PAGE>
5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If the Executive's termination was not after a
Change in Control and if the Executive shall have materially
violated the Confidentiality and/or Non-Competition Agreement or
any agreement he may have signed as an employee of the Company,
the Executive agrees that there shall be no obligation on the part
of the Company to provide any payments or benefits (other than
payments or benefits already earned or accrued) described in the
Termination of Rights and Benefits Section hereof, subject to the
provisions of Section 6.01 hereof. There will be no withholding of
benefits or payments if the termination occurred after a Change in
Control and the Executive will not be bound by the non-competition
provisions if terminated while the Change in Control provisions
hereof are applicable.
VI. GENERAL.
6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence
of a Change in Control, or under other circumstances even when a
Change in Control has not occurred, the Board of Directors or a
stockholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny Executive the benefits intended under this
Agreement; or actions may be taken to enforce the non-competition
or confidentiality provisions of this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that Executive not be required to
incur the legal fees and expenses associated with the protection
or enforcement of his rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the benefits intended to be extended to Executive hereunder
nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time
after the Effective Date of this Agreement, it should appear to
the Executive that the Company is or has acted contrary to or is
failing or has failed to comply with any of its obligations under
this Agreement for the reason that it regards this Agreement to be
void or unenforceable, that Executive has violated the terms of
this Agreement, or for any other reason, or that the Company has
purported to terminate his employment for cause or is in the
course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable,
or institutes any litigation or other legal action designed to
deny, diminish or to recover from Executive the benefits provided
or intended to be provided to him hereunder, and the Executive has
acted in good faith to perform his
Page 19 of 23
<PAGE>
obligations under this Agreement, the Company irrevocably
authorizes Executive from time to time to retain counsel of his
choice at the expense of the Company to represent him in
connection with the protection and enforcement of his rights
hereunder including, without limitation, representation in
connection with termination of his employment or withholding of
benefits or payments contrary to this Agreement or with the
initiation or defense of any litigation or any other legal action,
whether by or against the Executive or the Company or any
Director, Officer, stockholder or other person affiliated with the
Company, in any jurisdiction. Company is not authorized to
withhold the periodic payments of attorney's fees and expenses
hereunder based upon any belief or assertion by the Company that
Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was
not acting in good faith and has violated this Agreement,
Executive will be liable to the Company for reimbursement of
amounts paid due to Executive's actions not based on good faith
and in violation of this Agreement. The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company, on a regular, periodic basis within thirty (30) days
after presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of $250,000.00.
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable
for and will pay all income tax liability by virtue of any
payments made to the Executive under this Agreement, as if the
same were earned and paid in the normal course of business and not
the result of a Change in Control and not otherwise triggered by
the "golden parachute" or excess payment provisions of the
Internal Revenue Code of the United States, which would cause
additional tax liability to be imposed. If any additional income
tax, excise or other taxes are imposed on any amount or payment in
the nature of compensation paid or provided to or on behalf of
Executive, the Company shall "gross up" Executive for such tax
liability by paying to Executive an amount sufficient so that
after payment of all such taxes so imposed, Executive's position
on an after-tax basis is what it would have been had no such
additional taxes been imposed. Executive will cooperate with the
company to minimize the tax consequences to the Executive and to
the Company so long as the actions proposed to be taken by the
Company do not cause any additional tax consequences to the
Executive and do not prolong or delay the time that payments are
to be made, or the amount of payments to be made, unless the
Executive consents, in writing, to any delay or deferment of
payment.
6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination
of the Executive is for cause and not after a Change in Control,
Page 20 of 23
<PAGE>
the Company will have the right to withhold all payments (except
those specified in Sections 6.01); provided, however, that if a
final judgment is entered finding that cause did not exist for
termination, the Company will pay all benefits to the Executive to
which he would have been entitled had the termination not been for
cause, plus interest on all amounts withheld from the Executive at
the rate specified for judgments under Article 5069-1.05 V.A.T.S.
but not less than ten percent (10%) per annum. If the termination
for cause occurs after a Change in Control, the Company shall have
no right to suspend or withhold payments to the Executive under
any provision of this Agreement until or unless a final judgment
is entered upholding the Company's determination that the
termination was for cause, in which event the Executive will be
liable to the Company for all amounts paid, plus interest at the
rate allowed for judgments under Article 5069-1.05 V.A.T.S.
6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to
herein are not intended to exclude or limit Executive's
participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits
as may be authorized by the Board of Directors of the Company at
any time, or to limit or reduce any compensation or benefits to
which Executive would be entitled but for this Agreement.
6.05. NOTICES. Notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall
either be personally delivered by hand or sent by: (i) Registered
or Certified Mail, return receipt requested, postage prepaid,
properly packaged, addressed and deposited in the United States
Postal System, (ii) by facsimile transmission if the receiver
acknowledges receipt; (iii) by Federal Express or other expedited
delivery service provided that acknowledgement of receipt is
received and retained by the deliverer and furnished to the
sender, if to the Executive, at the last address he has filed in
writing with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06. NON-ALIENATION. The Executive shall not have any right to pledge
hypothecate, anticipate, or in any way create a lien upon any
amounts provided under this Agreement, and no payments or benefits
due hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts or by operation of law. So
long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject ,matter hereof. Upon the death of the Executive,
his Executors, Administrators, devisees and heirs, in that order,
shall have the right to enforce the provisions hereof.
6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof. No
Page 21 of 23
<PAGE>
provision of this Agreement may be amended, waived, or discharged
except by the mutual written agreement of the parties. The consent
of any other persons to any such amendment, waiver or discharge
shall not be required.
6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by
operation of law or otherwise including, without limitation, any
corporation or other entity or persons which shall succeed
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any successor,
by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement. Except as
otherwise provided herein this Agreement shall be binding upon and
inure to the benefit of the Executive and his legal
representatives, heirs, and assigns, provided however, that in the
event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each
such unpaid amount and distribution shall be paid in accordance
with this Agreement to the person or persons designated by
Executive, to the Company, to receive such payment or distribution
and in the event Executive has made no applicable designation, to
his Estate. If the Company should split, divide or otherwise
become more than one entity, all liability and obligations of the
Company shall be the joint and several liability and obligation of
all of the parts.
6.09. GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of the State of Louisiana, the validity,
interpretation and enforcement of this Agreement shall be governed
by the laws of the State of Texas.
6.10. VENUE. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County,
Texas.
6.11. HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.12. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
6.13. PARTIAL INVALIDITY. In the event that any part, portion or section
of this Agreement is found to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be
binding upon the parties
Page 22 of 23
<PAGE>
hereto and the Agreement will be construed to give meaning to the
remaining provisions of this Agreement in according with the
intent of this Agreement.
6.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but
all of which together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors and the Compensation
Committee, the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Executed in multiple originals and/or counterparts as of the
Effective Date.
\s\STEVEN R. TOLSON
STEVEN R. TOLSON
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
By: RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
ATTEST:
By: FRIDA A. MARTINEZ
Frida A. Martinez
Assistant Secretary
Page 23 of 23
EXHIBIT 10.23
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
ROBERT W. RANDALL
EFFECTIVE FEBRUARY 5, 1999
<PAGE>
INDEX
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6
1.01 Effect of Prior Agreements......................................6
II. DEFINITION OF TERMS...................................................6
2.01 Company.........................................................6
2.02 Executive/Officer/Employee......................................6
2.03 Office/Position/Title...........................................6
2.04 Effective Date..................................................6
2.05 Change in Control...............................................7
2.06 Termination.....................................................7
2.07 Customer........................................................9
III. EMPLOYMENT...........................................................9
3.01 Employment......................................................9
3.02 Best Efforts And Other Employment Of Executive.................10
3.03 Term Of Employment.............................................10
3.04 Compensation And Benefits......................................11
3.05 Termination Without Change In Control..........................12
IV.CHANGE IN CONTROL.....................................................14
4.01 Extension Of Employment Period.................................14
4.02 Change In Control Termination Payments & Benefits..............15
4.03 Voluntary Resignation Upon Change In Control...................15
V. NON-COMPETITION AND CONFIDENTIALITY...................................15
5.01 Consideration..................................................15
5.02 Non-Competition................................................16
5.03 Confidentiality................................................17
5.04 Geographical Area..............................................18
5.05 Company Remedies For Violation Of Non-Competition
Or Confidentiality Agreement............................18
5.06 Termination Of Benefits For Violation Of Non-
Competition And Confidentiality.....................19
Page 2 of 23
<PAGE>
VI. GENERAL.............................................................19
6.01 Enforcement Costs...............................................19
6.02 Income, Excise or Other Tax Liability...........................20
6.03 Payment Of Benefits Upon Termination For Cause..................21
6.04 Non-Exclusive Agreement.........................................21
6.05 Notices.........................................................21
6.06 Non-Alienation..................................................21
6.07 Entire Agreement: Amendment.....................................22
6.08 Successors And Assigns..........................................22
6.09 Governing Law...................................................22
6.10 Venue...........................................................22
6.11 Headings........................................................22
6.12 Severability....................................................22
6.13 Partial Invalidity..............................................23
6.14 Counterparts....................................................23
Page 3 of 23
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: FEBRUARY 5, 1999
COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation
5847 San Felipe, Suite 3300 Houston, Texas 77057
EXECUTIVE/EMPLOYEE: Robert W. Randall
14621 Westway Lane
Houston, Texas 77077
This Agreement is made as of the date first above written and to
become effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable
resource of the Company and the Company desires to be assured of the continued
services of Executive;
WHEREAS, the Company desires to obtain assurances that Executive
will devote his best efforts to his employment with the Company and will not
enter into competition with the Company in its business as now conducted and to
be conducted, or solicit customers or other employees of the Company to
terminate their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he
acknowledges that his talents and services to the Company are of a special,
unique, unusual and extraordinary character and are of particular and peculiar
benefit and importance to the Company;
Page 4 of 23
<PAGE>
WHEREAS, the Company is concerned that in the event of a possible
or threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive with
assurances as to the continuation of his employment status and responsibilities
in such event;
WHEREAS, the Company further desires to assure Executive that, if
a possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to this end
desires to protect Executive from any direct or implied threat to his financial
well-being;
WHEREAS, Executive is willing to continue to serve as such but
desires assurances that in the event of such a change in control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, that in the event this turns out not to be the
case, he will have fair and reasonable severance protection on the basis of his
service to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
Page 5 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and Executive are hereby amended, modified and
superseded by this Agreement insofar as future employment,
compensation, non- competition, confidentiality, accrual of
payments or any form of compensation or benefits from the Company
are concerned. This Agreement does not release or relieve Company
from its liability or obligation with respect to any compensation,
payments, or benefits already accrued to Executive, nor to any
vesting of benefits or other rights which are attributable to
length of employment, seniority or other such matters. This
agreement does not relieve Executive of any prior non-competition
or confidentiality obligations and agreements and the same are
hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective
Date hereof.
II. DEFINITION OF TERMS.
2.01. COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes
any subsidiary or affiliate of the Company to the extent it is
carrying on any portion of the business of the Company or a
business similar to that being conducted by the Company.
2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means
Robert W. Randall.
2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which
the Executive is employed is that of Vice President, General
Counsel and Secretary of the Company and carries with it the
duties, responsibilities, rights, benefits and privileges
presently held by the Executive, or as may reasonably be assigned
to the Executive as are customary and usual for such position.
2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of
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<PAGE>
February 5, 1999.
2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company
shall mean, and shall be deemed to have occurred on the date of
the first to occur of any of the following:
a. there occurs a Change in Control of the Company of the
nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A or Item 1
of Form 8(k) promulgated under the Securities Exchange Act
of 1934 as in effect on the date of this Agreement, or if
neither item remains in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar
purposes;
b. any "person" {as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or
becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
c. the individuals who were members of the Board of Directors
of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election;
d. the Company shall have merged into or consolidated with
another corporation, or merged another corporation into
the Company, on a basis whereby less than fifty percent
(50%) of the total voting power of the surviving
corporation is represented by shares held by former
shareholders of the Company prior to such merger or
consolidation; or
e. the Company shall have sold, transferred or exchanged all,
or substantially all, of its assets to another corporation
or other entity or person.
2.06. TERMINATION. The term "termination" shall mean termination, prior
to the expiration of the Employment Period, of the employment of
the Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below.
Termination includes non-renewal or failure to extend this
Agreement at the end of any employment term, except for cause.
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<PAGE>
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under
the Company's long-term disability plan. If no such plan
exists on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive
and the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
b. The term "cause" means: (i) the willful and continued
failure of the Executive substantially to perform his
duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board
of Directors which specifically identifies the manner in
which the Board believes he has not substantially
performed his duties, (ii) willful misconduct materially
and demonstrably injurious to the Company or (iii)
material violation of the covenant not to compete (except
after termination under the Change in Control provisions
hereof and confidentiality provisions hereof.) No act or
failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in
good faith and without reasonable belief that his action
or omission was in the best interest of the Company. The
unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities
or duties, a reduction in his total compensation or
benefits, or other action by or at request of the Company
in respect of his position, authority, or responsibility
that is contrary to this Agreement, may not be considered
by the Board of Directors to be a failure to perform or
misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause for purposes of this Agreement unless
and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths of
the entire Board of Directors of the Company at a meeting
of the Board of Directors called and held (after
reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the
Executive has been guilty of such a willful failure to
perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good
faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars
thereof.
c. The term "Constructive Termination" means any circumstance
by which the actions of the Company either reduce or
change Executive's title, position, duties,
responsibilities or authority to such an extent or in such
a manner as to relegate Executive to a position
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<PAGE>
not substantially similar to that which he presently
holds; would degrade, embarrass or otherwise make it
unreasonable for Executive to remain in the employment of
the Company; and includes violation of the employment
provisions and conditions of this Agreement.
d. The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more
of the following:
(i) the Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) any significant adverse change in the nature or
scope of the Executive's position, authorities or
duties from those described in this Agreement;
(iii) any reduction in the Executive's total compensation
or benefits from that provided in the Compensation
and Benefits Section hereof;
(iv) the material breach by the Company of any other
provision of this Agreement;
(v) any action by the Company which would constitute
Constructive Termination; or
(vi) non-renewal or failure to extend any employment
term, contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and
benefits provided in the "Termination Payments and Benefits"
Section hereof shall not be deemed or treated by the Company as
the termination of the Executive's employment or the forfeiture of
his participation, award, or eligibility, for the purpose of any
plan, practice or agreement of the Company referred to in the
Compensation and Benefits Section hereof.
2.07. CUSTOMER. The term "Customer" includes all persons, firms or
entities that are purchasers or end-users of services or products
offered, provided, developed, designed, sold or leased by the
Company during the relevant time periods, and all persons, firms
or entities which control, or which are controlled by, the same
person, firm or entity which controls such purchase.
III. EMPLOYMENT.
3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the
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<PAGE>
Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the
Company, for the Term of Employment ("Employment Period") herein
specified. During the Employment Period, Executive shall exercise
such position and authority and perform such responsibilities as
are commensurate with the position and authority being exercised
and duties being performed by the Executive immediately prior to
the Effective Date of this Agreement, which services shall be
performed at the location where the Executive was employed
immediately prior to the Effective Date of this Agreement or at
such other location as the Company and Executive may agree.
3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience
and talents, perform all of the duties that may be
required of and from him pursuant to the express and
implicit terms hereof, to the reasonable satisfaction of
the Company. Such duties shall be rendered at Houston,
Texas, and such other place or places within or without
the State of Texas as the Company and Executive shall
agree.
b. Executive shall devote his normal and regular business
time, attention and skill to the business and interests of
the Company, and the Company shall be entitled to all of
the benefits, profits or other issue arising from or
incident to all work, services and advice of Executive
performed for the Company. Such employment shall be
considered "full time" employment. Executive shall have
the right to make investments in businesses which engage
in activities other than those engaged by the Company.
Executive shall also have the right to devote such
incidental and immaterial amount of his time which are not
required for the full and faithful performance of his
duties hereunder to any outside activities and businesses
which are not being engaged in by the Company and which
shall not otherwise interfere with the performance of his
duties hereunder. Executive shall have the right to make
investments in the manner and to the extent authorized and
set forth in the Non-Competition Section of this
Agreement.
3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular
employment (no Change in Control being presently contemplated)
will commence on the Effective Date of this Agreement and will be
for a term of two (2) years ending at 12:00 o'clock midnight
February 4, 2001; thereafter, the Term of Employment of Executive
will be automatically extended for
Page 10 of 23
<PAGE>
successive terms of one (1) year each commencing February 5, 2001,
and on February 5 of each year thereafter, unless Company or
Executive gives written notice to the other that employment will
not be renewed or continued after the next scheduled expiration
date which is not less than one year after the date that the
notice of non-renewal was given. All extended employment terms
will be considered to be within the Employment Period while
Executive is employed with the Company.
3.04. COMPENSATION AND BENEFITS. During the Employment Period the
Executive shall receive the following compensation and benefits:
a. He shall receive an annual base salary of not less than his annual
base salary which is $170,000.00, with the opportunity for
increases, from time to time thereafter, which are in accordance
with the Company's regular executive compensation practices.
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other incentive
compensation plans which provide opportunities to receive
compensation in addition to his annual base salary which are the
greater of: (i) the opportunities provided by the Company for
Executives with comparable duties, or (ii) the opportunities under
any such plans in which he was participating immediately prior to
the Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to receive and
participate in salaried employee benefits including, but not
limited to: medical, life, health, accident and disability
insurance and disability benefits and prerequisites which are the
greater of: (i) the employee benefits and prerequisites provided
by the Company to Executives with comparable duties and (ii) the
employee benefits and prerequisites to which he was entitled or in
which he participated immediately prior to the Effective Date of
this Agreement.
d. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to continue to accrue
credited service for retirement benefits and to be entitled to
receive retirement benefits under and pursuant to the terms of the
Company's qualified retirement plan for salaried employees, the
Company's supplemental executive retirement plan, and any
successor or other retirement plan or agreement in effect on the
Effective Date of this Agreement with respect to his retirement,
whether or not a qualified plan or agreement, so that his
aggregate monthly retirement benefit from all such plans and
agreements (regardless when he begins to receive
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<PAGE>
such benefit) will be not less than it would be had all such plans
and agreements were in effect immediately prior to the Effective
Date of this Agreement and continued to be in effect without
change until and after he begins to receive such benefits.
e. Paid vacations each year and use of a Company car or a car
allowance to the same extent as he is presently receiving or the
benefits provided to Executives with comparable duties whichever
is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Compensation Committee
3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment
Period (including any extended term). Should the Company choose
not to renew or extend the Employment period of this Employment
Agreement or choose to terminate the Executive during, or at the
end of, the Employment Period, or in the event of death or
disability of the Executive, if the termination is not after a
Change in Control and is not for cause, the Company shall, within
thirty (30) days following such termination, pay and provide to
the Executive (or his Executor, Administrator or Estate in the
event of death, as soon as reasonably practical):
a. An amount equal to one (1) full year of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding
his Date of Termination). There shall be deducted only
such amounts as may be required by law to be withheld for
taxes and other applicable deductions.
b. The Company shall provide to Executive for a period of one
(1) full years following the Date of Termination, life,
health, accident and disability insurance. These benefits
are not to be less than the highest benefits furnished to
the Executive during the term of this Agreement.
c. An amount equal to the target award for the Executive
under the Company's annual bonus plan for the fiscal year
in which termination occurs, provided that if the
Executive has deferred his award for such year under a
Company plan, the payment due the Executive under this
subparagraph shall be paid in accordance with the terms of
the
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<PAGE>
deferral or as specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to
the Executive the amount and value of his entire plan
account and interest under any retirement plan, employee
benefit plan, investment plan or stock ownership plan, if
any exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive with respect to
distributions in accordance with the plan as if the
Executive's employment with the Company terminated at the
end of the month in which Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will
be vested only to the extent authorized or permitted by
the plan.
f. If Executive elects to treat the termination as retirement
then on the Date of Termination, the Executive shall be
deemed to have retired from the Company. At that time, or
at such later time as he may elect consistent with the
terms of any applicable plan or benefit, in order to
receive benefits or avoid or minimize any applicable early
pension reduction provisions, he shall be entitled to
commence to receive total combined qualified and
non-qualified retirement benefits to which he is entitled
hereunder; or, his total non-qualified retirement benefit
hereunder if under the terms of the Company's qualified
retirement plan for salaried employees he is not entitled
to a qualified benefit. Executive may treat the
termination as termination other than "retirement" if
Executive so elects and may defer "retirement" to a later
date if permitted by any applicable plan.
g. The "Compensation and Benefits" section hereof shall be
applicable in determining the payments and benefits due
the Executive under this section and if Termination occurs
after a reduction in all or part of the Executive's total
compensation or benefits, the lump sum severance allowance
and other compensation and benefits payable to him
pursuant to this section shall be based upon his
compensation and benefits before the reduction.
h. If any provision of this Section cannot, in whole or in
part, be
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<PAGE>
implemented and carried out under the terms of the
applicable compensation, benefit or other plan or
arrangement of the Company because the Executive has
ceased to be an actual employee of the Company, due to
insufficient or reduced credited service based upon his
actual employment by the Company or because the plan or
arrangement has been terminated or amended after the
Effective Date of this Agreement, or for any other reason,
the Company itself shall pay or otherwise provide the
equivalent of such rights, benefits and credits for such
benefits to the Executive, his dependents, beneficiaries
and estate as if Executive's employment had not been
terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents
shall continue for the same term as the Executive's
benefits. If the Executive dies, all benefits will be
provided for a term of one (1) year {or three (3) years if
after a change in control} after the date of death of the
Executive.
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent
any of such benefits are paid or provided to the Executive
by another employer, provided that the Executive shall
have all rights afforded to retirees to convert group
insurance coverage to the individual insurance coverage
as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart
from this subparagraph, the Executive shall have and be
subject to no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or
interpreted, to be an amendment to any compensation, benefit or
other plan to the Company. To the extent the Company's performance
under this Section includes the performance of the Company's
obligations to the Executive under any other plan or under another
agreement between the Company and the Executive, the rights of the
Executive under such other plan or other agreements, which are
discharged under this Agreement, are discharged, surrendered, or
released PRO TANTO.
IV. CHANGE IN CONTROL.
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<PAGE>
4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of three (3) years following the Effective
Date of the Change in Control and will expire at 12:00 o'clock
midnight on the last day of the month following three (3) years
after the Change in Control. Thereafter the Employment Period will
be extended for successive terms of one (1) year each, unless
terminated, all in the manner specified in the Term of Employment
Section pertaining to regular employment.
4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS.
In the event the Executive is terminated within three (3) years
following a Change in Control, the Executive will receive the
payments and benefits specified in the "Termination without Change
in Control" Section in the same time and manner therein specified
except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a will be
paid based upon a multiple of three (3) years {instead of
one (1) year}.
b. Life, health, accident and disability insurance specified
in Section 3.05b will be provided until: (i) Executive
becomes reemployed and receives similar benefits from a
new employer, or (ii) three (3) years after the Date of
Termination, whichever is earlier.
c. An amount equal to three (3) times the maximum award that
the Executive could receive under the Company's Annual
Bonus Plan for the fiscal year in which the termination
occurs, instead of the benefits provided in Section
3.05(c) hereof.
d. All other rights and benefits specified in Section 3.05.
4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the
Executive voluntarily resigns his employment within twelve (12)
months after a Change in Control (whether or not Company may be
alleging the right to terminate employment for cause), he will
receive the same payments, compensation and benefits as if he had
been terminated on the date of resignation after Change in
Control.
I. NON-COMPETITION AND CONFIDENTIALITY.
5.01. CONSIDERATION. The base salary awarded to the Executive and to be
paid to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination
of employment of Executive, voluntarily, involuntarily, or under a
Change in Control, under Sections 3.05a
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<PAGE>
and 4.02a hereof constitute payment, in part, for the
Non-Competition and Confidentiality of the Executive. It is
contracted, stipulated and agreed that fifteen percent (15%) of
such amount paid and to be paid to the Executive shall constitute
the consideration for the Non-Competition and Confidentiality
Agreement set forth herein.
5.02. NON-COMPETITION. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company could cause serious harm to the Company. Accordingly, the
Executive agrees that during his employment with the Company and
for a period of one (1) year after he is no longer employed by the
Company (unless his employment is terminated after a Change in
Control, in which event there will be no covenant not to compete
and the provisions of the covenant not to compete herein contained
will terminate on the date of termination of the Executive) the
Executive will not, directly or indirectly, either as an
individual, proprietor, stockholder {other than as a holder of up
to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in
accordance with the automated quotation system of the National
Association of Securities Dealers}, partner, officer, employee or
otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct
or indirect supervision or control, within one (1) year
preceding the Executive's termination of employment, in
any area where the Company provided, produced, leased or
sold such products or services at any time during the one
(1) year preceding such termination of employment, or
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive
had direct or indirect supervision or control, within one
(1) year preceding Executive's termination of employment,
to or from any person, firm or entity which was a customer
for such products or services of the Company during the
one (1) year preceding such termination from whom the
Company had solicited business during such one (1) year;
or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to: (i) leave his or her
employment or position with the Company, (ii) compete with
the business of the Company, or (iii)
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<PAGE>
violate the terms of any employment, non-competition or
similar agreement with the Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of
any officer, director, employee or any other individual
holding a position with the Company within two (2) years
after the Date of Termination of employment of Executive
with the Company or within two (2) years after such
officer, director, employee or individual terminated
employment with the Company, whichever occurs earlier.
5.03. CONFIDENTIALITY. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company, or divulged to others, could cause serious harm to the
Company. Accordingly, Executive will not at any time during or
after his employment by the Company, directly or indirectly,
divulge, disclose or communicate to any person, firm or
corporation (in any manner whatsoever) any information concerning
any matter affecting or relating to the Company or the business of
the Company. While engaged as an employee of the Company, the
Executive may only use information concerning any matters
affecting or relating to the Company or the business of the
Company for a purpose which is necessary to the carrying out of
the Executive's duties as an employee of the Company, and the
Executive may not make use of any information of the Company after
he is no longer an employee of the Company. The Executive agrees
to the foregoing without regard to whether all of the foregoing
matters will be deemed confidential, material or important, it
being stipulated by the parties. All information, whether written
or otherwise, regarding the Company's business, including, but not
limited to, information regarding customers, customer lists,
costs, prices, earnings, products, services, formulae,
compositions, machinery, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other
business arrangements, and sources of supply, is PRIMA FACIE
presumed to be important, material and confidential information of
the Company for the purposes of this Agreement, except to the
extent that such information may be otherwise lawfully and readily
available to the general public. The Executive further agrees that
he will, upon termination of his employment with the Company,
return to the Company all books, records, lists and other written,
typed or printed materials, whether furnished by the Company or
prepared by the Executive, which contain any information relating
to the Company's business, and the Executive agrees that he will
neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
the Executive will not be
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<PAGE>
liable for any breach of these confidentiality provisions unless
the same constitutes a material detriment to the Company, or due
to the nature of the information divulged and the manner in which
it was divulged and the person to whom it was divulged would
likely cause damage to the Company or constitute a material
detriment to the Company.
5.04. GEOGRAPHICAL AREA. The geographical area within which the non-
competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the
Company's present offices, (ii) any of the Company's present rig
yards, and (iii) any additional location where the Company, as of
the date of any action taken in violation of the non- competition
covenants of this Agreement, has an office, a rig yard, or
definitive plans to locate an office or a rig yard.
Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another country and the Company is not then
doing business in that other country, there will be no territorial
limitations extending into such other country.
5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR
CONFIDENTIALITY AGREEMENT. Without limiting the right of the
Company to pursue all other legal and equitable rights available
to it for violation of any of the covenants made by the Executive
herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the nature of the business of the Company, the
restrictions agreed to by Executive as to time and area
contained in this Agreement are reasonable; and
c. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience
and contacts that otherwise will make it difficult to
calculate in damages in an action at law and cannot fully
compensate the Company for any violation of any covenant
in this Agreement, accordingly,
(i) the Company shall be entitled to injunctive relief
to prevent violations of such covenants or
continuing violations thereof and to prevent
Executive from rendering any services to any
person, firm or entity in breach of such covenant
and to prevent Executive from divulging any
confidential information, and
Page 18 of 23
<PAGE>
(ii) compliance with this Agreement is a condition
precedent to the Company's obligation to make
payments of any nature to the Executive.
5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If the Executive's termination was not after a
Change in Control and if the Executive shall have materially
violated the Confidentiality and/or Non-Competition Agreement or
any agreement he may have signed as an employee of the Company,
the Executive agrees that there shall be no obligation on the part
of the Company to provide any payments or benefits (other than
payments or benefits already earned or accrued) described in the
Termination of Rights and Benefits Section hereof, subject to the
provisions of Section 6.01 hereof. There will be no withholding of
benefits or payments if the termination occurred after a Change in
Control and the Executive will not be bound by the non-competition
provisions if terminated while the Change in Control provisions
hereof are applicable.
VI. GENERAL.
6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence
of a Change in Control, or under other circumstances even when a
Change in Control has not occurred, the Board of Directors or a
stockholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny Executive the benefits intended under this
Agreement; or actions may be taken to enforce the non-competition
or confidentiality provisions of this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that Executive not be required to
incur the legal fees and expenses associated with the protection
or enforcement of his rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the benefits intended to be extended to Executive hereunder
nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time
after the Effective Date of this Agreement, it should appear to
the Executive that the Company is or has acted contrary to or is
failing or has failed to comply with any of its obligations under
this Agreement for the reason that it regards this Agreement to be
void or unenforceable, that Executive has violated the terms of
this Agreement, or for any other reason, or that the Company has
purported to terminate his employment for cause or is in the
course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other
Page 19 of 23
<PAGE>
person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation or other legal action
designed to deny, diminish or to recover from Executive the
benefits provided or intended to be provided to him hereunder, and
the Executive has acted in good faith to perform his obligations
under this Agreement, the Company irrevocably authorizes Executive
from time to time to retain counsel of his choice at the expense
of the Company to represent him in connection with the protection
and enforcement of his rights hereunder including, without
limitation, representation in connection with termination of his
employment or withholding of benefits or payments contrary to this
Agreement or with the initiation or defense of any litigation or
any other legal action, whether by or against the Executive or the
Company or any Director, Officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Company is not
authorized to withhold the periodic payments of attorney's fees
and expenses hereunder based upon any belief or assertion by the
Company that Executive has not acted in good faith or has violated
this Agreement. If Company subsequently establishes that Executive
was not acting in good faith and has violated this Agreement,
Executive will be liable to the Company for reimbursement of
amounts paid due to Executive's actions not based on good faith
and in violation of this Agreement. The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company, on a regular, periodic basis within thirty (30) days
after presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of $250,000.00.
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable
for and will pay all income tax liability by virtue of any
payments made to the Executive under this Agreement, as if the
same were earned and paid in the normal course of business and not
the result of a Change in Control and not otherwise triggered by
the "golden parachute" or excess payment provisions of the
Internal Revenue Code of the United States, which would cause
additional tax liability to be imposed. If any additional income
tax, excise or other taxes are imposed on any amount or payment in
the nature of compensation paid or provided to or on behalf of
Executive, the Company shall "gross up" Executive for such tax
liability by paying to Executive an amount sufficient so that
after payment of all such taxes so imposed, Executive's position
on an after-tax basis is what it would have been had no such
additional taxes been imposed. Executive will cooperate with the
company to minimize the tax consequences to the Executive and to
the Company so long as the actions proposed to be taken by the
Company do not cause any additional tax consequences to the
Executive and do not prolong or delay the time that payments are
to be made, or the amount of payments to be made, unless the
Executive consents, in writing, to any delay or
Page 20 of 23
<PAGE>
deferment of payment.
6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the
termination of the Executive is for cause and not after a Change
in Control, the Company will have the right to withhold all
payments (except those specified in Sections 6.01); provided,
however, that if a final judgment is entered finding that cause
did not exist for termination, the Company will pay all benefits
to the Executive to which he would have been entitled had the
termination not been for cause, plus interest on all amounts
withheld from the Executive at the rate specified for judgments
under Article 5069-1.05 V.A.T.S. but not less than ten percent
(10%) per annum. If the termination for cause occurs after a
Change in Control, the Company shall have no right to suspend or
withhold payments to the Executive under any provision of this
Agreement until or unless a final judgment is entered upholding
the Company's determination that the termination was for cause, in
which event the Executive will be liable to the Company for all
amounts paid, plus interest at the rate allowed for judgments
under Article 5069-1.05 V.A.T.S.
6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to
herein are not intended to exclude or limit Executive's
participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits
as may be authorized by the Board of Directors of the Company at
any time, or to limit or reduce any compensation or benefits to
which Executive would be entitled but for this Agreement.
6.05. NOTICES. Notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall
either be personally delivered by hand or sent by: (i) Registered
or Certified Mail, return receipt requested, postage prepaid,
properly packaged, addressed and deposited in the United States
Postal System, (ii) by facsimile transmission if the receiver
acknowledges receipt; (iii) by Federal Express or other expedited
delivery service provided that acknowledgement of receipt is
received and retained by the deliverer and furnished to the
sender, if to the Executive, at the last address he has filed in
writing with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06. NON-ALIENATION. The Executive shall not have any right to pledge
hypothecate, anticipate, or in any way create a lien upon any
amounts provided under this Agreement, and no payments or benefits
due hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts or by operation of law. So
long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject ,matter hereof. Upon the death of the Executive,
his Executors, Administrators, devisees and heirs, in that order,
Page 21 of 23
<PAGE>
shall have the right to enforce the provisions hereof.
6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof. No prpvision of this Agreement may be amended, waived, or
discharged except by the mutual written agreement of the parties.
The consent of any other persons to any such amendment, waiver or
discharge shall not be required.
6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by
operation of law or otherwise including, without limitation, any
corporation or other entity or persons which shall succeed
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any successor,
by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement. Except as
otherwise provided herein this Agreement shall be binding upon and
inure to the benefit of the Executive and his legal
representatives, heirs, and assigns, provided however, that in the
event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each
such unpaid amount and distribution shall be paid in accordance
with this Agreement to the person or persons designated by
Executive, to the Company, to receive such payment or distribution
and in the event Executive has made no applicable designation, to
his Estate. If the Company should split, divide or otherwise
become more than one entity, all liability and obligations of the
Company shall be the joint and several liability and obligation of
all of the parts.
6.09. GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of the State of Louisiana, the validity,
interpretation and enforcement of this Agreement shall be governed
by the laws of the State of Texas.
6.10. VENUE. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County,
Texas.
6.11. HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.12. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
Page 22 of 23
<PAGE>
6.13. PARTIAL INVALIDITY. In the event that any part, portion or section
of this Agreement is found to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be
binding upon the parties hereto and the Agreement will be
construed to give meaning to the remaining provisions of this
Agreement in according with the intent of this Agreement.
6.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but
all of which together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors and the Compensation
Committee, the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Executed in multiple originals and/or counterparts as of the
Effective Date.
\s\ROBERT W. RANDALL
ROBERT W. RANDALL
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
By: RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
ATTEST:
By: FRIDA A. MARTINEZ
Frida A. Martinez
Assistant Secretary
Page 23 of 23
EXHIBIT 10.24
PRIDE INTERNATIONAL, INC.
EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT
EARL W. MCNIEL
EFFECTIVE FEBRUARY 5, 1999
<PAGE>
INDEX
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6
1.01 Effect of Prior Agreements......................................6
II. DEFINITION OF TERMS...................................................6
2.01 Company.........................................................6
2.02 Executive/Officer/Employee......................................6
2.03 Office/Position/Title...........................................6
2.04 Effective Date..................................................6
2.05 Change in Control...............................................7
2.06 Termination.....................................................7
2.07 Customer........................................................9
III. EMPLOYMENT...........................................................9
3.01 Employment......................................................9
3.02 Best Efforts And Other Employment Of Executive.................10
3.03 Term Of Employment.............................................10
3.04 Compensation And Benefits......................................11
3.05 Termination Without Change In Control..........................12
IV. CHANGE IN CONTROL....................................................14
4.01 Extension Of Employment Period.................................14
4.02 Change In Control Termination Payments & Benefits..............15
4.03 Voluntary Resignation Upon Change In Control...................15
V. NON-COMPETITION AND CONFIDENTIALITY...................................15
5.01 Consideration..................................................15
5.02 Non-Competition................................................16
5.03 Confidentiality................................................17
5.04 Geographical Area..............................................18
5.05 Company Remedies For Violation Of Non-Competition
Or Confidentiality Agreement................................18
5.06 Termination Of Benefits For Violation Of Non-
Competition And Confidentiality.............................19
Page 2 of 23
<PAGE>
VI. GENERAL.............................................................19
6.01 Enforcement Costs...............................................19
6.02 Income, Excise or Other Tax Liability...........................20
6.03 Payment Of Benefits Upon Termination For Cause..................21
6.04 Non-Exclusive Agreement.........................................21
6.05 Notices.........................................................21
6.06 Non-Alienation..................................................21
6.07 Entire Agreement: Amendment.....................................21
6.08 Successors And Assigns..........................................22
6.09 Governing Law...................................................22
6.10 Venue...........................................................22
6.11 Headings........................................................22
6.12 Severability....................................................22
6.13 Partial Invalidity..............................................22
6.14 Counterparts....................................................23
Page 3 of 23
<PAGE>
EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY
AGREEMENT
DATE: FEBRUARY 5, 1999
COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation
5847 San Felipe, Suite 3300 Houston, Texas 77057
EXECUTIVE/EMPLOYEE: Earl W. McNiel
1423 Stependale
Katy, Texas 77450
This Agreement is made as of the date first above written and to
become effective as herein provided.
PREAMBLE
WHEREAS, the Company wishes to attract and retain well-qualified
Executive and key personnel and to assure itself of the continuity of its
management;
WHEREAS, Executive is an officer of the Company with significant
management responsibilities in the conduct of its business;
WHEREAS, the Company recognizes that Executive is a valuable
resource of the Company and the Company desires to be assured of the continued
services of Executive;
WHEREAS, the Company desires to obtain assurances that Executive
will devote his best efforts to his employment with the Company and will not
enter into competition with the Company in its business as now conducted and to
be conducted, or solicit customers or other employees of the Company to
terminate their relationships with the Company;
WHEREAS, Executive is a key employee of the Company and he
acknowledges that his talents and services to the Company are of a special,
unique, unusual and extraordinary character and are of particular and peculiar
benefit and importance to the Company;
Page 4 of 23
<PAGE>
WHEREAS, the Company is concerned that in the event of a possible
or threatened change in control of the Company, uncertainties necessarily arise;
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities; the Company, therefore, desires to provide Executive with
assurances as to the continuation of his employment status and responsibilities
in such event;
WHEREAS, the Company further desires to assure Executive that, if
a possible or threatened change in control should arise and Executive should be
involved in deliberations or negotiations in connection therewith, Executive
would be in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and to this end
desires to protect Executive from any direct or implied threat to his financial
well-being;
WHEREAS, Executive is willing to continue to serve as such but
desires assurances that in the event of such a change in control he will
continue to have the employment status and responsibilities he could reasonably
expect absent such event and, that in the event this turns out not to be the
case, he will have fair and reasonable severance protection on the basis of his
service to the Company to that time;
WHEREAS, different factors affect the Company and Executive under
circumstances of regular employment between the Company and the Executive when
there is no threat of change in control and/or none has occurred, as opposed to
circumstances under which a change in control is rumored, threatened, occurring
or has occurred. For this reason this Employment Agreement is primarily in two
parts. One part deals with the regular employment of Executive under
circumstances whereby no change in control is threatened, occurring or occurred;
herein called "Regular Employment". The second part deals with circumstances
whereby a change in control is threatened, occurring or has occurred. Other
parts of the Agreement deal with matters affecting both Regular Employment and
employment following change in control, including non-competition and
confidentiality; and
WHEREAS, Executive is willing to enter into and carry out the
Non-Competition and Confidentiality Agreement set forth herein in consideration
of the Employment Agreement set forth herein.
Page 5 of 23
<PAGE>
AGREEMENT
NOW THEREFORE, the parties agree as follows:
I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.
1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the
Effective Date all prior employment and non-competition contracts
between Company and Executive are hereby amended, modified and
superseded by this Agreement insofar as future employment,
compensation, non- competition, confidentiality, accrual of
payments or any form of compensation or benefits from the Company
are concerned. This Agreement does not release or relieve Company
from its liability or obligation with respect to any compensation,
payments, or benefits already accrued to Executive, nor to any
vesting of benefits or other rights which are attributable to
length of employment, seniority or other such matters. This
agreement does not relieve Executive of any prior non-competition
or confidentiality obligations and agreements and the same are
hereby modified and amended as to future matters and future
confidentiality even as to matters accruing prior to the Effective
Date hereof.
II. DEFINITION OF TERMS.
2.01. COMPANY. Company means Pride International, Inc., a Louisiana
corporation, as the same presently exists, as well as any and all
successors, regardless of the nature of the entity or the State or
Nation of organization, whether by reorganization, merger,
consolidation, absorption or dissolution. For the purpose of the
Non-Competition and Confidentiality Agreement, Company includes
any subsidiary or affiliate of the Company to the extent it is
carrying on any portion of the business of the Company or a
business similar to that being conducted by the Company.
2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Earl
W. McNiel.
2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which
the Executive is employed is that of Vice President and Chief
Financial Officer of the Company and carries with it the duties,
responsibilities, rights, benefits and privileges presently held
by the Executive, or as may reasonably be assigned to the
Executive as are customary and usual for such position.
2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of
Page 6 of 23
<PAGE>
February 5, 1999.
2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company
shall mean, and shall be deemed to have occurred on the date of
the first to occur of any of the following:
a. there occurs a Change in Control of the Company of the
nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A or Item 1
of Form 8(k) promulgated under the Securities Exchange Act
of 1934 as in effect on the date of this Agreement, or if
neither item remains in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar
purposes;
b. any "person" {as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934} is or
becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty percent
(20%) or more of the combined voting power of the
Company's then outstanding securities;
c. the individuals who were members of the Board of Directors
of the Company immediately prior to a meeting of the
shareholders of the Company involving a contest for the
election of Directors shall not constitute a majority of
the Board of Directors following such election;
d. the Company shall have merged into or consolidated with
another corporation, or merged another corporation into
the Company, on a basis whereby less than fifty percent
(50%) of the total voting power of the surviving
corporation is represented by shares held by former
shareholders of the Company prior to such merger or
consolidation; or
e. the Company shall have sold, transferred or exchanged all,
or substantially all, of its assets to another corporation
or other entity or person.
2.06. TERMINATION. The term "termination" shall mean termination, prior
to the expiration of the Employment Period, of the employment of
the Executive with the Company {including death and disability (as
described below)} for any reason other than cause (as described
below) or voluntary resignation (as described below). Termination
includes "Constructive Termination" as described below.
Termination includes non-renewal or failure to extend this
Agreement at the end of any employment term, except for cause.
Page 7 of 23
<PAGE>
a. The term "disability" means physical or mental incapacity
qualifying the Executive for a long-term disability under
the Company's long-term disability plan. If no such plan
exists on the Effective Date of this Agreement, the term
"disability" means physical or mental incapacity as
determined by a doctor jointly selected by the Executive
and the Board of Directors of the Company qualifying the
Executive for long-term disability under reasonable
employment standards.
b. The term "cause" means: (i) the willful and continued
failure of the Executive substantially to perform his
duties with the Company (other than any failure due to
physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board
of Directors which specifically identifies the manner in
which the Board believes he has not substantially
performed his duties, (ii) willful misconduct materially
and demonstrably injurious to the Company or (iii)
material violation of the covenant not to compete (except
after termination under the Change in Control provisions
hereof and confidentiality provisions hereof.) No act or
failure to act by the Executive shall be considered
"willful" unless done or omitted to be done by him not in
good faith and without reasonable belief that his action
or omission was in the best interest of the Company. The
unwillingness of the Executive to accept any or all of a
change in the nature or scope of his position, authorities
or duties, a reduction in his total compensation or
benefits, or other action by or at request of the Company
in respect of his position, authority, or responsibility
that is contrary to this Agreement, may not be considered
by the Board of Directors to be a failure to perform or
misconduct by the Executive. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for cause for purposes of this Agreement unless
and until there shall have been delivered to him a copy of
a resolution, duly adopted by a vote of three-fourths of
the entire Board of Directors of the Company at a meeting
of the Board of Directors called and held (after
reasonable notice to the Executive and an opportunity for
the Executive and his counsel to be heard before the
Board) for the purpose of considering whether the
Executive has been guilty of such a willful failure to
perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good
faith opinion of the Board of Directors the Executive has
been guilty thereof and specifying the particulars
thereof.
c. The term "Constructive Termination" means any circumstance
by which the actions of the Company either reduce or
change Executive's title, position, duties,
responsibilities or authority to such
Page 8 of 23
<PAGE>
an extent or in such a manner as to relegate Executive to
a position not substantially similar to that which he
presently holds; would degrade, embarrass or otherwise
make it unreasonable for Executive to remain in the
employment of the Company; and includes violation of the
employment provisions and conditions of this Agreement.
d. The resignation of the Executive shall be deemed
"voluntary" if it is for any reason other than one or more
of the following:
(i) the Executive's resignation or retirement is
requested by the Company other than for cause;
(ii) any significant adverse change in the nature or
scope of the Executive's position, authorities or
duties from those described in this Agreement;
(iii) any reduction in the Executive's total compensation
or benefits from that provided in the Compensation
and Benefits Section hereof;
(iv) the material breach by the Company of any other
provision of this Agreement;
(v) any action by the Company which would constitute
Constructive Termination; or
(vi) non-renewal or failure to extend any employment
term, contrary to the wishes of the Executive.
Termination that entitles the Executive to the payments and
benefits provided in the "Termination Payments and Benefits"
Section hereof shall not be deemed or treated by the Company as
the termination of the Executive's employment or the forfeiture of
his participation, award, or eligibility, for the purpose of any
plan, practice or agreement of the Company referred to in the
Compensation and Benefits Section hereof.
2.07. CUSTOMER. The term "Customer" includes all persons, firms or
entities that are purchasers or end-users of services or products
offered, provided, developed, designed, sold or leased by the
Company during the relevant time periods, and all persons, firms
or entities which control, or which are controlled by, the same
person, firm or entity which controls such purchase.
III. EMPLOYMENT.
Page 9 of 23
<PAGE>
3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the
Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the
Company, for the Term of Employment ("Employment Period") herein
specified. During the Employment Period, Executive shall exercise
such position and authority and perform such responsibilities as
are commensurate with the position and authority being exercised
and duties being performed by the Executive immediately prior to
the Effective Date of this Agreement, which services shall be
performed at the location where the Executive was employed
immediately prior to the Effective Date of this Agreement or at
such other location as the Company and Executive may agree.
3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE.
a. Executive agrees that he will at all times faithfully,
industriously and to the best of his ability, experience
and talents, perform all of the duties that may be
required of and from him pursuant to the express and
implicit terms hereof, to the reasonable satisfaction of
the Company. Such duties shall be rendered at Houston,
Texas, and such other place or places within or without
the State of Texas as the Company and Executive shall
agree.
b. Executive shall devote his normal and regular business
time, attention and skill to the business and interests of
the Company, and the Company shall be entitled to all of
the benefits, profits or other issue arising from or
incident to all work, services and advice of Executive
performed for the Company. Such employment shall be
considered "full time" employment. Executive shall have
the right to make investments in businesses which engage
in activities other than those engaged by the Company.
Executive shall also have the right to devote such
incidental and immaterial amount of his time which are not
required for the full and faithful performance of his
duties hereunder to any outside activities and businesses
which are not being engaged in by the Company and which
shall not otherwise interfere with the performance of his
duties hereunder. Executive shall have the right to make
investments in the manner and to the extent authorized and
set forth in the Non-Competition Section of this
Agreement.
3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular
employment (no Change in Control being presently contemplated)
will commence on the Effective Date of this Agreement and will be
for a term of
Page 10 of 23
<PAGE>
two (2) years ending at 12:00 o'clock midnight February 4, 2001;
thereafter, the Term of Employment of Executive will be
automatically extended for successive terms of one (1) year each
commencing February 5, 2001, and on February 5 of each year
thereafter, unless Company or Executive gives written notice to
the other that employment will not be renewed or continued after
the next scheduled expiration date which is not less than one year
after the date that the notice of non-renewal was given. All
extended employment terms will be considered to be within the
Employment Period while Executive is employed with the Company.
3.04. COMPENSATION AND BENEFITS. During the Employment Period the
Executive shall receive the following compensation and benefits:
a. He shall receive an annual base salary of not less than his annual
base salary which is $170,000.00, with the opportunity for
increases, from time to time thereafter, which are in accordance
with the Company's regular executive compensation practices.
Executive's salary will be reviewed at least annually by the
Compensation Committee of the Board of Directors.
b. To the extent that such plans exist immediately prior to the
Effective Date of this Agreement, he shall be eligible to
participate on a reasonable basis, and to continue his existing
participation, in annual bonus, stock option and other incentive
compensation plans which provide opportunities to receive
compensation in addition to his annual base salary which are the
greater of: (i) the opportunities provided by the Company for
Executives with comparable duties, or (ii) the opportunities under
any such plans in which he was participating immediately prior to
the Effective Date of this Agreement.
c. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to receive and
participate in salaried employee benefits including, but not
limited to: medical, life, health, accident and disability
insurance and disability benefits and prerequisites which are the
greater of: (i) the employee benefits and prerequisites provided
by the Company to Executives with comparable duties and (ii) the
employee benefits and prerequisites to which he was entitled or in
which he participated immediately prior to the Effective Date of
this Agreement.
d. To the extent such plans exist immediately prior to the Effective
Date of this Agreement, he shall be entitled to continue to accrue
credited service for retirement benefits and to be entitled to
receive retirement benefits under and pursuant to the terms of the
Company's qualified retirement plan for salaried employees, the
Company's supplemental executive retirement plan, and any
successor or other retirement plan or agreement in effect on the
Effective
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<PAGE>
Date of this Agreement with respect to his retirement, whether or
not a qualified plan or agreement, so that his aggregate monthly
retirement benefit from all such plans and agreements (regardless
when he begins to receive such benefit) will be not less than it
would be had all such plans and agreements were in effect
immediately prior to the Effective Date of this Agreement and
continued to be in effect without change until and after he begins
to receive such benefits.
e. Paid vacations each year and use of a Company car or a car
allowance to the same extent as he is presently receiving or the
benefits provided to Executives with comparable duties whichever
is greater.
f. Participation in all other executive incentive stock and benefit
plans approved by the Compensation Committee
3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the
right to terminate Executive at any time during the Employment
Period (including any extended term). Should the Company choose
not to renew or extend the Employment period of this Employment
Agreement or choose to terminate the Executive during, or at the
end of, the Employment Period, or in the event of death or
disability of the Executive, if the termination is not after a
Change in Control and is not for cause, the Company shall, within
thirty (30) days following such termination, pay and provide to
the Executive (or his Executor, Administrator or Estate in the
event of death, as soon as reasonably practical):
a. An amount equal to one (1) full year of his base salary
(including the amount allocated to the covenant not to
compete), which base salary is here defined as twelve (12)
times the then current monthly salary in effect for the
Executive and all other benefits due him based upon the
salary in effect on the Date of Termination (but not less
than the highest annual base salary paid to the Executive
during any of the three (3) years immediately preceding
his Date of Termination). There shall be deducted only
such amounts as may be required by law to be withheld for
taxes and other applicable deductions.
b. The Company shall provide to Executive for a period of one
(1) full years following the Date of Termination, life,
health, accident and disability insurance. These benefits
are not to be less than the highest benefits furnished to
the Executive during the term of this Agreement.
c. An amount equal to the target award for the Executive
under the
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<PAGE>
Company's annual bonus plan for the fiscal year in which
termination occurs, provided that if the Executive has
deferred his award for such year under a Company plan, the
payment due the Executive under this subparagraph shall be
paid in accordance with the terms of the deferral or as
specified by the Executive.
d. The Company shall pay, distribute and otherwise provide to
the Executive the amount and value of his entire plan
account and interest under any retirement plan, employee
benefit plan, investment plan or stock ownership plan, if
any exists on the Date of Termination, and all employer
contributions made or payable to any such plan for his
account prior to the end of the month in which Termination
occurs shall be deemed vested and payable to him. Such
payment or distribution shall be in accordance with the
elections made by the Executive with respect to
distributions in accordance with the plan as if the
Executive's employment with the Company terminated at the
end of the month in which Termination occurs.
e. All stock options and awards to which the Executive is
entitled will immediately vest and the time for exercising
any option will be as specified in the plan as if the
Executive were still employed by the Company; provided
however if the immediate vesting of all benefits under the
plan is not permitted by the plan, then the benefits will
be vested only to the extent authorized or permitted by
the plan.
f. If Executive elects to treat the termination as retirement
then on the Date of Termination, the Executive shall be
deemed to have retired from the Company. At that time, or
at such later time as he may elect consistent with the
terms of any applicable plan or benefit, in order to
receive benefits or avoid or minimize any applicable early
pension reduction provisions, he shall be entitled to
commence to receive total combined qualified and
non-qualified retirement benefits to which he is entitled
hereunder; or, his total non-qualified retirement benefit
hereunder if under the terms of the Company's qualified
retirement plan for salaried employees he is not entitled
to a qualified benefit. Executive may treat the
termination as termination other than "retirement" if
Executive so elects and may defer "retirement" to a later
date if permitted by any applicable plan.
g. The "Compensation and Benefits" section hereof shall be
applicable in determining the payments and benefits due
the Executive under this section and if Termination occurs
after a reduction in all or part of the Executive's total
compensation or benefits, the lump sum
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<PAGE>
severance allowance and other compensation and benefits
payable to him pursuant to this section shall be based
upon his compensation and benefits before the reduction.
h. If any provision of this Section cannot, in whole or in
part, be implemented and carried out under the terms of
the applicable compensation, benefit or other plan or
arrangement of the Company because the Executive has
ceased to be an actual employee of the Company, due to
insufficient or reduced credited service based upon his
actual employment by the Company or because the plan or
arrangement has been terminated or amended after the
Effective Date of this Agreement, or for any other reason,
the Company itself shall pay or otherwise provide the
equivalent of such rights, benefits and credits for such
benefits to the Executive, his dependents, beneficiaries
and estate as if Executive's employment had not been
terminated.
i. All life, health, hospitalization, medical and accident
benefits available to Executive's spouse and dependents
shall continue for the same term as the Executive's
benefits. If the Executive dies, all benefits will be
provided for a term of one (1) year {or three (3) years if
after a change in control} after the date of death of the
Executive.
j. The Company's obligation under this Section to continue to
pay or provide health care, life, accident and disability
insurance to the Executive, the Executive's spouse and
Executive's dependents, during the remainder of the
Employment Period shall be reduced when and to the extent
any of such benefits are paid or provided to the Executive
by another employer, provided that the Executive shall
have all rights afforded to retirees to convert group
insurance coverage to the individual insurance coverage
as, to the extent of, and whenever his group insurance
coverage under this Section is reduced or expires. Apart
from this subparagraph, the Executive shall have and be
subject to no obligation to mitigate.
k. The Company shall deduct applicable withholding taxes in
performing its obligations under this Section.
Nothing in this Section is intended, nor shall be deemed or
interpreted, to be an amendment to any compensation, benefit or
other plan to the Company. To the extent the Company's performance
under this Section includes the performance of the Company's
obligations to the Executive under any other plan or under another
agreement between the Company and the Executive,
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<PAGE>
the rights of the Executive under such other plan or other
agreements, which are discharged under this Agreement, are
discharged, surrendered, or released PRO TANTO.
IV. CHANGE IN CONTROL.
4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the
Employment Period shall be immediately and without further action
extended for a term of three (3) years following the Effective
Date of the Change in Control and will expire at 12:00 o'clock
midnight on the last day of the month following three (3) years
after the Change in Control. Thereafter the Employment Period will
be extended for successive terms of one (1) year each, unless
terminated, all in the manner specified in the Term of Employment
Section pertaining to regular employment.
4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS.
In the event the Executive is terminated within three (3) years
following a Change in Control, the Executive will receive the
payments and benefits specified in the "Termination without Change
in Control" Section in the same time and manner therein specified
except as amended and modified hereby:
a. The salary and benefits specified in Section 3.05a will be
paid based upon a multiple of three (3) years {instead of
one (1) year}.
b. Life, health, accident and disability insurance specified
in Section 3.05b will be provided until: (i) Executive
becomes reemployed and receives similar benefits from a
new employer, or (ii) three (3) years after the Date of
Termination, whichever is earlier.
c. An amount equal to three (3) times the maximum award that
the Executive could receive under the Company's Annual
Bonus Plan for the fiscal year in which the termination
occurs, instead of the benefits provided in Section
3.05(c) hereof.
d. All other rights and benefits specified in Section 3.05.
4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the
Executive voluntarily resigns his employment within twelve (12)
months after a Change in Control (whether or not Company may be
alleging the right to terminate employment for cause), he will
receive the same payments, compensation and benefits as if he had
been terminated on the date of resignation after Change in
Control.
Page 15 of 23
<PAGE>
I. NON-COMPETITION AND CONFIDENTIALITY.
5.01. CONSIDERATION. The base salary awarded to the Executive and to be
paid to the Executive in the future includes consideration for the
Non-Competition and Confidentiality Agreement set forth herein and
the amount to be paid to Executive in the event of the termination
of employment of Executive, voluntarily, involuntarily, or under a
Change in Control, under Sections 3.05a and 4.02a hereof
constitute payment, in part, for the Non-Competition and
Confidentiality of the Executive. It is contracted, stipulated and
agreed that fifteen percent (15%) of such amount paid and to be
paid to the Executive shall constitute the consideration for the
Non-Competition and Confidentiality Agreement set forth herein.
5.02. NON-COMPETITION. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company could cause serious harm to the Company. Accordingly, the
Executive agrees that during his employment with the Company and
for a period of one (1) year after he is no longer employed by the
Company (unless his employment is terminated after a Change in
Control, in which event there will be no covenant not to compete
and the provisions of the covenant not to compete herein contained
will terminate on the date of termination of the Executive) the
Executive will not, directly or indirectly, either as an
individual, proprietor, stockholder {other than as a holder of up
to one percent (1%) of the outstanding shares of a corporation
whose shares are listed on a stock exchange or traded in
accordance with the automated quotation system of the National
Association of Securities Dealers}, partner, officer, employee or
otherwise:
a. work for, become an employee of, invest in, provide
consulting services or in any way engage in any business
which provides, produces, leases or sells products or
services of the same or similar type provided, produced,
leased or sold by the Company and with regard to which
Executive was engaged, or over which Executive had direct
or indirect supervision or control, within one (1) year
preceding the Executive's termination of employment, in
any area where the Company provided, produced, leased or
sold such products or services at any time during the one
(1) year preceding such termination of employment, or
b. provide, sell, offer to sell, lease, offer to lease, or
solicit any orders for any products or services which the
Company provided and with regard to which the Executive
had direct or indirect supervision or control, within one
(1) year preceding Executive's termination of
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<PAGE>
employment, to or from any person, firm or entity which
was a customer for such products or services of the
Company during the one (1) year preceding such termination
from whom the Company had solicited business during such
one (1) year; or
c. solicit, aid, counsel or encourage any officer, director,
employee or other individual to: (i) leave his or her
employment or position with the Company, (ii) compete with
the business of the Company, or (iii) violate the terms of
any employment, non-competition or similar agreement with
the Company; or
d. employ, directly or indirectly; permit the employment of;
contract for services or work to be performed by; or
otherwise, use, utilize or benefit from the services of
any officer, director, employee or any other individual
holding a position with the Company within two (2) years
after the Date of Termination of employment of Executive
with the Company or within two (2) years after such
officer, director, employee or individual terminated
employment with the Company, whichever occurs earlier.
5.03. CONFIDENTIALITY. Executive acknowledges that his employment with
the Company has in the past and will, of necessity, provide him
with specialized knowledge which, if used in competition with the
Company, or divulged to others, could cause serious harm to the
Company. Accordingly, Executive will not at any time during or
after his employment by the Company, directly or indirectly,
divulge, disclose or communicate to any person, firm or
corporation (in any manner whatsoever) any information concerning
any matter affecting or relating to the Company or the business of
the Company. While engaged as an employee of the Company, the
Executive may only use information concerning any matters
affecting or relating to the Company or the business of the
Company for a purpose which is necessary to the carrying out of
the Executive's duties as an employee of the Company, and the
Executive may not make use of any information of the Company after
he is no longer an employee of the Company. The Executive agrees
to the foregoing without regard to whether all of the foregoing
matters will be deemed confidential, material or important, it
being stipulated by the parties. All information, whether written
or otherwise, regarding the Company's business, including, but not
limited to, information regarding customers, customer lists,
costs, prices, earnings, products, services, formulae,
compositions, machinery, equipment, apparatus, systems,
manufacturing procedures, operations, potential acquisitions, new
location plans, prospective and executed contracts and other
business arrangements, and sources of supply, is PRIMA FACIE
presumed to be important, material and confidential information of
the
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<PAGE>
Company for the purposes of this Agreement, except to the extent
that such information may be otherwise lawfully and readily
available to the general public. The Executive further agrees that
he will, upon termination of his employment with the Company,
return to the Company all books, records, lists and other written,
typed or printed materials, whether furnished by the Company or
prepared by the Executive, which contain any information relating
to the Company's business, and the Executive agrees that he will
neither make nor retain any copies of such materials after
termination of employment. Notwithstanding any of the foregoing,
the Executive will not be liable for any breach of these
confidentiality provisions unless the same constitutes a material
detriment to the Company, or due to the nature of the information
divulged and the manner in which it was divulged and the person to
whom it was divulged would likely cause damage to the Company or
constitute a material detriment to the Company.
5.04. GEOGRAPHICAL AREA. The geographical area within which the non-
competition covenants of this Agreement shall apply is that
territory within two hundred (200) miles of: (i) any of the
Company's present offices, (ii) any of the Company's present rig
yards, and (iii) any additional location where the Company, as of
the date of any action taken in violation of the non- competition
covenants of this Agreement, has an office, a rig yard, or
definitive plans to locate an office or a rig yard.
Notwithstanding the foregoing, if the two hundred (200) mile
radius extends into another country and the Company is not then
doing business in that other country, there will be no territorial
limitations extending into such other country.
5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR
CONFIDENTIALITY AGREEMENT. Without limiting the right of the
Company to pursue all other legal and equitable rights available
to it for violation of any of the covenants made by the Executive
herein, it is agreed that:
a. the skills, experience and contacts of Executive are of a
special, unique, unusual and extraordinary character which
give them a peculiar value;
b. because of the nature of the business of the Company, the
restrictions agreed to by Executive as to time and area
contained in this Agreement are reasonable; and
c. the injury suffered by the Company by a violation of any
covenant in this Agreement resulting from loss of profits
created by the competitive use of such skills, experience
and contacts that otherwise will make it difficult to
calculate in damages in an action at law and
Page 18 of 23
<PAGE>
cannot fully compensate the Company for any violation of
any covenant in this Agreement, accordingly,
(i) the Company shall be entitled to injunctive relief
to prevent violations of such covenants or
continuing violations thereof and to prevent
Executive from rendering any services to any
person, firm or entity in breach of such covenant
and to prevent Executive from divulging any
confidential information, and
(ii) compliance with this Agreement is a condition
precedent to the Company's obligation to make
payments of any nature to the Executive.
5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND
CONFIDENTIALITY. If the Executive's termination was not after a
Change in Control and if the Executive shall have materially
violated the Confidentiality and/or Non-Competition Agreement or
any agreement he may have signed as an employee of the Company,
the Executive agrees that there shall be no obligation on the part
of the Company to provide any payments or benefits (other than
payments or benefits already earned or accrued) described in the
Termination of Rights and Benefits Section hereof, subject to the
provisions of Section 6.01 hereof. There will be no withholding of
benefits or payments if the termination occurred after a Change in
Control and the Executive will not be bound by the non-competition
provisions if terminated while the Change in Control provisions
hereof are applicable.
VI. GENERAL.
6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence
of a Change in Control, or under other circumstances even when a
Change in Control has not occurred, the Board of Directors or a
stockholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny Executive the benefits intended under this
Agreement; or actions may be taken to enforce the non-competition
or confidentiality provisions of this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the parties that Executive not be required to
incur the legal fees and expenses associated with the protection
or enforcement of his rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the
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<PAGE>
benefits intended to be extended to Executive hereunder nor be
bound to negotiate any settlement of his rights hereunder under
threat of incurring such costs. Accordingly, if at any time after
the Effective Date of this Agreement, it should appear to the
Executive that the Company is or has acted contrary to or is
failing or has failed to comply with any of its obligations under
this Agreement for the reason that it regards this Agreement to be
void or unenforceable, that Executive has violated the terms of
this Agreement, or for any other reason, or that the Company has
purported to terminate his employment for cause or is in the
course of doing so, or is withholding payments or benefits, or is
threatening to withhold payments or benefits, contrary to this
Agreement, or in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable,
or institutes any litigation or other legal action designed to
deny, diminish or to recover from Executive the benefits provided
or intended to be provided to him hereunder, and the Executive has
acted in good faith to perform his obligations under this
Agreement, the Company irrevocably authorizes Executive from time
to time to retain counsel of his choice at the expense of the
Company to represent him in connection with the protection and
enforcement of his rights hereunder including, without limitation,
representation in connection with termination of his employment or
withholding of benefits or payments contrary to this Agreement or
with the initiation or defense of any litigation or any other
legal action, whether by or against the Executive or the Company
or any Director, Officer, stockholder or other person affiliated
with the Company, in any jurisdiction. Company is not authorized
to withhold the periodic payments of attorney's fees and expenses
hereunder based upon any belief or assertion by the Company that
Executive has not acted in good faith or has violated this
Agreement. If Company subsequently establishes that Executive was
not acting in good faith and has violated this Agreement,
Executive will be liable to the Company for reimbursement of
amounts paid due to Executive's actions not based on good faith
and in violation of this Agreement. The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company, on a regular, periodic basis within thirty (30) days
after presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary
practices, up to a maximum aggregate amount of $250,000.00.
6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable
for and will pay all income tax liability by virtue of any
payments made to the Executive under this Agreement, as if the
same were earned and paid in the normal course of business and not
the result of a Change in Control and not otherwise triggered by
the "golden parachute" or excess payment provisions of the
Internal Revenue Code of the United States, which would cause
additional tax liability to be imposed. If any additional income
tax, excise or other taxes are imposed on any amount or payment in
the nature of compensation paid or provided to or on behalf of
Executive, the Company shall "gross up" Executive for such tax
liability by paying to Executive an amount sufficient so that
after payment of all such taxes so imposed, Executive's position
on an after-tax basis is what it would have been had no such
additional taxes been imposed. Executive will cooperate with the
company to minimize the tax consequences to the Executive and to
the Company so long as the actions proposed to be taken by the
Company do not cause any additional tax consequences to the
Executive and do not prolong or delay the time that payments are
to be made, or the amount of payments to be made, unless the
Executive consents, in writing, to any delay or deferment of
payment.
6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination
of the Executive is for cause and not after a Change in Control,
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<PAGE>
the Company will have the right to withhold all payments (except
those specified in Sections 6.01); provided, however, that if a
final judgment is entered finding that cause did not exist for
termination, the Company will pay all benefits to the Executive to
which he would have been entitled had the termination not been for
cause, plus interest on all amounts withheld from the Executive at
the rate specified for judgments under Article 5069-1.05 V.A.T.S.
but not less than ten percent (10%) per annum. If the termination
for cause occurs after a Change in Control, the Company shall have
no right to suspend or withhold payments to the Executive under
any provision of this Agreement until or unless a final judgment
is entered upholding the Company's determination that the
termination was for cause, in which event the Executive will be
liable to the Company for all amounts paid, plus interest at the
rate allowed for judgments under Article 5069-1.05 V.A.T.S.
6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to
herein are not intended to exclude or limit Executive's
participation in other benefits available to executive personnel
generally, or to preclude or limit other compensation or benefits
as may be authorized by the Board of Directors of the Company at
any time, or to limit or reduce any compensation or benefits to
which Executive would be entitled but for this Agreement.
6.05. NOTICES. Notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall
either be personally delivered by hand or sent by: (i) Registered
or Certified Mail, return receipt requested, postage prepaid,
properly packaged, addressed and deposited in the United States
Postal System, (ii) by facsimile transmission if the receiver
acknowledges receipt; (iii) by Federal Express or other expedited
delivery service provided that acknowledgement of receipt is
received and retained by the deliverer and furnished to the
sender, if to the Executive, at the last address he has filed in
writing with the Company, or if to the Company, to its Corporate
Secretary at its principal executive offices.
6.06. NON-ALIENATION. The Executive shall not have any right to pledge
hypothecate, anticipate, or in any way create a lien upon any
amounts provided under this Agreement, and no payments or benefits
due hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts or by operation of law. So
long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement
or the subject ,matter hereof. Upon the death of the Executive,
his Executors, Administrators, devisees and heirs, in that order,
shall have the right to enforce the provisions hereof.
6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof. No
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<PAGE>
provision of this Agreement may be amended, waived, or discharged
except by the mutual written agreement of the parties. The consent
of any other persons to any such amendment, waiver or discharge
shall not be required.
6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors or assigns, by
operation of law or otherwise including, without limitation, any
corporation or other entity or persons which shall succeed
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any successor,
by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement. Except as
otherwise provided herein this Agreement shall be binding upon and
inure to the benefit of the Executive and his legal
representatives, heirs, and assigns, provided however, that in the
event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each
such unpaid amount and distribution shall be paid in accordance
with this Agreement to the person or persons designated by
Executive, to the Company, to receive such payment or distribution
and in the event Executive has made no applicable designation, to
his Estate. If the Company should split, divide or otherwise
become more than one entity, all liability and obligations of the
Company shall be the joint and several liability and obligation of
all of the parts.
6.09. GOVERNING LAW. Except to the extent required to be governed by the
laws of the State of Louisiana because the Company is incorporated
under the laws of the State of Louisiana, the validity,
interpretation and enforcement of this Agreement shall be governed
by the laws of the State of Texas.
6.10. VENUE. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County,
Texas.
6.11. HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
6.12. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
6.13. PARTIAL INVALIDITY. In the event that any part, portion or section
of this Agreement is found to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be
binding upon the parties
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<PAGE>
hereto and the Agreement will be construed to give meaning to the
remaining provisions of this Agreement in according with the
intent of this Agreement.
6.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but
all of which together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors and the Compensation
Committee, the Company has caused these presents to be executed in its name and
on its behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Executed in multiple originals and/or counterparts as of the
Effective Date.
\s\EARL W. MCNIEL
EARL W. MCNIEL
PRIDE INTERNATIONAL, INC.
CORPORATE SEAL
By: RAY H. TOLSON
RAY H. TOLSON
CEO and Chairman of the Board
ATTEST:
By: FRIDA A. MARTINEZ
Frida A. Martinez
Assistant Secretary
Page 23 of 23
EXHIBIT 21
PRIDE INTERNATIONAL, INC.
SUBSIDIARIES
- - ------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- - ------------------------------------------------------------------------------
PRIDE INTERNATIONAL, INC. Louisiana
Petroleum Supply Company Texas
Pride Offshore, Inc. Delaware
Mexico Drilling Limited, LLC Delaware
Ranger Well Service Texas
Ranger Corporation Delaware
Pride International Holdings, Inc. Delaware
Pride International Services, Inc. Delaware
Pride International Management Company Delaware
Pride International Ltd. British Virgin Islands
Pride South America Ltd. British Virgin Islands
Pride International, C.A. Venezuela
Pride Cyprus Ltd. Cyprus
Pride Limassol Ltd. Cyprus
Pride International JSC Russia
Pride International, S.A. Argentina
Larcom Insurance Ltd. Bermuda
Pride Drilling, C.A. Venezuela
Pride Peru S.A. Peru
Ingeser de Colombia, S.A. British Virgin Islands
Marlin Columbia Drilling Co., Inc. British Virgin Islands
*1*
<PAGE>
- - ------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- - ------------------------------------------------------------------------------
Pride Global Ltd. British Virgin Islands
SE Pacific Drilling Ltd. British Virgin Islands
Westville Management Corporation British Virgin Islands
Utah Drilling Limited British Virgin Islands
Pride International Personnel, Ltd. British Virgin Islands
Pride U.S. Personnel, Ltd. British Virgin Islands
Pride-Forasol-Foramer Ltd. British Virgin Islands
Dupont Maritime Ltd. British Virgin Islands
Durand Maritime Ltd. British Virgin Islands
Pride de Venezuela, C.A. Venezuela
Martin Maritime Limited Bahamas
Andre Maritime Ltd. Bahamas
Sonamer Limited Bahamas
Pride-Forasol, S.A. France
Forinter Ltd. Jersey
Pride-Foramer S.A. France
Al Jazirah Sharikat Corporation Liberia
Basafojagu (HS) Inc. Liberia
Caland Boren B.V. The Netherlands
Compagnie Monegasque De Services Comoser s.a.m. Monaco
Dayana Finance S.A. Panama
Drilling Labor Services PTE Ltd. Singapore
*2*
<PAGE>
- - ------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- - ------------------------------------------------------------------------------
Dundee Corp. Panama
Foracasp CEI
Foradel SDN B.H.D. Malaysia
Forasub, B.V. The Netherlands
Forafels Inc. Panama
Forarom SRI Romania
Forasol Drilling (West Africa) Ltd. Abuja
Forasol Arabia Limited Saudi Arabia
C.A. Foravep Venezuela
Hispano Americana de Petroleos S.A. HAPSA Argentina
Horwell S.A. France
Internationale de Travaux et de Materiel (I.T.M.) France
National Drilling & Services Co., L.L.C. Oman
S.B.M. France France
Societe Maritime De Services SOMASER France
Dupont Martime Ltd. Liberia
Inter-Drill Limited Bahamas Bahamas
Gisor Limited U.K.
Foramac Drilling Limited U.K.
Pride International Bolivia Ltda. Argentina
Amethyst Financial Company Ltd. British Virgin Islands
Petrodrill Two Limited British Virgin Islands
*3*
<PAGE>
- - ------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- - ------------------------------------------------------------------------------
Petrodrill Three Limited British Virgin Islands
Petrodrill Four Limited British Virgin Islands
Petrodrill Five Limited British Virgin Islands
Petrodrill Six Limited British Virgin Islands
Petrodrill Seven Limited British Virgin Islands
Pride Amethyst Ltd. British Virgin Islands
Petrodrill Two, Inc. Bahamas
Petrodrill Three, Inc. Bahamas
Techdrill Inc. Bahamas
Drillpetro Inc. Bahamas
Formaritima Ltd. British Virgin Islands
Petrodrill Offshore Inc. Bahamas
Petrodrill Engineering N.V. The Netherlands
BiGem Holdings N.V. The Netherlands
Compania Boliviana de Perforacion S.A.M. Bolivia
*4*
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Pride International, Inc. on Form S-8 (Registration Nos. 33-26854,
33-44823, 333-06823, 333-06825, 333-27661, 333-35089 and 333-35093) and on Form
S-3 (Registration Nos. 33-62425 and 333-44925) of our report dated March 30,
1999 on our audits of the consolidated financial statements of Pride
International, Inc. as of December 31, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998, which report is included in this
Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
March 31, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND THE YEAR THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 86,540
<SECURITIES> 0
<RECEIVABLES> 187,351
<ALLOWANCES> 1,354
<INVENTORY> 29,161
<CURRENT-ASSETS> 369,782
<PP&E> 1,725,787
<DEPRECIATION> 165,503
<TOTAL-ASSETS> 2,192,167
<CURRENT-LIABILITIES> 285,179
<BONDS> 289,807
0
0
<COMMON> 1
<OTHER-SE> 763,401
<TOTAL-LIABILITY-AND-EQUITY> 2,192,167
<SALES> 835,563
<TOTAL-REVENUES> 835,563
<CGS> 529,844
<TOTAL-COSTS> 694,600
<OTHER-EXPENSES> (7,056)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,776
<INCOME-PRETAX> 102,243
<INCOME-TAX> 24,726
<INCOME-CONTINUING> 24,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,517
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.39
</TABLE>
