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FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-56379
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 19, 1998
[MARINE DRILLING COMPANIES LOGO]1,000,000 SHARES
MARINE DRILLING COMPANIES, INC.
COMMON STOCK
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We are selling to the underwriter 1,000,000 shares of common stock at a
price of $18.50 per share.
The common stock is listed on the New York Stock Exchange under the symbol
"MRL." The last reported sale price of the common stock on the New York Stock
Exchange on January 5, 2000 was $20 1/8 per share.
The common stock may be offered by the underwriter from time to time at
negotiated prices in one or more transactions. The common stock will not be sold
on or through the facilities of a national securities exchange or to or through
a market maker otherwise than on an exchange. See "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 FOR A DESCRIPTION OF CERTAIN RISKS
RELATING TO THE COMMON STOCK.
Delivery of the common stock will be made on or about January 10, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
The date of this prospectus supplement is January 5, 2000
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS SUPPLEMENT.
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TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT
Incorporation of Additional Documents
By Reference........................ S-2
Forward-Looking Statements............ S-3
The Company........................... S-4
Recent Developments................... S-4
Risk Factors.......................... S-5
Use of Proceeds....................... S-8
Underwriting.......................... S-9
Legal Matters......................... S-10
Experts............................... S-10
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PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges and
Earnings to Fixed Charges and
Preferred Stock Dividends........... 3
Description of Debt Securities........ 4
Description of Common Stock and
Preferred Stock..................... 15
Description of Warrants............... 22
Plan of Distribution.................. 23
Legal Matters......................... 23
Experts............................... 24
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INCORPORATION OF ADDITIONAL DOCUMENTS BY REFERENCE
In addition to the documents referred to under "Incorporation of Certain
Documents By Reference" in the accompanying prospectus, this prospectus
supplement incorporates by reference the following documents filed by us with
the Securities and Exchange Commission:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
- Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1999, June 30, 1999 and September 30, 1999; and
- Current Report on Form 8-K dated June 3, 1999.
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FORWARD-LOOKING STATEMENTS
This prospectus supplement, particularly the section entitled "Risk
Factors", contains and incorporates by reference certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act") that are not historical facts concerning, among other things,
market conditions, the demand for offshore drilling services, future
acquisitions and fleet expansion, future financings, future rig contracts,
future capital expenditures (including rig construction, upgrades and
refurbishments), and future results of operations. We cannot guarantee that we
have identified and properly weighed all of the factors which affect market
conditions and the demand for our rigs, that the public information upon which
we have relied is accurate or complete or that our analysis of the market and
the demand for our rigs is correct or that the strategy based on this analysis
will be successful. Certain factors and risks that could cause actual results to
differ from those identified in these forward-looking statements include, among
others:
- a sustained period of low oil or gas prices;
- the termination of any of our long-term drilling contracts;
- inadequate insurance and indemnification protection for us against well
disasters and fire and environmental damage;
- our inability to obtain insurance at reasonable rates;
- a decrease in the demand for offshore drilling rigs, especially in the
U.S. Gulf of Mexico;
- the risks of operating in foreign countries, including actions taken by
those foreign countries and actions taken by the United States against
those foreign countries;
- our failure to successfully compete against our competitors that are
larger and that have a more diverse fleet of rigs and more resources;
- lower levels of rig utilization because of the reactivation of currently
inactive rigs or the construction of new rigs;
- new laws or regulations that affect drilling opportunities or increase
their cost or our potential liability;
- the occurrence of certain risks inherent to offshore drilling, including
blowouts, cratering, fires and explosions, capsizing, grounding or
collision, weather and sea conditions; and
- uninsured costs of litigation.
For a further discussion of such factors and risks, see "Risk Factors," and
our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are
incorporated by reference in this prospectus supplement. These forward-looking
statements speak only as of the date of this prospectus supplement. We disclaim
any obligation to release publicly any updates or revisions to any
forward-looking statement contained in this prospectus supplement to reflect any
changes in our expectations regarding such statements or any change in events,
conditions or circumstances on which they are based.
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THE COMPANY
We own and operate seventeen offshore drilling rigs domestically and
internationally, consisting of fifteen jack-up units, one of which is currently
configured as an accommodation unit, and two semi-submersible units. Our fleet
of jack-up rigs currently consists of nine mat-supported units and six
independent leg units. With twelve jack-up rigs located in the U.S. Gulf of
Mexico, we believe that we are the fourth largest jack-up rig operator in that
market. Our two semi-submersible units are both fourth-generation rigs and are
currently being used in deepwater drilling operations.
We incorporated in Texas in January 1990, although our predecessor
companies have been engaged in offshore contract drilling since 1966. Our
principal executive office is located at One Sugar Creek Center Boulevard, Suite
600, Sugar Land, Texas 77478-3556 and our telephone number is (281) 243-3000.
RECENT DEVELOPMENTS
On December 29, 1999, we entered into an agreement to acquire a jackup rig
known as the BARUNA V for $13.5 million. The rig is a Bethlehem mat cantilever
type unit similar to several of our existing jackup rigs, capable of working in
up to 200 feet of water. The rig was built in 1980 and is currently operating in
Southeast Asia. We expect to take delivery of the unit and close on the purchase
during the second half of January 2000, subject to satisfaction of closing
conditions. We cannot assure you that we will complete this acquisition or that
the closing will not be delayed. Shortly after the purchase, we will mobilize
the BARUNA V and a similar rig, the MARINE 201, which is currently in the United
Arab Emirates, to the Gulf of Mexico. We believe these two mat rigs are well
suited for the Gulf of Mexico market, where we already operate twelve jackup
rigs. We do not currently have drilling contracts in place for either rig.
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Before making an investment in shares of our common stock, you should
carefully consider the following Risk Factors, as well as the other information
included or incorporated by reference in this prospectus supplement and the
accompanying prospectus. See "Forward-Looking Statements" and "Incorporation of
Additional Documents By Reference."
RISK FACTORS
WE ARE DEPENDENT ON THE CONDITION OF THE OIL AND GAS INDUSTRY. DECLINES IN OIL
AND GAS PRICES HAVE ADVERSELY AFFECTED OUR DAYRATES AND RIG UTILIZATION
RESULTING IN LOSSES FOR US.
Our operations depend on oil and natural gas exploration and development
drilling activity. This activity is affected by fluctuations in oil and natural
gas prices. Historically, these fluctuations have been volatile because of
changes in the supply of and demand for these resources, market uncertainty,
weather and other political and economic factors beyond our control. As a
result, we cannot predict future prices of oil and natural gas with any
certainty. Sustained low levels of oil and natural gas prices, however, depress
levels of exploration, development and production activity and result in a
decline in the demand for our services, which has an adverse effect on our
revenues and profitability.
Oil and gas prices began declining in 1997 and continued to decline
substantially further in 1998 and reached multi-year lows in early 1999. These
lower prices had a material adverse effect on rig utilization and dayrates in
our industry, including in the U.S. Gulf of Mexico where 12 of our 15 jack-up
rigs are located. The lower prices have also shortened the average length of
contract terms. As a result of these conditions, we incurred a net loss for the
nine months ended September 30, 1999 of approximately $8.6 million.
SIGNIFICANCE OF THE MARINE 500 AND MARINE 700 CONTRACTS.
The drilling contracts for the MARINE 500 and MARINE 700 drilling rigs
currently account for a majority of our revenues and cash flow. These contracts
could be terminated in certain circumstances, such as operational problems, that
may be beyond our control. The loss or renegotiation of either of these
contracts could have a material adverse effect on our results of operations.
Our ability to successfully perform under the MARINE 500 and the MARINE 700
contracts may be impaired by our limited operating history in the deepwater
drilling market, which requires the use of more sophisticated technologies than
those used by jack-up rigs. Other drilling contractors have encountered
operational problems with new deepwater drilling rigs. We did not enter the
deepwater drilling market until 1997 and some of our competitors have
significantly more experience in deepwater operations than we do.
WE ARE SUBJECT TO OPERATIONAL RISKS.
Contract drilling operations are subject to a variety of risks including
blowouts, cratering, fires and explosions. The occurrence of any of these risks
could result in damage to or destruction of rigs, oil and gas wells, life and
property, environmental damage or suspension of our operations. Our drilling
equipment is also subject to the hazards of marine operations, including
capsizing, grounding, collision, weather, sea conditions and unsound location.
We currently maintain insurance coverage against certain general and marine
liabilities that we believe is customary in our industry. Except in limited
circumstances, this insurance does not cover liability for pollution or
environmental damage that happens below the water surface, but we are usually
indemnified against this liability by our customers. The insurance and
indemnification available to us, however, may not protect us from liability for
all of the results of well disasters or fire or environmental damage.
Furthermore, we may not be able to maintain adequate insurance in the future at
reasonable rates or we may not be able to recover amounts owing to us under the
indemnities provided by our customers. Any of these liabilities, if not covered
by insurance or third party indemnification, could have an adverse effect on us.
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THE MAJORITY OF OUR RIGS ARE OLD.
The majority of our rigs were built between 1975 and 1982. These older rigs
are more likely to require major repairs in order to remain operational than
newer rigs. Rigs generally cannot operate when undergoing major repairs. If we
are required to perform significant repairs to our rigs, this will likely reduce
our revenues and may require significant capital investments.
WE CONDUCT FOREIGN OPERATIONS.
From time to time, we operate several of our rigs in international markets,
including Southeast Asia, the Middle East and other international markets. When
we operate in international markets, we are subject to risks inherent to
operating in foreign countries, including war, strikes, civil disturbances,
guerilla activity, currency fluctuations and devaluations and governmental
activity that disrupt markets, restrict payments or the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair compensation. We cannot predict what foreign governmental regulations may
be enacted in the future that could affect the drilling industry.
WE FACE SIGNIFICANT COMPETITION.
The contract drilling industry is highly competitive, cyclical and capital
intensive. We believe that intense competition for drilling contracts will
continue because of the ability of drilling contractors to move rigs to areas of
greater activity and higher dayrates, to reactivate currently inactive rigs that
have been or could be upgraded and to construct new rigs to meet increased
demand for drilling rigs in any given market. The movement, reactivation or new
construction of offshore drilling rigs, or a decrease in drilling activity in a
major market, could depress dayrates and affect utilization of our rigs, even
with stronger oil and natural gas prices. There is also increasing competition
in the deepwater drilling industry. Many of our competitors are larger than us
and have more diverse fleets and greater resources than we do. This allows them
to better withstand industry downturns, to compete on the basis of price and to
build new rigs or acquire existing rigs, all of which could affect our revenues
and profitability.
ENVIRONMENTAL LAWS COULD INCREASE OUR COSTS AND LIABILITIES AND RESTRICT OUR
OPERATIONS.
Our operations are subject to numerous foreign, federal, state and local
laws and regulations relating to the environment. These laws and regulations
expose us to liability for our own actions (including actions in compliance with
applicable laws and regulations at the time they were taken) and, under certain
circumstances, for the conduct of others. These laws and regulations have become
more stringent in recent years. In connection with such laws and regulations, we
may be required in certain circumstances to pay administrative, civil and
criminal penalties or to shut down some or all of our operations, temporarily or
permanently. Some environmental laws and regulations can impose unlimited,
"strict liability" on parties responsible for environmental damage without
regard to negligence or fault. For instance, parties, including drilling
companies, may be held strictly liable for cleanup costs and natural resource
damages resulting from oil spills under the Oil Pollution Act of 1990, as
amended ("OPA"). Drilling companies also can become subject to private personal
injury or property damage claims relating to environmental damage.
We are required to maintain evidence of financial responsibility sufficient
to cover cleanup costs relating to potential spills or related environmental
damage. New regulations under OPA require mobile offshore drilling units serving
as offshore facilities, including ours, to satisfy additional financial
responsibility requirements and may impact our operations in certain
circumstances. Failure to comply with applicable financial responsibility
requirements could require us to suspend operations and subject us to other
significant sanctions.
In addition, from time to time legislation has been proposed that would
limit or prohibit drilling in environmentally sensitive areas or in areas of the
U.S. Gulf of Mexico and other U.S. offshore areas that, if enacted, may
adversely affect us. Similar restrictions have adversely affected us in the
past. Future laws, regulations or other governmental action that further
restricts or prohibits offshore drilling in the U.S. Gulf of Mexico or imposes
environmental protection requirements that increase the costs of offshore
exploration,
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development or production of oil and natural gas, could further adversely affect
us. In addition, liabilities under existing or future environmental laws and
regulations could have a material adverse effect on our business, results of
operations or financial condition.
A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR ALL OUR REVENUES.
All our revenue has been and will continue to be derived from a small
number of customers. The loss of any of these customers or the delay, reduction
or cancellation of contracts with any of these customers could hurt our results
and cause a decline in our stock price. In 1998 two jack-up rig customers
accounted for 36% of our revenues, with one jack-up rig accounting for 24%. For
the nine months ended September 30, 1999, two customers accounted for 48% of our
revenues, with one jack-up rig customer accounting for 28% of our revenues and
one semi-submersible rig customer accounting for 20%. Currently, a majority of
our revenues are accounted for by our two semi-submersible rig customers.
OUR STOCK PRICE IS VOLATILE.
Our common stock has experienced significant price volatility, and such
volatility may continue in the future. The price of our common stock could
fluctuate widely in response to a variety of factors, including oil and gas
prices and industry conditions and any developments with regard to our long-term
contracts.
GOVERNMENTAL REGULATION COULD ADVERSELY AFFECT OUR BUSINESS.
Our business is affected by political developments and by federal, state,
foreign and local laws and regulations relating to the oil and gas industry.
Laws and regulations that curtail exploration and development drilling for oil
and natural gas adversely affect us by limiting available drilling opportunities
for our customers. Additionally, laws relating to equipping and operating
offshore vessels may add to the cost of operating offshore drilling equipment.
OUR CHARTER DOCUMENTS AND TEXAS LAW MAY DISCOURAGE AN ATTEMPT BY OTHERS TO
ACQUIRE CONTROL OF US.
The Texas Business Corporation Act contains provisions, including a
business combination law, which may delay or prevent an attempt by a third party
to acquire control of us. Our articles of incorporation and bylaws contain
provisions that authorize the issuance of preferred stock by our Board of
Directors and restrict foreign ownership of our common stock. We also have
adopted a stockholder rights plan which may have the effect of impeding a
hostile attempt to acquire control of us. See "Description of Common Stock and
Preferred Stock" in the accompanying prospectus.
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USE OF PROCEEDS
The net proceeds to be received by us from the issuance of the shares of
common stock will be approximately $18.4 million (net of estimated offering
expenses). We expect to use all of these proceeds to fund the $13.5 million
purchase price of the BARUNA V jack-up drilling rig, and to use the remaining
funds to pay the costs of mobilizing the BARUNA V and the MARINE 201 to the U.S.
Gulf of Mexico and for general corporate purposes. If the acquisition of the
BARUNA V is not consummated, the funds that would otherwise be used for such
purchase will be used for general corporate purposes, which may include
acquisitions. Pending these uses, we will invest the funds in short-term
interest bearing investments.
After the offering, we will have outstanding 58,217,989 shares of common
stock and stock options to purchase approximately 2,674,800 shares of common
stock under our stock option plans.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated January 5, 2000, we will sell to Credit Suisse First Boston
Corporation all of the shares of common stock offered hereby.
It is expected that all or a substantial portion of the common stock may be
sold by the underwriter from time to time at negotiated fixed prices in one or
more transactions, subject to prior sale, when, as and if delivered to and
accepted by the underwriter. The common stock will not be sold on or through the
facilities of a national securities exchange or to or through a market maker
otherwise than on an exchange.
In connection with the sale of the common stock, the underwriter will
receive compensation in the form of commissions or discounts and may receive
compensation from purchasers of the common stock for whom it may act as agent or
to whom it may sell as principal in the form of commissions or discounts, in
each case in amounts which will not exceed those customary in the types of
transactions involved. The underwriter and dealers that participate in the
distribution of the common stock may be deemed to be underwriters, and any
discounts received by them from us and any compensation received by them on
resale of the common stock by them may be deemed to be underwriting discounts
and commissions under the Securities Act.
The underwriter is purchasing the common stock from us at $18.50 per share
(representing $18,500,000 aggregate proceeds to us, before we deduct our
out-of-pocket expenses of approximately $100,000). The underwriting agreement
provides that the underwriter is obligated to purchase all the shares of common
stock if any are purchased.
We have agreed to indemnify the underwriter against liabilities under the
Securities Act of 1933, or contribute to payments which the underwriter may be
required to make in respect thereof.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock, or enter into a
transaction that would have the same effect, or publicly disclose the intention
to make any such offer, sale, pledge, disposition or filing, without the prior
written consent of Credit Suisse First Boston Corporation for a period of 7 days
after the date of this prospectus, subject to certain exceptions.
The underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids with Regulation M under the
Exchange Act.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the underwriter to reclaim a selling concession from
a syndicate member when the common stock originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
New York Stock Exchange or otherwise and, if commenced, may be discontinued at
any time.
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LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for us by Vinson & Elkins L.L.P., Houston, Texas, and for the underwriter by
Cravath, Swaine & Moore, New York, New York.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997, and
for each of the years in the three-year period ended December 31, 1998, have
been incorporated by reference herein in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the
three-month periods ended March 31, 1999 and 1998, the three and six-month
periods ended June 30, 1999 and 1998, and the three and nine-month periods ended
September 30, 1999 and 1998, incorporated by reference herein, the independent
certified public accountants have reported that they applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate reports included in our quarterly reports on Form 10-Q
for the quarters ended March 31, 1999, June 30, 1999, and September 30, 1999,
and incorporated by reference herein, state that they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. The accountants
are not subject to the liability provisions of Section 11 of the Securities Act
for their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the prospectus or prospectus supplement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Securities Act.
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PROSPECTUS
MARINE DRILLING COMPANIES, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
LOGO WARRANTS
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Marine Drilling Companies, Inc. ("Marine" or the "Company") may offer and
sell from time to time, (i) unsecured debt securities, in one or more series,
consisting of notes, debentures or other evidences of indebtedness (the "Debt
Securities"), (ii) shares of preferred stock, par value $.01 per share of the
Company, in one or more series (the "Preferred Stock"), (iii) shares of common
stock of the Company, par value $.01 per share (the "Common Stock"), (iv)
warrants (the "Warrants") to purchase Common Stock and (v) guarantees, if any,
of the Company's payment obligations under any Debt Securities, given by one or
more subsidiaries of the Company named herein (the "Subsidiary Guarantees"). The
Company may offer and sell up to $300,000,000 aggregate public offering price of
Debt Securities, Preferred Stock, Common Stock, Warrants and Subsidiary
Guarantees (collectively, the "Securities"). The Securities may be offered in
separate series in amounts, and prices, and on terms to be determined at or
prior to the time of sale.
The specific terms of the particular Securities to be issued will be set
forth in a supplement to this Prospectus (a "Prospectus Supplement"), which will
be delivered together with this Prospectus, including, where applicable, (i) in
the case of Debt Securities, the specific designation, aggregate principal
amount, ranking as senior or subordinated Debt Securities, maturity, rate or
rates (or method of determining the same) and time or times for the payment of
interest, if any, any exchangeability or conversion terms, any terms for
optional or mandatory redemption or repurchase, or payment of additional amounts
or any sinking fund provisions, whether or not such Debt Securities are
guaranteed by subsidiaries of the Company, and any other specific terms of such
Debt Securities, (ii) in the case of Preferred Stock, the specific designation,
number of shares and liquidation value thereof and the dividend, liquidation,
redemption, voting and other rights, including conversion or exchange rights, if
any, and any other specific terms, (iii) in the case of Common Stock, the number
of shares, and (iv) in the case of Warrants, the number and terms thereof, the
number of shares of Common Stock issuable upon their exercise, the exercise
price, the terms of the offering and sale thereof and the duration and
detachability thereof. The Prospectus Supplement will also contain information
regarding the initial public offering price, the net proceeds to the Company
and, where applicable, the United States Federal income tax considerations
relating to the Securities covered by the Prospectus Supplement and a
description of certain factors that should be considered in connection with an
investment in the Securities covered by the Prospectus Supplement. Debt
Securities may be issued in registered form or bearer form with or without
interest coupons attached, or both. In addition, all or a portion of the Debt
Securities of a series may be issuable in temporary or permanent global form.
Debt Securities in bearer form are offered only to non-United States persons and
to offices located outside the United States of certain United States financial
institutions.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents of the Company or any underwriters are
involved in the sale of any Securities in respect of which the Prospectus is
being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in the Prospectus Supplement.
The Common Stock is listed on the New York Stock Exchange under the symbol
"MRL." The Prospectus Supplement will contain information about any listing on a
securities exchange of the Securities covered by the Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
June 19, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational filing requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Commission's Regional Offices located at Seven World Trade Center, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained by mail from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Website on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The Common Stock is traded on the New York Stock Exchange.
Reports and other information concerning the Company can also be inspected at
the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information
contained in the Registration Statement, certain portions of which are omitted
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement, including the exhibits thereto,
which may be inspected at the Commission's offices, without charge or copies of
which may be obtained from the Commission upon payment of prescribed fees.
Statements contained in this Prospectus as to the contents of any contract or
other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-18309) pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
3. The description of the Common Stock contained in the Registration
Statement on Form 8-B filed with the Commission on February 21, 1990, as
amended by Form 8 filed with the Commission on November 9, 1992, and any
subsequent amendment thereto filed for the purpose of updating such
description.
4. The description of the Company's Preferred Share Purchase Rights
contained in the Company's Registration Statement on Form 8-A dated
November 15, 1996.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities pursuant hereto shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained 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 other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified shall not be deemed to constitute a part of this Prospectus except as
so modified, and any statement so superseded shall not be deemed to constitute
part of this Prospectus.
2
<PAGE> 13
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to the Company, One Sugar
Creek Center Blvd., Suite 600, Sugar Land, Texas 77478-3556, Attention: Investor
Relations (telephone: 281/243-3000).
---------------------
THE COMPANY
The Company is engaged in the offshore contract drilling of oil and gas
wells for independent and major oil and gas companies. As of the date of this
Prospectus, the Company owns and operates a fleet of 16 offshore drilling rigs,
consisting of five independent leg jack-up units, three of which have a
cantilever feature, nine mat supported jack-up units, four of which have a
cantilever feature, and two semi-submersible units. The Company operates an
additional semi-submersible drilling rig under a bareboat charter.
The Company was incorporated in Texas in January, 1990, although the
Company or its predecessors have been engaged in offshore contract drilling
since 1966. The Company's principal executive office is located at One Sugar
Creek Center Boulevard, Suite 600, Sugar Land, Texas 77478-3556 and the
Company's telephone number is (281) 243-3000. The "Company" or "Marine" refers
to Marine Drilling Companies, Inc. and its consolidated subsidiaries, unless
otherwise indicated or the context otherwise suggests.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds
from the sale of the Securities offered by this Prospectus and the Prospectus
Supplement (the "Offered Securities") will be used for general corporate
purposes, which may include repayment of indebtedness, acquisitions, additions
to working capital, and capital expenditures. Until so utilized, it is expected
that such net proceeds will be invested in interest bearing time deposits or
short-term marketable securities.
RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
combined ratio of earnings to fixed charges and preferred stock dividend
requirements for the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
---- ----- ----- ---- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........... 41.2 131.3 -- 33.1 94.8 223.0
Ratio of earnings to combined fixed charges
and preferred stock dividend
requirements............................... 41.2 131.3 -- 33.1 94.8 223.0
</TABLE>
For purposes of computing the ratio of earnings to fixed charges: (i)
earnings consist of income before provision for income taxes plus fixed charges
as described below, excluding capitalized interest for the period and (ii) fixed
charges consist of interest expensed and capitalized, amortization of debt
discount and expense relating to indebtedness and the portion of rental expense
representative of the interest factor attributable to leases for rental
property. For purposes of computing the ratio of earnings to combined fixed
charges and preferred stock dividend requirements: (a) earnings consist of
income before provision for income taxes plus fixed charges and preferred stock
dividend requirements, excluding capitalized interest for the period and (b)
fixed charges and preferred stock dividend requirements consist of interest
expensed and capitalized, amortization of debt discount and expense relating to
indebtedness, the portion of rental
3
<PAGE> 14
expense representative of the interest factor attributable to leases for rental
property and preferred stock dividends.
Because of losses, earnings were not sufficient to cover fixed charges by
$6,228,000 for the year ended December 31, 1995. The Company had no preferred
stock dividend requirement for the periods indicated.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior or senior subordinated
debt of the Company ("Senior Debt Securities"), or subordinated debt of the
Company ("Subordinated Debt Securities"). Senior Debt Securities and
Subordinated Debt Securities will be issued pursuant to separate indentures
(respectively, a "Senior Debt Indenture" and a "Subordinated Debt Indenture"),
in each case between the Company, the Subsidiary Guarantors and Chase Bank of
Texas, National Association as trustee (the "Trustee"), and in substantially the
form that has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part, subject to such amendments or supplements as may be
adopted from time to time. The Senior Debt Indenture and the Subordinated Debt
Indenture, as amended or supplemented from time to time, are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures." The following summaries of provisions of the Indentures and the
Debt Securities do not purport to be complete and such summaries are subject to
the detailed provisions of the applicable Indenture to which reference is hereby
made for a full description of such provisions, including the definition of
certain terms used herein. Article or section references in parentheses below
are to articles or sections in both Indentures unless otherwise indicated.
Wherever particular sections or defined terms of the applicable Indenture are
referred to, such sections or defined terms are incorporated herein by reference
as part of the statement made, and the statement is qualified in its entirety by
such reference. The Indentures are substantially identical, except for
provisions relating to subordination and conversion.
The Debt Securities may be issued from time to time in one or more series.
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities of all series. The particular terms
of each series of Debt Securities offered by any Prospectus Supplement (the
"Offered Debt Securities") will be described therein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General
The Debt Securities will be unsecured senior, senior subordinated or
subordinated obligations of the Company and may be issued from time to time in
one or more series. The payment obligations of the Company under any Debt
Securities may, if specified in any Prospectus Supplement, be fully and
unconditionally guaranteed by one or more of the following subsidiaries of the
Company: Marine Drilling Management Company, Marine Drilling International, Inc.
and Marine 300 Series, Inc. (the "Subsidiary Guarantors"). If any series of Debt
Securities is guaranteed by a Subsidiary Guarantor (a "Subsidiary Guarantee"),
the applicable Prospectus Supplement will identify each Subsidiary Guarantor and
describe such Subsidiary Guarantee, including the circumstances in which it may
be released. Any guarantee of Debt Securities by a Subsidiary Guarantor will be
on a full and unconditional basis.
Except as may be set forth in any Prospectus Supplement, the Indentures do
not limit the amount of Debt Securities, debentures, notes or other types of
indebtedness that may be issued by the Company or any of its Subsidiaries nor do
they restrict transactions between the Company and its affiliates or the payment
of dividends or other distributions by the Company to its stockholders. The
rights of holders of Debt Securities will be limited to the assets of the
Company and the Debt Securities will not be obligations of any of the Company's
Subsidiaries, except in the case of any Debt Securities that are guaranteed by
such Subsidiaries. In addition, other than as may be set forth in any Prospectus
Supplement, the Indentures do not and the Debt Securities will not contain any
covenants or other provisions that are intended to afford holders of the Debt
Securities special protection in the event of either a change of control of the
Company or a highly leveraged transaction by the Company.
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<PAGE> 15
The Company conducts substantially all of its operations through its
Subsidiaries. Accordingly, the Company's ability to meet its cash obligations is
dependent upon the ability of its Subsidiaries to make cash distributions to the
Company. The ability of its Subsidiaries to make distributions to the Company is
and will continue to be restricted by, among other limitations, applicable
provisions of the laws of national and state governments and contractual
provisions. Except as may be set forth in any Prospectus Supplement, the
Indentures do not limit the ability of the Company's Subsidiaries to incur such
restrictions in the future. The right of the Company to participate in the
assets of any Subsidiary (and thus the ability of Holders of the Debt Securities
to benefit indirectly from such assets) is generally subject to the prior claims
of creditors, including trade creditors, of that Subsidiary, except to the
extent that the Company is recognized as a creditor of such Subsidiary, in which
case the Company's claims would still be subject to any security interest of
other creditors of such Subsidiary. Unless they are guaranteed by the Company's
Subsidiaries, therefore, the Debt Securities will be structurally subordinated
to creditors, including trade creditors, of Subsidiaries of the Company with
respect to the assets of the Subsidiaries against which such creditors have a
more direct claim.
Reference is made to the relevant Prospectus Supplement for the following
terms of and information relating to the Offered Debt Securities (to the extent
such terms are applicable to such Offered Debt Securities): (i) the title of the
Offered Debt Securities; (ii) the classification of such Debt Securities as
either Senior Debt Securities or Subordinated Debt Securities (including the
further classification of Senior Debt Securities as either senior debt or senior
subordinated debt); (iii) whether the Offered Debt Securities that constitute
Subordinated Debt Securities are convertible into Common Stock and, if so, the
terms and conditions upon which such conversion will be effected including the
initial conversion price or conversion rate (the "Conversion Price") and any
adjustments thereto, the conversion period and other conversion provisions in
addition to or in lieu of those described herein; (iv) any limit on the
aggregate principal amount of the Offered Debt Securities; (v) whether the
Offered Debt Securities are to be issuable as Registered Securities or Bearer
Securities or both, whether any of the Offered Debt Securities are to be
issuable initially in temporary global form and whether any of the Offered Debt
Securities are to be in permanent global form; (vi) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
the Offered Debt Securities will be issued; (vii) the date or dates on which the
Offered Debt Securities will mature; (viii) the rate or rates per annum (or the
method by which such will be determined) at which the Offered Debt Securities
will bear interest, if any, and the date from which any such interest will
accrue; (ix) the Interest Payment Dates on which any such interest on the
Offered Debt Securities will be payable, the Regular Record Date for any
interest payable on any Offered Debt Securities which are Registered Securities
on any Interest Payment Date and the extent to which, or the manner in which,
any interest payable on a temporary global Offered Debt Security on an Interest
Payment Date will be paid; (x) any mandatory redemption, sinking fund or
analogous provisions; (xi) each office or agency where, subject to the terms of
the Indentures as described below under "Payment and Paying Agents," the
principal of and any premium and interest on the Offered Debt Securities will be
payable and each office or agency where, subject to the terms of the Indentures
as described below under "Form, Exchange, Registration and Transfer," the
Offered Debt Securities may be presented for registration of transfer or
exchange; (xii) the right of the Company to redeem the Offered Debt Securities
at its option and the period or periods within which and the price or prices at
which the Offered Debt Securities may, pursuant to any optional or mandatory
redemption provisions, be redeemed, in whole or in part, and the other detailed
terms and provisions of any such optional or mandatory redemption; (xiii) the
denominations in which any Offered Debt Securities which are Registered
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof, and the denomination or denominations in which any
Offered Debt Securities which are Bearer Securities will be issuable, if other
than the denomination of $5,000; (xiv) the currency or currencies (including
composite currencies) in which payment of principal of and any premium and
interest on the Offered Debt Securities is payable if other than U.S. dollars;
(xv) any index used to determine the amount of payments of principal of and any
premium and interest on the Offered Debt Securities; (xvi) information with
respect to book-entry procedures, if any; (xvii) any deletions from,
modifications of or additions to the Events of Default or covenants of the
Company with respect to such Offered Debt Securities; (xviii) whether the
5
<PAGE> 16
Offered Debt Securities are to be guaranteed by Subsidiary Guarantors and, if
so, the terms of such Subsidiary Guarantees; (xix) whether the legal and
covenant defeasance provisions of the Indenture are applicable to the Offered
Debt Securities of such series and any additional means of discharge or
conditions thereto applicable to such series; (xx) any subordination provisions
with respect to the Offered Debt Securities of such series (and any related
Subsidiary Guarantees) in addition to or in lieu of those set forth herein; and
(xxi) any other terms of the Offered Debt Securities not inconsistent with the
provisions of the Indentures. (Section 301) Any such Prospectus Supplement will
also describe any special provisions for the payment of additional amounts with
respect to the Offered Debt Securities.
Debt Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Debt Security, including any Zero-Coupon
Security, which is issued at a price lower than the principal amount payable
upon the Stated Maturity thereof and which provides that upon redemption or
acceleration of the maturity thereof an amount less than the amount payable upon
the Stated Maturity thereof and determined in accordance with the terms of such
Debt Security shall become due and payable. Special United States federal income
tax considerations applicable to Debt Securities issued at an original issue
discount, including Original Issue Discount Securities, and special United
States tax considerations and other terms and restrictions applicable to any
Debt Securities which are issued in bearer form, offered exclusively to United
States Aliens or denominated in other than United States dollars, will be set
forth in the Prospectus Supplement relating thereto.
Form, Exchange, Registration and Transfer
Debt Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
Prospectus Supplement, Bearer Securities will have interest coupons attached.
(Section 201) The Indentures also provide that Debt Securities of a series may
be issuable in temporary or permanent global form. (Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Debt Securities of
any series are issuable as both Registered Securities and Bearer Securities, at
the option of the Holder, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in exchange
for Registered Securities between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest, and interest accrued as of
such date will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the terms of the applicable Indenture.
Bearer Securities will not be issued in exchange for Registered Securities.
(Section 305)
Debt Securities may be presented for exchange as provided above, and
Registered Securities may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indentures. Such
transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. The Trustee will serve initially
as Security Registrar. (Section 305) If a Prospectus Supplement refers to any
transfer agents (in addition to the Security Registrar) initially designated by
the Company with respect to any series of Debt Securities, the Company may at
any time rescind the designation of any such transfer agent or approve a change
in the location through which any such transfer agent acts, except that, if Debt
Securities of a series are issuable solely as Registered Securities, the Company
will be required to maintain a transfer agent in each Place of Payment for such
series and, if
6
<PAGE> 17
Debt Securities of a series are also issuable as Bearer Securities, the Company
will be required to maintain (in addition to the Security Registrar) a transfer
agent in a Place of Payment for such series located outside the United States.
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities. (Section 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
date of the first publication of the relevant notice of redemption or, if
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption, (ii) register
the transfer of or exchange any Registered Security, or portion thereof, called
for redemption, except the unredeemed portion of any Registered Security being
redeemed in part, or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption. (Section 305)
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Bearer Securities will be
payable, subject to any applicable laws and regulations, at the offices of such
Paying Agents outside the United States as the Company may designate from time
to time, in the manner indicated in such Prospectus Supplement. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on Bearer Securities on any Interest Payment Date will be made only
against surrender to the Paying Agent of the coupon relating to such Interest
Payment Date. (Section 1001) No payment with respect to any Bearer Security will
be made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to any account
maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal of and any premium and interest on Bearer
Securities denominated and payable in U.S. dollars will be made at the office of
the Company's Paying Agent in the Borough of Manhattan, City of New York, if
(but only if) payment of the full amount thereof in U.S. dollars at all offices
or agencies outside the United States is illegal or effectively precluded by
exchange controls or other similar restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Securities will be
made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment of
any interest may be made by check mailed on or before the due date to the
address of the Person entitled thereto as such address shall appear in the
Security Register. (Sections 307, 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee will act as Paying Agent for payments with respect to Debt Securities
which are issuable solely as Registered Securities and the Company will maintain
a Paying Agent outside the United States for payments with respect to Debt
Securities (subject to limitations described above in the case of Bearer
Securities) which are issuable solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Any Paying Agents outside the United States
and any other Paying Agents in the United States initially designated by the
Company for the Debt Securities will be named in an applicable Prospectus
Supplement. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issuable solely as Registered Securities, the Company will be required to
maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as Bearer
7
<PAGE> 18
Securities, the Company will be required to maintain (i) a Paying Agent in the
Borough of Manhattan, City of New York for principal payments with respect to
any Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the circumstances described above, but not
otherwise), and (ii) a Paying Agent in a Place of Payment located outside the
United States where Debt Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (Section 1003)
Global Debt Securities
Debt Securities of a series may be issued in whole or in part in the form
of one or more global Debt Securities that will be deposited with, or on behalf
of, a depository identified in the Prospectus Supplement relating to such
series. Global Debt Securities may be issued in either registered or bearer form
and in either temporary or permanent form. (Section 203) Unless and until it is
exchanged in whole or in part for the individual Debt Securities represented
thereby, a global Debt Security may not be transferred except as a whole by the
depository for such global Debt Security to a nominee of such depository or by a
nominee of such depository to such depository or another nominee of such
depository or by the depository or any nominee to a successor depository or any
nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities and certain limitations and restrictions relating to a series
of Bearer Securities in the form of one or more global Debt Securities will be
described in the Prospectus Supplement relating to such series.
Events of Default
Any one of the following events constitutes an Event of Default under each
Indenture with respect to Debt Securities of any series: (a) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(b) failure to pay principal of or any premium on any Debt Security of that
series when due; (c) failure to deposit any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) failure to perform any other
covenant of the Company in such Indenture (other than a covenant included in
such Indenture solely for the benefit of a series of any Debt Securities other
than that series), continued for 60 days after written notice as provided in
such Indenture; (e) certain events in bankruptcy, insolvency or reorganization
involving the Company and (f) any other Event of Default provided with respect
to Debt Securities of that series. (Section 501)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities of that
series by notice as provided in the applicable Indenture may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all the Debt Securities of that series to be due
and payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
(Section 502)
Each Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee is under no
obligation to exercise any of its rights or powers under such Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Sections 601, 603) Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of
8
<PAGE> 19
any series have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, with respect to the Debt Securities of that
series; provided, however, that the Trustee is not obligated to take any action
unduly prejudicial to Holders not joining in such direction or involving the
Trustee in personal liability. (Section 512)
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of its obligations under each Indenture and as
to any default in such performance. (Section 1006)
Defeasance
If so specified with respect to any particular series of Debt Securities
issued under an Indenture, the Company may discharge its indebtedness and its
obligations or certain of its obligations under such Indenture with respect to
such series by depositing funds or obligations issued or guaranteed by the
United States of America with the Trustee. (Sections 1301-1303)
Legal Defeasance and Discharge. Each Indenture provides that, if so
specified with respect to the Debt Securities of any series issued under such
Indenture (other than convertible Subordinated Debt Securities), the Company
(and, if applicable, the Subsidiary Guarantors) will be discharged from any and
all obligations in respect of the Debt Securities of such series (except for
certain obligations relating to temporary Debt Securities and exchange of Debt
Securities, registration of transfer or exchange of Debt Securities of such
series, replacement of stolen, lost or mutilated Debt Securities of such series,
maintenance of paying agencies to hold moneys for payment in trust and payment
of additional amounts, if any, required in consequence of United States
withholding taxes imposed on payments to non-United States persons) upon the
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any), and each installment of interest on, the
Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of such Indenture and the Debt Securities of such
series. (Sections 1302, 1304) Such a trust may only be established if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or (ii) since the date of such
Indenture there has been a change in applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of such series will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge, 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, defeasance and discharge had not occurred. (Section 1304) In the event
of any such defeasance and discharge of Debt Securities of such series, Holders
of such series would be entitled to look only to such trust fund for payment of
principal of and any premium and any interest on their Debt Securities until
Maturity.
Covenant Defeasance. Each Indenture also provides that, if so specified
with respect to the Debt Securities of any series issued thereunder, the Company
may omit to comply with certain restrictive covenants, and any such omission
shall not be an Event of Default with respect to the Debt Securities of such
series, upon the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), and each installment
of interest on, the Debt Securities of such series on the Stated Maturity of
such payments in accordance with the terms of such Indenture and the Debt
Securities of such series. The obligations of the Company under such Indenture
and the Debt Securities of such series other than with respect to such covenants
shall remain in full force and effect. (Section 1303) Such a trust may be
established only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and covenant defeasance and will be subject to federal income
tax on the same amounts and in the
9
<PAGE> 20
same manner and at the same times as would have been the case if such deposit
and covenant defeasance had not occurred. (Section 1304)
Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Debt Securities of such series at the time of their Stated Maturity, in the
event the Company exercises its option to omit compliance with the covenants
defeased with respect to the Debt Securities of any series as described above,
and the Debt Securities of such series are declared due and payable because of
the occurrence of any Event of Default, such amount may not be sufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. The Company shall in any
event remain liable for such payments as provided in the applicable Indenture.
Federal Income Tax Consequences. Under current United States federal income
tax law, defeasance and discharge would likely be treated as a taxable exchange
of Debt Securities to be defeased for an interest in the defeasance trust. As a
consequence, a holder would recognize gain or loss equal to the difference
between the holder's cost or other tax basis for such Debt Securities and the
value of the holder's interest in the defeasance trust, and thereafter would be
required to include in income the holder's share of the income, gain or loss of
the defeasance trust. Under current United States federal income tax law,
covenant defeasance would ordinarily not be treated as a taxable exchange of
such Debt Securities.
Meetings, Modification and Waiver
Modifications and amendments of any Indenture may be made by the Company,
the Subsidiary Guarantors and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of each
series affected by such modification or amendment; provided, however, that no
such modification or amendment may, without consent of the Holder of each
Outstanding Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Debt
Security, (b) change the Redemption Date with respect to any Debt Security, (c)
reduce the principal amount of, or premium or interest on, any Debt Security,
(d) change any obligation of the Company to pay additional amounts, (e) reduce
the amount of principal of an Original Issue Discount Security payable upon
acceleration of the Maturity thereof, (f) change the coin or currency in which
any Debt Security or any premium or interest thereon is payable, (g) change the
redemption right of any Holder, (h) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security or any
conversion right with respect thereto, (i) reduce the percentage in principal
amount of Outstanding Securities of any series, the consent of whose Holders is
required for modification or amendment of such Indenture or for waiver of
compliance with certain provisions of such Indenture or for waiver of certain
defaults, (j) reduce the requirements contained in such Indenture for quorum or
voting, (k) change any obligation of the Company to maintain an office or agency
in the places and for the purposes required by such Indenture, (l) adversely
affect the right to convert Subordinated Debt Securities, if applicable, or (m)
modify any of the above provisions. (Section 902)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Subordinated Debt Securities without the
consent of each holder of Senior Indebtedness (as defined below under
"-- Provisions Applicable Solely to Subordinated Debt Securities") then
outstanding that would be adversely affected thereby. (Section 907 of the
Subordinated Debt Indenture)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of all Holders of that series, waive,
insofar as that series is concerned, compliance by the Company with certain
restrictive provisions of the Indenture under which such series has been issued.
(Section 1007) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of all Holders of that
series, waive any past default under the applicable Indenture with respect to
any Debt Securities of that series, except a default (a) in the payment of
principal of, or premium, if any, or any interest on any Debt Security of such
series or (b) in respect of a
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covenant or provision of such Indenture which cannot be modified or amended
without the consent of the Holder of each Outstanding Security of such series
affected. (Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders for quorum purposes, (i) the principal
amount of an Original Issue Discount Security that is deemed to be Outstanding
will be the amount of the principal that would be due and payable as of the date
of such determination upon acceleration of the Maturity thereof, and (ii) the
principal amount of a Debt Security denominated in a foreign currency or
currency units will be the U.S. dollar equivalent, determined on the date of
original issuance of such Debt Security, of the principal amount of such Debt
Security or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent, determined on the date of original issuance of such Security, of the
amount determined as provided in (i) above. (Section 101)
Each Indenture contains provisions for convening meetings of the Holders of
a series if Debt Securities of that series are issuable as Bearer Securities.
(Section 1401) A meeting may be called at any time by the Trustee, and also,
upon request, by the Company or the Holders of at least 10% in aggregate
principal amount of the Outstanding Securities of such series, in any such case
upon notice given in accordance with "Notices" below. (Section 1402) Except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above, any resolution presented at a meeting (or
adjourned meeting at which a quorum is present) may be adopted by the
affirmative vote of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in aggregate
principal amount of the Outstanding Securities of a series may be adopted at a
meeting (or adjourned meeting duly reconvened at which a quorum is present) by
the affirmative vote of the Holders of such specified percentage in aggregate
principal amount of the Outstanding Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of any series duly held in
accordance with the applicable Indenture will be binding on all Holders of that
series and related coupons. The quorum at any meeting, and at any reconvened
meeting, will be Persons holding or representing a majority in aggregate
principal amount of the Outstanding Securities of a series. (Section 1404)
Consolidation, Merger and Sale of Assets
The Company, without the consent of the Holders of any of the outstanding
Securities under either Indenture, may consolidate with or merge into, or
convey, transfer or lease its assets substantially as an entirety to, any Person
which is a corporation, partnership or trust organized and validly existing
under the laws of any jurisdiction of the United States, provided that any
successor Person assumes the Company's obligations on the Securities and under
such Indenture, that after giving effect to the transaction no Event of Default,
and no event which, after notice or lapse of time, would become an Event of
Default, shall have occurred and be continuing, and that certain other
conditions are met. (Section 801)
Notices
Except as otherwise provided in the Indentures, notices to Holders of
Bearer Securities will be given by publication at least twice in a daily
newspaper in The City of New York and in such other city or cities as may be
specified in such Bearer Securities. Notices to Holders of Registered Securities
will be given by mail to the addresses of such Holders as they appear in the
Security Register. (Section 106)
Title
Title to any Bearer Securities (including Bearer Securities in permanent
global form) and any coupons appertaining thereto will pass by delivery. The
Company, the Trustee and any agent of the Company or the Trustee may treat the
bearer of any Bearer Security and the bearer of any coupon and
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the registered owner of any Registered Security as the owner thereof (whether or
not such Debt Security or coupon shall be overdue and notwithstanding any notice
to the contrary) for the purpose of making payment and for all other purposes.
(Section 308)
Replacement of Securities and Coupons
Any mutilated Debt Security or a Debt Security with a mutilated coupon
appertaining thereto will be replaced by the Company at the expense of the
Holder upon surrender of such Debt Security to the Trustee. Debt Securities or
coupons that became destroyed, stolen or lost will be replaced by the Company at
the expense of the Holder upon delivery to the Trustee of evidence of
destruction, loss or theft thereof satisfactory to the Company and the Trustee;
in the case of any coupon which becomes destroyed, stolen or lost, such coupon
will be replaced by issuance of a new Debt Security in exchange for the Debt
Security to which such coupon appertains. In the case of a destroyed, lost or
stolen Debt Security or coupon, an indemnity satisfactory to the Trustee and the
Company may be required at the expense of the Holder of such Debt Security or
coupon before a replacement Debt Security will be issued. (Section 306)
Governing Law
The Indentures, the Debt Securities and coupons and any Subsidiary
Guarantees will be governed by, and construed in accordance with, the laws of
the State of New York. (Section 113)
Regarding the Trustee
The Trustee under each Indenture is Chase Bank of Texas, National
Association.
Each Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest (as described in the Indentures), it must eliminate such
conflict or resign. (Section 608)
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
Senior Debt Securities will be issued under the Senior Debt Indenture, and
each series will rank pari passu as to the right of payment of principal and any
premium and interest with each other series issued thereunder. (Section 301)
If the Senior Debt Securities are issued on a senior subordinated basis,
the applicable Prospectus Supplement will describe the related subordination
provisions. All Senior Debt Securities, whether issued on a senior or senior
subordinated basis, will be senior in right of payment to each series of
Subordinated Debt Securities.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
Subordination. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all Senior Indebtedness (as defined below) of the Company.
(Article Sixteen of the Subordinated Debt Indenture)
"Senior Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as Indebtedness (as defined below) of the Company, whether outstanding
on the date of the Subordinated Debt Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior, in right of payment, to the Subordinated
Debt Securities or to other Indebtedness which is pari passu with, or
subordinated to, the Subordinated Debt Securities; provided, however, that in no
event shall Senior Indebtedness include (a) Indebtedness of the Company owed or
owing to any Subsidiary of the Company, (b) Indebtedness to trade creditors, (c)
any liability for taxes owed or owing by the Company, and (d) the Subordinated
Debt Securities. "Indebtedness" is defined in Section 101 of the Subordinated
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Debt Indenture as, with respect to any Person, (a) all liabilities and
obligations, contingent or otherwise, of any such Person, (i) in respect of
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), (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute trade payables to trade creditors in the ordinary
course of business, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under Interest Swap and Hedging Obligations;
(c) all liabilities of others of the kind described in the preceding clause (a)
or (b) that such Person has guaranteed or that is otherwise its legal liability
and all obligations to purchase, redeem or acquire any Capital Stock; and (d)
any and all deferrals, renewals, extensions, refinancings, refundings (whether
direct or indirect) of any liability of the kind described in any of the
preceding clause (a), (b) or (c), or this clause (d), whether or not between or
among the same parties.
The Subordinated Debt Indenture provides that no payment may be made by the
Company on account of the principal of or any premium or interest on the
Subordinated Debt Securities, or to acquire any of the Subordinated Debt
Securities (including repurchases of Subordinated Debt Securities at the option
of the Holders) for cash or property (other than Junior Securities), or on
account of any redemption provisions of the Subordinated Debt Securities, (i)
upon the maturity of any Senior Indebtedness of the Company by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of and
any premium and interest on such Senior Indebtedness are first paid in full (or
such payment is duly provided for), or (ii) in the event of default in the
payment of any principal of or any premium or interest on any Senior
Indebtedness when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist. (Section 1601 of the Subordinated Debt Indenture)
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Indebtedness or their representative
immediately to accelerate its maturity and (ii) written notice of such event of
default given to the Company and the Trustee by the holders of at least 25% in
the aggregate principal amount outstanding of such Senior Indebtedness or their
representative (a "Payment Notice"), then, unless and until such event of
default has been cured or waived or otherwise has ceased to exist, no payment
(by set off or otherwise) may be made by or on behalf of the Company on account
of the principal of or any premium or interest on the Subordinated Debt
Securities, or to acquire or repurchase any of the Subordinated Debt Securities
for cash or property, or on account of any redemption provisions of the
Subordinated Debt Securities, in any such case other than payments made with
Junior Securities of the Company. Notwithstanding the foregoing, unless (i) the
Senior Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "Payment Blockage Period"), and (ii)
such declaration has not been rescinded or waived, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Subordinated Debt Securities during the Payment Blockage Period
due to the foregoing prohibitions and to resume all other payments as and when
due on the Subordinated Debt Securities. Any number of Payment Notices may be
given; provided, however, that (i) not more than one Payment Notice shall be
given within a period of any 360 consecutive days and (ii) no event of default
that existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default is on the same
issue of Senior Indebtedness) shall be made the basis for the commencement of
any other Payment Blockage Period. (Section 1601 of the Subordinated Debt
Indenture)
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether voluntary or
involuntary, in bankruptcy, insolvency, receivership or a similar proceeding or
upon assignment for the benefit of creditors or any marshaling of assets or
liabilities, (i) the holders of all Senior Indebtedness will first be entitled
to receive payment in full (or
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have such payment duly provided for) before the Holders are entitled to receive
any payment on account of the principal of or any premium or interest on the
Subordinated Debt Securities (other than Junior Securities) and (ii) any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than Junior Securities) to which the Holders
or the Trustee on behalf of the Holders would be entitled (by set off or
otherwise), except for the subordination provisions contained in the
Subordinated Debt Indenture, will be paid by the liquidating trustee or agent or
other Person making such a payment or distribution directly to the holders of
Senior Indebtedness or their representative to the extent necessary to make
payment in full of all such Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness. (Section 1601 of the Subordinated Debt Indenture)
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) is received
by the Trustee or the Holders at a time when such payment or distribution is
prohibited by the foregoing provisions, such payment or distribution shall be
held in trust for the benefit of the holders of Senior Indebtedness, and shall
be paid or delivered by the Trustee or such Holders, as the case may be, to the
holders of the Senior Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment of all such
Senior Indebtedness in full after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. (Section 1601 of the
Subordinated Debt Indenture)
No provisions contained in the Subordinated Debt Indenture or the
Subordinated Debt Securities will affect the obligation of the Company, which is
absolute and unconditional, to pay, when due, principal of and any premium and
interest on the Subordinated Debt Securities as and when the same shall become
due and payable. The subordination provisions of the Subordinated Debt Indenture
and the Subordinated Debt Securities will not prevent the occurrence of any
Event of Default under the Subordinated Debt Indenture or limit the rights of
the Trustee or any Holder, subject to the three preceding paragraphs, to pursue
any other rights or remedies with respect to the Subordinated Debt Securities.
(Sections 501 and 1601 of the Subordinated Debt Indenture)
The Prospectus Supplement respecting any series of Subordinated Debt
Securities will set forth any subordination provisions applicable to such series
in addition to or different from those described above.
If any series of Subordinated Debt Securities is guaranteed by Subsidiary
Guarantees, then, except as otherwise specified in the applicable Prospectus
Supplement, the obligations of each Subsidiary Guarantor under such Subsidiary
Guarantees will be subordinated to the Senior Indebtedness of such Subsidiary
Guarantor to the same extent and in the same manner as the Subordinated Debt
Securities are subordinated to Senior Indebtedness of the Company. (Section 1611
of the Subordinated Debt Indenture)
By reason of such subordination, in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding
involving the Company or an assignment for the benefit of creditors of the
Company or any of its subsidiaries or a marshaling of assets or liabilities of
the Company or its subsidiaries, holders of Senior Indebtedness and holders of
other obligations of the Company that are not subordinated to Senior
Indebtedness may receive more, ratably, than holders of the Subordinated Debt
Securities. Such subordination will not prevent the occurrence of any Default or
Event of Default or limit the rights of the Trustee or any Holder, subject to
the other provisions of the Indenture, to pursue any other rights or remedies
with respect of the Subordinated Debt Securities.
Conversion. The Subordinated Debt Indenture may provide for a right of
conversion of Subordinated Debt Securities into Common Stock (or cash in lieu
thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The
following provisions will apply to Debt Securities that are convertible
Subordinated Debt Securities unless otherwise provided in the Prospectus
Supplement for such Debt Securities.
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The Holder of any convertible Subordinated Debt Securities will have the
right exercisable at any time prior to the close of business on the second
Business Day prior to their Stated Maturity, unless previously redeemed or
otherwise purchased by the Company, to convert such Subordinated Debt Securities
into shares of Common Stock at the Conversion Price set forth in the Prospectus
Supplement, subject to adjustment. The Holder of convertible Subordinated Debt
Securities may convert any portion thereof which is $1,000 in principal amount
or any integral multiple thereof. (Section 1502 of the Subordinated Debt
Indenture)
In certain events, the Conversion Price may be subject to adjustment as set
forth in the applicable Prospectus Supplement for such Subordinated Debt
Securities.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based on the then
current market price for the Common Stock. (Section 1503 of the Subordinated
Debt Indenture) Upon conversion, no adjustments will be made for accrued
interest or dividends, and convertible Subordinated Debt Securities surrendered
for conversion between the record date for an interest payment and the Interest
Payment Date (except convertible Subordinated Debt Securities called for
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the interest thereon which the Holder is to
receive. (Section 1502 of the Subordinated Debt Indenture)
In the case of any reclassification, consolidation or merger of the Company
with or into another Person or any merger of another Person with or into the
Company (with certain exceptions), or in case of any conveyance, transfer or
lease of the assets of the Company substantially as an entirety, each
convertible Subordinated Debt Security then outstanding will, without the
consent of any Holder thereof, become convertible only into the kind and amount
of securities, cash and other property receivable upon such reclassification,
consolidation, merger, conveyance, transfer or lease by a holder of the number
of shares of Common Stock into which such Subordinated Debt Security was
convertible immediately prior thereto, after giving effect to any adjustment
event, who failed to exercise any rights of election and received per share the
kind and amount received per share by a plurality of non-electing shares.
(Section 1505 of the Subordinated Debt Indenture)
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
The Company's authorized capital stock consists of 200,000,000 shares of
Common Stock, par value $.01 per share, and 20,000,000 shares of Preferred
Stock, par value $.01 per share, each of which is described below. The summary
description of the capital stock of the Company contained herein is necessarily
general and reference should be made in each case to the Company's Restated
Articles of Incorporation and Bylaws, which are exhibits to the Registration
Statement of which this Prospectus is a part.
COMMON STOCK
Each share of Common Stock is subject to all rights, privileges,
preferences and priorities of any class of preferred stock of the Company. Each
share of Common Stock has an equal and ratable right to receive dividends as and
when declared by the Board of Directors out of any funds of the corporation
legally available for the payment thereof. The Company currently has no
intention to pay dividends on the shares of Common Stock in the foreseeable
future.
In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share equally and ratably in the
assets available for distribution after payment of all liabilities, including
any liquidation preferences payable to the holders of Preferred Stock that may
at the time be outstanding.
Each share of Common Stock is entitled to one vote in the election of
directors and on all other matters submitted to a vote of shareholders. Holders
of Common Stock have no right to cumulate their vote in the election of
directors.
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American Stock Transfer & Trust Company, 40 Wall Street, New York, New York
10005, acts as the transfer agent and registrar of the Common Stock.
PREFERRED SHARE PURCHASE RIGHTS
On November 8, 1996, the Board of Directors of the Company authorized the
issuance of one preferred share purchase right (a "Right") for each share of
Common Stock outstanding on November 20, 1996 and for each share of Common Stock
issued thereafter until the Distribution Date (as defined below) or the earlier
redemption or expiration of the Rights. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Junior
Participating Preferred Stock, par value $.01 per share (the "Junior Preferred
Shares"), of the Company, at a price of $56.00 per one one-thousandth of a
Junior Preferred Share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") dated as of November 15, 1996 between the Company and
American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"),
and this description of the Rights is qualified in its entirety by reference to
such agreement, which is included as an exhibit to the Registration Statement of
which this Prospectus is a part.
Until the Distribution Date, the Rights will attach to all Common Stock
certificates representing outstanding shares and no separate Right Certificate
will be distributed. Accordingly, a Right will be issued for each share of
Common Stock issued hereunder. The Rights will separate from the shares of
Common Stock and a Distribution Date will occur upon the earlier of (i) 10
business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of 15% or more of the outstanding Voting Shares (as defined in the
Rights Agreement) of the Company, or (ii) 10 business days following the
commencement or announcement of an intention to commence a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding Voting Shares.
Until the Distribution Date (or earlier redemption or expiration of the
Rights) the Rights will be evidenced by the certificates representing such
Common Stock. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the shares of Common Stock as of the close of business on
the Distribution Date and such separate Right Certificates alone will thereafter
evidence the Rights. The Rights are not exercisable until the Distribution Date.
The Rights will expire on November 19, 2006 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or the Rights are earlier redeemed
or exchanged by the Company as described below.
If a person or group were to acquire 15% or more of the Voting Shares of
the Company, each Right then outstanding (other than Rights beneficially owned
by the Acquiring Person, which would become null and void) would become a right
to buy for the Purchase Price that number of shares of Common Stock (or under
certain circumstances, the equivalent number of one one-thousandths of a Junior
Preferred Share) that at the time of such acquisition would have a market value
of two times the Purchase Price of the Right. If the Company were acquired in a
merger or other business combination transaction or assets constituting more
than 50% of its consolidated assets or producing more than 50% of its earning
power or cash flow were sold, proper provision will be made so that each holder
of a Right will thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction would have
a market value of two times the Purchase Price of the Right.
The dividend and liquidation rights, and the non-redemption feature, of the
Junior Preferred Shares are designed so that the value of one one-thousandth of
a Junior Preferred Share purchasable upon exercise of each Right will
approximate the value of one Common Stock. The Junior Preferred Shares issuable
upon exercise of the Rights will be non-redeemable and rank junior to all other
series of the Company's preferred stock. Each whole Junior Preferred Share will
be entitled to receive a quarterly
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preferential dividend in an amount per share equal to the greater of (i) $1.00
in cash, or (ii) in the aggregate, 1,000 times the dividend declared on the
shares of Common Stock. In the event of liquidation, the holders of the Junior
Preferred Shares will be entitled to receive a preferential liquidation payment
equal to the greater of (i) $1,000 per share, or (ii) in the aggregate, 1,000
times the payment made on the shares of Common Stock. In the event of any
merger, consolidation or other transaction in which shares of Common Stock are
exchanged for or changed into other stock or securities, cash or other property,
each whole Junior Preferred Share will be entitled to receive 1,000 times the
amount received per Common Stock. Each whole Junior Preferred Share will be
entitled to 1,000 votes on all matters submitted to a vote of the stockholders
of the Company, and Junior Preferred Shares will generally vote together as one
class with the Common Stock and any other capital stock on all matters submitted
to a vote of shareholders of the Company.
If required, the offer and sale of the Junior Preferred Shares issuable
upon exercise of the Rights will be registered under the Securities Act at such
time as the Rights become exercisable.
The number of one one-thousandths of a Junior Preferred Share or other
securities or property issuable upon exercise of the Rights, and the Purchase
Price payable, are subject to customary adjustments from time to time to prevent
dilution. The number of outstanding Rights and the number of one one-
thousandths of a Junior Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the shares of Common
Stock or a stock dividend on the shares of Common Stock payable in shares of
Common Stock or subdivisions, consolidations or combinations of the shares of
Common Stock occurring, in any such case, prior to the Distribution Date.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Voting Shares of the Company and before the acquisition by a person or group of
50% or more of the outstanding Voting Shares of the Company, the Board of
Directors may, at its option, issue shares of Common Stock in mandatory
redemption of, and in exchange for, all or part of the then outstanding and
exercisable Rights (other than Rights owned by such person or group which would
become null and void) at an exchange ratio of one share of Common Stock (or one
one-thousandth of a Junior Preferred Share) for each two shares of Common Stock
for which each Right is then exercisable, subject to adjustment.
At any time prior to the first public announcement that a person or group
has become the beneficial owner of 15% or more of the outstanding Voting Shares,
the Board of Directors of the Company may redeem all but not less than all the
then outstanding Rights at a price of $0.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to extend the Final Expiration Date, and, provided a Distribution Date has not
occurred, to extend the period during which the Rights may be redeemed, except
that after the first public announcement that a person or group has become the
beneficial owner of 15% or more of the outstanding Voting Shares, no such
amendment may materially and adversely affect the interests of the holders of
the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not determined by the Board of Directors to be in the best interests of
all shareholders. The Rights will not interfere with a merger or other business
combination approved by the Board of Directors, prior to the time that a person
or group has acquired beneficial ownership of 15% or more of the Common Stock,
since the Rights may be redeemed by the Company prior to that time.
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PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which an
applicable Prospectus Supplement may relate. Certain other terms of any series
of Preferred Stock offered by an applicable Prospectus Supplement will be
specified in such Prospectus Supplement. If so specified in the applicable
Prospectus Supplement, the terms of any series of Preferred Stock may differ
from the terms set forth below. The description of the terms of the Preferred
Stock set forth below and in an applicable Prospectus Supplement does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Statement of Resolution relating to the applicable series of
Preferred Stock, which will be filed as an exhibit to, or incorporated by
reference in, the Registration Statement of which this Prospectus forms a part.
General. The Preferred Stock may be divided into and issued in one or more
series, each series to be so designated as to distinguish the shares thereof
from the shares of all other series and classes. The Board of Directors is
vested with the authority to establish and designate such series from time to
time, and within the limitations prescribed by law or set forth in the Company's
Restated Articles of Incorporation, to fix and determine the number,
preferences, limitations and relative rights, including voting rights, of the
authorized shares within each such series; provided, however, that the Board of
Directors may not decrease the number of shares within a series below the number
of shares within such series that is then issued. The Board of Directors shall
exercise such authority by the adoption of a resolution or resolutions as
prescribed by law.
The terms of any series of Preferred Stock may be amended without the
consent of the holders of any other series of Preferred Stock or of any class of
junior stock, provided such amendment does not adversely affect the holders of
such other series of Preferred Stock or class of junior stock. Shares of any
class of Preferred Stock which have been issued and reacquired in any manner and
are not held as treasury shares, including shares redeemed by purchase (whether
through the operation of a retirement or sinking fund or otherwise), will have
the status of authorized and unissued Preferred Stock and may be reissued as a
part of the series of which they were originally a part or may be reclassified
into and reissued as part of a new series.
No shares of Preferred Stock are, as of the date of this Prospectus, issued
or outstanding, although the Company has issued Rights to purchase Junior
Preferred Shares as described above under "-- Preferred Share Purchase Rights."
It is not possible to state the actual effect of the authorization and issuance
of a new series of Preferred Stock upon the rights of holders of the Common
Stock and other series of Preferred Stock unless and until the Board of
Directors determines the attributes of such new series of Preferred Stock and
the specific rights of its holders. Such effects might include, however, (i)
restrictions on dividends on Common Stock and other series of Preferred Stock if
dividends on such new series of Preferred Stock have not been paid; (ii)
dilution of the voting power of Common Stock and other series of Preferred Stock
to the extent that such new series of Preferred Stock has voting rights, or to
the extent that any such new series of Preferred Stock is convertible into
Common Stock; (iii) dilution of the equity interest of Common Stock and other
series of Preferred Stock; and (iv) limitation on the right of holders of Common
Stock and other series of Preferred Stock to share in the Company's assets upon
liquidation until satisfaction of any liquidation preference attributable to
such new series of Preferred Stock. While the ability of the Company to issue
Preferred Stock provides flexibility in connection with possible acquisitions
and other corporate purposes, its issuance could be used to impede an attempt by
a third party to acquire a majority of the outstanding voting stock of the
Company.
The Preferred Stock will have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation of such Preferred Stock, the number of shares offered and the
liquidation value thereof; (ii) the price at which such Preferred Stock will be
issued; (iii) the dividend rate (or method of calculation), the dates on which
dividends shall be payable, whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from
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which dividends shall commence to accumulate; (iv) the liquidation preference
thereof; (v) any redemption or sinking fund provisions; (vi) any conversion or
exchange provisions of such Preferred Stock; and (vii) any additional dividend,
liquidation, redemption, sinking fund and other rights, preferences, limitations
and restrictions of such Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of the Preferred Stock, each series of the Preferred Stock will rank on a
parity as to dividends and distributions in the event of a liquidation with each
other series of the Preferred Stock, if any. Holders of Preferred Stock will
have no preemptive rights to subscribe for or purchase shares of capital stock.
Dividend Rights. Holders of the Preferred Stock of each series will be
entitled to receive, when, as and if declared by the Board of Directors, out of
assets of the Company legally available therefor, cash dividends at such rates
and on such dates as are set forth in the Prospectus Supplement relating to such
series of the Preferred Stock. Such rate may be fixed or variable or both. Each
such dividend will be payable to the holders of record as they appear on the
stock books of the Company on such record dates as will be fixed by the Board of
Directors or a duly authorized committee thereof. Dividends on any series of the
Preferred Stock may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating thereto. If the Board of Directors fails to
declare a dividend payable on a dividend payment date on any series of Preferred
Stock for which dividends are noncumulative, then the right to receive a
dividend in respect of the dividend period ending on such dividend payment date
will be lost, and the Company shall have no obligation to pay the dividend
accrued for that period, whether or not dividends are declared for any future
period.
Unless otherwise indicated in an applicable Prospectus Supplement, all
series of Preferred Stock will be senior in right as to dividends and in
liquidation to the Common Stock and any other class of stock of the Company
ranking junior to the Preferred Stock.
Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock will be entitled to receive out of assets of the
Company available for distribution to stockholders, before any distribution of
assets is made to holders of Common Stock or any other class of stock ranking
junior to such series of the Preferred Stock upon liquidation, liquidating
distributions in the amount set forth in the Prospectus Supplement relating to
such series of the Preferred Stock plus an amount equal to accrued and unpaid
dividends for the then-current dividend period and, if such series of the
Preferred Stock is cumulative, for all dividend periods prior thereto. If, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company, the amounts payable with respect to the Preferred Stock of any series
and any other shares of stock of the Company ranking as to any such distribution
on a parity with such series of the Preferred Stock are not paid in full, the
holders of the Preferred Stock of such series and of such other shares will
share ratably in any such distribution of assets of the Company in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of such series of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. Neither the sale of all or
substantially all the property or business of the Company nor the merger or
consolidation of the Company into or with any other corporation shall be deemed
to be a dissolution, liquidation or winding up, voluntary or involuntary, of the
Company.
Redemption. A series of the Preferred Stock may be redeemable, in whole or
in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times and
at the redemption prices set forth in the Prospectus Supplement relating to such
series.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such series
of Preferred Stock that will be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to any accrued and unpaid dividends thereon to the
date of
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redemption. The redemption price may be payable in cash, capital stock or in
cash received from the net proceeds of the issuance of capital stock of the
Company, as specified in the Prospectus Supplement relating to such series of
Preferred Stock.
If fewer than all the outstanding shares of any series of the Preferred
Stock are to be redeemed, whether by mandatory or optional redemption, the
selection of the shares to be redeemed will be determined by lot or pro rata as
may be determined by the Board of Directors or a duly authorized committee
thereof, or by any other method which may be determined by the Board of
Directors or such committee to be equitable. From and after the date of
redemption (unless default shall be made by the Company in providing for the
payment of the redemption price), dividends shall cease to accrue on the shares
of Preferred Stock called for redemption and all rights of the holders thereof
(except the right to receive the redemption price) shall cease.
In the event that full dividends, including accumulations in the case of
cumulative Preferred Stock, on any series of the Preferred Stock have not been
paid, such series of the Preferred Stock may not be redeemed in part and the
Company may not purchase or acquire any shares of such series of the Preferred
Stock otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of such series of the Preferred Stock.
Conversion or Exchange Rights. The Prospectus Supplement for any series of
the Preferred Stock will state the terms, if any, on which shares of such series
are convertible into, or exchangeable for, securities of the Company or another
person.
Voting Rights. Unless otherwise determined by the Board of Directors and
indicated in the Prospectus Supplement relating to a particular series of
Preferred Stock, the holders of the Preferred Stock will not be entitled to
vote, except as expressly required by applicable law. In the event the Company
issues share of any series of Preferred Stock with voting rights, including any
voting rights in the case of dividend arrearages, unless otherwise specified in
the Prospectus Supplement relating to a particular series of Preferred Stock,
each such share will be entitled to one vote on matters on which holders of such
series of the Preferred Stock are entitled to vote. In the case of any series of
Preferred Stock having one vote per share on matters on which holders of such
series are entitled to vote, the voting power of such series, on matters on
which holders of such series and holders of other series of preferred stock are
entitled to vote as a single class, will depend on the number of shares in such
series, not on the aggregate liquidation preference or initial offering price of
the shares of such series of Preferred Stock.
Conditions and Restrictions Upon the Company. The Prospectus Supplement
relating to a series of the Preferred Stock will describe any conditions or
restrictions upon the Company which are for the benefit of such series,
including restrictions upon the creation of debt or other series of Preferred
Stock; payment of dividends; or distributions, acquisitions or redemptions of
shares ranking junior to such series.
VOTING
The Company's Restated Articles of Incorporation provide that (a) action
may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall have
been signed by the holder or holders of shares having not less than the minimum
number of votes that would be necessary to take such action at a meeting of the
shareholders, and (b) the vote required to approve a merger, share exchange,
certain sales of assets, charter amendment or dissolution involving the Company
shall be a majority of each outstanding class of capital stock entitled to vote
thereon.
NO PREEMPTIVE RIGHTS
No holder of shares of the Company, including shares of Common Stock or
Preferred Stock, shall have any preemptive right or other right to purchase or
subscribe for or receive any shares of any class, or series thereof, of stock of
the Company, whether now or hereafter authorized, or any warrants, options,
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bonds, debentures or other securities convertible into, exchangeable for or
carrying any right to purchase any shares of any class, or series thereof, of
stock.
BUSINESS COMBINATION LAW
The Company is subject to Part Thirteen of the Texas Business Corporation
Act, known as the "Business Combination Law," which became effective September
1, 1997. In general, the Business Combination Law prevents an "affiliated
shareholder" (or its affiliates or associates) from entering into or engaging in
a "business combination" with an "issuing public corporation" during the
three-year period immediately following the date on which the affiliated
shareholder became an affiliated shareholder, unless (a) before the date such
person became an affiliated shareholder, the board of directors of the issuing
public corporation approves the business combination or the acquisition of
shares that caused the affiliated shareholder to become an affiliated
shareholder, or (b) not less than six months after the date such person became
an affiliated shareholder, the business combination is approved by the
affirmative vote of holders of at least two-thirds of the issuing public
corporation's outstanding voting shares not beneficially owned by the affiliated
shareholder or its affiliates or associates. For the purposes of the foregoing,
"affiliated shareholder" is defined generally as a person that is or was within
the preceding three-year period the beneficial owner of 20% or more of a
corporation's outstanding voting shares; "business combination" is defined
generally to include (i) mergers, share exchanges or conversions involving the
affiliated shareholder, (ii) dispositions of assets involving the affiliated
shareholder having an aggregate value equal to 10% or more of the market value
of the assets or of the outstanding common stock or representing 10% or more of
the earning power or net income of the corporation, (iii) certain issuances or
transfers of securities by the corporation to the affiliated shareholder other
than on a pro rata basis, (iv) certain plans or agreements relating to a
liquidation or dissolution of the corporation involving an affiliated
shareholder, (v) certain reclassifications, recapitalizations, distributions or
other transactions that would have the effect of increasing the affiliated
shareholder's percentage ownership of the corporation and (vi) the receipt of
tax, guarantee, loan or other financial benefits by an affiliated shareholder
other than proportionately as a shareholder of the corporation; and "issuing
public corporation" is generally defined to include most publicly held Texas
corporations, including the Company.
FOREIGN OWNERSHIP
The Restated Articles of Incorporation of the Company contain provisions
limiting foreign ownership of the capital stock of the Company. These provisions
were originally intended to, among other things, protect the Company's ability
to be deemed a United States citizen under Section 2 ("U.S. citizen") of the
Shipping Act, 1916, as amended (the "Shipping Act") which allowed the Company to
avail itself of certain types of U.S. government guaranteed financings
previously available only for U.S. flag vessels owned by U.S. citizens. Although
being a U.S. citizen is not currently necessary to obtain such financings, the
ability to be a U.S. citizen may be beneficial in the future should the Company
desire to obtain certain types of U.S. flag vessels. One of the conditions that
must be satisfied in order that a corporation may be deemed to be a U.S. citizen
is that a controlling interest therein is owned by citizens of the United
States. Thus, a transfer of Common Stock which would result in more than 50% of
the outstanding Common Stock being held by non-U.S. citizens would cause the
Company to then be ineligible to be a U.S. citizen. Under the provisions of the
Company's Restated Articles of Incorporation, (i) shares of any class of capital
stock of the Company are not issuable to and are not registrable upon transfer
in the name of any person who cannot demonstrate to the satisfaction of the
Company that such person is a U.S. citizen and is not holding such shares for
the account of any non-U.S. citizen, if as a result of such issuance or
registration of transfer the percentage of such class owned by non-U.S. citizens
would exceed a fixed percentage (the "Permitted Percentage"), which is equal to
2% less than the percentage that would prevent the Company from being a U.S.
citizen (currently 50%, thus resulting in a Permitted Percentage of 48%), and
any such transfer shall be void and ineffective as against the Company, and (ii)
if at any time non-U.S. ownership of any such class (either record or
beneficial) exceeds the Permitted Percentage, the Company may withhold payment
of dividends on such shares deemed to be in excess of the Permitted Percentage
and may suspend the voting rights of such shares. The Company's Restated
Articles of
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Incorporation do not prohibit transfers that would result in the Company's being
ineligible to engage in coastwise trade.
In addition to the foregoing, Section 9 of the Shipping Act provides that a
controlling interest in the Company may not be acquired by a non-U.S. citizen
without the consent of the U.S. Secretary of Transportation, acting through the
United States Maritime Administration ("MARAD"). Notwithstanding the provisions
of Section 9, current MARAD regulations authorize the transfer of a controlling
interest in a company as long as the United States is not at war, the transferee
is not a national of a country to which the transfer would be contrary to the
foreign policy of the United States and the Company's U.S. flag vessels remain
documented under the U.S. flag after the transfer. In the absence of MARAD
consent (either by the current regulations or otherwise) the transfer of a
controlling interest in the Company to non-U.S. citizens would enable MARAD to
exercise various remedies under the Shipping Act including seizure of vessels,
civil penalties and, in certain cases, criminal penalties.
Certificates representing the capital stock of the Company bear legends
concerning the restrictions on non-U.S. ownership. In addition, the Board of
Directors is authorized to adopt a bylaw provision for the establishment of a
dual stock certificate systems under which different forms of certificates may
be used to indicate whether or not the owner thereof is a U.S. citizen. To date,
the Board of Directors has not deemed it necessary to adopt such a system.
The restrictions imposed by the Company's Restated Articles of
Incorporation may at times preclude U.S. citizens from transferring their shares
of Common Stock to non-U.S. citizens. This may restrict the available market for
resales of shares of Common Stock and for the issuance of shares by the Company.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Common Stock. Warrants
may be issued independently or together with Debt Securities, Preferred Stock or
Common Stock offered by any Prospectus Supplement and may be attached to or
separate from any such offered Securities. Each series of Warrants will be
issued under a separate warrant agreement (a "Warrant Agreement") to be entered
into between the Company and a bank or trust company, as warrant agent (the
"Warrant Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Warrants. The Warrant Agent will act solely as an agent of
the Company in connection with the Warrants and will not assume any obligation
or relationship of agency or trust for or with any holders of Warrants or
beneficial owners of Warrants. The following summary of certain provisions of
the Warrants does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all provisions of the Warrant Agreements.
Reference is made to the Prospectus Supplement relating to the particular
issue of Warrants offered thereby for the terms of such Warrants, including,
where applicable: (i) the number of shares of Common Stock purchasable upon the
exercise of Warrants and the price at which such number of shares of Common
Stock may be purchased upon such exercise; (ii) the date on which the right to
exercise such Warrants shall commence and the date on which such right shall
expire (the "Expiration Date"); (iii) United States Federal income tax
consequences applicable to such Warrants; and (iv) any other terms of such
Warrants. Warrants will be offered and exercisable for U.S. dollars only.
Warrants will be issued in registered form only. The exercise price for Warrants
will be subject to adjustment in accordance with the applicable Prospectus
Supplement.
Each Warrant will entitle the holder thereof to purchase such number of
shares of Common Stock at such exercise price as shall in each case be set forth
in, or calculable from, the Prospectus Supplement relating to the Warrants,
which exercise price may be subject to adjustment upon the occurrence of certain
events as set forth in such Prospectus Supplement. After the close of business
on the Expiration Date (or such later date to which such Expiration Date may be
extended by the Company), unexercised Warrants will become void. The place or
places where, and the manner in which, Warrants may be exercised shall be
specified in the Prospectus Supplement relating to such Warrants.
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Prior to the exercise of any Warrants, holders of such Warrants will not
have any of the rights of holders of Common Stock purchasable upon such
exercise, including the right to receive payments of dividends, if any, on the
Common Stock purchasable upon such exercise, or to exercise any applicable right
to vote.
PLAN OF DISTRIBUTION
GENERAL
The Company may sell Securities to or through underwriters or dealers, and
also may sell Securities directly to one or more other purchasers or through
agents. The Prospectus Supplement will set forth the names of any underwriters
or agents involved in the sale of the Offered Securities and any applicable
commissions or discounts.
Underwriters, dealers or agents may offer and sell the Offered Securities
at a fixed price or prices, which may be changed, or from time to time at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the sale of the
Securities, underwriters or agents may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of the Securities for whom they may act
as agent. Underwriters or agents may sell the Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters or commissions from the purchasers for whom
they may act as agent.
The Securities (other than the Common Stock), when first issued, will have
no established trading market. Any underwriters or agents to or through whom
Securities are sold by the Company for public offering and sale may make a
market in such Securities, but such underwriters or agents will not be obligated
to do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any such
Securities.
Any underwriters, dealers or agents participating in the distribution of
the Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Securities may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended (the "1933 Act"). Underwriters, dealers or
agents may be entitled, under agreements entered into with the Company, to
indemnification against or contribution toward certain civil liabilities,
including liabilities under the 1933 Act.
LEGAL MATTERS
Unless otherwise specified in a Prospectus Supplement relating to
particular Securities, certain legal matters with respect to the validity of the
Securities will be passed upon for the Company by Vinson & Elkins L.L.P.,
Houston, Texas.
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EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, have been incorporated by reference herein and
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of such firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 1998 and 1997, incorporated by reference herein, the independent
certified public accountants have reported that they applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate reports included in the Company's quarterly reports on
Form 10-Q for the quarter ended March 31, 1998, and incorporated by reference
herein, states that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their report on the
unaudited interim financial information because that report is not a "report" or
a "part" of the Registration Statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the Securities Act.
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