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PROSPECTUS
SEACOR SMIT INC.
OFFER TO EXCHANGE 7.20% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR 7.20% SENIOR NOTES DUE 2009 WHICH HAVE NOT BEEN SO REGISTERED
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON DECEMBER 8, 1997, UNLESS EXTENDED.
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SEACOR SMIT Inc., a Delaware corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus (as
defined) and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 7.20% Senior Notes due
2009 (the "Exchange Notes") which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), for an equal principal amount of its
outstanding 7.20% Senior Notes due 2009 which have not been so registered (the
"Existing Notes"), of which an aggregate principal amount of $150,000,000 is
outstanding as of the date hereof. The form and terms of each of the Exchange
Notes will be the same in all material respects as the form and terms of each of
the Existing Notes, except that (i) the Exchange Notes will be registered under
the Securities Act and, hence will not bear legends restricting the transfer
thereof and (ii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Existing Notes under the Registration Agreement dated as of
September 22, 1997 (the "Registration Agreement"), which will terminate upon
consummation of the Exchange Offer. See "The Exchange Offer--Purpose and Effect
of the Exchange Offer." Except as discussed below, the Exchange Notes will be
available only in book-entry form. The Company expects that the Exchange Notes
issued pursuant to the Exchange Offer will be issued in the form of one or more
fully registered global notes that will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
its nominee. Beneficial interests in the global notes representing the Exchange
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by DTC and its participants. After the initial issuance of
such global notes, Exchange Notes in certificated form will be issued in
exchange for the global notes only in accordance with the terms and conditions
set forth in the Indenture (as defined). See "Description of Exchange
Notes--Book-Entry; Delivery and Form" and "--Certificated Notes."
The Existing Notes were issued and sold in a transaction exempt from the
registration requirements of the Securities Act and may not be offered or sold
in the United States unless so registered or pursuant to an applicable exemption
under the Securities Act. The Exchange Notes are being offered herewith in order
to satisfy certain obligations of the Company contained in the Registration
Agreement. Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
that the Exchange Notes to be issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than (i) a broker-dealer who purchases such Exchange Notes from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, or (ii) a person that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and such holders are not participating and have no arrangement with any
person to participate in the distribution of such Exchange Notes. However, the
Company has not sought a no-action letter with respect to the Exchange Offer and
there can be no assurance the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Eligible holders wishing to
accept the Exchange Offer must represent to the Company that such conditions
have been met. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. A broker-dealer may nonetheless be deemed to be
an "underwriter" under the Securities Act notwithstanding such disclaimer. This
Prospectus (as it may be amended or supplemented from time to time) may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days (exclusive of
any period during which any stop order shall be in effect suspending the
effectiveness of the Registration Statement (as defined)) after the Expiration
Date (as defined herein), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
(CONTINUED ON NEXT PAGE)
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SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DESCRIPTION OF CERTAIN FACTORS
WHICH HOLDERS OF EXISTING NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS NOVEMBER 5, 1997.
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(CONTINUED FROM PREVIOUS PAGE)
Holders of Existing Notes whose Existing Notes are not tendered and accepted
in the Exchange Offer will continue to hold such Existing Notes and will be
entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the indenture governing the Existing Notes
and the Exchange Notes (the Existing Notes and the Exchange Notes are sometimes
referred to herein collectively as the "Notes"). Following consummation of the
Exchange Offer, the holders of Existing Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the Securities
Act of the Existing Notes held by them. The Exchange Notes will evidence the
same debt as the Existing Notes and will be entitled to the benefits of the
indenture dated September 22, 1997 (the "Indenture") governing the Notes. The
Notes will bear interest at the rate of 7.20% per annum, payable semi-annually
on March 15 and September 15, commencing March 15, 1998. The Notes will mature
on September 15, 2009. The Company may redeem the Notes, in whole or in part, at
any time, at the redemption prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. The Notes will not be
subject to any sinking fund requirement. See "Description of Exchange
Notes--Optional Redemption." Other than restrictive covenants, including
limitations on liens and sale and leaseback transactions, the Indenture does not
contain any provisions that afford holders of the Notes protection in the event
of a highly leveraged or other transaction that may adversely affect such
holders. See "Description of Exchange Notes."
The Existing Notes are and the Exchange Notes will be senior unsecured
obligations of the Company. The Existing Notes rank and the Exchange Notes will
rank PARI PASSU in right of payment with all existing and future senior
indebtedness of the Company and will rank senior in right of payment to any
future subordinated indebtedness of the Company. The Notes will be effectively
subordinated to any secured debt of the Company to the extent of the assets
serving as security therefor.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Existing Notes being tendered for exchange. The Company will accept
for exchange any and all validly tendered Existing Notes not withdrawn prior to
5:00 p.m., New York City time, on December 8, 1997 unless extended by the
Company (the "Expiration Date"). Tenders of Existing Notes may be withdrawn at
any time prior to the Expiration Date. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer--Conditions." The Company has
agreed to pay all expenses incident to the Exchange Offer. The Company will not
receive any proceeds from the Exchange Offer.
The Existing Notes constitute securities for which there is no established
trading market. Any Existing Notes not tendered and accepted in the Exchange
Offer will remain outstanding. The Company does not currently intend to list the
Exchange Notes on any securities exchange. To the extent that any Existing Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Existing Notes could be adversely affected. No assurances can be
given as to the liquidity of the trading market for either the Existing Notes or
the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
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FORWARD-LOOKING INFORMATION
WHEN INCLUDED IN THIS PROSPECTUS OR IN DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, THE WORDS "EXPECTS," "INTENDS," "ANTICIPATES," "BELIEVES,"
"ESTIMATES" AND ANALOGOUS EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC
AND BUSINESS CONDITIONS, INDUSTRY FLEET CAPACITY, CHANGES IN FOREIGN AND
DOMESTIC OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITY, COMPETITION, CHANGES
IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND
COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER PREFERENCES AND VARIOUS OTHER
MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. THESE FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS PROSPECTUS. THE COMPANY EXPRESSLY
DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR ANY
CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN
EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY STATEMENT IS BASED.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549, and at the Commission's regional offices in Chicago, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and in New York, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such information may also be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov). In
addition, such reports, proxy statements and other information can be inspected
at The New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-4
(the "Registration Statement"), filed by the Company with the Commission under
the Securities Act. This Prospectus omits certain of the information contained
in the Registration Statement in accordance with the rules and regulations of
the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Notes. Statements contained herein concerning the provisions of any documents
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
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IMPORTANT
To properly tender Existing Notes, the following procedures must be
followed:
- Each beneficial owner owning interests in Existing Notes ("Beneficial
Owner") through a DTC Participant (as defined) must instruct such DTC
Participant to cause Existing Notes to be tendered in accordance with the
procedures set forth in this Prospectus and in the Letter of Transmittal.
- Each participant (a "DTC Participant") in the Depository Trust Company
("DTC") holding Existing Notes through DTC must (i) electronically
transmit its acceptance to DTC through the DTC Automated Tender Offer
Program ("ATOP"), for which the transaction will be eligible, and DTC will
then edit and verify the acceptance, execute a book-entry delivery to the
account of First Trust National Association (the "Exchange Agent") at DTC
and send an Agent's Message (as defined) to the Exchange Agent for its
acceptance, or (ii) comply with the guaranteed delivery procedures set
forth under "Exchange Offer--Guaranteed Delivery Procedures." By tendering
through ATOP, DTC Participants will expressly acknowledge receipt of the
accompanying Letter of Transmittal and agree to be bound by its terms and
the Company will be able to enforce such agreement against such DTC
participants.
- Each registered owner of certificated Existing Notes (a "Holder") must (i)
complete and sign the accompanying Letter of Transmittal, and mail or
deliver such Letter of Transmittal, and all other documents required by
the Letter of Transmittal, together with certificate(s) representing all
tendered Existing Notes, to the Exchange Agent at its address set forth
under "The Exchange Offer--Exchange Agent," or (ii) comply with the
guaranteed delivery procedures set forth under "The Exchange
Offer--Guaranteed Delivery Procedures."
For purposes of this Prospectus, "Tendering Holder" shall mean (i) each DTC
Participant that has properly transmitted (and not properly withdrawn) its
acceptance through ATOP and in respect of which DTC has sent an Agent's Message,
(ii) each Holder that has timely delivered to the Exchange Agent (and not
properly withdrawn) a properly completed and duly executed Letter of
Transmittal, and any other documents required by the Letter of Transmittal,
together with certificate(s) representing all tendered Existing Notes, or (iii)
each DTC Participant or Holder that has complied with the guaranteed delivery
procedures set forth herein.
The information in this Prospectus concerning DTC and its book-entry systems
has been obtained by the Company from sources that the Company believes to be
reliable, and the Company takes no responsibility for the accuracy thereof.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997; and
(iii) the Company's Current Reports on Form 8-K/A and Form 8-K filed
March 4, 1997 and May 2, 1997.
Each document or report filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED BY REFERENCE HEREIN (OTHER
THAN EXHIBITS NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO THE TEXTS OF SUCH
DOCUMENTS). REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO: SEACOR SMIT INC.,
1370 AVENUE OF THE AMERICAS, 25TH FLOOR, NEW YORK, NY 10019, ATTENTION:
SECRETARY, TELEPHONE NUMBER (212) 307-6633.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
MADE BY DECEMBER 1, 1997.
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. AS
USED HEREIN AND UNLESS THE CONTEXT REQUIRES OTHERWISE, THE "COMPANY" MEANS
SEACOR SMIT INC. AND ITS SUBSIDIARIES AS WELL AS ITS PREDECESSORS, AND "SEACOR"
MEANS SEACOR SMIT INC.
THE COMPANY
The Company is a major provider of offshore marine services to the oil and
gas exploration and production industry and is one of the leading providers of
oil spill response services to owners of tank vessels and oil storage,
processing and handling facilities. As of June 30, 1997, the Company operated a
diversified fleet of 306 vessels primarily dedicated to servicing offshore oil
and gas exploration and production facilities in the U.S. Gulf of Mexico, the
North Sea, offshore West Africa, Mexico, the Far East, Latin America and the
Mediterranean. The recent consummation of the acquisition of assets, including
certain vessels owned by Galaxie Marine Service, Inc., Moonmaid Marine, Inc.,
Waveland Marine Service, Inc. and Triangle Marine Inc. (the "Galaxie
Transaction"), as well as a vessel construction contract has enlarged the
Company's fleet capacity in the U.S. Gulf of Mexico. The Company's offshore
service vessels deliver cargo and personnel to offshore installations, handle
anchors for drilling rigs and other marine equipment, support offshore
construction and maintenance work and provide standby safety support. The
Company also furnishes vessels for special projects such as well stimulation,
seismic data gathering, freight hauling and line handling. In connection with
its offshore marine services, the Company, through Energy Logistics, Inc., a
joint venture with Baker Energy, a unit of the Michael Baker Corporation, a U.S.
public company, also offers logistics services for the offshore industry,
including the coordination and provision of marine, air and land transportation,
materials handling and storage, inventory control and "just-in-time"
procurement.
The Company's environmental services business principally provides
contractual oil spill response services to entities who store, transport,
produce or handle petroleum and certain other non-petroleum oils as required by
the Oil Pollution Act of 1990 ("OPA 90") and various state regulations. The
Company's services, provided primarily through its indirect wholly-owned
subsidiary, National Response Corporation ("NRC"), also include training for and
supervision of activities in response to oil spill emergencies and the
maintenance of specialized equipment for immediate deployment and spill
response. NRC has acted as the principal oil spill response contractor on
several of the largest oil spills that have occurred in the United States since
the enactment of OPA 90.
In August 1997, SEACOR Offshore Rigs, Inc. ("SEACOR Rigs"), a wholly-owned
subsidiary of SEACOR, invested approximately $9.0 million in exchange for a 50%
interest in Chiles Offshore LLC ("Chiles"), a joint venture and strategic
alliance created to manage and invest in partnerships which will construct, own
and operate two premium jackup drilling rigs. Chiles has contracted for delivery
of such two rigs in 1999 for estimated total project costs of approximately $177
million and, in connection therewith, obtained an option to purchase one
additional premium jackup drilling rig. The Company believes that this business
is complementary to SEACOR's marine transportation and logistics business.
SEACOR Rigs anticipates contributing an additional $26.0 million in equity
investments in Chiles or a successor to Chiles to partially fund construction.
It is anticipated that SEACOR Rigs will initially own 80% of the equity in this
venture; however, the Company anticipates that this ownership interest will be
reduced through the sale of additional equity interests to third parties. On
September 8, 1997, Chiles entered into a letter of intent providing for the
construction of two additional premium jackup drilling rigs and for options to
construct two more premium jackup drilling rigs. Estimated average project costs
for each rig would be approximately $96.0 million. The Company does not
presently intend to fund any portion of such costs, which it anticipates would
be funded by debt and additional third party equity investments. Any such
additional rig transactions are contingent upon the preparation, negotiation and
execution of definitive
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documentation and Chiles' obtaining financing therefor by December 7, 1997, and,
consequently, there can be no assurance that any such transaction will be
consummated.
BUSINESS STRATEGY
The Company's strategy is to identify and pursue opportunities for growth,
development and integration of its offshore marine, environmental services and
other related marine and energy businesses.
OFFSHORE MARINE SERVICES
The Company seeks to pursue growth opportunities while balancing its
exposure to the cyclical nature of the oil and gas exploration and production
industry. The Company implements this strategy by (i) diversifying
geographically to enhance asset utilization and enable the Company to take
advantage of cyclical market opportunities, (ii) maintaining a balance between
long-term charters, which enhance asset utilization, increase the predictability
of cash flows and foster lasting customer relationships, and short term
charters, which provide the Company with flexibility to take advantage of
improving market conditions and opportunities in different markets, (iii)
maintaining a diversified fleet of vessels that enables the Company to service a
broad range of customer requirements and (iv) meeting its customers' needs
through efficient use of existing vessels and logistical systems and through
modifying and converting vessels for specialized services.
ENVIRONMENTAL SERVICES
The Company seeks to expand its OPA 90 related business and balance its
exposure to the event-driven nature of the oil spill response business by (i)
pursuing new customer relationships and expanding the scope of its services to
customers by identifying, developing and providing services ancillary to the
requirements of OPA 90, (ii) expanding its oil spill response and ancillary
services businesses internationally, (iii) expanding its sources of retainer
revenue by actively marketing its environmental services to vessel owners,
facilities and others who must comply with various state and federal
environmental regulations but are not subject to the requirements of OPA 90 and
(iv) maintaining a highly efficient and cost-effective spill response network by
coordinating and managing existing resources and supplementing them with a
variety of purpose-built equipment.
OTHER RELATED BUSINESSES
The Company seeks acquisition and investment opportunities in other related
marine and energy businesses that are complementary to the Company's current
operations, such as its August 1997 investment in Chiles.
Through implementation of its business strategy and as a result of improving
industry conditions, the Company increased net income in the first six months of
1997 to $66.9 million, or $4.14 per fully-diluted share, from $13.2 million, or
$1.16 per fully-diluted share, respectively, in the first six months of 1996.
Operating revenues increased to $164.4 million from $102.7 million, and EBITDA
increased to $74.1 million from $34.3 million for the comparable periods. Total
assets were $720.7 million at June 30, 1997 compared to $636.5 million at
December 31, 1996.
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THE EXCHANGE OFFER
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<S> <C>
EXISTING NOTES................ The Existing Notes were sold by the Company on September 22, 1997, to Salomon
Brothers Inc, Bear Stearns & Co. Inc. and Credit Suisse First Boston Corporation
(collectively, the "Initial Purchasers") pursuant to a Purchase Agreement, dated
September 15, 1997 (the "Purchase Agreement"). The Initial Purchasers
subsequently resold the Notes to qualified institutional buyers pursuant to Rule
144A under the Securities Act or outside the United States in compliance with
Regulation S under the Securities Act.
REGISTRATION AGREEMENT........ Pursuant to the Purchase Agreement, the Company and the Initial Purchasers
entered into the Registration Agreement, which grants the holders of the
Existing Notes certain exchange and registration rights. The Exchange Offer is
intended to satisfy such exchange and registration rights which terminate upon
the consummation of the Exchange Offer.
SECURITIES OFFERED............ $150,000,000 aggregate principal amount of 7.20% Senior Notes due 2009, which
have been registered under the Securities Act (the "Exchange Notes").
THE EXCHANGE OFFER............ The Company is offering to exchange $1,000 principal amount of Exchange Notes
for each $1,000 principal amount of Existing Notes that are properly tendered
and accepted. The Company will issue Exchange Notes on or promptly after the
Expiration Date. As of the date hereof, there is $150,000,000 aggregate
principal amount of Existing Notes outstanding. The terms of the Exchange Notes
are identical in all material respects to the terms of the Existing Notes for
which they may be exchanged pursuant to the Exchange Offer, except that the
Exchange Notes are freely transferable by holders thereof (other than as
provided herein), and are not subject to any covenant restricting transfer
absent registration under the Securities Act. See "The Exchange Offer." The
Exchange Offer is not conditioned upon any minimum aggregate principal amount of
Existing Notes being tendered for exchange.
</TABLE>
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<TABLE>
<S> <C>
Based on no-action letters issued by the staff of the Commission to third
parties with respect to similar transactions, including "Exxon Capital Holdings
Corporation" (available May 13, 1988) and "Morgan Stanley & Co. Incorporated"
(available June 5, 1991) and similar no-action letters, the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange for
Existing Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than (i) a broker-dealer who purchases such Exchange
Notes from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 of the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holders are not engaged in, have no
arrangement or understanding with any person to participate in, and do not
intend to engage in, any distribution of the Exchange Notes. However, the
Company has not sought a no-action letter with respect to the Exchange Offer and
there can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Each holder of Exchange Notes,
other than a broker-dealer, must represent that such conditions have been met.
In addition, each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal accompanying this Prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
nonetheless be deemed to be an "underwriter" under the Securities Act
notwithstanding such disclaimer. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. Pursuant to the
Registration Agreement, the Company has agreed that, for a period of 180 days
(exclusive of any period during which a stop order shall be in effect suspending
the effectiveness of the Registration Statement) after the Expiration Date, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "The Exchange Offer--Purpose and Effect of the
Exchange Offer" and "Plan of Distribution."
</TABLE>
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<TABLE>
<S> <C>
Any holder who tenders in the Exchange Offer with the intention to participate,
or for the purpose of participating, in a distribution of the Exchange Notes
will not be able to rely on the position of the staff of the Commission
enunciated in no-action letters and, in the absence of an applicable exemption,
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Failure to comply with
such requirements in such instance may result in such holder incurring liability
under the Securities Act for which the holder is not indemnified by the Company.
EXPIRATION DATE............... 5:00 p.m., New York City time, on December 8, unless the Exchange Offer is
extended, in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
ACCRUED INTEREST OR
ACCUMULATED DIVIDENDS ON THE
EXCHANGE NOTES.............. Each Exchange Note will bear interest from the most recent date to which
interest has been paid on the Existing Notes or, if no interest has been paid on
such Existing Notes, from September 22, 1997.
EXCHANGE DATE................. As soon as practicable after the close of the Exchange Offer, the Issuer will
accept for exchange all Existing Notes properly tendered and not validly
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. See
"The Exchange Offer-- Withdrawal of Tenders."
CONDITIONS TO
THE EXCHANGE OFFER.......... The Exchange Offer is subject to customary conditions, certain of which may be
waived by the Company. The Company reserves the right to terminate or amend the
Exchange Offer at any time prior to the Expiration Date upon the occurrence of
any such condition. The Exchange Offer is not conditioned on any minimum
aggregate principal amount of Existing Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
CONSEQUENCES OF FAILURE
TO EXCHANGE................. Any Existing Notes not tendered pursuant to the Exchange Offer will remain
outstanding and continue to accrue interest. Such Existing Notes will remain
"restricted securities" under the Securities Act, subject to the transfer
restrictions described herein. As a result, the liquidity of the market for such
Existing Notes could be adversely affected upon completion of the Exchange
Offer. See "Risk Factors--Consequences of Failure to Exchange" and "The Exchange
Offer--Consequences of Failure to Exchange."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS.............. The exchange pursuant to the Exchange Offer should not be a taxable event for
U.S. federal income tax purposes. See "Certain U.S. Federal Income Tax
Considerations."
USE OF PROCEEDS............... There will be no cash proceeds to the Company from the Exchange Offer. See "Use
of Proceeds."
PROCEDURES FOR TENDERING...... Each beneficial owner owning interests in Existing Notes through a DTC
Participant must instruct such DTC Participant to cause Existing Notes to be
tendered in accordance with the procedures set forth in this Prospectus and in
the Letter of Transmittal. See "The Exchange Offer--Procedures for
Tendering--Existing Notes held through DTC."
Each DTC Participant holding Existing Notes through DTC must (i) electronically
transmit its acceptance to DTC through ATOP for which the transaction will be
eligible, and DTC will then edit and verify the acceptance, execute a book-entry
delivery to the Exchange Agent's account at DTC and send an Agent's Message (as
defined herein) to the Exchange Agent for its acceptance, or (ii) comply with
the guaranteed delivery procedures set forth in this Prospectus and in the
Letter of Transmittal. By tendering through ATOP, DTC Participants will
expressly acknowledge receipt of the accompanying Letter of Transmittal and
agree to be bound by its terms and the Company will be able to enforce such
agreement against such DTC participants. See "The Exchange Offer--Procedures for
Tendering--Existing Notes held through DTC," and "-- Guaranteed Delivery
Procedures--Existing Notes held through DTC."
Each Holder must (i) complete and sign a Letter of Transmittal, and mail or
deliver such Letter of Transmittal, and all other documents required by the
Letter of Transmittal, together with certificate(s) representing all tendered
Existing Notes, to the Exchange Agent at its address set forth in this
Prospectus and in the Letter of Transmittal, or (ii) comply with the guaranteed
delivery procedures set forth in this Prospectus. See "The Exchange
Offer--Procedures for Tendering," "--Exchange Agent," and "--Guaranteed Delivery
Procedures--Existing Notes held by Holders."
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
By tendering, each holder will represent to the Company that, among other
things, (i) it is not an affiliate of the Company, (ii) it is not a
broker-dealer tendering Existing Notes acquired directly from the Company for
its own account, (iii) the Exchange Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of such holder and
(iv) it has no arrangements or understandings with any person to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes. See "The
Exchange Offer-- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES.................. DTC Participants holding Existing Notes through DTC who wish to cause their
Existing Notes to be tendered, but who cannot transmit their acceptances through
ATOP prior to the Expiration Date, may effect a tender in accordance with the
procedures set forth in this Prospectus and in the Letter of Transmittal. See
"Exchange Offer--Guaranteed Delivery Procedures." Holders who wish to tender
their Existing Notes but (i) whose Existing Notes are not immediately available
and will not be available for tendering prior to the Expiration Date, or (ii)
who cannot deliver their Existing Notes, the Letter of Transmittal, or any other
required documents to the Exchange Agent prior to the Expiration Date, may
effect a tender in accordance with the procedures set forth in this Prospectus.
See "The Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS............. The tender of Existing Notes pursuant to the Exchange Offer may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date, in
accordance with the procedures set forth in this Prospectus. See "The Exchange
Offer-- Withdrawal of Tenders."
EXCHANGE AGENT................ First Trust National Association is serving as Exchange Agent in connection with
the Exchange Offer. See "The Exchange Offer--Exchange Agent."
SHELF REGISTRATION
STATEMENT................... Under circumstances described in the Registration Agreement, certain Initial
Purchasers of Existing Notes may require the Company to file, and use its best
efforts to cause to become effective, a shelf registration statement under the
Securities Act, which would cover resales of Existing Notes by such holders. See
"Exchange Offer--Purpose and Effect of the Exchange Offer."
</TABLE>
12
<PAGE>
TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
SECURITIES OFFERED................ $150.0 million principal amount of 7.20% Notes Due 2009,
which have been registered under the Securities Act.
MATURITY.......................... The Exchange Notes will mature on September 15, 2009.
INTEREST PAYMENT DATES............ Interest on the Exchange Notes is payable semiannually
on each March 15 and September 15, commencing March 15,
1998.
OPTIONAL REDEMPTION............... The Exchange Notes may be redeemed at any time at the
option of the Company, in whole or from time to time in
part, at a price equal to 100% of the principal amount
thereof plus accrued and unpaid interest to the date of
redemption plus a Make-Whole Premium relating to the
then prevailing Treasury Yield and the remaining life of
the Notes. See "Description of Exchange Notes--Optional
Redemption."
CERTAIN COVENANTS................. The Indenture relating to the Exchange Notes will
contain limitations on the Company's ability to (i)
incur certain liens and (ii) engage in certain sale and
leaseback transactions. See "Description of Exchange
Notes--Certain Covenants."
RANKING........................... The Exchange Notes will be senior securities of the
Company, ranking PARI PASSU with all other
unsubordinated and unsecured indebtedness of the
Company. The Company, as of September 30, 1997, had
outstanding $30.7 million of senior indebtedness,
approximately $6.8 million of which was principal amount
of borrowings under a $100.0 million revolving bank
credit facility with Den norske Bank ASA, as Agent for
itself and the other lenders named therein (the "DnB
Facility"), and $150.0 million of Existing Notes, with
which the Exchange Notes would rank PARI PASSU.
USE OF PROCEEDS................... There will be no cash proceeds to the Company from the
exchanges pursuant to the Exchange Offer.
</TABLE>
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary historical and pro forma financial
information for the Company at the dates and for the periods indicated. The
following data should be read in conjunction with "Selected Historical Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements and notes
thereto incorporated by reference in this Offering Memorandum. The historical
consolidated results of operations for the six months ended June 30, 1996 and
June 30, 1997 are unaudited and not necessarily indicative of the results of
operations for the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
--------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA PRO FORMA
1994 1995 1996 1996(1) 1996 1996(2)
--------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue
Marine......................................... $ 93,985 $ 104,894 $ 193,557 $ 257,422 $ 87,736 $ 119,905
Environmental.................................. -- 21,765 30,887 30,887 15,012 15,012
Operating expenses
Marine......................................... 55,860 66,205 108,043 148,339 50,027 70,325
Environmental.................................. -- 12,223 16,625 16,625 8,156 8,156
Administrative and general....................... 7,278 13,953 22,304 25,983 11,117 12,961
Depreciation and amortization.................... 14,108 18,842 24,967 33,250 11,542 15,684
Operating income................................. 16,739 15,436 52,505 64,112 21,906 27,791
Interest Expense............................... 5,422 6,681 5,713 13,426 3,452 7,266
Interest (Income).............................. (1,874) (2,583) (3,558) (3,558) (1,042) (1,042)
Net income....................................... 9,327 11,325 34,153 37,332 13,239 14,029
Net income per common share:
Assuming no dilution(3)........................ $ 1.29 $ 1.48 $ 2.90 $ 2.66 $ 1.31 $ 1.00
Assuming full dilution......................... 1.22 1.36 2.67 2.61 1.16 1.00
Weighted average common shares:
Assuming no dilution(3)........................ 7,219,002 7,665,235 11,776,743 14,037,057 10,071,417 14,005,385
Assuming full dilution......................... 9,625,544 10,032,332 13,568,933 16,511,369 12,419,836 14,041,078
STATEMENT OF CASH FLOWS DATA:
Cash provided by operating activities............ $ 21,150 $ 9,939 $ 58,737 -- $ 22,669 --
Cash provided by (used in) investing
activities..................................... (4,855) (78,695) (100,120) -- (7,511) --
Cash provided by (used in) financing
activities..................................... (7,714) 53,291 161,482 -- (15,766) --
OTHER FINANCIAL DATA:
EBITDA(4)........................................ $ 32,923 $ 35,964 $ 79,730 $ 99,620 $ 34,291 $ 44,318
Ratio of earnings to fixed charges(5)............ 3.17 3.18 9.71 5.08 6.33 3.91
Ratio of EBITDA to certain fixed charges(6)...... 6.07 5.38 13.96 7.42 9.93 6.10
<CAPTION>
<S> <C>
1997
----------
<S> <C>
INCOME STATEMENT DATA:
Operating revenue
Marine......................................... $ 154,948
Environmental.................................. 9,479
Operating expenses
Marine......................................... 74,879
Environmental.................................. 4,100
Administrative and general....................... 14,115
Depreciation and amortization.................... 17,621
Operating income................................. 53,712
Interest Expense............................... 5,641
Interest (Income).............................. (4,561)
Net income....................................... 66,861
Net income per common share:
Assuming no dilution(3)........................ $ 4.74
Assuming full dilution......................... 4.14
Weighted average common shares:
Assuming no dilution(3)........................ 14,119,642
Assuming full dilution......................... 16,969,634
STATEMENT OF CASH FLOWS DATA:
Cash provided by operating activities............ $ 39,870
Cash provided by (used in) investing
activities..................................... (20,843)
Cash provided by (used in) financing
activities..................................... (5,841)
OTHER FINANCIAL DATA:
EBITDA(4)........................................ $ 74,094
Ratio of earnings to fixed charges(5)............ 16.74
Ratio of EBITDA to certain fixed charges(6)...... 11.94
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
1997
<S> <C>
HISTORICAL
---------------
<CAPTION>
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and temporary investments................................................................. $ 162,213
Total assets................................................................................... 720,710
Long-term debt (including current portion): --
Capital lease obligations.................................................................... 23,393
5 3/8% Convertible Subordinated Notes Due November 15, 2006.................................. 187,750
DnB Facility................................................................................. 6,991
Other senior secured debt.................................................................... 750
Total debt..................................................................................... 218,884
Total stockholders' equity..................................................................... 411,143
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
(1) Reflects adjustments to the Company's historical results of operations for
the year ended December 31, 1996, to give effect to (i) the 6.0% Note
Conversion, (ii) the consummation of the 1996 Common Stock Offering
(including the application of the net proceeds therefrom), (iii) the
completion of the 1996 CNN Transaction (including the issuance of 156,650
shares of Common Stock upon conversion of the 2.5% Notes), (iv) the
Convertible Notes Placement and (v) the Smit Transaction, in each case as if
such transactions occurred on January 1, 1996. See "1996 Transactions."
(2) Reflects adjustments to the Company's historical results of operations for
the six months ended June 30, 1996, to give effect to (i) the 6.0% Note
Conversion, (ii) the consummation of the 1996 Common Stock Offering
(including the application of the net proceeds therefrom), (iii) the
completion of the 1996 CNN Transaction (including the issuance of 156,650
shares of Common Stock upon conversion of the 2.5% Notes), (iv) the
Convertible Notes Placement and (v) the Smit Transaction, in each case as if
such transactions occurred on January 1, 1996. See "1996 Transactions."
(3) This computation is submitted in accordance with Regulation S-K Item
601(b)(11). For the periods noted, it is contrary to APB Opinion No. 15 as
per footnote to paragraph 14 thereto which does not require the inclusion of
common stock equivalents in the earnings per share calculation if the
dilutive effect is less than 3%.
(4) As used herein, "EBITDA" is operating income plus depreciation and
amortization, amortization of deferred mobilization costs, which is included
in marine operating expenses, minority interest in (income) loss of
subsidiary and equity in net earnings of 50% or less owned companies. EBITDA
should not be considered by an investor as an alternative to net income as
an indicator of the Company's operating performance or to cash flows as a
measure of liquidity.
(5) This computation is submitted in accordance with Regulation S-K Item 503(d).
Earnings are computed as Income Before Income Taxes, Minority Interest,
Equity in Earnings of 50% or Less Owned Companies, and Extraordinary Item
plus fixed charges and Minority Interest in Income of Subsidiary. Fixed
charges are computed as interest, whether expensed or capitalized,
amortization of debt expense and discount and the portion of rental expense
representative of interest.
(6) As used herein, the ratio of EBITDA to certain fixed charges is EBITDA
divided by interest, whether expensed or capitalized, exclusive of
amortization of debt expense and discount. The ratio of EBITDA to certain
fixed charges should not be considered by an investor as an alternative to
cash flows or ratio of earnings to fixed charges as a measure of liquidity.
15
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS.
INDUSTRY CONDITIONS
OFFSHORE MARINE SERVICES; MARKET VOLATILITY
The Company's offshore vessel operations are dependent on activity in the
offshore oil and gas exploration and production industry. The level of
exploration and development of offshore areas is affected by both short-term and
long-term trends in oil and gas prices which, in turn, are related to the demand
for petroleum products and the current availability of oil and gas resources.
The level of offshore activity also is related to local policies that influence
drilling activities. In recent years, oil and gas prices and, therefore, the
level of offshore exploration and drilling activity have been volatile. A
significant or prolonged decline in future oil and gas prices likely would
result in reduced exploration and development of offshore areas and a decline in
the demand for offshore marine services. Such reduced activity could have a
material adverse effect on the Company's financial condition and results of
operations.
Charter rates for the Company's vessels also are dependent on the supply of
offshore marine vessels. Excess vessel capacity in the industry can result from
refurbishment of inactive vessels, conversion of vessels formerly dedicated to
services other than oil support and related offshore marine activities and
construction of new vessels. The addition of new capacity to the worldwide
offshore marine fleet would increase competition in those markets where the
Company presently operates which, in turn, could have a material adverse effect
on the Company's financial condition and results of operations.
ENVIRONMENTAL SERVICES
The environmental response business is dependent upon the development,
interpretation and enforcement of regulations promulgated under OPA 90 and, to a
lesser extent, upon oil spill response regulations developed at the state level.
There currently is no uniformity of regulatory development or enforcement on a
federal or state level. The Company believes that it generally benefits from
increasingly stringent oil spill regulations and from increased enforcement of
such regulations (which, in each case, increases demand for NRC's services).
However, a relaxation of oil spill requirements or decreased enforcement of such
regulations could reduce demand for NRC's services and, therefore, have a
material adverse effect on the Company's financial condition and results of
operations.
RELIANCE ON FOREIGN OPERATIONS
For the six months ended June 30, 1997, approximately 41% of the Company's
offshore marine revenues were derived from foreign operations. The Company's
foreign offshore marine operations are subject to various risks inherent in
conducting business in foreign nations. These risks include, among others,
political instability, potential vessel seizure, nationalization of assets,
currency restrictions and exchange rate fluctuations, import-export quotas and
other forms of public and governmental regulation, all of which are beyond the
control of the Company. Although, historically, the Company's operations have
not been affected materially by such conditions or events, it is not possible to
predict whether any such conditions or events might develop in the future. The
occurrence of any one or more of such conditions or events could have a material
adverse effect on the Company's financial condition and results of operations.
The Company currently operates 33 vessels offshore West Africa, which
primarily service the local offshore oil and gas industry. The Company's
operations offshore West Africa are highly dependent on the level of activity in
Nigeria. At this time, Nigeria, because of its domestic policies, has become the
subject of certain international sanctions, including the suspension of
development aid by the European Union and the suspension of Nigeria from the
Commonwealth of Nations. Additional sanctions may be imposed in
16
<PAGE>
the future, which could include economic sanctions, such as an oil embargo.
Economic sanctions or an oil embargo would have a significant negative impact on
activity in the oil and gas industry offshore West Africa, which in turn would
have a negative impact on the Company's operations in that area. There can be no
assurance that the effects of economic sanctions or an oil embargo with respect
to Nigeria would not have a material adverse effect on the Company's financial
condition and results of operations.
CURRENCY FLUCTUATIONS
Due to its foreign operations, the Company is exposed to currency
fluctuations and exchange rate risks. To minimize the financial impact of these
risks, the Company attempts to contract the majority of its services in U.S.
dollars. However, in certain of the Company's foreign operations, the Company
collects revenues and pays expenses in local currency. For financial statement
reporting purposes, these accounts are translated into U.S. dollars at the
weighted average exchange rates during the relevant period.
Because the Company conducts substantially all its operations in U.S.
dollars, to the extent the value of the U.S. dollar decreases in relation to the
value of applicable foreign currencies, such decrease potentially could
adversely affect the Company's operating revenues in foreign jurisdictions. To
date, currency fluctuations have not had a material impact on the Company's
financial condition or results of operations. The Company has a policy of
monitoring its foreign currency exposure and has entered into certain hedging
agreements.
AGE OF FLEET
As of June 30, 1997, the average age of the Company's owned offshore marine
service fleet was approximately 14.2 years. The Company believes that after an
offshore supply vessel has been in service for approximately 25 years, the
amount of expenditures (which typically increase with vessel age) necessary to
satisfy required marine certification standards may not be economically
justifiable. If the Company is unable to replace its vessels at the end of their
useful economic lives, the cost of building new vessels could materially
increase the Company's capital expenditures. There can be no assurance that the
Company will be able to maintain its fleet by extending the economic life of
existing vessels or acquiring new or used vessels, or that the Company's
financial resources will be sufficient to enable it to make capital expenditures
for such purposes.
COMPETITION
Both the Company's marine and environmental segments operate in highly
competitive industries. In addition to price, service and reputation, the
principal competitive factors for offshore supply fleets include the existence
of national flag preference, operating conditions and intended use (all of which
determine the suitability of vessel types), complexity of maintaining logistical
support and the cost of transferring equipment from one market to another. See
"--Industry Conditions--Offshore Marine Services; Market Volatility" for other
factors and "Business--Strategy--Offshore Marine Services."
The principal competitive factors in the environmental services business are
price, service, reputation, experience and operating capabilities. The Company
believes that the lack of uniformity of regulatory development and enforcement
on a federal and state level has created a lower barrier of entry in several
market segments which has increased the number of competitors. NRC faces
competition from the Marine Spill Response Corporation (a non-profit corporation
funded by the major integrated oil companies), other industry cooperatives and
also from smaller contractors who target specific market niches.
HOLDING COMPANY STRUCTURE
The Notes will be general unsecured obligations of the Company. The Notes
will not be guaranteed by the Company's subsidiaries and will not be secured by
any assets of such subsidiaries. Because the Company conducts its offshore
marine operations through its operating subsidiaries, the Company's ability
17
<PAGE>
to service its debt obligations, including its ability to pay the principal of
and interest on the Notes, is strictly dependent upon the earnings and cash
flows of its subsidiaries and the ability of these subsidiaries to make funds
available to the Company for such purpose (whether in the form of intercompany
loans, dividends or otherwise). The Company's subsidiaries are distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts due
pursuant to the Notes or to make any funds available therefor, whether by
dividends, interest, loans, advances or other payments. In addition, the payment
of dividends and the making of loans, advances and other payments to the Company
by its subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business and other considerations.
As a consequence of the Company's holding company structure, the Notes are
effectively subordinated in right of payment to the prior payment in full of all
existing and future obligations and liabilities of the Company's subsidiaries.
Therefore, the claims of creditors of the Company's subsidiaries will, in
respect of the assets of such subsidiaries, have priority over claims of the
Company's creditors (including holders of the Notes). The Indenture will not
restrict or limit the ability of the Company's subsidiaries to incur, assume or
guarantee any indebtedness.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange their Existing Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such securities as set forth in the legend thereon
and in the Offering Memorandum dated September 15, 1997, because the Existing
Notes were issued pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Existing Notes may not be offered or sold
unless registered under the Securities Act and applicable state securities laws,
or pursuant to an exemption therefrom, or in a transaction not subject to the
Securities Act and applicable state securities laws. The Company does not intend
to register the Existing Notes under the Securities Act and, after consummation
of the Exchange Offer, will not be obligated to do so except under limited
circumstances. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer." Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties with respect to similar transactions,
including "Exxon Capital Holdings Corporation" (available May 13, 1988) and
Morgan Stanley & Co. Incorporated" (available June 5, 1991) and similar
no-action letters, the Company believes that the Exchange Notes issued pursuant
to the Exchange Offer in exchange for Existing Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchases such Exchange Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act,
or (ii) a person that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
securities are acquired in the ordinary course of such holder's business, such
holders have no arrangement with any person to participate in the distribution
of such securities and neither such holders nor any such other person is
engaging in or intends to engage in a distribution of such securities. Any
holder of Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution" and "The Exchange Offer--Procedures for Tendering." To the extent
the Existing Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Existing Notes could be
adversely affected. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer."
18
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Agreement. In consideration for issuing the
Exchange Notes contemplated in this Prospectus, the Company will exchange
Existing Notes (in a like principal amount), the form and terms of which are the
same as the form and terms of such Existing Notes, except as otherwise described
herein. The Existing Notes surrendered in exchange for Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company. As such, no effect has been given to the Exchange Offer in the
capitalization table. The Company will not receive any proceeds from the
Exchange Offer. The gross proceeds to the Company from the offering of Existing
Notes on September 22, 1997 (the "Existing Notes Offering") were approximately
$148.8 million net of discounts to the Initial Purchasers (before deducting fees
and expenses relating to such Offering). The net proceeds of the Existing Notes
Offering will be used to fund certain anticipated capital expenditures for
vessels and rigs, to pay up to $47.2 million in contractual obligations to Smit
Internationale N.V. ("Smit") and to finance potential acquisitions and joint
ventures. The balance, if any, of the net proceeds will be used for general
corporate purposes. See "Capitalization."
CAPITALIZATION
The following table sets forth the cash and cash equivalents, short-term
borrowings and capitalization of the Company at June 30, 1997, (i) on an
historical basis and (ii) as adjusted to reflect the sale of the Notes offered
hereby for the Existing Notes. The information set forth in the table below
should be read in conjunction with the Consolidated Financial Statements and
notes thereto incorporated by reference in this Prospectus. For additional
information as to the capitalization of the Company, see "Selected Historical
Financial Information" contained herein and Management's Discussion and Analysis
of Financial Condition and Results of Operations and the consolidated financial
statements of the Company and the related notes thereto in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and its Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Cash and Cash Equivalents................................................................ $ 162,213 $ 309,563
---------- -----------
---------- -----------
Short-term Borrowings.................................................................... $ -- $ --
---------- -----------
---------- -----------
Current portion of long-term debt........................................................ $ 1,797 $ 1,797
---------- -----------
Long-term Debt:
7.20% Senior Notes Due 2009............................................................ $ -- $ 148,800
DnB Facility........................................................................... 6,991 6,991
Capital Lease Obligations.............................................................. 21,746 21,746
5 3/8% Convertible Subordinated Notes Due November 15, 2007............................ 187,750 187,750
Other.................................................................................. 600 600
---------- -----------
Total long-term debt................................................................. 217,087 365,887
Minority Interests and Indebtedness to Minority Shareholder.............................. 714 714
Stockholders' Equity:
Common stock, $.01 par value........................................................... 140 140
Additional paid-in capital............................................................. 264,391 264,391
Retained earnings...................................................................... 158,866 158,866
Less 162,768 shares held in treasury, at cost.......................................... (5,137) (5,137)
Less unamortized restricted stock compensation......................................... (1,191) (1,191)
Currency translation adjustments....................................................... (5,926) (5,926)
---------- -----------
Total stockholders' equity........................................................... 411,143 411,143
---------- -----------
Total capitalization................................................................. $ 630,741 $ 778,827
---------- -----------
---------- -----------
</TABLE>
19
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected consolidated income statement and
balance sheet information for each of the five years in the period ended
December 31, 1996, which, in the case of the four-year period ended December 31,
1996, has been derived from consolidated financial statements of the Company
that have been audited by Arthur Andersen LLP, independent public accountants.
The selected consolidated income statement and balance sheet data for the six
months ended June 30, 1996 and 1997 are derived from the Company's unaudited
financial statements. Interim results, in the opinion of management, include all
adjustments (consisting solely of normal recurring adjustments) necessary to
present fairly the financial information for such periods; however, such results
are not necessarily indicative of the results which may be expected for any
other interim period or for a full year. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in the Company's annual report to
shareholders on Form 10-K for the year ended December 31, 1996 and quarterly
report on Form 10-Q for the quarterly period ended June 30, 1997 and the
Consolidated Financial Statements and the notes thereto each incorporated by
reference in this registration statement. Pro forma financial statements of the
Company are also presented elsewhere in this registration statement. See "Pro
Forma Financial Statements."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30
------------------------------------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue:
Marine.................................................... $ 74,317 $ 92,168 $ 93,985 $104,894 $193,557 $ 87,736 $154,948
Oil spill response........................................ -- -- -- 8,927 12,466 5,919 1,637
Environmental retainer and other service.................. -- -- -- 12,838 18,421 9,093 7,842
-------- -------- -------- -------- -------- -------- --------
74,317 92,168 93,985 126,659 224,444 102,748 164,427
Costs and Expenses:
Costs of oil spill response............................... -- -- -- 7,643 10,398 5,392 1,562
Operating expenses -
Marine.................................................. 46,775 53,958 55,860 66,205 108,043 50,027 74,879
Environmental........................................... -- -- -- 4,580 6,227 2,764 2,538
Administrative and general................................ 5,211 7,187 7,278 13,953 22,304 11,117 14,115
Depreciation and amortization............................. 12,804 12,107 14,108 18,842 24,967 11,542 17,621
-------- -------- -------- -------- -------- -------- --------
Operating income............................................ 9,527 18,916 16,739 15,436 52,505 21,906 53,712
Net interest expense........................................ 6,728 3,719 3,548 4,098 2,155 2,410 1,080
(Gain)/Loss from equipment sales or retirements............. -- 8 388 (4,076) (2,264) (522) (47,010)
Other (income) expense...................................... 1,197 (122) 267 (228) 104 (310) (443)
McCall acquisition costs.................................... -- -- -- -- 542 472 --
-------- -------- -------- -------- -------- -------- --------
Income before income taxes, minority interest, equity in net
earnings of 50% or less owned companies, and extraordinary
item...................................................... 1,602 15,311 12,536 15,642 51,968 19,856 100,085
Income tax expense.......................................... 652 5,339 4,368 5,510 18,535 7,205 35,203
-------- -------- -------- -------- -------- -------- --------
Income before minority interest, equity in net earnings of
50% or less owned companies, and extraordinary item....... 950 9,972 8,168 10,132 33,433 12,651 64,882
Minority interest in (income) loss of a subsidiary.......... 41 (51) 184 321 244 147 145
Equity in net earnings of 50% or less owned companies....... -- 287 975 872 1,283 441 2,159
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary item............................ 991 10,208 9,327 11,325 34,960 13,239 67,186
Extraordinary item-loss on extinguishment of debt, net (less
applicable income taxes).................................. -- 1,093 -- -- 807 -- (325)
-------- -------- -------- -------- -------- -------- --------
Net income.................................................. $ 991 $ 9,115 $ 9,327 $ 11,325 $ 34,153 $ 13,239 $ 66,861
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net income per common share -
Assuming no dilution (1).................................. $ 0.19 $ 1.28 $ 1.29 $ 1.48 $ 2.90 $ 1.35 $ 4.81
Assuming full dilution.................................... 0.19 1.22 1.22 1.36 2.67 1.16 4.14
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS DATA:
Cash provided by operating activities..................... $ 15,311 $ 23,416 $ 21,150 $ 9,939 $ 58,737 $ 22,669 $ 39,870
Cash provided by (used in) investing activities........... 6,048 (24,251) (4,855) (78,695) (100,120) (7,511) (20,843)
Cash provided by (used in) financing activities........... 852 17,657 (7,714) 53,291 161,482 (15,766) (5,841)
OTHER FINANCIAL DATA:
EBITDA(2)................................................. $ 24,570 $ 32,366 $ 32,923 $ 35,964 $ 79,730 $ 34,291 $ 74,094
Ratio of earnings to fixed charges(3)....................... 1.21 3.93 3.17 3.18 9.71 6.33 16.74
Ratio of EBITDA to certain fixed charges(4)................. 3.49 6.77 6.07 5.38 13.96 9.93 11.94
BALANCE SHEET DATA (AT PERIOD END):
Cash and temporary investments............................ $ 19,564 $ 36,008 $ 44,637 $ 28,786 $149,053 $ 28,179 $162,213
Total assets.............................................. 181,765 233,511 238,145 350,883 636,455 356,891 720,710
Total long-term debt, including current portion........... 50,653 87,959 79,517 111,095 220,452 94,812 218,884
Stockholders' equity...................................... 89,639 100,532 111,482 183,464 351,071 196,886 411,143
</TABLE>
- ------------------------
(1) This computation is submitted in accordance with Regulation S-K, Item
601(b)(11). For the periods noted, it is contrary to APB Opinion No. 15 as
per footnote to paragraph 14 thereto which does not require the inclusion of
Common Stock equivalents in the earnings per share calculation if the
dilutive effect is less than 3%.
(2) As used herein, "EBITDA" is operating income plus depreciation and
amortization, amortization of deferred mobilization costs, which is included
in marine operating expenses, minority interest in (income) loss of
subsidiary and equity in net earnings of 50% or less owned companies, before
applicable income taxes. EBITDA should not be considered by an investor as
an alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flows or ratio of earnings to fixed
changes as a measure of liquidity.
(3) This computation is submitted in accordance with Regulation S-K Item 503(d).
Earnings are computed as Income Before Income Taxes, Minority Interest,
Equity in Earnings of 50% or Less Owned Companies, and Extraordinary Item
plus fixed charges and Minority Interest in Income of Subsidiary. Fixed
charges are computed as interest, whether expensed or capitalized,
amortization of debt expense and discount and the portion of rental expense
representative of interest.
(4) As used herein, the ratio of EBITDA to certain fixed charges is EBITDA
divided by interest, whether expensed or capitalized, exclusive of
amortization of debt expense and discount. The ratio of EBITDA to certain
fixed charges should not be considered by an investor as an alternative to
cash flows as a measure of liquidity.
21
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements presented below reflect the effects of
adjustments to the Consolidated Financial Statements and notes thereto
incorporated by reference in this registration statement necessary to give pro
forma effect to certain transactions described below as if such transactions had
occurred on January 1, 1996.
The pro forma financial statements of the Company and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and
notes thereto and the unaudited financial statements of the Company for the six
months ended June 30, 1997 incorporated by reference in this Registration
Statement.
Management believes that the assumptions used provide a reasonable basis on
which to present the pro forma financial data. The pro forma financial
statements are provided for information purposes only and should not be
construed to be indicative of the Company's results of operations or financial
position had the transactions described below been consummated on or as of the
dates assumed, and are not intended to project the Company's results of
operations or its financial position for any future period or as of any future
date.
The pro forma adjustments give effect to the 6.0% Note Conversion, the 1996
Common Stock Offering, the 1996 CNN Transaction (including the issuance of
156,650 shares of Common Stock upon conversion of the 2.5% Notes), and the Smit
Transaction in each case as if such transactions occurred on January 1, 1996.
22
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONVERTIBLE
JULY 1996 NOTES SMIT
TRANSACTIONS PLACEMENT TRANSACTION
HISTORICAL NOTE B NOTE C NOTE D PRO FORMA
------------ ----------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Operating Revenue:
Marine........................... $193,557,000 $ -- $ -- $63,865,000(7) $257,422,000
Environmental--
Oil spill response............. 12,466,000 -- -- -- 12,466,000
Retainer and other services.... 18,421,000 -- -- -- 18,421,000
------------ ----------------- ------------- -------------- ------------
224,444,000 -- -- 63,865,000 288,309,000
------------ ----------------- ------------- -------------- ------------
Costs and Expenses:
Cost of oil spill response....... 10,398,000 -- -- -- 10,398,000
Operating expenses--
Marine......................... 108,043,000 -- -- 40,296,000(7) 148,339,000
Environmental.................. 6,227,000 -- -- -- 6,227,000
Administrative and general....... 22,304,000 -- -- 9,421,000(7)
(5,742,000)(8) 25,983,000
Depreciation and amortization.... 24,967,000 (211,000)(1) -- 11,088,000(7)
-- -- (2,594,000)(9) 33,250,000
------------ ----------------- ------------- -------------- ------------
171,939,000 (211,000) -- 52,469,000 224,197,000
------------ ----------------- ------------- -------------- ------------
Operating Income................... 52,505,000 211,000 -- 11,396,000 64,112,000
------------ ----------------- ------------- -------------- ------------
Other Income (Expense):
Interest on Debt................. (5,713,000) 4,048,000(1)(2) (9,698,000)(5) (2,063,000)(10) (13,426,000)
Interest Income.................. 3,558,000 -- -- -- 3,558,000
Gain (loss) from equipment sales
or retirements................. 2,264,000 -- -- -- 2,264,000
Other............................ (646,000) -- -- -- (646,000)
------------ ----------------- ------------- -------------- ------------
(537,000) 4,048,000 (9,698,000) (2,063,000) (8,250,000)
------------ ----------------- ------------- -------------- ------------
Income Before Income Taxes,
Minority
Interest, Equity in Net Earnings
of 50% or Less Owned Companies
and Extraordinary Item......... 51,968,000 4,259,000 (9,698,000) 9,333,000 55,862,000
Income Tax Expense (Benefit)....... 18,535,000 1,448,000(3) (3,394,000)(6) 3,267,000(11) 19,856,000
------------ ----------------- ------------- -------------- ------------
Income Before Minority Interest,
Equity in Net Earnings of 50% or
Less Owned Companies and
Extraordinary Item............... 33,433,000 2,811,000 (6,304,000) 6,066,000 36,006,000
Minority Interest in Income (Loss)
of a Subsidiary.................. 244,000 -- -- -- 244,000
Equity in Net Earnings of 50% or
Less Owned Companies............. 1,283,000 -- -- 933,000(7)
(327,000)(11) 1,889,000
------------ ----------------- ------------- -------------- ------------
Income before Extraordinary Item... 34,960,000 2,811,000 (6,304,000) 6,672,000 38,139,000
Extraordinary Item-Loss on
Extinguishment of Debt........... (807,000) -- -- -- (807,000)
------------ ----------------- ------------- -------------- ------------
Net Income......................... $ 34,153,000 $2,811,000 $(6,304,000) 6,672,000 37,332,000
------------ ----------------- ------------- -------------- ------------
------------ ----------------- ------------- -------------- ------------
Earnings Per Common Share--
Assuming no Dilution
Income before extraordinary
item........................... $ 3.03 -- -- -- $ 2.72
Extraordinary Item............... (0.07) -- -- -- (0.06)
------------ ----------------- ------------- -------------- ------------
Net Income......................... $ 2.96 -- -- -- $ 2.66
Earnings Per Common Share--
Assuming Full Dilution
Income before extraordinary
item........................... $ 2.73 -- -- -- $ 2.66
Extraordinary Item............... (0.06) -- -- -- (0.05)
------------ ----------------- ------------- -------------- ------------
Net Income......................... $ 2.67 -- -- -- $ 2.61
Weighted Average Common Shares:
Assuming no dilution............... 11,533,198 -- -- -- 14,037,057
Assuming full dilution............. 13,568,933 -- -- -- 16,911,369
</TABLE>
23
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONVERTIBLE
JULY 1996 NOTES SMIT
TRANSACTIONS PLACEMENT TRANSACTION
HISTORICAL NOTE B NOTE C NOTE D PRO FORMA
----------- ------------- -------------- -------------- -------------
Operating Revenue:
Marine........................... $87,736,000 $ -- $ -- $32,169,000(7) $ 119,905,000
Environmental--
Oil spill response............. 5,919,000 -- -- -- 5,919,000
Retainer and other services.... 9,093,000 -- -- -- 9,093,000
----------- ------------- -------------- -------------- -------------
102,748,000 -- -- 32,169,000 134,917,000
----------- ------------- -------------- -------------- -------------
Costs and Expenses:
Cost of oil spill response....... 5,392,000 -- -- -- 5,392,000
Operating expenses--
Marine......................... 50,027,000 -- -- 20,298,000(7) 70,325,000
Environmental.................. 2,764,000 -- -- -- 2,764,000
Administrative and general....... 11,117,000 -- -- 4,745,000(7)
(2,901,000)(8) 12,961,000
Depreciation and amortization.... 11,542,000 (105,000)(1) -- 5,586,000(7) 15,684,000
(1,339,000)(9)
----------- ------------- -------------- -------------- -------------
80,842,000 (105,000) -- 26,389,000 107,126,000
----------- ------------- -------------- -------------- -------------
Operating Income................... 21,906,000 105,000 -- 5,780,000 27,791,000
----------- ------------- -------------- -------------- -------------
Other Income (Expense):
Interest on Debt................. (3,452,000) 2,079,000(1)(2) (4,852,000)(5) (1,041,000)(10) (7,266,000)
Interest Income.................. 1,042,000 -- -- -- 1,042,000
Gain (loss) from equipment sales
or retirements................. 522,000 -- -- -- 522,000
McCall acquisition costs......... -- -- -- -- --
Other............................ (162,000) -- -- -- (162,000)
----------- ------------- -------------- -------------- -------------
(2,050,000) 2,079,000 (4,852,000) (1,041,000) (5,864,000)
----------- ------------- -------------- -------------- -------------
Income Before Income Taxes,
Minority Interest, Equity in Net
Earnings of 50% or Less Owned
Companies and Extraordinary
Item............................. 19,856,000 2,184,000 (4,852,000) 4,739,000 21,927,000
Income Tax Expense (Benefit)....... 7,205,000 764,000(3) (1,698,000)(6) 1,659,000(11) 7,930,000
----------- ------------- -------------- -------------- -------------
Income Before Minority Interest,
Equity in Net Earnings of 50% or
Less Owned Companies and
Extraordinary Item............... 12,651,000 1,420,000 (3,154,000) 3,080,000 13,997,000
Minority Interest in Income (Loss)
of a Subsidiary.................. 147,000 -- -- -- 147,000
Equity in Net Earnings of 50% or
Less Owned Companies............. 441,000 -- -- 470,000(7) 746,000
(165,000)(11)
----------- ------------- -------------- -------------- -------------
Income before Extraordinary Item... 13,239,000 1,420,000 (3,154,000) 3,385,000 14,890,000
Extraordinary Item-Loss on
Extinguishment of Debt........... -- (861,000)(4) -- -- (861,000)
----------- ------------- -------------- -------------- -------------
Net Income......................... $13,239,000 $ 559,000 $(3,154,000) $3,385,000 14,029,000
----------- ------------- -------------- -------------- -------------
----------- ------------- -------------- -------------- -------------
Earnings Per Common Share--
Assuming no Dilution:
Income before extraordinary
item........................... $ 1.35 $ 1.06
Extraordinary Item............... -- (0.06)
----------- -------------
Net Income......................... $ 1.35 $ 1.00
----------- -------------
----------- -------------
Earnings Per Common Share--
Assuming Full Dilution:
Income before extraordinary
item........................... $ 1.16 $ 1.06
Extraordinary Item............... -- (0.06)
----------- -------------
Net Income......................... $ 1.16 $ 1.00
----------- -------------
----------- -------------
Weighted Average Common Shares:
Assuming no dilution............... 9,835,707 14,005,385
Assuming full dilution............. 12,419,836 14,041,078
</TABLE>
24
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
As discussed in the Company's annual report to shareholders on Form 10-K for
the year ended December 31, 1996, the Company completed several transactions
during 1996 (the 6.0% Note Conversion, the 1996 CNN Transaction, the 1996 Common
Stock Offering (collectively, the "July 1996 Transactions"), the Convertible
Notes Placement, and the Smit Transaction).
The accompanying pro forma condensed consolidated statements of income for
the year ended December 31, 1996 and for the six months ended June 30, 1996 have
been prepared based upon certain pro forma adjustments to historical financial
information, assuming (i) the July 1996 Transactions, (ii) the Convertible Notes
Placement, and (iii) the Smit Transaction, in each case occurred on January 1,
1996. No pro forma adjustments were made to the statements of income with
respect to operating revenues and expenses for the 1996 CNN Transaction because
the effect of such adjustments would not be material.
The pro forma data are not necessarily indicative of the operating results
or financial position that would have occurred had the above described
transactions been consummated at the dates indicated, nor necessarily indicative
of future operating results or financial position.
The weighted averages of common shares used to calculate pro forma
consolidated earnings per share, assuming no dilution, are based on the actual
weighted average number of shares outstanding during each period, adjusted to
give effect to shares issued in connection with the July 1996 Transactions and
the Smit Transaction, assuming that the transactions had taken place on January
1, 1996 and for additional shares assumed to be outstanding to reflect the
dilutive effect of common stock equivalents using the treasury stock method. The
weighted average of common shares used to calculate pro forma consolidated
earnings per share, assuming full dilution, for the year ended December 31, 1996
is based on the actual weighted average number of shares outstanding during the
period, adjusted to give effect to the July 1996 Transactions and the Smit
Transaction and for additional shares assumed to be outstanding to reflect the
dilutive effect of common stock equivalents using the treasury stock method and
the assumption that the 5 3/8% Convertible Subordinated Notes issued in the
Convertible Notes Placement and the Smit Transaction were converted into common
stock. Net income has been adjusted for the interest expense (net of income tax)
associated with the convertible subordinated notes. The weighted average of
common shares used to calculate pro forma consolidated earnings per share,
assuming full dilution, for the six months ended June 30, 1996, was calculated
on the same basis except that the effect of the conversion of the 5 3/8%
Convertible Subordinated Notes into Common Stock is not considered in the
calculation of earnings per share assuming full dilution because the effect is
antidilutive.
B. JULY 1996 TRANSACTIONS
6.0% NOTE CONVERSION
On June 6, 1996, the Company notified the Trustee of the 6.0% Notes of its
election to call the 6.0% Notes for redemption on July 12, 1996. Holders of the
6.0% Notes had the right to convert the 6.0% Notes into shares of Common Stock
at a ratio of 39.024 shares of Common Stock per $1,000 principal amount of the
6.0% Notes (representing a conversion price of $25.625 per share) prior to the
date of redemption. Upon conversion, 2,156,083 shares of Common Stock were
issued. The following adjustment reflects the assumed conversion of the entire
principal amount outstanding of the 6.0% Notes:
(1) To reflect the reductions in interest expense and the amortization of
debt issuance costs as a result of the conversion.
25
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. JULY 1996 TRANSACTIONS (CONTINUED)
1996 CNN TRANSACTION
(2) To reflect the reduction in interest expense due to the retirement of
indebtedness outstanding with a portion of the net proceeds from the 1996 Common
Stock Offering.
(3) To adjust income tax expense for the effect of the adjustments described
in notes (1) and (2) assuming an effective tax rate of 35%.
(4) To reflect an extraordinary loss in the six-month period ended June 30,
1996 due to the write-off of unamortized debt discount relating to the early
repayment of $9.6 million of indebtedness outstanding to CNN, net of income tax
benefits.
C. CONVERTIBLE NOTES PLACEMENT
These adjustments reflect the completion of the 5 3/8% Convertible
Subordinated Notes Offering. The detail of these adjustments is as follows:
(5) To reflect the increase in interest expense due to the sale of $172.5
million principal amount of the 5 3/8% Convertible Subordinated Notes and the
amortization of deferred financing costs.
(6) To adjust income tax expense for the effect of the adjustment described
in note (5) assuming an effective tax rate of 35%.
D. SMIT TRANSACTION
For the purpose of the pro forma adjustments with respect to the operations
of Smit, the revenues and expenses of these operations are translated from Dutch
guilders to U.S. dollars at the weighted average currency exchange rates during
the applicable reporting periods.
(7) To reflect the operating revenues and expenses and equity in net
earnings of 50% or less owned entities attributable to the Smit assets acquired.
(8) To adjust administrative and general expenses associated with the
acquired assets to reflect the Company's budget for these operations.
(9) To reflect depreciation associated with the acquired assets relative to
such expense as reported by Smit. The Company recorded the acquired assets at
their fair market values in accordance with the purchase method of accounting.
Consistent with the Company's depreciation policies, the depreciable lives
assigned to each of the vessels acquired in the Smit Transaction were determined
by subtracting from 25 years the period from each vessel's original construction
date to its acquisition date.
(10) To reflect an increase in interest expense due to the issuance of
$15.25 million principal amount of Smit Notes and payments under capital lease
obligations.
(11) To adjust income tax expense for the effect of the adjustments
described in notes (7) through (10) assuming an effective tax rate of 35%.
26
<PAGE>
THE COMPANY
The Company is a major provider of offshore marine services to the oil and
gas exploration and production industry and is one of the leading providers of
oil spill response services to owners of tank vessels and oil storage,
processing and handling facilities. As of June 30, 1997, the Company operated a
diversified fleet of 306 vessels primarily dedicated to servicing offshore oil
and gas exploration and production facilities in the U.S. Gulf of Mexico, the
North Sea, offshore West Africa, Mexico, the Far East, Latin America and the
Mediterranean. Additionally, the recent consummation of the acquisition of
assets, including certain vessels owned by Galaxie Marine Service, Inc.,
Moonmaid Marine, Inc., Waveland Marine Service, Inc. and Triangle Marine Inc.,
as well as a vessel construction contract, has enlarged the Company's fleet
capacity in the U.S. Gulf of Mexico. The Company's offshore service vessels
deliver cargo and personnel to offshore installations, handle anchors for
drilling rigs and other marine equipment, support offshore construction and
maintenance work and provide standby safety support. The Company also furnishes
vessels for special projects such as well stimulation, seismic data gathering,
freight hauling and line handling. In connection with its offshore marine
services, the Company, through Energy Logistics, Inc., a joint venture with
Baker Energy, a unit of the Michael Baker Corporation, a U.S. public company,
also offers logistics services for the offshore industry, including the
coordination and provision of marine, air and land transportation, materials
handling and storage, inventory control and "just-in-time" procurement.
The Company's environmental services business principally provides
contractual oil spill response services to entities who store, transport,
produce or handle petroleum and certain other non-petroleum oils as required by
OPA 90 and various state regulations. The Company's services, provided primarily
through its indirect wholly-owned subsidiary, NRC, also include training for and
supervision of activities in response to oil spill emergencies and the
maintenance of specialized equipment for immediate deployment and spill
response. NRC has acted as the principal oil spill response contractor on
several of the largest oil spills that have occurred in the United States since
the enactment of OPA 90.
In August 1997, SEACOR Rigs, a wholly-owned subsidiary of SEACOR, invested
approximately $9.0 million in exchange for a 50% interest in Chiles, a joint
venture and strategic alliance created to manage and invest in partnerships
which will construct, own and operate two premium jackup drilling rigs. Chiles
has contracted for delivery of such two rigs in 1999 for estimated total project
costs of approximately $177 million and, in connection therewith, obtained an
option to purchase one additional premium jackup drilling rig. The Company
believes that this business is complementary to SEACOR's marine transportation
and logistics business. SEACOR Rigs anticipates contributing an additional $26.0
million in equity investments in Chiles or a successor to Chiles to partially
fund construction. It is anticipated that SEACOR Rigs will initially own 80% of
the equity in this venture; however, the Company anticipates that this ownership
interest will be reduced through the sale of additional equity interests to
third parties. On September 8, 1997, Chiles entered into a letter of intent
providing for the construction of two additional premium jackup drilling rigs
and for options to construct two more premium jackup drilling rigs. Estimated
average project costs for each rig would be approximately $96.0 million. The
Company does not presently intend to fund any portion of such costs, which it
anticipates would be funded by debt and additional third party equity
investments. Any such additional rig transactions are contingent upon the
preparation, negotiation and execution of definitive documentation and Chiles'
obtaining financing therefor by December 7, 1997, and, consequently, there can
be no assurance that any such transaction will be consummated.
SEACOR's principal executive offices are located at 11200 Westheimer, Suite
850, Houston, Texas 77042, where its telephone number is (713) 782-5990.
27
<PAGE>
BUSINESS
STRATEGY
The Company's strategy is to identify and pursue opportunities for growth,
development and integration of its offshore marine, environmental services and
other related marine and energy businesses. In its offshore marine services
business, the Company seeks to be innovative in meeting the long-term needs of
its customers while managing the short-term challenges characteristic of a
cyclical, global and capital-intensive business. In its environmental services
business, the Company seeks to provide value-added services to its customers in
the most cost-efficient manner by capitalizing on its knowledge and experience
in planning for and responding to oil spill emergencies, its diversified fleet
of offshore marine service vessels and its extensive network of independent
contractors. A key element of the Company's strategy is the acquisition of
assets or businesses which expand the Company's markets, customer base and
services. The Company seeks to develop "total" customer relationships by meeting
its customers' vessel and environmental services needs on a global basis.
OFFSHORE MARINE SERVICES
The Company's strategy is to pursue growth opportunities while balancing its
exposure to the cyclical nature of the oil and gas exploration and production
industry. The Company implements this strategy by:
DIVERSIFYING GEOGRAPHICALLY. The Company seeks to expand its presence in
multiple markets and thereby enhance asset utilization by enabling it to deploy
vessels to different geographic regions to take advantage of cyclical market
opportunities and better service its customers' global operations.
MAINTAINING A BALANCE BETWEEN LONG-TERM AND SHORT-TERM CHARTERS. The
Company seeks to maintain a balance between long-term charters (i.e., those
having a duration of one year or more from inception), which increase asset
utilization, enhance the predictability of cash flows and facilitate the
development of lasting customer relationships, and short-term charters, which
provide the Company with the flexibility to take advantage of improving market
conditions and opportunities in different markets.
BROADENING THE MIX OF VESSELS. The Company maintains a diversified fleet of
vessels which enables it to service a broad range of customer requirements and
provide services to both the exploration and production sectors of the energy
industry.
OFFERING SPECIALIZED SERVICES. The Company seeks to meet its customers'
needs through efficient use of vessels and logistical systems. In conjunction
with this strategy, the Company has modified and converted vessels for special
projects such as well stimulation, seismic data gathering, standby safety
support and freight hauling.
ENVIRONMENTAL SERVICES
In its environmental services business, the Company's strategy is to balance
its exposure to the event-driven nature of its marine spill response business by
expanding its core OPA 90 business and developing and promoting ancillary
environmental services. The Company implements this strategy by:
EXPANDING ITS SERVICES. The Company is committed to pursuing new customer
relationships and expanding its services by identifying, developing and
providing services ancillary to the requirements of OPA 90. Ancillary services
include environmental training programs, standby oil spill response services and
planning for oil spill response drills.
EXPANDING INTERNATIONALLY. The Company seeks to develop its oil spill
response and ancillary services businesses internationally by capitalizing on
its knowledge and experience, existing customer relationships and rapid
equipment deployment capability.
28
<PAGE>
DIVERSIFYING ITS CUSTOMER BASE. The Company seeks to expand its sources of
retainer revenues by actively marketing its environmental services to vessel
owners, facilities and others who must comply with various state and federal
planning regulations but who are not covered by the requirements of OPA 90.
MAINTAINING A COST-EFFECTIVE SPILL RESPONSE NETWORK. The Company maintains
a highly efficient and cost-effective spill response network by coordinating and
managing existing resources and supplementing them with a variety of
purpose-built equipment. The Company's network of approximately 53 independent
spill response contractors stores and maintains NRC's equipment in a constant
state of preparedness and provides trained personnel and resources in the event
of a spill.
OTHER RELATED BUSINESSES
The Company seeks acquisition and investment opportunities in other related
marine and energy businesses that are complementary to the Company's current
operations, such as its August 1997 investment in Chiles.
OFFSHORE MARINE SERVICES
GEOGRAPHIC MARKETS SERVED
The operations of the Company's offshore marine services business are
concentrated in five geographic markets: the United States (principally, the
U.S. Gulf of Mexico), offshore West Africa, the North Sea, the Far East and
Latin America. The table below sets forth, at the dates indicated, the number of
vessels operated directly by the Company or through its joint ventures and
pooling arrangements in each geographic market. Prior to 1996, the information
contained in the table has been restated to include vessels purchased in the
McCall Acquisition (as defined in "1996 Transactions").
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
---------------------
<S> <C> <C> <C> <C>
GEOGRAPHIC MARKET 1994 1995 1996(1) 1997(2)
- ------------------------------ ---- ---- ------- -----------
Domestic...................... 79 194 175(3) 191(3)
---- ---- ------- -----
Foreign:
Offshore West Africa........ 20 27 34 33
North Sea................... 11 15 34 35
Far East.................... -- -- 19 17
Latin America............... 10 10 12 18
Other(4).................... 4 3 12 12
---- ---- ------- -----
Total Foreign............. 45 55 111 115
---- ---- ------- -----
Total Fleet............. 124 249 286 306(3)
---- ---- ------- -----------
---- ---- ------- -----------
</TABLE>
- ------------------------
(1) Includes 45 vessels acquired pursuant to the Smit Transaction (See "1996
Transactions").
(2) The increase following December 31, 1996 primarily relates to the Galaxie
Transaction (See "Summary--The Company").
(3) Excludes 13 oil spill response vessels.
(4) Includes vessels operating primarily in the Middle East and the
Mediterranean.
DOMESTIC. The Company is a major provider of offshore marine services to
the oil and gas exploration and production industry that operates primarily in
the U.S. Gulf of Mexico. Exploration activity, including recent trends to drill
in deeper water in the U.S. Gulf of Mexico, is generally supported by larger
supply, towing supply and anchor handling towing supply vessels. At June 30,
1997, the Company operated 27 of approximately 300 of these larger vessels
currently in the U.S. Gulf of Mexico. Production activity is supported by
similar vessels as well as smaller crew and utility vessels. At June 30, 1997,
the Company operated 157 of approximately 400 estimated crew and utility vessels
in the U.S. Gulf of Mexico.
29
<PAGE>
The Company also operated four specially equipped vessels for customers who
provide well stimulation, seismic data gathering and freight services from shore
bases primarily in the U.S. Gulf of Mexico region.
Exploration and drilling activity in the U.S. Gulf of Mexico, which affects
the demand for vessels, is largely a function of the short-term and long-term
trends in the levels of oil and gas prices. Demand for vessels in the U.S. Gulf
of Mexico has increased recently due to increased drilling activity associated
with natural gas exploration and production, deepwater drilling and rig workover
projects. There can be no assurance that this trend will continue.
OFFSHORE WEST AFRICA. The Company is one of the largest operators serving
the West African coast. At June 30, 1997, the Company owned 32 and chartered-in
one vessel of the approximately 200 offshore support vessels working in this
market. The number of operators is more concentrated in this market as compared
to the U.S. Gulf of Mexico in that four companies operate almost 90% of the
vessels currently active in the region.
The need for offshore support vessels in this market is primarily dependent
upon multi-year offshore oil and gas exploration and development projects and
production support. The demand for vessels in offshore West Africa has increased
over the past year. However, the region is highly dependent on the level of
activity in Nigeria, and recent political developments could have an adverse
effect on exploration and development activity, which in turn would adversely
impact the Company's operations in this market.
NORTH SEA. The Company provides standby safety, supply, towing supply and
anchor handling towing supply services to customers in the North Sea.
At June 30, 1997, there were approximately 150 vessels certified to provide
standby safety services in the North Sea and the Company owns and operates 22 of
these vessels. Twelve additional standby safety vessels are marketed by the
company or its managing agent under pooling arrangements with U.K. companies.
See "--Joint Ventures and Pooling Arrangements." Demand in this market for
standby safety service developed in 1992 after the United Kingdom promulgated
increased safety legislation requiring offshore operations to maintain standby
safety vessels. The legislation generally requires a vessel to "stand by" to
provide a means of evacuation and rescue for platform and rig personnel in the
event of an emergency at an offshore installation. The Company believes that it
was one of the first companies to convert its existing vessels for use as
standby safety service vessels. Demand for standby safety vessels in the North
Sea declined steadily over the last two years as drilling activity was scaled
back due to a decline in oil prices, tax laws changes and a surplus of certified
vessels. Since mid-1995, however, demand has improved with increased exploration
activity, stimulated in part by updated exploration technology and the
development of new drilling areas west of the Shetland Islands. There can be no
assurance, however, that this trend will continue.
The Smit Transaction (as defined in "1996 Transactions") has allowed the
Company to expand its North Sea operations and, at June 30, 1997, 13 of the
approximately 185 offshore support vessels working in this market were owned by
the Company. Eight vessels are working on the Netherlands' Continental Shelf and
five are operating in the U.K. sector of the North Sea. For the remainder of
1997 and 1998, drilling activity in the North Sea is forecasted to increase and
89 mobile drilling rigs are projected to operate near capacity. Presently, there
are 20 offshore support vessels under construction in Norway that are expected
to add significant vessel capacity to the North Sea market in 1997 and 1998. It
is not certain if these new vessels will negatively affect existing rates per
day worked and utilization in the North Sea or possibly stimulate the migration
of older offshore support vessels to other regions.
FAR EAST. At June 30, 1997, the Company operated 12 anchor handling towing
supply vessels, four towing supply vessels and one seismic data gathering vessel
in this region, of which ten were owned by joint venture corporations. At June
30, 1997, there were approximately 275 offshore support vessels owned by ten
companies supporting both exploration and production activities in approximately
16 countries in the Far East. Exploration activity, occurring in both shallow
and deep water areas, has been increasing and
30
<PAGE>
continued improvement is expected. At present, vessels with high horsepower or
vessels capable of assisting with offshore construction are in high demand.
Production activity has improved and, although there can be no assurance, demand
for smaller offshore marine service vessels as operated by the Company in the
U.S. Gulf of Mexico is anticipated to increase.
LATIN AMERICA. The Company provides offshore marine services in Latin
America for both exploration and production activities. At June 30, 1997, 12 of
the Company's 18 vessels operating in this region worked in Mexico, and the
remaining six vessels worked in the Caribbean, Trinidad and South America. At
June 30, 1997, there were approximately 80 offshore support vessels operated in
Mexico. All of the Company's vessels working in Mexico were owned and operated
by a joint venture with Transportacion Maritima Mexicana S.A. de C.V., a Mexican
corporation ("TMM"). See "--Joint Ventures and Pooling Arrangements."
While operating conditions in Mexico are, in many respects, similar to those
in the U.S. Gulf of Mexico, demand for offshore support vessels in Mexico
historically has been affected to a significant degree by Mexican government
policies, particularly those relating to Petroleos Mexicanos ("PEMEX"), the
Mexican national oil company. Offshore exploration and production activity has
been down for most of the past year as a result of political and fiscal changes.
Although there can be no assurance, the Company anticipates that these changes
will result in increased exploration and production maintenance activity in
future periods.
FLEET
The offshore marine service industry supplies vessels to owners and
operators of offshore drilling rigs and production platforms. Two of the largest
groups of offshore support vessels which the Company operates are crew boats,
which transport personnel and small loads of cargo when expedited deliveries are
required, and utility boats, which support offshore production by delivering
general cargo and facilitating infield transportation of personnel and
materials. Two other significant classes of vessels operated by the Company are
towing supply and anchor handling towing supply vessels. These vessels have more
powerful engines, a deck mounted winch and are capable of towing and positioning
offshore drilling rigs as well as providing supply vessel services. The Company
also operates supply vessels, which transport drill pipe, drilling fluids and
construction materials, special service vessels, which include well stimulation,
seismic data gathering, line handling, freight, oil spill response and standby
safety vessels. As of June 30, 1997, the average age of the Company's owned
offshore marine fleet was approximately 14.2 years.
The following table sets forth, at the dates indicated, certain summary
fleet information for the Company. Prior to 1996, the information contained in
the table has been restated to include vessels acquired in May 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------- AT JUNE 30,
TYPE OF VESSEL 1994 1995 1996(1) 1997(2)
- ------------------------------ ---- ---- ------- -----------
<S> <C> <C> <C> <C>
Crew.......................... 38 77 77 82
Supply and Towing Supply...... 46 52 70 73
Utility and Line Handling..... 9 86 70 87
Anchor Handling Towing
Supply...................... 11 10 37 38
Standby Safety................ 11 15 22 22
Geophysical, Freight and
Other....................... 9 9 10 4
---- ---- ------- -----
Total Fleet............... 124 249 286 306(3)
---- ---- ------- -----
---- ---- ------- -----
</TABLE>
- ------------------------
(1) Includes 45 vessels acquired pursuant to the Smit Transaction. See "1996
Transactions."
(2) The increase following December 31, 1996 primarily relates to the Galaxie
Transaction. See "Summary--The Company."
(3) Excludes 13 oil spill response vessels but includes 256 offshore marine
service vessels owned by the Company and 50 offshore marine service vessels
that are not owned by the Company. Of the 50 offshore marine service vessels
that are not 100% Company-owned, 33 are owned by joint venture corporations
in which the Company has an equity interest, 12 are operated under pooling
arrangements with Company-owned vessels, and five are bareboat or time
chartered-in by the Company for use in its operations.
31
<PAGE>
The Company actively monitors opportunities to buy or sell vessels that will
maximize the overall utility and flexibility of its fleet structures. Presently,
the Company has entered into arrangements to sell seven vessels for a total of
approximately $38.0 million to two leasing companies and lease back the same for
a period of three years. These transactions are true operating leases and are
scheduled to close towards the end of the fourth quarter of 1997.
The Company's operating revenue is affected by rates per day worked and
utilization. These performance measures are closely aligned with the offshore
oil and gas exploration industry and are a function of demand and availability
of marine vessels. The level of exploration and development of offshore areas is
affected by both short-term and long-term trends in oil and gas prices which, in
turn, are related to the demand for petroleum products and the current
availability of oil and gas resources.
The table below sets forth rates per day worked and utilization data for the
Company during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- SIX MONTHS ENDED
1994 1995 1996 JUNE 30, 1997
--------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Rates Per Day Worked: (1)(2)
Supply/Towing Supply.................................. $ 3,254 $ 3,198 $ 4,479 $ 6,069
Anchor Handling Towing Supply......................... 5,322 4,960 6,482 9,738
Crew.................................................. 1,420 1,529 1,726 2,114
Standby Safety........................................ 4,687 4,378 4,884 5,669
Utility/Line Handling................................. 1,260 1,126 1,152 1,327
Project and Geophysical/Freight....................... 3,801 4,010 4,289 4,692
Overall Fleet....................................... 2,731 2,376(3) 2,565 3,422
Overall Utilization: (1)
Supply/Towing Supply.................................. 81.6% 83.9% 94.5% 93.1%
Anchor Handling Towing Supply......................... 84.5 80.1 93.1 82.5
Crew.................................................. 91.4 96.9 97.8 97.6
Standby Safety........................................ 87.0 82.1 85.8 91.6
Utility/Line Handling................................. 87.4 73.0 81.4 97.5
Project and Geophysical/Freight....................... 94.6 89.2 99.1 95.0
Overall Fleet....................................... 87.9 86.1 90.8 95.0
</TABLE>
- ------------------------
(1) Rates per day worked is the ratio of total charter revenue to the total
number of vessel days worked. Rates per day worked and overall utilization
figures exclude owned vessels that are bareboat and time chartered-out,
vessels owned by corporations that participate in pooling arrangements with
the Company, joint venture vessels and managed/operated vessels and include
vessels that are bareboat and time chartered-in by the Company.
(2) Certain of the Company's vessels earn revenue in foreign currencies which
have been converted to U.S. dollars for reporting purposes at the weighted
average exchange rates of those foreign currencies for the periods
indicated.
(3) The decline in the overall fleet's average rate per day worked for the year
ended December 31, 1995 was due primarily to the addition of a large number
of crew and utility vessels acquired in 1995. Crew and utility vessels earn
substantially lower rates per day worked than the other types of vessels in
the Company's fleet but also have substantially lower costs. Thus,
management believes that the comparative rates per day worked amount is not
necessarily indicative of operating income performance.
32
<PAGE>
The table below sets forth the Company's marine fleet structure at the dates
indicated:
<TABLE>
<CAPTION>
AT JUNE 30,
-------------
FLEET STRUCTURE 1997 1996
----- -----
<S> <C> <C>
Owned.................................. 256 226
Bareboat and Time Chartered-in(1)...... 5 3
Joint Ventured(2)...................... 33 10
Pooled(3).............................. 12 5
--- ---
Overall Fleet........................ 306 244
--- ---
--- ---
</TABLE>
- ------------------------
(1) A bareboat charter is a vessel lease under which the entity chartering-in a
vessel is typically responsible for all crewing, insurance, and operating
expenses, as well as the payment of bareboard charter hire to the vessel
owner. A time charter is a vessel lease under which the entity providing the
vessel is responsible for all crewing, insurance, and operating expenses. At
June 30, 1997, the Company bareboat chartered-in two vessels and time
chartered-in three vessels. At June 30, 1996, the Company bareboat
chartered-in two vessels and time chartered-in one vessel.
(2) 1997 and 1996 include twelve and ten vessels, respectively, owned by a joint
venture between TMM and the Company. 1997 also includes 21 vessels owned by
corporations in which the Company acquired an equity interest pursuant to a
transaction with Smit Internationale N.V. ("Smit") in December 1996.
(3) 1997 and 1996 include five vessels owned by Toisa Ltd. which participate in
a pool with ten Company-owned North Sea standby safety vessels.
Additionally, 1997 includes seven standby safety vessels in which the
Company shares net operating profits after certain adjustments with Toisa
and owners of the vessels.
JOINT VENTURES AND POOLING ARRANGEMENTS
The Company has formed or acquired interests in joint ventures and entered
into pooling arrangements with various third parties to enter new markets,
enhance its marketing capabilities and facilitate operations in certain foreign
markets. These arrangements allow the Company to expand its fleet and minimize
the risks and capital outlays associated with independent fleet expansion. The
principal joint venture and pooling arrangements in which the Company
participates are described below:
VEESEA JOINT VENTURE. Standby safety vessels operated by the Company in the
North Sea are owned by a subsidiary of the Company, VEESEA Holdings, Inc.
("VEESEA Holdings") and its subsidiaries (collectively, "VEESEA"). All standby
safety vessels operated by the Company in the North Sea are managed under an
arrangement with Vector Offshore Limited, a U.K. company ("Vector"), which owns
a 9% interest in VEESEA Holdings (the "Veesea Joint Venture"). The Company's
joint venture arrangement with Vector enabled it to enter a niche market using
local management and an existing infrastructure. The number of standby safety
vessels owned by the Company has grown from one vessel in December 1991 to ten
vessels in service today.
SEAVEC POOL. In January 1995, the Company entered into a pooling
arrangement with Toisa Ltd., a U.K. offshore marine transportation and services
company ("Toisa"). Under this pooling arrangement (the "SEAVEC Pool"), the
Company and Toisa jointly market their standby safety vessels in the North Sea
market, with operating revenues pooled and allocated to the respective companies
pursuant to a formula based on the class of vessels each company contributes to
the pool. The SEAVEC Pool currently markets 15 vessels.
SAINT FLEET POOL. In November 1996, Vector entered into bareboat charters
for seven standby safety vessels which provide for VEESEA Holdings, Toisa, and
the owners of the vessels to share in net operating profits after certain
adjustments for maintenance and management expenses (the "Saint Fleet Pool").
Vector assumed management control of these vessels in December 1996 and markets
the vessels in coordination with the SEAVEC Pool.
TMM JOINT VENTURE. During 1994, the Company and TMM organized a joint
venture to serve the Mexican offshore market (the "TMM Joint Venture"). The TMM
Joint Venture is comprised of two
33
<PAGE>
corporations, Maritima Mexicana, S.A. and SEAMEX International, Ltd., in each of
which the Company owns a 40% equity interest. The TMM Joint Venture has enabled
the Company to expand into a new market contiguous to the U.S. Gulf of Mexico
and has provided greater marketing flexibility for the Company's fleet in the
region.
SMIT JOINT VENTURES. Pursuant to the Smit Transaction, the Company acquired
certain joint venture interests owned by Smit (the "Smit Joint Ventures") which
increased the Company's presence in international markets. The vessel-owning
Smit Joint Ventures in which the Company owns a 50% or less equity interest
include 21 vessels currently operated in the Far East, Latin America, the Middle
East, the Mediterranean and offshore West Africa.
CUSTOMERS
The Company offers offshore marine services to over 140 customers who are
primarily major integrated oil companies and large independent oil and gas
exploration and production companies. The Company has enjoyed long-standing
relationships with several of its customers with whom the Company has sought to
establish alliances. The percentage of revenues attributable to an individual
customer varies from time to time, depending on the level of oil and gas
exploration undertaken by a particular customer, the suitability of the
Company's vessels for the customer's projects and other factors, many of which
are beyond the Company's control. For the quarter ended June 30, 1997,
approximately 10.8% of the Company's marine operating revenues was received from
Mobil Oil Corporation.
CHARTER TERMS
Customers for offshore vessels generally award charters based on suitability
and availability of equipment, price and reputation for quality service and
duration of employment. Charter terms may vary from several days to several
years.
COMPETITION
The offshore marine services industry is highly competitive. In addition to
price, service and reputation, the principal competitive factors for offshore
supply fleets include the existence of national flag preference, operating
conditions and intended use (all of which determine the suitability of vessel
types), complexity of maintaining logistical support and the cost of
transferring equipment from one market to another.
Although there are many suppliers of marine offshore services, management
believes there is only one company, Tidewater, Inc., which operates in all
geographic markets and has a substantial percentage of the domestic and foreign
offshore marine market in relation to that of the Company and its other
competitors.
ENVIRONMENTAL SERVICES
MARKET
The Company's environmental services business is operated primarily through
NRC and provides contractual oil spill response services to those who store,
transport, produce or handle petroleum and certain other non-petroleum oils as
required by OPA 90. The market for marine spill response retainer services has
grown substantially since 1990 when the United States Congress passed OPA 90
after the Exxon Valdez spill in Alaska. OPA 90 requires that all tank vessels
operating within the Exclusive Economic Zone of the United States and all
facilities and pipelines handling oil that could have a spill impacting the
navigable waters of the United States, develop a plan to respond to a "worst
case" oil spill and ensure by contract or other approved means the ability to
respond to such a spill.
34
<PAGE>
EQUIPMENT AND SERVICES
OIL SPILL RESPONSE SERVICES. The Company owns and maintains specialized
equipment which is positioned in designated areas to comply with regulations
promulgated by the Coast Guard, and also has personnel trained to respond to oil
spills as required by customers and regulations. This specialized oil spill
response equipment includes containment boom, used to protect sensitive areas
and also to trap oil in areas where it can be recovered, pumps, vacuum transfer
units, skimmers, portable barges, mobile command centers equipped with field
communications capability, small boats for deploying boom and barges and utility
vessels outfitted with skimming equipment to recover oil.
When an oil spill occurs, the Company mobilizes this equipment, using either
its own personnel or personnel under contract, to provide emergency response
services for both land and marine oil spills. This equipment is also used by the
Company to offer industrial maintenance services. The Company currently has
agreements with approximately 53 independent oil spill response contractors
through a network organized by the Company. The network is assisted by NRC's
regional offices in Texas, Florida, Tennessee and Puerto Rico, and by NRC's
access to the Company's operating bases and offshore marine vessels in the U.S.
Gulf of Mexico. NRC maintains constant contact with its network members through
client drills, training sessions, standby services and actual oil spill
responses. The drills are mandated by OPA 90 and ensure a constant state of
response readiness. NRC has acted as the principal contractor on several of the
largest oil spills that have occurred in the United States after the enactment
of OPA 90.
NRC has expanded its coverage area to include the West Coast of the United
States through Clean Pacific Alliance ("CPA"), a joint venture between NRC and
Crowley Marine Services. CPA has established dedicated oil spill response
capabilities including two response vessels, response depots, a contractually
available Marine Response Network and a client service center.
The table below sets forth certain summary information regarding the
Company's oil spill response resources at December 31, 1996 and June 30, 1997.
<TABLE>
<CAPTION>
AT AT
DECEMBER 31, JUNE 30,
1996 1997
------------------ ------------------
<S> <C> <C>
Certified Oil Spill Response Vessels(1).................................. 15 15
Support Vessels.......................................................... 187 210(2)
Shallow Water Recovery Barges............................................ 58 58
Mobile Trailers.......................................................... 141 144
Vacuum Transfer Units.................................................... 38 38
Mobile Communications Centers............................................ 3 3
Containment Boom......................................................... 152,000 ft. 152,000 ft.
Skimming Capacity........................................................ 804,939 bbls/day 804,839 bbls/day
Temporary Storage........................................................ 183,563 bbls 184,063 bbls
</TABLE>
- ------------------------
(1) Includes 11 vessels owned by the Company's environmental subsidiaries, two
vessels owned by the Company's marine subsidiaries (also included in the
marine fleet statistics) and two vessels which are bareboat chartered-in.
The table does not include resources owned by the Company's network of
independent response contractors.
(2) Includes 12 twenty-eight foot boom handling vessels and 196 vessels operated
in the U.S. Gulf of Mexico by the Company's marine subsidiaries, of which
four have been outfitted with oil spill response equipment.
TRAINING AND DRILL SERVICES. The Company has developed customized training
programs for industrial companies which educate personnel on the risks
associated with and the prevention of and response to marine and non-marine oil
spills. The Company also plans for and participates in customer oil spill
response drill programs. The Company's drill services and training programs are
offered both on a stand-alone basis and as part of its base retainer services.
35
<PAGE>
INTERNATIONAL. The Company has also established International Response
Corporation ("IRC"), a wholly-owned subsidiary, to evaluate international
opportunities with respect to its environmental services business. IRC is
currently providing consulting services in connection with oil spill response,
pollution control, and the evaluation of the feasibility of constructing waste
oil, waste water and sludge reception facilities in Asia.
CUSTOMERS AND CONTRACT ARRANGEMENTS
The Company offers its services and oil spill response services primarily to
the domestic and international shipping community, including dry cargo vessel
owners and owners of facilities such as refineries, pipelines, exploration and
production platforms and tank terminals. In addition to its retainer customers,
the Company also provides oil spill response services to others, including,
under certain circumstances, the Coast Guard. The Company presently has
approximately 340 customers and provides retainer coverage to approximately
1,750 self-propelled vessels, 750 barges and 450 facilities. The Company's
retainer arrangements with these customers include both short-term contracts
(one year or less) and long-term agreements, in some cases as long as seven
years from inception. At June 30, 1997, Coastal Refining and Marketing, Inc.
("Coastal") and CITGO, NRC's two largest customers, accounted for approximately
28% and 9%, respectively, of NRC's retainer revenues.
The Company also generates revenue from the supervision of activities in
response to oil spill emergencies. The Company's environmental services revenue
can be dramatically impacted by the level of spill activity. A single large
spill can contribute significantly to overall revenues and to operating income.
However, the Company is unable to predict revenues from oil spills.
COMPETITION
The principal competitive factors in the environmental response business are
price, service, reputation, experience and operating capabilities. Management
believes that the lack of uniformity of regulatory development and enforcement
on a federal and state level has created a lower barrier to entry in several
market segments which has increased the number of competitors. NRC faces
competition primarily from the Marine Spill Response Corporation, a non-profit
corporation funded by the major integrated oil companies, other industry
cooperatives and also from smaller contractors who target specific market
niches.
36
<PAGE>
1996 TRANSACTIONS
During the year ended December 31, 1996, the Company entered into the
transactions described below.
MCCALL ACQUISITION. On May 31, 1996, the Company acquired McCall
Enterprises, Inc. and its affiliated companies (collectively, the "McCall
Companies") which, at the date of such acquisition, operated 36 crew boats and
five utility boats dedicated to serving the oil and gas industry primarily in
the U.S. Gulf of Mexico. Such acquisition (the "McCall Acquisition") was
accomplished pursuant to a series of merger and share exchange agreements
involving the Company and certain of its subsidiaries, the McCall Companies and
the former stockholders of the McCall Companies. In consideration for the McCall
Acquisition, on August 9, 1996, the Company issued an aggregate of 1,306,550
shares of common stock to the former stockholders of the McCall Companies. The
McCall Acquisition has been accounted for as a pooling-of-interests.
1996 COMMON STOCK OFFERING. On July 3, 1996, the Company sold in an
underwritten public offering 909,235 shares of its Common Stock at $43.50 per
share (the "1996 Common Stock Offering"). In conjunction therewith, 842,355
shares of Common Stock were sold by certain of the Company's stockholders. The
Company received net proceeds of approximately $37.7 million, of which $26.0
million was used to purchase four vessels acquired from Compagnie Nationale de
Navigation, a French corporation ("CNN"), pursuant to the 1996 CNN Transaction
(as defined) and to prepay $9.6 million of indebtedness then owed by the Company
to CNN.
1996 CNN TRANSACTION. On July 3, 1996, pursuant to an agreement entered
into by the Company and CNN in June 1996, the Company consummated a transaction
providing for the acquisition from CNN of six vessels for $22.7 million in cash
(the "1996 CNN Transaction"). At closing, the Company prepaid $9.6 million
aggregate principal amount of the indebtedness outstanding under promissory
notes previously issued to CNN by a subsidiary of the Company. In addition, CNN
converted $4.8 million principal amount of the Company's 2.5% Convertible
Subordinated Notes due January 1, 2004 (the "2.5% Notes") into 156,650 shares of
Common Stock (in accordance with the terms of the 2.5% Notes), and subsequently
sold all 616,598 shares of Common Stock then owned by it (including the shares
of Common Stock received by CNN upon such conversion) in the 1996 Common Stock
Offering.
6.0% NOTE CONVERSION. On July 12, 1996, following notice from the Company
of the redemption on such date of all $55.3 million principal amount of its then
outstanding 6.0% Convertible Subordinated Notes due July 1, 2003 (the "6.0%
Notes"), the holders thereof converted all of such 6.0% Notes into an aggregate
of 2,156,083 shares of Common Stock issued by the Company (the "6.0% Note
Conversion").
CONVERTIBLE NOTES PLACEMENT. On November 5, 1996, the Company completed a
private placement of $172.5 million aggregate principal amount of 5 3/8%
Convertible Subordinated Notes due November 15, 2006 (the "Convertible Notes")
of the Company (the "Convertible Notes Placement").
SMIT TRANSACTION. On December 19, 1996, the Company acquired substantially
all of the offshore vessel assets and certain joint venture interests owned by
Smit and its subsidiaries (the "Smit Transaction"). These acquired assets
include 100% interests in 24 vessels and 50% interests in nine vessels sold
directly by Smit and Smit's interests in joint ventures that own and operate 12
vessels. The aggregate consideration, including amounts payable under certain
lease purchase arrangements for two vessels, consisted of: (i) approximately
$71.1 million in cash, (ii) 712,000 shares of the Company's Common Stock, (iii)
up to $22.0 million principal amount of the Company's Series A 5 3/8%
Convertible Subordinated Notes due November 15, 2006 (of which $15.3 million
principal amount has been issued to date) and (iv) additional consideration as
described herein. The Company also entered into several related agreements.
37
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DESCRIPTION OF EXCHANGE NOTES
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
The terms of the Exchange Notes and the Existing Notes are identical in all
material respects, except for certain transfer restrictions relating to the
Existing Notes. The Exchange Notes will bear interest from the most recent date
to which interest has been paid on the Existing Notes or, if no interest has
been paid on the Existing Notes, from September 22, 1997. Accordingly,
registered holders of Exchange Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid on the Existing Notes or, if no interest has been paid, from September 22,
1997. Existing Notes accepted for exchange will cease to accrue interest from
and after the date of consummation of the Exchange Offer. Holders whose Existing
Notes are accepted for exchange will not receive any payment in respect of
interest on such Existing Notes otherwise payable on any interest payment date
the record date for which occurs on or after consummation of the Exchange Offer.
TERMS OF THE EXCHANGE NOTES
The Exchange Notes will be unsecured senior obligations of the Company,
limited to $150.0 million aggregate principal amount, and will mature on
September 15, 2009. The Exchange Notes will bear interest at the rate per annum
shown on the cover page hereof from September 22, 1997 or from the most recent
date to which interest has been paid or provided for, payable semiannually to
Holders of record at the close of business on the March 1 or September 1
immediately preceding the interest payment date on March 15 and September 15 of
each year, commencing March 15, 1998. The Company will pay interest on overdue
principal at 1% per annum in excess of such rate, and it will pay interest on
overdue installments of interest at such higher rate to the extent lawful.
Interest will be paid on a 360-day year, twelve 30-day month basis.
The interest rate on the Existing Notes is subject to increase in certain
circumstances if the Company does not file a registration statement relating to
the Exchange Offer or if the registration statement is not declared effective on
a timely basis or if certain other conditions are not satisfied, all as further
described under "The Exchange Offer."
OPTIONAL REDEMPTION
The Exchange Notes will be redeemable at any time, at the option of the
Company, in whole or from time to time in part, upon not less than 30 and not
more than 60 days' notice as provided in the Indenture, on any date prior to
maturity (the "Redemption Date") at a price equal to 100% of the principal
amount thereof plus accrued interest to the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive interest due
on an interest payment date that is on or prior to the Redemption Date) plus a
Make-Whole Premium, if any (the "Redemption Price"). In no event will the
Redemption Price ever be less than 100% of the principal amount of the Notes
plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Exchange Note (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(1) the sum of the present values, calculated as of the Redemption Date,
of:
(a) each interest payment that, but for such redemption, would have
been payable on the Exchange Note (or portion thereof) being redeemed on
each interest payment date occurring after the Redemption Date (excluding
any accrued interest for the period prior to the Redemption Date); and
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(b) the principal amount that, but for such redemption, would have
been payable at the final maturity of the Exchange Note (or portion
thereof) being redeemed; over
(2) the principal amount of the Exchange Note (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in clause
(1) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield (as defined below) plus 20 basis
points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided that
if the Company fails to make such appointment at least 45 business days prior to
the Redemption Date, or if the institution so appointed is unwilling or unable
to make such calculation, such calculation will be made by Salomon Brothers Inc
or, if such firm is unwilling or unable to make such calculation, by an
independent investment banking institution of national standing appointed by the
Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means a
rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Notes, calculated to the nearest 1/12th of
a year (the "Remaining Term"). The Treasury Yield will be determined as of the
third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be determined
by reference to the most recent statistical release published by the Federal
Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or
any successor release (the "H.15 Statistical Release"). If the H.15 Statistical
Release sets forth a weekly average yield for United States Treasury Notes
having a constant maturity that is the same as the Remaining Term, then the
Treasury Yield will be equal to such weekly average yield. In all other cases,
the Treasury Yield will be calculated by interpolation, on a straight-line
basis, between the weekly average yields on the United States Treasury Notes
that have a constant maturity closest to and greater than the Remaining Term and
the United States Treasury Notes that have a constant maturity closest to and
less than the Remaining Term (in each case as set forth in the H.15 Statistical
Release). Any weekly average yields so calculated by interpolation will be
rounded to the nearest 1/100th of 1%, with any figure of 1/200th of 1% or above
being rounded upward. If weekly average yields for United States Treasury Notes
are not available in the H.15 Statistical Release or otherwise, then the
Treasury Yield will be calculated by interpolation of comparable rates selected
by the Independent Investment Banker.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The indebtedness evidenced by the Existing Notes is and the indebtedness
evidenced by the Exchange Notes will be senior unsecured obligations of the
Company, will rank PARI PASSU in right of payment with all existing and future
senior indebtedness of the Company and will be senior in right of payments to
all future subordinated indebtedness of the Company. The Company, as of
September 30, 1997, had outstanding $30.7 million of senior indebtedness,
approximately $6.8 million of which was principal amount of
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borrowings under a $100.0 million revolving bank credit facility with Den norske
Bank ASA, as Agent for itself and other lenders named therein, and $150.0
million of Existing Notes with which the Exchange Notes would rank PARI PASSU.
Substantially all of the Company's operating income and cash flow is
generated by its subsidiaries. As a result, funds necessary to meet the
Company's debt service obligations are provided in part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of the Company's subsidiaries, could limit the Company's ability to
obtain cash from its subsidiaries for the purpose of meeting its debt service
obligations, including the payment of principal and interest on the Notes. The
claims of creditors of the subsidiaries will effectively have priority with
respect to the assets and earnings of such companies over the claims of
creditors of the Company, including the holders of the Notes.
BOOK-ENTRY; DELIVERY AND FORM
Except as described below, the Notes sold will initially be issued in the
form of one or more global notes (the "Global Notes"). The Global Notes will be
deposited with, or on behalf of, the Depository and registered in the name of
the Depository or its nominee. Except as set forth below, the Global Notes may
be transferred, in whole and not in part, only to the Depository or another
nominee of the Depository. Investors may hold their beneficial interests in the
Global Notes directly through the Depository if they have an account with the
Depository or indirectly through organizations which have accounts with the
Depository.
Upon the transfer of a Note in definitive form, such Note will, unless the
Global Notes have previously been exchanged for Notes in definitive form, be
exchanged for an interest in the Global Notes representing the principal amount
of Notes being transferred, with certain exceptions for transfers pursuant to
Rule 144.
Notes originally purchased by persons outside the United States pursuant to
sales in accordance with Regulation S under the Securities Act will be
represented upon issuance by a temporary global Note certificate in fully
registered form without interest coupons (the "Temporary Certificate") which
will not be exchangeable for Certificated Notes until the expiration of the
"40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S
under the Securities Act. The Temporary Note will be registered in the name of,
and held by, a temporary certificate holder until the expiration of such 40-day
period, at which time the Temporary Certificate will be delivered to the Trustee
in exchange for Certificated Notes registered in the names requested by such
temporary certificate holder. In addition, until the expiration of such 40-day
period, transfers of interests in the Temporary Certificate can only be effected
through such temporary certificate holder in accordance with the requirements
set forth in "Notice to Investors."
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly (collectively, the "indirect participants").
Holders who are not
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participants may beneficially own securities held by or on behalf of DTC only
through participants or indirect participants.
Upon the issuance of the Global Notes, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Notes to the accounts of participants. The accounts
to be credited shall be designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Notes will be limited to
participants or persons that may hold interests through participants. Any person
acquiring an interest in a Global Note through an offshore transaction in
reliance on Regulation S may hold such interest through CEDEL or Euroclear.
Ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depository (with respect to participants' interest) and such
participants (with respect to the owners of beneficial interests in the Global
Notes other than participants). The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Notes.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Notes, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Notes will not be entitled to have the Notes
represented by the Global Notes registered in their names, will not receive or
be entitled to receive physical delivery of certificated Notes in definitive
form and will not be considered to be the owners or holders of any Notes under
the Global Notes. The Company understands that under existing industry practice,
in the event an owner of a beneficial interest in the Global Notes desires to
take any action that the Depository, as the holder of the Global Notes, is
entitled to take, the Depository would authorize the participants to take such
action, and that the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Notes registered in the name of and held by the Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Notes.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Notes held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Notes for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Notes owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Notes may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
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CERTIFICATED NOTES
The Notes represented by the Global Notes are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of U.S.
$1,000 and integral multiples thereof if (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for the Global Notes or
if at any time the Depository ceases to be a clearing agency registered under
the Exchange Act and a successor Depository is not appointed by the Company
within 90 days, (ii) the Company in its discretion at any time determines not to
have all of the Notes represented by the Global Notes, (iii) an Event (as
defined) of Default has occurred and is continuing or (iv) upon the occurrence
of certain other events. Any Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Notes are not exchangeable, except for a
Global Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee.
SAME-DAY PAYMENT
The Indenture requires that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address.
CERTAIN COVENANTS
The Indenture does not limit the amount of indebtedness or other obligations
that may be incurred by the Company and its subsidiaries and does not contain
provisions which would give holders of the Notes the right to require the
Company to repurchase their Notes in the event of a decline in the credit rating
of the Company's debt securities. The Indenture contains covenants including,
among others, the following:
LIMITATION ON LIENS. The Indenture provides that the Company will not, and
will not permit any of its Subsidiaries to, create, incur or otherwise cause or
suffer to exist or become effective any Liens of any kind upon any Principal
Property or any shares of stock or indebtedness of any Subsidiary that owns or
leases any Principal Property (whether such Principal Property, shares of stock
or indebtedness are now owned or hereafter acquired) unless all payments due
under the Indenture and the Notes are secured on an equal and ratable basis with
the obligations so secured until such time as such obligation is no longer
secured by a Lien, except for Permitted Liens. See also "Exempted Indebtedness"
below.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Indenture provides that
neither the Company nor any Subsidiary will enter into any Sale and Leaseback
Transaction with respect to any Principal Property unless either (a) the Company
or such Subsidiary would be entitled, pursuant to the provisions of the
Indenture, to incur Indebtedness secured by a Lien on the property to be leased
without equally and ratably securing the Notes or (b) the Company, within 180
days after the effective date of such transaction, applies to the voluntary
retirement of its funded debt an amount equal to the value of such transaction,
defined as the greater of the net proceeds of the sale of the property leased in
such transaction or the fair value, in the opinion of the Board of Directors, of
the leased property at the time such transaction was entered into. See also
"Exempted Indebtedness" below.
EXEMPTED INDEBTEDNESS. Notwithstanding the foregoing limitations on Liens
and Sale and Leaseback Transactions, the Company and its Subsidiaries may issue,
assume, or guarantee Indebtedness secured by a Lien without securing the Notes,
or may enter into Sale and Leaseback Transactions without retiring funded debt,
or enter into a combination of such transactions, if the sum of the principal
amount of all such Indebtedness and the aggregate value of all such Sale and
Leaseback Transactions does not at any time exceed 15% of the Consolidated Net
Tangible Assets of the Company and its consolidated Subsidiaries as shown in the
audited consolidated balance sheet contained in the latest annual report to the
shareholders of the Company.
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MERGER AND CONSOLIDATION. The Indenture provides that the Company, without
the consent of the Holders of any of the outstanding Notes, may consolidate with
or merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person or may permit any Person to
consolidate with or merge into, or transfer or lease its properties
substantially as an entirety to, the Company; provided that (a) the successor,
transferee or lessee is organized under the laws of any United States
jurisdiction; (b) the successor, transferee or lessee, if other than the
Company, expressly assumes the Company's obligations under the Indenture and the
Notes by means of a supplemental indenture entered into with the Trustee; (c)
after giving effect to the transaction, no Default shall have occurred and be
continuing; and (d) certain other conditions are met.
Under any consolidation by the Company with, or merger by the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety as described in the preceding
paragraph, the successor resulting from such consolidation or into which the
Company is merged or the transferee or lessee to which such conveyance, transfer
or lease is made, will succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture, and thereafter,
except in the case of a lease, the predecessor (if still in existence) will be
released from its obligations and covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture to be a (i) default in the
payment of any interest upon any of the Notes for 30 days or more after such
payment is due, (ii) default in the payment of the principal of and premium, if
any, on any of the Notes when due, (iii) default by the Company in the
performance, or breach, of any of its other covenants in the Indenture which
will not have been remedied by the end of a period of 60 days after written
notice to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the outstanding Notes, (iv)
failure to pay when due the principal of, or acceleration of, any indebtedness
for money borrowed by the Company or a Subsidiary in excess of $15.0 million
principal amount, if such indebtedness is not discharged, or such acceleration
is not annulled, by the end of a period of 10 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the outstanding Notes and (v) certain events of
bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary.
The Indenture provides that if an Event of Default (other than of a type
referred to in clause (v) of the preceding paragraph) shall have occurred and is
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the outstanding Notes may declare the principal amount of all Notes to
be immediately due and payable. Such declaration may be rescinded if certain
conditions are satisfied. If an Event of Default of the type referred to in
clause (v) of the preceding paragraph shall have occurred, the principal amount
of the outstanding Notes shall automatically become immediately due and payable.
The Indenture also provides that the Holders of not less than a majority in
principal amount of the outstanding Notes may direct the time, method and place
of conducting any proceedings for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee; provided that such
direction is not in conflict with any rule of law or with the Indenture. The
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
The Indenture contains provisions entitling the Trustee, subject to the duty
of the Trustee during the continuance of an Event of Default to act with the
required standard of care, to be indemnified by the Holders of Notes before
proceeding to exercise any right or power under the Indenture at the request of
the Holders of Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the Holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to
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institute such proceeding as Trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the outstanding
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not apply
to a suit instituted by a Holder of a Note for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note or of the right to convert such Note
in accordance with the Indenture.
The Indenture requires the Company to file annually with the Trustee a
certificate, executed by a designated officer of the Company, stating to the
best of his knowledge that the Company is not in default under certain covenants
under the Indenture or if he has knowledge that the Company is in such default,
specifying such default.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the Holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected thereby, no amendment may, among other things, (i)
reduce the amount of Notes whose Holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce
the amount payable upon the redemption of any Note or change the time at which
any Note may be redeemed as described under
" -- Optional Redemption" above, (v) make any Note payable in money other than
that stated in the Note, (vi) impair the right of any Holder of the Notes to
receive payment of principal of and interest on such Holder's Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such Holder's Notes or (vii) make any change in the
amendment provisions which require each Holder's consent or in the waiver
provisions.
Without the consent of any Holder of the Notes, the Company and Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of the
Company under the Indenture, to provide for uncertificated Notes in addition to
or in place of certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section 163(f)(2)(B)
of the Code), to add guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Company for the benefit of the Holders of the
Notes or to surrender any right or power conferred upon the Company, to make any
change that does not adversely affect the rights of any Holder of the Notes or
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the Trust Indenture Act.
The consent of the Holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all Holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
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DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Certain Covenants" (other than the covenant described under
"--Certain Covenants--Merger and Consolidation"), the operation of the cross
acceleration provision and the bankruptcy provisions with respect to Significant
Subsidiaries described under "--Events of Default" above and the limitations
contained in clauses (c) and (d) under "--Certain Covenants--Merger and
Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii), (iv) or (v) under "--Events of
Default" above or because of the failure of the Company to comply with clause
(c) or (d) under "--Certain Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that Holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance and will
be subject to federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
CONCERNING THE TRUSTEE
First Trust National Association is the Trustee under the Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
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"business day" means each day which is not a legal holiday.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with such principles; and the Stated Maturity thereof shall be the
date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting (1) all
current liabilities (excluding the amount of those which are by their terms
extendable or renewable at the option of the obligor to a date more than 12
months after the date as of which the amount is being determined) and (2) all
goodwill, tradenames, trademarks, patents, unamortized debt discount and expense
and other like intangible assets, all as set forth on the most recent balance
sheet of the Company and its consolidated Subsidiaries and determined in
accordance with GAAP.
"Consolidated Net Worth" means the excess of assets over liabilities of the
Company and its consolidated Subsidiaries, plus Minority Interests, as
determined from time to time in accordance with GAAP.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, at any date, any of the
following, without duplication, (i) any liability, contingent or otherwise, of
such Person (A) for borrowed money (whether or not the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof), (B)
evidenced by a note, bond, debenture or similar instrument or (C) for the
payment of money relating to a Capitalized Lease Obligation or other obligation
(whether issued or assumed) relating to the deferred purchase price of property;
(ii) all conditional sale obligations and all obligations under any title
retention agreement (even if the rights and remedies of the seller under such
agreement in the event of default are limited to repossession or sale of such
property), but excluding trade accounts payable arising in the
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ordinary course of business; (iii) all obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction other than entered into in the ordinary course of business; (iv) all
indebtedness of others secured by (or for which the holder of such indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
any asset or property (including, without limitation, leasehold interests and
any other tangible or intangible property) of such Person, whether or not such
indebtedness is assumed by such Person or is not otherwise such Person's legal
liability; PROVIDED, that if the obligations so secured have not been assumed in
full by such Person or are otherwise not such Person's legal liability in full,
the amount of such indebtedness for the purposes of this definition shall be
limited to the lesser of the amount of such indebtedness secured by such Lien or
the fair market value of the assets of the property securing such Lien; (v) all
indebtedness of others (including all interest and dividends on any Indebtedness
or Preferred Stock of any other Person for the payment of which is) guaranteed,
directly or indirectly, by such Person or that is otherwise its legal liability
or which such Person has agreed to purchase or repurchase or in respect of which
such Person has agreed contingently to supply or advance funds; and (vi)
obligations in respect of Currency Agreements and Interest Rate Agreements (as
such capitalized terms are defined in the Indenture).
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien,
charge or adverse claim affecting title or resulting in an encumbrance against
real or personal property or a security interest of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof or any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party or property leased to the Company or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).
"Minority Interest" means any shares of stock of any class of a Subsidiary
that are not owned by the Company or a Subsidiary.
"Permitted Liens" means, with respect to any Person: (i) Liens existing on
the Issue Date; (ii) Liens on property or assets of, or any shares of stock of
or secured debt of, any corporation existing at the time such corporation
becomes a Subsidiary of the Company or at the time such corporation is merged
into the Company or any of its Subsidiaries; (iii) Liens in favor of the Company
or any of its Subsidiaries; (iv) Liens in favor of governmental bodies to secure
progress or advance payments; (v) Liens securing industrial revenue or pollution
control bonds; (vi) Liens on Property to secure Indebtedness incurred for the
purpose of (a) financing all or any part of the purchase price of such Property
incurred prior to, at the time of, or within 180 days after, the acquisition of
such Property or (b) financing all or any part of the cost of construction,
improvement, development or expansion of any such Property; (vii) statutory
liens or landlords', carriers', warehouseman's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have been
made therefor; (viii) Liens on current assets of Subsidiaries securing
Indebtedness of such Subsidiaries; and (ix) any extensions, substitutions,
replacements or renewals in whole or in part of a Lien (an "existing Lien")
enumerated in clauses (i) through (viii) above; PROVIDED that the Lien may not
extend beyond (A) the Property or Indebtedness subject to the existing Lien and
(B) improvements and construction on such Property and the Indebtedness secured
by the Lien may not exceed the Indebtedness secured at the time by the existing
Lien.
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"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Principal Property" means any Property owned or leased by the Company or
any Subsidiary, the gross book value of which exceeds one percent of
Consolidated Net Worth.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Sale and Leaseback Transaction" means any arrangement with any Person
pursuant to which the Company or any Subsidiary leases any Principal Property
that has been or is to be sold or transferred by the Company or the Subsidiary
to such Person, other than (1) temporary leases for a term, including renewals
at the option of the lessee, of not more than five years, (2) leases between the
Company and a Subsidiary or between Subsidiaries, (3) leases of Principal
Property executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the commencement
of commercial operation of the Principal Property, and (4) arrangements pursuant
to any provision of law with an effect similar to the former Section 168(f)(8)
of the Internal Revenue Code of 1954.
"SEC" means the Securities and Exchange Commission.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity," when used with respect to any security or any installment
of interest thereon, means the date specified in such security as the fixed date
on which the principal of such security or such installment of interest is due
and payable.
"Subsidiary" of any Person means (i) any Person of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the Subsidiaries of that Person or a
combination thereof, and (ii) any partnership, joint venture or other Person in
which such Person or one or more of the Subsidiaries of that Person or a
combination thereof has the power to control by contract or otherwise the board
of directors or equivalent governing body or otherwise controls such entity.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or one or more
Wholly-Owned Subsidiaries.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Existing Notes were originally sold by the Company on September 22,
1997, to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Existing Notes to qualified institutional
buyers pursuant to Rule 144A under the Securities Act, or outside the United
States in compliance with Regulation S under the Securities Act. Pursuant to the
Purchase Agreement the Company entered into a registration rights agreement with
the Initial Purchasers (the "Registration Agreement") pursuant to which the
Company agreed, for the benefit of the holders of the Existing Notes, at the
Company's cost, to (i) file a registration statement (the "Exchange Offer
Registration Statement") within 150 days after the date of original issuance of
such Existing Notes (the "Issue Date") with the Commission with respect to
registered offers to exchange each of such Existing Notes for debentures (the
"Exchange Notes") with terms identical in all material respects thereto (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions or the special interest payments described below), and (ii) use its
best efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 180 days after the Issue Date.
Promptly after the Exchange Offer Registration Statement is declared effective,
the Company will offer the Exchange Notes in exchange for surrender of the
Existing Notes (the "Exchange Offer"). The Company will keep the Exchange Offer
open for not less than 30 days (or longer if required by applicable law) after
the date notice of the Exchange Offer is mailed to the holders of the Existing
Notes.
For each Existing Note properly tendered and accepted pursuant to the
Exchange Offer and not withdrawn by the holder thereof, the holder of such
Existing Note will receive an Exchange Note having a principal amount equal to
that of the Existing Note tendered. Interest on each Exchange Note will accrue
from the last respective interest date on which interest was paid on the
Existing Note tendered in exchange therefor or, if no interest has been paid on
such Existing Note, from the Issue Date.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties with respect
to similar transactions, including "Exxon Capital Holdings Corporation"
(available May 13, 1988) and "Morgan Stanley & Co. Incorporated" (available June
5, 1991) and similar no-action letters, and subject to the immediately following
sentence, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
the holders thereof (other than holders who are broker-dealers) without further
compliance with the registration and prospectus delivery provisions of the
Securities Act. As the Company has not sought a no-action letter with respect to
the Exchange Offer, there can be no assurance that the Staff of the Commission
would make a similar determination with respect to the Exchange Offer. However,
any holder of Existing Notes who is an "affiliate" of the Company or who intends
to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes, or any Initial Purchasers (i) will not be able to rely on the
interpretation by the staff of the Commission set forth in the above-mentioned
no-action letters, (ii) will not be able to tender its Existing Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Exchange Notes unless such sale or transfer is made pursuant to
an exemption from such requirements.
Each holder of the Existing Notes (other than certain specified holders) who
wishes to exchange Existing Notes for Exchange Notes in the Exchange Offer will
be required to represent in the Letter of Transmittal that among other things
(i) it is not an affiliate of the Company, (ii) any Exchange Notes to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Notes. In addition, in connection with any resales of
Exchange Notes, any broker-dealer (an "Exchanging Dealer") who acquired the
Existing Notes for its own account as a result of market-making activities or
other trading activities must deliver a prospectus meeting
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the requirements of the Securities Act. The Commission has taken the position
that Exchanging Dealers may fulfill their prospectus delivery requirements with
respect to the Exchange Notes (other than a resale of an unsold allotment from
the original sale of the Notes) with the prospectus contained in the Exchange
Offer Registration Statement. Under the Registration Agreement, the Company is
required to allow Exchanging Dealers and other persons, if any, subject to
similar prospectus delivery requirements to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
Exchange Notes for a period of 180 days (exclusive of any period during which a
stoporder shall be in effect suspending the effectiveness of the Registration
Statement) after the consummation of the Exchange Offer.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer
with respect to the Notes, or if for any reason the Exchange Offer Registration
Statement is not declared effective within 180 days following the Issue Date, or
upon the request of the Initial Purchasers under certain circumstances, the
Company will, in lieu of effecting the registration of the applicable Exchange
Notes pursuant to the Exchange Offer Registration Statement and at its cost, (i)
as promptly as practicable, file with the Commission a Shelf Registration
Statement (the "Shelf Registration Statement") covering resales of the Existing
Notes, (ii) use its best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act by the 210th day after the Issue
Date (or promptly in the event of a request by the Initial Purchasers) and (iii)
keep effective the Shelf Registration Statement until the earliest of (x) the
second anniversary of the Issue Date (or the first anniversary of the effective
date if such Shelf Registration Statement is filed at the request of the Initial
Purchasers), (y) the time when the Existing Notes registered thereunder can be
sold by non-affiliates pursuant to Rule 144 under the Securities Act without
limitation under clauses (c), (e), (f) and (h) of Rule 144, or (z) such time as
all the Existing Notes registered thereunder have been sold. See "--Resale of
the Exchange Notes." During any consecutive 365-day period, the Company will
have the ability to suspend the availability of the Shelf Registration Statement
for up to two periods of up to 45 consecutive days, but no more than an
aggregate of 60 days during any 365-day period. The Company will, in the event
of the filing of a Shelf Registration Statement, provide to each holder of such
Existing Notes copies of the prospectus which is part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for
such Existing Notes has become effective and take certain other actions as are
required to permit unrestricted resales of such Existing Notes. A holder of such
Notes that sells such Existing Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling security holder in
the related prospectus and to deliver a prospectus to the purchaser, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Agreement which are applicable to such a holder (including certain
indemnification obligations). In addition, each holder of such Existing Notes
will be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Agreement in
order to have their Existing Notes included in the Shelf Registration Statement
and to benefit from the provisions regarding Special Interest set forth in the
following paragraph. If the Company has consummated the Exchange Offer, then,
subject to certain limited exceptions, the Company will have no obligation to
file or to maintain the effectiveness of a Shelf Registration Statement with
respect to any Existing Notes that are not tendered in the Exchange Offer.
In the event that (i) by the 150th day following the Issue Date, the
Exchange Offer Registration Statement is not filed with the Commission, (ii) by
the 180th day following the Issue Date, neither the Exchange Offer Registration
Statement is declared effective nor (if the Exchange Offer is not permitted as
described above) the Shelf Registration Statement is filed with the Commission,
or (iii) by the 210th day following the Issue Date, the Exchange Offer is not
consummated or the Shelf Registration Statement is not declared effective with
respect thereto (each such event referred to in clauses (i) through (iii), a
"Registration Default"), interest will accrue on the applicable Existing Notes
(in addition to stated interest on such Notes) which, except as provided below,
shall be the sole and exclusive remedy for such
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Registration Default from and including the next day following each such
Registration Default. In each case such additional interest (the "Special
Interest") will be payable in cash semiannually in arrears each March 15 and
September 15, at a rate per annum equal to 0.25% of the principal amount of such
Existing Notes for each such Registration Default. The aggregate amount of
Special Interest payable pursuant to the above provisions will in no event
exceed 0.25% per annum of the principal amount of such Existing Notes which,
except as provided below, shall be the sole and exclusive remedy for such
Registration Default. Upon (a) the filing of the Exchange Offer Registration
Statement after the 150-day period described in clause (i) above, (b) the
effectiveness of the Exchange Offer Registration Statement or the filing of the
Shelf Registration Statement after the 180-day period described in clause (ii)
above or (c) the consummation of the Exchange Offer for such Notes or the
effectiveness of a Shelf Registration Statement, as the case may be, after the
210-day period described in clause (iii) above, the Special Interest payable on
such Notes as a result of the applicable Registration Default will cease to
accrue. For purposes of the preceding sentence, the curing of a Registration
Default by the means described in clause (b) above shall constitute a cure of
the Registration Defaults described in clauses (i) and (ii) above, and the
curing of a Registration Default by the means described in clause (c) above
shall constitute a cure of the Registration Defaults described in clauses (i),
(ii) and (iii) above. The Company will have no other liabilities for monetary
damages with respect to the above; PROVIDED, HOWEVER, that in the event the
Company breaches, fails to comply with or violates certain provisions of the
Registration Agreement, the holders of Existing Notes shall be entitled to, and
the Company shall not oppose the granting of, equitable relief, including
injunction and specific performance.
In the event that a Shelf Registration Statement is declared effective
pursuant to the paragraph preceding the immediately preceding paragraph, if the
Company fails to keep such Registration Statement continuously effective for the
period required by the Registration Agreement (except as specifically permitted
therein), then from such time as the Shelf Registration Statement is no longer
effective until the earlier of (i) the date that the Shelf Registration
Statement is again deemed effective and (ii) the date that is the earliest of
(x) the second anniversary of the Issue Date (or until the first anniversary of
the effective date if the Shelf Registration Statement is filed at the request
of the Initial Purchasers), (y) the time when the Existing Notes registered
thereunder can be sold by non-affiliates pursuant to Rule 144 under the
Securities Act without any limitation under clauses (c), (e), (f) and (h) of
Rule 144, or (z) the date as of which all such Existing Notes are sold pursuant
to the Shelf Registration Statement, Special Interest shall accrue at a rate per
annum equal to 0.25% of the principal amount of the Existing Notes which, except
as provided below, shall be the sole and exclusive remedy for such Registration
Default and shall be payable in cash semiannually in arrears each March 15 and
September 15. The Company will have no other liabilities for monetary damages
with respect to the above; PROVIDED, HOWEVER, that in the event the Company
breaches, fails to comply with or violates certain provisions of the
Registration Agreement, the holders of Existing Notes shall be entitled to, and
the Company shall not oppose the granting of, equitable relief, including
injunction and specific performance.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is available upon request to the Company.
Following the consummation of the Exchange Offer, holders of the Existing
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Existing Notes will not have any further exchange or registration
rights and such Existing Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for such
Existing Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Existing
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding
Existing Notes accepted in the Exchange Offer. Holders may tender some or all of
their Existing Notes pursuant to the Exchange Offer. However, Existing Notes may
be tendered only in integral multiples of $1,000.
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The form and terms of the Exchange Notes are the same as the form and terms
of the Existing Notes except (i) the Exchange Notes bear a different CUSIP
Number from the Existing Notes and (ii) the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof. The Exchange Notes will evidence the same debt as the Existing
Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus $150,000,000 aggregate principal amount of
Existing Notes are outstanding. The Company has fixed the close of business on
November 4, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of the Existing Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Existing Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Existing Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Existing Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Existing Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions of the
Letter of Transmittal, transfer taxes with respect to the exchange of Existing
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than the transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
December 8, 1997 unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right (i) to delay accepting any Existing Notes, to
extend the Exchange Offer or to terminate the Exchange Offer if any of the
conditions set forth below under "--Conditions" shall not have been satisfied,
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
PROCEDURES FOR TENDERING
The tender of Existing Notes pursuant to any of the procedures set forth in
this Prospectus and in the Letter of Transmittal will constitute a binding
agreement between the Tendering Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. The tender of Existing Notes will constitute an agreement to
deliver good and marketable title to all tendered Existing Notes prior to the
Expiration Date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind.
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EXCEPT AS PROVIDED IN "--GUARANTEED DELIVERY PROCEDURES," UNLESS THE
EXISTING NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION, REJECT SUCH
TENDER. ISSUANCE OF EXCHANGE NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF TENDERED
EXISTING NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS. NOTWITHSTANDING THE
FOREGOING, DTC PARTICIPANTS TENDERING THROUGH ATOP WILL BE DEEMED TO HAVE MADE
VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN AGENT'S MESSAGE (DEFINED
BELOW) PRIOR TO THE EXPIRATION DATE.
Accordingly, to properly tender Existing Notes, the following procedures
must be followed:
EXISTING NOTES HELD THROUGH DTC. Each Beneficial Owner holding Existing
Notes through a DTC Participant must instruct such DTC Participant to cause its
Existing Notes to be tendered in accordance with the procedures set forth in
this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Existing Notes through DTC must (i) electronically transmit
its acceptance through ATOP, and DTC will then edit and verify the acceptance,
execute a book-entry delivery to the Exchange Agent's account at DTC and send an
Agent's Message to the Exchange Agent for its acceptance, or (ii) comply with
the guaranteed delivery procedures set forth below and in the Notice of
Guaranteed Delivery. See "--Guaranteed Delivery Procedures."
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to
Existing Notes held through DTC, and any financial institution that is a DTC
Participant may make book-entry delivery of interests in Existing Notes into the
Exchange Agent's account through ATOP. However, although delivery of interests
in the Existing Notes may be effected through book-entry transfer into the
Exchange Agent's account through ATOP, an Agent's Message in connection with
such book-entry transfer, and any other required documents, must be, in any
case, transmitted to and received by the Exchange Agent at its address set forth
under "--Exchange Agent," or the guaranteed delivery procedures set forth below
must be complied with, in each case, prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. The
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants have
received a Letter of Transmittal and agree to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such DTC Participants.
Cede & Co., as the Holder of the global certificates representing the
Existing Notes (each a "Global Security," or together, the "Global Securities"),
will tender a portion of each of the Global Securities equal to the aggregate
principal amount due at the stated maturity for which instructions to tender are
given by DTC Participants.
EXISTING NOTES HELD BY HOLDERS. Each Holder must (i) complete and sign and
mail or deliver the accompanying Letter of Transmittal, and any other documents
required by the Letter of Transmittal, together with certificate(s) representing
all tendered Existing Notes, to the Exchange Agent at its address set forth
under "--Exchange Agent," or (ii) comply with the guaranteed delivery procedures
set forth below and in the Notice of Guaranteed Delivery. See "--Guaranteed
Delivery Procedures."
All signatures on a Letter of Transmittal must be guaranteed by any member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor" institution
within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"); PROVIDED, HOWEVER, that signatures on a Letter of Transmittal
need not be guaranteed if such Existing Notes
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are tendered for the account of an Eligible Institution, including (as such
terms are defined in Rule 17Ad-15): (i) a bank; (ii) a broker, dealer, municipal
securities dealer, municipal securities broker, government securities dealer or
government securities broker; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
institution that is a participant in a Securities Transfer Association
recognized program.
If a Letter of Transmittal or any Existing Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
Holders should indicate in the applicable box in the Letter of Transmittal
the name and address to which substitute certificates evidencing Existing Notes
for amounts not tendered are to be issued or sent, if different from the name
and address of the person signing the Letter of Transmittal. In the case of
issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no instructions are given,
such Existing Notes not tendered, as the case may be, will be returned to the
person signing the Letter of Transmittal.
By tendering, each Holder and each DTC Participant will make to the Company
the representations set forth in the fourth paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, as the case may be, each Tendering Holder waives any
right to receive any notice of the acceptance for purchase of its Existing
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Existing Notes will be resolved by the
Company, whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which may, in the opinion of counsel for the Company, be unlawful.
The Company also reserves the absolute right to waive any condition to the
Exchange Offer and any irregularities or conditions of tender as to particular
Existing Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding. Unless waived, any irregularities in connection with tenders
must be cured within such time as the Company shall determine. The Company and
the Exchange Agent shall not be under any duty to give notification of defects
in such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Existing Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Existing Notes received
by the Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND EXISTING NOTES MUST BE SENT ONLY TO THE EXCHANGE
AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR EXISTING NOTES TO THE COMPANY OR
DTC.
The method of delivery of Existing Notes and Letters of Transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, it is suggested that the Holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to the Expiration Date.
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GUARANTEED DELIVERY PROCEDURES
EXISTING NOTES HELD THROUGH DTC. DTC Participants holding Existing Notes
through DTC (the "Book-Entry Transfer Facility") who wish to cause their
Existing Notes to be tendered, but who cannot transmit their acceptances through
ATOP prior to the Expiration Date, may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Company herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent within
three New York Stock Exchange trading days after the date of the execution
of the Notice of Guaranteed Delivery.
EXISTING NOTES HELD BY HOLDERS. Holders who wish to tender their Existing
Notes and (i) whose Existing Notes are not immediately available, (ii) who
cannot deliver their Existing Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer, prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder, the
certificate number(s) of such Existing Notes and the principal amount of
Existing Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Existing Notes (or a
confirmation of book-entry transfer of such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility), and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Existing Notes in proper form for transfer (or a confirmation or book-entry
transfer of such Existing Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon three New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Existing Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
EXISTING NOTES HELD THROUGH DTC. DTC Participants holding Existing Notes
who have transmitted their acceptances through ATOP may, prior to 5:00 p.m., New
York City time, on the Expiration Date, withdraw the instruction given thereby
by delivering to the Exchange Agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC Participant, the principal amount due at the stated maturity of the Existing
Notes to which such withdrawal relates and the signature of the DTC
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Participant. Withdrawal of such an instruction will be effective upon receipt of
such written notice of withdrawal by the Exchange Agent.
EXISTING NOTES HELD BY HOLDERS. Holders may withdraw a tender of Existing
Notes in the Exchange Offer, by a telegram, telex, letter or facsimile
transmission notice of withdrawal received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Existing Notes to be withdrawn (the "Depositor"), (ii) identify
the Existing Notes to be withdrawn (including the certificate number(s) and
principal amount due at the stated maturity of such Existing Notes, or, in the
case of Existing Notes transferred by book-entry transfer, the name and number
of the account at the Book-Entry Transfer Facility to be credited), (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Existing Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Existing Notes register the
transfer of such Existing Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Existing Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Existing Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer, and no Exchange Notes will
be issued with respect thereto unless the Existing Notes so withdrawn are
validly re-tendered. Any Existing Notes which have been tendered but which are
not accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Existing Notes may be
re-tendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an Eligible
Institution; PROVIDED, HOWEVER, that signatures on the notice of withdrawal need
not be guaranteed if the Existing Notes being withdrawn are held for the account
of an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC Participant or a Holder, as the case may be, in the same manner as the
person's name appears on its transmission through ATOP or Letter of Transmittal,
as the case may be, to which such withdrawal relates. If a notice of withdrawal
is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when signing
and must submit with the revocation appropriate evidence of authority to execute
the notice of withdrawal. A DTC Participant or a Holder may withdraw an
instruction or a tender, as the case may be, only if such withdrawal complies
with the provisions of this Prospectus.
A withdrawal of a tender of Existing Notes by a DTC Participant or a Holder,
as the case may be, may be rescinded only by a new transmission of an acceptance
through ATOP or execution and delivery of a new Letter of Transmittal, as the
case may be, in accordance with the procedures described herein.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, and subject to its
obligations pursuant to the Registration Agreement, the Company shall not be
required to accept for exchange, or exchange securities for, any Existing Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Existing Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Company upon written advice of counsel, could
reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or any material adverse development has
occurred in any existing action or proceeding with respect to the Company or
any of the subsidiaries; or
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(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the judgment of
the company and based on written advice of counsel, could reasonably be
expected to materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its discretion and based on written advice of counsel,
deem necessary for the consummation of the Exchange Offer as contemplated
hereby.
If any of the conditions are not satisfied, the Company may (i) refuse to
accept any Existing Notes and return all tendered Existing Notes to the
tendering holders, (ii) extend the Exchange Offer and retain all Existing Notes
tendered prior to the expiration of the Exchange Offer, subject, however, to the
rights of holders to withdraw such Existing Notes (see "--Withdrawal of
Tenders"), or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Existing Notes which have not
been withdrawn.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time
upon advice of outside counsel. The failure by the Company at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Existing Notes
tendered and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order is threatened by the Commission or in
effect with respect to the Registration Statement of which this Prospectus is a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of
Existing Notes being tendered for exchange.
EXCHANGE AGENT
First Trust National Association has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Therese Linscheid
Specialized Finance
Telephone: (612) 244-1234
Facsimile: (612) 244-1537
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The
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Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Existing Notes, which is face value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Exchange Offer
will be amortized over the term of the Exchange Notes under generally accepted
accounting principles.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Existing Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Existing
Notes may be resold only (i) to the Company, (ii) so long as such Existing Notes
are eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a "qualified institutional buyer," as defined in Rule
144A under the Securities Act (a "QIB"), that purchases for its own account or
for the account of a QIB to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, (iii) outside the United States
in accordance with Regulation S, (iv) to an institution that is an "accredited
investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act
(an "Institutional Accredited Investor") who has certified to the Company and
the Trustee for the Existing Notes that such transferee is an Institutional
Accredited Investor and is acquiring such Notes for investment purposes and not
for distribution, (iv) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if applicable) under the Securities Act or
(v) pursuant to an effective registration statement under the Securities Act, in
each case in accordance with any applicable securities laws of any state of the
United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes
in the ordinary course of business, whether or not such person is the holder
(other than (i) a broker-dealer who purchases such Exchange Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in
exchange for Existing Notes, and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each broker-dealer that
receives Exchange Notes for its own account in exchange for Existing Notes,
where such Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
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As contemplated by these no-action letters and the Registration Agreement,
each holder accepting the Exchange Offer is required to represent to the Company
in the Letter of Transmittal that (i) the Exchange Notes are to be acquired by
the holder or the person receiving such Exchange Notes, whether or not such
person is the holder, in the ordinary course of business, (ii) the holder or any
such other person (other than a broker-dealer referred to in the next sentence)
is not engaging, and does not intend to engage, in the distribution of the
Exchange Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the Exchange
Notes, it must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale of the Exchange Notes and
cannot rely on those no-action letters. As indicated above, each broker-dealer
that receives any Exchange Notes for its own account in exchange for Existing
Notes must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. For a description of the procedures for such
resales by broker-dealers, see "Plan of Distribution."
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain material U.S. federal
income tax consequences to Tendering Holders of (i) the exchange of Existing
Notes for Exchange Notes and (ii) the ownership and disposition of Exchange
Notes. This discussion is a summary for general informational purposes only and
does not consider all aspects of U.S. federal income taxation that may be
relevant to a particular Tendering Holder in light of such Tendering Holder's
individual investment circumstances. This discussion also does not address the
U.S. federal income tax consequences of ownership of Notes not held as capital
assets within the meaning of Section 1221 of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), or the U.S. federal income tax consequences to
certain types of Tendering Holders subject to special treatment under the U.S.
federal income tax laws, such as dealers in securities or foreign currency, tax-
exempt entities, financial institutions, insurance companies, persons that hold
the Notes as part of a "straddle", "hedge" or "conversion transaction," persons
that have a "functional currency" other than the U.S. dollar, and investors in
pass-through entities. In addition, this discussion does not describe any tax
consequences arising under U.S. federal gift and estate taxes (except to the
limited extent set forth below under "Non-U.S. Holders"), nor any consequences
arising under the laws of any state, locality or foreign jurisdiction.
This discussion is based upon the Code, the Treasury Regulations promulgated
thereunder (including temporary regulations), administrative interpretations and
judicial authority, in each case as in effect as of the date hereof. All of the
foregoing are subject to change at any time, possibly with retroactive effect.
EACH TENDERING HOLDER SHOULD CONSULT WITH SUCH TENDERING HOLDER'S OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH TENDERING HOLDER OF
PARTICIPATION IN THE EXCHANGE OFFER, AND THE OWNERSHIP AND DISPOSITION OF
EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
U.S. HOLDERS
The following discussion is limited to certain material U.S. federal income
tax consequences relevant to a holder of a Note that is (i) a citizen or
resident (as defined in Section 7701(b)(1) of the Code) of the United States,
(ii) a corporation or other entity organized under the laws of the United States
or any political subdivision thereof or therein, (iii) an estate, the income of
which is subject to U.S. federal income tax regardless of the source, or (iv) a
trust with respect to the administration of which a court within the United
States is able to exercise primary supervision and one or more U.S. persons have
the authority to control all substantial decisions of the trust (a "U.S.
Holder"). Certain material U.S. federal income tax consequences relevant to a
holder other than a U.S. Holder are discussed separately below.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF TENDERING EXISTING NOTES
The exchange of Existing Notes for Exchange Notes pursuant to the Exchange
Offer should not be a taxable exchange for U.S. federal income tax purposes.
Accordingly, the Exchange Offer should have no U.S. federal income tax
consequences to U.S. Holders. A U.S. Holder should have the same adjusted basis
and holding period in the Exchange Note as it had in the Existing Note
immediately before the exchange.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING EXCHANGE NOTES
INTEREST
Generally, interest paid on the Exchange Notes will be taxable to a U.S.
Holder as ordinary income at the time it accrues or is received in accordance
with such holder's method of accounting for U.S. federal income tax purposes. In
certain cases, in the event the Company does not comply with certain covenants
set forth in the Registration Agreement, the Company will be obligated to pay
certain liquidated damages
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to the holders of the Exchange Notes. The Company believes that the contingency
that the Company will pay such additional amounts is "remote" within the meaning
of applicable Treasury Regulations. On that basis, the Company believes that
such additional amounts, if any, will be taxable to U.S. Holders as ordinary
income at the time it accrues or is received in accordance with each such
holder's method of accounting.
MARKET DISCOUNT
If an Exchange Note is acquired at a "market discount," some or all of any
gain realized upon a subsequent sale, other disposition, or full or partial
principal payment, of such Exchange Note may be treated as ordinary income, and
not capital gain, as described below. For this purpose, "market discount" is the
excess (if any) of the stated redemption price at maturity of a debt obligation
over the basis of such debt obligation immediately after its acquisition by the
taxpayer, subject to a statutory de minimis exception. Unless a U.S. Holder has
elected to include the market discount in income as it accrues, gain, if any,
realized on any subsequent disposition (other than in connection with certain
nonrecognition transactions) or full or partial principal payment of such
Exchange Note will be treated as ordinary income to the extent of the market
discount that is treated as having accrued during the period such U.S. Holder
held such Exchange Note.
The amount of market discount treated as having accrued will be determined
either (i) on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the Exchange Note was
held by the U.S. Holder and the denominator of which is the total number of days
after the date such U.S. Holder acquired the Exchange Note up to and including
the date of its maturity or (ii) if the U.S. Holder so elects, on a constant
interest rate method. A U.S. Holder may make that election with respect to any
Exchange Note but, once made, such election is irrevocable.
A U.S. Holder of an Exchange Note acquired at a market discount may elect to
include market discount in income currently, through the use of either the
straight-line inclusion method or the elective constant interest method in lieu
of recharacterizing gain upon disposition as ordinary income to the extent of
accrued market discount at the time of disposition. Once made, this election
will apply to all notes and other obligations acquired by the electing U.S.
Holder at a market discount during the taxable year for which the election is
made, and all subsequent taxable years, unless the Internal Revenue Service (the
"IRS") consents to a revocation of the election. If an election is made to
include market discount in income currently, the basis of the Exchange Note in
the hands of the U.S. Holder will be increased by the market discount thereon as
it is included in income.
Unless a U.S. Holder who acquires an Exchange Note at a market discount
elects to include market discount in income currently, such U.S. Holder may be
required to defer deductions for any interest paid on indebtedness allocable to
such Exchange Note in an amount not exceeding the deferred income, until such
income is realized.
BOND PREMIUM
If a U.S. Holder purchases an Exchange Note and immediately after the
purchase the adjusted basis of the Exchange Note exceeds the sum of all amounts
payable on the instrument after the purchase date (other than qualified stated
interest), the Exchange Note will be treated as having been acquired with "bond
premium." A U.S. Holder may elect to amortize such bond premium over the
remaining term of such Exchange Note (or, if it results in a smaller amount of
amortizable bond premium, until an earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an interest payment date
or at the stated maturity, as the case may be, will, except as Treasury
Regulations may otherwise provide, be reduced by the portion of premium
allocable to such period based on the Exchange Note's yield to maturity. If such
an election to amortize
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bond premium is not made, a U.S. Holder must include the full amount of each
interest payment in income in accordance with its regular method of accounting
and will receive a tax benefit from the premium only in computing such U.S.
Holder's gain or loss upon the sale or other disposition or full or partial
principal payment of the Exchange Note.
An election to amortize bond premium will apply to amortizable bond premium
on all notes and other bonds, the interest on which is includible in the U.S.
Holder's gross income, held at the beginning of the U.S. Holder's first taxable
year to which the election applies or that are thereafter acquired, and may be
revoked only with the consent of the IRS. A U.S. Holder who elects to amortize
bond premium must reduce its adjusted basis in the Exchange Notes by the amount
of such allowable amortization.
SALE, EXCHANGE OR REDEMPTION OF THE EXCHANGE NOTES
Upon the disposition of an Exchange Note by sale, exchange or redemption
(including pursuant to an offer by the Company), a U.S. Holder will generally
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of any property received upon such sale, exchange or
redemption (other than amounts attributable to accrued interest not yet taken
into income) and (ii) the U.S. Holder's adjusted tax basis in the Exchange Note.
Generally, a U.S. Holder's adjusted tax basis in an Exchange Note will equal the
cost of the Exchange Note to the U.S. Holder increased by any market discount
included in income and reduced by any bond premium amortized by the U.S. Holder.
Assuming the Exchange Note is held as a capital asset, such gain or loss
(except to the extent that the market discount rules otherwise provide) will
generally constitute capital gain or loss, which will be either long-term or
short-term if the U.S. Holder is a corporation; or long-term, mid-term or
short-term if the U.S. Holder is a non-corporate entity, depending on the U.S.
Holder's holding period.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under the Code, a U.S. Holder of an Exchange Note may be subject, under
certain circumstances, to information reporting and/or backup withholding at a
31% rate with respect to payments of interest or the gross proceeds from the
sale, exchange or redemption of an Exchange Note. This withholding applies only
if a U.S. Holder (i) fails to furnish its social security or other taxpayer
identification number ("TIN") within a reasonable time after a request therefor,
(ii) furnishes an incorrect TIN, (iii) fails to report interest or dividends
properly, or (iv) fails, under certain circumstances, to provide a certified
statement, signed under penalty or perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding. Any amount withheld
from a payment to a U.S. Holder under the backup withholding rules is allowable
as a credit (and may entitle such holder to a refund) against such holder's U.S.
federal income tax liability, provided that the required information is
furnished to the IRS. Certain persons are exempt from backup withholding,
including corporations and financial institutions. Holders of Exchange Notes
should consult their tax advisors as to their qualification for exemption from
withholding and the procedure for obtaining such exemption.
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NON-U.S. HOLDERS
The following discussion is limited to certain material U.S. federal income
tax consequences relevant to a holder of a Note who, for U.S. federal income tax
purposes, is (i) a nonresident alien individual, (ii) a foreign corporation,
(iii) a foreign estate which is not subject to U.S. federal income tax on a net
income basis in respect of income or gain from a Note or (iv) a trust if a U.S.
court is not able to exercise primary supervision over administration of the
trust or one or more U.S. persons do not have the authority to control all
substantial decisions of the trust (a "Non-U.S. Holder").
Under present U.S. federal income and estate tax law, and subject to the
discussion below concerning backup withholding:
(a) payments of principal and interest on the Notes by the Company or
any paying agent to any Non-U.S. Holder will not be subject to U.S. federal
withholding tax, provided that, in the case of interest, (i) such Non-U.S.
Holder does not own, actually or constructively, ten percent or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, is not a controlled foreign corporation related, directly or
indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
the beneficial owner fulfills the statement requirement set forth in Section
871(h) or Section 881(c) of the Code;
(b) a Non-U.S. Holder of a Note will not be subject to U.S. federal
income tax on gain realized on the sale, exchange or other disposition of
such Note unless (i) subject to certain exceptions, such Non-U.S. Holder is
an individual who is present in the United States for 183 days or more
during the taxable year of disposition and certain other requirements are
met; (ii) such gain is effectively connected with the conduct by such
Non-U.S. Holder of a trade or business in the United States; or (iii) the
Non-U.S. Holder is subject to tax pursuant to the provisions of the Code
applicable to certain former citizens and residents of the United States;
and
(c) a Note or coupon held by an individual who is not a citizen or
resident of the United States at the time of his death will not be subject
to U.S. federal estate tax as a result of such individual's death, provided
that the individual does not own, actually or constructively, ten percent or
more of the total combined voting power of all classes of stock of the
Company entitled to vote and, at the time of the individual's death,
payments with respect to such Note would not have been effectively connected
to the conduct by such individual of a trade or business in the United
States.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from U.S. federal withholding tax described in
paragraph (a) above, either the beneficial owner or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the Note on behalf of such beneficial owner
file a statement with the withholding agent to the effect that the beneficial
owner of the Note is not a United States person. Under temporary United States
Treasury Regulations, such requirement will be fulfilled if the beneficial owner
of a Note certifies on Internal Revenue Service Form W-8, under penalties of
perjury, that he is not a United States person and provides his name and
address, and any Financial Institution holding the Note on behalf of the
beneficial owner certifies that such a statement has been received from the
beneficial owner by it, or by a Financial Institution between it and the
beneficial owner, and furnishes the withholding agent with a copy thereof. A
Form W-8 generally remains in effect for three calendar years.
Interest paid to a Non-U.S. Holder may also be exempt from U.S. withholding
taxes provided such Non U.S. Holder delivers (i) IRS Form 1001 signed by the
beneficial owner of the Note or such holder's agent claiming complete exemption
from withholding under an applicable tax treaty, or (ii) IRS Form 4224 signed by
the beneficial owner of the Note or such owner's agent claiming exemption from
withholding tax on income connected with the conduct of a trade or business in
the United States; provided that, in any
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such case (x) the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Non-U.S. Holder is a U.S. person or that any certification on
the form is false. Under recently enacted legislation, Non-U.S. Holders that are
classified as partnerships for U.S. federal income tax purposes but classified
as corporations for foreign tax purposes may not be entitled to the benefits of
otherwise applicable U.S. tax treaties.
Recently adopted Treasury Regulations not yet in effect (the "Final
Regulations"), would alter the foregoing rules in certain respects. In general,
the Final Regulations are effective January 1, 1999. Under the Final
Regulations, a Non-U.S. Holder seeking an exemption under (i) or (ii) of the
preceding paragraph would generally be required to provide a beneficial owner
certificate on Form W-8, which form may include, among other things, the
Non-U.S. Holder's taxpayer identification number. The Final Regulations also
provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, interest paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
the entity. The foregoing is not intended to be a complete discussion of the
provisions of the Final Regulations, and Non-U.S. Holders are urged to consult
their advisors with respect to the effect that the Final Regulations will have
when they become effective.
Backup Withholding and Information Reporting
Under current U.S. federal income tax law, a 31% backup withholding tax and
information reporting requirements apply to certain payments of principal and
interest made to, and to the proceeds of sales before maturity by, certain
noncorporate United States persons. Under current Treasury Regulations, backup
withholding will not apply to payments made on a Note if the certifications
required by Sections 871(h) and 881(c) of the Code (described above) are
received, provided that the Company or such paying agent, as the case may be,
does not have actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker will not
be subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for U.S. tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with a United
States trade or business for a specified three-year period or certain other
foreign entities with a U.S. connection, information reporting will be required
unless the broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain conditions are met or the
beneficial owner otherwise establishes an exemption. Payments to or through the
United States office of a broker will be subject to backup withholding and
information reporting unless the Non-U.S. Holder certifies, under penalties of
perjury, that it is not a United States person or otherwise establishes an
exemption.
The Final Regulations would provide certain presumptions under which a
Non-U.S. Holder would be subject to backup withholding and information reporting
unless the Non-U.S. Holder provides a certification of non-U.S. status.
Non-U.S. Holders should consult their tax advisors regarding the application
of information reporting and backup withholding in their particular situations,
the availability of an exemption therefrom, and the procedure for obtaining such
an exemption, if available. Any amounts withheld from a payment to a Non-U.S.
Holder under the backup withholding rules will be allowed as a credit against
such Non-U.S. Holder's U.S. federal income tax liability and may entitle such
Non-U.S. Holder to a refund, provided that the required information is furnished
to the United States Internal Revenue Service.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Existing
Notes, where such Exchange Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days (exclusive of any period during which any stop order shall be
in effect suspending the effectiveness of the Registration Statement) after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until February 3, 1998, all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes, or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commission or concessions from any such
broker-dealer and/ or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensations under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date (exclusive of any period
during which any stop order shall be in effect suspending the effectiveness of
the Registration Statement), the Company will promptly send additional copies of
this Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents pursuant to a Letter of Transmittal.
The Company has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for certain holders of the Existing
Notes) other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the Existing Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Weil, Gotshal & Manges LLP, New York City, New York.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996
incorporated by reference in this Prospectus and elsewhere in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report thereon included therein and incorporated
herein by reference in reliance upon said firm as experts in accounting and
auditing.
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GLOSSARY OF SELECTED INDUSTRY TERMS
ANCHOR HANDLING TOWING SUPPLY VESSELS. Anchor handling towing supply
vessels are equipped with winches capable of towing drilling rigs and lifting
and positioning their anchors and other marine equipment. They range in size and
capacity and are usually characterized in terms of horsepower and towing
capacity. For Gulf of Mexico service, anchor handling towing supply vessels
typically require 6,000 horsepower or more to position and service
semi-submersible rigs drilling in deep water areas.
BAREBOAT CHARTER. This is a lease arrangement under which the lessee
(charterer) is responsible for all crewing, insurance and operating expenses, as
well as the payment of the bareboat charter hire to the vessel owner.
CREW BOATS. Crew boats transport personnel and cargo to and from production
platforms and rigs. Older crew boats, early-1980's built, are generally 100 to
110 ft. in length and are generally designed for speed to transport personnel.
Newer crew boat designs are generally larger, 130 to 160 ft. in length, and have
greater cargo carrying capacities. They are used primarily to transport cargo on
a time-sensitive basis.
FREIGHT VESSELS. Freight vessels have a substantial amount of clear deck
space for cargo and adequate stability to handle tiers of containers or
overdimensional cargo. Speed and fuel consumption are also important factors in
this vessel category.
LINE HANDLING VESSELS. Line handling vessels are outfitted with special
equipment to assist tankers while they are loading at single buoy moorings. They
have a high degree of maneuverability, are well-tendered and include pollution
dispersal capability.
OIL SPILL RESPONSE VESSELS. Oil spill response vessels are specially
equipped to respond to oil spill emergencies and are certified as such by the
U.S. Coast Guard.
OVERALL UTILIZATION. For any vessel with respect to any period, the ratio
of aggregate number of days worked by such vessel to total calendar days
available during such period.
PREMIUM JACKUP DRILLING RIGS. Jackup drilling rigs stand on elevating
support legs which extend to the ocean floor with their hull and drilling
equipment elevated above the water. "Premium" designation generally indicates
suitability for water depths exceeding 300 feet.
PROJECT AND GEOPHYSICAL VESSELS. These vessels generally have special
features to meet the requirements of specific jobs. The special features include
large deck spaces, high electrical generating capacities, slow controlled speed
and unique thrusters, extra berthing facilities and long range capabilities.
These vessels are primarily used for well stimulation and for the deployment of
seismic data gathering equipment.
RATE PER DAY WORKED. For any vessel with respect to any period, the ratio
of total charter revenue of such vessel to the aggregate number of days worked
of such vessel for such period.
STANDBY SAFETY VESSELS. Standby safety vessels operate in the U.K. sector
of the North Sea. They typically remain on station to provide a safety backup to
offshore rigs and production facilities, carry special equipment to rescue
personnel, are equipped to provide first aid and shelter and, in some cases,
also function as supply vessels.
SUPPLY VESSELS. Supply vessels serve drilling and production facilities and
support offshore construction and maintenance work. They are differentiated from
other vessels by cargo flexibility and capacity. The size of a vessel typically
determines deck capacity, although vessels constructed after 1979 with exhaust
stacks forward have better configurations for cargo stowage and handling. In
addition to deck cargo, such as pipe or drummed materials on pallets, supply
vessels transport liquid mud, potable and drill water, diesel fuel and dry bulk
cement. Generally, customers prefer vessels with large liquid mud and bulk
cement
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capacity and large areas of clear deck space. For certain jobs, other
characteristics such as maneuverability, fuel efficiency or firefighting
capability may also be important.
TOWING SUPPLY VESSELS. These vessels perform the same functions as supply
vessels but are equipped with more powerful engines (3,000 to 5,000 horsepower)
and towing winches, giving them the added capability to perform general towing
duties, buoy setting and limited anchor handling work. Towing supply vessels are
primarily used in international operations, which require the additional
versatility that these vessels offer relative to supply vessels.
UTILITY BOATS. These vessels provide service to offshore production
facilities and also support offshore maintenance and construction work. Their
capabilities include the transportation of fuel, water, deck cargo and
personnel. They range in length from 96 feet to 135 feet and can, depending on
the vessel design, have enhanced features such as firefighting and pollution
response capabilities.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 3
Incorporation of Certain Documents
by Reference.................................. 5
Summary......................................... 6
Risk Factors.................................... 16
Use of Proceeds................................. 19
Capitalization.................................. 19
Selected Historical Financial Information....... 20
Pro Forma Financial Statements.................. 22
The Company..................................... 27
Business........................................ 28
1996 Transactions............................... 37
Description of Exchange Notes................... 38
The Exchange Offer.............................. 49
Certain U.S. Federal Income Tax
Considerations................................ 60
Plan of Distribution............................ 65
Legal Matters................................... 65
Experts......................................... 65
Glossary of Selected Industry Terms............. 66
</TABLE>
$150,000,000
SENIOR NOTES
SEACOR SMIT INC.
OFFER TO EXCHANGE
7.20% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR
7.20% SENIOR NOTES DUE 2009
WHICH HAVE NOT BEEN SO REGISTERED
---------------------
PROSPECTUS
---------------------
NOVEMBER 5, 1997
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