<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
<TABLE>
<S> <C> <C> <C>
BJ SERVICES COMPANY DELAWARE 1389 63-0084140
BJ SERVICES COMPANY, U.S.A. DELAWARE 1389 76-0310419
BJ SERVICE INTERNATIONAL, INC. DELAWARE 1389 95-2902194
BJ SERVICES COMPANY MIDDLE EAST DELAWARE 1389 76-0344390
(Exact name of Registrant as (State or other (Primary Standard (I.R.S. Employer
specified in its charter) jurisdiction of incorporation Industrial Classification Identification
or organization) Code Number) Number)
</TABLE>
------------------------------------
<TABLE>
<S> <C>
5500 NORTHWEST CENTRAL DRIVE MARGARET BARRETT SHANNON, ESQ.
HOUSTON, TEXAS 77092 VICE PRESIDENT -- GENERAL COUNSEL
(713) 462-4239 5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
(Address, including zip code, (713) 462-4239
and telephone number, including area code,
of Registrant's Principal Executive Offices) (Name, address, including zip code, and
telephone number,
including area code, of agent for service)
</TABLE>
------------------------------------
COPIES TO:
ANDREWS & KURTH L.L.P.
4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002
ROBERT V. JEWELL, ESQ.
(713) 220-4200
------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT TO PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE (1) FEE(1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7% Series B Notes due 2006....... $125,000,000 100% $125,000,000 $43,104
- ------------------------------------------------------------------------------------------------------
Subsidiary Guarantees............ -- -- -- (2)
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated in accordance with Rule 457(f)(2). For purposes of this
calculation, the Offering Price per Series B Note was assumed to be the
stated principal amount of each Series A Note that may be received by the
Registrant in the exchange transaction in which the Series B Notes will be
offered.
(2) Each registrant other than BJ Services Company is a subsidiary of BJ
Services Company and is guaranteeing payment of the Notes. Pursuant to Rule
457(n) under the Securities Act of 1933, no registration fee is required
with respect to these guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
BJ SERVICES COMPANY
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- ------------------------------------------------------ -------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................. Front cover page
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside front cover page; "Available
Information"; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information.......................... Summary
4. Terms of the Transaction......................... "Summary"; "The Exchange Offer";
"Description of the Notes"
5. Pro Forma Financial Information.................. Not applicable
6. Material Contacts with the Company Being
Acquired....................................... Not applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be
Underwriters................................... Not applicable
8. Interests of Named Experts and Counsel........... Not applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not applicable
10. Information with Respect to S-3 Registrants...... "Incorporation of Certain Documents
by Reference"
11. Incorporation of Certain Information by
Reference...................................... "Incorporation of Certain Documents
by Reference"
12. Information with Respect to S-2 or S-3
Registrants.................................... Not applicable
13. Incorporation of Certain Information by
Reference...................................... Not applicable
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants.................... Not applicable
15. Information with Respect to S-3 Companies........ Not applicable
16. Information with Respect to S-2 or S-3
Companies...................................... Not applicable
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies........................... Not applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited............. Not applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer................................. "Incorporation of Certain Documents
by Reference"; "Management"
</TABLE>
- ---------------
*Not Applicable
(i)
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED APRIL , 1996
PROSPECTUS
BJ SERVICES COMPANY
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 7% SERIES B NOTES DUE 2006
FOR EACH $1,000 PRINCIPAL AMOUNT OF OUTSTANDING
7% SERIES A NOTES DUE 2006
($125,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)
------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED
------------------------------
BJ Services Company, a Delaware corporation (as used below, the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal, to exchange $1,000
principal amount of its 7% Series B Notes due 2006 (the "Exchange Notes"), in a
transaction registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for each $1,000 principal amount of
the outstanding 7% Series A Notes due 2006 (the "Existing Notes"), of which
$125,000,000 aggregate principal amount is outstanding (the "Exchange Offer").
The Exchange Notes and the Existing Notes are sometimes referred to herein
collectively as the "Notes."
The Company will accept for exchange any and all Existing Notes that are
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the date the Exchange Offer expires, which will be , 1996 unless the
Exchange Offer is extended (the "Expiration Date"). Tenders of Existing Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange offer is not conditioned upon any minimum
principal amount of Existing Notes being tendered for exchange. However, the
Exchange Offer is subject to certain conditions that may be waived by the
Company and to the terms and provisions of the Registration Rights Agreement (as
defined herein). See "The Exchange Offer." Existing Notes may be tendered only
in denominations of $1,000 and integral multiples thereof. The Company has
agreed to pay the expenses of the Exchange Offer.
The Exchange Notes will be obligations of the Company entitled to the
benefits of the Indenture (as defined herein) relating to the Existing Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Existing Notes except that the Exchange Notes will
be issued in a transaction registered under the Securities Act. The holders of
Existing Notes will continue to be subject to the existing restrictions on
transfer thereof and, as a general matter, the Company will not have any further
obligation to such holders to provide for registration under the Securities Act
of the Existing Notes held by them. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered and tendered but unaccepted Existing Notes could be adversely
affected. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer."
The Existing Notes were sold by the Company on February 20, 1996, to
Merrill Lynch & Co., CS First Boston, BA Securities, Inc. and Chase Securities,
Inc. (the "Initial Purchasers") in transactions not registered under the
Securities Act in reliance upon the exemption provided in Section 4(2) of the
Securities Act. The Initial Purchasers subsequently placed the Existing Notes
with qualified institutional buyers in reliance upon Rule 144A under the
Securities Act. Accordingly, the Existing Notes may not be reoffered, resold or
otherwise transferred in the United States unless such transaction is registered
under the Securities Act or an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereby in order to satisfy the obligations of the Company under the
Registration Rights Agreement. (continued on next page)
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.
------------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
The Exchange Notes will bear interest from February 20, 1996, the date of
issuance of the Existing Notes that are tendered in exchange for the Exchange
Notes (or the most recent date on which interest was paid or duly provided for
on the Existing Notes surrendered in exchange for the Exchange Notes).
Accordingly, holders of Existing Notes that are accepted for exchange will not
receive interest that is accrued but unpaid on such Existing Notes at the time
of tender. The Notes will mature on February 1, 2006 and will not be redeemable
prior to maturity.
Existing Notes were initially represented by a single, global Existing Note
(the "Existing Global Note") in registered form, registered in the name of Cede
& Co., as nominee for The Depository Trust Company ("DTC" or the "Depositary"),
as depositary. The Exchange Notes exchanged for Existing Notes represented by
the Existing Global Note will be represented by a single, global Exchange Note
(the "Exchange Global Note") in registered form, registered in the name of the
Depositary. See "Description of Notes -- Book-Entry, Delivery and Form." Subject
to certain conditions, any person having a beneficial interest in the Exchange
Global Note may, upon request to the Trustee (as defined herein), exchange such
interest for Exchange Notes in definitive form, in denominations of $1,000 and
integral multiples thereof. See "Description of Notes -- Certificated
Securities."
The Existing Notes are, and the Exchange Notes will be, senior unsecured
obligations of the Company ranking pari passu in right of payment with all other
senior unsecured indebtedness of the Company and senior in right of payment to
all existing and future subordinated indebtedness of the Company. The Company's
obligations under the Exchange Notes will be unconditionally guaranteed by
certain of its subsidiaries so that the Exchange Notes will not be structurally
subordinated to the Company's obligations under its bank credit facility or any
other funded indebtedness of the Company that is guaranteed, from time to time,
by subsidiaries of the Company. The indenture relating to the Notes provides for
the release and addition of subsidiaries of the Company as Guarantors. The
guarantee of the Notes by any subsidiary may be released if, but only so long
as, no other funded indebtedness of the Company is guaranteed by such
subsidiary. See "Capitalization" and "Description of Notes -- The Guarantors."
The Indenture contains covenants that limit the Company's ability to incur
indebtedness secured by certain liens and to engage in certain sale/leaseback
transactions.
Based on an interpretation of the Securities and Exchange Commission (the
"Commission"), Exchange Notes issued pursuant to this Exchange Offer in exchange
for Existing Notes may be offered for resale, resold and otherwise transferred
by a holder thereof (other than (i) a broker-dealer who purchased such Existing
Notes directly from the Company for resale pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company or any Guarantor (within the meaning of Rule 405 of
the Securities Act)), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the Exchange Notes in its ordinary course of business and is not participating,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Existing Notes wishing to accept
the Exchange Offer must represent to the Company that such conditions have been
met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the consummation of the Exchange Offer, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
Prior to this Exchange Offer, there has been no public market for the
Existing Notes or the Exchange Notes. The Company intends to apply for the
listing of the Exchange Notes on the New York Stock Exchange ("NYSE"). There can
be no assurance that an active market for the Exchange Notes will develop. To
the
2
<PAGE> 5
extent that a market for the Exchange Notes does develop, future trading prices
of the Exchange Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities and other factors, including the financial
condition of the Company. The Exchange Notes may trade at a discount from their
principal amount.
Although the Initial Purchasers have informed the Company that, following
completion of the Exchange Offer, they each currently intend to make a market in
the Exchange Notes, they are not obligated to do so and any market-making
activities with respect to the Exchange Notes may be discontinued at any time
without notice. The Company will not receive any proceeds from the Exchange
Offer. No dealer-manager is being used in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
3
<PAGE> 6
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Exchange Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission and to which reference is hereby made. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act") and, in accordance therewith, files reports,
proxy statements and other information with the Commission. All such information
and items or information omitted from this Prospectus but contained or
incorporated by reference in the Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Copies of such material
may also be obtained at prescribed rates from the Public Reference Section of
the Commission at its principal office at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and such information may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. In addition, the
Company's common stock, par value $.10 per share (including the associated
preferred share purchase rights), warrants to purchase common stock and 12 7/8%
Senior Notes due 2002 are listed for trading on the NYSE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents (File
No. 1-10570):
(a) Annual Report on Form 10-K for the fiscal year ended September 30,
1995;
(b) Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1995;
(c) Current Report on Form 8-K filed April 28, 1995, as amended by
Form 8-K/A filed May 31, 1995, and Current Report on Form 8-K filed
February 6, 1996;
(d) The sections of the Company's Proxy Statement for the January 25,
1996 Annual Meeting of Stockholders entitled "Voting Securities," "Election
of Directors," "Executive Compensation -- Summary Compensation Table,"
"-- Option/SAR Grants in Last Fiscal Year," "-- Aggregated Option/SAR
Exercises in Last Fiscal Year and FY-End Option/SAR Values," "-- Long-Term
Incentive Plans -- Awards in Last Fiscal Year" and "Severance Agreements";
and
(e) 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 hereof
and prior to termination of the offering made hereby.
Any statement contained herein or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented
4
<PAGE> 7
or otherwise modified from time to time. Statements contained in this Prospectus
as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document, copies of which are available from the Company as
described below, each such statement being qualified in all respects by such
reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM BJ
SERVICES COMPANY, 5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS 77092, ATTENTION:
CORPORATE COMMUNICATIONS MANAGER, TELEPHONE NUMBER (713) 462-4239. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1996. The Company undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference herein, other than the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates. Written or oral requests for such
copies should be directed to the address set forth above.
5
<PAGE> 8
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and does not purport to be complete. Reference is made to, and
this Summary is qualified in its entirety by and should be read in conjunction
with, the more detailed information contained elsewhere herein or incorporated
by reference in this Prospectus. Unless otherwise defined herein, capitalized
terms used in this Summary have the respective meanings ascribed to them
elsewhere in this Prospectus or in the indenture with respect to the Notes (the
"Indenture"). References in this Prospectus to "BJ Services" and the "Company,"
unless the context requires otherwise, are to BJ Services Company and its
subsidiaries, which include former subsidiaries of The Western Company of North
America ("Western") following the acquisition of Western by BJ Services on April
13, 1995 (the "Western Acquisition"). In references to the issuer of the Notes,
the "Company" means BJ Services Company. Financial and other information
included in this Prospectus for the year ended September 30, 1995 includes the
Western operations since April 1, 1995.
THE COMPANY
BJ Services is a leading provider of pressure pumping and other oilfield
services for the petroleum industry worldwide. Pressure pumping services offered
by BJ Services consist of cementing, well stimulation, sand control and coiled
tubing services used in the completion of new oil and natural gas wells and in
remedial work on existing wells, both onshore and offshore. These services are
provided through domestic and international locations to customers in most of
the major oil and natural gas producing regions of the United States, Latin
America, Europe, Southeast Asia, Africa and the Middle East. The Company
believes that it is the third largest provider of pressure pumping services
worldwide, with a particularly strong presence in the Alaskan North Slope, the
Gulf of Mexico, the North Sea, Indonesia and most of Latin America. The Company
believes that it is also one of the largest suppliers of casing and tubular
services in the U.K. North Sea and is continuing to expand these services in
Latin America, the Middle East and Southeast Asia. The Company provides
commissioning and leak detection services to offshore platforms and pipelines,
primarily in the United Kingdom, and also provides production and industrial
chemicals to the oil, gas, refining and petrochemical industries in the United
States.
On April 13, 1995, the Company completed the Western Acquisition for a
total purchase price of $511.4 million, which was paid approximately half in
cash and half in shares of the Company's common stock and warrants to purchase
common stock. The Western Acquisition provides the Company with a greater
"critical mass" with which to compete in both domestic and international markets
and the opportunity to realize significant consolidation benefits. The Western
Acquisition has increased the Company's existing total revenue base by
approximately 75% and has more than doubled the Company's existing domestic
revenue base. In addition, approximately $40 million in annual overhead and
redundant operating costs have been eliminated by combining the two companies.
During the year ended September 30, 1995, the Company generated approximately
39% of its revenue from cementing services, 47% from stimulation services and
14% from product and equipment sales and other oilfield services (37%, 48% and
15%, respectively, during the portion of the 1995 fiscal year since the Western
Acquisition). Over the same period, the Company generated approximately 55% of
its revenue from domestic operations and 45% from international operations (60%
and 40%, respectively, since the Western Acquisition).
The Company's capital spending and expansion efforts (other than the
Western Acquisition) have been primarily focused outside of the United States.
Recently, these expansion efforts have included: (i) the expansion of pumping
services into several key international oil and gas markets, including Saudi
Arabia, Qatar and Vietnam; (ii) the expansion of tubular services and
commissioning and leak detection services into geographic regions outside of the
North Sea; (iii) the addition of pumping service capacity in certain important
Latin American markets, including Argentina and Venezuela and (iv) certain
strategic international acquisitions. The management of BJ Services continues to
believe that opportunities exist for geographic and service line expansions in
international markets.
The Company's principal executive offices are located at 5500 Northwest
Central Drive, Houston, Texas 77092, and its telephone number is (713) 462-4239.
6
<PAGE> 9
SUMMARY OF TERMS OF EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $125,000,000 aggregate
principal amount of Exchange Notes for up to an equal aggregate principal amount
of Existing Notes. The Exchange Notes will be obligations of the Company
entitled to the benefits of the Indenture. The form and terms of the Exchange
Notes are identical in all material respects to the form and terms of the
Existing Notes, except that the offering of the Exchange Notes has been
registered under the Securities Act and, therefore, the Exchange Notes are not
entitled to the benefits of the Registration Rights Agreement and provisions
relating to the contingent increases in the interest rates provided for under
certain circumstances pursuant thereto. See "Description of the Notes."
THE EXCHANGE OFFER............ $1,000 principal amount of Exchange Notes will
be issued in exchange for each $1,000 principal
amount of Existing Notes validly tendered and
accepted pursuant to the Exchange Offer. As of
the date hereof, $125,000,000 in aggregate
principal amount of Existing Notes are
outstanding. The Company will issue the
Exchange Notes to tendering holders of Existing
Notes promptly following the Expiration Date.
RESALE........................ Based on existing interpretations of the
Securities Act by the staff of the Commission
set forth in several no-action letters to third
parties, and subject to the immediately
following sentence, the Company believes that
the Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale,
resold and otherwise transferred by the holders
thereof (other than holders who are
broker-dealers) without further compliance with
the registration and prospectus delivery
provisions of the Securities Act. However, any
purchaser of Notes who is an affiliate of the
Company or who intends to participate in the
Exchange Offer for the purpose of distributing
the Exchange Notes, or any broker-dealer who
purchased the Notes from the Company to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act, (i) will
not be able to rely on the interpretations by
the staff of the Commission set forth in the
above-mentioned no-action letters, (ii) will
not be able to tender its Notes in the Exchange
Offer and (iii) must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any sale or transfer of the
Notes unless such sale or transfer is made
pursuant to an exemption from such
requirements. The Company does not intend to
seek its own no-action letter and there is no
assurance that the staff of the Commission
would make a similar determination with respect
to the Exchange Notes as it has in such
no-action letters to third parties. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "Plan of Distribution."
EXPIRATION DATE............... 5:00 p.m., New York City time, on ,
1996, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
EXISTING NOTES................ The Exchange Notes will bear interest from
February 20, 1996, the date of issuance of the
Existing Notes that are tendered in exchange
for the Exchange Notes (or the most recent date
on
7
<PAGE> 10
which interest was paid or duly provided for on
the Existing Notes surrendered in exchange for
the Exchange Notes). Accordingly, holders of
Existing Notes that are accepted for exchange
will not receive interest that is accrued but
unpaid on such Existing Notes at the time of
tender. Interest on the Exchange Notes will be
payable semi-annually on each February 1 and
August 1, commencing on the first such date
following their date of issuance. See "The
Exchange Offer Interest on the Exchange Notes."
TERMINATION OF THE EXCHANGE
OFFER......................... The Company may terminate the Exchange Offer if
it determines that its ability to proceed with
the Exchange Offer could be materially impaired
due to the occurrence of certain conditions.
The Company does not expect any of the
foregoing conditions to occur, although there
can be no assurance that such conditions will
not occur. Holders of Existing Notes will have
certain rights against the Company under the
Registration Rights Agreement should the
Company fail to consummate the Exchange Offer.
See "The Exchange Offer -- Termination" and
"Description of the Notes -- Registration
Rights Agreement."
PROCEDURES FOR TENDERING
EXISTING NOTES................ Each holder of Existing Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Existing
Notes to be exchanged and any other required
documentation to Bank of Montreal Trust
Company, as Exchange Agent, at the address set
forth herein and therein or effect a tender of
Existing Notes pursuant to the procedures for
book-entry transfer as provided for herein and
therein. By executing the Letter of
Transmittal, each holder will represent to the
Company that, among other things, the Exchange
Notes pursuant to the Exchange Offer are being
acquired in the ordinary course of business of
the person receiving such Exchange Notes,
whether or not such person is the holder, that
neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of
such Exchange Notes and neither the holder nor
any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act,
of the Company or any Guarantor. Following the
consummation of the Exchange Offer, holders of
Existing Notes not tendered as a general matter
will not have any further registration rights,
and the Existing Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for
the Existing Notes could be adversely affected.
See "The Exchange Offer -- Procedures for
Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. Any beneficial owner whose Existing Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender
on his behalf. If such beneficial owner wishes
to tender on his own behalf, such beneficial
owner must, prior to
8
<PAGE> 11
completing and executing the Letter of
Transmittal and delivering his Existing Notes,
either make appropriate arrangements to
register ownership of the Existing Notes in
such holder's name or obtain a properly
completed bond power from the registered holder
or endorsed certificates representing the
Existing Notes to be tendered. The transfer of
record ownership may take considerable time and
may not be able to be completed prior to the
Expiration Date. See "The Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Existing Notes who wish to tender
their Existing Notes and whose Existing Notes
are not immediately available, or who cannot
deliver their Existing Notes (or complete the
procedure for book-entry transfer) and deliver
a properly completed Letter of Transmittal and
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Existing Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
WITHDRAWAL RIGHTS............. Tenders of Existing Notes may be withdrawn at
any time prior to the Expiration Date by
furnishing a written or facsimile transmission
notice of withdrawal to the Exchange Agent
containing the information set forth in "The
Exchange Offer -- Withdrawal of Tenders."
ACCEPTANCE OF EXISTING NOTES
AND DELIVERY OF EXCHANGE
NOTES......................... Subject to certain conditions (as summarized
above in "Termination of the Exchange Offer"
and described more fully in "The Exchange
Offer -- Termination"), the Company will accept
for exchange any and all Existing Notes that
are properly tendered in the Exchange Offer
prior to the Expiration Date. See "The Exchange
Offer -- Procedures for Tendering." The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date.
EXCHANGE AGENT................ Bank of Montreal Trust Company, the Trustee
under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection with
the Exchange Offer. The mailing address of the
Exchange Agent and the address for deliveries
by overnight courier is Bank of Montreal Trust
Company, 77 Water Street, 4th Floor, New York,
New York 10005, and the address for hand
deliveries is Bank of Montreal Trust Company,
77 Water Street, 5th Floor Window, New York,
New York 10005. For assistance and requests for
additional copies of this Prospectus, the
Letter of Transmittal or the Notice of
Guaranteed Delivery, the telephone number for
the Exchange Agent is (212) 701-7653, and the
facsimile number for the Exchange Agent is
(212) 701-7684.
See "The Exchange Offer" for more detailed information concerning the terms of
the Exchange Offer.
9
<PAGE> 12
SUMMARY OF TERMS OF EXCHANGE NOTES
SECURITIES OFFERED............ $125,000,000 principal amount of 7% Series B
Notes.
MATURITY DATE................. February 1, 2006.
INTEREST PAYMENT DATES........ February 1 and August 1 of each year. The
August 1, 1996 interest payment (the first
interest payment date with respect to the
Exchange Notes) will include accrued but unpaid
interest from February 20, 1996.
REDEMPTION.................... The Notes are not redeemable prior to maturity.
RANKING AND GUARANTEES........ The Notes are senior unsecured indebtedness of
the Company and will rank pari passu in right
of payment with the Company's obligations under
the Bank Credit Facility and certain other
indebtedness and senior in right of payment to
all future indebtedness that is, by its terms,
expressly subordinated to the Notes. See
"Capitalization." The Company's obligations
under the Notes are unconditionally guaranteed
by certain of its subsidiaries so that the
Notes will not be structurally subordinated to
the Company's obligations under the Bank Credit
Facility or any other funded indebtedness of
the Company that is guaranteed, from time to
time, by subsidiaries of the Company. The
Indenture will provide for the release and
addition of subsidiaries of the Company as
guarantors and for the limitation of the
obligations of each guarantor under certain
circumstances. The guarantee of the Notes by
any subsidiary may be released if, but only so
long as, no other funded indebtedness of the
Company is guaranteed by such subsidiary. See
"Description of the Notes."
COVENANTS..................... The Indenture contains covenants that limit the
Company's ability to incur indebtedness secured
by certain liens and to engage in certain
sale/leaseback transactions. These limitations
are subject to certain qualifications and
exceptions. See "Description of the
Notes -- Certain Covenants."
USE OF PROCEEDS............... The Company will not receive any proceeds from
the Exchange Offer.
DENOMINATIONS................. The Exchange Notes will be issued in
denominations of $1,000 and any integral
multiple thereof.
ABSENCE OF MARKET FOR THE
NOTES......................... The Exchange Notes will be a new issue of
securities for which there currently is no
market. Although the initial Purchasers have
informed the Company that they each currently
intend to make a market in the Exchange Notes,
they are not obligated to do so, and any
market-making activities with respect to the
Exchange Notes may be discontinued at any time
without notice. The Company intends to apply
for the listing of the Exchange Notes on the
New York Stock Exchange ("NYSE"). There can be
no assurance that an active market for the
Exchange Notes will develop.
See "Description of the Notes" for more detailed information regarding the terms
of the Exchange Notes.
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<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data for the
Company and its subsidiaries as of and for the five years ended September 30,
1995 and as of and for the three-month periods ended December 31, 1995 and 1994.
The operations of Western and its subsidiaries are included since April 1, 1995.
The summary consolidated financial data have been derived from the Company's
consolidated financial statements. The financial information presented below as
of and for the three-month periods ended December 31, 1995 and 1994, reflects
all normal and recurring adjustments that, in the opinion of management, are
necessary for a fair presentation of the Company's consolidated results of
operations and financial position for such periods. The information shown for
the three-month periods is not necessarily indicative of full-year results. The
following data should be read in conjunction with the Company's consolidated
financial statements and notes thereto included herein. See "Consolidated
Financial Statements."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
-------------------- ----------------------------------------------------
1995(1) 1994 1995(1) 1994 1993 1992 1991
--------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 206,501 $119,415 $633,660 $434,476 $394,363 $330,028 $390,296
Operating expenses, excluding unusual
charges and goodwill amortization......... 187,602 111,710 592,905 414,493 373,934 316,305 358,475
Goodwill amortization....................... 1,342 289 3,266 1,298 691
Unusual charges(2).......................... 17,200 15,700
Operating income (loss)..................... 17,557 7,416 20,289 18,685 19,738 (1,977) 31,821
Interest expense............................ (5,538) (2,307) (15,164) (7,383) (5,414) (2,977) (3,135)
Other income -- net......................... 600 836 2,734 877 2,014 297 1,736
Income tax expense (benefit)................ 3,553 1,338 (1,102) 2,006 1,593 (3,657) 5,170
Income (loss) before cumulative effect of
accounting change......................... 9,145 4,744 9,889 10,770 14,561 (1,104) 24,422
Cumulative effect of change in accounting
principle, net of tax(3).................. (10,400)
Net income (loss)........................... 9,145 4,744 9,889 370 14,561 (1,104) 24,422
Net income (loss) per share................. $ .33 $ .30 $ .46 $ .02 $ .94 $ (.08) $ 1.88
OTHER DATA:
Depreciation and amortization(4)............ $ 14,371 $ 6,675 $ 42,064 $ 25,335 $ 24,170 $ 12,742 $ 14,497
Capital expenditures(5)..................... 10,408 6,093 30,966 39,345 37,350 26,197 34,588
Operating income before depreciation and
amortization and unusual charges(6)....... 31,928 14,091 79,553 44,020 43,908 26,465 46,318
Ratio of earnings to fixed charges(7)....... 2.75x 2.61x 1.37x 1.89x 2.76x 5.58x
FINANCIAL POSITION DATA (AT END OF PERIOD):
Property -- net............................. $ 414,792 $195,192 $416,810 $198,844 $183,962 $171,420 $134,139
Total assets................................ 1,002,098 411,172 989,683 410,066 369,531 328,799 265,686
Long-term debt, including current
maturities................................ 291,581 98,400 295,166 105,900 90,500 56,500 32,396
Stockholders' equity........................ 478,271 195,287 466,795 189,927 187,132 134,794 135,307
</TABLE>
- ---------------
(1) Includes the effect of the Western Acquisition, which was accounted for
as a purchase in accordance with generally accepted accounting principles.
(2) Unusual charges for the year ended September 30, 1995 represent
nonrecurring costs associated with the Western Acquisition, including a
non-cash charge for impairment of facilities (approximately $3.6 million)
and charges for severance of employees of BJ Services and other Western
Acquisition-related costs. Unusual charges for 1992, which primarily
represent a provision for restructuring the Company's North American
operations, include non-cash charges of approximately $10.6 million for
asset writedowns.
(3) In the year ended September 30, 1994, the Company changed its method of
accounting for postretirement benefits other than pensions.
(4) In October 1991, the Company revised the estimated salvage values and
remaining useful lives of certain of its U.S. pumping services equipment to
more closely reflect expected remaining lives. The effect of this change in
accounting estimate resulted in a decrease of $2.9 million, or $.22 per
share, in the Company's net loss for 1992.
(5) Excluding acquisitions of businesses.
11
<PAGE> 14
(6) Operating income before depreciation and amortization and unusual charges is
a supplemental financial measurement used by the Company in the evaluation
of its business and presented solely as a supplemental disclosure, and
should not be construed as an alternative to operating income or to cash
flows from operating activities, or any other measure of financial
performance presented in accordance with generally accepted accounting
principles.
(7) For the purpose of calculating this ratio, earnings consist of earnings
before income taxes and fixed charges. Fixed charges consist of interest
expense and capitalized interest and the portion of operating lease rental
expense that is representative of the interest factor (deemed to be
one-third of the lease rentals). For the year ended September 30, 1992,
earnings were inadequate to cover fixed charges by $4.4 million because of
the unusual charges.
RECENT DEVELOPMENTS
On April 1, 1996, the Company made an oral offer to Nowsco Well Service
Ltd.("Nowsco"), a well service company based in Calgary, Canada, to acquire all
of its outstanding common shares for a price per share of $27.00 in Canadian
dollars (approximately $19.88 per share in U.S. dollars at the exchange rate in
effect on April 3, 1996). At December 31, 1995, Nowsco had 20,806,546
outstanding common shares. For the fiscal year ended December 31, 1995, Nowsco
reported revenues of $480.1 million, operating income of $16.5 million and net
income of $16.2 million, or $.78 per share, in Canadian dollars. Nowsco's
operations are conducted in Canada, the United States, Europe, Africa, the
Middle East, Southeast Asia, Argentina, Australia, China and Russia and include
oil and gas pressure pumping, coiled tubing, commissioning and pipeline service
businesses. Nowsco announced that it has established a committee to evaluate the
Company's offer and other strategic alternatives available to Nowsco and its
shareholders. No assurance can be given that the Company will be successful in
its efforts to consummate a transaction with Nowsco or, if it is successful, on
what terms.
12
<PAGE> 15
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Existing Notes were sold by the Company on February 20, 1996, to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently placed the Existing Notes with qualified institutional buyers
("Qualified Institutional Buyers") in reliance on Rule 144A under the Securities
Act. As a condition to the purchase of the Existing Notes by the Initial
Purchasers, the Company and the Guarantors entered into a registration rights
agreement with the Initial Purchasers (the "Registration Rights Agreement"),
which requires, among other things, that promptly following the issuance and
sale of the Existing Notes, the Company and the Guarantors file with the
Commission the Registration Statement with respect to the Exchange Notes, use
their reasonable best efforts to cause the Registration Statement to become
effective under the Securities Act and, upon the effectiveness of the
Registration Statement, offer to the holders of the Existing Notes the
opportunity to exchange their Existing Notes for a like principal amount of
Exchange Notes, which will be issued without a restrictive legend and may be
reoffered and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
term "holder" with respect to the Exchange Offer means any person in whose name
Existing Notes are registered on the Company's books or any other person who has
obtained a properly completed bond power from the registered holder or any
person whose Existing Notes are held of record by the Depositary who desires to
deliver such Existing Notes by book-entry transfer of the Depositary.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the holders thereof (other than holders who are
broker-dealers) without further compliance with the registration and prospectus
delivery provisions of the Securities Act. However, any purchaser of Notes who
is an affiliate of the Company or who intends to participate in the Exchange
Offer for the purpose of distributing the Exchange Notes, or any broker-dealer
who purchased the Notes from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act, (i) will not be able to rely
on the interpretations by the staff of the Commission set forth in the
above-mentioned no-action letters, (ii) will not be able to tender its Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Notes unless such sale or transfer is made pursuant to an
exemption from such requirements. Any holder who tenders in the Exchange Offer
with the intention to participate, or for the purpose of participating, in a
distribution of the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
As a result of the filing and effectiveness of the Registration Statement
of which this Prospectus is a part, the Company and the Guarantors will not be
required to pay an increased interest rate on the Existing Notes. Following the
consummation of the Exchange Offer, holders of Existing Notes not tendered will
not have any further registration rights except in certain limited circumstances
requiring the filing of a Shelf Registration Statement (as defined herein), and
the Existing Notes will continue to be subject to certain restrictions on
transfer. See "Description of Notes -- Registration Rights Agreement."
Accordingly, the liquidity of the market for the Existing Notes could be
adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept all Existing Notes
properly tendered and not withdrawn prior to 5:00 p.m. New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Existing Notes
accepted in the Exchange Offer. Holders may tender some or all of their Existing
Notes pursuant to the Exchange Offer in denominations of $1,000 and integral
multiples thereof.
Each holder of the Notes (other than certain specified holders) who wishes
to exchange Notes for Exchange Notes in the Exchange Offer will be required to
represent that (i) it is not an affiliate of the
13
<PAGE> 16
Company or any Guarantor, (ii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) it has no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the date of the consummation of the
Exchange Offer, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Existing Notes except that the Exchange
Notes will be issued in a transaction registered under the Securities Act and
therefore will not bear legends restricting transfer thereof. The Exchange Notes
will evidence the same debt as the Existing Notes. The Exchange Notes will be
issued under and entitled to the benefits of the Indenture.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of the Existing Notes is outstanding. In connection with the issuance of the
Existing Notes, the Company arranged for the Existing Notes, which were
initially purchased by Qualified Institutional Buyers, to be issued and
transferable in book-entry form through the facilities of the Depositary, acting
as depositary. The Exchange Notes will also be issuable and transferable in
book-entry form through the Depositary.
This Prospectus, together with the accompanying Letter of Transmittal, is
initially being sent to all registered holders as of the close of business on
, 1996. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act, and the rules
and regulations of the Commission thereunder, including Rule 14e-1, to the
extent applicable. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Existing Notes being tendered, and holders of the
Existing Notes do not have any appraisal or dissenters' rights under the General
Corporation Law of the State of Delaware or under the Indenture in connection
with the Exchange Offer. The Company shall be deemed to have accepted validly
tendered Existing Notes when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. See "-- Exchange Agent." The Exchange
Agent will act as agent for the tendering holders for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Existing Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Existing Notes will be returned, at the
Company's cost, to the tendering holder thereof as promptly as practicable after
the Expiration Date.
Holders who tender Existing Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Existing Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
Exchange Offer. See "-- Solicitation of Tenders; Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended.
The Company expressly reserves the right, in its sole discretion (i) to
delay acceptance of any Existing Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Existing
14
<PAGE> 17
Notes not previously accepted, if any of the conditions set forth herein under
"-- Termination" shall have occurred and shall not have been waived by the
Company (if permitted to be waived by the Company), by giving oral or written
notice of such delay, extension or termination to the Exchange Agent and (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof by the Company to the registered
holders of the Existing Notes. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from February 20, 1996, the date of
issuance of the Existing Notes that are tendered in exchange for the Exchange
Notes (or the most recent date on which interest was paid or duly provided for
on the Existing Notes surrendered in exchange for the Exchange Notes).
Accordingly, holders of Existing Notes that are accepted for exchange will not
receive interest that is accrued but unpaid on such Existing Notes at the time
of tender. Interest on the Exchange Notes will be payable semi-annually on each
February 1 and August 1, commencing on the first such date following their date
of issuance.
PROCEDURES FOR TENDERING
Only a holder may tender its Existing Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal or a facsimile thereof, have the signatures thereof guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver such Letter
of Transmittal or such facsimile, together with the Existing Notes (unless such
tender is being effected pursuant to the procedure for book-entry transfer
described below) and any other required documents, to the Exchange Agent, prior
to 5:00 p.m. New York City time, on the Expiration Date.
Any financial institution that is a participant in the Depositary's
Book-Entry Transfer Facility system may make book-entry delivery of the Existing
Notes by causing the Depositary to transfer such Existing Notes into the
Exchange Agent's account in accordance with the Depositary's procedure for such
transfer. Although delivery of Existing Notes may be effected through book-entry
transfer into the Exchange Agent's account at the Depositary, the Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the Exchange Agent at its address set forth herein under "-- Exchange Agent"
prior to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF
DOCUMENTS TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder will constitute an agreement between such holder,
the Company and the Exchange Agent in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO THE COMPANY THAT,
AMONG OTHER THINGS, (1) THE EXCHANGE NOTES RECEIVED PURSUANT TO THE EXCHANGE
OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (2)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT OR UNDERSTANDING
WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION OF SUCH EXCHANGE NOTES, (3)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED IN
RULE 405 UNDER THE SECURITIES ACT, OF THE COMPANY OR ANY GUARANTOR, (4) THE
HOLDER IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF
THE
15
<PAGE> 18
EXCHANGE NOTES, AND (5) IF THE TENDERING HOLDER IS A BROKER OR DEALER (AS
DEFINED IN THE EXCHANGE ACT) (A) IT ACQUIRED THE EXISTING NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND
(B) IT HAS NOT ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH THE COMPANY,
ANY GUARANTOR OR ANY "AFFILIATE" OF THE COMPANY OR ANY GUARANTOR (WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT) TO DISTRIBUTE THE EXCHANGE NOTES
TO BE RECEIVED IN THE EXCHANGE OFFER. In the case of a broker-dealer that
receives Exchange Notes for its own account in exchange for Existing Notes which
were acquired by it as a result of market-making or other trading activities,
the Letter of Transmittal will also include an acknowledgment that the
broker-dealer will deliver a copy of this Prospectus in connection with the
resale by it of Exchange Notes received pursuant to the Exchange Offer. See
"Plan of Distribution."
The method of delivery of Existing Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent prior to the Expiration Date.
No Letter of Transmittal or Existing Notes should be sent to the Company.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for holders in each case
as set forth herein and in the Letter of Transmittal.
Any beneficial owner whose Existing Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Existing Notes, either
make appropriate arrangements to register ownership of the Existing Notes in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Existing
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" of the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If the Letter of Transmittal is signed by a person
other than the registered holder listed therein, such Existing Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Existing Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Existing
Notes. If the Letter of Transmittal or any Existing Notes or bond powers are
signed or endorsed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with such Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Existing Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Existing Notes not properly tendered or any Existing Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Existing Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Existing Notes, neither the
Company, the Exchange Agent nor any
16
<PAGE> 19
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Existing Notes nor shall any of them
incur any liability for failure to give such notification. Tenders of Existing
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Existing Notes received by the Exchange Agent that the
Company determines are not properly tendered or the tender of which is otherwise
rejected by the Company and as to which the defects or irregularities have not
been cured or waived by the Company will be returned by the Exchange Agent to
the tendering holder unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Existing Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "-- Termination," to
terminate the Exchange Offer and (b) to the extent permitted by applicable law,
purchase Existing Notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers may differ from the
terms of the Exchange Offer.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Existing Notes and (i) whose Existing
Notes are not immediately available, or (ii) who cannot deliver their Existing
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, or if such holder cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such holder's Existing Notes and the principal amount of such
Existing Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Existing Notes to be tendered in proper
form for transfer and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Existing Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at the Depositary of
Existing Notes delivered electronically) and all other documents required
by the Letter of Transmittal are received by the Exchange Agent within five
business days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Existing Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Existing Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Existing Notes or, in
the case of Existing Notes transferred by book-entry transfer, the name and
number of the account at the Depositary to be credited), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Existing Notes were tendered (including any required
signature guarantee) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Existing Notes to register the transfer
of such Existing Notes into the name of the Depositor withdrawing the tender and
(iv) specify the name in which any such Existing Notes are to be registered, if
17
<PAGE> 20
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Existing Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued with respect thereto unless the Existing Notes so withdrawn are validly
retendered. Any Existing Notes that have been tendered but are not accepted for
exchange will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Existing Notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange Exchange Notes for, any
Existing Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Existing Notes if, in the Company's judgment, the
Company's ability to proceed with the Exchange Offer can reasonably be expected
to be impaired as a result of certain events set forth in the Registration
Rights Agreement. Accordingly, the Exchange Offer is subject to the following
conditions: (i) that the Exchange Offer, or the making of any exchange by a
holder, does not violate applicable law or any applicable interpretation of the
staff of the Commission, (ii) that no action or proceeding shall have been
instituted or threatened in any court or by or before any governmental agency or
body with respect to the Exchange Offer, (iii) that there shall not have been
adopted or enacted any law, statute, rule or regulation that can reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer, (iv) that there shall not have been declared by United States federal or
Texas or New York state authorities a banking moratorium, (v) that trading on
the New York Stock Exchange or generally in the United States over-the-counter
market shall not have been suspended by order of the Commission or any other
governmental agency and (vi) other conditions reasonably acceptable to the
Initial Purchasers.
If the Company determines that it may terminate the Exchange Offer for any
of the reasons set forth above, the Company may (i) refuse to accept any
Existing Notes and return any Existing Notes that have been tendered to the
holders thereof, (ii) extend the Exchange Offer and retain all Existing Notes
tendered prior to the Expiration Date of the Exchange Offer, subject to the
rights of such holders of tendered Existing Notes to withdraw their tendered
Existing Notes or (iii) waive such termination event with respect to the
Exchange Offer and accept all properly tendered Existing Notes that have not
been withdrawn. If such waiver constitutes a material change in the Exchange
Offer, the Company will disclose such change by means of a supplement to this
Prospectus that will be distributed to each registered holder, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
period.
18
<PAGE> 21
EXCHANGE AGENT
Bank of Montreal Trust Company, the Trustee under the Indenture, has been
appointed as Exchange Agent for the Exchange Offer. In such capacity, the
Exchange Agent has no fiduciary duties and will be acting solely on the basis of
directions of the Company. Requests for assistance and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail or Overnight Courier: Bank of Montreal Trust Company
77 Water Street, 4th Floor
New York, New York 10005
By Hand Delivery: Bank of Montreal Trust Company
77 Water Street, 5th Floor Window
New York, New York 10005
Facsimile Transmission: (212) 701-7684
Confirm by Telephone: (212) 701-7653
</TABLE>
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation pursuant to the Exchange Offer
is being made by mail. Additional solicitations may be made by officers and
regular employees of the Company and its affiliates in person, by telegraph,
telephone or telecopier.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket costs and expenses
in connection therewith and will indemnify the Exchange Agent for all losses and
claims incurred by it as a result of the Exchange Offer. The Company may also
pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, Letters of Transmittal and related documents to the beneficial
owners of the Existing Notes and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees and printing costs, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Existing Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the
Existing Notes tendered, or if tendered Existing Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Existing
Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed by the Company directly to such tendering
holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Existing Notes, as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the consummation of the Exchange Offer. The
expenses of the Exchange Offer will be amortized by the Company over the term of
the Exchange Notes.
19
<PAGE> 22
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Exchange Notes for Existing Notes pursuant to the Exchange
Offer should not be treated as an "exchange" for United States federal income
tax purposes because the Exchange Notes should not be considered to differ
materially in kind or extent from the Existing Notes. Rather, the Exchange Notes
received by a United States holder should be treated as a continuation of the
Existing Notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to United States holders
exchanging Existing Notes for Exchange Notes pursuant to the Exchange Offer.
OTHER
Participation in the Exchange Offer is voluntary. Holders of the Existing
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Registration Rights Agreement. Holders of the Existing Notes who do not tender
their certificates in the Exchange Offer will continue to hold such certificates
and will be entitled to all the rights, and subject to the limitations
applicable thereto, under the Indenture, except for any such rights under the
Registration Rights Agreement that by their terms terminate or cease to have
further effect as a result of the making of this Exchange Offer. See
"Description of the Notes." All untendered Existing Notes will continue to be
subject to the restrictions on transfer set forth in the Indenture. To the
extent that Existing Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Existing Notes could be adversely affected.
The Company may in the future seek to acquire untendered Existing Notes in
the open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company intends to make any such acquisitions
of Existing Notes in accordance with the applicable requirements of the Exchange
and the rules and regulations of the Commission thereunder, including Rule
14e-1, to the extent applicable. The Company has no present plan to acquire any
Existing Notes that are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any Existing Notes that are not
tendered pursuant to the Exchange Offer.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Existing Notes in like principal amount, the terms of which are identical in all
material respects to the Exchange Notes except that the Exchange Notes will be
issued in a transaction registered under the Securities Act and hence will not
bear legends restricting the transfer thereof. The Existing Notes surrendered in
exchange for Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in a change in the
indebtedness of the Company.
RECENT DEVELOPMENTS
On April 1, 1996, the Company made an oral offer to Nowsco Well Service
Ltd.("Nowsco"), a well service company based in Calgary, Canada, to acquire all
of its outstanding common shares for a price per share of $27.00 in Canadian
dollars (approximately $19.88 per share in U.S. dollars at the exchange rate in
effect on April 3, 1996). At December 31, 1995, Nowsco had 20,806,546
outstanding common shares. For the fiscal year ended December 31, 1995, Nowsco
reported revenues of $480.1 million, operating income of $16.5 million and net
income of $16.2 million, or $.78 per share, in Canadian dollars. Nowsco's
operations are conducted in Canada, the United States, Europe, Africa, the
Middle East, Southeast Asia, Argentina, Australia, China and Russia and include
oil and gas pressure pumping, coiled tubing, commissioning and pipeline service
businesses. Nowsco announced that it has established a committee to evaluate the
Company's offer and other strategic alternatives available to Nowsco and its
shareholders. No assurance can be given that the Company will be successful in
its efforts to consummate a transaction with Nowsco or, if it is successful, on
what terms.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth the short-term borrowings and the
capitalization of the Company at December 31, 1995 and as adjusted to reflect
the issuance of the Existing Notes and the use of the net proceeds therefrom of
approximately $123 million.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings:.............................................. $ 8,281 $ 8,281
======== ========
Long-term debt:
7% Notes due 2006, net of discount............................... $ $ 124,238
12 7/8 Senior Notes due 2002...................................... 2,166 2,166
9.2% Notes due August 1998....................................... 18,000 18,000
Notes payable to banks............................................ 271,415 148,415
-------- --------
Total long-term debt, including current maturities............. 291,581 292,819
-------- --------
Stockholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized,
none issued....................................................
Common stock, $.10 par value; 80,000,000 shares authorized,
28,046,264 outstanding(1)...................................... 2,805 2,805
Capital in excess of par.......................................... 417,224 417,224
Retained earnings, less cumulative translation adjustment......... 58,242 58,242
-------- --------
Total stockholders' equity..................................... 478,271 478,271
-------- --------
Total capitalization................................................ $769,852 $ 771,090
======== ========
</TABLE>
- ---------------
(1) As of December 31, 1995, the Company had 4,792,402 outstanding warrants to
purchase common stock at an exercise price of $30.00 per share. In
addition, as of such date, 1,726,334 shares of common stock were reserved
for issuance pursuant to outstanding stock options and other outstanding
awards under the Company's employee benefit plans.
The funding for the cash portion of the consideration for the Western
Acquisition was provided through the Bank Credit Facility, a committed,
unsecured facility entered into in April 1995. The Bank Credit Facility
currently provides for a six-year term loan in an aggregate principal amount of
$225.0 million and a five-year revolving loan facility in an aggregate principal
amount at any one time outstanding of up to $175.0 million. The borrowers and
guarantors under the Bank Credit Facility are the Company and three of its
subsidiaries, BJ Services Company, U.S.A., BJ Service International, Inc. and BJ
Services Company Middle East. The subsidiary borrowers and guarantors of the
borrowings under the Bank Credit Facility are also guarantors of the Notes. As
of December 31, 1995, $271.0 million was outstanding at a weighted average rate
of 6.4% and an additional $125.0 million was available under the Bank Credit
Facility.
As of December 31, 1995, pursuant to certain note agreements entered into
in August 1991, the Company had $18.0 million aggregate principal amount
outstanding under its 9.2% Notes Due August 1, 1998 (the "9.2% Notes"). BJ
Services Company, U.S.A., BJ Service International, Inc. and BJ Services Company
Middle East are also borrowers under the 9.2% Notes. The principal amount of the
9.2% Notes is payable annually on August 1 in installments of $6.0 million until
maturity on August 1, 1998.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company's operations are primarily driven by the number of oil and gas
wells being drilled, the depth and drilling conditions of such wells, the number
of well completions and the level of workover activity worldwide. Drilling
activity, in turn, is largely dependent on the price of oil and natural gas.
This is especially true in the United States, where the Company generates
approximately 60% of its revenues after giving effect to the Western
Acquisition.
Due to weak energy prices and lower-cost sources of oil internationally,
drilling activity in the United States has declined more than 75% from its peak
in 1981. Record low drilling activity levels were experienced in 1986 and 1992.
As a result, pumping service companies have been unable to recapitalize their
aging United States fleets due to the inability, under current market
conditions, to generate adequate returns on new capital investments. The Company
believes it is important to operate with a greater critical mass in key U.S.
markets to improve returns in this environment. This conclusion led to the
decision to withdraw from certain low activity areas in the past several years
and to consolidate its remaining operations with those acquired in April 1995
from Western, which had a larger presence in the United States.
The rig count in the United States averaged 739 active drilling rigs during
fiscal 1995, a 6% and 2% decline, compared with 1994 and 1993, respectively, and
the second lowest count on record. The rig count in the United States averaged
765 active drilling rigs during the three months ended December 31, 1995, a 7%
decline compared with the prior year's first fiscal quarter. Much of the
activity decline was the result of a reduction in drilling for natural gas in
the central U.S.
While international drilling activity (excluding Canada) has historically
been less volatile than domestic drilling activity, the international active rig
count had declined in each of the last four years prior to fiscal 1995 due to
weak oil prices and economic and political instability in certain overseas
countries. The most significant declines in international drilling activity
occurred in the North Sea, Italy, Nigeria and Mexico. The activity decline has
leveled off somewhat with the active rig count for 1995 up slightly from 1994.
International drilling activity increased by 5% during the most recent quarter
compared with the prior year's first fiscal quarter on the strength of
development work in Latin America, especially Argentina and Venezuela, and
renewed exploration programs in the U.K. North Sea.
In both the U.S. and internationally, there has been a continuing trend by
oil and gas companies toward "alliances" with the service companies. These
alliances take various forms including packaged or integrated services, single
source suppliers and turnkey agreements. Approximately 20% of the Company's
revenues are generated under such alliances, or approximately $117 million of
the Company's revenues during 1995.
EXPANSIONS AND ACQUISITIONS
Management believes the primary opportunities for geographic and product
expansion remain in international markets. As a result, other than the Western
Acquisition, the Company's capital spending and expansion efforts have been
primarily focused outside of the United States. The Company's expansion efforts
during the past three years have included expanding pumping services into
several key international markets, including Saudi Arabia, Qatar and Vietnam;
expanding tubular services and commissioning and leak detection services into
geographic regions outside the North Sea; adding additional pumping service
capacity in key Latin American markets; and acquiring Norsk Bronnservice A/S
("NBS") in April 1993, Italog S.p.A. ("SIAT") in July 1993, the remaining 50%
ownership of its joint venture in Egypt in February 1994 and the remaining 60%
of the Company's Brazilian joint venture in December 1995.
On April 13, 1995, the Company completed the Western Acquisition for a
total purchase price of $511.4 million (including transaction costs of $7.2
million), which was paid approximately half in cash and half in shares of the
Company's common stock and warrants to purchase common stock. The Western
Acquisition provides the Company with a greater critical mass with which to
compete in domestic and international markets and the opportunity to realize
significant consolidation benefits. The Western Acquisi-
22
<PAGE> 25
tion has increased the Company's existing total revenue base by approximately
75% and has more than doubled the Company's domestic revenue base beginning in
the June 1995 quarter. In addition, approximately $40 million in overhead and
redundant operating costs have been eliminated annually by combining the two
companies.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
Revenue: Revenue increased by 73% during the quarter, primarily as a
result of the acquisition of Western and continued strong international
operations.
U.S. revenue more than doubled during the quarter as a result of adding the
former Western operations. On a pro forma basis, however, U.S. revenue declined
by 14%, primarily as a result of the significant activity reductions in natural
gas drilling activity, especially by independent operators in the Rocky Mountain
region, which comprised a significant portion of the former Western operations.
In addition, weather-related disruptions in the Gulf of Mexico resulted in the
loss of approximately 10 working days in that area. Management expects U.S.
natural gas drilling activity to remain weak during at least the next fiscal
quarter.
The Company's international operations continue to show significant
quarter-over-quarter revenue increases with a 25% increase from the prior year
(18% on a pro forma basis). This represents the twelfth consecutive quarter of
international revenue improvement. Each of the Company's international regions
and service lines experienced revenue increases during the quarter. Much of the
revenue improvement occurred in Latin America (up 46%) from strong activity
increases in Argentina as well as revenue increases in Venezuela and Colombia
from recent capital investments. Revenue from the Company's expansions into
Vietnam, Saudi Arabia and Brazil, combined with improving activity in the U.K.
and Nigeria, also contributed to the international revenue growth. Management
expects the year over year international revenue increases to continue over the
next several quarters, however, at a much lower growth rate. The Company
recently decided to "warm stack" a stimulation vessel acquired from Western, the
Renaissance. The vessel's hull will ultimately be liquidated with the proceeds
used to reduce outstanding debt, while the vessel's fracturing equipment will be
redeployed to more profitable opportunities. The Company believes that the
liquidation of the vessel, if consummated, will not have a material adverse
impact on the Company's operating results.
Operating Income: Operating income more than doubled as a result of the
revenue increase and higher operating margins resulting from efficiencies
derived from the combination of the Company's and former Western operations and
the continued growth of the Company's international operations. The cost of
sales and services as a percentage of revenue during the quarter was 2.5% lower
than the prior year's first quarter primarily as a result of cost reduction
efforts implemented after the acquisition of Western and the economies of scale
in having a larger U.S. operation. Other operating expenses, excluding goodwill
amortization, increased by 69% primarily as a result of additional overhead from
the former Western operations, along with increased marketing expenses related
to international expansions. Marketing expenses represent a higher percentage of
revenue than previously due to the higher concentration of the additional
revenues being in the U.S., which requires a relatively greater marketing
effort. The increase in goodwill amortization also resulted from the Western
Acquisition, which was accounted for under the purchase method of accounting.
Interest expense increased by $3.2 million from the prior year's first
quarter due to increased borrowings to fund the Western Acquisition. See
"Financial Condition -- Capital Resources and Liquidity for the Three Months
Ended December 31, 1995 and 1994." Other income was a net gain in both periods
primarily as a result of royalty income from one of the Company's proprietary
products.
The effective tax rate increased to 28% from 22% in the prior year's first
quarter primarily due to marginal tax rates on higher U.S. profitability.
23
<PAGE> 26
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1995, 1994 AND
1993
The following table sets forth selected key operating statistics reflecting
industry rig count and the Company's financial results:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Average active rigs:(1)
U.S. ........................................................ 739 784 755
International (excluding Canada)............................. 750 747 783
Revenue per rig (in thousands)................................. $425.6 $283.8 $256.4
Revenue per employee (in thousands)............................ $168.3 $160.4 $151.4
Percentage of gross profit to revenue(2)....................... 15.1% 13.1% 14.3%
Percentage of marketing expense to revenue..................... 4.2% 3.3% 3.3%
Percentage of general and administrative expense to revenue.... 4.5% 5.2% 5.8%
</TABLE>
- ---------------
(1) Industry estimate of average active rigs published by Baker Hughes
Incorporated.
(2) Gross profit represents revenue less cost of sales and services and research
and engineering expenses.
Revenue: Revenue increased by 10% in 1994 and 46% during 1995, the third
consecutive yearly increase. The increase in 1994 was driven primarily by the
Company's international expansion program and an increase in domestic natural
gas drilling and stimulation activity. In 1995, the increase was due primarily
to continued growth of the international expansion, increased activity in Latin
America and the Western Acquisition.
U.S. revenues increased by 6% and 67% in 1994 and 1995, respectively. The
1994 increase was due primarily to a 12% increase in the active rig count for
gas-related drilling, partially offset by a 4% decline in the rig count for
oil-related drilling. In addition, customer alliances contributed an additional
$14.5 million in revenues during the year. During the first six months of 1995
(prior to the Western Acquisition), the Company's revenues increased 5% over the
same period in 1994 due primarily to the increased placement of cementing units
and the addition of a stimulation vessel in the Gulf of Mexico. With the Western
Acquisition, the Company's U.S. revenues over the balance of the year more than
doubled, accounting for the remainder of the 67% increase for 1995.
In the last quarter of 1995, continued weak natural gas prices caused many
of the Company's customers to significantly curtail their drilling activity.
During this period, management believes it retained most of the key customers of
both the Company and Western. However, since the former Western operations were
more heavily concentrated in the natural gas regions of the United States, the
decline in natural gas drilling activity significantly impacted the Company's
operations. While pricing for the Company's U.S. pumping services remained
relatively stable during 1995, pricing remains depressed compared to levels
realized in the past. Management expects these competitive pricing conditions to
remain until a significant increase in drilling activity occurs.
International revenues increased by 14% and 27% during 1994 and 1995,
respectively. The increases were primarily attributable to three factors: (a)
continued geographic expansion of the Company's tubular services
andcommissioning and leak detection service lines, (b) significant increase in
Latin America business and (c) acquisitions. The tubular services and
commissioning and leak detection product lines have now been expanded into 13
countries, including parts of the Middle East, Africa, South America, Southeast
Asia and Australia. Most of the revenue growth in Latin America (up 36% and 46%
in 1994 and 1995, respectively) was a result of increased cementing and
stimulation activity with both private and national oil and gas companies in
Argentina and the addition of a stimulation vessel in 1994 and a coiled tubing
barge in 1995 to service the Lake Maracaibo, Venezuela market. The acquisitions
which contributed to the Company's revenue growth were NBS in April 1993, SIAT
in July 1993, the former Egypt joint venture in February 1994 and Western in
April 1995, which added international operations in Indonesia, Hungary and
Nigeria. These acquisitions
24
<PAGE> 27
added approximately $14 million and $30 million in international revenue during
1994 and 1995, respectively, compared with 1993.
Operating Income: Operating income decreased by $1.1 million in 1994 and
increased by $1.6 million in 1995. In 1994, the decrease was due primarily to
lower margins on the Company's North Sea stimulation business caused by lower
activity and pricing, and a decline in U.S. pricing. In 1995, the increase was
primarily due to the revenue increases described above, partially offset by a
$17.2 million unusual charge incurred in 1995. The unusual charge was taken in
conjunction with a consolidation program that is designed to improve
efficiencies and reduce costs resulting from the Western Acquisition. Included
in the unusual charge is an adjustment to the carrying value of duplicate
operating facilities, severance and related benefit costs, benefits due under
agreements covering the Company's executives which were triggered as a result of
the Western Acquisition, and legal and other costs that would not have been
incurred had the Western Acquisition not occurred.
The cost of sales and services as a percentage of revenue decreased to
83.0% in 1995 as compared to 84.9% and 83.4% in 1994 and 1993, respectively. The
increase from 1993 to 1994 was due primarily to a decline in U.S. pricing, which
negatively impacted margins by $5.5 million, and lower margins on the Company's
North Sea stimulation business caused by lower activity and pricing. The
reduction in 1995 was primarily as a result of cost reduction efforts
implemented after the Western Acquisition and the economies of scale by having a
larger U.S. operation.
Other operating expenses, excluding the unusual charge and goodwill
amortization, increased by 1% and 47% in 1994 and 1995, respectively. The 1994
increase was attributable to higher marketing expenses from international
expansion efforts and corporate marketing and alliance programs, partially
offset by lower research and engineering and general and administrative expenses
due to the Company's continued overhead reduction efforts. The 1995 increase was
primarily attributable to overhead from the former Western operations, along
with increased marketing expenses related to international expansions. Marketing
expenses are expected to increase as a percentage of sales due to the higher
concentration of Western's revenues earned in the United States, which requires
a relatively greater marketing effort. The increase in goodwill amortization
resulted from the aforementioned acquisitions, most significantly Western, which
will result in annual goodwill amortization expense of $4.4 million.
Other: Interest expense increased by $2.0 million and $7.8 million in 1994
and 1995, respectively. The 1994 increase resulted from higher interest rates
and increased borrowings to fund the Company's international expansions and
acquisitions. While interest rates continued to increase marginally during 1995,
the additional interest expense is primarily attributed to borrowings incurred
to finance the Western Acquisition. See "-- Financial Condition -- Capital
Resources and Liquidity for the Fiscal Years Ended September 30, 1995, 1994 and
1993" and Notes 4 and 5 of the Notes to Consolidated Financial Statements.
Other income was a net gain in both 1994 and 1995 due to nonrecurring gains
on asset sales and, in 1995, $1.4 million of royalty income from one of the
Company's proprietary products.
Primarily as a result of profitability in international jurisdictions where
the statutory rate is below the U.S. rate and the availability of tax benefits
from the Company's reorganization pursuant to its initial public offering in
1990, the Company's effective tax rate remained below the U.S. statutory rate
during 1995. Additionally, certain nonrecurring benefits have reduced the
Company's effective tax rate, including $1.3 million in 1993 resulting from a
change in the valuation reserve for net operating losses and from changes in tax
laws in the U.S. and other countries, $1.9 million in 1994 from a change in the
valuation reserve for net operating losses and $1.5 million in 1995 from the
favorable settlement of a tax audit and from tax losses attributable to foreign
exchange fluctuations in certain international jurisdictions.
Minority interest expense declined in both 1994 and 1995, as a result of
lower profitability of the Company's Southeast Asian joint ventures and losses
by the Company's Nigerian joint venture. Results in 1994 include a $16.0 million
($10.4 million after tax) charge for the cumulative effect of an accounting
change for retiree health benefits. See Note 9 of the Notes to Consolidated
Financial Statements.
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FINANCIAL CONDITION
Capital resources and liquidity: Net cash provided from operating
activities for the three months ended December 31, 1995 increased by $3.6
million from the prior year's first quarter. Higher profitability and
depreciation was partially offset by increased inventory levels from
international expansions and the payment of merger-related and various other
expenses previously accrued for. Cash flows from operating activities increased
to $26.3 million in 1994 and $39.4 in 1995 as compared to cash used in operating
activities of $.3 million in 1993. The 1994 improvement resulted primarily from
a smaller increase in both receivables and other current assets and liabilities
compared with 1993. In 1995, cash flows from operating activities increased
primarily as a result of higher profitability and higher noncash expenses during
the period.
Management strives to maintain low cash balances while utilizing available
credit facilities to meet the Company's capital needs. Excess cash generated is
used to pay down outstanding borrowings. In April 1995, the Company replaced its
existing credit facility with a committed, unsecured bank credit facility (the
"Bank Credit Facility") executed to accommodate the Western Acquisition. The
Bank Credit Facility consists of a five-year $175.0 million revolving credit
facility and a six-year $225.0 million term loan, providing an aggregate of
$400.0 million in available principal borrowings to the Company. At December 31,
1995, borrowings outstanding under the Bank Credit Facility amounted to $271.0
million consisting of $221.0 million under the term loan and $50.0 million
borrowed under the revolver. At December 31, 1995, principal reductions of term
loans under the Bank Credit Facility are due in aggregate installments of
$25,600,000; $31,200,000; $43,200,000; $48,400,000; $48,400,000 and $24,200,000
in the years ending September 30, 1996, 1997, 1998, 1999, 2000 and 2001,
respectively.
The outstanding balance of the Company's 9.2% Notes, issued in 1991, was
$18.0 million at December 31, 1995. Principal reductions of $6.0 million are
required annually each August until maturity on August 1, 1998.
The Company's interest-bearing debt represented 38.5% of its total
capitalization at December 31, 1995, a slight decrease from 38.9% at the
previous fiscal year-end. The Company's Bank Credit Facility and 9.2% Notes
contain various customary covenants, including the maintenance of certain
profitability and solvency ratios and restrictions on dividend payments.
Management believes that the Bank Credit Facility, combined with other
discretionary credit facilities and cash flow from operations, will provide the
Company with sufficient capital resources and liquidity to manage its routine
operations and fund projected capital expenditures.
At December 31, 1995, the Company had approximately $512 million of U.S.
tax net operating loss carryforwards expiring between 2000 and 2010. With the
Western Acquisition, the Company acquired approximately $375 million of tax net
operating loss carryforwards, subject to certain limitations, expiring between
2000 and 2008. Under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), the Company is required to record a
deferred tax asset for the future tax benefit of these tax net operating loss
carryforwards, as well as other items, if realization is "more likely than not."
As previously discussed, the Western Acquisition gives the Company a greater
critical mass with which to compete in the U.S. as it has more than doubled the
Company's U.S. revenue base. In addition, with the combination of the Company
and Western, the Company has realized significant consolidation benefits.
Management estimates that approximately $40 million of overhead and redundant
operating costs have been eliminated annually as a result of the combination of
the two companies. Management has concluded that the Company's future U.S.
taxable income will be sufficient over the remaining carryforward periods to
realize the tax benefits represented by approximately $332 million of tax net
operating loss carryforwards acquired with Western and generated by the
Company's operations prior to the Western Acquisition. The tax benefits
resulting from the Western Acquisition have been included in the approximately
$84 million net deferred tax asset recognized in the purchase price allocation
at the acquisition date. Valuation allowances have been established for the
benefits of the tax net operating loss carryforwards that are estimated to
expire prior to their utilization.
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Requirements for Capital: Excluding acquisitions, capital expenditures
during the three months ended December 31, 1995 were $10.4 million, or $4.3
million higher than the spending in the comparable quarter of the prior year.
The current quarter's spending related primarily to international expansion
opportunities, primarily in Latin America, and upgrades of the Company's
information systems. Other investing activities included the acquisition of the
remaining 60% interest in the Company's joint venture in Brazil for total
consideration of $5.4 million consisting of $3.7 million of cash and $1.7
million of debt assumed by the Company. Excluding acquisitions, capital
expenditures during 1995 were $31.0 million, or $8.4 million below 1994
spending. Spending for 1995 related primarily to offshore operations both in the
United States and abroad, and international growth opportunities, including
geographic expansions and expansions of services. The prior year's spending
included approximately $11 million for the construction of two offshore
stimulation vessels. Investing activities in the fiscal year ended September 30,
1995 included $5.4 million of proceeds from the sale of a duplicate facility and
other disposals of assets.
Capital expenditures for fiscal 1996 are projected to be approximately $45
million, excluding acquisitions, and are expected to include spending for
continued geographic expansions of all service lines, construction or upgrading
of at least two offshore vessels, additional capacity in certain high margin
locations and normal levels of replacement capital. The actual amount of fiscal
1996 capital expenditures will be primarily dependent upon the availability of
expansion opportunities and will be funded by cash flows from operating
activities and available credit facilities. Management believes cash flows from
operating activities and available lines of credit, if necessary, will be
sufficient to fund projected capital expenditures.
BUSINESS
GENERAL
The Company, whose operations trace back to the Byron Jackson Company
(which was founded in 1872), was organized in 1990 under the corporate laws of
the State of Delaware. The Company is a leading provider of pressure pumping and
other oilfield services serving the petroleum industry worldwide. The Company's
pressure pumping services consist of well stimulation, cementing, sand control
and coiled tubing services used in the completion of new oil and natural gas
wells and in remedial work on existing wells, both onshore and offshore. Other
oilfield services include casing and tubular services provided to the oil and
gas exploration and production industry, commissioning and leak detection
services provided to offshore platforms and pipelines, primarily in the United
Kingdom, and specialty chemical services.
On April 13, 1995, the Company completed the Western Acquisition for a
total purchase price of $511.4 million (including transaction costs of $7.2
million), which was paid approximately half in cash and half in shares of the
Company's common stock and warrants to purchase common stock. The Western
Acquisition provides the Company with a greater critical mass with which to
compete in both domestic and international markets and the opportunity to
realize significant consolidation benefits. The Western Acquisition has
increased the Company's existing total revenue base by approximately 75% and has
more than doubled the Company's existing domestic revenue base. In addition,
approximately $40 million in annual overhead and redundant operating costs have
been eliminated by combining the two companies. During the year ended September
30, 1995, the Company generated approximately 39% of its revenue from cementing
services, 47% from stimulation services and 14% from product and equipment sales
and other oilfield services (37%, 48% and 15%, respectively, during the portion
of the 1995 fiscal year since the Western Acquisition). Over the same period,
the Company generated approximately 55% of its revenue from domestic operations
and 45% from international operations (60% and 40%, respectively, since the
Western Acquisition).
CEMENTING SERVICES
The Company's cementing services, which accounted for approximately 39% of
the Company's total revenue during 1995 (37% since the Western Acquisition),
consist of blending cement and water with various solid and liquid additives to
create a slurry that is pumped into a well between the casing and the wellbore.
The additives and the properties of the slurry are designed to ensure the proper
pump time, compressive strength
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and fluid loss control, and vary depending upon the well depth, downhole
temperatures and pressures and formation characteristics.
The Company provides regional laboratory testing services to evaluate
slurry properties, which vary with cement supplier and local water properties.
Job design recommendations are developed by the Company's field engineers to
achieve desired porosity and bonding characteristics.
There are a number of specific applications for cementing services used in
oilfield operations. The principal application is the cementing between the
casing pipe and the wellbore during the drilling and completion phase of a well
("primary cementing"). Primary cementing is performed to (1) isolate fluids
behind the casing between productive formations and other formations which would
damage the productivity of hydrocarbon producing zones or damage the quality of
freshwater aquifers, (2) seal the casing from corrosive formation fluids and (3)
provide structural support for the casing string. Cementing services are also
utilized when recompleting wells from one producing zone to another and when
plugging and abandoning wells.
STIMULATION SERVICES
The Company's stimulation services, which accounted for approximately 47%
of the Company's total revenue during 1995 (48% since the Western Acquisition),
consist of hydraulic fracturing, acidizing, sand control, nitrogen and coiled
tubing services designed to improve the flow of oil and gas from producing
formations and are summarized as follows:
Fracturing. Fracturing is performed to enhance the production of oil and
gas from formations having such low permeability that the natural flow is
restricted. The fracturing process consists of pumping a fluid gel into a cased
well at sufficient pressure to "fracture" the formation. Sand, bauxite or
synthetic proppant which is suspended in the gel is pumped into the fracture to
prop it open. The size of a fracturing job is generally expressed in terms of
the pounds of proppant. The main pieces of equipment used in the fracturing
process are the blender, which blends the proppant and chemicals into the
fracturing fluid, and the pumping unit, which is capable of pumping significant
volumes at high pressures. The Company's fracturing pump units are capable of
pumping slurries at pressures of up to 14,000 pounds per square inch at rates of
up to four barrels per minute. In some cases, fracturing is performed by an acid
solution pumped under pressure without a proppant or with small amounts of
proppant.
An important element of fracturing services is the design of the fracturing
treatment, which includes determining the proper fracturing fluid, proppants and
injection program to maximize results. The Company's field engineering staff
provides technical evaluation and job design recommendations as an integral
element of its fracturing service for the customer. Technological developments
in the industry over the past three to four years have focused on proppant
concentration control (i.e., proppant density), liquid gel concentrate
capabilities, computer design and monitoring of jobs and cleanup properties for
fracturing fluids. Over the past decade, the Company has successfully introduced
equipment to respond to these technological advances. During 1991, the Company
introduced a patented, borate-based fracturing fluid, Spectra Frac G(R). During
1993, the Company introduced two additional fracturing fluids, Medallion FracSM
and Spartan FracSM. These fracturing fluids are now used in most of the
Company's fracturing treatments. During 1994, the Company commercialized a
proprietary enzyme chemistry used in conjunction with the three fracturing
fluids. These "enzyme breakers" can significantly enhance the production of oil
and gas in a wide range of wells.
Acidizing. Acidizing is performed to enhance the flow rate of oil and gas
from wells with reduced flow caused by formation damage due to drilling or
completion fluids, or the buildup over time of various materials that block the
formation. Acidizing entails pumping large volumes of specially formulated acids
into reservoirs to dissolve barriers and enlarge crevices in the formation,
thereby eliminating obstacles to the flow of oil and gas. The Company maintains
a fleet of mobile acid transport and pumping units to provide acidizing services
for the onshore market.
Sand Control. Sand control services involve the pumping of gravel to fill
the cavity created around the wellbore during drilling. The gravel provides a
filter for the exclusion of formation sand from the producing
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pathway. Oil and gas is then free to move through the gravel into the wellbore
to be produced. These services are primarily provided in the Gulf of Mexico, the
North Sea, Venezuela, Trinidad and Indonesia.
Nitrogen. There are a number of uses for nitrogen, an inert gas, in
pressure pumping operations. Used alone, it is effective in displacing fluids
during drill stem testing. However, nitrogen services are used principally in
applications which support the Company's cementing and fracturing services.
Coiled Tubing Services. Coiled tubing services involve the injection of
coiled tubing into wells to perform various applications and functions for use
principally in well-servicing operations. The application of coiled tubing to
drilling operations also has increased in recent years due to improvements in
coiled tubing technology. Coiled tubing is a flexible steel pipe with a diameter
of less than three inches manufactured in lengths of thousands of feet and wound
or coiled along a large reel on a truck or skid-mounted unit. Due to the small
diameter of coiled tubing, it can be inserted through production pipe and used
to perform workovers without using a larger, more costly workover rig. The other
principal advantages of employing coiled tubing in a workover include (i) not
having to "shut-in" the well during such operations, thereby allowing production
to continue and reducing the risk of formation damage to the well, (ii) the
ability to reel continuous coiled tubing in and out of a well significantly
faster than conventional pipe, which must be jointed and unjointed, (iii) the
ability to direct fluids into a wellbore with more precision, allowing for
localized stimulation treatments and providing a source of energy to power a
downhole motor or manipulate downhole tools and (iv) enhanced access to remote
or offshore fields due to the smaller size and mobility of a coiled tubing unit.
Recent technological improvements to coiled tubing have increased its
dependability and durability, expanding coiled tubing's potential uses and
markets.
The Company participates in the offshore stimulation market through the use
of skid-mounted pump units and through operation of several stimulation vessels
including the "Vestfonn" in the North Sea, the "Sea Hero," "Tad Tide" and "Jan
Tide" in the Gulf of Mexico and the "BJ003" and "BJ007" on Lake Maracaibo in
Venezuela. The Jan Tide and BJ003 were commissioned in the spring of 1994 and
the BJ007 in the summer of 1995. The Renaissance, formerly used as a stimulation
vessel in the North Sea, has been "warm stacked" and is proposed to be sold for
use other than as a stimulation vessel.
The Company believes that as production continues to decline in key
producing fields of the U.S. and certain international regions, the demand for
fracturing and stimulation services is likely to increase. The Company has
recently increased its pressure pumping capabilities in certain international
markets.
OTHER SERVICES
The Company's other services, including product and equipment sales for
cementing and stimulation services, as well as the following services, accounted
for approximately 14% of the Company's total revenue in 1995 (15% since the
Western Acquisition). Such products and equipment sales to customers are
generally made in the course of providing cementing and stimulation services to
certain customers and, other than the specialty chemical business, the Company
generally does not sell proprietary products to other companies involved in well
servicing.
Casing and Tubular Services. Casing services principally consist of
installing (or "running") pipe in a wellbore to protect the structural integrity
of the wellbore and to seal various zones in the well. These services are
primarily provided during the drilling and completion phases of a well. Tubular
services, which consist of running pipe inside the casing to improve the flow of
oil and gas, are principally provided during workovers. The Company expects that
workover activity and the demand for tubular services in the North Sea should
increase during at least the next several years as operators there attempt to
mitigate the decline in production from the North Sea's mature fields.
Commissioning and Leak Detection Services. Leak detection services,
provided through the Company's Comtec division, involve the inspection and
testing of the integrity of pipe connections in offshore drilling and production
platforms, onshore and offshore pipelines and industrial plants, and are
provided during the commissioning, decommissioning, installation or construction
stages of these infrastructures, as well as during routine maintenance checks.
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Specialty Chemical Services. Specialty chemical services, provided through
the Company's Unichem division acquired as part of Western, include corrosion
and scale inhibitors, as well as process chemicals and paraffin control for the
treatment of oil wells and for refining, gas processing plant and petrochemical
facility maintenance and flow improvement.
OPERATIONS
The Company's cementing and stimulation services are used in the completion
of new oil and gas wells and in remedial work on existing wells. These services
are provided through domestic and international locations to customers in most
of the major oil and natural gas producing regions of the United States, Latin
America, Europe, Southeast Asia, Africa and the Middle East. The Company
believes that it is the third largest provider of cementing and stimulation
services worldwide, with a particularly strong presence in the Alaskan North
Slope, the Gulf of Mexico, the North Sea, Indonesia and most of Latin America.
Cementing and stimulation services are provided to both land-based and offshore
customers on a 24-hour, on-call basis, through regional and district facilities
in over 70 locations worldwide, utilizing complex, truck- or skid-mounted
equipment designed and constructed for the particular service furnished. After
such equipment is moved to a well location, it is configured with appropriate
connections to perform the specific services required. The mobility of this
equipment permits the Company to provide cementing and stimulation services to
changing geographic areas. Management believes that the Company's cementing and
stimulation equipment is adequate to service both current and projected levels
of market activity in the near term.
The Company maintains a fleet of mobile cement blending and pumping
equipment for onshore operations. Offshore operations are performed with
skid-mounted cement pumping units. The Company has successfully utilized its
patented RAM (Recirculating Averaging Mixer) both for onshore applications and
as an offshore skid. In 1991, the Company introduced a sand control blender, the
Cyclone, which also has pressure pumping and fracturing applications. Responding
to its customers' monitoring needs, in 1992 the Company introduced its
computerized monitor which allows for real-time monitoring of the cementing
process.
Principal materials utilized in the cementing and stimulation business
include cement, fracturing proppants, acid and bulk chemical additives.
Generally, these items are available from several suppliers, and the Company
generally utilizes more than one supplier for each item. The Company also
produces certain of its specialized products through company-owned blending
facilities in Germany and Singapore. Sufficient material inventories are
maintained to allow the Company to provide on-call services to its customers to
whom the materials are resold in the course of providing cementing and
stimulation services. Repair parts and maintenance items for cementing and
stimulation equipment are carried in inventory to ensure continued operations
without significant downtime caused by parts shortages. The Company has not
experienced significant difficulty in obtaining necessary supplies of these
materials or replacing equipment parts and does not anticipate a shortage in the
foreseeable future.
The Company believes that coiled tubing and other materials utilized in
performing coiled tubing services are and will continue to be widely available
from a number of manufacturers. Although there are only two principal
manufacturers of the reels around which the coiled tubing is wrapped, the
Company is not aware of any difficulty in obtaining coiled tubing reels in the
past, and the Company anticipates no such difficulty in the future.
The Company's operations are subject to hazards inherent in the oil and gas
industry, such as fire, explosion, blowouts and oil spills, which can cause
personal injury or loss of life, damage to property, equipment, the environment
and marine life, and suspension of operations. In addition, claims for loss of
oil and gas production and damages to formations are incidental to the pressure
pumping business. The Company maintains insurance coverage that it believes to
be customary in the industry against these hazards and whenever possible obtains
agreements from customers providing indemnification against liability to others.
However, such insurance provides for substantial deductibles and premium
adjustments based on claims experience and excludes coverage for damages
resulting from breach of contract or based on alleged fraud or
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deceptive trade practices. Neither insurance nor indemnity agreements can
provide complete protection against casualty losses.
ENGINEERING AND SUPPORT SERVICES
The Company maintains a manufacturing and research and development center
near Houston, Texas. The Company's research and development organization is
divided into three distinct areas-Petroleum Engineering, Instrumentation
Engineering and Mechanical Engineering.
Petroleum Engineering. The Petroleum Engineering laboratory specializes in
designing fluids with enhanced performance characteristics in the fracturing,
acidizing and cementing operations (i.e., "frac fluids" and "cement slurries").
As fluids must perform under a wide range of downhole pressures, temperatures
and other conditions, this design process is a critical element in developing
products to meet customer needs.
In addition to fluids technology, the Company's Petroleum Engineering group
develops and supports a wide range of proprietary software utilized in the
monitoring of both cement and stimulation job parameters. This software,
combined with the Company's internally developed monitoring hardware, allows for
real-time job control as well as post-job analysis.
Instrumentation Engineering. The pumping services industry utilizes an
array of both monitoring and control instrumentation as an integral element of
providing cementing and stimulation services. The Company's monitoring and
control instrumentation, developed by its Instrumentation Engineering group,
complements its products and equipment and provides customers with desired
real-time monitoring of critical applications.
Mechanical Engineering. Though similarities exist between the major
competitors in the general design of their pumping equipment, the actual
engine/transmission configurations as well as the mixing and blending systems
differ significantly. Additionally, different approaches to the integrated
control systems result in equipment designs which are usually distinct in
performance characteristics for each competitor. The Company's Mechanical
Engineering group is responsible for the design and manufacturing of virtually
all of the Company's primary pumping and blending equipment. However, some
peripheral support equipment that is generic to the industry is purchased
externally. The Company's Mechanical Engineering group provides new product
design as well as support to the rebuilding and field maintenance functions.
MANUFACTURING
In addition to the engineering facility, the Company's technology and
research center houses its main equipment and instrumentation manufacturing
facility. This operation currently occupies approximately 65,000 square feet and
includes complete fabrication, engine and transmission rebuilding, pump
manufacturing and assembly capabilities. As a result of the Western Acquisition,
the Company acquired a research and engineering center located in The Woodlands,
north of Houston, Texas. The Company also has ancillary manufacturing facilities
in Singapore and Scotland. The Company employs outside vendors for some
fabrication but is not dependent on any one source.
COMPETITION
Pressure Pumping Services. The Company competes with larger pumping
service companies, in particular Halliburton Company ("Halliburton") and a
division of Schlumberger Limited ("Schlumberger"), in all areas of the U.S. in
which the Company participates and in most international regions. Several
smaller companies compete with the Company in certain areas of the U.S. and in
certain foreign countries. The principal methods of competition which apply to
the Company's business are its prices, service record and reputation in the
industry. While Halliburton and Schlumberger are significantly larger in terms
of overall revenues, the Company has a number one or a number two share position
in several pumping service markets, including many regions in the United States,
the North Sea and Latin America.
Other Services. The Company believes that it is one of the largest
suppliers of casing and tubular services in the U.K. North Sea and is expanding
such services in Latin America. The largest provider of casing
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and tubular services in Europe is Weatherford Enterra, Inc. In the U.K., casing
and tubular services are typically provided under long-term contracts which
limit the opportunities to compete for business until the end of the contract
term. In continental Europe, shorter-term contracts are typically available for
bid by the provider of casing and tubular services. The Company believes it and
is one of the largest suppliers of commissioning and leak detection services in
the U.K. North Sea. In specialty chemical services, there are several major
chemical suppliers significantly larger than the Company's Unichem division.
MARKETS AND CUSTOMERS
General. Demand for the Company's services and products depends primarily
upon the number of oil and gas wells being drilled, the depth and drilling
conditions of such wells, the number of well completions and the level of
workover activity worldwide.
The Company's principal customers consist of major and independent oil and
gas producing companies. During 1995, the Company provided oilfield services to
over 2,500 customers, none of which accounted for more than 5% of consolidated
revenues. While the loss of certain of the Company's largest customers could
have a material adverse effect on Company revenues and operating results in the
near term, management believes the Company would be able to obtain other
customers for its services in the event it lost any of its largest customers.
In both the U.S. and internationally, there has been a continuing trend by
oil and gas companies toward "alliances" with the service companies. These
alliances take various forms including packaged or integrated services, single
source suppliers and turnkey agreements. Approximately 20% of the Company's
revenues are generated under such alliances, or approximately $117 million of
the Company's revenues during 1995.
United States. The Company provides its pumping services to its U.S.
customers through a network of over 40 locations, a majority of which offer both
cementing and stimulation services. Demand for the Company's services in the
U.S. is primarily driven by oil and natural gas drilling activity, which is
affected by the current and anticipated prices of oil and natural gas. Due to
weak energy prices and lower-cost sources of oil internationally, drilling
activity in the U.S. has declined more than 75% from its peak in 1981. Record
low drilling activity levels were experienced in 1986 and 1992. As a result,
pumping service companies have been unable to recapitalize their aging U.S.
fleets due to the inability, under current market conditions, to generate
adequate returns on new capital investments. Management believes it is important
to operate with a greater critical mass in key U.S. markets to improve returns
in this environment. This conclusion led to the decision to withdraw from
certain low activity areas in the past several years and to consolidate the
Company's operations with those acquired from Western, which had a larger
presence in the U.S.
International. The Company operates in more than 30 countries in the major
international oil and natural gas producing areas of Latin America, Europe,
Africa, Southeast Asia and the Middle East. The Company generally provides
services to its international customers through wholly owned foreign
subsidiaries. Additionally, the Company holds certain controlling and minority
interests in joint venture companies, through which it conducts a portion of its
international operations. For geographic information, see Note 8 of the Notes to
Consolidated Financial Statements.
The international market is somewhat less volatile than the U.S. market
despite energy price fluctuations. Due to the significant investment and
complexity in international projects, management believes drilling decisions
relating to such projects tend to be evaluated and monitored with a longer-term
perspective with regard to oil and gas pricing. Additionally, the international
market is dominated by major oil companies and national oil companies which tend
to have different objectives and more operating flexibility than the typical
independent producer in the U.S. International activities have been increasingly
important to the Company's results of operations since 1992, when it implemented
a strategy to expand its international presence.
In general, the Company operates in those international markets where it
can achieve and maintain both a significant share position and an attractive
return on its investment. The Company's major international revenue and income
producing operations are in the North Sea in the European market; Indonesia and
Malaysia in the Southeast Asian market; and Argentina, Venezuela, Ecuador and
Colombia in the Latin
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American market. In Brazil, the Company recently completed the acquisition of
the 60% interest of its local joint venture partner. Foreign operations are
subject to special risks that can materially affect the sales and profits of the
Company, including currency exchange rate fluctuations, the impact of inflation,
governmental expropriation, exchange controls, political instability and other
risks.
EMPLOYEES
At September 30, 1995, the Company had a total of 4,777 employees.
Approximately 37% of the Company's employees are employed outside the United
States.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The Company's business is affected both directly and indirectly by
governmental regulations relating to the oil and gas industry in general, as
well as environmental and safety regulations which have specific application to
the Company's business.
The Company, through the routine course of providing its services, handles
and stores bulk quantities of hazardous materials. In addition, leak detection
services involve the inspection and testing of facilities for leaks of hazardous
or volatile substances. If leaks or spills of hazardous materials handled,
transported or stored by the Company occur, the Company may be responsible under
applicable environmental laws for costs of remediating damage to the surface,
sub-surface or aquifers incurred in connection with such occurrence.
Accordingly, the Company has implemented and continues to implement various
procedures for the handling and disposal of hazardous materials. Such procedures
are designed to minimize the occurrence of spills or leaks of these materials.
The Company has implemented and continues to implement various procedures
to further assure its compliance with environmental regulations. Such procedures
generally pertain to the operation of underground storage tanks, disposal of
empty chemical drums, improvement to acid and wastewater handling facilities and
cleaning of certain areas at the Company's facilities. The estimated cost for
such procedures, including other environmental investigations and remedial
actions, is approximately $14 million which will be distributed over a period of
several years, for which the Company has provided appropriate reserves. In
addition, the Company maintains insurance for certain environmental liabilities
which the Company believes is reasonable based on its knowledge of the industry.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund," imposes liability without regard to fault or the
legality of the original conduct, on certain classes of persons that contributed
to the release of a "hazardous substance" into the environment. Certain disposal
facilities used by the Company or its predecessors have been investigated under
state and federal superfund statutes, and the Company has been named as a
potentially responsible party for cleanup at 10 such sites. Although the
Company's level of involvement varies at each site, in general, the Company is
one of numerous parties named and will be obligated to pay an allocated share of
the cleanup costs. While it is not feasible to predict the outcome of these
matters with certainty, management is of the opinion that their ultimate
resolution should not have a material effect on the Company's operations or
financial position.
RESEARCH AND DEVELOPMENT; PATENTS
Research and development activities are directed primarily toward
improvement of existing products and services and the design of new products and
processes to meet specific customer needs. Research and development expenses for
each of the three fiscal years ended September 30, 1995 were approximately $6.8
million, $6.4 million and $6.5 million, respectively.
The Company currently holds numerous patents relating to products and
equipment used in its pumping services business. While such patents, in the
aggregate, are important to maintaining the Company's competitive position, no
single patent is considered to be of a critical or essential nature.
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Additionally, the Company operates under various license arrangements,
generally ranging from 10 to 20 years in duration, relating to certain products
or techniques. None of these license arrangements is of a material nature.
To remain competitive, the Company devotes significant resources to
developing technological improvements to its products. In 1991, the Company
introduced a borate-based fracturing fluid, Spectra Frac G(R), which is being
widely used in the U.S. stimulation market and the North Sea. In 1993, this
product was complemented with two additional fracturing fluids, Spartan FracSM
and Medallion FracSM, which have expanded the Company's service line offerings
to cover a broader range of economic and downhole design variables. These
products replaced several products previously made available to customers.
During 1994, the Company commercialized a proprietary enzyme chemistry used in
conjunction with the three fracturing fluids. These "enzyme breakers"
significantly enhance the production of oil and gas in a wide range of wells. In
1991, the Company introduced its "Cyclone" blender which, along with Western's
completion tool technology, have helped address the growing sand control and
frac pack markets in the Gulf of Mexico and the North Sea. The Company believes
that these products and equipment have enabled the Company to maintain or
increase its market share in the United States, the Gulf of Mexico and the North
Sea.
In 1995, the Company developed Sandstone Acid(TM), a matrix acidizing
chemistry used in sandstone formations. While still in the early stages of
testing, management believes this product offers significant advantages over
conventional acidizing methods in sandstone reservoirs. The Company intends to
continue to devote significant resources to its research and development
efforts.
MANAGEMENT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
J. W. Stewart................. 51 Director, Chairman of the Board, President and
Chief Executive Officer
Michael McShane............... 41 Director, Vice President -- Finance and Chief Financial
Officer
David D. Dunlap............... 34 Vice President -- International Operations
Thomas H. Koops............... 49 Vice President -- Technology and Logistics
Margaret B. Shannon........... 46 Vice President -- General Counsel
Kenneth A. Williams........... 45 Vice President -- North American Operations
Matthew D. Fitzgerald......... 38 Controller
Taylor M. Whichard............ 37 Treasurer
Stephen A. Wright............. 48 Director of Human Resources
L. William Heiligbrodt........ 54 Director
John R. Huff.................. 49 Director
William J. Johnson............ 61 Director
Don D. Jordan................. 63 Director
R. A. LeBlanc................. 65 Director
James E. McCormick............ 68 Director
Michael E. Patrick............ 53 Director
</TABLE>
Mr. Stewart, director (Class III) of the Company since 1990, joined Hughes
Tool Company in 1969 as Project Engineer. He served as Vice President -- Legal
and Secretary of Hughes Tool Company and as Vice President -- Operations for a
predecessor of the Company prior to being named President of the Company in
1986.
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<PAGE> 37
Mr. McShane, director (Class II) of the Company since 1990, joined the
Company in 1987 from Reed Tool Company, an oilfield tool company, where he was
employed for seven years. At Reed Tool Company he held various financial
management positions, including Corporate Controller and Regional Controller of
Far East Operations.
Mr. Dunlap joined the Company in 1984 as a District Engineer and was named
Vice President -- International Operations in 1995. He has previously served as
Vice President -- Sales for the Coastal Division of North America and U.S. Sales
and Marketing Manager.
Mr. Koops joined the Company as Manager -- Products and Technical Services
in 1976, prior to being named Vice President -- Manufacturing and Logistics of
the Company in 1988 and to his current position in 1992.
Ms. Shannon joined the Company in February 1994 as Vice
President -- General Counsel from the law firm of Andrews & Kurth L.L.P., where
she had been a partner since 1984.
Mr. Williams joined the Company in 1973 and has since held various
positions in the U.S. operations. Prior to being named Vice President -- North
American Operations in 1991, he served as Region Manager -- Western U.S. and
Canada.
Mr. Fitzgerald joined the Company as Controller in 1989 from Baker Hughes
Incorporated, where he was the Director of Corporate Audit. Prior thereto, he
was a Senior Manager with the certified public accounting firm of Ernst &
Whinney.
Mr. Whichard joined the Company as Tax and Treasury Manager in 1989 from
Weatherford International, where he was the Tax Manager. Prior to being named
Treasurer in 1992, he served in various positions, including Tax Director and
Assistant Treasurer.
Mr. Wright joined the Company as Manager of Compensation and Benefits in
1985 from Global Marine Inc., an offshore drilling company, and was named to his
current position with the Company in 1987.
Mr. Heiligbrodt, director (Class III) of the Company since 1992, is
President, Chief Operating Officer and a director of Service Corporation
International, a funeral services corporation ("SCI"). He has served in various
management positions with SCI since February 1990. Prior to joining SCI, Mr.
Heiligbrodt served as President of Provident Services, Inc. from March 1988 to
February 1990. Prior to that, he served for five years as Vice Chairman and
Chief Executive Officer of WEDGE Group, Incorporated, a multi-industry holding
company. He is Chairman of the Nominating Committee and a member of the
Executive Compensation Committee.
Mr. Huff, director (Class I) of the Company since 1992, is Chairman,
President and Chief Executive Officer of Oceaneering International, Inc., an
oilfield services corporation. Mr. Huff has been President, Chief Executive
Officer and a director of Oceaneering since 1986 and Chairman of the Board of
Oceaneering since 1990. Mr. Huff is also a director of Production Operators
Corp. He is a member of the Audit Committee and the Executive Compensation
Committee.
Mr. Johnson, director (Class II) of the Company since April 1995, has been
an independent oil and natural gas producer and consultant since May 1994;
President and Chief Operating Officer and a director of Apache Corporation, an
independent oil and gas exploration and production company, from 1991 to 1994;
President, Chief Executive Officer and a director of TEX/CON Oil & Gas Company,
a subsidiary of British Petroleum P.L.C., from 1989 to 1991. Mr. Johnson also
serves as a director of Camco International, Inc., a provider of oil and natural
gas production equipment and services, and of Snyder Oil Corporation, an
independent oil and gas exploration and production company, and as an advisory
member of the board of directors of Texas Commerce Bank National Association. He
is a member of the Nominating Committee.
Mr. Jordan, director (Class II) of the Company since 1990, is Chairman,
Chief Executive Officer and a director of Houston Industries Incorporated, a
public utility holding company with interests in domestic and international
electric utility companies and projects. Mr. Jordan has been employed by various
subsidiaries of Houston Industries Incorporated since 1956. He currently serves
as a director of Texas Commerce
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<PAGE> 38
Bancshares, UTECH Joint Venture and AEGIS Insurance Services. He is Chairman of
the Executive Compensation Committee and a member of the Audit Committee.
Mr. LeBlanc, director (Class I) of the Company since 1994, served in
various executive positions with Keystone International, Inc., a manufacturer of
flow control products, including Chairman of the Board, Chief Executive Officer
and a director, from 1959 until his retirement in July 1995. Mr. LeBlanc also
serves as an advisory member of the board of directors of Texas Commerce Bank
National Association. He is a member of the Audit Committee and the Nominating
Committee.
Mr. McCormick, director (Class III) of the Company since 1990, served in
various executive positions with ORYX Energy Company, a diversified energy
company, including President and Chief Operating Officer and a director, from
1977 until his retirement on March 1, 1992. Mr. McCormick currently serves on
the board of directors of Lone Star Technology, Snyder Oil Company and Texas
Commerce Bank National Association. He is Chairman of the Audit Committee and a
member of the Executive Compensation Committee and the Nominating Committee.
Mr. Patrick, director (Class I) of the Company since April 1995, Chief
Investment Officer of the Meadows Foundation since December 1, 1995; consultant
from 1994 to 1995; President of Lomas Information Systems, Inc., a subsidiary of
Lomas Financial Corporation, from 1993 to 1994; Executive Vice President, Chief
Financial Officer and a director of Lomas Financial Corporation and President
and Chief Operating Officer of its Lomas Mortgage USA subsidiary, both of which
are engaged in mortgage banking, real estate and information services, from 1992
until 1994; and Executive Vice Chancellor for Asset Management of the University
of Texas System, where he was responsible for the investment of all endowment
funds, from 1984 to 1991. He is a member of the Executive Compensation
Committee.
The terms of the Class I, Class II and Class III directors expire in 1997,
1998 and 1996, respectively.
A Special Committee of the Board of Directors is responsible for
administering certain employee arrangements related to the acquisition of
Western. The Special Committee is composed of Messrs. McCormick (Chairman),
LeBlanc, Johnson and Patrick.
DESCRIPTION OF THE NOTES
GENERAL
The Existing Notes were issued under an indenture, dated as of February 1,
1996 (the "Indenture"), by and among the Company, the Guarantors and Bank of
Montreal Trust Company, as trustee under the Indenture (the "Trustee"). The
Exchange Notes will be issued under the same Indenture. The Exchange Notes will
be issued solely in exchange for an equal principal amount of Existing Notes
pursuant to the Exchange Offer. The form and terms of the Exchange Notes will be
identical in all material respects to the form and terms of the Existing Notes
except that the offering of the Exchange Notes has been registered under the
Securities Act and, therefore, the Exchange Notes are not entitled to the
benefits of the Registration Rights Agreement and provisions relating to the
contingent increases in the interest rates provided for under certain
circumstances pursuant thereto. See "-- Registration Rights Agreement." The
Notes are subject to the terms stated in the Indenture, a copy of which has been
filed as an exhibit to the Registration Statement, and holders of the Notes are
referred thereto for a statement of those terms. The statements and definitions
of terms under this caption relating to the Notes and the Indenture described
below are summaries and do not purport to be complete. Such summaries make use
of certain terms defined in the Indenture and are qualified in their entirety by
express reference to the Indenture. Certain terms used herein are defined below
under "-- Certain Definitions."
The Existing Notes and the Exchange Notes will constitute a single series
of debt securities under the Indenture. If the Exchange Offer is consummated,
holders of Existing Notes who do not exchange their Existing Notes for Exchange
Notes will vote together with holders of the Exchange Notes for all relevant
purposes under the Indenture. In that regard, the Indenture requires that
certain actions by the holders thereunder (including acceleration following an
Event of Default) must be taken, and certain rights must be
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<PAGE> 39
exercised, by specified minimum percentages of the aggregate principal amount of
the outstanding securities issued under the Indenture. In determining whether
holders of the requisite percentage in principal amount have given any notice,
consent or waiver or taken any other action permitted under the Indenture, any
Existing Notes that remain outstanding after the Exchange Offer will be
aggregated with the Exchange Notes, and the holders of such Existing Notes and
the Exchange Notes will vote together as a single series for all such purposes.
Accordingly, all references herein to specified percentages in aggregate
principal amount of the outstanding Notes shall be deemed to mean, at any time
after the Exchange Offer is consummated, such percentages in aggregate principal
amount of the Existing Notes and the Exchange Notes then outstanding.
Each Note will mature on February 1, 2006 and will bear interest at the
rate per annum stated on the cover page hereof from February 20, 1996, payable
semiannually on February 1 and August 1 of each year, commencing August 1, 1996,
to the person in whose name the Note is registered at the close of business on
the January 15 or July 15 next preceding such interest payment date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Principal and interest will be payable at the offices of the Trustee, provided
that, at the option of the Company, payment of interest will be made by check
mailed to the address of the person entitled thereto as it appears in the
register of the Notes (the "Register") maintained by the Registrar. The Notes
will be transferable and exchangeable at the office of the Registrar and any
co-registrar and will be issued in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. The Company may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection with certain transfers and exchanges.
The Notes may not be redeemed prior to maturity and will not be subject to
any sinking fund. Following the consummation of the Exchange Offer, holders of
Existing Notes not tendered as a general matter will not have any further
registration rights under the Registration Rights Agreement.
RANKING AND GUARANTEES
The Notes are senior unsecured obligations of the Company and rank pari
passu in right of payment with the Company's obligations under the Bank Credit
Facility and the 9.2% Notes and senior in right of payment to all future
indebtedness of the Company that is, by its terms, expressly subordinated to the
Notes.
The following Subsidiaries of the Company, each of which also is a borrower
and a guarantor of the Company's obligations under the Bank Credit Facility and
a co-obligor on the 9.2% Notes (collectively, the "Guarantors"), have
unconditionally guaranteed (the "Guarantees") on a joint and several basis the
Company's obligations to pay principal and interest with respect to the Notes:
BJ Services Company, U.S.A., BJ Service International, Inc. and BJ Services
Company Middle East. Each of the Guarantees is an unsecured obligation of the
Guarantor providing such Guarantee and ranks pari passu with the guarantee
provided by and the obligations of such Guarantor under the Bank Credit Facility
and the obligations of such Guarantor under the 9.2% Notes and with all existing
and future unsecured indebtedness of such Guarantor that is not, by its terms,
expressly subordinated in right of payment to such Guarantee.
Under the terms of the Indenture, a Guarantor may be released from its
Guarantee if such Guarantor is not a guarantor of (or co-obligor on) any Funded
Indebtedness of the Company other than the Notes and other than Funded
Indebtedness of the Company (i) subject to a release provision similar to the
release provision described in this paragraph and (ii) the related guarantee (or
obligation) of which will be released substantially concurrently with the
release of the Guarantee of such Guarantor pursuant to such release provision,
provided that no Default or Event of Default under the Indenture has occurred
and is continuing. The Indenture also provides that if any Subsidiary of the
Company guarantees or becomes a co-obligor on any Funded Indebtedness of the
Company other than the Notes at any time subsequent to the date on which the
Notes are originally issued (including, without limitation, following any
release of such Subsidiary from its Guarantee as described above), then the
Company will cause the Notes to be equally and ratably guaranteed by such
Subsidiary, which shall thereupon become a Guarantor.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor
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<PAGE> 40
under its Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal, state
or foreign law. Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in a pro
rata amount based on the Adjusted Net Assets of each Guarantor.
Although holders of the Notes are direct creditors of the Company's
principal direct Subsidiaries by virtue of the Guarantees, existing or future
creditors of the Guarantors could avoid or subordinate Guarantees, in whole or
in part, under fraudulent conveyance laws to the extent they were successful in
establishing that (i) a Guarantee was incurred with intent to hinder, delay or
defraud any present or future creditor or contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of others
or (ii) any of the Guarantors did not receive fair consideration or reasonably
equivalent value for issuing its Guarantee and that it (w) was insolvent at the
time of such issuance, or (x) was rendered insolvent by reason of such issuance,
or (y) was engaged in a business or transaction for which its assets constituted
unreasonably small capital to carry on its business or (z) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured. Under the circumstances referred to in clause (ii), but not clause (i),
above, the provision of the Indenture described in the previous paragraph
generally limit the obligations of each Guarantor to the maximum amount that
would not constitute a fraudulent conveyance or transfer under applicable law.
To the extent any Guarantee is avoided as a fraudulent conveyance or held
unenforceable for any other reason (or limited pursuant to such provision), the
holders of the Notes will cease to have any claim (or, as applicable, have only
a limited claim) in respect of a Guarantor, and will be solely creditors of the
Company or any Guarantor whose Guarantee was not avoided or held unenforceable
(or to the extent not so limited). In such event (and to the extent of any such
limitation), the claims of the holders of the Notes would be subject to the
prior payment of all liabilities of the Subsidiaries of the Company who were not
valid Guarantors.
Substantially all of the Company's operating income and cash flow is
generated by its Subsidiaries. As a result, funds necessary to meet the
Company's debt service obligations are provided in part by distributions or
advances from its Subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of the Company's Subsidiaries, could limit the Company's ability to
obtain cash from its Subsidiaries for the purpose of meeting its debt service
obligations, including the payment of principal and interest on the Notes.
Although holders of the Notes are direct creditors of the Company's principal
direct Subsidiaries by virtue of the Guarantees, the Company has Subsidiaries
("Non-Guarantor Subsidiaries") that are not included among the Guarantors, and
such Subsidiaries are not obligated with respect to the Notes. As a result, the
claims of creditors of the Non-Guarantor Subsidiaries effectively have priority
with respect to the assets and earnings of such companies over the claims of
creditors of the Company, including the holders of the Notes.
CERTAIN COVENANTS
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any Subsidiary of the Company to, issue, assume or guarantee any
Indebtedness for borrowed money secured by any Lien on any property or asset now
owned or hereafter acquired by the Company or such Subsidiary without making
effective provision whereby any and all Notes then or thereafter outstanding
will be secured by a Lien equally and ratably with any and all other obligations
thereby secured for so long as any such obligations shall be so secured.
The foregoing restriction does not, however, apply to:
(a) Liens existing on the date on which the Notes are originally
issued or provided for under the terms of agreements existing on such date;
(b) Liens on property securing (i) all or any portion of the cost of
acquiring, constructing, altering, improving or repairing any property or
assets, real or personal, or improvements used or to be used in connection
with such property or (ii) Indebtedness incurred by the Company or any
Subsidiary of the Company prior to or within one year after the later of
the acquisition, the completion of construction,
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<PAGE> 41
alteration, improvement or repair or the commencement of commercial
operation thereof, which Indebtedness is incurred for the purpose of
financing all or any part of the purchase price thereof or construction or
improvements thereon;
(c) Liens securing Indebtedness owed by a Subsidiary of the Company to
the Company or to any other Subsidiary of the Company;
(d) Liens on the property of any Person existing at the time such
Person becomes a Subsidiary of the Company and not incurred as a result of
(or in connection with or in anticipation of) such Person becoming a
Subsidiary of the Company, provided that such Liens do not extend to or
cover any property or assets of the Company or any of its Subsidiaries
other than the property encumbered at the time such Person becomes a
Subsidiary of the Company and do not secure Indebtedness with a principal
amount in excess of the principal amount outstanding at such time;
(e) Liens on any property securing (i) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or (ii) Indebtedness issued or guaranteed by the United States or
any State thereof or any department, agency or instrumentality of either;
(f) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted
under clause (a), (b), (d) or (e) above, provided that such Lien extends to
or covers only the property that is subject to the Lien being extended,
renewed or replaced and that the principal amount of the Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so
secured at the time of such extension, renewal or replacement; or
(g) Liens (exclusive of any Lien of any type otherwise permitted under
clauses (a) through (f) above) securing Indebtedness for borrowed money of
the Company or any Subsidiary of the Company in an aggregate principal
amount which, together with the aggregate amount of Attributable
Indebtedness deemed to be outstanding in respect of all Sale/Leaseback
Transactions entered into pursuant to clause (a) of the covenant described
under "Limitation on Sale/Leaseback Transactions" below (exclusive of any
such Sale/Leaseback Transactions otherwise permitted under clauses (a)
through (f) above), does not at the time such Indebtedness is incurred
exceed 10% of the Consolidated Net Worth of the Company (as shown in the
most recent audited consolidated balance sheet of the Company and its
Subsidiaries).
Limitation on Sale/Leaseback Transactions. The Indenture provides that the
Company will not, and will not permit any Subsidiary to, enter into any
Sale/Leaseback Transaction with any person (other than the Company or a
Subsidiary) unless:
(a) the Company or such Subsidiary would be entitled to incur
Indebtedness, in a principal amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback Transaction, secured by a Lien on the
property subject to such Sale/Leaseback Transaction pursuant to the
covenant described under "Limitation on Liens" above without equally and
ratably securing the Notes pursuant to such covenant;
(b) after the date on which the Notes are originally issued and within
a period commencing six months prior to the consummation of such
Sale/Leaseback Transaction and ending six months after the consummation
thereof, the Company or such Subsidiary shall have expended for property
used or to be used in the ordinary course of business of the Company and
its Subsidiaries an amount equal to all or a portion of the net proceeds of
such Sale/Leaseback Transaction and the Company shall have elected to
designate such amount as a credit against such Sale/Leaseback Transaction
(with any such amount not being so designated to be applied as set forth in
clause (c) below); or
(c) the Company, during the 12-month period after the effective date
of such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Notes or any Pari Passu Indebtedness an amount
equal to the greater of the net proceeds of the sale or transfer of the
property leased in such Sale/Leaseback Transaction and the fair value, as
determined by the Board of Directors of
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<PAGE> 42
the Company, of such property at the time of entering into such
Sale/Leaseback Transaction (in either case adjusted to reflect the
remaining term of the lease and any amount expended by the Company as set
forth in clause (b) above), less an amount equal to the principal amount of
Notes and Pari Passu Indebtedness voluntarily defeased or retired by the
Company within such 12-month period and not designated as a credit against
any other Sale/Leaseback Transaction entered into by the Company or any
Subsidiary during such period.
LIMITATIONS ON MERGERS AND CONSOLIDATIONS
The Indenture provides that neither the Company nor any Guarantor (other
than any Guarantor that shall have been released from its Guarantee pursuant to
the provisions of the Indenture) will consolidate with or merge into any Person,
or sell, lease, convey, transfer or otherwise dispose of all or substantially
all of its assets to any Person, unless: (i) the Person formed by or surviving
such consolidation or merger (if other than the Company or such Guarantor, as
the case may be), or to which such sale, lease, conveyance, transfer or other
disposition shall be made (collectively, the "Successor"), is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia (or, alternatively, in the case of a Guarantor
organized under the laws of a jurisdiction outside the United States, a
corporation organized and existing under the laws of such foreign jurisdiction),
and the Successor assumes by supplemental indenture in a form satisfactory to
the Trustee all of the obligations of the Company or such Guarantor, as the case
may be, under the Indenture and under the Notes; and (ii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms and
for the definitions of other capitalized terms used herein and not defined
below.
"Adjusted Net Assets" of a Guarantor at any date means the lesser of (x)
the amount by which the fair value of the property of such Guarantor at such
date exceeds the total amount of liabilities, including, without limitation, the
probable amount of contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date) of such
Guarantor at such date, but excluding liabilities under the Guarantee of such
Guarantor, and (y) the amount by which the present fair saleable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liability of such Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary of such
Guarantor in respect of any obligations of such Subsidiary under the Guarantee
of such Guarantor), excluding debt in respect of the Guarantee of such
Guarantor, as they become absolute and matured.
"Attributable Indebtedness," when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at the rate set forth or implicit in the terms of the lease included
in such transaction) of the total obligations of the lessee for rental payments
(other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with generally accepted accounting principles; and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
generally accepted accounting principles.
"Consolidated Net Worth" of the Company means the consolidated
stockholders' equity of the Company and its Subsidiaries, as determined in
accordance with generally accepted accounting principles.
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"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option of any
obligor thereon to a date, more than one year after the date on which such
Indebtedness is originally incurred.
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit and
performance bonds issued by such Person in the ordinary course of business, to
the extent not drawn or, to the extent drawn, if such drawing is reimbursed not
later than the third Business Day following demand for reimbursement, (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in the
ordinary course of business, (v) all Capitalized Lease Obligations of such
Person, (vi) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of others guaranteed by such Person to the extent of such guarantee
and (viii) all Hedging Obligations of such Person.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law. For
the purposes of the Indenture, the Company or any Subsidiary of the Company
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease Obligation or other title retention agreement
relating to such asset.
"Non-Recourse Indebtedness" means, at any date, the aggregate amount at
such date of Indebtedness of the Company or a Subsidiary of the Company in
respect of which the recourse of the holder of such Indebtedness, whether direct
or indirect and whether contingent or otherwise, is effectively limited to
specified assets, and with respect to which neither the Company nor any of its
Subsidiaries provides any credit support.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding on the date on which the Notes are originally issued or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall be
subordinated in right of payment to the Notes.
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company, for a
period of more than three years, of any real or tangible personal property,
which property has been or is to be sold or transferred by the Company or such
Subsidiary to such Person in contemplation of such leasing.
"Significant Subsidiary" has the meaning set forth in Regulation S-X under
the Exchange Act.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being: (i) default by
the Company or any Guarantor for 30 days in payment of any interest on the
Notes; (ii) default by the Company or any Guarantor in any payment of principal
of the Notes; (iii) default by the Company or any Guarantor in compliance with
any of its other covenants or agreements in, or provisions of, the Notes, the
Guarantees or the Indenture which shall not have been remedied within 60 days
after written notice by the Trustee or by the holders of at least 25% in
principal amount of the Notes then outstanding; (iv) the acceleration of the
maturity of any Indebtedness (other than the Notes or any Non-Recourse
Indebtedness) of the Company or any Subsidiary of the Company having an
outstanding principal amount of $20 million or more individually or in the
aggregate, or a default in the payment of any principal or interest in respect
of any Indebtedness (other than the Notes or any Non-Recourse Indebtedness) of
the Company or any Subsidiary of the Company having an outstanding principal
amount of $20 million or more individually or in the aggregate and such default
shall be continuing for a period of 30 days without the Company or such
Subsidiary, as the case may be, effecting a cure of such
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default; (v) a judgment or order for the payment of money in excess of $20
million (net of applicable insurance coverage) having been rendered against the
Company, a Guarantor or any Significant Subsidiary of the Company and such
judgment or order shall continue unsatisfied and unstayed for a period of 30
days; or (vi) certain events involving bankruptcy, insolvency or reorganization
of the Company, a Guarantor or any Significant Subsidiary of the Company.
Pursuant to the Indenture, Guarantors may not be released from their Guarantees
if a Default or Event of Default has occurred and is continuing. The obligations
of any Subsidiary of the Company that becomes a Guarantor are not dependent upon
whether such Subsidiary becomes a Guarantor prior to or after an Event of
Default. The Indenture will provide that the Trustee may withhold notice to the
holders of the Notes of any default (except in payment of principal of or
interest on the Notes) if the Trustee considers it in the interest of the
holders of the Notes to do so.
The Indenture provides that if an Event of Default occurs and is continuing
with respect to the Indenture, the Trustee or the holders of not less than 25%
in principal amount of the Notes outstanding may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable immediately. If
an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company or a Guarantor occurs and is continuing, the
principal of and interest on all the Notes will become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holders of the Notes. The amount due and payable on the acceleration of any
Note will be equal to 100% of the principal amount of such Note, plus accrued
interest to the date of payment. Under certain circumstances, the holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
The Indenture provides that no holder of a Note may pursue any remedy under
the Indenture unless (i) the Trustee shall have received written notice of a
continuing Event of Default, (ii) the Trustee shall have received a request from
holders of at least 25% in principal amount of the Notes to pursue such remedy,
(iii) the Trustee shall have been offered indemnity reasonably satisfactory to
it and (iv) the Trustee shall have failed to act for a period of 60 days after
receipt of such notice and offer of indemnity; however, such provision does not
affect the right of a holder of a Note to sue for enforcement of any overdue
payment thereon.
The holders of a majority in principal amount of the Notes then outstanding
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee under the Indenture, subject
to certain limitations specified in the Indenture. The Indenture requires the
annual filing by the Company with the Trustee of a written statement as to
compliance with the covenants contained in the Indenture.
MODIFICATION AND WAIVER
The Indenture provides that modifications and amendments to the Indenture
or the Notes may be made by the Company, the Guarantors and the Trustee with the
consent of the holders of a majority in principal amount of the Notes then
outstanding; provided that no such modification or amendment may, without the
consent of the holder of each Note then outstanding affected thereby, (i) reduce
the amount of Notes whose holders must consent to an amendment, supplement or
waiver; (ii) reduce the rate of or change the time for payment of interest,
including default interest, on any Note; (iii) reduce the principal of or change
the fixed maturity of any Note; (iv) make any Note payable in money other than
that stated in the Note; (v) impair the right to institute suit for the
enforcement of any payment of principal of or interest on any Note; (vi) make
any change in the percentage of principal amount of Notes necessary to waive
compliance with certain provisions of the Indenture; or (vii) waive a continuing
Default or Event of Default in the payment of principal of or interest on the
Notes. The Indenture provides that modifications and amendments of the Indenture
may be made by the Company, the Guarantors and the Trustee without the consent
of any holders of Notes in certain limited circumstances, including (a) to cure
any ambiguity, omission, defect or inconsistency, (b) to provide for the
assumption of the obligations of the Company or any Guarantor under the
Indenture upon the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or any such Guarantor, (c) to
provide for uncertificated Notes in addition to or in place of certificated
Notes, (d) to reflect the release of any Guarantor from its Guarantee, or the
addition of any Subsidiary of the Company as a Guarantor, in the manner provided
by the Indenture, (e) to comply with any
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requirement in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act of 1939 or (f) to make any change that does not
adversely affect the rights of any holder of Notes in any material respect.
The Indenture provides that the holders of a majority in aggregate
principal amount of the Notes then outstanding may waive any past default under
the Indenture, except a default in the payment of principal or interest.
DISCHARGE AND TERMINATION
Defeasance of Certain Obligations. The Indenture provides that the Company
and the Guarantors may terminate certain of their obligations under the
Indenture, including those described under the section "Certain Covenants," if
(i) the Company irrevocably deposits in trust with the Trustee cash or
non-callable U.S. Government Obligations or a combination thereof sufficient to
pay principal of and interest on the Notes to maturity, and to pay all other
sums payable by it under the Indenture; (ii) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit; (iii) the
Company shall have delivered to the Trustee an Opinion of Counsel from
nationally recognized counsel acceptable to the Trustee or a tax ruling to the
effect that the holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of the Company's exercise of its option
under such section and will be subject to Federal income tax on the same amount
and in the same manner and at the same times as would have been the case if such
option had not been exercised; (iv) the Company delivers to the Trustee certain
other documents called for by the Indenture, including an Officers' Certificate
and Opinions of Counsel; and (v) certain other conditions are satisfied. The
Company's payment obligations and the Guarantors' Guarantees shall survive until
the Notes are no longer outstanding.
Discharge. The Indenture provides that the Indenture shall cease to be of
further effect (subject to certain exceptions relating to compensation and
indemnity of the Trustee and repayment to the Company of excess money or
securities) when (i) either (A) all outstanding Notes theretofore authenticated
and issued (other than destroyed, lost or stolen Notes that have been replaced
or paid) have been delivered to the Trustee for cancellation; or (B) all
outstanding Notes not theretofore delivered to the Trustee for cancellation (x)
have become due and payable or (y) will become due and payable at their stated
maturity within one year and the Company has deposited or caused to be deposited
with the Trustee as funds (immediately available to the holders in the case of
clause (x) in trust for such purpose an amount which, together with earnings
thereon, will be sufficient to pay and discharge the entire indebtedness on such
Notes for principal and interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the stated maturity, as the case
may be; (ii) the Company has paid all other sums payable by it under the
Indenture; and (iii) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and discharge
of the Indenture have been complied with, together with an Opinion of Counsel to
the same effect.
GOVERNING LAW
The Indenture and the Notes are governed by and will be construed in
accordance with the laws of the State of New York, but without giving effect to
applicable principles of conflicts of law to the extent the application of the
laws of another jurisdiction would be required thereby.
THE TRUSTEE
Bank of Montreal Trust Company is the Trustee under the Indenture. Its
address is 77 Water Street, 4th Floor, New York, New York 10005. The Company has
also appointed the Trustee as the initial Registrar and as initial Paying Agent
under the Indenture. Bank of Montreal Trust Company is an affiliate of Bank of
Montreal, which is a lender under the Company's Bank Credit Facility. Bank of
Montreal received a portion of the repayment by the Company of borrowings under
the Bank Credit Facility from the proceeds of the offering of the Existing
Notes.
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The 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 on certain property received in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act of 1939, as amended), it must eliminate such conflict or
resign.
The Indenture provides that in case an Event of Default shall occur (and be
continuing), the Trustee will be required to use the degree of care and skill of
a prudent man in the conduct of his own affairs. The Trustee will be under no
obligation to exercise any of its powers under the Indenture at the request of
any of the holders of the Notes, unless such holders shall have offered the
Trustee indemnity reasonably satisfactory to it.
BOOK-ENTRY, DELIVERY AND FORM
The Existing Notes were initially issued in the form of the Existing Global
Note. Upon issuance, the Existing Global Note was deposited with, or on behalf
of, the Depositary and registered in the name of Cede & Co., as nominee of the
Depositary.
The Existing Notes, to the extent directed by their holders in their
Letters of Transmittal, will be exchanged through book-entry electronic transfer
for the Exchange Global Note in definitive, fully registered form, without
coupons, registered in the name of Cede & Co., as nominee of the Depositary.
References to "Global Note" shall be references to the Exchange Global Note and
the Existing Global Note.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Notes will be shown on, and the transfer of these ownership interests will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. In addition, no beneficial owner of
an interest in a Global Note will be able to transfer that interest except in
accordance with the applicable procedures of DTC and, if applicable, Cedel,
societe anonyme ("Cedel"), and Morgan Guaranty Trust Company of New York, as
operator of the Euroclear system ("Euroclear") (in addition to those under the
Indenture referred to herein).
Payments on Global Notes will be made to DTC or its nominee, as the
registered owner thereof. None of the Company, the Guarantors, the Trustee or
any paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment in
respect of a Global Note representing any Notes held by it or its nominee, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Note for such Notes as shown on the records of DTC or its nominee. The Company
also expects that payments by participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. The laws of some states require that certain
Persons take physical delivery of securities in definitive form. Consequently,
the ability to transfer beneficial interests in a Global Note to such Persons
may be limited. Because DTC can only act on behalf of participants, who in turn
act on behalf of indirect participants (as defined below) and certain banks, the
ability of a Person having a beneficial interest in a Global Note to pledge such
interest to Persons that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate of such interest.
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DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC holds securities that its participants
deposit with DTC and facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Access to the DTC system
is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly ("indirect participants"). The
rules applicable to DTC and its participants are on file with the Commission.
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among participants of DTC, Euroclear and Cedel, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Guarantors or the Trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel or
the participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in a
Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for Notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Notes in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof). In addition, if (i) DTC or any successor depositary (the
"Depositary") notifies the Company in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Securities under the Indenture, then, upon surrender by the
registered owner or holder of a Global Note (a "Global Note Holder") of its
Global Note, Notes in such form will be issued to each Person that such Global
Note Holder and the Depositary identify as the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
related Global Note Holder or the Depositary in identifying the beneficial
owners of the related Notes, and each such Person may conclusively rely on, and
will be protected in relying on, instructions from such Global Note Holder or of
the Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Notes to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
Secondary market trading activity in the Notes will be required by the
Depositary to be settled in immediately available funds. No assurance can be
given as to the effect, if any, of such settlement arrangements on trading
activity in the Notes.
REGISTRATION RIGHTS AGREEMENT
The Company and the Guarantors entered into the Registration Rights
Agreement with the Initial Purchasers for the benefit of the holders of the
Notes wherein the Company and the Guarantors agreed, for the benefit of the
holders of the Notes, to (i) use their reasonable best efforts, to the extent
not prohibited by law, to file with the Commission, within 60 days after the
date of original issuance of the Notes, the Exchange Offer Registration
Statement relating to the Exchange Offer for the Exchange Notes, which will have
terms identical in all material respects to the Existing Notes (except that the
Exchange Notes will not contain terms with respect to transfer restrictions and
will not provide for any increase in the interest rate thereon under the
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circumstances described below) and (ii) use their reasonable best efforts, to
the extent not prohibited by law, to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 120 days
after the date of original issuance of the Notes.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the holders thereof (other than holders who are
broker-dealers) without further compliance with the registration and prospectus
delivery provisions of the Securities Act. However, any purchaser of Notes who
is an affiliate of the Company or who intends to participate in the Exchange
Offer for the purpose of distributing the Exchange Notes, or any broker-dealer
who purchased the Notes from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act, (i) will not be able to rely
on the interpretations by the staff of the Commission set forth in the
above-mentioned no-action letters, (ii) will not be able to tender its Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Notes unless such sale or transfer is made pursuant to an
exemption from such requirements. The Company does not intend to seek its own
no-action letter and there is no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Notes as it has
in such no-action letters to third parties.
Each holder of the Notes (other than certain specified holders) who wishes
to exchange Notes for Exchange Notes in the Exchange Offer will be required to
represent that (i) it is not an affiliate of the Company or any Guarantor, (ii)
any Exchange Notes to be received by it were acquired in the ordinary course of
its business and (iii) it has no arrangement with any person to participate in
the distribution (within the meaning of the Securities Act) of the Exchange
Notes. In addition, in connection with any resales of Exchange Notes, any
broker-dealer who acquired the Notes for its own account as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer") must deliver a prospectus meeting the requirements of the
Securities Act. The staff of the Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of the Notes) with the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Company and the Guarantors will be required, for a period of 180 days
following the consummation of the Exchange Offer, to use their reasonable best
efforts to allow Participating Broker-Dealers to use the prospectus contained in
the Exchange Offer Registration Statement in connection with the resale of
Exchange Notes received in exchange for Notes acquired by such Participating
Broker-Dealers for their own account as a result of market-making or other
trading activities.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company and the Guarantors to
effect the Exchange Offer, or if for any reason the Exchange Offer Registration
Statement is not declared effective within 120 days following the date of
original issuance of the Notes or the Exchange Offer is not consummated within
180 days after such date, or upon the request of the Initial Purchasers in
certain circumstances, the Company and the Guarantors will, in lieu of effecting
(or, in the case of such a request by the Initial Purchasers, in addition to
effecting) the registration of the Exchange Notes pursuant to the Exchange Offer
Registration Statement (i) as promptly as practicable, file with the Commission
the Shelf Registration Statement covering resales of the Notes, (ii) use their
reasonable best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act by the 180th day after the date of original
issue of the Notes (or promptly in the event of a request by the Initial
Purchasers) and (iii) use their reasonable best efforts to keep effective the
Shelf Registration Statement until three years after its effective date (or
until one year after such effective date if such Shelf Registration Statement is
filed at the request of the Initial Purchasers) or until all of the Notes
covered by such Shelf Registration Statement have been sold. The Company will,
in the event of the filing of a Shelf Registration Statement, provide to each
holder of the Notes copies of the prospectus which is a part of the Shelf
Registration Statement and notify each such holder when the Shelf Registration
Statement has become effective. A holder of Notes that sells such Notes pursuant
to the Shelf Registration Statement generally will
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be required to be named as a selling securityholder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
which are applicable to such a holder (including certain indemnification
obligations). In addition, each holder of the Notes will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement in order to have their
Notes included in the Shelf Registration Statement and to benefit from the
provisions regarding the increase in the interest rate borne by the Notes
described in the second succeeding paragraph.
Each Existing Note will contain a legend to the effect that the holder of
such Notes by its acceptance thereof, will be deemed to have agreed to be bound
by the provisions of the Registration Rights Agreement. In that regard, each
holder will be deemed to have agreed that, upon receipt of notice from the
Company of the occurrence of any event which makes any statement in the
prospectus which is part of the Shelf Registration Statement (or, in the case of
Participating Broker Dealers, the prospectus which is a part of the Exchange
Offer Registration Statement) untrue in any material respect or which requires
the making of any changes in such prospectus in order to make the statements
therein not misleading or of certain other events specified in the Registration
Rights Agreement, such holder (or Participating Broker-Dealer, as the case may
be) will suspend the sale of Notes pursuant to such prospectus until the Company
and the Guarantors have amended or supplemented such prospectus to correct such
misstatement or omission have furnished copies of the amended or supplemented
prospectus to such holder (or Participating Broker-Dealer, as the case may be)
or the Company and the Guarantors have given notice that the sale of the Notes
may be resumed, as the case may be. If the Company and the Guarantors shall give
such notice to suspend the sale of the Notes, they shall extend the relevant
period referred to above during which they are required to keep effective the
Shelf Registration Statement (or the period during which Participating
Broker-Dealers are entitled to use the prospectus included in the Exchange Offer
Registration Statement in connection with the resale of Exchange Notes, as the
case may be) by the number of days during the period from and including the date
of the giving of such notice to and including the date when holders shall have
received copies of the supplemented or amended prospectus necessary to permit
resales of the Notes or to and including the date on which the Company and the
Guarantors have given notice that the sale of Notes may be resumed, as the case
may be.
The Registration Rights Agreement provides that in the event that either
(a) the Exchange Offer Registration Statement is not filed with the Commission
on or prior to the 60th day following the date of original issuance of the
Notes, (b) the Exchange Offer Registration Statement is not declared effective
on or prior to the 120th day following the date of original issuance of the
Notes or (c) the Exchange Offer is not consummated or a Shelf Registration
Statement with respect to the Notes is not declared effective on or prior to the
180th day following the date of original issuance of the Notes, the interest
rate borne by the Notes shall be increased by .50% per annum following such 60th
day in the case of clause (a) above, such 120th day in the case of clause (b)
above and such 180th day in the case of clause (c) above; provided that the
aggregate amount of any such increase in the interest rate on the Notes pursuant
to the foregoing provisions shall in no event exceed .50% per annum; and
provided, further, that if the Exchange Offer Registration Statement is not
declared effective on or prior to the 120th day following the date of original
issuance of the Notes and the Company shall request holders of Notes to provide
the information called for by the Registration Rights Agreement for inclusion in
the Shelf Registration Statement, then Notes owned by holders who do not deliver
such information to the Company or who do not provide comments on the Shelf
Registration Statement when required pursuant to the Registration Rights
Agreement will not be entitled to any such increase in the interest rate for any
day after the 180th day following the date of original issuance of the Notes.
Upon (x) the filing of the Exchange Offer Registration Statement after the 60th
day described in clause (a) above, (y) the effectiveness of the Exchange Offer
Registration Statement after the 120th day described in clause (b) above or (z)
the consummation of the Exchange Offer or the effectiveness of the Shelf
Registration Statement, as the case may be, after the 180th day described in
clause (c) above, the interest rate on the Notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate set forth on the cover page of this Prospectus; provided,
however, that the interest rate on the Notes will be reduced to the original
interest rate only if all of the events set forth in the immediately preceding
sentence causing the interest rate on the Notes to increase have been cured.
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The Registration Rights Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, which is filed as an
exhibit to the Registration Statement. In addition, the information set forth
above concerning certain interpretations of and positions taken by the staff of
the Commission is not intended to constitute legal advice, and prospective
investors should consult their own legal advisors with respect to such matters.
PLAN OF DISTRIBUTION
In case of a broker-dealer which acquired Existing Notes for its own
account as a result of market making activities or other trading activities,
such broker-dealer may, if it is able to make the representations set forth in
the second paragraph under "The Exchange Offer -- Procedures for Tendering,"
obtain Exchange Notes in the Exchange Offer and may resell such Exchange Notes
without registration under the Securities Act, provided that such broker-dealer
delivers to the purchaser of such Exchange Notes a copy of a prospectus relating
thereto, which may be this Prospectus as supplemented or amended from time to
time. Such broker-dealer may offer the Exchange Notes for sale from time to time
in negotiated transactions or otherwise, at market prices prevailing at the time
of sale, at prices related to such market prices or at negotiated prices, and
any resale may be made directly to purchasers or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or purchasers of any such Exchange Notes. The Letter of
Transmittal (i) requires that any broker-dealer who acquired Existing Notes for
its own account as a result of market-making activities or other trading
activities must deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of the Exchange Notes pursuant to the Exchange
Offer but (ii) states that such broker-dealer, by so delivering a prospectus,
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
Based on no-action letters issued by the staff of the Commission, the
Company and the Guarantors believe that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Existing Notes may be offered for resale,
resold and otherwise transferred by any holder of such Exchange Notes (other
than any such holder which is an "affiliate" of the Company and the Guarantors
within the meaning of Rule 405 under the Securities Act and certain
broker-dealers and their affiliates) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder does not intend to participate and has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. Any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
There currently is no market for the Notes. The Company intends to apply
for the listing of the Exchange Notes on the NYSE. Although the Initial
Purchasers have informed the Company that they currently intend to make a market
in the Exchange Notes, they are not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Exchange
Notes.
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby will be
passed upon for the Company by Andrews & Kurth L.L.P., Houston, Texas.
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EXPERTS
The consolidated financial statements and the related financial statement
schedule of the Company as of September 30, 1995 and 1994 and for each of the
three years in the period ended September 30, 1995, included or incorporated by
reference in this Registration Statement, have been audited by Deloitte & Touche
LLP, independent accountants, as stated in their reports, which are included or
incorporated by reference herein, and have been so included or incorporated by
reference in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of The Western Company of North
America as of December 31, 1994 and 1993 and for each of the three years in the
period ended December 31, 1994 incorporated by reference in this Registration
Statement have been so incorporated by reference in reliance on the report of
Price Waterhouse LLP, independent accountants, and have been so incorporated by
reference in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
49
<PAGE> 52
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants..................................... F-2
Consolidated Statement of Operations for the Years Ended September 30,
1995, 1994 and 1993................................................. F-3
Consolidated Statement of Financial Position as of September 30, 1995
and 1994............................................................ F-4
Consolidated Statement of Stockholders' Equity for the Years Ended
September 30, 1995, 1994 and 1993................................... F-5
Consolidated Statement of Cash Flows for the Years Ended September 30,
1995, 1994 and 1993................................................. F-6
Notes to Consolidated Financial Statements............................ F-7
Consolidated Condensed Statement of Operations (Unaudited) -- Three
months ended December 31, 1995 and 1994............................. F-31
Consolidated Condensed Statement of Financial Position -- December 31,
1995 (Unaudited) and September 30, 1995............................. F-32
Consolidated Condensed Statement of Cash Flows (Unaudited) -- Three
months ended December 31, 1995 and 1994............................. F-33
Notes to Unaudited Consolidated Condensed Financial Statements........ F-34
</TABLE>
F-1
<PAGE> 53
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders of BJ Services Company:
We have audited the accompanying consolidated statements of financial position
of BJ Services Company and its subsidiaries as of September 30, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended September 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of BJ Services Company and its
subsidiaries at September 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1995 in conformity with generally accepted accounting principles.
As described in Note 9 to the consolidated financial statements, the Company
changed its method of account for postretirement benefits other than pensions
effective October 1, 1993 to conform with Statement of Financial Accounting
Standards No. 106.
DELOITTE & TOUCHE LLP
Houston, Texas
November 21, 1995 (March 28, 1996 as to Note 15)
F-2
<PAGE> 54
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenue.................................................... $633,660 $434,476 $394,363
Operating Expenses:
Cost of sales and services............................... 525,859 368,994 329,042
Research and engineering................................. 12,299 8,621 9,098
Marketing................................................ 26,429 14,169 12,969
General and administrative............................... 28,318 22,709 22,825
Goodwill amortization.................................... 3,266 1,298 691
Unusual charge........................................... 17,200
-------- -------- --------
Total operating expenses................................. 613,371 415,791 374,625
-------- -------- --------
Operating income........................................... 20,289 18,685 19,738
Interest expense........................................... (15,164) (7,383) (5,414)
Interest income............................................ 899 729 500
Other income -- net........................................ 2,734 877 2,014
-------- -------- --------
Income before income taxes, minority interest and
cumulative effect of accounting change................... 8,758 12,908 16,838
Income tax expense (benefit)............................... (1,102) 2,006 1,593
-------- -------- --------
Income before minority interest and cumulative effect of
accounting change........................................ 9,860 10,902 15,245
Minority interest.......................................... (29) 132 684
-------- -------- --------
Income before cumulative effect of accounting change....... 9,889 10,770 14,561
Cumulative effect of change in accounting principle, net of
tax benefit of $5,600,000................................ (10,400)
-------- -------- --------
Net income....................................... $ 9,889 $ 370 $ 14,561
======== ======== ========
Net Income Per Share:
Income per share before cumulative effect of accounting
change................................................ $ .46 $ .69 $ .94
Cumulative effect of change in accounting principle, net
of tax................................................ (.67)
-------- -------- --------
Net income per share............................. $ .46 $ .02 $ .94
======== ======== ========
Weighted average shares outstanding.............. 21,376 15,665 15,456
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE> 55
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 1,842 $ 3,218
Receivables, less allowance for doubtful accounts: 1995, $7,483,000; 1994,
$2,184,000................................................................... 168,771 103,754
Inventories:
Finished goods............................................................... 46,242 30,970
Work in process.............................................................. 2,392 1,118
Raw materials................................................................ 18,217 6,591
-------- --------
Total inventories....................................................... 66,851 38,679
Deferred income taxes.......................................................... 9,370 4,478
Other current assets........................................................... 10,101 8,230
-------- --------
Total current assets.................................................... 256,935 158,359
Property:
Land........................................................................... 13,031 12,031
Buildings...................................................................... 83,205 47,042
Machinery and equipment........................................................ 634,692 446,739
-------- --------
Total property.......................................................... 730,928 505,812
Less accumulated depreciation.................................................. 314,118 306,968
-------- --------
Property -- net.............................................................. 416,810 198,844
Goodwill, net of amortization.................................................... 193,263 20,998
Deferred income taxes............................................................ 107,889 20,607
Investments and other assets..................................................... 14,786 11,258
-------- --------
$989,683 $410,066
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable -- trade...................................................... $ 85,675 $ 54,609
Short-term borrowings.......................................................... 2,000 2,250
Current portion of long-term debt.............................................. 35,600 31,200
Accrued employee compensation and benefits..................................... 24,885 10,521
Income taxes................................................................... 5,915 7,719
Taxes other than income........................................................ 5,460 2,751
Accrued insurance.............................................................. 12,867 2,637
Other accrued liabilities...................................................... 31,869 9,162
-------- --------
Total current liabilities............................................... 204,271 120,849
Long-term debt................................................................... 259,566 74,700
Deferred income taxes............................................................ 11,496 7,194
Accrued postretirement benefits.................................................. 25,146 15,834
Minority interest and other long-term liabilities................................ 22,409 1,562
Commitments and contingencies
Stockholders' Equity:
Preferred stock (authorized 5,000,000 shares)
Common stock, $.10 par value (authorized 80,000,000 shares; issued and
outstanding 1995 -- 27,951,784 shares, 1994 -- 15,670,903 shares)............ 2,795 1,567
Capital in excess of par....................................................... 415,242 151,340
Retained earnings.............................................................. 53,505 43,616
Cumulative translation adjustment.............................................. (4,747) (4,133)
Unearned compensation.......................................................... (2,463)
-------- --------
Total stockholders' equity.............................................. 466,795 189,927
-------- --------
$989,683 $410,066
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE> 56
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL CUMULATIVE
COMMON IN EXCESS UNEARNED RETAINED TRANSLATION
STOCK OF PAR COMPENSATION EARNINGS ADJUSTMENT TOTAL
------ --------- ------------ -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992........ $1,304 $ 105,374 $ $ 28,685 $ (569) $134,794
Net income....................... 14,561 14,561
Issuance of stock for:
Business acquisition.......... 250 40,537 40,787
Stock options................. 3 504 507
Stock purchase plan........... 4 619 623
Stock performance awards...... 2,855 (2,855)
Amortization of unearned
compensation.................. 500 500
Cumulative translation
adjustment.................... (4,640) (4,640)
------ --------- -------- -------- ------- --------
Balance, September 30, 1993........ 1,561 149,889 (2,355) 43,246 (5,209) 187,132
Net income....................... 370 370
Issuance of stock for:
Stock options................. 2 294 296
Stock purchase plan........... 4 680 684
Stock performance awards...... 944 (944)
Buyback of stock rights.......... (155) (155)
Amortization of unearned
compensation.................. 524 524
Revaluation of stock performance
awards........................ (312) 312
Cumulative translation
adjustment.................... 1,076 1,076
------ --------- -------- -------- ------- --------
Balance, September 30, 1994........ 1,567 151,340 (2,463) 43,616 (4,133) 189,927
Net income....................... 9,889 9,889
Issuance of stock for:
Business acquisition.......... 1,204 262,347 263,551
Stock options................. 2 535 537
Stock purchase plan........... 5 733 738
Stock performance awards...... 17 287 1,803 2,107
Amortization of unearned
compensation.................. 660 660
Cumulative translation
adjustment.................... (614) (614)
------ --------- -------- -------- ------- --------
Balance, September 30, 1995........ $2,795 $ 415,242 $ $ 53,505 $(4,747) $466,795
====== ======== ========== ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE> 57
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 9,889 $ 370 $14,561
Adjustments to reconcile net income to cash provided from
(used for) operating activities:
Cumulative effect of accounting change................ 10,400
Depreciation and amortization......................... 42,064 25,335 24,170
Net (gain) loss on disposal of assets................. (830) (346) 62
Recognition of unearned compensation.................. 2,463 524 500
Deferred income tax benefit........................... (8,861) (4,959) (4,877)
Unusual charge (noncash).............................. 3,646
Minority interest..................................... (29) 132 684
Changes in:
Receivables........................................... (1,091) (9,235) (17,550)
Accounts payable-trade................................ 7,707 8,417 6,687
Inventories........................................... (8,078) (621) (572)
Other current assets and liabilities.................. (1,170) (1,960) (16,481)
Other, net............................................ (6,326) (1,802) (7,499)
--------- -------- --------
Net cash flows provided from (used for) operating
activities............................................... 39,384 26,255 (315)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions......................................... (30,966) (39,345) (37,350)
Proceeds from disposal of assets........................... 5,393 2,588 3,982
Acquisitions of businesses, net of cash acquired........... (203,313) (2,000) (7,400)
--------- -------- --------
Net cash used for investing activities..................... (228,886) (38,757) (40,768)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock..................... 40,787
Proceeds from exercise of stock options and stock purchase
grants................................................... 1,275 980 1,130
Proceeds from (reduction of) borrowings-net................ 192,851 19,120 (689)
Principal payment on long-term notes....................... (6,000) (6,000)
--------- -------- --------
Net cash flows provided from financing activities.......... 188,126 14,100 41,228
Increase (decrease) in cash and cash equivalents........... (1,376) 1,598 145
Cash and cash equivalents at beginning of year............. 3,218 1,620 1,475
--------- -------- --------
Cash and cash equivalents at end of year................... $ 1,842 $ 3,218 $ 1,620
========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE> 58
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
BJ Services Company is a leading provider of pressure pumping and other
oilfield services to the petroleum industry. The consolidated financial
statements include the accounts of BJ Services Company and its majority-owned
subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Certain amounts for 1994 and 1993 have been reclassified in the
accompanying consolidated financial statements to conform to the current year
presentation. The amounts changed were foreign exchange gains and losses,
previously classified as other income -- net and now classified in cost of sales
and services, and goodwill amortization previously classified as other
income -- net and now classified as a separate component of operating expenses.
Net income was not affected by these changes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income per share: Net income per share has been computed by dividing
net income by the weighted average number of outstanding common shares. Common
stock equivalents had no material dilutive effect on the computation of net
income per share for each year presented.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from these estimates.
Cash and cash equivalents: The Company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.
Inventories: Inventories, which consist principally of (a) products which
are consumed in the Company's services provided to customers, (b) spare parts
for equipment used in providing these services and (c) manufactured components
and attachments for equipment used in providing services, are stated primarily
at the lower of average cost or market.
Property: Property is stated at cost less amounts provided for permanent
impairments and includes capitalized interest of $216,000, $541,000 and $167,000
for the years ended September 30, 1995, 1994 and 1993, respectively, on funds
borrowed to finance the construction of capital additions. Depreciation is
generally provided using the straight-line method over the estimated useful
lives of individual items. Leasehold improvements are amortized on a
straight-line basis over the shorter of the estimated useful life or the lease
term.
Goodwill: Goodwill represents the excess of cost over the fair value of the
net assets of companies acquired in purchase transactions. Goodwill is being
amortized on a straight-line method over periods ranging from 5 to 40 years.
Accumulated amortization at September 30, 1995 and 1994 was $5,174,000 and
$1,880,000, respectively. The Company utilizes undiscounted cash flows of
acquired operations to evaluate any possible impairment of the related goodwill.
Investments: Investments in companies in which the Company's ownership
interest ranges from 20 to 50 percent and the Company exercises significant
influence over operating and financial policies are accounted for using the
equity method. Other investments are accounted for using the cost method.
Foreign currency translation: Gains and losses resulting from financial
statement translation of foreign operations where the U.S. dollar is the
functional currency are included in the consolidated statement of operations.
Gains and losses resulting from financial statement translation of foreign
operations where a
F-7
<PAGE> 59
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
foreign currency is the functional currency are included as a separate component
of stockholders' equity. The Company's foreign operations primarily use the U.S.
dollar as the functional currency.
Foreign exchange contracts: From time to time, the Company enters into
forward foreign exchange contracts to hedge the impact of foreign currency
fluctuations on certain assets and liabilities denominated in foreign
currencies. Changes in market value are offset against foreign exchange gains or
losses on the related assets or liabilities and are included in cost of sales
and services. There were no foreign exchange contracts outstanding at September
30, 1995.
Environmental remediation and compliance: Environmental remediation and
compliance costs are accrued based on estimates of known environmental
exposures. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.
3. UNUSUAL CHARGE
During 1995, the Company recorded an unusual charge of $17.2 million ($.52
per share after-tax) for costs incurred in connection with the acquisition of
The Western Company of North America ("Western"). The components of the unusual
charge are as follows:
<TABLE>
<CAPTION>
BALANCE AT
1995 1995 SEPTEMBER 30,
PROVISION EXPENDITURES 1995
--------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Facility closings.............................. $ 5,596(1) $ (5,003)(1) $ 593
Change in control costs........................ 5,381 (4,081) 1,300
Legal and other................................ 4,047 (3,570) 477
Severance costs................................ 2,176 (1,976) 200
------ -------- ------
Total................................ $ 17,200 $(14,630) $ 2,570
====== ======== ======
</TABLE>
- ---------------
(1) Includes $3.6 million noncash impairment of facilities.
The Company and Western both operated facilities in many of the same
locations. Management has made the decision to close the duplicate facilities
previously operated by BJ Services and retain those operated by Western. A
provision was recorded to adjust the carrying value of these duplicate
facilities to estimated net realizable value and accruals were recorded for the
estimated costs associated with their closings, including maintenance of the
facilities until their ultimate sale and relocation of assets. Substantially all
of the duplicate facilities were closed as of September 30, 1995.
The consummation of the Western acquisition triggered the change in control
provision under the Company's 1990 Stock Incentive Plan. As a result, 168,547
performance units previously granted to the Company's executive officers became
fully vested and 168,547 shares of common stock were subsequently issued. The
unusual charge includes an amount for the excess of the value of the performance
units on the date of issuance over the estimated amount which otherwise was
earned had the acquisition not occurred.
The unusual charge also includes legal, severance of BJ employees and other
merger-related costs that would not have been incurred had the acquisition of
Western not occurred.
F-8
<PAGE> 60
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS OF BUSINESSES
In April 1995, the Company acquired Western for total consideration,
including transaction costs, of $511.4 million in cash, Company common stock and
warrants to purchase common stock. The transaction may be summarized as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash................................................... $247,880
Stock issued (12,036,393 shares)....................... 239,551
Warrants issued (4,800,037 warrants)................... 24,000
-----------
Total consideration............................... 511,431
Net assets acquired.................................... 335,891(1)
-----------
Goodwill.......................................... $175,540
===========
</TABLE>
- ---------------
(1) Includes cash acquired of $44.5 million.
This acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Western are included in the financial statements
beginning April 1, 1995. The assets and liabilities of Western have been
recorded on the Company's books at estimated fair market value on April 1, 1995
with the remaining purchase price reflected as goodwill, which is being
amortized on a straight-line basis over 40 years. The following unaudited pro
forma summary presents the consolidated results of operations, excluding
estimated consolidation savings, of the Company for the two years ended
September 30, 1995 and 1994 as if the acquisition had occurred at the beginning
of each fiscal year:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenue........................................................ $807,582 $763,313
Net income (loss) from continuing operations before cumulative
effect of accounting change.................................. 2,308 (15,330)
Net income (loss).............................................. 2,308 (25,730)
Net income (loss) per share from continuing operations before
cumulative effect of accounting change....................... .08 (.55)
Net income (loss) per share.................................... .08 (.92)
</TABLE>
On February 9, 1994, the Company acquired the remaining 50% ownership of
its joint venture in Egypt, Hughes Services C.I., Ltd., for $2.0 million. Prior
to the acquisition, this joint venture was accounted for using the equity method
of accounting.
On April 1, 1993, the Company completed a transaction to acquire the
assets, including existing service contracts, of Norsk Bronnservice A/S, a
subsidiary of Odfjell Drilling & Consulting A/S, for $5.4 million. These
operations provide cementing, gravel packing and completion fluids services to
the Norwegian oil and gas industry.
On July 30, 1993 the Company acquired the coiled tubing operations of
Italog, S.p.A. for $2.0 million. Italog is based in Milan, Italy and provides
coiled tubing and nitrogen pumping services in Italy and Nigeria, under the name
of SIAT. The acquisition included the assets and existing contracts of SIAT.
The 1993 and 1994 acquisitions have been accounted for as purchases and
accordingly, the acquired assets and liabilities have been recorded at their
estimated fair values at the date of acquisition. The excess of the
consideration paid over the estimated fair value of net assets acquired has been
recorded as goodwill and is being amortized over periods ranging from 5 to 40
years.
F-9
<PAGE> 61
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT AND BANK CREDIT FACILITIES
Long-term debt at September 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable, banks........................................... $275,000 $ 81,900
9.2% notes due August 1998..................................... 18,000 24,000
Other.......................................................... 2,166
-------- --------
295,166 105,900
Less current maturities of long-term debt...................... 35,600 31,200
-------- --------
Long-term debt................................................. $259,566 $ 74,700
======== ========
</TABLE>
On April 15, 1995, the Company canceled its existing credit facility and
the outstanding borrowings were repaid with funds from a committed, unsecured
credit facility ("Bank Credit Facility") executed to accommodate the acquisition
of Western. The Bank Credit Facility consists of a five-year $175.0 million
revolver and a six-year $225.0 million term loan, providing an aggregate of
$400.0 million in available principal borrowings to the Company. The Company is
charged various fees in connection with this Bank Credit Facility, including a
commitment fee based on the average daily unused portion of the commitment.
Borrowings outstanding under the Bank Credit Facility at September 30, 1995
amounted to $275.0 million, which is comprised of $225.0 million under the term
loan and $50.0 million under the revolver. Interest is charged on outstanding
borrowings based on current market rates. The weighted average interest rate for
such outstanding borrowings was 6.4% at September 30, 1995.
The Bank Credit Facility incorporates a swingline facility allowing the
Company to borrow up to $20.0 million for up to seven days in minimum advances
of $1.0 million. In addition, standby letters of credit are available in an
amount not to exceed $20.0 million. No such borrowings were outstanding at
September 30, 1995.
At September 30, 1995, long-term debt was due in aggregate annual
installments of $35,600,000, $37,200,000, $49,200,000, $48,400,000 and
$98,400,000 in the years ending September 30, 1996, 1997, 1998, 1999 and 2000,
respectively, and an aggregate of $26,366,000 thereafter.
Commitment fees under the Company's credit facilities were $207,206,
$16,223 and $63,679 for 1995, 1994 and 1993, respectively.
In addition to the committed facility, the Company had $50.0 million in
various unsecured, discretionary lines of credit at September 30, 1995 which
expire at various dates in 1996. There are no requirements for commitment fees
or compensating balances in connection with these lines of credit. Interest on
borrowings is based on prevailing market rates. At September 30, 1995, there
were $2.0 million in outstanding borrowings under these lines of credit (none at
September 30, 1994).
In August 1991, the Company placed $30.0 million of unsecured notes (the
"Notes") with private investors. The Notes bear interest at a fixed rate of 9.2%
with principal payments due in five equal annual installments the first of which
was paid in August 1994. From October 1991 to May 1995, the Company entered into
interest rate swap agreements which effectively converted the Notes from fixed
rate debt with an interest rate of 9.2% to floating rate debt. The swap
agreement was liquidated in May 1995 at a loss of $679,000. The agreements
resulted in an average annual effective interest rate of 11.5% (excluding the
loss) and 9.3% on the Notes for 1995 and 1994, respectively.
F-10
<PAGE> 62
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At September 30, 1995, the Company had outstanding letters of credit and
performance related bonds totaling $16.6 million and $14.8 million,
respectively. The letters of credit are issued to guarantee various trade and
insurance activities.
The Company's debt agreements contain various customary covenants including
maintenance of certain profitability and solvency ratios and restrictions on
dividend payments, as defined in the Bank Credit Facility. At September 30,
1995, the Company's debt to capitalization ratio exceeded 35%. As a result, the
Company is prohibited, under its Bank Credit Facility from making any dividend
payments until such time as the ratio drops below 35%. The Company is also
required to make mandatory prepayments from free cash flow (as defined in the
Bank Credit Facility) subject to certain ratios as calculated at the end of each
fiscal year. At September 30, 1995, an estimate of $4 million of such
prepayments has been classified as current maturities of long-term debt.
6. FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Cash and Cash Equivalents, Trade Receivables and Trade Payables: The
carrying amount approximates fair value because of the short maturity of those
instruments.
Long-term Debt: Based on the rates currently available to the Company for
debt with similar terms and average maturities, the fair value of the Company's
Notes is $19.1 million. Other long-term debt consists of borrowings under the
Company's Bank Credit Facility. The carrying amount of such borrowings
approximates fair value as the individual borrowings bear interest at current
market rates.
7. INCOME TAXES
The geographical sources of income (loss) before income taxes, minority
interest and cumulative effect of accounting change for the three years ended
September 30, 1995, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States....................................... $(31,879) $(12,793) $(8,540)
Foreign............................................. 40,637 25,701 25,378
-------- -------- -------
Income before income taxes, minority interest and
cumulative effect of accounting change............ $ 8,758 $ 12,908 $16,838
======== ======== =======
</TABLE>
The provision (benefit) for income taxes for the three years ended
September 30, 1995 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
United States
Foreign........................................... $ 7,759 $ 6,965 $ 6,470
-------- -------- -------
Total current............................. 7,759 6,965 6,470
Deferred:
United States..................................... (8,336) (2,831) (4,414)
Foreign........................................... (525) (2,128) (463)
-------- -------- -------
Total deferred............................ (8,861) (4,959) (4,877)
-------- -------- -------
Income tax expense (benefit)........................ $ (1,102) $ 2,006 $ 1,593
======== ======== =======
</TABLE>
F-11
<PAGE> 63
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated effective income tax rates (as a percent of income before
income taxes, minority interest and cumulative effect of accounting change) for
the three years ended September 30, 1995 varied from the United States statutory
income tax rate for the reasons set forth below:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory rate............................................ 35.0% 35.0% 35.0%
Foreign earnings at varying tax rates..................... (79.8) (17.4) (11.9)
Amortization of excess tax basis over book basis resulting
from separation from former parent...................... (20.4) (13.8) (10.6)
Changes in valuation reserve.............................. (14.5) (3.7)
Foreign income recognized domestically.................... 37.2 25.6 4.3
Goodwill amortization..................................... 10.3 1.3 .9
Nondeductible expenses.................................... 6.1 1.0 .7
Other -- net.............................................. (1.0) (1.6) (5.2)
===== ===== =====
Effective income tax rate (benefit)....................... (12.6)% 15.6% 9.5%
===== ===== =====
</TABLE>
The income tax provisions for 1994 and 1993 included $1,867,000 and
$620,000 of deferred foreign tax benefits related to the recognition of foreign
net loss carryforwards which were reserved for in the valuation account at
September 30, 1993 and September 30, 1992, respectively.
Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations. Generally, deferred tax assets and liabilities are classified as
current or noncurrent according to the classification of the related asset or
liability for financial reporting. The estimated deferred tax effect of
temporary differences and carryforwards at September 30, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred assets:
Expenses accrued for financial reporting, not yet deducted
for tax................................................... $ 45,469 $ 7,956
Net operating loss carryforwards............................. 181,400 44,621
Valuation allowance.......................................... (54,420) (11,164)
-------- --------
Total deferred tax asset....................................... 172,449 41,413
Deferred liabilities:
Differences in depreciable basis of property................. (60,520) (16,838)
Income accrued for financial reporting, not yet reported for
tax....................................................... (6,166) (6,684)
-------- --------
Total deferred tax liability................................... (66,686) (23,522)
-------- --------
Deferred tax asset -- net...................................... $105,763 $ 17,891
======== ========
</TABLE>
The net change in the deferred tax asset valuation allowance reflects
purchase accounting adjustments made to properly state the anticipated future
benefit of the combined net operating loss carryforwards of BJ Services and
Western. The entire deferred tax asset valuation allowance, if realized, will be
recorded as a reduction to goodwill.
At September 30, 1995, the Company had approximately $512 million of U.S.
tax net operating loss carryforwards expiring in varying amounts between 2000
and 2010. As a result of Western having experienced changes in control as
defined in Internal Revenue Code Section 382 in prior years, and in the current
year due
F-12
<PAGE> 64
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to the merger with BJ Services, the usage of approximately $375 million of the
tax net operating loss carryforwards is subject to an annual limitation. The
potential impact that the annual limitation may have on the usage of tax net
operating loss carryforwards has been reflected in the deferred tax asset
valuation allowance.
The Company also has foreign tax net operating loss carryovers of $6.7
million as of September 30, 1995. The foreign tax net operating loss
carryforwards are not subject to an annual limitation and will carryforward
indefinitely.
The Company does not provide federal income taxes on the undistributed
earnings of its foreign subsidiaries that the Company considers to be
permanently reinvested in foreign operations. The cumulative amount of such
undistributed earnings was approximately $147 million at September 30, 1995. If
these earnings were to be remitted to the Company, any U.S. income taxes payable
would be substantially reduced by foreign tax credits generated by the
repatriation of the earnings.
8. GEOGRAPHIC INFORMATION
The Company operates exclusively in one business segment -- the oilfield
services industry. Summarized information concerning geographic areas in which
the Company operated at September 30, 1995, 1994 and 1993 and for each of the
years then ended is shown as follows:
<TABLE>
<CAPTION>
WESTERN HEMISPHERE
-------------------------- EASTERN HEMISPHERE
UNITED LATIN AMERICA --------------------
STATES AND CANADA EUROPE OTHER TOTAL
-------- ------------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995:
Revenue................ $345,922 $ 111,447 $104,840 $71,451 $633,660
Operating income
(loss).............. (13,683) 22,095 4,942 6,935 20,289
Identifiable assets.... 627,545 88,655 201,838 71,645 989,683
1994:
Revenue................ $208,279 $ 75,745 $ 95,181 $55,271 $434,476
Operating income
(loss).............. (2,634) 9,590 4,560 7,169 18,685
Identifiable assets.... 127,561 72,558 156,594 53,353 410,066
1993:
Revenue................ $196,674 $ 60,560 $ 83,553 $53,576 $394,363
Operating income....... 1,694 2,477 6,217 9,350 19,738
Identifiable assets.... 117,543 54,950 150,612 46,426 369,531
</TABLE>
Export sales totaled $2,807,000, $1,392,000 and $1,861,000 for the years
ended September 30, 1995, 1994 and 1993, respectively.
Corporate general and administrative expense, research and engineering
expense and certain other expenses related to worldwide manufacturing and other
support functions benefit both domestic and international operations. An
allocation of these expenses has been made to foreign areas based on total
revenues. The expenses allocated totaled $8,357,000, $6,847,000 and $8,390,000
for the years ended September 30, 1995, 1994 and 1993, respectively.
9. EMPLOYEE BENEFIT PLANS
The Company has a thrift plan whereby eligible employees elect to
contribute from 2% to 12% of their base salaries to an employee benefit trust.
Employee contributions are matched by the Company at the rate of $.50 per $1.00
up to 6% of the employee's base salary. In addition, the Company contributes
between 2% and 5% of each employee's base salary depending on his age as of
January 1 each year as a base contribution.
F-13
<PAGE> 65
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company matching contributions vest immediately while base contributions become
fully vested after five years of employment. The Company's U.S. employees
formerly employed by Western are covered under a thrift plan which is being
merged into the Company's thrift plan effective December 31, 1995. During the
period since the acquisition, the Company intends to match employee
contributions at the same rate as the Company's existing thrift plan. The
Company's contributions to these thrift plans amounted to $2,862,000, $2,551,000
and $2,324,000 in 1995, 1994 and 1993, respectively.
The Company's U.S. employees formerly employed by Western with at least one
year of service are also covered under a defined benefit pension plan as a
carryover from the Western acquisition. Pension benefits are based on years of
service and average compensation for each employee's five consecutive highest
paid years during the last ten years worked. Pension benefits are fully vested
after five years of service.
Management intends to freeze benefits under this plan effective December
31, 1995 and merge all employees under the thrift plan. Management has not yet
made a decision on when to terminate the plan and therefore will fund the
amounts necessary to meet minimum funding requirements under the Employees'
Retirement Income Security Act, as amended. Because management intends to freeze
the plan effective December 31, 1995, the accrued pension liability as of the
acquisition date and the net pension expense since the acquisition date have
been reflected under that assumption. The funded status of this plan as of
September 30, 1995 was as follows (in thousands):
<TABLE>
<S> <C>
Vested benefit obligation........................................ $39,669
=======
Accumulated benefit obligation................................... $40,701
Plan assets at fair value........................................ 34,394
-------
Benefit obligation in excess of plan assets...................... 6,307
Unrecognized gain................................................ 71
-------
Net pension liability.................................. $ 6,378
=======
</TABLE>
Assumptions used in accounting for the Company's U.S. defined benefit plan
are as follows:
<TABLE>
<S> <C>
Weighted average discount rate...................................... 7.3%
Weighted average rate of increase in future compensation............ 5.0%
Weighted average expected long-term rate of return on assets........ 9.0%
</TABLE>
Costs for the period from April 1, 1995 to September 30, 1995 for the
Company's U.S. defined benefit plan were as follows (in thousands):
<TABLE>
<S> <C>
Service cost for benefits earned................................. $ 586
Interest cost on projected benefit obligation.................... 1,382
Actual return on plan assets..................................... (3,267)
Net amortization and deferral.................................... 1,916
-------
Net pension cost....................................... $ 617
=======
</TABLE>
F-14
<PAGE> 66
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company sponsors defined benefit plans for foreign
operations which cover substantially all employees in the United Kingdom and
Venezuela. Due to differences in foreign pension laws and economics, the defined
benefit plans are at least partially unfunded. The funded status of these plans
at September 30, 1995 and 1994 was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation...................................... $ 5,357 $ 4,789
======= =======
Accumulated benefit obligation................................. $ 6,474 $ 5,292
======= =======
Projected benefit obligation..................................... 9,846 7,155
Plan assets at fair value........................................ (6,718) (5,531)
------- -------
Projected benefit obligation in excess of plan assets............ 3,128 1,624
Unrecognized gain (loss)......................................... (1,093) 248
Unrecognized transition asset, net of amortization............... 155 166
Unrecognized prior service cost.................................. (253) (281)
------- -------
Net pension liability............................................ $ 1,937 $ 1,757
======= =======
</TABLE>
Assumptions used in accounting for the Company's international defined
benefit pension plans are as follows:
<TABLE>
<S> <C>
Weighted average discount rate....................................... 6-9%
Weighted average rate of increase in future compensation............. 5-7%
Weighted average expected long-term rate of return on assets......... 9%
</TABLE>
Combined costs for the Company's international defined benefit plans for
the two years ended September 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
Net periodic foreign pension cost:
Service cost for benefits earned................................. $1,090 $ 830
Interest cost on projected benefit obligation.................... 660 497
Actual return on plan assets..................................... (617) (45)
Net amortization and deferral.................................... 158 (391)
------ -----
Net pension cost................................................... $1,291 $ 891
====== =====
</TABLE>
The Company also sponsors a plan whereby certain health care and life
insurance benefits are provided for retired employees (primarily U.S.) and their
eligible dependents if the employee meets specified age and service
requirements. These plans are unfunded and the Company retains the right,
subject to existing agreements, to modify or eliminate these plans.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106"). In accordance with the requirements of SFAS
106, the Company changed its accounting for postretirement benefits from a cash
basis to an accrual basis over an employee's period of service. On October 1,
1993, the Company elected to immediately recognize the cumulative effect of the
change in accounting principle of $16.0 million ($10.4 million after tax, or
$.67 per share).
Effective January 1, 1994 the Company amended its postretirement medical
benefit plan to provide credits based on years of service which could be used to
purchase coverage under the active employee plans.
F-15
<PAGE> 67
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
This change effectively caps the Company's health care inflation rate at a 4%
increase per year. The reduction of approximately $5.7 million in the
accumulated postretirement benefit obligation due to this amendment is being
amortized over the average period of future service to the date of full
eligibility for such postretirement benefits of the active employees.
Postretirement medical benefit costs were $946,000, $639,000 and $590,000 in
1995, 1994 and 1993, respectively.
Net periodic postretirement benefit costs for the two years ended September
30, 1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
Service cost -- benefits attributed to service during the period... $ 807 $ 512
Interest cost on accumulated postretirement benefit obligation..... 1,033 798
Amortization of prior service costs................................ (894) (671)
----- -----
Net periodic postretirement benefit cost........................... $ 946 $ 639
===== ====
</TABLE>
The actuarial and recorded liabilities for these postretirement benefits
were as follows at September 30, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $ 7,680 $ 5,312
Fully eligible active plan participants........................ 3,525 1,569
Other active plan participants................................. 8,988 3,881
------- -------
20,193 10,762
Unrecognized cumulative net gain................................. 776
Unrecognized prior service cost.................................. 4,177 5,072
------- -------
Accrued postretirement benefit liability......................... $25,146 $15,834
======= =======
</TABLE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 7% and a health care cost trend rate of 13%, decreasing ratably
to 5.2% in the year 2020 and thereafter. Increasing the assumed health care cost
trend rates by one percentage point in each year would not have a material
impact on the accumulated postretirement benefit obligation or the net periodic
postretirement benefit cost because these benefits are effectively "capped" by
the Company's 1994 plan amendment.
10. COMMITMENTS AND CONTINGENCIES
The Company through performance of its service operations is sometimes
named as a defendant in litigation, usually relating to claims for bodily
injuries or property damage (including claims for well or reservoir damage). The
Company maintains insurance coverage against such claims to the extent deemed
prudent by management. The Company believes that there are no existing claims of
a potentially material adverse nature for which it has not already provided
appropriate accruals.
Federal, state and local laws and regulations govern the Company's
operation of underground fuel storage tanks. Rather than incur additional costs
to restore and upgrade tanks as required by regulations, management has opted to
remove the existing tanks. The Company is in the process of removing these tanks
and has identified certain tanks with leaks which will require remedial
cleanups. In addition, the Company is conducting a number of environmental
investigations and remedial actions at current and former company locations and,
along with other companies, has been named a potentially responsible party at 10
waste disposal sites. The Company has established an accrual of $13,986,000 for
such environmental matters which management believes to be its best estimate of
the Company's portion of future costs to be incurred. The
F-16
<PAGE> 68
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company also maintains insurance for environmental liabilities which the Company
believes is reasonable based on its knowledge of its industry.
Lease Commitments: At September 30, 1995, the Company had long-term
operating leases covering certain facilities and equipment with varying
expiration dates. Minimum annual rental commitments for the years ended
September 30, 1996, 1997, 1998, 1999 and 2000 are $16,198,000, $12,132,000,
$10,023,000, $6,866,000 and $5,674,000, respectively, and $35,732,000 in the
aggregate thereafter.
11. SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental financial information for the three years ended September 30,
1995 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Consolidated Statement of Operations:
Research and development expense................... $ 6,801 $ 6,421 $ 6,500
Rent expense....................................... 16,759 15,580 11,020
Net foreign exchange gain (loss)................... 1,537 (762) 228
Consolidated Statement of Cash Flows:
Income taxes paid.................................. $ 5,980 $ 6,233 $ 7,168
Interest paid...................................... 12,798 10,330 5,112
Details of acquisitions:
Fair value of assets acquired................... 447,622 1,808 4,483
Liabilities assumed............................. 111,731 501
Goodwill........................................ 175,540 693 2,917
Cash paid for acquisitions, net of cash
acquired...................................... 203,313 2,000 7,400
</TABLE>
In connection with the Acquisition, the Company issued $263,551,000 of
common stock and warrants to Western stockholders.
Other income -- net for the three years ended September 30, 1995 is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Gain (loss) on sales of assets -- net................ $ 830 $ 346 $ (62)
Gain on Argentine bonds.............................. 400 800
Royalty income....................................... 1,385
Dividend income...................................... 430
Other -- net......................................... 89 131 1,276
-------- ------- -------
Other income -- net.................................. $ 2,734 $ 877 $ 2,014
======== ======= =======
</TABLE>
12. EMPLOYEE STOCK PLANS
Stock Option Plans:
The Company's 1990 Stock Incentive Plan and 1995 Incentive Plan (the
"Plans") provide for the granting of options for the purchase of the Company's
common stock ("Common Stock") and other performance based awards to officers,
key employees and nonemployee directors of the Company. Such options vest over a
three year period and are exercisable for periods ranging from one to ten years.
An aggregate of 3,000,000 shares of Common Stock have been reserved for grants,
of which 1,324,386 were available at September 30, 1995.
F-17
<PAGE> 69
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option activity under the Company's Plans is summarized below:
<TABLE>
<CAPTION>
NUMBER OF SHARES 1995 1994 1993
----------------------------------------------------------------- ----- --- ---
(IN THOUSANDS)
<S> <C> <C> <C>
Stock options outstanding, beginning of year..................... 767 621 451
Changes during the year:
Granted (per share):
1995, $16.89 to $21.62...................................... 697
1994, $19.63 to $22.75...................................... 188
1993, $16.28................................................ 195
Exercised/surrendered (per share):
1995, $16.28 to $21.62...................................... (29)
1994, $13.63 to $23.25...................................... (42)
1993, $19.38 to $23.25...................................... (25)
----- --- ---
Stock options outstanding, end of year (per share: $12.00 to
$23.25)........................................................ 1,435 767 621
===== === ===
Stock options exercisable, end of year (per share: $12.00 to
$23.25)........................................................ 630 417 250
===== === ===
</TABLE>
Pursuant to the terms of the 1990 Stock Incentive Plan, during 1993 and
1994 the Company also issued a total of 220,316 Performance Units ("Units") to
officers of the Company. Each Unit represented the right to receive from the
Company at the end of a stipulated period an unrestricted share of Common Stock,
contingent upon achievement of certain financial performance goals over the
stipulated period. Should the Company have failed to achieve the specific
financial goals as set by the Executive Compensation Committee of the Board of
Directors, the Units would have been canceled and the related shares reverted to
the Company for reissuance under the plan. The aggregate fair market value of
the underlying shares granted under this plan was considered unearned
compensation at the time of grant and was adjusted annually based on the current
market price for the Company's Common Stock. Compensation expense was determined
based on management's current estimate of the likelihood of meeting the specific
financial goals and charged ratably over the stipulated period. In connection
with the acquisition of Western, which triggered certain change of control
provisions in the Company's 1990 Stock Incentive Plan, a total of 168,547 Units
were converted into Common Stock and issued to officers, with the remaining
51,769 Units canceled. The difference between the amount accrued as of the
acquisition date and the value of the shares issued has been reflected as an
unusual charge in the accompanying financial statements (see Note 3). As of
September 30, 1995 there were no Units outstanding.
Stock Purchase Plan:
The Company's 1990 Employee Stock Purchase Plan (the "Purchase Plan") is a
plan under which all employees may purchase shares of the Company's Common Stock
at 85% of market value on the first or last business day of the twelve-month
plan period beginning each October, whichever is lower. Such purchases are
limited to 10% of the employee's regular pay. A maximum aggregate of 750,000
shares has been reserved under the Purchase Plan, 576,826 of which were
available for future purchase at September 30, 1995. In October 1995, 55,440
shares were purchased at $16.68 per share.
13. STOCKHOLDERS' EQUITY
Stockholder Rights Plan:
The Company has a Stockholder Rights Plan designed to deter coercive
takeover tactics and to prevent an acquirer from gaining control of the Company
without offering a fair price to all of the Company's stockholders. Under this
plan, each outstanding share of the Company's Common Stock includes one
F-18
<PAGE> 70
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
preferred share purchase right ("Right") which becomes exercisable under certain
circumstances, including when beneficial ownership of the Company's Common Stock
by any person, or group, equals or exceeds 20% of the Company's outstanding
Common Stock. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series Two Junior Participating
Preferred Stock, at a price of $75, subject to adjustment under certain
circumstances. Upon the occurrence of certain events specified in the
Stockholder Rights Plan, each holder of a Right (other than an Acquiring Person)
will have the right, upon exercise of such Right, to receive that number of
shares of common stock of the Company (or the surviving corporation) that, at
the time of such transaction, would have a market price of two times the
purchase price of the Right. No shares of Series Two Junior Participating
Preferred Stock have been issued by the Company at September 30, 1995.
In January 1994, the former Stockholder Rights Plan was triggered and the
Company redeemed all of the preferred share purchase rights issued under its
Stockholder Rights agreement to acquire Series One Junior Participating
Preferred Stock. The Rights were redeemed at a price of $.01 per Right, a total
cost to the Company of $155,000.
Stock Purchase Warrants:
In connection with the acquisition of Western (see Note 4), the Company
issued 4,800,037 stock purchase warrants ("Warrants"). The Warrants were issued
on April 14, 1995 at an initial value of $5.00 per Warrant. Each Warrant
represents the right to purchase one share of the Company's common stock at an
exercise price of $30, until the expiration date of April 13, 2000. As of
September 30, 1995, no Warrants had been exercised.
F-19
<PAGE> 71
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL
FIRST SECOND THIRD FOURTH YEAR
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Fiscal Year 1995:
Revenue............................ $119,415 $106,668 $199,542 $208,035 $633,660
Gross profit(a).................... 17,753 13,788 28,782 35,179 95,502
Net income (loss).................. 4,744 1,378 (5,848)(b) 9,615(c)(d) 9,889
Net income (loss) per share........ .30 .09 (.22)(b) .34(c)(d) .46
Fiscal Year 1994:
Revenue............................ $104,757 $ 98,451 $106,318 $124,950 $434,476
Gross profit(a).................... 15,071 10,325 13,327 18,138 56,861
Income before cumulative effect of
accounting change................ 3,572 445 2,067 4,686(e) 10,770
Cumulative effect of change in
accounting principle, net of tax
benefit of $5,600,000............ (10,400) (10,400)
Net income (loss).................. (6,828) 445 2,067 4,686(e) 370
Net income (loss) per share:
Before cumulative effect of
accounting change............. .23 .03 .13 .30(e) .69
Cumulative effect of change in
accounting principle, net of
tax........................... (.67) (.67)
Net income (loss) per share........ (.44) .03 .13 .30(e) .02
</TABLE>
- ---------------
(a) Represents revenue less cost of sales and services and research and
engineering expenses.
(b) Includes $16.0 million ($10.4 million after tax or $.40 per share) unusual
charge resulting from the acquisition of Western. See Note 3.
(c) Includes $1.2 million ($.8 million after tax or $.03 per share) unusual
charge resulting from the acquisition of Western. See Note 3.
(d) Includes $1.5 million ($.05 per share) of nonrecurring tax benefits.
(e) Includes $1.3 million ($.08 per share) of nonrecurring tax benefits.
15. SUPPLEMENTAL GUARANTOR INFORMATION
On February 20, 1996, BJ Services Company ("Parent") issued $125 million of
7% notes due 2006 ("Notes") as to which its direct subsidiaries BJ Services
Company, U.S.A., BJ Service International, Inc. and BJ Services Company Middle
East (collectively "Guarantor Subsidiaries" and individually "Guarantor") have
guaranteed, on a joint and several basis, its obligation to pay principal and
interest with respect to the Notes. Each of the guarantees is an unsecured
obligation of the Guarantor and ranks pari passu with the guarantees provided by
and the obligations of such Guarantor Subsidiaries under the Bank Credit
Facility and the obligations of such Guarantor Subsidiaries under the 9.2% Notes
and with all existing and future unsecured indebtedness of such Guarantor for
borrowed money that is not, by its terms, expressly subordinated in right of
payment to such guarantee.
Substantially all of the Company's operating income and cash flow is
generated by its subsidiaries. As a result, funds necessary to meet the
Company's debt service obligations are provided in part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of the Company's subsidiaries, could limit the Company's
F-20
<PAGE> 72
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ability to obtain cash from its subsidiaries for the purpose of meeting its debt
service obligations, including the payment of principal and interest on the
Notes. Although holders of the Notes will be direct creditors of the Company's
principal direct subsidiaries by virtue of the guarantees, the Company has
subsidiaries ("Non-Guarantor Subsidiaries") that are not included among the
Guarantors, and such subsidiaries will not be obligated with respect to the
Notes. As a result, the claims of creditors of the Non-Guarantor Subsidiaries
will effectively have priority with respect to the assets and earnings of such
companies over the claims of creditors of the Company, including the holders of
the Notes.
The following supplemental consolidating condensed financial statements
present:
1. Consolidating condensed statements of financial position as of
September 30, 1995 and 1994 and consolidating condensed statements of
operations and cash flows for each of the three years in the period ended
September 30, 1995.
2. The Parent and combined Guarantor Subsidiaries and combined
Non-Guarantor Subsidiaries with their investments in subsidiaries accounted
for using the equity method.
3. Elimination entries necessary to consolidate the Parent and all of
its subsidiaries.
The Company does not believe that separate financial statements of the
Guarantors of the Notes are material to investors in the Notes.
F-21
<PAGE> 73
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue.............................. $ $392,207 $267,755 $(26,302) $633,660
Operating Expenses:
Cost of sales and services......... 345,937 206,224 (26,302) 525,859
Research and engineering........... 11,505 794 12,299
Marketing.......................... 19,146 7,283 26,429
General and administrative......... 16,055 12,263 28,318
Goodwill amortization.............. 2,573 693 3,266
Unusual charge..................... 17,200 17,200
------ -------- -------- -------- --------
Total operating expenses... 412,416 227,257 (26,302) 613,371
------ -------- -------- -------- --------
Operating income (loss).............. (20,209) 40,498 20,289
Interest income...................... 1,384 672 (1,157) 899
Interest expense..................... (12,090) (4,231) 1,157 (15,164)
Income from equity investees......... 9,889 29,373 (39,262)
Other income -- net.................. 2,683 80 2,763
------ -------- -------- -------- --------
Income (loss) before income taxes.... 9,889 1,141 37,019 (39,262) 8,787
Income tax expense (benefit)......... (8,748) 7,646 (1,102)
------ -------- -------- -------- --------
Net income........................... $9,889 $ 9,889 $ 29,373 $(39,262) $ 9,889
====== ======== ======== ======== ========
</TABLE>
F-22
<PAGE> 74
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue............................... $ $249,716 $209,909 $(25,149) $434,476
Operating Expenses:
Cost of sales and services.......... 228,071 166,072 (25,149) 368,994
Research and engineering............ 7,671 950 8,621
Marketing........................... 8,608 5,561 14,169
General and administrative.......... 12,025 10,684 22,709
Goodwill amortization............... 1,274 24 1,298
---- -------- -------- -------- --------
Total operating expenses.... 257,649 183,291 (25,149) 415,791
---- -------- -------- -------- --------
Operating income (loss)............... (7,933) 26,618 18,685
Interest income....................... 2,869 (2,140) 729
Interest expense...................... (6,685) (2,838) 2,140 (7,383)
Income from equity investees.......... 370 17,504 (17,874)
Other income (expense) -- net......... 1,830 (1,085) 745
---- -------- -------- -------- --------
Income before income taxes and
cumulative effect of accounting
change.............................. 370 7,585 22,695 (17,874) 12,776
Income tax expense (benefit).......... (3,185) 5,191 2,006
---- -------- -------- -------- --------
Income before cumulative effect of
accounting change................... 370 10,770 17,504 (17,874) 10,770
Cumulative effect of change in
accounting principle, net of tax.... (10,400) (10,400)
---- -------- -------- -------- --------
Net income............................ $370 $ 370 $ 17,504 $(17,874) $ 370
==== ======== ======== ======== ========
</TABLE>
F-23
<PAGE> 75
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue............................. $ $228,682 $184,431 $(18,750) $394,363
Operating Expenses:
Cost of sales and services........ 205,971 141,821 (18,750) 329,042
Research and engineering.......... 8,035 1,063 9,098
Marketing......................... 8,854 4,115 12,969
General and administrative........ 11,879 10,946 22,825
Goodwill amortization............. 691 691
------ -------- -------- -------- --------
Total operating
expenses................ 235,430 157,945 (18,750) 374,625
------ -------- -------- -------- --------
Operating income (loss)............. (6,748) 26,486 19,738
Interest income..................... 3,081 (1,099) (1,482) 500
Interest expense.................... (6,268) (628) 1,482 (5,414)
Income from equity investees........ 14,561 17,566 (32,127)
Other income (expense) -- net....... 1,359 (29) 1,330
------ -------- -------- -------- --------
Income before income taxes.......... 14,561 8,990 24,730 (32,127) 16,154
Income tax expense (benefit)........ (5,571) 7,164 1,593
------ -------- -------- -------- --------
Net income.......................... $14,561 $ 14,561 $ 17,566 $(32,127) $ 14,561
====== ======== ======== ======== ========
</TABLE>
F-24
<PAGE> 76
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
SEPTEMBER 30, 1995
ASSETS
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........ $ $ 1,842 $ $ $ 1,842
Receivables -- net............... 87,118 81,653 168,771
Inventories -- net............... 38,463 28,388 66,851
Deferred income taxes............ 9,370 9,370
Other current assets............. 3,163 6,938 10,101
-------- -------- -------- --------- --------
Total current assets..... 139,956 116,979 256,935
Investment in subsidiaries....... 171,612 107,653 (279,265)
Intercompany advances -- net..... 296,156 (296,156)
Property -- net.................. 261,713 155,097 416,810
Deferred income taxes............ 92,447 15,442 107,889
Goodwill and other assets........ 205,403 2,646 208,049
-------- -------- -------- --------- --------
Total assets............. $467,768 $807,172 $290,164 $ (575,421) $989,683
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................. $ $ 60,677 $ 24,998 $ $ 85,675
Short-term borrowings and current
portion of long-term debt..... 37,600 37,600
Accrued employee compensation and
benefits...................... 16,277 8,608 24,885
Income and other taxes........... 7 4,097 7,271 11,375
Other accrued liabilities........ 966 29,959 16,648 (2,837) 44,736
-------- -------- -------- --------- --------
Total current
liabilities............ 973 148,610 57,525 (2,837) 204,271
Long-term debt..................... 222,566 37,000 259,566
Deferred income taxes.............. 2,248 9,248 11,496
Accrued post retirement benefits
and other........................ 46,902 653 47,555
Intercompany advances -- net....... 215,234 78,085 (293,319)
Stockholders' equity............... 466,795 171,612 107,653 (279,265) 466,795
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity... $467,768 $807,172 $290,164 $ (575,421) $989,683
======== ======== ======== ========= ========
</TABLE>
F-25
<PAGE> 77
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
SEPTEMBER 30, 1994
ASSETS
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........ $ $ 3,218 $ $ $ 3,218
Receivables -- net............... 45,086 58,668 103,754
Inventories -- net............... 18,452 20,227 38,679
Deferred income taxes............ 4,478 4,478
Other current assets............. 2,751 5,479 8,230
-------- -------- -------- --------- --------
Total current assets..... 73,985 84,374 158,359
Investment in subsidiaries......... 159,260 84,008 (243,268)
Intercompany advances -- net....... 30,674 (30,674)
Property -- net.................... 91,270 107,574 198,844
Deferred income taxes.............. 16,365 4,242 20,607
Goodwill and other assets.......... 28,816 3,440 32,256
-------- -------- -------- --------- --------
Total assets............. $189,934 $294,444 $199,630 $ (273,942) $410,066
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................. $ $ 33,812 $ 20,797 $ $ 54,609
Short-term borrowings and current
portion of long-term debt..... 31,200 2,250 33,450
Accrued employee compensation and
benefits...................... 4,023 6,498 10,521
Income and other taxes........... 7 2,133 8,330 10,470
Other accrued liabilities........ 6,484 6,041 (726) 11,799
-------- -------- -------- --------- --------
Total current
liabilities............ 7 77,652 43,916 (726) 120,849
Long-term debt..................... 37,639 37,061 74,700
Deferred income taxes.............. 2,248 4,946 7,194
Accrued post retirement benefits
and other........................ 15,895 1,501 17,396
Intercompany advance -- net........ 1,750 28,198 (29,948)
Stockholders' equity............... 189,927 159,260 84,008 (243,268) 189,927
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity... $189,934 $294,444 $199,630 $ (273,942) $410,066
======== ======== ======== ========= ========
</TABLE>
F-26
<PAGE> 78
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income......................... $ 9,889 $ 9,889 $ 29,373 ($39,262) $ 9,889
Adjustments to reconcile net income
to cash provided by operating
activities:
Unusual charge (noncash)......... 3,646 3,646
Depreciation and amortization.... 22,688 19,376 42,064
Net gain on disposal of assets... (27) (803) (830)
Recognition of unearned
compensation.................. 2,463 2,463
Deferred income taxes
(benefit)..................... (8,336) (525) (8,861)
Income of equity investees....... (9,889) (29,373) 39,262
Changes in:
Receivables...................... 21,894 (22,985) (1,091)
Accounts payable................. 3,506 4,201 7,707
Inventories...................... 83 (8,161) (8,078)
Other current assets and
liabilities................... 966 (10,224) 10,199 (2,111) (1,170)
Other, net....................... (2,241) 2,167 (8,392) 2,111 (6,355)
------- -------- -------- -------- ---------
Net cash provided by
(used for) operating
activities............. (1,275) 18,376 22,283 39,384
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property additions............... (8,263) (22,703) (30,966)
Proceeds from disposal of
assets........................ 2,662 2,731 5,393
Acquisition of business, net of
cash acquired................. (203,313) (203,313)
------- -------- -------- -------- ---------
Net cash used for
investing activities... (208,914) (19,972) (228,886)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
stock......................... 1,275 1,275
Proceeds from (reduction of)
borrowings -- net............. 189,162 (2,311) 186,851
------- -------- -------- -------- ---------
Net cash provided by
(used for) financing
activities............. 1,275 189,162 (2,311) 188,126
Decrease in cash and cash
equivalents...................... (1,376) (1,376)
Cash and cash equivalents at
beginning of period.............. 3,218 3,218
------- -------- -------- -------- ---------
Cash and cash equivalents at end of
period........................... $ $ 1,842 $ $ $ 1,842
======= ======== ======== ======== =========
</TABLE>
F-27
<PAGE> 79
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $ 370 $ 370 $ 17,504 $(17,874) $ 370
Adjustments to reconcile net income to
cash provided by operating activities:
Cumulative effect of accounting
change............................... 10,400 10,400
Depreciation and amortization........... 9,988 15,347 25,335
Net gain on disposal of assets.......... (148) (198) (346)
Recognition of unearned compensation.... 524 524
Deferred income taxes (benefit)......... (2,831) (2,128) (4,959)
Income of equity investees.............. (370) (17,504) 17,874
Changes in:
Receivables............................. (2,666) (6,569) (9,235)
Accounts payable........................ 5,165 3,252 8,417
Inventories............................. 57 (678) (621)
Other current assets and liabilities.... (2,786) 1,298 (472) (1,960)
Other, net.............................. (980) 2,975 (4,137) 472 (1,670)
----- -------- -------- -------- --------
Net cash provided by (used for)
operating activities.......... (980) 3,544 23,691 26,255
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions...................... (13,343) (26,002) (39,345)
Proceeds from disposal of assets........ 1,059 1,529 2,588
Acquisition of business, net of cash
acquired............................. (2,000) (2,000)
----- -------- -------- -------- --------
Net cash used for investing
activities.................... (12,284) (26,473) (38,757)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock......... 980 980
Proceeds from borrowings -- net......... 10,338 2,782 13,120
----- -------- -------- -------- --------
Net cash provided by financing
activities.................... 980 10,338 2,782 14,100
Increase in cash and cash equivalents..... 1,598 1,598
Cash and cash equivalents at beginning of
period.................................. 1,620 1,620
----- -------- -------- -------- --------
Cash and cash equivalents at end of
period.................................. $ $ 3,218 $ $ $ 3,218
===== ======== ======== ======== ========
</TABLE>
F-28
<PAGE> 80
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income......................... $ 14,561 $ 14,561 $ 17,566 ($32,127) $ 14,561
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization.... 9,352 14,818 24,170
Net loss on disposal of assets... 62 62
Recognition of unearned
compensation.................. 500 500
Deferred income taxes
(benefit)..................... (4,414) (463) (4,877)
Income of equity investees....... (14,561) (17,566) 32,127
Changes in:
Receivables...................... (5,812) (11,738) (17,550)
Accounts payable................. 2,240 4,447 6,687
Inventories...................... 2,476 (3,048) (572)
Other current assets and
liabilities................... (180) (4,949) (11,088) (264) (16,481)
Other, net....................... (15,618) (5,468) 14,007 264 (6,815)
-------- -------- -------- -------- --------
Net cash provided by
(used for) operating
activities............. (15,798) (9,018) 24,501 (315)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property additions............... (6,809) (30,541) (37,350)
Proceeds from disposal of
assets........................ 2,043 1,939 3,982
Acquisition of business, net of
cash acquired................. (7,400) (7,400)
-------- -------- -------- -------- --------
Net cash used for
investing activities... (4,766) (36,002) (40,768)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
stock......................... 41,917 41,917
Proceeds from (reduction of)
borrowings -- net............. (26,119) 13,929 11,501 (689)
-------- -------- -------- -------- --------
Net cash provided by
financing activities... 15,798 13,929 11,501 41,228
Increase in cash and cash
equivalents...................... 145 145
Cash and cash equivalents at
beginning of period.............. 1,475 1,475
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period........................... $ $ 1,620 $ $ $ 1,620
======== ======== ======== ======== ========
</TABLE>
F-29
<PAGE> 81
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-30
<PAGE> 82
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Revenue................................................................ $206,501 $119,415
Operating expenses:
Cost of sales and services........................................... 167,086 99,599
Research and engineering............................................. 3,744 2,063
Marketing............................................................ 8,283 3,944
General and administrative........................................... 8,489 6,104
Goodwill amortization................................................ 1,342 289
-------- --------
Total operating expenses..................................... 188,944 111,999
-------- --------
Operating income....................................................... 17,557 7,416
Interest expense....................................................... (5,538) (2,307)
Interest income........................................................ 79 137
Other income -- net.................................................... 600 836
-------- --------
Income before income taxes............................................. 12,698 6,082
Income taxes........................................................... 3,553 1,338
-------- --------
Net income............................................................. $ 9,145 $ 4,744
======== ========
Net income per share................................................... $ .33 $ .30
======== ========
Average shares outstanding............................................. 28,015 15,716
======== ========
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
F-31
<PAGE> 83
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1995
---------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 3,799 $ 1,842
Receivables -- net............................................... 173,633 168,771
Inventories:
Finished goods................................................ 56,949 50,665
Work in process............................................... 2,543 2,394
Raw materials................................................. 13,348 13,792
---------- --------
Total inventories........................................ 72,840 66,851
Deferred income taxes............................................ 11,135 9,370
Other current assets............................................. 11,591 10,101
---------- --------
Total current assets..................................... 272,998 256,935
Property -- net.................................................... 414,792 416,810
Deferred income taxes.............................................. 106,800 107,889
Goodwill and other assets.......................................... 207,508 208,049
---------- --------
$1,002,098 $ 989,683
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 90,534 $ 85,675
Short-term borrowings and current portion of long-term debt...... 47,681 37,600
Accrued employee compensation and benefits....................... 21,169 24,885
Income and other taxes........................................... 13,481 11,375
Accrued insurance................................................ 10,755 12,867
Other accrued liabilities........................................ 29,674 31,869
---------- --------
Total current liabilities................................ 213,294 204,271
Long-term debt..................................................... 252,181 259,566
Deferred income taxes.............................................. 11,877 11,496
Accrued post retirement benefits and other......................... 46,475 47,555
Stockholders' equity............................................... 478,271 466,795
---------- --------
$1,002,098 $ 989,683
========== ========
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
F-32
<PAGE> 84
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1995 1994
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $ 9,145 $ 4,744
Adjustments to reconcile net income to cash provided by operating
activities:
Amortization of unearned compensation................................. 330 330
Depreciation and amortization......................................... 14,371 6,675
Deferred income taxes (benefit)....................................... 571 (1,057)
Net (gain) loss on disposal of property............................... 16 (687)
Changes in:
Receivables........................................................... (1,918) 844
Inventories........................................................... (3,958) (166)
Accounts payable...................................................... 4,002 (8,881)
Other current assets and liabilities.................................. (9,860) 5,744
Other, net............................................................ 398 1,923
-------- -------
Net cash provided by operating activities..................... 13,097 9,469
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions.................................................... (10,408) (6,093)
Proceeds from disposal of assets...................................... 319 3,328
Acquisition of business, net of cash acquired......................... (3,700)
-------- -------
Net cash used for investing activities........................ (13,789) (2,765)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (reduction of) borrowings............................... 987 (3,737)
Proceeds from issuance of stock....................................... 1,662 749
-------- -------
Net cash provided by (used for) financing activities.......... 2,649 (2,988)
Increase in cash and cash equivalents................................... 1,957 3,716
Cash and cash equivalents at beginning of period........................ 1,842 3,218
-------- -------
Cash and cash equivalents at end of period.............................. $ 3,799 $ 6,934
======== =======
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements
F-33
<PAGE> 85
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL
In the opinion of management, the unaudited consolidated condensed
financial statements for BJ Services Company (the "Company") include all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the financial position as of December 31, 1995, and the
results of operations and cash flows for each of the three month periods ended
December 31, 1995 and 1994. The consolidated condensed statement of financial
position at September 30, 1995 is derived from the September 30, 1995 audited
consolidated financial statements. Although management believes the disclosures
in these financial statements are adequate to make the information presented not
misleading, certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results of operations
and the cash flows for the three-month period ended December 31, 1995 are not
necessarily indicative of the results to be expected for the full year.
Certain amounts for fiscal 1995 have been reclassified in the accompanying
consolidated condensed financial statements to conform to the current year
presentation.
2. ACQUISITION OF BUSINESS
Effective December 1, 1995, the Company acquired the remaining 60%
ownership of its previously unconsolidated joint venture in Brazil, for total
consideration of $5.4 million consisting of $3.7 million in cash and $1.7
million in debt assumed by the Company. This acquisition was accounted for as a
purchase and, accordingly, the acquired assets and liabilities have been
recorded at their estimated fair values at the date of acquisition. The
consolidated statement of operations includes operating results of the
subsidiary acquired since the date of acquisition. This acquisition is not
material to the Company's financial statements and therefore pro forma
information is not presented.
3. SUPPLEMENTAL GUARANTOR INFORMATION
On February 20, 1996, BJ Services Company ("Parent") issued $125 million of
7% notes due 2006 ("Notes") as to which its direct subsidiaries BJ Services
Company, U.S.A., BJ Service International, Inc. and BJ Services Company Middle
East (collectively "Guarantor Subsidiaries" and individually "Guarantor") have
guaranteed, on a joint and several basis, its obligation to pay principal and
interest with respect to the Notes. Each of the guarantees is an unsecured
obligation of the Guarantor and ranks pari passu with the guarantees provided by
and the obligation of such Guarantor Subsidiaries under the Bank Credit Facility
and the obligations of such Guarantor Subsidiaries under the 9.2% Notes and with
all existing and future unsecured indebtedness of such Guarantor for borrowed
money that is not, by its terms, expressly subordinated in right of payment to
such guarantee.
Substantially all of the Company's operating income and cash flow is
generated by its subsidiaries. As a result, funds necessary to meet the
Company's debt service obligations are provided in part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of the Company's subsidiaries, could limit the Company's ability to
obtain cash from its subsidiaries for the purpose of meeting its debt service
obligations, including the payment of principal and interest on the Notes.
Although holders of the Notes will be direct creditors of the Company's
principal direct subsidiaries by virtue of the guarantees, the Company has
subsidiaries ("Non-Guarantor Subsidiaries") that are not included among the
Guarantors, and such subsidiaries will not be obligated with respect to the
Notes. As a result, the claims of creditors of the Non-Guarantor Subsidiaries
will effectively have priority with respect to the assets and earnings of such
companies over the claims of creditors of the Company, including the holders of
the Notes.
F-34
<PAGE> 86
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
The following supplemental consolidating condensed financial statements
present:
1. Consolidating condensed statements of financial position as of
December 31, 1995 and September 30, 1995 and consolidating condensed
statements of operations and cash flows for each of the three-month periods
ended December 31, 1995 and 1994.
2. The Parent and combined Guarantor Subsidiaries and combined
Non-Guarantor Subsidiaries with their investments in subsidiaries accounted
for using the equity method.
3. Elimination entries necessary to consolidate the Parent and all of
its subsidiaries.
The Company does not believe that separate financial statements of the
Guarantors of the Notes are material to investors in the Notes.
F-35
<PAGE> 87
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue.............................. $ $140,027 $ 75,027 $ (8,553) $206,501
Operating Expenses:
Cost of sales and services......... 118,296 57,343 (8,553) 167,086
Research and engineering........... 3,558 186 3,744
Marketing.......................... 6,542 1,741 8,283
General and administrative......... 5,177 3,312 8,489
Goodwill amortization.............. 1,167 175 1,342
------ -------- ------- -------- --------
Total operating expenses... 134,740 62,757 (8,553) 188,944
------ -------- ------- -------- --------
Operating income..................... 5,287 12,270 17,557
Interest income...................... 363 78 (362) 79
Interest expense..................... (4,808) (1,092) 362 (5,538)
Income from equity investees......... 9,145 7,769 (16,914)
Other income (expense) -- net........ 623 (23) 600
------ -------- ------- -------- --------
Income before income taxes........... 9,145 9,234 11,233 (16,914) 12,698
Income tax expense................... 89 3,464 3,553
------ -------- ------- -------- --------
Net income........................... $9,145 $ 9,145 $ 7,769 $(16,914) $ 9,145
====== ======== ======= ======== ========
</TABLE>
F-36
<PAGE> 88
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue............................. $ $ 68,101 $ 56,468 $ (5,154) $119,415
Operating Expenses:
Cost of sales and services........ 60,376 44,377 (5,154) 99,599
Research and engineering.......... 1,754 309 2,063
Marketing......................... 2,316 1,628 3,944
General and administrative........ 3,224 2,880 6,104
Goodwill amortization............. 117 172 289
------ ------- ------- ------- --------
Total operating
expenses................ 67,787 49,366 (5,154) 111,999
------ ------- ------- ------- --------
Operating income.................... 314 7,102 7,416
Interest income..................... 348 137 (348) 137
Interest expense.................... (757) (1,898) 348 (2,307)
Income from equity investees........ 4,744 3,284 (8,028)
Other income (expense) -- net....... 620 216 836
------ ------- ------- ------- --------
Income before income taxes.......... 4,744 3,809 5,557 (8,028) 6,082
Income tax expense (benefit)........ (935) 2,273 1,338
------ ------- ------- ------- --------
Net income.......................... $ 4,744 $ 4,744 $ 3,284 $ (8,028) $ 4,744
====== ======= ======= ======= ========
</TABLE>
F-37
<PAGE> 89
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ $ 3,799 $ $ $ 3,799
Receivables -- net............... 93,965 79,668 173,633
Inventories -- net............... 41,410 31,430 72,840
Deferred income taxes............ 11,135 11,135
Other current assets............. 4,437 7,154 11,591
-------- -------- -------- --------- ----------
Total current assets..... 154,746 118,252 272,998
Investment in subsidiaries....... 181,088 115,749 (296,837)
Intercompany advances -- net..... 297,975 (297,975)
Property -- net.................. 255,697 159,196 (101) 414,792
Deferred income taxes............ 90,546 16,254 106,800
Goodwill and other assets........ 206,028 1,480 207,508
-------- -------- -------- --------- ----------
Total assets............. $479,063 $822,766 $295,182 $ (594,913) $ 1,002,098
======== ======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................. $ $ 62,206 $ 28,328 $ $ 90,534
Short-term borrowings and current
portion of long-term debt..... 46,385 1,296 47,681
Accrued employee compensation and
benefits...................... 12,486 8,683 21,169
Income and other taxes........... 7 5,005 8,469 13,481
Other accrued liabilities........ 785 29,673 17,387 (7,416) 40,429
-------- -------- -------- --------- ----------
Total current
liabilities............ 792 155,755 64,163 (7,416) 213,294
Long-term debt..................... 214,768 37,413 252,181
Deferred income taxes.............. 2,248 9,629 11,877
Accrued post retirement benefits
and other........................ 45,765 710 46,475
Intercompany advances -- net....... 223,142 67,518 (290,660)
Stockholders' equity............... 478,271 181,088 115,749 (296,837) 478,271
-------- -------- -------- --------- ----------
Total liabilities and
stockholders' equity... $479,063 $822,766 $295,182 ($ 594,913) $ 1,002,098
======== ======== ======== ========= ==========
</TABLE>
F-38
<PAGE> 90
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ $ 1,842 $ $ $ 1,842
Receivables -- net............... 87,118 81,653 168,771
Inventories -- net............... 38,463 28,388 66,851
Deferred income taxes............ 9,370 9,370
Other current assets............. 3,163 6,938 10,101
-------- -------- -------- --------- --------
Total current assets..... 139,956 116,979 256,935
Investment in subsidiaries......... 171,612 107,653 (279,265)
Intercompany advances -- net....... 296,156 (296,156)
Property -- net.................... 261,713 155,097 416,810
Deferred income taxes.............. 92,447 15,442 107,889
Goodwill and other assets.......... 205,403 2,646 208,049
-------- -------- -------- --------- --------
Total assets............. $467,768 $807,172 $290,164 $ (575,421) $989,683
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................. $ $ 60,677 $ 24,998 $ $ 85,675
Short-term borrowings and current
portion of long-term debt..... 37,600 37,600
Accrued employee compensation and
benefits...................... 16,277 8,608 24,885
Income and other taxes........... 7 4,097 7,271 11,375
Other accrued liabilities........ 966 29,959 16,648 (2,837) 44,736
-------- -------- -------- --------- --------
Total current
liabilities............ 973 148,610 57,525 (2,837) 204,271
Long-term debt..................... 222,566 37,000 259,566
Deferred income taxes.............. 2,248 9,248 11,496
Accrued post retirement benefits
and other........................ 46,902 653 47,555
Intercompany advances -- net....... 215,234 78,085 (293,319)
Stockholders' equity............... 466,795 171,612 107,653 (279,265) 466,795
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity... $467,768 $807,172 $290,164 $ (575,421) $989,683
======== ======== ======== ========= ========
</TABLE>
F-39
<PAGE> 91
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income.......................... $ 9,145 $ 9,145 $ 7,769 $(16,914) $ 9,145
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization..... 8,801 5,570 14,371
Net loss on disposal of assets.... 16 16
Recognition of unearned
compensation................... 330 330
Deferred income taxes............. 136 435 571
Income of equity investees........ (9,145) (7,769) 16,914
Changes in:
Receivables....................... (6,847) 4,929 (1,918)
Accounts payable.................. 1,529 2,473 4,002
Inventories....................... (2,947) (1,011) (3,958)
Other current assets and
liabilities.................... (181) (6,208) 1,108 (4,579) (9,860)
Other, net........................ (1,481) 9,229 (11,929) 4,579 398
------- ------- -------- -------- --------
Net cash provided by (used
for) operating
activities.............. (1,662) 5,399 9,360 13,097
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property additions................ (4,429) (5,979) (10,408)
Proceeds from disposal of
assets......................... 319 319
Acquisition of business, net of
cash acquired.................. (3,700) (3,700)
------- ------- -------- -------- --------
Net cash used for
investing activities.... (4,429) (9,360) (13,789)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of stock... 1,662 1,662
Proceeds from (reduction of)
borrowings -- net.............. 987 987
------- ------- -------- -------- --------
Net cash provided by
financing activities.... 1,662 987 2,649
Increase in cash and cash
equivalents....................... 1,957 1,957
Cash and cash equivalents at
beginning of period............... 1,842 1,842
------- ------- -------- -------- --------
Cash and cash equivalents at end of
period............................ $ 3,799 $ 3,799
======= ======= ======== ======== ========
</TABLE>
F-40
<PAGE> 92
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income.......................... $ 4,744 $ 4,744 $ 3,284 $ (8,028) $ 4,744
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization..... 2,494 4,181 6,675
Net gain on disposal of assets.... (687) (687)
Recognition of unearned
compensation................... 330 330
Deferred income taxes (benefit)... (1,057) (1,057)
Income of equity investees........ (4,744) (3,284) 8,028
Changes in:
Receivables....................... (3,178) 4,022 844
Accounts payable.................. (1,707) (7,174) (8,881)
Inventories....................... 17 (183) (166)
Other current assets and
liabilities.................... 4,365 2,186 (807) 5,744
Other, net........................ (749) 3,714 (1,849) 807 1,923
------- ------- ------- ------- -------
Net cash provided by (used
for) operating
activities.............. (749) 6,438 3,780 9,469
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property additions................ (2,140) (3,953) (6,093)
Proceeds from disposal of
assets......................... 1,373 1,955 3,328
------- ------- ------- ------- -------
Net cash used for
investing activities.... (767) (1,998) (2,765)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of stock... 749 749
Proceeds from (reduction of)
borrowings -- net.............. (1,955) (1,782) (3,737)
------- ------- ------- ------- -------
Net cash provided by (used
for) financing
activities.............. 749 (1,955) (1,782) (2,988)
Increase in cash and cash
equivalents....................... 3,716 3,716
Cash and cash equivalents at
beginning of period............... 3,218 3,218
------- ------- ------- ------- -------
Cash and cash equivalents at end of
period............................ $ 6,934 $ 6,934
======= ======= ======= ======= =======
</TABLE>
F-41
<PAGE> 93
===============================================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE GUARANTORS, THE INITIAL PURCHASERS OR ANY OF THEIR RESPECTIVE
AFFILIATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY OR THE
GUARANTORS SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 4
Incorporation of Certain Documents by
Reference............................ 4
Summary................................ 6
The Exchange Offer..................... 13
Use of Proceeds........................ 20
Recent Developments.................... 20
Capitalization......................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 27
Management............................. 34
Description of the Notes............... 36
Plan of Distribution................... 48
Legal Matters.......................... 48
Experts................................ 49
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
===============================================================================
===============================================================================
$125,000,000
EXCHANGE OFFER
[BJ SERVICES COMPANY LOGO]
BJ SERVICES COMPANY
7% SERIES B SENIOR NOTES
DUE 2006
------------------------
PROSPECTUS
------------------------
, 1996
===============================================================================
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
BJ Services Company (the "Company") is governed by Section 145 of the
DGCL which permits a corporation to indemnify certain persons, including
officers and directors, who are (or are threatened to be made) parties to any
threatened, pending or completed action or suit (other than an action by or in
the right of the corporation) by reason of their being directors, officers or
other agents of the corporation.
The Company's Certificate of Incorporation provides that no director
of the Company shall be held personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit. The Company's Certificate of
Incorporation also provides that if the DGCL is amended to authorize further
limitation or elimination of the personal liability of directors, then the
liability of the Company's directors shall be limited or eliminated to the full
extent permitted by the DGCL.
Section 16 of Article III of the Company's Bylaws provides as
follows: (a) the Company shall indemnify every person who is or was a party or
is or was threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Company or any
of its direct or indirect wholly-owned subsidiaries or, while a director,
officer, employee or agent of the Company or any of its direct or indirect
wholly-owned subsidiaries, is or was serving at the request of the Company or
any of its direct or indirect wholly-owned subsidiaries, as a director,
officer, employee, agent or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the full extent permitted by applicable laws provided that the
Company shall not be obligated to indemnify any such person against any such
action, suit or proceeding which is brought by such person against the Company
or any of its direct or indirect wholly owned subsidiaries or the directors of
the Company or any of its direct or indirect wholly owned subsidiaries, other
than an action brought by such person to enforce his rights to indemnification
hereunder, unless a majority of the Board of Directors of the Company shall
have previously approved the bringing of such action, suit or proceeding. The
Company shall indemnify every person who is or was a party or is or was
threatened to be made a party to any action, suit, or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was licensed to practice law and an employee (including an employee who
is or was an officer) of the Company or any of its direct or indirect
wholly-owned subsidiaries and, while acting in the course of such employment
committed or is alleged to have committed any negligent acts, errors or
omissions in rendering professional legal services at the request of the
Company or pursuant to his employment (including, without limitation, rendering
written or oral legal opinions to third parties) against expenses (including
counsel fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
to the full extent permitted by applicable law; provided that the Company
shall not be obligated to indemnify any such person against any action, suit or
proceeding arising out of any adjudicated criminal, dishonest or fraudulent
acts, errors or omissions of such person or any adjudicated willful,
intentional or malicious acts, errors or omissions of such person.
(b) Expenses incurred by an officer or director of the Company or
any of its direct or indirect wholly-owned subsidiaries in defending a civil
or criminal action, suit or proceeding shall be paid by the Company in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company as authorized in this Section 16. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
II-1
<PAGE> 95
(c) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 16 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any provision of law, the Company's Certificate of
Incorporation, the Certificate of Incorporation or Bylaws or other governing
documents of any direct or indirect wholly-owned subsidiary of the Company, or
any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding any of the positions or having any of the relationships referred
to in this Section 16.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of
this Registration Statement:
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
*4.1 Indenture among BJ Services Company, BJ Services Company, U.S.A., BJ Services Company Middle East,
BJ Service International, Inc. and Bank of Montreal Trust Company, Trustee, dated as of February 1,
1996, which includes the form of 7% Series A Notes due 2006 as Exhibit thereto.
*4.2 Registration Rights Agreement, dated as of February 20, 1996, among BJ Services Company, as issuer,
BJ Services Company, U.S.A., BJ Services Company Middle East, and BJ Service International, Inc., as
subsidiary guarantors, and Merrill Lynch & Co., CS First Boston Corporation, BA Securities, Inc., and
Chase Securities, Inc.
*5.1 Opinion of Andrews & Kurth L.L.P. as to the legality of the securities being registered.
*10.1 Third Amendment to Note Agreement dated as of August 1, 1991, by and among the Company, BJ Services
Company, U.S.A., BJ Service International, Inc. and BJ Services Company Middle East for the issuance of
the 9.2% Senior Notes due August 1, 1998.
*10.2 Second Amendment dated as of February 12, 1996 to Credit Agreement dated as of April 13, 1995, among the
Company, BJ Services Company, U.S.A., BJ Service International, Inc., BJ Services Company Middle East,
Bank of America National Trust and Savings Association, as agent, and the other financial institutions
party thereto.
*12.1 Computation of ratio of earnings to fixed charges.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Price Waterhouse LLP.
*23.3 Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
*24.1 Powers of Attorney (included in Part II of the Registration Statement).
*25.1 Statement of Eligibility and Qualification on Form T-1 of Bank of Montreal Trust Company.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------
* Filed herewith.
II-2
<PAGE> 96
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement:
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S- 3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
II-3
<PAGE> 97
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally promptly means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 98
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON,
STATE OF TEXAS, ON THE 5TH DAY OF APRIL, 1996.
BJ SERVICES COMPANY
By: /s/ J. W. STEWART
-------------------------------------
J. W. Stewart
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints J. W. Stewart, Michael
McShane and Margaret Barrett Shannon, and each of them acting alone, as his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any registration statement for
the same offering filed pursuant to Rule 462 under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
and grants unto said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or would do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his or
her substitute and substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the securities act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. W. STEWART Chairman of the Board, President April 5, 1996
- -------------------------------------- and Chief Executive Officer; Director
J. W. Stewart (Principal Executive Officer)
/s/ MICHAEL MCSHANE Vice President-Finance April 5, 1996
- -------------------------------------- and Chief Financial Officer; Director
Michael McShane (Principal Financial Officer)
/s/ MATTHEW D. FITZGERALD Controller April 5, 1996
- --------------------------------------
Matthew D. Fitzgerald (Principal Accounting Officer)
/s/ L. WILLIAM HEILIGBRODT Director April 5, 1996
- --------------------------------------
L. William Heiligbrodt
/s/ JOHN R. HUFF Director April 5, 1996
- --------------------------------------
John R. Huff
/s/ WILLIAM J. JOHNSON Director April 5, 1996
- --------------------------------------
William J. Johnson
Director
- --------------------------------------
Don D. Jordan
/s/ R. A. LEBLANC Director April 5, 1996
- --------------------------------------
R. A. LeBlanc
/s/ JAMES E. McCORMICK Director April 5, 1996
- --------------------------------------
James E. McCormick
/s/ MICHAEL E. PATRICK Director April 5, 1996
- --------------------------------------
Michael E. Patrick
</TABLE>
II-5
<PAGE> 99
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
*4.1 Indenture among BJ Services Company, BJ Services Company, U.S.A., BJ Services Company Middle East,
BJ Service International, Inc. and Bank of Montreal Trust Company, Trustee, dated as of February 1,
1996, which includes the form of 7% Series A Notes due 2006 as Exhibit thereto.
*4.2 Registration Rights Agreement, dated as of February 20, 1996, among BJ Services Company, as issuer,
BJ Services Company, U.S.A., BJ Services Company Middle East, and BJ Service International, Inc., as
subsidiary guarantors, and Merrill Lynch & Co., CS First Boston Corporation, BA Securities, Inc., and
Chase Securities, Inc.
*5.1 Opinion of Andrews & Kurth L.L.P. as to the legality of the securities being registered.
*10.1 Third Amendment to Note Agreement dated as of August 1, 1991, by and among the Company, BJ Services
Company, U.S.A., BJ Service International, Inc. and BJ Services Company Middle East for the issuance of
the 9.2% Senior Notes due August 1, 1998.
*10.2 Second Amendment dated as of February 12, 1996 to Credit Agreement dated as of April 13, 1995, among the
Company, BJ Services Company, U.S.A., BJ Service International, Inc., BJ Services Company Middle East,
Bank of America National Trust and Savings Association, as agent, and the other financial institutions
party thereto.
*12.1 Computation of ratio of earnings to fixed charges.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Price Waterhouse LLP.
*25.1 Statement of Eligibility and Qualification on Form T-1 of Bank of Montreal Trust Company.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------
* Filed herewith.
II-2
<PAGE> 1
================================================================================
BJ SERVICES COMPANY,
AS ISSUER,
THE GUARANTORS NAMED HEREIN,
AS GUARANTORS,
and
BANK OF MONTREAL TRUST COMPANY,
TRUSTEE
--------------------------------
INDENTURE
Dated as of February 1, 1996
--------------------------------
$125,000,000
SERIES A AND SERIES B
7% NOTES DUE 2006
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
----------- -----------------
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10; 7.01(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.04
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
318 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.01
</TABLE>
- -----------------
N.A. means not applicable
* This Cross-Reference Table is not part of this Indenture
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.04 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.01 Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02 Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.03 Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.04 Paying Agent to Hold Money in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.05 Holder Lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.06 Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.07 Replacement Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.08 Outstanding Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.09 Treasury Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.10 Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.12 Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.13 Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 3
COVENANTS . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.01 Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.02 Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.03 SEC Reports; Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.04 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.05 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.06 Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.07 Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.08 Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.09 Limitation on Sale/Leaseback Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.10 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.11 Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 4
SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.01 Limitations on Mergers and Consolidations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.02 Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 5
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.02 Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.03 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.04 Waiver of Existing Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.05 Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.06 Limitations on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.07 Rights of Holders to Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.08 Collection Suit by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.09 Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.10 Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.11 Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 6
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.02 Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.03 Individual Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.04 Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.05 Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.06 Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.07 Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.08 Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.09 Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.10 Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.11 Preferential Collection of Claims Against Company. . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 7
DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.01 Termination of Company's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.02 Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.03 Repayment to Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.04 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 8
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.01 Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.02 With Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 8.03 Compliance with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.04 Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.05 Notation on or Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 9
GUARANTEES OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.01 Unconditional Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.02 Limitation of Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.03 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.04 Execution and Delivery of Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.05 Addition of Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9.06 Release of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.07 Consent to Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.08 Waiver of Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.09 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.01 Trust Indenture Act Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.03 Communication by Holders with Other Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.04 Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.05 Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.06 Rules by Trustee and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.07 Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.08 No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.09 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.10 No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.11 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.13 Counterpart Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.14 Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
-iii-
<PAGE> 6
INDENTURE dated as of February 1, 1996 between BJ Services
Company, a Delaware corporation (the "Company"), the Guarantors named herein
and Bank of Montreal Trust Company, a New York banking corporation (the
"Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
7% Series A Notes due 2006 (the "Series A Securities") and the Company's 7%
Series B Notes due 2006 (the "Series B Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Adjusted Net Assets" of a Guarantor at any date means the
lesser of (x) the amount by which the fair value of the property of such
Guarantor at such date exceeds the total amount of liabilities, including,
without limitation, the probable amount of contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed on
such date) of such Guarantor at such date, but excluding liabilities under the
Guarantee of such Guarantor, and (y) the amount by which the present fair
saleable value of the assets of such Guarantor at such date exceeds the amount
that will be required to pay the probable liability of such Guarantor on its
debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any collection from
any Subsidiary of such Guarantor in respect of any obligation of such
Subsidiary under the Guarantee of such Guarantor), excluding debt in respect of
the Guarantee of such Guarantor, as they become absolute and matured.
"Affiliate" of any specified Person means any Person directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition,
"control" of a Person shall mean the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing. The Trustee may
request and may conclusively rely upon an Officers' Certificate to determine
whether any Person is an Affiliate of any specified Person.
"Agent" means any Registrar or Paying Agent.
"Attributable Indebtedness," when used with respect to any
Sale/Leaseback Transaction, means, as at the time of determination, the present
value (discounted at the rate set forth or implicit in the terms of the lease
included in such transaction) of the total obligations of the lessee for rental
payments (other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining term of the
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<PAGE> 7
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal, state or foreign law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized, with respect to any
particular matter, to act by or on behalf of the Board of Directors of the
Company.
"Business Day" means any day that is not a Legal Holiday.
"Capital Stock" of any Person means and includes any and all
shares, interests, rights to purchase, warrants or options (whether or not
currently exercisable), participations or other equivalents of or interests in
(however designated) the equity (which includes, but is not limited to, common
stock, preferred stock and partnership and joint venture interests) of such
Person (excluding any debt securities that are convertible into, or
exchangeable for, such equity).
"Capitalized Lease Obligation" of any Person means any
obligation of such Person to pay rent or other amounts under a lease of
property, real or personal, that is required to be capitalized for financial
reporting purposes in accordance with GAAP; and the amount of such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.
"Common Equity" of any Person means and includes all Capital
Stock of such Person that is generally entitled to (i) vote in the election of
directors of such Person, or (ii) if such Person is not a corporation, vote or
otherwise participate in the selection of the governing body, partners,
managers or others that will control the management and policies of such
Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation; provided, however, that for
purposes of any provision contained herein which is required by the TIA,
"Company" shall also mean each Guarantor, if any.
"Consolidated Net Worth" of the Company means the consolidated
stockholders' equity of the Company and its Subsidiaries, as determined in
accordance with GAAP.
"Corporate Trust Office of the Trustee" means the office of
the Trustee in the Borough of Manhattan, The City of New York at which the
corporate trust business of the Trustee shall be principally administered,
which office shall initially be located at the address of the Trustee specified
in Section 3.02 hereof and may be located at such other address as the Trustee
may give notice to the Company.
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<PAGE> 8
"Default" means any event, act or condition that is, or after
notice or the passage of time or both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form
of Exhibit A attached hereto (but without including the text referred to in
footnote 1 thereto).
"Depositary" means, with respect to the Securities issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Securities, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depositary" shall mean or include such
successor.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
"Exchange Offer" means the offer by the Company to the Holders
of all outstanding Transfer Restricted Securities to exchange all such
outstanding Transfer Restricted Securities held by such Holders for Series B
Securities, in an aggregate principal amount equal to the aggregate principal
amount of the Transfer Restricted Securities tendered in such exchange offer by
such Holders.
"Exchange Offer Registration Statement" means the registration
statement under the Securities Act relating to the Exchange Offer, including
the related prospectus.
"Funded Indebtedness" means all Indebtedness (including
Indebtedness incurred under any revolving credit, letter of credit or working
capital facility) that matures by its terms, or that is renewable at the option
of any obligor thereon to a date, more than one year after the date on which
such Indebtedness is originally incurred.
"GAAP" means generally accepted accounting principles in the
United States set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, as in effect from
time to time.
"Global Security" means a Security that is issued in global
form in the name of Cede & Co. or such other name as may be requested by an
authorized representative of the Depositary, and that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in the form
of Security attached hereto as Exhibit A.
"Guarantor" means (i) each Subsidiary of the Company executing
this Indenture, (ii) each Subsidiary of the Company that becomes a guarantor of
the Securities pursuant to Section 9.05 hereof, (iii) each Subsidiary of the
Company that executes a supplemental indenture
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<PAGE> 9
in which such Subsidiary agrees to be bound by Article 9 hereof and (iv) any
Subsidiary of the Company that is a successor corporation of any Subsidiary of
the Company referred to in clauses (i) through (iii). The term "Guarantor"
shall not include any Subsidiary of the Company referred to in clauses (i)
through (iv) that shall have been released from its obligations under Article 9
pursuant to Section 9.06 hereof.
"Hedging Obligations" of any Person means the net obligations
(not the notional amount) of such Person pursuant to any interest rate swap
agreement, foreign currency exchange agreement, interest rate collar agreement,
option or futures contract or other similar agreement or arrangement relating
to interest rates or foreign exchange rates.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" of any Person at any date means, without
duplication, (i) all indebtedness or obligations of such Person for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto), other
than standby letters of credit and performance bonds issued by such Person in
the ordinary course of business, to the extent not drawn or, to the extent
drawn, if such drawing is reimbursed not later than the third Business Day
following demand for reimbursement, (iv) all obligations of such Person to pay
the deferred and unpaid purchase price of property or services, except trade
payables and accrued expenses incurred in the ordinary course of business, (v)
all Capitalized Lease Obligations of such Person, (vi) all Indebtedness of
others secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person, (vii) all Indebtedness of others
guaranteed by such Person to the extent of such guarantee and (viii) all
Hedging Obligations of such Person.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated, CS First Boston Corporation, BA Securities, Inc. and Chase
Securities, Inc., as initial purchasers in the Offering.
"Interest Payment Date" shall have the meaning assigned to
such term in the Securities.
"Issue Date" means the date on which the Securities are
originally issued under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in any of The City of New York, Houston, Texas or a place
of payment are authorized or obligated by law, regulation or executive order to
remain closed.
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<PAGE> 10
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, but excluding agreements to refrain from granting Liens. For the purposes
of this Indenture, the Company or any Subsidiary of the Company shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
Capitalized Lease Obligation or other title retention agreement relating to
such asset.
"Net Proceeds" means, with respect to any Sale/Leaseback
Transaction entered into by the Company or any Subsidiary of the Company, the
aggregate net proceeds received by the Company or such Subsidiary from such
Sale/Leaseback Transaction after payment of expenses, taxes, commissions and
similar amounts incurred in connection therewith, whether such proceeds are in
cash or in property (valued at the fair market value thereof at the time of
receipt, as determined by the Board of Directors).
"Non-Recourse Indebtedness" means, at any date, the aggregate
amount at such date of Indebtedness of the Company or a Subsidiary of the
Company in respect of which the recourse of the holder of such Indebtedness,
whether direct or indirect and whether contingent or otherwise, is effectively
limited to specified assets, and with respect to which neither the Company nor
any of its Subsidiaries provides any credit support.
"Offering" means the Offering of the Series A Securities
pursuant to the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum of the
Company, dated February 14, 1996, relating to the Offering.
"Officer" means the Chairman of the Board, the President, any
Vice Chairman of the Board, any Vice President, the chief financial officer,
the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any
Assistant Secretary of a Person.
"Officers' Certificate" means a certificate signed by two
Officers of a Person, one of whom must be the Person's chief executive officer,
chief financial officer or chief accounting officer.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. Such counsel may be an employee of
or counsel to the Company, a Guarantor or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the
Company, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall be subordinated in right of
payment to the Securities.
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<PAGE> 11
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, incorporated or unincorporated
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof or other entity of
any kind.
"Registrable Securities" shall have the meaning assigned to
such term in the Registration Rights Agreement.
"Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of February 20, 1996, among the
Company, the Guarantors party thereto and the Initial Purchasers.
"Sale/Leaseback Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Subsidiary of the
Company, for a period of more than three years, of any real or tangible
personal property, which property has been or is to be sold or transferred by
the Company or such Subsidiary to such Person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B
Securities treated as a single class of Securities. For purposes of this
Indenture, the term "Securities" shall, except where the context otherwise
requires, include the Guarantees.
"Securities Act" means the Securities Act of 1933, as amended,
and any successor statute.
"Security Custodian" means the Trustee, as custodian with
respect to the Securities in global form, or any successor entity thereto.
"Series A Securities" means the Company's 7% Series A Notes
due 2006 to be issued pursuant to this Indenture.
"Series B Securities" means the Company's 7% Series B Notes
due 2006 to be issued pursuant to this Indenture in the Exchange Offer.
"Subsidiary" of any Person means (i) any corporation of which
at least a majority of the aggregate voting power of all classes of the Common
Equity is owned by such Person directly or through one or more other
Subsidiaries of such Person, and (ii) any entity other than a corporation at
least a majority of the Common Equity of which is owned by such Person directly
or through one or more other Subsidiaries of such Person.
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<PAGE> 12
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S.C. Sections 77aaa-77bbbb), as in effect on the Issue Date.
"Transfer Restricted Securities" means the Registrable
Securities under the Registration Rights Agreement.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"U.S. Government Obligations" means direct obligations of the
United States of America for the payment of which the full faith and credit of
the United States of America is pledged.
SECTION 1.02 Other Definitions.
<TABLE>
<CAPTION>
Defined
in
Term Section
---- -------
<S> <C>
"Authorized Agent" . . . . . . . . . . . . . . . . . . . . . . 9.07
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . 5.01
"Funding Guarantor" . . . . . . . . . . . . . . . . . . . . . . 9.03
"Guarantees" . . . . . . . . . . . . . . . . . . . . . . . . . 9.01(a)
"Judgment Currency" . . . . . . . . . . . . . . . . . . . . . . 9.09
"Non-U.S. Guarantor" . . . . . . . . . . . . . . . . . . . . . 9.07
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Significant Subsidiary" . . . . . . . . . . . . . . . . . . . 5.01
"Successor" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.01
</TABLE>
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
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<PAGE> 13
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
each Guarantor.
All terms used in this Indenture that are defined by the TIA,
defined by a TIA reference to another statute or defined by an SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) provisions apply to successive events and
transactions.
ARTICLE 2
THE SECURITIES
SECTION 2.01 Form and Dating.
The Securities, the notations thereon relating to the
Guarantees and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A to this Indenture, which is hereby
incorporated into this Indenture. The Securities may have notations, legends
or endorsements required by law, securities exchange rule, the Company's
certificate of incorporation or bylaws, agreements to which the Company is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication. The Securities shall be in registered
form without coupons and only in denominations of $1,000 and any integral
multiples thereof.
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<PAGE> 14
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and to the
extent applicable, the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
The Securities will initially be issued in global form,
substantially in the form of Exhibit A attached hereto (including footnote 1
thereto) and in definitive form, substantially in the form of Exhibit A hereto
(not including footnote 1 thereto). A Global Security shall represent such of
the outstanding Securities as shall be specified therein and shall provide that
it shall represent the aggregate amount of outstanding Securities from time to
time endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of Global
Securities to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
SECTION 2.02 Execution and Authentication.
Two Officers of the Company shall sign the Securities on
behalf of the Company, and two Officers of each Guarantor shall sign the
notation on the Securities relating to the Guarantees on behalf of such
Guarantor, in each case by manual or facsimile signature. The Company's seal
shall be impressed, affixed, imprinted or reproduced on the Securities and may
be in facsimile form.
If an Officer of the Company or any Guarantor whose signature
is on a Security no longer holds that office at the time the Security is
authenticated, the Security shall be valid nevertheless.
A Security shall not be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose until authenticated by the
manual signature of an authorized signatory of the Trustee, which signature
shall be conclusive evidence that the Security has been authenticated under
this Indenture.
The Trustee shall authenticate Securities for original issue
up to the aggregate principal amount of $125,000,000, upon a written order of
the Company signed by two Officers of the Company. Such order shall specify
the amount of the Securities to be authenticated and the date on which the
original issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed such amount except
as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent
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<PAGE> 15
has the same rights as an Agent to deal with the Company, the Guarantors or an
Affiliate of any of them.
SECTION 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and address of any
Agent not a party to this Indenture. The Company may change any Paying Agent
or Registrar without notice to any Holder. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
The Company initially appoints the Trustee as Registrar and
Paying Agent.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Security.
SECTION 2.4 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities, whether such money shall
have been paid to it by the Company or any Guarantor, and will notify the
Trustee of any default by the Company or any Guarantor in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon payment
over to the Trustee and upon accounting for any funds disbursed, the Paying
Agent (if other than the Company or a Subsidiary of the Company) shall have no
further liability for the money. If the Company or a Subsidiary of the Company
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent.
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<PAGE> 16
SECTION 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each Interest Payment Date, and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Holders, and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Registrar with the request:
(x) to register the transfer of the Definitive
Securities, or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirement for such transactions are met; provided, however, that the
Definitive Securities presented or surrendered for registration of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a
written instruction of transfer in form
satisfactory to the Registrar duly executed
by the Holder thereof or by his attorney,
duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities
that are Definitive Securities, shall be
accompanied by the following additional
information and documents, as applicable,
upon which the Registrar may conclusively
rely:
(A) if such Transfer Restricted
Securities are being delivered to
the Registrar by a Holder for
registration in the name of such
Holder, without transfer, a
certification from such Holder to
that effect (in substantially the
form of Exhibit B hereto); or
(B) if such Transfer Restricted
Securities are being transferred (1)
to a "qualified institutional buyer"
(as defined in Rule 144A under the
Securities Act) in accordance with
Rule 144A under the Securities Act
or (2) pursuant to an exemption from
registration in accordance with Rule
144
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<PAGE> 17
under the Securities Act (and
based upon an opinion of counsel if
the Company so requests) or (3)
pursuant to an effective
registration statement under the
Securities Act, a certification to
that effect from such Holder
(in substantially the form of
Exhibit B hereto); or
(C) if such Transfer Restricted
Securities are being transferred to
an institutional "accredited
investor," within the meaning of
Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to
a private placement exemption from
the registration requirements of the
Securities Act (and based upon an
opinion of counsel if the Company so
requests), a certification to that
effect from such Holder (in
substantially the form of Exhibit B
hereto) and a certification from the
applicable transferee (in
substantially the form of Exhibit C
hereto);
(D) if such Transfer Restricted
Securities are being transferred
pursuant to an exemption from
registration in accordance with Rule
904 under the Securities Act (and
based upon an opinion of counsel if
the Company so requests),
certifications to that effect from
such Holder (in substantially the
form of Exhibits B and D hereto); or
(E) if such Transfer Restricted
Securities are being transferred in
reliance on another exemption from
the registration requirements of the
Securities Act (and based upon an
opinion of counsel if the Company so
requests), a certification to that
effect from such Holder (in
substantially the form of Exhibit B
hereto).
(b) Restriction on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer
Restricted Security, certification,
substantially in the form of Exhibit B
hereto, upon which the Trustee may
conclusively rely, that such Definitive
Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with
Rule 144A under the Securities Act; or
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<PAGE> 18
(ii) if such Definitive Security is a Transfer
Restricted Security and is being transferred
pursuant to an exemption from registration in
accordance with Rule 904 under the Securities
Act (and based upon an opinion of counsel if
the Company so requests), certifications to
that effect from such Holder (in
substantially the form of Exhibits B and D
hereto); and
(iii) whether or not such Definitive Security is a
Transfer Restricted Security, written
instructions directing the Trustee to make,
or direct the Security Custodian to make, an
endorsement on the Global Security to reflect
an increase in the aggregate principal amount
of the Securities represented by the Global
Security;
then the Trustee shall cancel such Definitive Security in accordance with
Section 2.11 hereof and cause, or direct the Security Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Security Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased accordingly. If
no Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Security
for a Definitive Security.
(i) Any Person having a beneficial interest in a
Global Security may upon request exchange
such beneficial interest for a Definitive
Security. Upon receipt by the Trustee of
written instructions or such other form of
instructions as is customary for the
Depositary, from the Depositary or its
nominee on behalf of any Person having a
beneficial interest in a Global Security, and
in the case of a Transfer Restricted
Security, the following additional
information and documents (all of which may
be submitted by facsimile), upon which the
Trustee may conclusively rely:
(A) if such beneficial interest is being
transferred to the Person designated
by the Depositary as being the
beneficial owner, a certification
from such Person to that effect (in
substantially the form of Exhibit B
hereto); or
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<PAGE> 19
(B) if such beneficial interest is
being transferred (1) to a
"qualified institutional buyer" (as
defined in Rule 144A under the
Securities Act) in accordance with
Rule 144A under the Securities Act or
(2) pursuant to an exemption from
registration in accordance with Rule
144 under the Securities Act (and
based upon an opinion of counsel if
the Company so requests) or (3)
pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from the
transferor (in substantially the form
of Exhibit B hereto); or
(C) if such beneficial interest is being
transferred to an institutional
"accredited investor," within the
meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act
pursuant to a private placement
exemption from the registration
requirements of the Securities Act
(and based upon an opinion of
counsel if the Company so requests),
a certification to that effect from
such transferor (in substantially
the form of Exhibit B hereto) and a
certification from the applicable
transferee (in substantially the
form of Exhibit C hereto); or
(D) if such beneficial interest is being
transferred pursuant to an exemption
from registration in accordance with
Rule 904 under the Securities Act
(and based upon an opinion of
counsel if the Company so requests),
certifications to that effect from
such transferor (in substantially
the form of Exhibits B and D
hereto); or
(E) if such beneficial interest is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act
(and based upon an opinion of
counsel if the Company so requests),
a certification to that effect from
such transferor (in substantially
the form of Exhibit B hereto);
the Trustee or the Security Custodian, at the
direction of the Trustee, shall, in accordance with
the standing instructions and procedures existing
between the Depositary and the Security Custodian,
cause the aggregate principal amount of Global
Securities to be reduced accordingly and, following
such reduction, the Company shall execute and the
Trustee shall authenticate and deliver to the
transferee a Definitive Security in the appropriate
principal amount.
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(ii) Definitive Securities issued in exchange for
a beneficial interest in a Global Security
pursuant to this Section 2.06(d) shall be
registered in such names and in such
authorized denominations as the Depositary,
pursuant to instructions from its direct or
indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the
Persons in whose names such Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.06), a Global
Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Securities in Absence of
Depositary. If at any time:
(i) the Depositary for the Securities
notifies the Company that the Depositary is
unwilling or unable to continue as Depositary
for the Global Securities and a successor
Depositary for the Global Securities is not
appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to
cause the issuance of Definitive Securities
under this Indenture,
then the Company will execute, and the Trustee will authenticate and deliver
Definitive Securities, in an aggregate principal amount equal to the principal
amount of the Global Securities, in exchange for such Global Securities and
registered in such names as the Depositary shall instruct the Trustee or the
Company in writing.
(g) Legends.
(i) Except as permitted by the following
paragraph (ii), each Security certificate
evidencing the Global Securities and the
Definitive Securities (and all Securities
issued in exchange therefor or substitution
thereof) shall bear a legend in substantially
the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS
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SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D),
(E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
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<PAGE> 22
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE.
Each Security certificate evidencing the Global
Securities also shall bear the paragraph referred to
in footnote 1 in the form of Security attached hereto
as Exhibit A.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer
Restricted Security represented by a Global
Security) pursuant to Rule 144 under the
Securities Act or an effective registration
statement under the Securities Act:
(A) in the case of any Transfer
Restricted Security that is a
Definitive Security, the Registrar
shall permit the Holder thereof to
exchange such Transfer Restricted
Security for a Definitive Security
that does not bear the legend set
forth in (i) above and rescind any
restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer
Restricted Security represented by a
Global Security, such Transfer
Restricted Security shall not be
required to bear the legend set
forth in (i) above if all other
interests in such Global Security
have been or are concurrently being
sold or transferred pursuant to Rule
144 under the Securities Act or
pursuant to an effective
registration statement under the
Securities Act, but such Transfer
Restricted Security shall continue
to be subject to the provisions of
Section 2.06(c) hereof; provided,
however, that with respect to any
request for an exchange of a
Transfer Restricted Security that is
represented by a Global Security for
a Definitive Security that does not
bear a legend set forth in (i)
above, which request is made in
reliance upon Rule 144 under the
Securities Act, the Holder thereof
shall certify in writing to the
Registrar that such request is being
made pursuant to Rule 144 under the
Securities Act (such certification
to be substantially in the form of
Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Exchange Offer, the
Company shall issue and, upon receipt of an
authentication order in accordance with
Section 2.02 hereof, the Trustee shall
authenticate Series B Securities in exchange
for Series A Securities accepted for exchange
in the Exchange Offer, which
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<PAGE> 23
Series B Securities shall not bear the
legend set forth in (i) above, and the
Registrar shall rescind any restriction on the
transfer of such Securities, in each case
unless the Holder of such Series A Securities
is either (A) a broker-dealer, (B) a Person
participating in the distribution of the
Series A Securities or (C) a Person who is an
affiliate (as defined in Rule 144 under the
Securities Act) of the Company. The Company
shall identify to the Trustee such Holders of
the Securities in a written certification
signed by an Officer of the Company and,
absent certification from the Company to such
effect, the Trustee shall assume that there
are no such Holders.
(h) Cancellation and/or Adjustment of Global Security. At
such time as all beneficial interests in a Global Security have either been
exchanged for Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to or retained and canceled by the Trustee.
At any time prior to such cancellation, if any beneficial interest in a Global
Security is exchanged for Definitive Securities, redeemed, repurchased or
canceled, the principal amount of Securities represented by such Global Security
shall be reduced and an endorsement shall be made on such Global Security, by
the Trustee or the Security Custodian, at the direction of the Trustee to
reflect such reduction.
(i) General Provisions with respect to Transfer and
Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the
Trustee shall authenticate Definitive
Securities and Global Securities at the
Registrar's request.
(ii) No service charge shall be made to a Holder
for any registration of transfer or exchange
(except as otherwise expressly permitted
herein), but the Company may require payment
of a sum sufficient to cover any transfer tax
or similar governmental charge payable in
connection therewith (other than such
transfer tax or similar governmental charge
payable upon exchanges pursuant to Section
8.05 hereof).
(iii) The Trustee shall authenticate Definitive
Securities and Global Securities in
accordance with the provisions of Section
2.02 hereof.
(iv) Notwithstanding any other provisions of this
Indenture to the contrary, the Company shall
not be required to register the transfer or
exchange of a Security between the record
date and the next succeeding Interest Payment
Date.
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<PAGE> 24
(v) Neither the Company nor the Trustee will have
any responsibility or liability for any
aspect of the records relating to, or
payments made on account of, Securities by
the Depositary, or for maintaining,
supervising or reviewing any records of the
Depositary relating to such Securities.
Neither the Company nor the Trustee shall be
liable for any delay by the related Global
Security Holder or the Depositary in
identifying the beneficial owners of the
related Securities and each such Person may
conclusively rely on, and shall be protected
in relying on, instructions from such Global
Security Holder or the Depositary for all
purposes (including with respect to the
registration and delivery, and the respective
principal amounts, of the Securities to be
issued).
SECTION 2.07 Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
are met. If required by the Trustee, the Company or any Guarantor, such Holder
must furnish an indemnity bond that is sufficient in the judgment of the
Trustee, the Company and the Guarantors to protect the Company, the Guarantors,
the Trustee, any Agent or any authenticating agent from any loss which any of
them may suffer if a Security is replaced. The Company, the Trustee and the
Guarantors may charge for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company and the Guarantors.
SECTION 2.08 Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Security
effected by the Trustee hereunder and those described in this Section 2.08 as
not outstanding.
If a Security is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid
under Section 3.01 hereof, it ceases to be outstanding and interest on it
ceases to accrue.
A Security does not cease to be outstanding because the
Company, a Guarantor or an Affiliate of any of them holds the Security.
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<PAGE> 25
SECTION 2.09 Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, a Guarantor or an Affiliate of any of them
shall be disregarded, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
SECTION 2.10 Temporary Securities.
Until Definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of Definitive
Securities, but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate Definitive Securities in exchange for
temporary Securities. Until so exchanged, the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as
Definitive Securities.
SECTION 2.11 Cancellation.
The Company or any Guarantor at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee shall cancel all
Securities surrendered for registration of transfer, exchange, payment,
replacement or cancellation. Unless the Company shall direct that canceled
Securities be returned to it, after written notice to the Company all canceled
Securities held by the Trustee shall be disposed of in accordance with the
usual disposal procedures of the Trustee, and the Trustee shall maintain a
record of their disposal. The Company may not issue new Securities to replace
Securities that have been paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest on the defaulted interest, in each case at the rate
provided in the Securities and in Section 3.01 hereof. The Company may pay the
defaulted interest to the Persons who are Holders on a subsequent special
record date. At least 15 days before any special record date, the Company (or
the Trustee, in the name of and at the expense of the Company) shall mail to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
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<PAGE> 26
SECTION 2.13 Persons Deemed Owners.
The Company, the Trustee, any Agent and any authenticating
agent may treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payments of principal of or
interest on such Security and for all other purposes. None of the Company, the
Trustee, any Agent or any authenticating agent shall be affected by any notice
to the contrary.
ARTICLE 3
COVENANTS
SECTION 3.01 Payment of Securities.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and in
this Indenture. Principal and interest shall be considered paid on the date
due if the Paying Agent, other than the Company or a Subsidiary of the Company,
holds on that date money deposited by the Company designated for and sufficient
to pay all principal and interest then due.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at a
rate equal to the then applicable interest rate on the Securities to the extent
lawful; and it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 3.02 Maintenance of Office or Agency.
The Company will maintain, in the Borough of Manhattan, The
City of New York, an office or agency (which may be an office of the Trustee,
the Registrar or the Paying Agent) where Securities may be presented for
registration of transfer or exchange, where Securities may be presented for
payment and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. Unless otherwise designated by
the Company by written notice to the Trustee, such office or agency shall be
the principal office of the Trustee, in The City of New York which, on the
date hereof, is located at 77 Water Street, 4th Floor, New York, New York
10005. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation
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<PAGE> 27
or rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York
for such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency. The Company hereby designates the Corporate Trust
Office of the Trustee as one such office or agency of the Company in accordance
with Section 2.03 hereof.
SECTION 3.03 SEC Reports; Financial Statements.
(a) The Company shall file with the Trustee, within 15 days
after it files the same with the SEC, copies of the annual reports and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. If the Company is not subject to the requirements of such Section
13 or 15(d), the Company shall file with the Trustee, within 15 days after it
would have been required to file the same with the SEC, financial statements,
including any notes thereto (and with respect to annual reports, an auditors'
report by a firm of established national reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," both
comparable to that which the Company would have been required to include in such
annual reports, information, documents or other reports if the Company had been
subject to the requirements of such Section 13 or 15(d). The Company shall also
comply with the provisions of TIA Section 314(a).
(b) If the Company is required to furnish annual or
quarterly reports to its stockholders pursuant to the Exchange Act, the Company
shall cause any annual report furnished to its stockholders generally and any
quarterly or other financial reports furnished by it to its stockholders
generally to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the register of Securities maintained by the Registrar.
If the Company is not required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its financial
statements referred to in Section 3.03(a) hereof, including any notes thereto
(and with respect to annual reports, an auditors' report by a firm of
established national reputation), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" to be so mailed to the Holders
within 90 days after the end of each of the Company's fiscal years and within 60
days after the end of each of the Company's first three fiscal quarters.
(c) For so long as any Transfer Restricted Securities
remain outstanding, the Company shall furnish to all Holders and prospective
purchasers of the Securities designated by the Holders of Transfer Restricted
Securities, promptly upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(d) The Company shall provide the Trustee with a sufficient
number of copies of all reports and other documents and information that the
Trustee may be required to deliver to Holders under this Section 3.03.
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SECTION 3.04 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120
days after the end of each fiscal year of the Company, a statement signed by two
Officers of the Company, which need not constitute an Officers' Certificate,
complying with TIA Section 314(a)(4) and stating that in the course of
performance by the signing Officers of the Company of their duties as such
Officers of the Company they would normally obtain knowledge of the keeping,
observing, performing and fulfilling by the Company of its obligations under
this Indenture, and further stating, as to each such Officer signing such
statement, that to the best of his knowledge the Company and each Guarantor has
kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions hereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which such Officer may have knowledge and what action the Company or such
Guarantor, as the case may be, is taking or proposes to take with respect
thereto).
(b) The Company and the Guarantors shall, so long as any of
the Securities are outstanding, deliver to the Trustee, forthwith upon any
Officer of the Company or any Guarantor becoming aware of any Default or Event
of Default under this Indenture, an Officers' Certificate specifying such
Default or Event of Default and what action the Company or such Guarantor is
taking or proposes to take with respect thereto.
SECTION 3.05 Corporate Existence.
Subject to Article 4 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership and other existence of each
of its Subsidiaries and all rights (charter and statutory) and franchises of
the Company and its Subsidiaries, provided that the Company shall not be
required to preserve the corporate existence of any Subsidiary of the Company
or any such right or franchise if the Board of Directors shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries taken as a whole and that the loss thereof
would not have a material adverse effect on the business, prospects, assets or
financial condition of the Company and its Subsidiaries taken as a whole and
would not have any material adverse effect on the payment and performance of
the obligations of the Company and the Guarantors under the Securities and this
Indenture.
SECTION 3.06 Maintenance of Properties.
The Company shall cause all material properties owned by or
leased to the Company or any Subsidiary of the Company or used or held for use
in the conduct of its business or the business of any such Subsidiary to be
maintained and kept in good condition, repair and working order (reasonable
wear and tear excepted) and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be
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properly conducted at all times; provided that nothing in this Section 3.06
shall prevent the Company from discontinuing the operation or maintenance of any
of such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any such Subsidiary
and not disadvantageous in any material respect to the Holders.
SECTION 3.07 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries or upon the income, profits or property of the Company or
any of its Subsidiaries, and (ii) all material lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
property of the Company or any of its Subsidiaries; provided that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith, and, if necessary, by appropriate
proceedings.
SECTION 3.08 Waiver of Stay, Extension or Usury Laws.
The Company and each Guarantor covenant (to the extent that
they may lawfully do so) that they will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury law or other law, which would prohibit or forgive
the Company or any Guarantor from paying all or any portion of the principal of
or interest on the Securities as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that they may lawfully do so)
the Company and each Guarantor hereby expressly waive all benefit or advantage
of any such law, and covenant that they will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
SECTION 3.09 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Subsidiary of
the Company to, enter into any Sale/Leaseback Transaction with any Person
(other than the Company or a Subsidiary of the Company) unless:
(a) the Company or such Subsidiary would be entitled to
incur Indebtedness, in a principal amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction, secured by a Lien
on the property subject to such Sale/Leaseback Transaction pursuant to Section
3.10 hereof without equally and ratably securing the Securities pursuant to such
Section;
(b) after the Issue Date and within a period commencing six
months prior to the consummation of such Sale/Leaseback Transaction and ending
six months after the
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consummation thereof, the Company or such Subsidiary shall have expended for
property used or to be used in the ordinary course of business of the Company
and its Subsidiaries an amount equal to all or a portion of the Net Proceeds of
such Sale/Leaseback Transaction and the Company shall have elected to designate
such amount as a credit against such Sale/Leaseback Transaction (with any such
amount not being so designated to be applied as set forth in clause (c) below);
or
(c) the Company, during the 12-month period after the
effective date of such Sale/Leaseback Transaction, shall have applied to the
voluntary defeasance or retirement of Securities or any Pari Passu Indebtedness
an amount equal to the greater of the Net Proceeds of the sale or transfer of
the property leased in such Sale/Leaseback Transaction and the fair value, as
determined by the Board of Directors, of such property at the time of entering
into such Sale/Leaseback Transaction (in either case adjusted to reflect the
remaining term of the lease and any amount expended by the Company as set forth
in clause (b) above), less an amount equal to the principal amount of Securities
and Pari Passu Indebtedness voluntarily defeased or retired by the Company
within such 12-month period and not designated as a credit against any other
Sale/Leaseback Transaction entered into by the Company or any Subsidiary of the
Company during such period.
SECTION 3.10 Limitation on Liens.
The Company shall not, and shall not permit any Subsidiary of
the Company to, issue, assume or guarantee any Indebtedness for borrowed money
secured by any Lien on any property or asset now owned or hereafter acquired by
the Company or such Subsidiary without making effective provision whereby any
and all Securities then or thereafter outstanding will be secured by a Lien
equally and ratably with any and all other obligations thereby secured for so
long as any such obligations shall be so secured. Notwithstanding the
foregoing, the Company or any Subsidiary of the Company may, without so
securing the Securities, issue, assume or guarantee Indebtedness for borrowed
money secured by the following Liens:
(a) Liens existing on the Issue Date or provided for under
the terms of agreements existing on the Issue Date securing Indebtedness
existing on the Issue Date (including, without limitation, the Lien provided for
pursuant to Section 6.07 hereof);
(b) Liens on property securing (i) all or any portion of
the cost of acquiring, constructing, altering, improving or repairing any
property or assets, real or personal, or improvements used or to be used in
connection with such property or (ii) Indebtedness incurred by the Company or
any Subsidiary of the Company prior to or within one year after the later of the
acquisition, the completion of construction, alteration, improvement or repair
or the commencement of commercial operation thereof, which Indebtedness is
incurred for the purpose of financing all or any part of the purchase price
thereof or construction or improvements thereon;
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(c) Liens securing Indebtedness owed by a Subsidiary of the
Company to the Company or to any other Subsidiary of the Company;
(d) Liens on the property of any Person existing at the
time such Person becomes a Subsidiary of the Company and not incurred as a
result of (or in connection with or in anticipation of) such Person's becoming a
Subsidiary of the Company, provided that such Liens do not extend to or cover
any property or assets of the Company or any of its Subsidiaries other than the
property encumbered at the time such Person becomes a Subsidiary of the Company
and do not secure Indebtedness with a principal amount in excess of the
principal amount outstanding at such time;
(e) Liens on any property securing (i) Indebtedness
incurred in connection with the construction, installation or financing of
pollution control or abatement facilities or other forms of industrial revenue
bond financing or (ii) Indebtedness issued or guaranteed by the United States or
any State thereof or any department, agency or instrumentality of either;
(f) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted under
clause (a), (b), (d) or (e) above, provided that such Lien extends to or
covers only the property that is subject to the Lien being extended, renewed or
replaced and that the principal amount of the Indebtedness secured thereby shall
not exceed the principal amount of Indebtedness so secured at the time of such
extension, renewal or replacement; or
(g) Liens (exclusive of any Lien of any type otherwise
permitted under clauses (a) through (f) above) securing Indebtedness for
borrowed money of the Company or any Subsidiary of the Company in an aggregate
principal amount which, together with the aggregate amount of Attributable
Indebtedness deemed to be outstanding in respect of all Sale/Leaseback
Transactions entered into pursuant to clause (a) of Section 3.09 hereof
(exclusive of any such Sale/Leaseback Transactions otherwise permitted under
clauses (a) through (f) above), does not at the time such Indebtedness is
incurred exceed 10% of the Consolidated Net Worth of the Company (as shown in
the most recent audited consolidated balance sheet of the Company and its
Subsidiaries).
SECTION 3.11 Registration Rights Agreement.
The Company shall perform its obligations under the
Registration Rights Agreement and shall comply in all material respects with
the terms and conditions contained therein including, without limitation, the
payment of additional interest (as described in Section 2(e) of the
Registration Rights Agreement).
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ARTICLE 4
SUCCESSORS
SECTION 4.01 Limitations on Mergers and Consolidations.
Neither the Company nor any Guarantor shall consolidate with
or merge into any Person, or sell, lease, convey, transfer or otherwise dispose
of all or substantially all of its assets to any Person, unless:
(i) the Person formed by or surviving such
consolidation or merger (if other than the
Company or such Guarantor, as the case may
be), or to which such sale, lease,
conveyance, transfer or other disposition
shall be made (collectively, the
"Successor"), is a corporation organized
and existing under the laws of the United
States or any State thereof or the District
of Columbia (or, alternatively, in the case
of a Guarantor organized under the laws of
a jurisdiction outside the United States, a
corporation organized and existing under
the laws of such foreign jurisdiction), and
the Successor assumes by supplemental
indenture in a form satisfactory to the
Trustee all of the obligations of the
Company or such Guarantor, as the case may
be, under this Indenture and the Securities;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default
shall have occurred and be continuing; and
(iii) the Company shall have delivered to the
Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that the
transaction and such supplemental indenture
comply with this Indenture.
SECTION 4.02 Successor Corporation Substituted.
Upon any consolidation or merger of the Company or any
Guarantor, or any sale, lease, conveyance, transfer or other disposition of all
or substantially all of the assets of the Company or any Guarantor in
accordance with Section 4.01 hereof, the Successor formed by such consolidation
or into or with which the Company or such Guarantor is merged or to which such
sale, lease, conveyance, transfer or other disposition or assignment is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company or such Guarantor, as the case may be, under this
Indenture and the Securities with the same effect as if such Successor had
been named as the Company or such Guarantor herein and the predecessor
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Company or Guarantor, in the case of a sale, conveyance, transfer or other
disposition, shall be released from all obligations under this Indenture and the
Securities.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01 Events of Default.
An "Event of Default" occurs if:
(1) the Company or any Guarantor defaults in the payment of
interest on any Security when the same becomes due and payable and
such default continues for a period of 30 days;
(2) the Company or any Guarantor defaults in the payment of
the principal of any Security when the same becomes due and payable
at maturity, upon acceleration or otherwise;
(3) the Company or any Guarantor fails to comply with any
of its other agreements or covenants in, or provisions of, the
Securities, the Guarantees or this Indenture and such failure
continues for the period and after the notice specified in the last
paragraph of this Section 5.01;
(4) any default shall occur which results in the
acceleration of the maturity of any Indebtedness of the Company or any
Subsidiary of the Company (other than the Securities or any
Non-Recourse Indebtedness) having an outstanding principal amount of
$20 million or more individually or, taken together with all other
such Indebtedness that has been so accelerated, in the aggregate; or
any default shall occur in the payment of any principal or interest in
respect of any Indebtedness of the Company or any Subsidiary of the
Company (other than the Securities or any Non-Recourse Indebtedness)
having an outstanding principal amount of $20 million or more
individually or, taken together with all other such Indebtedness with
respect to which any such payment has not been made, in the aggregate
and such default shall be continuing for a period of 30 days without
the Company or such Subsidiary, as the case may be, effecting a cure
of such default;
(5) a judgment or order for the payment of money in
excess of $20 million (net of applicable insurance coverage) shall be
rendered against the Company, any Guarantor or any other "significant
subsidiary" (as such term is defined in Regulation S-X under the
Exchange Act; a "Significant Subsidiary") of the Company and such
judgment or order shall continue unsatisfied and unstayed for a period
of 30 days;
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(6) the Company, any Guarantor or any other Significant
Subsidiary of the Company pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of
it or for all or for a substantial part of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that remains unstayed and in effect
for 60 days and that:
(A) is for relief against the Company, any
Guarantor or any other Significant Subsidiary of the Company
as debtor in an involuntary case,
(B) appoints a Custodian of the Company, any
Guarantor or any other Significant Subsidiary of the Company
or a Custodian for all or for a substantial part of the
property of the Company, any Guarantor or any other
Significant Subsidiary of the Company, or
(C) orders the liquidation of the Company, any
Guarantor or any other Significant Subsidiary of the Company.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
The Trustee shall not be deemed to know of a Default unless a
Trust Officer at the Corporate Trust Office of the Trustee has actual knowledge
of such Default or the Trustee receives written notice at the Corporate Trust
Office of the Trustee of such Default with specific reference to such Default.
When a Default is cured, it ceases.
A Default under clause (3) of this Section is not an Event of
Default until the Trustee notifies the Company and, in the case of a Default by
a Guarantor, such Guarantor, or the Holders of at least 25% in principal amount
of the then outstanding Securities notify the Company, such Guarantor (where
applicable) and the Trustee, of the Default, and neither the Company nor such
Guarantor cures the Default within 60 days after receipt of the notice. The
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notice must specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default."
SECTION 5.02 Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (6) or (7) of Section 5.01 hereof with respect to the
Company or any Guarantor) occurs and is continuing, the Trustee by notice to
the Company, or the Holders of at least 25% in principal amount of the then
outstanding Securities by notice to the Company and the Trustee, may declare
the principal of and accrued and unpaid interest on all then outstanding
Securities to be due and payable immediately. Upon any such declaration the
amounts due and payable on the Securities, as determined in accordance with the
next succeeding paragraph, shall be due and payable immediately. If an Event
of Default specified in clause (6) or (7) of Section 5.01 hereof with respect
to the Company or any Guarantor occurs, such amounts shall ipso facto become
and be immediately due and payable without any declaration, notice or other act
on the part of the Trustee or any Holder. The Holders of a majority in
principal amount of the then outstanding Securities by written notice to the
Trustee may rescind an acceleration and its consequences (other than nonpayment
of principal of or interest on the Securities) if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived, except nonpayment of principal or interest that has
become due solely because of the acceleration.
In the event that the maturity of the Securities is
accelerated pursuant to this Section 5.02, 100% of the principal amount thereof
shall become due and payable plus accrued interest to the date of payment.
SECTION 5.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal of or
interest on the Securities or to enforce the performance of any provision of
the Securities, this Indenture or the Registration Rights Agreement.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 5.04 Waiver of Existing Defaults.
Subject to Sections 5.07 and 8.02 hereof, the Holders of a
majority in principal amount of the then outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences (including waivers obtained in connection with a tender offer or
exchange offer for Securities or a solicitation of consents in respect of
Securities,
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provided that in each case such offer or solicitation is made to all Holders of
then outstanding Securities on equal terms), except (1) a continuing Default or
Event of Default in the payment of the principal of or interest on any Security
or (2) a continued Default in respect of a provision that under Section 8.02
hereof cannot be amended without the consent of each Holder affected. Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 5.05 Control by Majority.
The Holders of a majority in principal amount of the then
outstanding Securities may 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 it hereunder. However, the Trustee may refuse to follow any
direction that conflicts with applicable law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of other Holders, or
that may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 5.06 Limitations on Suits.
Subject to Section 5.07 hereof, a Holder may pursue a remedy
with respect to this Indenture (including the Guarantees) or the Securities
only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of
the then outstanding Securities make a written request to the Trustee
to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority
in principal amount of the Securities do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
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SECTION 5.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Security to receive payment of principal of and
interest on the Security, on or after the respective due dates expressed in the
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, is absolute and unconditional and shall not be impaired
or affected without the consent of the Holder.
SECTION 5.08 Collection Suit by Trustee.
If an Event of Default specified in clause (1) or (2) of
Section 5.01 hereof occurs and is continuing, the Trustee is authorized to
recover judgment in its own name and as trustee of an express trust against the
Company and any Guarantor for the amount of principal and interest remaining
unpaid on the Securities, and interest on overdue principal and, to the extent
lawful, interest on overdue interest, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 5.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents and to take such actions, including participating as
a member, voting or otherwise, of any committee of creditors, as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders allowed in any judicial
proceedings relative to the Company and any Guarantor or their respective
creditors or properties and shall be entitled and empowered to collect, receive
and distribute any money or other property payable or deliverable on any such
claims and any Custodian in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 6.07 hereof. To the extent
that the payment of any such compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 6.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Securities may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
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SECTION 5.10 Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.07
hereof;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Article.
SECTION 5.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 5.07 hereof, or a suit by a Holder or Holders of
more than 10% in principal amount of the then outstanding Securities.
ARTICLE 6
TRUSTEE
SECTION 6.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in such exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
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(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine such
certificates and opinions to determine whether or not, on their face,
they appear to conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee may
refuse to perform any duty or exercise any right or power unless it receives
indemnity reasonably satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law. All money received by the Trustee
shall, until applied as herein provided, be held in trust for the payment of the
principal of and interest on the Securities.
SECTION 6.02 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of
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Counsel. The Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company or any
Guarantor shall be sufficient if signed by an Officer of the Company or such
Guarantor.
SECTION 6.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, the
Guarantors or any of their Affiliates with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 6.10 and 6.11 hereof.
SECTION 6.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company's use of the proceeds from the Securities or any money paid to the
Company or upon the Company's direction under any provision hereof, it shall
not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee and it shall not be responsible for any
statement or recital herein or any statement in the Securities other than its
certificate of authentication.
SECTION 6.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
it is known to the Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 45 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of or interest on any
Security, the Trustee may withhold the notice if and so long as a committee of
its Trust Officers in good faith determines that withholding the notice is in
the interests of Holders.
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SECTION 6.06 Reports by Trustee to Holders.
Within 60 days after each January 31, beginning with January
31, 1996, and in any event prior to March 31 in each year, the Trustee shall
mail to Holders a brief report dated as of such
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such reporting date that complies with TIA Section 313(a); provided, however,
that if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted. The Trustee
also shall comply with TIA Section 313(b). The Trustee shall also transmit by
mail all reports as required by TIA Sections 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders
shall be filed with the SEC and each securities exchange, if any, on which the
Securities are listed. The Company shall notify the Trustee if and when the
Securities are listed on any stock exchange.
SECTION 6.07 Compensation and Indemnity.
The Company and the Guarantors jointly and severally agree to
pay to the Trustee from time to time reasonable compensation for its acceptance
of this Indenture and services hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company and the Guarantors jointly and severally agree to reimburse the Trustee
upon request for all reasonable disbursements, advances and expenses incurred
by it. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company and the Guarantors jointly and severally agree to
indemnify the Trustee against any loss, liability or expense incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, except as set forth in the next paragraph. The
Trustee shall notify the Company and the Guarantors promptly of any claim for
which it may seek indemnity. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company and the Guarantors shall pay the reasonable fees and expenses
of such counsel. The Company need not pay for any settlement made without its
consent.
Neither the Company nor the Guarantors shall be obligated to
reimburse any expense or indemnify against any loss or liability incurred by
the Trustee through negligence or bad faith.
To secure the payment obligations of the Company and the
Guarantors in this Section 6.07, the Trustee shall have a Lien prior to the
Securities on all money or property held or collected by the Trustee, except
that held in trust to pay principal of and interest on the Securities. Such
Lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 5.01(6) or (7) hereof occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
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SECTION 6.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 6.08.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company and the Guarantors. The Holders of a
majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove
the Trustee if:
(1) the Trustee fails to comply with Section 6.10
hereof;
(2) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to
the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company and the Guarantors shall
promptly appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in principal amount of the
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the then
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10 hereof, any
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company and the Guarantors.
Thereupon the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Holders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject
to the Lien provided for in Section 6.07 hereof. Notwithstanding replacement
of the Trustee pursuant to this Section 6.08 hereof, the obligations
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of the Company and the Guarantors under Section 6.07 hereof shall continue for
the benefit of the retiring Trustee.
SECTION 6.09 Successor Trustee by Merger, etc.
Subject to Section 6.10 hereof, if the Trustee consolidates,
merges or converts into, or transfers all or substantially all of its corporate
trust business to, another corporation, the successor corporation without any
further act shall be the successor Trustee; provided, however, that in the case
of a transfer of all or substantially all of its corporate trust business to
another corporation, the transferee corporation expressly assumes all of the
Trustee's liabilities hereunder.
In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Securities so authenticated; and in case at that time any of
the Securities shall not have been authenticated, any successor to the Trustee
may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the
Securities or in this Indenture provided that the certificate of the Trustee
shall have.
SECTION 6.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be
a corporation organized and doing business under the laws of the United States
of America, any State thereof or the District of Columbia and authorized under
such laws to exercise corporate trust power, shall be subject to supervision or
examination by Federal or State (or the District of Columbia) authority and
shall have, or be a Subsidiary of a bank or bank holding company having, a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition.
The Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee
is subject to and shall comply with the provisions of TIA Section 310(b)
during the period of time required by this Indenture. Nothing in this
Indenture shall prevent the Trustee from filing with the SEC the application
referred to in the penultimate paragraph of TIA Section 310(b).
SECTION 6.11 Preferential Collection of Claims Against Company.
The Trustee is subject to and shall comply with the provisions
of TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b). A Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated therein.
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ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.1 Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect
(except that the Company's and the Guarantors' obligations under Section 6.07
hereof and the Trustee's and Paying Agent's obligations under Section 7.03
hereof shall survive), and the Trustee, on demand of the Company, shall execute
proper instruments acknowledging the satisfaction and discharge of this
Indenture, when:
(1) either
(A) all outstanding Securities theretofore
authenticated and issued (other than destroyed, lost or stolen
Securities that have been replaced or paid) have been
delivered to the Trustee for cancellation; or
(B) all outstanding Securities not theretofore
delivered to the Trustee for cancellation:
(i) have become due and payable, or
(ii) will become due and payable at their
stated maturity within one year,
and the Company, in the case of clause (i) or (ii) above, has
deposited or caused to be deposited with the Trustee as funds
(immediately available to the Holders in the case of clause
(i)) in trust for such purpose an amount which, together with
earnings thereon, will be sufficient to pay and discharge the
entire indebtedness on such Securities for principal and
interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the stated
maturity, as the case may be;
(2) the Company has paid all other sums payable by it
hereunder; and
(3) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of this Indenture have been complied with, together with
an Opinion of Counsel to the same effect.
(b) The Company and the Guarantors may, subject as
provided herein, terminate all of their obligations under this Indenture if:
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(1) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for and dedicated solely to the benefit of the Holders, (i)
cash in an amount, or (ii) U.S. Government Obligations, maturing as
to principal and interest at such times and in such amounts as will
insure the availability of cash in an amount or (iii) a combination t
hereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay, without consideration of the
reinvestment of any such amounts and after payment of all taxes or
other charges or assessments in respect thereof payable by the Trustee,
the principal and interest on all Securities on each date that such
principal or interest is due and payable and to pay all other sums
payable by it hereunder; provided that the Trustee shall have been
irrevocably instructed to apply such money and/or the proceeds of such
U.S. Government Obligations to the payment of said principal and
interest with respect to the Securities as the same shall become due;
(2) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of this Indenture have been complied with, and an Opinion
of Counsel to the same effect;
(3) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as clauses (6)
and (7) of Section 5.01 hereof are concerned, at any time during the
period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) the Company shall have delivered to the Trustee an
Opinion of Counsel from a nationally recognized counsel acceptable to
the Trustee or a tax ruling to the effect that the Holders will not
recognize income, gain or loss for Federal income tax purposes as a
result of the Company's exercise of its option under this Section
7.01(b) and will be subject to Federal income tax on the same amount
and in the same manner and at the same times as would have been the
case if such option had not been exercised;
(5) such deposit and discharge will not result in a breach
or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound;
(6) such deposit and discharge shall not cause the Trustee
to have a conflicting interest as defined in TIA Section 310(b); and
(7) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the passage of 91 days
following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally.
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In such event, this Indenture shall cease to be of further
effect (except as provided in the next succeeding paragraph), and the Trustee,
on demand of the Company, shall execute proper instruments acknowledging
satisfaction and discharge under this Indenture.
However, the Company's obligations in Sections 2.03, 2.04,
2.05, 2.06, 2.07, 3.01, 4.01, 6.07, 6.08 and 7.04 hereof, the Company's and the
Guarantors' obligations in Sections 4.01, 6.07, 7.04 and 9.01 hereof and the
Trustee's and Paying Agent's obligations in Section 7.03 hereof shall survive
until the Securities are no longer outstanding. Thereafter, only the Company's
and the Guarantors' obligations in Section 6.07 hereof and the Trustee's and
Paying Agent's obligations in Section 7.03 hereof shall survive.
After such irrevocable deposit made pursuant to this Section
7.01(b) and satisfaction of the other conditions set forth herein, the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture except for those surviving obligations
specified above.
In order to have money available on a payment date to pay
principal of or interest on the Securities, the U.S. Government Obligations
shall be payable as to principal or interest on or before such payment date in
such amounts as will provide the necessary money. U.S. Government Obligations
shall not be callable at the issuer's option.
SECTION 7.02 Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the
Company shall hold in trust money or U.S. Government Obligations deposited
with it pursuant to Section 7.01 hereof. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
SECTION 7.03 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the
Company upon written request any excess money or securities held by them at any
time.
Subject to the requirements of any applicable abandoned
property laws, the Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such payment
shall have become due; provided, however, that the Company shall have either
caused notice of such payment to be mailed to each Holder entitled thereto no
less than 30 days prior to such repayment or within such period shall have
published such notice in a financial newspaper of widespread circulation
published in The City of New York. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and the Paying Agent with respect to such money shall
cease.
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SECTION 7.04 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money or U. S. Government Obligations in accordance with Section 7.01 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Company and the Guarantors under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 7.01 hereof until such time as the
Trustee or the Paying Agent is permitted to apply all such money or U. S.
Government Obligations in accordance with Section 7.01 hereof; provided,
however, that if the Company or any Guarantor has made any payment of principal
of or interest on any Securities because of the reinstatement of its
obligations, the Company or such Guarantor shall be subrogated to the rights of
the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or the Paying Agent.
ARTICLE 8
AMENDMENTS
SECTION 8.01 Without Consent of Holders.
The Company, the Guarantors and the Trustee may amend or
supplement this Indenture or the Securities or waive any provision hereof or
thereof without the consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Section 4.01 hereof;
(3) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(4) to reflect the release of any Guarantor from its
Guarantee, or the addition of any Subsidiary of the Company as a
Guarantor, in the manner provided by this Indenture;
(5) to comply with any requirement in order to effect or
maintain the qualification of this Indenture under the TIA;
(6) to add guarantees of the Securities;
(7) to comply with any requirements of the SEC in
connection with qualifying this Indenture under the TIA;
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(8) to add to the covenants of the Company or any Guarantor
for the benefit of the Holders or to surrender any right or power
herein conferred upon the Company or any Guarantor; or
(9) to make any change that does not adversely affect the
rights hereunder and under the Registration Rights Agreement of any
Holder in any material respect.
Upon the request of the Company and the Guarantors,
accompanied by a resolution of the Board of Directors and of the board of
directors, board of trustees or managing partners of each Guarantor authorizing
the execution of any such supplemental indenture, and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee shall
join with the Company and the Guarantors in the execution of any supplemental
indenture authorized or permitted by the terms of this Indenture and make any
further appropriate agreements and stipulations that may be therein contained.
After an amendment, supplement or waiver under this Section 8.01 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 8.02 With Consent of Holders.
Except as provided below in this Section 8.02, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture or the
Securities with the written consent (including consents obtained in connection
with a tender offer or exchange offer for Securities or a solicitation of
consents in respect of Securities, provided that in each case such offer or
solicitation is made to all Holders of then outstanding Securities on equal
terms) of the Holders of at least a majority in principal amount of the then
outstanding Securities.
Upon the request of the Company and the Guarantors,
accompanied by a resolution of the Board of Directors and of the board of
directors, board of trustees or managing partners of each Guarantor authorizing
the execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of the Holders as aforesaid, and upon
receipt by the Trustee of the documents described in Section 8.06 hereof, the
Trustee shall join with the Company and the Guarantors in the execution of such
supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
The Holders of a majority in principal amount of the then
outstanding Securities may waive compliance in a particular instance by the
Company or the Guarantors with any provision of this Indenture or the
Securities (including waivers obtained in connection with a tender offer or
exchange offer for Securities or a solicitation of consents in respect of
Securities,
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provided that in each case such offer or solicitation is made to all Holders of
then outstanding Securities on equal terms).
However, without the consent of each Holder affected, an
amendment, supplement or waiver under this Section may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal of or change the fixed maturity of
any Security;
(4) make any Security payable in money other than that
stated in the Security;
(5) impair the right to institute suit for the enforcement
of any payment of principal of or interest on any Security pursuant to
Sections 5.07 and 5.08 hereof, except as limited by Section 5.06
hereof;
(6) make any change in the percentage of principal amount
of Securities necessary to waive compliance with certain provisions
of this Indenture pursuant to Section 5.04 or 5.07 hereof or this
clause of this Section 8.02; or
(7) waive a continuing Default or Event of Default in the
payment of principal of or interest on the Securities.
The right of any Holder to participate in any consent required
or sought pursuant to any provision of this Indenture (and the obligation of
the Company to obtain any such consent otherwise required from such Holder) may
be subject to the requirement that such Holder shall have been the Holder of
record of any Securities with respect to which such consent is required or
sought as of a date identified by the Trustee in a notice furnished to Holders
in accordance with the terms of this Indenture.
SECTION 8.03 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall
comply in form and substance with the TIA as then in effect.
SECTION 8.04 Revocation and Effect of Consents.
Until an amendment (which includes any supplement) or waiver
becomes effective, a consent to it by a Holder is a continuing consent by the
Holder and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's
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Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his or her
Security or portion of a Security if the Trustee receives written notice of
revocation before the date the amendment or waiver becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment or waiver or to take any other action under this Indenture. If a
record date is fixed, then notwithstanding the provisions of the immediately
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only those Persons, shall be entitled to
consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No consent shall be valid or effective for more than 90 days
after such record date unless consents from Holders of the principal amount of
Securities required hereunder for such amendment or waiver to be effective
shall have also been given and not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it is of the type described in any of clauses
(1) through (7) of Section 8.02 hereof. In such case, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder that
evidences the same debt as the consenting Holder's Security.
SECTION 8.05 Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee
may require the Holder of the Security to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Security regarding the changed
terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Security shall issue and
the Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment.
SECTION 8.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article if the amendment or supplemental indenture
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment or supplemental indenture, the Trustee shall be
entitled to receive and subject to Section 6.01 hereof, shall be fully protected
in relying upon, an Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company and the Guarantors in accordance with its terms.
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ARTICLE 9
GUARANTEES OF SECURITIES
SECTION 9.01 Unconditional Guarantees.
(a) For value received, the Guarantors, jointly and
severally, hereby fully, unconditionally and absolutely guarantee (the
"Guarantees") to the Holders and to the Trustee the due and punctual payment of
the principal of and interest on the Securities and all other amounts due and
payable under this Indenture and the Securities by the Company, when and as
such principal and interest shall become due and payable, whether at the stated
maturity or by declaration of acceleration or otherwise, according to the terms
of the Securities and this Indenture.
(b) Failing payment when due of any amount guaranteed
pursuant to the Guarantees, for whatever reason, each Guarantor will be
obligated to pay the same immediately. Each Guarantee hereunder is intended to
be a general, unsecured, senior obligation of each Guarantor and will rank pari
passu in right of payment with all Indebtedness of each such Guarantor that is
not, by its terms, expressly subordinated in right of payment to the Guarantee
of such Guarantor. Each of the Guarantors hereby agrees that its obligations
hereunder shall be full, unconditional and absolute, irrespective of the
validity, regularity or enforceability of the Securities, the Guarantees or
this Indenture, the absence of any action to enforce the same, any waiver or
consent by any Holder with respect to any provisions hereof or thereof, any
release of any other Guarantor, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
Each of the Guarantors hereby agrees that in the event of a default in payment
of the principal of or interest on the Securities, whether at the stated
maturity or by declaration of acceleration or otherwise, legal proceedings may
be instituted by the Trustee on behalf of the Holders or, subject to Section
5.06 hereof, by the Holders, on the terms and conditions set forth in this
Indenture, directly against each of the Guarantors to enforce the Guarantees
without first proceeding against the Company.
(c) The obligations of each Guarantor under this Article
9 shall be as aforesaid full, unconditional and absolute and shall not be
impaired, modified, released or limited by any occurrence or condition
whatsoever, including, without limitation, (i) any compromise, settlement,
release, waiver, renewal, extension, indulgence or modification of, or any
change in, any of the obligations and liabilities of the Company or any
Guarantor contained in the Securities or this Indenture, (ii) any impairment,
modification, release or limitation of the liability of the Company, any
Guarantor or any of their estates in bankruptcy, or any remedy for the
enforcement thereof, resulting from the operation of any present or future
provision of any applicable Bankruptcy Law, as amended, or other statute or from
the decision of any court, (iii) the assertion or exercise by the Company, any
Guarantor or the Trustee of any rights or remedies under the Securities or this
Indenture or their delay in or failure to assert or exercise any such rights or
remedies, (iv) the assignment or the purported assignment of any property as
security for the Securities, including all or any part of the rights of the
Company or any Guarantor under this Indenture, (v) the extension of the time for
payment by the Company or any Guarantor of any payments or other
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sums or any part thereof owing or payable under any of the terms and provisions
of the Securities or this Indenture or of the time for performance by the
Company or any Guarantor of any other obligations under or arising out of any
such terms and provisions or the extension or the renewal of any thereof, (vi)
the modification or amendment (whether material or otherwise) of any duty,
agreement or obligation of the Company or any Guarantor set forth in this
Indenture, (vii) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of, or other similar proceeding affecting, the Company or any of the Guarantors
or any of their respective assets, or the disaffirmance of the Securities, the
Guarantees or this Indenture in any such proceeding, (viii) the release or
discharge of the Company or any Guarantor from the performance or observance of
any agreement, covenant, term or condition contained in any of such instruments
by operation of law, (ix) the unenforceability of the Securities, the Guarantees
or this Indenture or (x) any other circumstance which might otherwise constitute
a legal or equitable discharge of a surety or guarantor.
(d) Each of the Guarantors hereby (i) waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
the merger, insolvency or bankruptcy of the Company or a Guarantor, and all
demands whatsoever, (ii) acknowledges that any agreement, instrument or
document evidencing the Guarantees may be transferred and that the benefit of
its obligations hereunder shall extend to each holder of any agreement,
instrument or document evidencing the Guarantees without notice to them and
(iii) covenants that its Guarantee will not be discharged except by complete
performance of the Guarantees. Each Guarantor further agrees that if at any
time all or any part of any payment theretofore applied by any Person to any
Guarantee is, or must be, rescinded or returned for any reason whatsoever,
including without limitation, the insolvency, bankruptcy or reorganization of
any Guarantor, such Guarantee shall, to the extent that such payment is or must
be rescinded or returned, be deemed to have continued in existence
notwithstanding such application, and the Guarantees shall continue to be
effective or be reinstated, as the case may be, as though such application had
not been made.
(e) Each Guarantor shall be subrogated to all rights of
the Holders and the Trustee against the Company in respect of any amounts paid
by such Guarantor pursuant to the provisions of this Indenture; provided,
however, that no Guarantor shall be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation until all of
the Securities and the Guarantees shall have been paid in full or discharged.
(f) A director, officer, employee or stockholder, as
such, of any Guarantor shall not have any liability for any obligations of such
Guarantor under this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation.
SECTION 9.02 Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by
such Guarantor pursuant to its Guarantee
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not constitute a fraudulent transfer or conveyance for purposes of any federal,
state or foreign law. To effectuate the foregoing intention, the Holders and
each Guarantor hereby irrevocably agree that the obligations of each Guarantor
under its Guarantee shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to Section 9.03 hereof, result in the obligations of such
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal, state or foreign law.
SECTION 9.03 Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by the Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to its Guarantee.
SECTION 9.04 Execution and Delivery of Guarantees.
To further evidence the Guarantees, each Guarantor hereby
agrees that a notation relating to such Guarantees shall be endorsed on each
Security authenticated and delivered by the Trustee and executed by either
manual or facsimile signature of two Officers of each Guarantor.
Each of the Guarantors hereby agrees that its Guarantee shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a notation relating to such Guarantee.
If an Officer of a Guarantor whose signature is on this
Indenture or a Security no longer holds that office at the time the Trustee
authenticates such Security or at any time thereafter, such Guarantor's
Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any
Guarantee set forth in this Indenture on behalf of the Guarantor.
SECTION 9.05 Addition of Guarantors.
(a) If any Subsidiary of the Company guarantees (or
becomes a co-obligor on) any Funded Indebtedness of the Company other than the
Securities at any time subsequent to the Issue Date (including, without
limitation, following any release of such Subsidiary pursuant to Section 9.06
hereof from any Guarantee previously provided by it under this Article 9), then
the Company shall (i) cause the Securities to be equally and ratably guaranteed
by such Subsidiary,
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but only to the extent that the Securities are not already guaranteed by such
Subsidiary on reasonably comparable terms and (ii) cause such Subsidiary to
execute and deliver a supplemental indenture evidencing its provision of a
Guarantee in accordance with clause (b) below.
(b) Any Person that was not a Guarantor on the Issue Date
may become a Guarantor by executing and delivering to the Trustee (i) a
supplemental indenture in form and substance satisfactory to the Trustee, which
subjects such Person to the provisions (including the representations and
warranties) of this Indenture as a Guarantor and (ii) an Opinion of Counsel and
Officers' Certificate to the effect that such supplemental indenture has been
duly authorized and executed by such Person and constitutes the legal, valid,
binding and enforceable obligation of such Person (subject to such customary
exceptions concerning creditors' rights and equitable principles as may be
acceptable to the Trustee in its discretion and provided that no opinion need
be rendered concerning the enforceability of the Guarantee).
SECTION 9.06 Release of Guarantee.
Notwithstanding anything to the contrary in this Article 9, in
the event that any Guarantor shall no longer be a guarantor of (or co-obligor
on) any Funded Indebtedness of the Company other than the Securities and other
than Funded Indebtedness of the Company (i) subject to a release provision
substantially similar to this Section 9.06 and (ii) the related guarantee (or
obligation) of which will be released substantially concurrently with the
release of the Guarantee of such Guarantor pursuant to this Section 9.06, and
so long as no Default or Event of Default shall have occurred or be continuing,
such Guarantor, upon giving notice to the Trustee to the foregoing effect,
shall be deemed to be released from all of its obligations under this Indenture
and the Guarantee of such Guarantor shall be of no further force or effect.
Following the receipt by the Trustee of any such notice, the Company shall
cause this Indenture to be amended as provided in Section 8.01 hereof;
provided, however, that the failure to so amend this Indenture shall not affect
the validity of the termination of the Guarantee of such Guarantor.
SECTION 9.07 Consent to Jurisdiction and Service of Process.
Each Guarantor that is not organized under the laws of the
United States (including the States and the District of Columbia) (each a
"Non-U.S. Guarantor") hereby appoints the principal office of CT Corporation
System in The City of New York which, on the date hereof, is located at 1633
Broadway, New York, New York 10019, as the authorized agent thereof (the
"Authorized Agent") upon whom process may be served in any action, suit or
proceeding arising out of or based on this Indenture or the Securities which may
be instituted in the Supreme Court of the State of New York or the United States
District Court for the Southern District of New York, in either case in The
Borough of Manhattan, The City of New York, by the Holder of any Security, and
each Non-U.S. Guarantor hereby waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding and expressly and
irrevocably accepts and submits, for the benefit of the Holders from time to
time of the Securities, to the nonexclusive jurisdiction of any such court in
respect of any such action, suit or proceeding, for itself and with respect to
its properties, revenues and assets. Such appointment shall be
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irrevocable unless and until the appointment of a successor authorized agent for
such purpose, and such successor's acceptance of such appointment, shall have
occurred. Each Non-U.S. Guarantor agrees to take any and all actions, including
the filing of any and all documents and instruments, that may be necessary to
continue such appointment in full force and effect as aforesaid. Service of
process upon the Authorized Agent with respect to any such action shall be
deemed, in every respect, effective service of process upon any such Non-U.S.
Guarantor. Notwithstanding the foregoing, any action against any Non-U.S.
Guarantor arising out of or based on any Security may also be instituted by the
Holder of such Security in any court in the jurisdiction of organization of such
Non-U.S. Guarantor, and such Non-U.S. Guarantor expressly accepts the
jurisdiction of any such court in any such action. The Company shall require
the Authorized Agent to agree in writing to accept the foregoing appointment as
agent for service of process.
SECTION 9.08 Waiver of Immunity.
To the extent that any Non-U.S. Guarantor or any of its
properties, assets or revenues may have or may hereafter become entitled to, or
have attributed to it, any right of immunity, on the grounds of sovereignty or
otherwise, from any legal action, suit or proceeding, from the giving of any
relief in any thereof, from set-off or counterclaim, from the jurisdiction of
any court, from service of process, from attachment upon or prior to judgment,
from attachment in aid of execution of judgment, or from execution of judgment,
or other legal process or proceeding for the giving of any relief or for the
enforcement of any judgment, in any jurisdiction in which proceedings may at
any time be commenced, with respect to its obligations, liabilities or any
other matter under or arising out of or in connection with this Indenture or
the Securities, such Non-U.S. Guarantor, to the maximum extent permitted by
law, hereby irrevocably and unconditionally waives, and agrees not to plead or
claim, any such immunity and consents to such relief and enforcement.
SECTION 9.09 Judgment Currency.
Each Non-U.S. Guarantor agrees to indemnify the Trustee and
each Holder against any loss incurred by it as a result of any judgment or
order being given or made and expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the Judgment Currency for the purpose of such judgment or order
and (ii) the spot rate of exchange in The City of New York at which the Trustee
or such Holder on the date of payment of such judgment or order is able to
purchase United States dollars with the amount of the Judgment Currency actually
received by the Trustee or such Holder. The foregoing indemnity shall
constitute a separate and independent obligation of each Non-U.S. Guarantor and
shall continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "spot rate of exchange" shall include any premiums
and costs of exchange payable in connection with the purchase of, or conversion
into, United States dollars.
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ARTICLE 10
MISCELLANEOUS
SECTION 10.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by operation of TIA Section 318(c), the
imposed duties shall control.
SECTION 10.02 Notices.
Any notice or communication by the Company, the Guarantors or
the Trustee to the others is duly given if in writing and delivered in person
or mailed by first-class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the other's address:
If to the Company or the Guarantors:
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Attention: General Counsel
If to the Trustee:
Bank of Montreal Trust Company
77 Water Street, 4th Floor
New York, New York 10005
Attention: Corporate Trust Department
The Company, the Guarantors or the Trustee by notice to the
others may designate additional or different addresses for subsequent notices
or communications.
All notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
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<PAGE> 58
Any notice or communication to a Holder shall be mailed by
first-class mail, postage prepaid, to the Holder's address shown on the
register kept by the Registrar. Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company or any Guarantor mails a notice or
communication to Holders, it shall mail a copy to the Trustee and each Agent at
the same time.
All notices or communications, including without limitation
notices to the Trustee or the Company or any Guarantor by Holders, shall be in
writing, except as set forth below.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
SECTION 10.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA Section 312(c).
SECTION 10.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any
Guarantor to the Trustee to take any action under this Indenture, the Company
or such Guarantor shall, if requested by the Trustee, furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 10.05 hereof) stating that, in
the opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 10.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been complied with.
SECTION 10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
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<PAGE> 59
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied with.
SECTION 10.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or the Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 10.07 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 10.08 No Recourse Against Others.
A director, officer, employee or stockholder of the Company or
any Guarantor, as such, shall not have any liability for any obligations of the
Company or such Guarantor under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release shall be part of the consideration for the
issue of Securities.
SECTION 10.09 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
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SECTION 10.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company, any Guarantor or any other Subsidiary of
the Company. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 10.11 Successors.
All agreements of the Company and the Guarantors in this
Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 10.12 Severability.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 10.13 Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 10.14 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed as of the day and year first above written.
BJ SERVICES COMPANY
By: /s/___________________________
Name:
Title:
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<PAGE> 61
BANK OF MONTREAL TRUST COMPANY
By: /s/___________________________
Name:
Title:
BJ SERVICES COMPANY, U.S.A.
By: /s/___________________________
Name:
Title:
Address:
BJ SERVICE INTERNATIONAL, INC.
By: /s/___________________________
Name:
Title:
Address:
BJ SERVICES COMPANY MIDDLE EAST
By: /s/____________________________
Name:
Title:
Address:
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<PAGE> 62
EXHIBIT A
[FACE OF SECURITY]
BJ SERVICES COMPANY
7% SERIES [A/B] NOTE DUE 2006
CUSIP ___________
No. $
BJ Services Company, a Delaware corporation (the "Company"),
for value received promises to pay to ___________________________ or
registered assigns, the principal sum of _____________________________ Dollars
on February 1, 2006.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or imprinted hereon.
Dated:
[SEAL] BJ SERVICES COMPANY
By: ______________________________
By: ______________________________
Certificate of Authentication:
BANK OF MONTREAL TRUST COMPANY,
as Trustee, certifies that this is one of the
Securities referred to in the within-mentioned
Indenture.
By: _____________________________
Authorized Signature
__________________________
1 So long as the restrictive legend is included on a Definitive Security,
a CUSIP number is not needed for a Definitive Security transferred to
an institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act of 1933).
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[Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. The Depository Trust Company shall act as the Depositary
until a successor shall be appointed by the Company and the Registrar. Unless
this certificate is presented by an authorized representative of The Depository
Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as may be requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.](2)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
______________________
(2) This paragraph should be included only if the Security is issued in global
form.
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<PAGE> 64
THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE.
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<PAGE> 65
[REVERSE OF SECURITY]
BJ SERVICES COMPANY
7% SERIES [A/B] NOTE DUE 2006
This Security is one of a duly authorized issue of 7% [Series
A/Series B] Notes due 2006 (the "Securities") of BJ Services Company, a
Delaware corporation (the "Company").
1. Interest. The Company promises to pay interest on the
principal amount of this Security at 7% per annum from February 20, 1996 until
maturity. The Company will pay interest semiannually on February 1 and August 1
of each year (each an "Interest Payment Date"), or if any such day is not a
Business Day, on the next succeeding Business Day. Interest on the Securities
will accrue from the most recent Interest Payment Date on which interest has
been paid or, if no interest has been paid, from February 20, 1996; provided
that if there is no existing Default in the payment of interest, and if this
Security is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be August 1, 1996. The Company shall pay interest
on overdue principal from time to time on demand at a rate equal to the interest
rate then in effect; it shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such record
date and on or before such Interest Payment Date. The Holder must surrender
this Security to a Paying Agent to collect principal payments. The Company will
pay the principal of and interest on the Securities in money of the United
States of America that at the time of payment is legal tender for payment of
public and private debts. The Company, however, may pay such amounts by check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. Ranking and Guarantees. The Securities are senior
unsecured obligations of the Company. The Company's obligations to pay
principal and interest with respect to the Securities are unconditionally
guaranteed on a joint and several basis (the "Guarantees") by the guarantors
(the "Guarantors"), parties to the Indenture. Each of the Guarantees is an
unsecured obligation of the Guarantor providing such Guarantee. Certain
limitations to the obligations of the Guarantors are set forth in further detail
in the Indenture. References herein to the Indenture or the Securities shall be
deemed also to refer to the Guarantees set forth in the Indenture except where
the context otherwise requires.
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<PAGE> 66
4. Paying Agent and Registrar. Initially, Bank of Montreal
Trust Company (the "Trustee"), the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar,
co-registrar or additional paying agent without notice to any Holder. The
Company may act in any such capacity.
5. Indenture. The Company issued the Securities under an
Indenture dated as of February 1, 1996 (the "Indenture") among the Company, the
Guarantors and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb), as in
effect on the date of execution of the Indenture. The Securities are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Securities are unsecured general obligations of
the Company limited to $125,000,000 in aggregate principal amount.
6. Denominations, Transfer, Exchange. The Securities are
in registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Securities during the period between a record date and the
corresponding Interest Payment Date.
7. Persons Deemed Owners. The registered Holder of a
Security shall be treated as its owner for all purposes.
8. Amendments and Waivers. Subject to certain exceptions
and limitations, the Indenture or the Securities may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Securities, and any existing Default under, or compliance
with any provision of, the Indenture may be waived (other than any continuing
Default or Event of Default in the payment of the principal of or interest on
the Securities) by the Holders of at least a majority in principal amount of the
Securities then outstanding in accordance with the terms of the Indenture.
Without the consent of any Holder, the Company, the Guarantors and the Trustee
may amend or supplement the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency; to provide for uncertificated Securities in
addition to or in place of certificated Securities; to provide for the
assumption of the obligations of the Company and each Guarantor under the
Indenture to Holders in the case of the merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company or any
Guarantor; to reflect the release of any Guarantor from its Guarantee to the
extent permitted by the Indenture; to add guarantees to the Securities; to add
to the covenants of the Company or the Guarantors or to surrender any right of
the Company or any Guarantor; to make any change that does not materially
adversely affect the rights of any Holder; or to comply with the qualification
of the Indenture under the Trust Indenture Act of 1939, as amended.
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<PAGE> 67
The right of any Holder to participate in any consent required
or sought pursuant to any provision of the Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Securities with respect to which such consent is required or
sought as of a date identified by the Trustee in a notice furnished to Holders
in accordance with the terms of the Indenture.
Without the consent of each Holder affected, the Company may
not (i) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the rate of or change the time for
payment of interest, including default interest, on any Security, (iii) reduce
the principal of or change the fixed maturity of any Security, (iv) make any
Security payable in money other than that stated in the Security, (v) impair
the right to institute suit for the enforcement of any payment of principal of
or interest on any Security, (vi) make any change in the percentage of
principal amount of Securities necessary to waive compliance with certain
provisions of the Indenture or (vii) waive a continuing Default or Event of
Default in the payment of principal of or interest on the Securities.
9. Defaults and Remedies. Events of Default include:
default in payment of interest on the Securities for 30 days; default in
payment of principal of the Securities; failure by the Company or any Guarantor
for 60 days after written notice by the Trustee or by the Holders of at least
25% of the aggregate principal amount of the Securities then outstanding to it
to comply with any of its other covenants or agreements in the Indenture, the
Guarantees or the Securities; the acceleration of the maturity of any
Indebtedness of the Company or any Subsidiary of the Company (other than the
Securities or any Non-Recourse Indebtedness) that has an outstanding principal
amount of $20 million or more individually or in the aggregate; a default in the
payment of principal or interest in respect of any Indebtedness of the Company
or any Subsidiary of the Company (other than the Securities or any Non-Recourse
Indebtedness) having an outstanding principal amount of $20 million or more
individually or in the aggregate, and such default shall be continuing for a
period of 30 days without the Company or such Subsidiary, as the case may be,
effecting a cure of such default; a judgment or order for the payment of money
in excess of $20 million (net of applicable insurance coverage) having been
rendered against the Company, any Guarantor or any other "significant
subsidiary" (as such term is defined in Regulation S-X under the Securities
Exchange Act of 1934, as amended; a "Significant Subsidiary") of the Company and
such judgment or order shall continue unsatisfied and unstayed for a period of
30 days; or certain events involving bankruptcy, insolvency or reorganization of
the Company, any Guarantor or any other Significant Subsidiary of the Company.
If an Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Securities may declare
the principal of and interest on all the Securities to be immediately due and
payable, except that in the case of an Event of Default arising from certain
events of bankruptcy, insolvency or reorganization of the Company or any
Guarantor, all outstanding Securities become due and payable immediately without
further action or notice. The amount due and payable upon the acceleration of
any Security is equal to 100% of the principal amount thereof plus accrued
interest to the date of payment. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
A-6
<PAGE> 68
require indemnity reasonably satisfactory to it before it enforces the Indenture
or the Securities. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Securities may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of principal or
interest) if it determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the Trustee.
10. Discharge Prior to Maturity. The Indenture shall be
discharged and canceled upon the payment of all of the Securities and shall be
discharged except for certain obligations upon the irrevocable deposit with the
Trustee of funds or U.S. Government Obligations sufficient for such payment.
11. Trustee Dealings with Company and Guarantors. The
Trustee, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, the Guarantors or their
respective Affiliates, and may otherwise deal with the Company, the Guarantors
or their respective Affiliates, as if it were not Trustee.
12. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or any Guarantor shall not
have any liability for any obligations of the Company or such Guarantor under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
13. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
14. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures,
the Company has caused CUSIP numbers to be printed on the Securities as a
convenience to the Holders of the Securities. No representation is made as to
the accuracy of such numbers as printed on the Securities and reliance may be
placed only on the other identification numbers printed thereon.
15. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. Additional Rights of Holders of Transfer Restricted
Securities. In addition to the rights provided by Holders of Securities under
the Indenture, Holders of Transfer Restricted Securities shall have all the
rights set forth in the Registration Rights Agreement, dated as of the Issue
Date (the "Registration Rights Agreement"), among the Company and the Initial
Purchasers.
A-7
<PAGE> 69
THE COMPANY WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUEST MAY BE MADE TO:
BJ SERVICES COMPANY
5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
ATTENTION: GENERAL COUNSEL
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<PAGE> 70
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTEES
Each Guarantor (which term includes any successor Person under
the Indenture), has fully, unconditionally and absolutely guaranteed, to the
extent set forth in the Indenture and subject to the provisions in the
Indenture, the due and punctual payment of the principal of and interest on the
Securities and all other amounts due and payable under the Indenture and the
Securities by the Company.
The obligations of the Guarantors to the Holders of Securities
and to the Trustee pursuant to the Guarantees and the Indenture are expressly
set forth in Article 9 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantees.
BJ SERVICES COMPANY, U.S.A.
By:_______________________________________
By:_______________________________________
BJ SERVICE INTERNATIONAL, INC.
By:_______________________________________
By:_______________________________________
BJ SERVICES COMPANY MIDDLE EAST
By:_______________________________________
By:_______________________________________
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<PAGE> 71
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to _________________________________________
______________________________________________________________________________
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
as agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
________________________________________________________________________________
Date: ___________________________ Your Signature:______________________________
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee ___________________________________________________________
(Participant in a Recognized Signature
Guaranty Medallion Program)
A-10
<PAGE> 72
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITY*
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount
decrease in increase in of this Global Signature of
Principal Amount Principal Amount Security following authorized officer
of this Global of this Global such decrease of Trustee or
Date of Exchange Security Security (or increase) Security Custodian
---------------- ---------------- --------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
______________________
* This should be included only if the Security is issued in global form.
A-11
<PAGE> 73
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 7% Series [A/B] Notes due 2006 of BJ Services Company
This Certificate relates to $_____ principal amount of
Securities held in *______ book-entry or *______ definitive form by
_____________________ (the "Transferor").
The Transferor**:
[ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Securities held by the
Depositary a Security or Securities in definitive, registered form equal to its
beneficial interest in such Global Securities (or the portion thereof indicated
above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relative to the above captioned Securities and that the
transfer of this Security does not require registration under the Securities
Act (as defined below) because:*
[ ] Such Security is being acquired for the Transferor's own
account without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred (i) to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")), in reliance on Rule 144A under the
Securities Act or (ii) pursuant to an exemption from registration in accordance
with Rule 904 under the Securities Act (and in the case of clause (ii), based
on an opinion of counsel if the Company so requests and together with a
certification in substantially the form of Exhibit D to the Indenture).
[ ] Such Security is being transferred (i) in accordance with Rule
144 under the Securities Act (and based on an opinion of counsel if the Company
so requests) or (ii) pursuant to an effective registration statement under the
Securities Act.
_____________________
**Check applicable box.
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<PAGE> 74
[ ] Such Security is being transferred to aninstitutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based on an opinion of
counsel if the Company so requests) together with a certification in
substantially the form of Exhibit C to the Indenture.
[ ] Such Security is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
________________________________________
[INSERT NAME OF TRANSFEROR]
By:_____________________________________
Name:
Title:
Address:
Date:____________________
B-2
<PAGE> 75
EXHIBIT C
FORM OF TRANSFEREE LETTER OF REPRESENTATION
TO BE DELIVERED BY INSTITUTIONAL ACCREDITED INVESTORS
BJ Services Company,
c/o Bank of Montreal Trust Company, as Trustee
77 Water Street, 4th Floor
New York, New York 10005
Dear Sirs:
In connection with the proposed transfer to us of $___________
aggregate principal amount of the 7% Notes due 2006 (the "Notes") of BJ
SERVICES COMPANY, a Delaware corporation (the "Company"), we confirm that:
1. We understand that the Notes have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or other
applicable securities laws, and may not be offered, sold or otherwise
transferred except as permitted in the following sentence. We agree on our
behalf and on behalf of any investor account for which we are purchasing Notes
to offer, sell or otherwise transfer such Notes prior to the date which is
three years after the later of the date of original issue thereof and the last
date on which the Company or any "affiliate" of the Company was the owner of
such Notes (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement which
has been declared effective under the Securities Act, (c) so long as the Notes
are eligible for resale pursuant to Rule 144A under the Securities Act, to a
person we reasonably believe is a "qualified institutional buyer" (a "QIB") as
defined in Rule 144A under the Securities Act that purchases for its own
account or for the account of a QIB to whom notice is given that the transfer
is being made in reliance on Rule 144A, (d) pursuant to offers and sales to
non-U.S. persons that occur outside the United States within the meaning of
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" (an "Institutional Accredited Investor") within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that
is acquiring the Notes for its own account or for the account of such an
Institutional Accredited Investor for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject to the Company's and
the Trustee's right prior to any such offer, sale or transfer (i) pursuant to
clause (d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to each of them and (ii)
in each of the foregoing cases to require that a certificate of transfer in the
form appearing on the Notes is completed and delivered by the transferor to the
Trustee.
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<PAGE> 76
2. We are an Institutional Accredited Investor
purchasing for our own account or for the account of such an Institutional
Accredited Investor for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act or any other applicable securities laws and we have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of our
or its investment for an indefinite period.
3. We are acquiring the Notes purchased by us for our
own account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
Name of Transferee: ___________________
By: ___________________________________
Date: _________________________________
Upon transfer the Notes would be registered in the name of the
new beneficial owner as follows:
Name: __________________________
Address: _______________________
_______________________
Taxpayer ID No: _______________
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<PAGE> 77
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
_____________, ____
Bank of Montreal Trust Company, as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed sale of certain 7% Series
[A/B] Notes due 2006 (the "Securities") of BJ Services Company, a Delaware
corporation (the "Company"), we represent that:
(i) the offer of the Securities was not made to a person
in the United States;
(ii) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States;
(iii) no directed selling efforts have been made by us in
the United States in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S under the U.S. Securities Act of 1933,
as applicable; and
(iv) the transaction is not part of a plan or scheme to
evade the registration requirements of the U.S. Securities Act of
1933.
You and the Company are entitled to rely upon this letter and
you are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S under the U.S. Securities Act of 1933.
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Very truly yours,
___________________________
[Name]
By: _______________________
Name:
Title:
Address:
D-2
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
Dated as of February 20, 1996
among
BJ SERVICES COMPANY,
Issuer,
BJ SERVICES COMPANY, U.S.A.,
BJ SERVICES COMPANY MIDDLE EAST,
BJ SERVICE INTERNATIONAL, INC.,
Subsidiary Guarantors,
and
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
CS FIRST BOSTON CORPORATION,
BA SECURITIES, INC.,
CHASE SECURITIES, INC.,
Initial Purchasers
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered as of February 20, 1996, among BJ SERVICES COMPANY, a Delaware
corporation (the "Company"), and BJ SERVICES COMPANY, U.S.A., BJ SERVICES
COMPANY MIDDLE EAST and BJ SERVICE INTERNATIONAL, INC., each a Delaware
corporation and direct or indirect wholly owned subsidiary of the Company (the
"Subsidiary Guarantors"), and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, CS FIRST BOSTON CORPORATION, BA SECURITIES, INC.
and CHASE SECURITIES, INC. (the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated February 14, 1996 among the Company, the Subsidiary Guarantors and the
Initial Purchasers (the "Purchase Agreement"), which provides for the sale by
the Company to the Initial Purchasers of an aggregate of $125,000,000 principal
amount of the Company's 7% Series A Notes due 2006 (the "Debt Securities"). As
provided in the Indenture (as hereinafter defined), the Debt Securities are
unconditionally guaranteed pursuant to the guarantees of the Subsidiary
Guarantors. In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company and the Subsidiary Guarantors have agreed to
provide to the Initial Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree,
and all other Holders (as defined below) of Registrable Securities (as defined
below) from time to time, by their acceptance thereof, shall be conclusively
deemed to have agreed, as follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Agreement" shall have the meaning set forth in the preamble.
"Closing Date" shall mean the date on which the Closing Time
(as defined in the Purchase Agreement) occurs.
"Company" shall have the meaning set forth in the preamble and
also includes the Company's successors.
"Debt Securities" shall have the meaning set forth in the
preamble.
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<PAGE> 3
"Depositary" shall mean the Trustee, or any other exchange
agent appointed by the Company.
"Exchange Offer" shall mean the exchange offer by the Company
and the Subsidiary Guarantors of Exchange Securities for Registrable Securities
pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Exchange Securities" shall mean 7% Series B Notes due 2006
issued by the Company under the Indenture containing terms identical in all
material respects to the Debt Securities (except that (i) interest thereon
shall accrue from the last date on which interest was paid or duly provided for
on the Debt Securities or, if no such interest has been paid, from February 20,
1996, (ii) the transfer restrictions thereon shall be eliminated and (iii)
certain provisions relating to an increase in the stated rate of interest
thereon shall be eliminated), to be offered to Holders of Debt Securities in
exchange for Debt Securities pursuant to the Exchange Offer.
"Holders" shall mean each of the Initial Purchasers, for so
long as it owns any Registrable Securities, and each of its successors, assigns
and direct and indirect transferees who shall at the time be owners of
Registrable Securities under the Indenture; provided, however, that the term
Holder shall exclude any underwriter who purchased Registrable Securities for
distribution in an underwritten public offering pursuant to an effective
Registration Statement.
"Indenture" shall mean the Indenture relating to the Debt
Securities dated as of February 1, 1996 between the Company, the Subsidiary
Guarantors and Bank of Montreal Trust Company, as trustee, as the same may be
amended from time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; provided,
however, that whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities directly or indirectly held by the Company shall be disregarded in
determining whether such consent or approval was given by the Holders of such
required percentage or amount; and provided, further, that whenever the consent
or approval of Holders of Registrable Securities is required hereunder with
regard to matters related to an underwritten
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<PAGE> 4
registration or similar offering or with regard to matters pertaining to a
Registration Statement, Registrable Securities held by Holders not
participating in such underwritten registration or similar offering, or
Registrable Securities not registered pursuant to such Registration Statement
(or, at any time prior to the filing of a Subject Registration Statement and
after the determination to file such Subject Registration Statement is made,
Registrable Securities whose Holders have not requested that such Registrable
Securities be included in such Subject Registration Statement), as the case may
be, shall be disregarded in determining whether such consent or approval was
given by the Holders of such required percentage or amount.
"Merrill Lynch" shall mean Merrill Lynch, Pierce, Fenner &
Smith Incorporated, on behalf of the Initial Purchasers.
"Person" shall mean an individual, partnership, corporation,
trust, unincorporated organization, limited liability company, joint stock
company, joint venture, charitable foundation or other entity, or a government
or any agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Subject Registration Statement, and
by all other amendments and supplements to a prospectus, including
post-effective amendments, and in each case including all material incorporated
or deemed to be incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Purchaser Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company and the Subsidiary Guarantors pursuant to
the provisions of Section 2(b)(iii) of this Agreement with respect to offers
and sales of Registrable Securities held by any or all of the Initial
Purchasers (except Registrable Securities which the Initial Purchasers have
elected not to include in such Purchaser Shelf Registration Statement or the
Initial Purchasers of which have not complied with their obligations under the
penultimate paragraph of Section 3 hereof or under the penultimate sentence of
Section 2(b) hereof) after completion of the Exchange Offer on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be adopted
by the SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated or deemed
to be incorporated by reference therein.
"Registrable Securities" shall mean the Debt Securities;
provided, however, that any Debt Securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such Debt
Securities shall have been declared effective under the 1933 Act and such Debt
Securities shall have been disposed of pursuant to such Registration Statement,
(ii) such Debt Securities shall have been sold to the public pursuant to Rule
144 (or any similar provision then in force, but not Rule 144A) under the 1933
Act, (iii) such Debt Securities shall have
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<PAGE> 5
become eligible for resale pursuant to Rule 144(k) under the 1933 Act, (iv)
such Debt Securities shall have ceased to be outstanding or (v) such Debt
Securities have been exchanged for Exchange Securities upon consummation of the
Exchange Offer.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company and the Subsidiary
Guarantors with this Agreement, including without limitation: (i) all SEC or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, (ii) all fees and expenses incurred in connection with compliance
with state securities or blue sky laws (including reasonable fees and
disbursements of one firm of legal counsel for any underwriters and Holders in
connection with blue sky qualification of any of the Exchange Securities or
Registrable Securities), (iii) all expenses of printing and distributing any
Registration Statement, any Prospectus and any amendments or supplements
thereto, (iv) all rating agency fees, (v) the fees and disbursements of
counsel(s) for the Company and the Subsidiary Guarantors and of the independent
public accountants of the Company and the Subsidiary Guarantors, including the
expenses of "cold comfort" letters required by this Agreement, (vi) the fees
and expenses of the Trustee, and any escrow agent or custodian, (vii) all fees
and expenses incurred in connection with listing the Debt Securities or the
Exchange Securities, as the case may be, on any securities exchange or on any
securities quotation system and (viii) the reasonable fees and expenses of any
special experts retained by the Company or the Subsidiary Guarantors in
connection with any Registration Statement, but excluding fees of counsel to
the underwriters or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a Holder.
"Registration Statement" shall mean any registration statement
of the Company and the Subsidiary Guarantors which covers any of the Exchange
Securities or Registrable Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated or deemed to be incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company and the Subsidiary Guarantors pursuant to
the provisions of Section 2(b)(i) or (ii) of this Agreement which covers all of
the Registrable Securities (except Registrable Securities which the Holders
have elected not to include in such Shelf Registration Statement or the Holders
of which have not complied with their obligations under the penultimate
paragraph of Section 3 hereof or under the penultimate sentence of Section 2(b)
hereof) on an appropriate form under Rule 415 under the 1933 Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements
to such registration statement, including post-effective amendments,
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<PAGE> 6
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated or deemed to be incorporated by reference
therein.
"Subject Registration Statement" shall mean a Shelf
Registration Statement or a Purchaser Shelf Registration Statement or both (as
the context requires).
"Subsidiary Guarantors" shall have the meaning set forth in
the preamble and also includes any subsidiary of the Company that becomes a
guarantor of the Debt Securities pursuant to the terms and provisions of the
Indenture.
"Trustee" shall mean the trustee with respect to the Debt
Securities under the Indenture.
All references herein to information which is "included" or "contained" in a
Registration Statement or Prospectus, and all references of like import, shall
include the information (including financial statements) incorporated or deemed
to be incorporated by reference therein, and all references herein to
amendments or supplements to a Registration Statement or Prospectus shall
include any documents filed by the Company or any Subsidiary Guarantor under
the 1934 Act which are deemed to be incorporated by reference therein.
2. REGISTRATION UNDER THE 1933 ACT. (a) Exchange Offer
Registration. To the extent not prohibited by law (including, without
limitation, any applicable interpretation of the staff of the SEC), the Company
and the Subsidiary Guarantors shall use their reasonable best efforts (A) to
file within 60 days after the Closing Date an Exchange Offer Registration
Statement covering the offer by the Company and the Subsidiary Guarantors to
the Holders to exchange all of the Registrable Securities (except Registrable
Securities held by an Initial Purchaser and acquired directly from the Company
if such Initial Purchaser is not permitted, in the reasonable opinion of
counsel to the Initial Purchasers, pursuant to applicable law or SEC
interpretation, to participate in the Exchange Offer) for Exchange Securities,
(B) to cause such Exchange Offer Registration Statement to be declared
effective by the SEC within 120 days after the Closing Date, (C) to cause such
Exchange Offer Registration Statement to remain effective until the closing of
the Exchange Offer and (D) to consummate the Exchange Offer within 180 days
following the Closing Date. The Exchange Securities will be issued under the
Indenture. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company and the Subsidiary Guarantors shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
(other than Participating Broker-Dealers (as defined in Section 3(f) hereof)
and broker-dealers who purchased Debt Securities directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the 1933
Act) eligible and electing to exchange Registrable Securities for Exchange
Securities (assuming that such Holder is not an affiliate of the Company,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any person to
participate in the distribution (within the meaning of the 1933 Act) of
Exchange Securities) to trade such Exchange Securities from and after their
receipt without any limitations or restrictions
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<PAGE> 7
under the 1933 Act and without material restrictions under the securities laws
of a substantial proportion of the several states of the United States.
In connection with the Exchange Offer, the Company and the
Subsidiary Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(iii) use the services of the Depositary for the Exchange
Offer;
(iv) permit Holders to withdraw tendered Registrable
Securities at any time prior to the close of business, New York City
time, on the last business day on which the Exchange Offer shall
remain open, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Debt Securities exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company and the Subsidiary Guarantors shall:
(i) accept for exchange Registrable Securities duly tendered
and not validly withdrawn pursuant to the Exchange Offer in accordance
with the terms of the Exchange Offer Registration Statement and the
letter of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities so accepted for exchange by
the Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Securities to each Holder of Registrable Securities equal in
amount to the Registrable Securities of such Holder so accepted for
exchange.
Interest on each Exchange Security will accrue from the last
date on which interest was paid or duly provided for on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from February 20, 1996. The Exchange Offer shall
not be subject to any conditions, other than (i) that the Exchange Offer, or
the making of any exchange by a Holder, does not violate applicable law or any
applicable interpretation of
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<PAGE> 8
the staff of the SEC, (ii) that no action or proceeding shall have been
instituted or threatened in any court or by or before any governmental agency
or body with respect to the Exchange Offer, (iii) that there shall not have
been adopted or enacted any law, statute, rule or regulation, (iv) that there
shall not have been declared by United States federal or Texas or New York
state authorities a banking moratorium, (v) that trading on the New York Stock
Exchange or generally in the United States over-the-counter market shall not
have been suspended by order of the SEC or any other governmental authority and
(vi) such other conditions as may be reasonably acceptable to Merrill Lynch, in
each of clauses (ii) through (v), which, in the Company's judgment, would
reasonably be expected to impair the ability of the Company to proceed with the
Exchange Offer. In addition, each Holder of Registrable Securities (other than
Participating Broker-Dealers) who wishes to exchange such Registrable
Securities for Exchange Securities in the Exchange Offer will be required to
represent that (i) it is not an affiliate of the Company or any Subsidiary
Guarantor, (ii) any Exchange Securities to be received by it were acquired in
the ordinary course of business and (iii) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, the distribution (within the meaning of the 1933 Act) of the
Exchange Securities. Each Participating Broker-Dealer shall be required to make
such representations as, in the reasonable judgment of the Company, may be
necessary under applicable SEC rules, regulations or interpretations or
customary in connection with similar exchange offers. Each Holder (including
Participating Broker-Dealers) shall be required to make such other
representations as may be reasonably necessary under applicable SEC rules,
regulations or interpretations to render the use of Form S-4 or another
appropriate form under the 1933 Act available and will be required to agree to
comply with their agreements and covenants set forth in this Agreement. The
Exchange Offer shall be subject to the further condition that no stop order
shall have been issued by the SEC or any state securities authority suspending
the effectiveness of the Exchange Offer Registration Statement and no
proceedings shall have been initiated or, to the knowledge of the Company,
threatened for that purpose. To the extent permitted by law, the Company shall,
upon request of Merrill Lynch, inform the Initial Purchasers of the names and
addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right to, and, if requested by the Company, shall,
contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall, if requested by the
staff of the SEC, provide a supplemental letter to the SEC (i) stating that the
Company and the Subsidiary Guarantors are registering the Exchange Offer in
reliance on the position of the SEC enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc.
(available June 5, 1991) and (ii) including a representation that the Company
and the Subsidiary Guarantors have not entered into any arrangement or
understanding with any Person to distribute the Exchange Securities and that,
to the best of the Company's and the Subsidiary Guarantors' information and
belief, each Holder participating in the Exchange Offer is acquiring the
Exchange Securities in its ordinary course of business and has no arrangement
or understanding with any Person to participate in the distribution of the
Exchange Securities received in the Exchange Offer.
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<PAGE> 9
If in the reasonable opinion of counsel to the Company and the
Subsidiary Guarantors there is a question as to whether the Exchange Offer is
permitted by applicable law, the Company and the Subsidiary Guarantors hereby
agree to seek a no-action letter or other favorable decision from the SEC
allowing the Company and the Subsidiary Guarantors to consummate the Exchange
Offer. The Company and the Subsidiary Guarantors hereby agree to pursue the
issuance of such a decision to the SEC staff level, but shall not be required
to take commercially unreasonable action to effect a change of SEC policy. The
Company and the Subsidiary Guarantors hereby agree, however, to (i) participate
in telephonic conferences with the SEC and the staff of the SEC, (ii) deliver
to the staff of the SEC an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that the
Exchange Offer should be permitted and (iii) diligently pursue a resolution
(which need not be favorable) by the staff of the SEC of such submission.
(b) Shelf Registration. (i) If, because of any change in law
or applicable interpretations thereof by the staff of the SEC, the Company and
the Subsidiary Guarantors are not permitted to effect the Exchange Offer as
contemplated by Section 2(a) hereof, or (ii) if for any other reason the
Exchange Offer Registration Statement is not declared effective within 120 days
after the Closing Date or the Exchange Offer is not consummated within 180 days
after the Closing Date, or (iii) upon the request of Merrill Lynch (but only
with respect to any Registrable Securities which the Initial Purchasers
acquired directly from the Company) following the consummation of the Exchange
Offer if any of the Initial Purchasers shall hold Registrable Securities which
such Initial Purchaser acquired directly from the Company and if such Initial
Purchaser is not permitted, in the reasonable opinion of counsel to the Initial
Purchasers, pursuant to applicable law or applicable interpretation of the
staff of the SEC to participate in the Exchange Offer, the Company and the
Subsidiary Guarantors shall, at their cost:
(A) in the event clause (i) or (ii) is applicable, as
promptly as practicable (but in no event (x) more than 30 days from
the date on which the Company and the Subsidiary Guarantors determined
that they are not permitted to effect the Exchange Offer as
contemplated by Section 2(a) hereof in the case of clause (i) or (y)
on the 150th day after the Closing Date in the case of clause (ii)),
file with the SEC a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities (other than Registrable
Securities owned by Holders who have elected not to include such
Registrable Securities in such Shelf Registration Statement or who
have not complied with their obligations under the penultimate
paragraph of Section 3 hereof or under the penultimate sentence of
this Section 2(b)) by the Holders from time to time in accordance with
the methods of distribution elected by the Majority Holders of such
Registrable Securities and set forth in such Shelf Registration
Statement, and use their reasonable best efforts to cause such Shelf
Registration Statement to be declared effective by the SEC by the
180th day after the Closing Date. In the event that the Company is
required to file a Purchaser Shelf Registration Statement upon the
request of Merrill Lynch pursuant to clause (iii) above, the Company
and the Subsidiary Guarantors shall use their reasonable best efforts
(unless clause (i) or (ii) above is applicable) to file and have
declared effective by the SEC an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to
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<PAGE> 10
all Registrable Securities (other than Registrable Securities acquired
directly from the Company and held by the Initial Purchasers) and use
their reasonable best efforts to file, promptly after any such
request from Merrill Lynch, and have declared effective, a Purchaser
Shelf Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement or, if clause
(i) or (ii) above is applicable, a combined Registration Statement
with the Shelf Registration Statement);
(B) use their reasonable best efforts to keep the relevant
Subject Registration Statement continuously effective in order to
permit the Prospectus forming part thereof to be usable by Holders for
a period of three years from the date a Shelf Registration Statement
is declared effective by the SEC (or one year from the date a
Purchaser Shelf Registration Statement is declared effective) or in
each case such shorter period which will terminate when all of the
Registrable Securities covered by the relevant Subject Registration
Statement have been sold pursuant to such Subject Registration
Statement or otherwise are no longer Registrable Securities; and
(C) notwithstanding any other provisions hereof, use their
reasonable best efforts to ensure that (i) any Subject Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any supplement thereto complies in all material respects
with the 1933 Act and the rules and regulations thereunder, (ii) any
Subject Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Subject Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to
time), does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
To the extent permitted by law, the Company and the Subsidiary
Guarantors further agree, if necessary, to supplement or amend the Shelf
Registration Statement (if reasonably requested by one firm of legal counsel
selected by the Majority Holders) or the Purchaser Shelf Registration Statement
(if reasonably requested by Merrill Lynch), as the case may be, with respect to
information relating to the Holders or the Initial Purchasers, respectively,
and otherwise as required by Section 3(b) below, to use their reasonable best
efforts to cause any such amendment to become effective and such Subject
Registration Statement to become usable as soon as thereafter practicable and
to furnish to the Holders of Registrable Securities registered thereby or the
relevant Initial Purchasers, as the case may be, copies of any such supplement
or amendment promptly after its being used or filed with the SEC. The Company
may require, as a condition to including the Registrable Securities of any
Holder in any Subject Registration Statement, that such Holder shall have
furnished to the Company a written agreement to the effect that such Holder
agrees to comply with and be bound by the provisions of this Agreement. For
further clarity, the Company and the Subsidiary Guarantors shall have no
obligation to keep the Shelf Registration Statement effective after
consummation of the Exchange Offer, and the
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<PAGE> 11
Company's and the Subsidiary Guarantors' obligations to use their reasonable
best efforts to file a Shelf Registration Statement and to keep such Shelf
Registration Statement effective shall immediately be suspended upon
effectiveness of the Exchange Offer Registration Statement (regardless of when
such effectiveness shall occur).
(c) Expenses. The Company and the Subsidiary Guarantors (i)
shall pay all Registration Expenses in connection with the registration
pursuant to Section 2(a) or 2(b) and (ii) in connection with the Exchange Offer
Registration Statement and the Shelf Registration Statement, shall reimburse
the Holders of Registrable Securities being tendered in the Exchange Offer
and/or resold pursuant to the "Plan of Distribution" contained in the Exchange
Offer Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable (or to the extent such fees and disbursements are paid
to such counsel by the Initial Purchasers, the Initial Purchasers), for the
reasonable fees and disbursements of not more than one counsel, to be chosen by
the Holders of a majority in principal amount of the Registrable Securities for
whose benefit such Registration Statement is being prepared. Each Holder
(including each Initial Purchaser) shall pay all expenses of its counsel other
than as set forth in the preceding sentence, underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to any Subject Registration
Statement or the exchange of its Registrable Securities pursuant to any
Exchange Offer Registration Statement. Notwithstanding anything in this
Agreement to the contrary, the Company and the Subsidiary Guarantors shall not
be required to pay the fees and disbursements of legal counsel for any Holders
(including Initial Purchasers) except (A) as provided in clause (ii) of the
first sentence of this paragraph, (B) to the extent such fees and disbursements
constitute Registration Expenses which the Company is required to pay pursuant
to the other provisions of this Agreement and (C) to the extent required by
Section 5 hereof.
(d) Effective Registration Statement. (i) The Company and the
Subsidiary Guarantors will be deemed not to have used their reasonable best
efforts to cause the Exchange Offer Registration Statement or any Subject
Registration Statement, as the case may be, to become, or to remain, effective
during the requisite period if the Company or any Subsidiary Guarantor
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable
Securities covered thereby not being able to exchange or offer and sell such
Registrable Securities during that period unless such action is, in the
reasonable judgment of the Company, required by applicable law (including,
without limitation, any interpretation of the SEC).
(ii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Subject Registration Statement pursuant to
Section 2(b) hereof will not be deemed to have become effective unless
it has been declared effective by the SEC; provided, however, that if,
after it has been declared effective, the offering of Registrable
Securities pursuant to such Subject Registration Statement is
interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Subject Registration Statement will be deemed not to have been
effective
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<PAGE> 12
during the period of such interference, until the offering of
Registrable Securities pursuant to such Subject Registration
Statement may legally resume.
(e) Increase in Interest Rate. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 60th calendar day after the Closing Date, (ii) the Exchange Offer
Registration Statement is not declared effective by the SEC on or prior to the
120th calendar day after the Closing Date or (iii) the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective by the
SEC on or prior to the 180th calendar day after the Closing Date, the interest
rate borne by the Debt Securities shall be increased by 0.50% per annum, as
liquidated damages, following such 60th day in the case of clause (i) above,
such 120th day in the case of clause (ii) above, or such 180th day in the case
of clause (iii) above; provided, however, that the aggregate amount of any such
increase in such interest rate will in no event exceed 0.50% per annum; and
provided, further that if the Exchange Offer Registration Statement is not
declared effective by the SEC on or prior to the 120th day following the
Closing Date, then Debt Securities owned by Persons who do not comply in all
material respects with their obligations under the penultimate paragraph of
Section 3 will not be entitled to any such increase in the interest rate for
any day after the 180th day following the Closing Date. Upon (x) the filing of
the Exchange Offer Registration Statement after the 60th day described in
clause (i) above, (y) the effectiveness of the Exchange Offer Registration
Statement after the 120th day described in clause (ii) above or (z) the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, after the 180th day described in clause (iii)
above, the interest rate borne by the Debt Securities from the date of such
filing, effectiveness or consummation (effective immediately preceding such
consummation), as the case may be, will be reduced to the original interest
rate; provided, however, that the interest rate borne by the Debt Securities
will be reduced to the original interest rate only if all of the events set
forth in the immediately preceding sentence causing the interest rate borne by
the Debt Securities to increase have been cured.
(f) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company and the
Subsidiary Guarantors acknowledge that any failure by the Company or any
Subsidiary Guarantor to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchasers or any Holder may, to
the extent permitted by law, obtain such relief as may be required to
specifically enforce the Company's and the Subsidiary Guarantors' obligations
under Section 2(a) and Section 2(b) hereof.
3. REGISTRATION PROCEDURES. In connection with the
obligations of the Company and the Subsidiary Guarantors with respect to the
Registration Statements pursuant to Sections 2(a) and 2(b) hereof, but only so
long as the Company and the Subsidiary Guarantors shall have an obligation
under this Agreement to keep a Registration Statement effective, the Company
and the Subsidiary Guarantors shall:
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<PAGE> 13
(a) use their reasonable best efforts to prepare and file
with the SEC a Registration Statement, within the relevant time period
specified in Section 2, on the appropriate form under the 1933 Act, which form
(i) shall be selected by the Company, (ii) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities by the
selling Holders thereof and (iii) shall comply as to form in all material
respects with the requirements of the applicable form and include or
incorporate by reference all financial statements required by the SEC to be
filed therewith, and use their reasonable best efforts to cause such
Registration Statement to become effective and use their reasonable best
efforts to cause such Registration Statement to remain effective in accordance
with Section 2 hereof;
(b) to the extent permitted by law, use their reasonable best
efforts to (i) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under applicable
law to keep such Registration Statement effective for the applicable period,
(ii) cause each Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed (if required) pursuant to Rule
424 under the 1933 Act, and (iii) comply with the provisions of the 1933 Act
with respect to the disposition of all securities covered by each Registration
Statement during the applicable period in accordance with the intended method
or methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities, at least ten business days prior to filing,
that the Shelf Registration Statement with respect to the Registrable
Securities is being filed and advising such Holders that the distribution of
Registrable Securities will be made in accordance with the method elected by
the Majority Holders; and (ii) furnish to each Holder of Registrable Securities
registered under the Shelf Registration Statement, to a single firm of legal
counsel for the Holders (including the Initial Purchasers) and to the managing
underwriters of an underwritten offering of Registrable Securities, if any, and
their counsel, without charge, as many copies of each Prospectus, including
each preliminary prospectus, and any amendment or supplement thereto and
documents incorporated by reference therein as such Holder, counsel or
underwriters may reasonably request and, if the Holder so requests, all
exhibits thereto (including those incorporated by reference) in order to
facilitate the public sale or other disposition of the Registrable Securities;
and (iii) subject to Section 3(k) hereof and the last paragraph of this Section
3, hereby consent to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto but only during the period of
time that the Company and the Subsidiary Guarantors are required to keep the
Shelf Registration Statement effective pursuant to this Agreement;
(d) use their reasonable best efforts to register or qualify
the Registrable Securities under all applicable state securities or "blue sky"
laws of such jurisdictions in the United States as the Majority Holders of
Registrable Securities covered by a Registration Statement and the managing
underwriter of an underwritten offering of Registrable Securities shall
reasonably request prior to the time the applicable Registration Statement is
declared effective by the SEC, to cooperate with the Holders in connection
with any filings required to be made with the NASD,
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<PAGE> 14
and do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder pursuant to
such Registration Statement; provided, however, that the Company and each
Subsidiary Guarantor shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) or (ii) take any
action that would subject it to general service of process or taxation in any
such jurisdiction if it is not then so subject;
(e) in the case of a Subject Registration Statement, notify a
single firm of legal counsel for the Holders of Registrable Securities
registered thereby (including any Initial Purchasers) and Merrill Lynch
promptly and, if requested by such counsel or Merrill Lynch, confirm such
advice in writing promptly (by notice to such counsel or to Merrill Lynch) (i)
when such Registration Statement has become effective and when any
post-effective amendments thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to such Registration Statement and the related Prospectus or for
additional information after such Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of such Registration Statement or the
initiation of any proceedings for that purpose, (iv) if, between the effective
date of such Registration Statement and the closing of any sale of Registrable
Securities covered thereby pursuant to an underwriting agreement to which the
Company and/or any Subsidiary Guarantor is a party, the representations and
warranties of the Company and/or such Subsidiary Guarantor contained in such
underwriting agreement cease to be true and correct in all material respects,
(v) of the receipt by the Company or any Subsidiary Guarantor of any
notification with respect to the suspension of the qualification of the
Registrable Securities covered by such Registration Statement for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose and (vi) upon the Company or any Subsidiary Guarantor becoming aware
thereof, of the happening of any event or the discovery of any facts during the
period such Registration Statement is effective which (A) makes any statement
made in such Registration Statement or the related Prospectus untrue in any
material respect or (B) causes such Registration Statement or the related
Prospectus to omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section covering
the use of the Prospectus included in the Exchange Offer Registration Statement
by Participating Broker-Dealers (as defined below) who have exchanged their
Registrable Securities for Exchange Securities for the resale of such Exchange
Securities, (ii) furnish to each Participating Broker-Dealer who notifies the
Company in writing that it desires to participate in the Exchange Offer,
without charge, as many copies of each Prospectus included in the Exchange
Offer Registration Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such broker-dealer may reasonably request,
(iii) include in the Exchange Offer Registration Statement a statement that any
broker-dealer who holds Registrable Securities acquired for its own account as
a result of market-making activities or other trading activities (a
"Participating Broker-Dealer"), and who
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<PAGE> 15
receives Exchange Securities for Registrable Securities pursuant to the
Exchange Offer, may be a statutory underwriter and must deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale of such
Exchange Securities, (iv) subject to Section 3(k) hereof and the last paragraph
of this Section 3, hereby consent to the use of the Prospectus forming part of
the Exchange Offer Registration Statement or any amendment or supplement
thereto by any Participating Broker-Dealer in connection with the sale or
transfer of the Exchange Securities covered by the Prospectus or any amendment
or supplement thereto for a period ending 180 days following consummation of
the Exchange Offer or, if earlier, when all Exchange Securities received by
such Participating Broker-Dealer in exchange for Registrable Securities
acquired for their own account as a result of market-making or other trading
activities have been disposed of by such Participating Broker-Dealer, and (v)
include in the letter of transmittal or similar documentation to be executed by
an exchange offeree in order to participate in the Exchange Offer a provision
substantially in the following form (or such similar provision as is reasonably
acceptable to counsel for the Initial Purchasers and as, in the reasonable
opinion of the Company, may at the time be required by applicable law or SEC
interpretation):
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Securities. If the undersigned is
a broker-dealer that will receive Exchange Securities for its own
account in exchange for Registrable Securities, it represents that
the Registrable Securities to be exchanged for Exchange Securities
were acquired by it as a result of market-making activities or other
trading activities and acknowledges that it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any
resale of such Exchange Securities pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter"
within the meaning of the 1933 Act"; and
(B) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Company and the Subsidiary Guarantors
shall use their reasonable best efforts to cause to be delivered at the request
of an entity representing the Participating Broker-Dealers (which entity shall
be Merrill Lynch, Pierce, Fenner & Smith Incorporated or another Initial
Purchaser) (i) a "cold comfort" letter addressed to the Participating
Broker-Dealers from the Company's and the Subsidiary Guarantors' independent
certified public accountants with respect to the Prospectus in the Exchange
Offer Registration Statement in the form existing on the last date for which
exchanges are accepted pursuant to the Exchange Offer and (ii) an opinion of
counsel to the Company and the Subsidiary Guarantors addressed to the
Participating Broker-Dealers in customary form relating to the Exchange
Securities; and
(C) to the extent any Participating Broker-Dealer
participates in the Exchange Offer and notifies the Company or causes the
Company to be notified in writing that it
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<PAGE> 16
is a Participating Broker-Dealer, the Company and the Subsidiary Guarantors
shall use their reasonable best efforts to maintain the effectiveness of the
Exchange Offer Registration Statement for a period of 180 days following the
last date on which exchanges are accepted pursuant to the Exchange Offer, or,
if earlier, when all Exchange Securities received by Participating
Broker-Dealers in exchange for Registrable Securities acquired for their own
account as a result of market-making or other trading activities have been
disposed of by such Participating Broker-Dealers; and
(D) the Company and the Subsidiary Guarantors shall not be
required to amend or supplement the Prospectus contained in the Exchange Offer
Registration Statement as would otherwise be contemplated by Section 3(b)
hereof, or take any other action as a result of this Section 3(f), for a period
exceeding 180 days after the last date for which exchanges are accepted
pursuant to the Exchange Offer (or such earlier date referred to in Paragraph
(C) above) and Participating Broker-Dealers shall not be authorized by the
Company to, and shall not, deliver such Prospectus after such period in
connection with resales contemplated by this Section 3 or otherwise;
it being understood that, notwithstanding anything in this Agreement to the
contrary, the Company shall not be required to comply with any provision of
this Section 3(f) or any other provision of this Agreement relating to the
distribution of Exchange Securities by Participating Broker-Dealers, to the
extent that the Company reasonably concludes (with the consent of Merrill
Lynch, not to be unreasonably withheld) that compliance with such provision is
no longer required by applicable law or interpretation of the staff of the SEC;
(g) (A) in the case of an Exchange Offer, furnish one firm of
legal counsel for the Initial Purchasers and (B) in the case of a Shelf
Registration, furnish one firm of legal counsel for the Holders of Registrable
Securities covered thereby copies of any request received by or on behalf of
the Company or any Subsidiary Guarantor, from the SEC or any state securities
authority for amendments or supplements to the relevant Registration Statement
and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement as soon as
practicable and provide prompt notice to one firm of legal counsel for the
Holders of the withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities registered thereby, without charge, at least
one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legend (except any customary legend borne by
securities held through The Depository Trust Company or any similar
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<PAGE> 17
depository); and cause such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in such names
as the selling Holders or the underwriters, if any, may reasonably request at
least two business days prior to the closing of any sale of Registrable
Securities;
(k) in the case of a Shelf Registration, upon the Company or
any Subsidiary Guarantor becoming aware of the occurrence of any event or the
discovery of any facts, each as contemplated by Section 3(e)(vi) hereof, use
their reasonable best efforts to prepare a supplement or post-effective
amendment to the relevant Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company and the Subsidiary Guarantors agree to
notify each Holder of Registrable Securities registered under the relevant
Subject Registration Statement to suspend use of the Prospectus as promptly as
practicable after the Company or any Subsidiary Guarantor becomes aware of the
occurrence of such an event, and each Holder of Registrable Securities
registered under the relevant Subject Registration Statement hereby agrees to
suspend use of the Prospectus after receipt of such notice until the Company
and the Subsidiary Guarantors have amended or supplemented the Prospectus to
correct such misstatement or omission or have advised such Holders that use of
such Prospectus may be resumed. At such time as such public disclosure is
otherwise made or the Company determines that such disclosure is not necessary,
in each case to correct any misstatement of a material fact or to include any
omitted material fact, or the Company otherwise determines that use of such
Prospectus may be resumed, the Company and the Subsidiary Guarantors agree
promptly to notify each Holder of Registrable Securities registered under the
relevant Subject Registration Statement of such determination and (if
applicable) to furnish each such Holder such numbers of copies of the
Prospectus, as amended or supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Securities, or
Registrable Securities, as the case may be, not later than the effective date
of a Registration Statement, and provide the Trustee with printed certificates
for the Exchange Securities or the Registrable Securities, as the case may be,
in a form eligible for deposit with The Depository Trust Company; provided,
however, that the Company shall not be required to provide for any Exchange
Securities or Registrable Securities to be so-called "book-entry only"
securities;
(m) unless the Indenture, as it relates to the Exchange
Securities or the Registrable Securities, as the case may be, has already been
so qualified, use their reasonable best efforts to (i) cause the Indenture to
be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"),
in connection with the registration of the Exchange Securities or Registrable
Securities, as the case may be, (ii) cooperate with the Trustee and the Holders
to effect such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and (iii) execute, and
use their reasonable best efforts to cause the Trustee to execute,
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<PAGE> 18
all documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable the Indenture to be
so qualified in a timely manner;
(n) in the case of a Shelf Registration, take all customary
and appropriate actions (including those reasonably requested by the Majority
Holders) in order to expedite or facilitate the disposition of the Registrable
Securities registered thereby. The Company and the Subsidiary Guarantors agree
that they will in good faith negotiate the terms of any such Underwriting
Agreement, which shall be in form and scope as is customary for similar
offerings of debt securities with similar credit ratings (including, without
limitation, representations and warranties to the underwriters) and shall
otherwise be reasonably satisfactory to the Company and the managing
underwriters; and:
(i) if requested by the managing underwriters, obtain opinions
of counsel to the Company and the Subsidiary Guarantors (which counsel
shall be reasonably satisfactory to the managing underwriters)
addressed to such underwriters, covering the matters customarily
covered in opinions requested in underwritten sales of securities in
substantially the forms specified in the Underwriting Agreement;
(ii) if requested by the managing underwriters, obtain a
"cold comfort" letter and an update thereto not later than two weeks
after the date of the original letter (or if not available under
applicable accounting pronouncements or standards, a single
"procedures" letter and a single update thereto) from the Company's
and the Subsidiary Guarantors' independent certified public
accountants addressed to the underwriters named in the Underwriting
Agreement and use their reasonable best efforts to have such letter
addressed to the selling Holders of Registrable Securities (provided,
however, that such letter need not be addressed to any Holders to
whom, in the reasonable opinion of the Company's and the Subsidiary
Guarantors' independent certified public accountants, addressing such
letter is not permissible under applicable accounting standards), such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" (or "procedures") letters to
underwriters in connection with similar underwritten offerings; and
(iii) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
underwritten offerings.
Notwithstanding anything herein to the contrary, the Company and the Subsidiary
Guarantors shall have no obligation to enter into any underwriting agreement or
permit an underwritten offering of Registrable Securities unless a request
therefor shall have been received from at least 33 1/3% of the Holders of all
Registrable Securities then outstanding. In the case of such a request for an
underwritten offering, the Company shall provide written notice to the Holders
of all Registrable Securities of such underwritten offering at least 30 days
prior to the filing of a Shelf Registration Statement or a prospectus
supplement providing for such underwritten offering. Such notice shall (x)
offer each such Holder the right to participate in such underwritten offering
(but may indicate that whether or not all Registrable Securities are included
will be at the discretion
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<PAGE> 19
of the underwriters), (y) specify a date, which shall be no earlier than ten
business days following the date of such notice, by which such Holder must
inform the Company of its intent to participate in such underwritten offering
and (z) include the instructions such Holder must follow in order to
participate in such underwritten offering;
(o) in the case of a Shelf Registration, and to the extent
customary in connection with a "due diligence" investigation for an offering of
debt securities with a similar credit rating to that of the Registrable
Securities, make available for inspection by representatives appointed by the
Majority Holders and any underwriters participating in any disposition pursuant
to a Shelf Registration Statement and one firm of legal counsel retained for
all Holders participating in such Shelf Registration, and one firm of legal
counsel to the underwriters, if any, all financial and other records, pertinent
corporate documents and properties of the Company and the Subsidiary Guarantors
reasonably requested by any such persons, and cause the respective officers,
employees and any other agents of the Company and the Subsidiary Guarantors to
supply all information reasonably requested by any such representative,
underwriters or counsel in connection with the Shelf Registration Statement;
provided, however, that, if any such records, documents or other information
relates to pending or proposed acquisitions or dispositions, or otherwise
relates to matters reasonably considered by the Company and the Subsidiary
Guarantors to constitute sensitive or proprietary information, the Company and
the Subsidiary Guarantors need not provide such records, documents or
information unless the foregoing parties enter into a confidentiality agreement
in customary form and reasonably acceptable to such parties and the Company;
(p) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the Initial
Purchasers, and make such changes in any such document prior to the filing
thereof as Merrill Lynch or one firm of legal counsel to the Initial Purchasers
may reasonably request; (ii) in the case of a Shelf Registration, a reasonable
time prior to filing any Shelf Registration Statement, any Prospectus forming a
part thereof, any amendment to such Shelf Registration Statement or amendment
or supplement to such Prospectus, provide copies of such document to Merrill
Lynch, one firm of legal counsel appointed by the Majority Holders to represent
the Holders participating in such Shelf Registration, the managing underwriters
of an underwritten offering of Registrable Securities, if any, and their
counsel, and make such changes in any such document prior to the filing thereof
as Merrill Lynch, such one firm of legal counsel for the Holders, such managing
underwriters or their counsel may reasonably request; and (iii) cause the
representatives of the Company and the Subsidiary Guarantors to be available
for discussion of such document as shall be reasonably requested by Merrill
Lynch, one firm of legal counsel to the Holders, the managing underwriters and
their counsel and shall not at any time make any filing of any such document of
which Merrill Lynch, one firm of legal counsel to the Holders, the managing
underwriters and their counsel shall not have previously been advised and
furnished a copy or to which Merrill Lynch, one firm of legal counsel to the
Holders, the managing underwriters and their counsel shall reasonably object;
provided, however, that the provisions of this paragraph (p) shall not apply to
any document filed by the Company or any
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<PAGE> 20
Subsidiary Guarantor pursuant to the 1934 Act which is incorporated or deemed
to be incorporated by reference in any Registration Statement or Prospectus;
(q) in the case of a Shelf Registration and if requested by
the managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of the Registrable Securities subject to the Shelf
Registration Statement, (i) as soon as practicable incorporate in a prospectus
supplement or post-effective amendment such information or revisions to
information therein relating to such Underwriters or selling Holders as the
managing underwriters, if any, or such Holders or their counsel reasonably
request to be included or made therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as practicable
after the Company and the Subsidiary Guarantors have received notification of
the matters to be incorporated in such prospectus supplement or post-effective
amendment and (iii) supplement or make amendments to such Shelf Registration
Statement;
(r) upon delivery of the Registrable Securities by Holders to
the Company and the Subsidiary Guarantors (or to such other Person as directed
by the Company and the Subsidiary Guarantors) in exchange for the Exchange
Securities, the Company and the Subsidiary Guarantors shall mark, or cause to
be marked, on such Registrable Securities that such Registrable Securities are
being canceled in exchange for the Exchange Securities; in no event shall such
Registrable Securities be marked as paid or otherwise satisfied;
(s) use their reasonable best efforts to cause the Exchange
Securities, if applicable, and, in the event of a Shelf Registration, the Debt
Securities to be rated with not more than two rating agencies selected by the
Company, if so requested by the Majority Holders or by the managing
underwriters of an underwritten offering of Registrable Securities, if any,
unless the Exchange Securities or the Registrable Securities, as the case may
be, are already so rated or unless the Company has obtained such ratings for
its long-term debt securities generally;
(t) otherwise use their reasonable best efforts to comply
with all applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering at least 12 months which shall satisfy the provisions of Section 11(a)
of the 1933 Act and Rule 158 thereunder; and
(u) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
managing underwriters and their counsel.
In the case of a Subject Registration Statement, the Company
and the Subsidiary Guarantors may (as a condition to such Holder's
participation in the Shelf Registration) (i) require each Holder of Registrable
Securities to furnish to the Company such information regarding such Holder and
the proposed distribution by such Holder of such Registrable Securities as the
Company may from time to time reasonably request in writing and such other
information as, in the reasonable opinion of the Company, is required for
inclusion in the Subject Registration Statement, and (ii) further require each
Holder of Registrable Securities, through one firm of legal
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<PAGE> 21
counsel on behalf of all such Holders, to furnish to the Company comments on
the Subject Registration Statement and the Prospectus included therein or any
amendment or supplement to any of the foregoing not later than such times as
the Company reasonably may request.
In the case of a Subject Registration Statement, each Holder
agrees and, in the case of the Exchange Offer Registration Statement, each
Participating Broker-Dealer agrees that, upon receipt of any notice from the
Company or any Subsidiary Guarantor of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(ii)-(vi) or
Section 3(k) hereof (it being understood and agreed that, for purposes of this
paragraph, all references in Sections 3(e)(ii)-(vi) and Section 3(k) to a
"Subject Registration Statement", a "Shelf Registration Statement" or a
"Registration Statement" shall be deemed to mean and include the Shelf
Registration Statement, the Purchaser Shelf Registration Statement or the
Exchange Offer Registration Statement or all or any combination thereof (as the
context requires), mutatis mutandis), such Holder or Participating
Broker-Dealer, as the case may be, will forthwith discontinue disposition of
Registrable Securities pursuant to such Registration Statement and discontinue
use of the Prospectus included therein until such Holder's or Participating
Broker-Dealer's receipt, as the case may be, of (A) copies of the supplemented
or amended Prospectus contemplated by Section 3(k) hereof or (B) notice from
the Company that the sale of the Registrable Securities may be resumed, and, if
so directed by the Company, such Holder or Participating Broker-Dealer, as the
case may be, will deliver to the Company (at its expense) all copies in its
possession, other than permanent file copies then in its possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice. If the Company or any Subsidiary Guarantor shall give any such
notice to suspend the disposition of Registrable Securities pursuant to a
Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e) (ii)-(vi) or
3(k) hereof, the Company and the Subsidiary Guarantor shall be deemed to have
used their reasonable best efforts to keep such Registration Statement
effective during such period of suspension, provided that the Company and the
Subsidiary Guarantors shall use their reasonable best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to such Registration Statement or the related Prospectus and shall
extend the period during which such Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice to and including the
date when the Holders shall have received copies of the supplemented or amended
Prospectus necessary to resume such dispositions or the date on which the
Company has given notice that the sale of Registrable Securities may be
resumed, as the case may be. Each Holder of Registrable Securities hereby
agrees that it will at all times use the then most current Prospectus (as the
case may be), as then amended or supplemented, which has been provided to it by
the Company in connection with the resale or transfer of any Registrable
Securities pursuant to a Registration Statement or Prospectus.
4. UNDERWRITTEN REGISTRATIONS. If any of the Registrable
Securities covered by the Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will manage the offering will be selected
-20-
<PAGE> 22
by the Majority Holders of such Registrable Securities included in such
offering and shall be reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and each
of the Subsidiary Guarantors shall jointly and severally indemnify and hold
harmless each Initial Purchaser, each Holder and each Person, if any, who
controls any of such Person within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all losses, liabilities, claims, damages
and expenses whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) pursuant to
which Exchange Securities or Registrable Securities were registered
under the 1933 Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all losses, liabilities, claims, damages
and expenses whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including (subject to Section 5(c) below) the reasonable fees and
disbursements of counsel chosen by Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in the event that Merrill Lynch, Pierce, Fenner
& Smith Incorporated is not an indemnified party, by a majority of the
indemnified parties), reasonably incurred in investigating, preparing
or defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
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<PAGE> 23
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Initial Purchaser, any Holder or any underwriter expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto); and provided, however, that this indemnity
agreement with respect to any Prospectus shall not inure to the benefit of any
Initial Purchaser or Holder from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Securities or Exchange
Securities (or any person who controls such Initial Purchaser or Holder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) if a
copy of the Prospectus (as then amended or supplemented and furnished by the
Company to such Initial Purchaser or Holder, as the case may be) was not sent
or given by or on behalf of such Initial Purchaser or Holder, as the case may
be, to such person, if such is required by law, at or prior to the sale of such
Registrable Securities or Exchange Securities and if the Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability.
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Subsidiary Guarantors, each Initial Purchaser, each underwriter who
participates in an offering of Registrable Securities and the other Holders and
each of their respective directors and officers (including each officer of the
Company who signed the Registration Statement in question) and each Person, if
any, who controls the Company, the Subsidiary Guarantors, any Initial
Purchaser, any underwriter or any other Holder within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, against any and all losses,
liabilities, claims, damages and expenses described in the indemnity contained
in Section 5(a) hereof, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Holder
expressly for use in the Registration Statement (or any amendment thereto) or
the Prospectus (or any amendment or supplement thereto); provided, however,
that no such Holder shall be liable for any claims hereunder in excess of the
amount of net proceeds received by such Holder from the sale of Registrable
Securities pursuant to such Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which
it may have other than on account of this indemnity agreement or the
contribution agreement set forth in Section 5(d) below. An indemnifying party
may participate at its own expense in the defense of such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such
-22-
<PAGE> 24
action; provided, however, that if such indemnified parties reasonably object
to such assumption on the ground (based on the advice of counsel) that there
may be legal defenses available to them which are different from or in addition
to those available to such indemnifying party, such indemnified parties shall
be entitled to choose separate counsel with respect to such defenses and to
retain or assume control of such defenses at the expense of the indemnifying
party. If an indemnifying party assumes the defense of such action (other than
with respect to defenses addressed in the immediately preceding sentence), the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action
(other than with respect to defenses addressed in the immediately preceding
sentence). In no event shall the indemnifying parties be liable for the fees
and expenses of more than one legal counsel (in addition to any local counsel)
(which counsels shall be selected by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or, in the event that Merrill Lynch, Pierce, Fenner & Smith
Incorporated is not an indemnified party, by a majority of the indemnified
parties) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 5 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii)
does not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution
in circumstances in which any of the indemnity provisions set forth in this
Section 5 are for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company, the
Subsidiary Guarantors, the Initial Purchasers and the Holders shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by such indemnity agreement incurred by the Company, the
Subsidiary Guarantors, the Initial Purchasers and the Holders, as incurred;
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person that was not guilty of such fraudulent
misrepresentation. As between the Company, the Subsidiary Guarantors, the
Initial Purchasers and the Holders, such parties shall contribute to such
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative fault of the Company and the Subsidiary
Guarantors on the one hand, the Initial Purchasers on another hand, and the
Holders on another hand, with respect to the statements or omissions which
resulted in such loss, liability, claim, damage or expense, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault of the Company and the Subsidiary Guarantors on the one hand,
the Initial Purchasers on another hand, and the Holders on another hand shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
-23-
<PAGE> 25
omission to state a material fact relates to information supplied by the
Company and the Subsidiary Guarantors or by the Initial Purchasers or by the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue or alleged untrue statement or
omission. The Company, the Subsidiary Guarantors, the Initial Purchasers and
the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were to be determined by pro rata allocation or
by any other method of allocation that does not take into account the relevant
equitable considerations. For purposes of this Section 5(d), each Person, if
any, who controls an Initial Purchaser or a Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Initial Purchaser or such Holder, and each
director of the Company or any Subsidiary Guarantor, each officer of the
Company or any Subsidiary Guarantor who signed the Registration Statement in
question, and each Person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company and the Subsidiary Guarantors.
6. MISCELLANEOUS. (a) Rule 144 and Rule 144A. For so long as
the Company or the Subsidiary Guarantors are subject to the reporting
requirements of Section 13 or 15 of the 1934 Act, the Company and the
Subsidiary Guarantors covenant that they will file the reports required to be
filed by them under Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder, that if any such entity ceases to be
so required to file such reports, it will upon the request of any Holder of
Registrable Securities (i) make publicly available such information as is
necessary to permit sales pursuant to Rule 144 under the 1933 Act, (ii) deliver
such information to a prospective purchaser as is necessary to permit sales
pursuant to Rule 144A under the 1933 Act and (iii) take such further action
that is reasonable in the circumstances, in each case, to the extent required
from time to time to enable such Holder to sell its Registrable Securities
without registration under the 1933 Act within the limitation of the exemptions
provided by (x) Rule 144 under the 1933 Act, as such Rule may be amended from
time to time, (y) Rule 144A under the 1933 Act, as such Rule may be amended
from time to time or (z) any similar rules or regulations hereafter adopted by
the SEC (provided that the obligations of the Company and the Subsidiary
Guarantors under any such similar rules or regulations shall not be more
burdensome in any substantial respect than those referred to in clauses (x) or
(y)). Upon the request of any Holder of Registrable Securities, the Company and
the Subsidiary Guarantors will deliver to such Holder a written statement as to
whether they have complied with such requirements.
(b) No Inconsistent Agreements. The Company and each
Subsidiary Guarantor has not entered into nor will the Company and each
Subsidiary Guarantor on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any such
agreements.
-24-
<PAGE> 26
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company and the Subsidiary
Guarantors have obtained the written consent of Holders of at least a majority
in aggregate principal amount of the outstanding Registrable Securities
affected by such amendment, modification, supplement, waiver or departure;
provided, however, that to the extent any provision of this Agreement relates
to the Purchaser Shelf Registration Statement or otherwise to the Initial
Purchasers, such provision may be amended, modified or supplemented, and
waivers or consents to departures from such provisions thereof may be given, by
Merrill Lynch; and provided, further, that no amendment, modification,
supplement or waiver or consent to any departure from the provisions of Section
5 hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder. Notwithstanding anything in this
Agreement to the contrary, this Agreement may be amended, modified or
supplemented, and waivers and consents to departures from the provisions hereof
may be given, by written agreement signed by the Company, the Subsidiary
Guarantors and Merrill Lynch to the extent that any such amendment,
modification, supplement, waiver or consent is, in their reasonable judgment,
necessary or appropriate to comply with applicable law (including any
interpretation of the staff of the SEC) or any change therein.
(d) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier or any courier providing
overnight delivery (i) if to a Holder, at its address appearing in the register
of the Debt Securities and/or Exchange Securities kept by the Registrar (as
defined in the Indenture) or at such other address as shall have been given by
such Holder to the Company by means of a notice given in accordance with the
provisions of this Section 6(d), which address initially is, with respect to
the Initial Purchasers, the address care of Merrill Lynch, Pierce, Fenner &
Smith Incorporated set forth in the Purchase Agreement, and (ii) if to the
Company or any Subsidiary Guarantor initially at or in care of the Company's
address set forth in the Purchase Agreement, or in each case to such other
address notice of which is given in accordance with the provisions of this
Section 6(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next business day if timely delivered to an air courier providing
overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms hereof or of the Purchase
Agreement, the Indenture or the Offering Memorandum dated February 14, 1996;
and provided, further, that Holders of Registrable Securities may not assign
their rights under this Agreement
-25-
<PAGE> 27
except in connection with the permitted transfer of Registrable Securities and
then only insofar as relates to such Registrable Securities. If any transferee
of any Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Securities, such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
(f) Third-Party Beneficiary. The Holders from time to time
shall each be a third-party beneficiary to the agreements made hereunder
between the Company and the Subsidiary Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, and Merrill Lynch, Pierce, Fenner &
Smith Incorporated shall have the right to enforce such agreements directly to
the extent it deems such enforcement necessary or advisable to protect its
rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
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<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
BJ SERVICES COMPANY
By: /s/_________________________________
Name:
Title:
BJ SERVICES COMPANY, U.S.A.
By: /s/_________________________________
Name:
Title:
BJ SERVICES COMPANY MIDDLE EAST
By: /s/_________________________________
Name:
Title:
BJ SERVICE INTERNATIONAL, INC.
By: /s/_________________________________
Name:
Title:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/_________________________________
Name:
Title:
-27-
<PAGE> 29
CS FIRST BOSTON CORPORATION
By: /s/_________________________________
Name:
Title:
BA SECURITIES, INC.
By: /s/_________________________________
Name:
Title:
CHASE SECURITIES, INC.
By: /s/_________________________________
Name:
Title:
-28-
<PAGE> 1
EXHIBIT 5.1
April 4, 1996
Board of Directors
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Ladies and Gentlemen:
We have acted as counsel to BJ Services Company, a Delaware
corporation (the "Company"), and to BJ Services Company, U.S.A., BJ Service
International, Inc. and BJ Services Company Middle East, each a Delaware
corporation (collectively, the "Subsidiary Guarantors"), in connection with the
Company's Registration Statement on Form S-4 (the "Registration Statement")
relating to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of the offering by the Company of up to an aggregate
principal amount of $125 million of 7% Series B Notes due 2006 (the "Exchange
Notes") in exchange for up to an aggregate principal amount of $125 million of
7% Series A Notes due 2006 (the "Existing Notes," and together with the
Exchange Notes, the "Notes"). The Existing Notes were issued, and the Exchange
Notes will be issued, pursuant to the Indenture dated as of February 1, 1996
among the Company, the Subsidiary Guarantors and the Bank of Montreal Trust
Company, as trustee (the "Indenture"), which provides for guarantees of the
Notes (the "Guarantees") by the Subsidiary Guarantors.
As the basis for the opinions hereinafter expressed, we have
examined such statutes, regulations, corporate records and documents and such
other instruments as we have deemed necessary for the purposes of the opinions
contained herein. As to all matters of fact material to such opinions, we have
relied upon the representations of officers of the Company and certificates of
public officials. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with the original documents of all documents submitted to us as copies.
Based upon the foregoing and having due regard for such legal
considerations as we deem relevant, we are of the opinion that the Exchange
Notes (including the Guarantees thereof), (a) when exchanged in the manner
described in the Registration Statement, (b) when duly executed, authenticated,
issued and delivered in accordance with the terms of the Indenture, (c) when
the Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended, and (d) when applicable provisions of "blue sky" laws have been
complied with, will be legally issued and constitute binding obligations of the
Company and the Subsidiary Guarantors, enforceable against the Company and the
Subsidiary Guarantors in accordance with the terms of the Indenture and the
Exchange Notes (including the Guarantees thereof), subject to (x) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws relating to creditors' rights and remedies generally and (y)
general principles of equity (whether enforcement is sought in a proceeding at
law or in equity).
This opinion is limited in all respects to the General
Corporation Law of the State of Delaware and the laws of the United States of
America insofar as such laws are applicable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to our firm name under the
caption "Legal Matters" therein. In giving this consent, we do not thereby
admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
<PAGE> 1
BJ SERVICES COMPANY
BJ SERVICES COMPANY, USA
BJ SERVICE INTERNATIONAL, INC.
BJ SERVICES COMPANY MIDDLE EAST
THIRD AMENDMENT TO NOTE AGREEMENT
Re: Note Agreement Dated as of August 1, 1991
and
$30,000,000 9.20% Senior Notes
Due August 1, 1998
Dated as of
September 19, 1995
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0800
Connecticut Mutual Life Insurance Company
140 Garden Street
Hartford, Connecticut 06154
Ladies and Gentlemen:
Reference is made to the separate Note Agreements each dated as of
August 1, 1991, as amended to the date hereof (collectively, the "Note
Agreement"), between and among BJ Services Company, BJ Services Company, USA,
BJ Service International, Inc., BJ Services Company Middle East, each a
Delaware corporation (collectively, the "Constituent Companies"), and you,
under and pursuant to which $30,000,000 aggregate principal amount of Senior
Notes Due August 1, 1998 (the "Notes") were originally issued.
The Constituent Companies desire to amend certain provisions of the
Note Agreement to clarify the parties' intent in respect of certain provisions
incorporated therein pursuant to that certain Second Amendment to Note
Agreement dated as of September 19, 1995 (the "Second Amendment") in the manner
herein provided. All capitalized terms used herein without definition shall
have the same meanings respectively assigned to such terms in the Note
Agreement.
<PAGE> 2
SECTION 1. INCORPORATION OF CERTAIN COVENANTS.
Section 2 of the Second Amendment is hereby deleted in its entirety
and the following shall be substituted therefor:
The following provisions of the Bank Credit Agreement in the
form attached hereto as the same may be subsequently modified or
amended provided that any such amendments or modifications are
consented to in writing by the holders of at least seventy percent
(70%) of the aggregate outstanding principal amount of the Notes are
hereby incorporated by reference into the Note Agreement with the same
force and effect as though therein set forth in full, in each case
together with all related definitions set forth in the Bank Credit
Agreement as the same may be subsequently modified or amended provided
that any such amendments or modifications are consented to in writing
by the holders of at least seventy percent (70%) of the aggregate
outstanding principal amount of the Notes: Sections 8.01 through
8.05, both inclusive, Sections 8.08, 8.09, 8.10(a)(i) and (ii) (but
only as such provisions pertain to the Western Indenture and the
Western Subordinated Debentures), and Sections 8.12 through 8.16, both
inclusive; provided, however, that the terms "Default" and "Event of
Default" referred to in Section 8.03 and Section 8.15 incorporated
herein by reference shall refer to such terms as defined in the Note
Agreement. All provisions incorporated by reference shall remain
effective for purposes of the Note Agreement unless and until the
Notes shall no longer remain outstanding.
SECTION 2. DEFINITION OF BANK CREDIT AGREEMENT.
The definition of "Bank Credit Agreement" in Section 8.1 of the Note
Agreement is hereby deleted in its entirety and the following shall be
substituted therefor:
"Bank Credit Agreement" shall mean that certain Credit
Agreement dated as of April 13, 1995 among the Constituent Companies,
Bank of America National Trust and Savings Association, as Agent, and
the other parties named therein in the form attached hereto as the
same may be subsequently modified or amended provided that any such
amendments or modifications are consented to in writing by the holders
of at least seventy percent (70%) of the aggregate outstanding
principal amount of the Notes."
-2-
<PAGE> 3
SECTION 3. MISCELLANEOUS.
Section 2.1. Effective Date; Ratification. The amendments
contemplated by this Third Amendment to Note Agreement shall be effective as of
September 19, 1995 (although this Third Amendment to Note Agreement has been
accepted on a later date or dates). Except as amended herein, the terms and
provisions of the Note Agreement are hereby ratified, confirmed and approved in
all respects.
Section 2.2. Ratification of Original Note Agreements; Condition
Precedent. Except as amended and restated herein, the terms and provisions of
the Note Agreement and the Notes are hereby ratified, confirmed and approved in
all respects.
Section 2.3. Successors and Assigns. This Third Amendment to Note
Agreement shall be binding upon the Constituent Companies and their successors
and assigns and shall inure to the benefit of the holders of the Notes and to
the benefit of their successors and assigns, including each successive holder
or holders of any Notes.
Section 2.4. Counterparts. This Third Amendment to Note Agreement
may be executed in any number of counterparts, each executed counterpart
constituting an original but all together one and the same instrument.
Section 2.5. No Legend Required. Any and all notices, requests,
certificates and other instruments including, without limitation, the Notes,
may refer to the Note Agreement without making specific reference to this Third
Amendment to Note Agreement, but nevertheless all such references shall from
and after the date hereof be deemed to include this Third Amendment to Note
Agreement unless the context shall otherwise require.
Section 2.6. No Defaults or Events of Default; Representations and
Warranties are True and Correct. Each of the Constituent Companies jointly and
severally represents and warrants that no Default or Event of Default has
occurred and is continuing. The representations and warranties made by the
Constituent Companies in Exhibit B of the Note Agreement are true and correct
in all material respects as of the date hereof except such representations and
warranties, if any, which expressly refer to an earlier date, which
representations and warranties are true and correct in all material respects as
of such earlier date.
Section 2.7 Governing Law. This Third Amendment to Note Agreement
shall be construed in accordance with and governed by the laws of the State of
Connecticut.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to Note Agreement to be effective as of September 19, 1995.
BJ SERVICES COMPANY
By /s/
------------------------------------
Its Treasurer
BJ SERVICES COMPANY, USA
By /s/
------------------------------------
Its Treasurer
BJ SERVICE INTERNATIONAL, INC.
By /s/
------------------------------------
Its Treasurer
BJ SERVICES COMPANY MIDDLE EAST
By /s/
------------------------------------
Its Treasurer
-4-
<PAGE> 5
Accepted on the 13th day of February, 1996 to be effective as of
September 19, 1995.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By /s/
------------------------------------
Its
--------------------------------
By /s/
------------------------------------
Its
--------------------------------
Holder of $12,000,000 principal amount
of Notes outstanding
-5-
<PAGE> 6
Accepted on the 13th day of February, 1996 to be effective as of
September 19, 1995.
CONNECTICUT MUTUAL LIFE INSURANCE COMPANY
By /s/
-------------------------------------
Its
---------------------------------
Holder of $6,000,000 principal amount of
Notes outstanding
-6-
<PAGE> 1
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as
of February 12, 1996, is made and entered into among BJ SERVICES COMPANY, a
Delaware corporation (the "Company"), BJ SERVICES COMPANY, U.S.A., a Delaware
corporation, BJ SERVICE INTERNATIONAL, INC., a Delaware corporation, BJ
SERVICES COMPANY MIDDLE EAST, a Delaware corporation (collectively and
including the Company, the "Borrowers"); BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent; BANK OF AMERICA ILLINOIS, Individually and as
Letter of Credit Issuing Bank; THE CHASE MANHATTAN BANK, N.A., Individually and
as Co-Agent; CREDIT LYONNAIS CAYMAN ISLAND BRANCH, Individually and as
Co-Agent, FIRST INTERSTATE BANK OF TEXAS, N.A., Individually and as Co-Agent
and the other banks listed on the signature pages hereof.
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of April 13, 1995 (the "Credit Agreement"), as amended by
First Amendment dated as of April 25, 1995; and
WHEREAS, Company has proposed to issue notes pursuant to a private
placement and to use all or a portion of the net proceeds of such issuance to
prepay the Term Loans, and the Company has proposed to amend the amortization
schedule for the Term Loans set forth in the Credit Agreement as herein
provided; and
WHEREAS, subject to the terms and conditions herein set forth, the
Banks are willing to agree to such amended amortization schedule;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto hereby agree to amend the Credit
Agreement as follows:
1. CREDIT AGREEMENT AMENDMENTS.
a. Amendment of Section 2.08(e). The first sentence of
Section 2.08(e) is hereby deleted in its entirety and the following shall be
substituted therefor:
"Any prepayments pursuant to this Section 2.08 shall reduce
pro rata the principal installments of the Term Loans due during the
period commencing after the date of such prepayment and ending on the
Term Loan Maturity Date."
<PAGE> 2
b. Amendment of Section 2.10(a). Section 2.10(a) of the
Credit Agreement is hereby redesignated as Section 2.10(a)(i), and a new
Section 2.10(a)(ii) is hereby added to read as follows:
"(ii) in the event (A) the Term Loan Borrower
issues in a private placement unsecured notes due 2006 and the
Term Loan Borrower elects to use all or any portion of the net
proceeds of such issuance to prepay the Term Loans, and (B)
such prepayment is made on or before March 31, 1996, and (C)
no Event of Default shall have occurred and be continuing at
the time of the prepayment, then at all times after such
prepayment is made the Term Loan Borrower's obligation to
repay the principal of the Term Loans shall be governed by
this Subsection 2.10(a)(ii) rather than Subsection 2.10(a)(i)
above. If such prepayment is made with proceeds of such
issuance, the Term Loan Borrower thereafter shall be obligated
to make principal payments on each date set forth below (each,
a "Principal Payment Date"), in an amount equal to the dollar
amount set forth below opposite such date. The schedule of
payments set forth below is based upon the assumption that the
amount of the prepayment will be $125,000,000. In the event
such prepayment is more than $125,000,000, the amount of each
payment set forth in the schedule below shall be adjusted pro
rata among all such payments. In the event, such prepayment
is less than $125,000,000, the amount of the first 16 payments
set forth in the schedule below shall be adjusted pro rata
among such 16 payments, and the amount of the last 2 payments
shall remain the same.
<TABLE>
<CAPTION>
Principal Payment Date Amount of Payment
---------------------- -----------------
<S> <C>
December 31, 1996 $1,400,000
March 31, 1997 1,400,000
June 30, 1997 1,400,000
September 30, 1997 1,400,000
December 31, 1997 4,700,000
March 31, 1998 4,700,000
June 30, 1998 4,700,000
September 30, 1998 4,700,000
December 31, 1998 5,950,000
March 31, 1999 5,950,000
June 30, 1999 5,950,000
September 30, 1999 5,950,000
December 31, 1999 5,950,000
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Principal Payment Date Amount of Payment
---------------------- -----------------
<S> <C>
March 31, 2000 5,950,000
June 30, 2000 5,950,000
September 30, 2000 5,950,000
December 30, 2000 12,000,000
March 31, 2001 12,000,000
TOTAL $96,000,000
</TABLE>
(iii) This Section 2.10(a) shall not be deemed to
authorize the issuance of notes which would not be permitted
pursuant to Article VIII of this Credit Agreement."
c. Amendment of Section 8.01(h). Section 8.01(h) of the
Credit Agreement is hereby deleted in its entirety and the following shall be
substituted therefor:
"(h) Liens on assets of the Company or any
Subsidiary other than stock of Subsidiaries; provided,
however, that the aggregate consolidated book value of all
such assets encumbered at any one time shall not exceed
$10,000,000."
2. NO DEFAULT OR EVENTS OF DEFAULT; REPRESENTATIONS AND
WARRANTIES ARE TRUE. Each of the Borrowers hereby represents and warrants to
the Banks that no Event of Default or Default has occurred and is continuing.
The representations and warranties made by the Borrowers in Article VI of the
Credit Agreement are true and correct in all material respects as of the date
hereof (except such representations and warranties which expressly refer to an
earlier date, which representations and warranties are true and correct in all
material respects as of such earlier date).
3. RATIFICATION. The Credit Agreement, each Guaranty and the
other Loan Documents shall continue in full force and effect as amended hereby.
Except as expressly provided herein, the Credit Agreement is not amended or
modified. The Credit Agreement and this Amendment shall be read, taken and
construed as one and the same instrument.
4. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties on separate counterparts, each of which
shall be construed as an original, but all of which together shall constitute
one and the same instrument.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF
-3-
<PAGE> 4
NEW YORK); PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
6. CERTAIN DEFINED TERMS. Capitalized terms used herein
(including in the recitals hereof) without definition shall have the meaning
assigned to them in the Credit Agreement.
7. ENTIRE AGREEMENT. THIS AMENDMENT, THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the date first above written.
BJ SERVICES COMPANY
By:
-----------------------------------
Name:
Title:
BJ SERVICES COMPANY, U.S.A.
By:
-----------------------------------
Name:
Title:
BJ SERVICES COMPANY MIDDLE EAST
By:
-----------------------------------
Name:
Title:
BJ SERVICE INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title:
-5-
<PAGE> 6
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
-----------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS, as a Bank
and as Issuing Bank
By:
-----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.,
as Co-Agent and as a Bank
By:
-----------------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
as Co-Agent and as a Bank
By:
-----------------------------------
Name:
Title:
-6-
<PAGE> 7
FIRST INTERSTATE BANK OF TEXAS, N.A.,
as Co-Agent and as a Bank
By:
-----------------------------------
Name:
Title:
BANK OF MONTREAL
By:
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-----------------------------------
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE
By:
-----------------------------------
Name:
Title:
-7-
<PAGE> 8
CORESTATES BANK, N.A.
By:
-----------------------------------
Name:
Title:
DEN NORSKE BANK AS
By:
-----------------------------------
Name:
Title:
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
THE FUJI BANK, LIMITED
By:
-----------------------------------
Name:
Title:
-8-
<PAGE> 9
THE INDUSTRIAL BANK OF JAPAN TRUST
COMPANY
By:
-----------------------------------
Name:
Title:
THE MITSUBISHI BANK, LTD.
HOUSTON AGENCY
By:
-----------------------------------
Name:
Title:
THE YASUDA TRUST AND BANKING
COMPANY LIMITED
By:
-----------------------------------
Name:
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By:
-----------------------------------
Name:
Title:
-9-
<PAGE> 10
FIRST NATIONAL BANK OF COMMERCE
By:
-----------------------------------
Name:
Title:
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By:
-----------------------------------
Name:
Title:
-10-
<PAGE> 1
EXHIBIT 12.1
BJ SERVICES COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
Three Months Ended
December 31, Year Ended September 30,
1995 1994 1995 1994 1993 1992 1991
----------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Pretax earnings from continuing
operations $12,897 $6,186 $ 8,758 $12,908 $16,838 $(4,192) $31,133
Minority interest (199) (104) 29 (132) (684) (569) (1,541)
Minority interest income in
subsidiaries with fixed charges 95 227 595 1,373 858 1,122 1,486
Minority interest - losses (223) (253) (1,344) (1,921) (644) (711) (148)
----------------- ---------------------------------------------------
Earnings (loss) 12,570 6,056 8,038 12,228 16,368 (4,350) 30,930
Add:
Interest on indebtedness 5,538 2,307 15,164 7,383 5,414 2,977 3,135
Portion of rents representative of the
interest factor 1,560 1,383 5,530 5,141 3,637 2,488 2,697
----------------- ---------------------------------------------------
Earnings as adjusted $19,668 $9,746 $28,732 $24,752 $25,419 $ 1,115 $36,762
================= ===================================================
FIXED CHARGES:
Interest on indebtedness $ 5,538 $2,307 $15,164 $ 7,383 $ 5,414 $ 2,977 $ 3,135
Capitalized interest 50 50 216 541 167 800 750
Portion of rents representative of the
interest factor 1,560 1,383 5,530 5,141 3,637 2,488 2,697
----------------- ---------------------------------------------------
Fixed charges $ 7,148 $3,740 $20,910 $13,065 $ 9,218 $ 6,265 $ 6,582
================= ===================================================
----------------- ---------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES (1) 2.75 2.61 1.37 1.89 2.76 --(2) 5.58
================= ===================================================
</TABLE>
(1) For purposes of calculating this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
capitalized interest, and the portion of operating lease rental expense
that is representative of the interest factor (deemed to be one-third of
the lease rentals).
(2) For the year ended September 30, 1992, earnings were inadequate to cover
fixed charges by $4,350 because of the unusual charges recorded in that
fiscal year.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of BJ Services Company on
Form S-4 of our report dated November 21, 1995 (March 28, 1996 as to Note 15)
appearing in the Prospectus, which is part of this Registration Statement, and
to the incorporation by reference in this Registration Statement of our report
dated November 21, 1995, appearing in the Annual Report on Form 10-K of BJ
Services Company for the year ended September 30, 1995.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Houston, Texas
April 4, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-4 of BJ Services Company of our report dated February 22,
1995 relating to the financial statements of The Western Company of North
America, which appears in the Current Report on Form 8-K/A of BJ Services
Company dated April 13, 1995. We also consent to the reference to us under the
heading "Experts" in such Form S-4.
PRICE WATERHOUSE LLP
Houston, Texas
April 2, 1996
<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-4941093
(JURISDICTION OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
77 Water Street
New York, New York 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
77 Water Street, New York, NY 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------
BJ SERVICES COMPANY
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Texas 63-0084140
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
5500 Northwest Central Drive
Houston, Texas 77092
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
----------------------------
7% SERIES B NOTES DUE 2006
(TITLE OF THE INDENTURE SECURITIES)
================================================================================
<PAGE> 2
-2-
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York N.Y. 10045
State of New York Banking Department
2 Rector Street, New York, N.Y. 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust
Company to transact business and exercise corporate trust
powers; incorporated herein by reference as Exhibit "A" filed
with Form T-1 Statement, Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust
Company; incorporated herein by reference as Exhibit "B" filed
with Form T-1 Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the
Act; incorporated herein by reference as Exhibit "C" with Form
T-1 Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal
Trust Company published pursuant to law or the requirements of
its supervising or examining authority, attached hereto as
Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939 the Trustee, Bank of Montreal Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 29th day of March, 1996.
BANK OF MONTREAL TRUST COMPANY
By /s/ AMY S. ROBERTS
--------------------------------
Amy S. Roberts
Assistant Vice President
<PAGE> 3
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
<TABLE>
<S> <C>
ASSETS
Due From Banks $ 1,570,159
-----------
Investment Securities:
State & Municipal 17,025,354
Other 100
-----------
TOTAL SECURITIES 17,025,454
-----------
Loans and Advances
Federal Funds Sold 12,000,000
Overdrafts (336,057)
-----------
TOTAL LOANS AND ADVANCES 11,663,943
-----------
Investment in Harris Trust, NY 6,656,129
Premises and Equipment 509,422
Other Assets 2,494,863
-----------
TOTAL ASSETS $39,919,970
===========
LIABILITIES
Trust Deposits $ 9,859,384
Other Liabilities 9,239,409
-----------
TOTAL LIABILITIES 19,098,793
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 15,510,844
Equity - Municipal Gain/Loss 88,145
-----------
TOTAL CAPITAL ACCOUNTS 20,821,177
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $39,919,970
===========
</TABLE>
I, Mark F. McLaughlin, Vice President, of the above-named bank do
hereby declare that this Report of Condition is true and correct to the best of
my knowledge and belief.
Mark F. McLaughlin
December 31, 1995
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declared that it has been examined
by us, and to the best of our knowledge and belief has been prepared in
conformance with the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
7% SERIES B NOTES DUE 2006
BJ SERVICES COMPANY
PURSUANT TO THE PROSPECTUS DATED APRIL ________, 1996
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON __________________, 1996, UNLESS THE OFFER IS EXTENDED.
TO: BANK OF MONTREAL TRUST COMPANY (THE "EXCHANGE AGENT")
FOR INFORMATION CALL: [ ]
By Mail: By Hand:
Bank of Montreal Trust Company Bank of Montreal Trust Company
Transfer and Exchange Agent Transfer and Exchange Agent
77 Water Street, 4th Floor 77 Water Street, 4th Floor
New York, New York 10005 New York, New York 10005
By Facsimile Transmission: By Overnight Courier:
Bank of Montreal Trust Company Bank of Montreal Trust Company
[ ] Transfer and Exchange Agent
Confirm by Telephone: 77 Water Street, 4th Floor
[ ] New York, New York 10005
Delivery of this instrument to an address or transmission to a
facsimile number other than as set forth above does not constitute a valid
delivery. The method of delivery of all documents, including certificates, is
at the risk of the Holder. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. The instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed.
The undersigned acknowledges that he or she has received the
Prospectus dated April ______, 1996 (the "Prospectus") of BJ Services Company
(the "Company") and this Letter of Transmittal and the instructions hereto (the
"Letter of Transmittal"), which together constitute the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 7% Series B Notes
due 2006 (the "Exchange Notes") that have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which the Prospectus is a part, for each $1,000 principal amount
of its outstanding 7% Series A Notes due 2006 (the "Existing Notes"), upon the
terms and subject to the conditions set forth in the Prospectus. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on
____________________, 1996, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended by the Company. Capitalized terms used
but not defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used either if (i) certificates
representing Existing Notes are to be physically delivered to the Exchange
Agent herewith by Holders, (ii) tender of Existing Notes is to be made by book-
entry transfer to an account maintained by the Exchange Agent at The Depository
Trust Company ("DTC"), pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus by any financial institution
that is a participant in DTC and whose name appears on a security position
listing as the owner of Existing Notes or (iii) tender of Existing Notes is to
be made according to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Procedures for Tendering." Delivery of
this Letter of Transmittal and any other required documents must be made to the
Exchange Agent. Delivery of documents to DTC does not constitute delivery to
the Exchange Agent.
<PAGE> 2
The term "Holder" with respect to the Exchange Offer means any person
in whose name Existing Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Existing Notes must
complete this Letter of Transmittal in its entirety.
THE INSTRUCTIONS INCLUDED IN THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED
DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE INSTRUCTION 12 HEREIN.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR
EXISTING NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND
COMPLY WITH ALL ITS TERMS.
List below the Existing Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule, attached
hereto. The minimum permitted tender is $1,000 in principal amount of 7%
Series A Notes due 2006. All other tenders must be in integral multiples of
$1,000.
DESCRIPTION OF 7% SERIES A NOTES DUE 2006
<TABLE>
<CAPTION>
<S> <C> <C>
Aggregate Principal
Name(s) and Address(es) of Registered Holder(s) Amount Tendered
(Please fill in, if blank) Certificate Number(s)* (if less than all)**
_________________________ ________________________
_________________________ ________________________
_________________________ ________________________
</TABLE>
TOTAL PRINCIPAL AMOUNT OF EXISTING NOTES TENDERED
_____________________________
* Need not be completed by book-entry holders.
** Need not be completed by Holders who wish to tender with respect to
all Existing Notes listed.
SPECIAL REGISTRATION INSTRUCTIONS Address_________________________
(SEE INSTRUCTIONS 4, 5 AND 6)
_____________________________
(Include Zip Code)
To be completed ONLY if
certificates for Existing Notes
in a principal amount not tendered,
or Exchange Notes issued in
exchange for Existing Notes
accepted for exchange, are to
be issued in the name of someone
other than the undersigned. ___________________________________________
(Tax Identification or Social Security No.)
Issue certificate(s) to:
Name _____________________________________
(Please Print)
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
SPECIAL DELIVERY INSTRUCTIONS Address ________________________________________________
(SEE INSTRUCTIONS 4, 5 AND 6)
_____________________________________________________
(Include Zip Code)
To be completed ONLY if certificates for Existing
Notes in a principal amount not tendered, or Exchange Notes
issued in exchange for Existing Notes accepted for exchange,
are to be delivered to someone other than the undersigned. _____________________________________________________
(Tax Identification or Social Security No.)
Issue certificate(s) to:
Name ___________________________________
(Please Print)
</TABLE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER
WITH THE CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY
TRANSFER OF SUCH EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF
GUARANTEED DELIVERY PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
[ ] CHECK HERE IF EXISTING NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________
[ ] The Depository Trust Company
Account Number ________________________________________________________
Transaction Code Number _______________________________________________
Holders whose Existing Notes are not immediately available or who
cannot deliver their Existing Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date may tender their Existing
Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering."
See Instruction 2.
[ ] CHECK HERE IF EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of tendering Holder(s)_________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________
Name of Institution which Guaranteed Delivery _________________________
Transaction Code Number _______________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undesigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Existing Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: _________________________________________________________________
Address: ______________________________________________________________
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<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to BJ Services Company (the "Company") the principal
amount of Existing Notes indicated above.
Subject to and effective upon the acceptance for exchange of the
principal amount of Existing Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Existing Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee and
Registrar under the Indenture for the Existing Notes and the Exchange Notes)
with respect to the tendered Existing Notes with full power of substitution
(such power of attorney being deemed an irrevocable power coupled with an
interest) to (i) deliver certificates for such Existing Notes to the Company or
transfer ownership of such Existing Notes on the account books maintained by
DTC, together, in either such case, with all accompanying evidences of transfer
and authenticity to, or upon the order of, the Company and (ii) present such
Existing Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Existing Notes, all in accordance with the terms of the Exchange Offer.
The undersigned acknowledges that the Offer is being made in reliance
upon interpretative advice given by the staff of the Securities and Exchange
Commission (the "SEC") to third parties in connection with transactions similar
to the Exchange Offer, so that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Existing Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company or any Guarantor within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes.
The undersigned represents that (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving Exchange Notes (which shall be the undersigned
unless otherwise indicated in the box entitled "Special Delivery Instructions"
above) (the "Recipient"), (ii) neither the undersigned nor the Recipient (if
different) has any arrangement with any person to participate in the
distribution of such Exchange Notes, and (iii) neither the undersigned nor the
Recipient (if different) is an "affiliate" of the Company or any Guarantor as
defined in Rule 405 under the Securities Act. If the undersigned is not a
broker-dealer, the undersigned further represents that it is not engaged in,
and does not intend to engage in, a distribution of the Exchange Notes. If the
undersigned is a broker-dealer, the undersigned further (x) represents that it
acquired Existing Notes for the undersigned's own account as a result of
marketing activities or other trading activities, (y) represents that it has
not entered into any arrangement or understanding with the Company or any
Guarantor or any "affiliate" of the Company or any Guarantor (within the
meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes
to be received in the Exchange Offer and (z) acknowledges that it will deliver
a prospectus meeting the requirements of the Securities Act (for which purposes
delivery of the Prospectus, as the same may be hereafter supplemented or
amended, shall be sufficient) in connection with any resale of Exchange Notes
received in the Exchange Offer. Such a broker- dealer will not be deemed,
solely by reason of such acknowledgment and prospectus delivery, to be
admitting that it is an "underwriter" within the meaning of the Securities Act.
The undersigned understand and agrees that the Company reserves the
right not to accept tendered Existing Notes from any tendering holder if the
Company determines, in its sole and absolute discretion, that such acceptance
could result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, exchange, assign and transfer the
Existing Notes tendered hereby and to acquire Exchange Notes issuable upon the
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<PAGE> 5
exchange of such tendered Existing Notes, and that, when the same are accepted
for exchange, the Company will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Existing Notes or transfer of ownership of such Existing
Notes on the account books maintained by a book-entry transfer facility.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees,
that upon the receipt of notice by the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemented prospectus to such broker-dealer.
The undersigned understands and acknowledges that the Company reserves
the right in its sole discretion to purchase or make offers for any Existing
Notes that remain outstanding subsequent to the Expiration Date or, as set
forth in the Prospectus under the caption "The Exchange Offer--Termination,"
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Existing Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
For purposes of the Exchange Offer, the Company shall be deemed to
have accepted validly tendered Existing Notes when, as and if the Company has
given oral (which shall be confirmed in writing) or written notice thereof to
the Exchange Agent.
If any tendered Existing Notes are not accepted for exchange pursuant
to the Exchange Offer for any reason, certificates for any such unaccepted
Existing Notes will be returned (except as noted below with respect to tenders
through DTC), at the Company's cost and expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
The undersigned understands that the first interest payment following
the Expiration Date will include unpaid interest on the Existing Notes accrued
through the Expiration Date, which is the date of issuance of the Exchange
Notes.
The undersigned understands that tenders of Existing Notes pursuant to
the procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the Exchange Notes issued in
exchange for the Existing Notes accepted for exchange and return any
certificates for Existing Notes not tendered or not exchanged, in the name(s)
of the undersigned (or, in either such event in the case of Existing Notes
tendered by DTC, by credit to the account at DTC). Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the Exchange Notes issued in exchange for the Existing Notes
accepted for exchange and any certificates for Existing Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s), unless, in either
event, tender is being made through DTC. In the event that both "Special
Registration Instructions" and "Special
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<PAGE> 6
Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Existing Notes
accepted for exchange in the name(s) of, and return any certificates for
Existing Notes not tendered or not exchanged to, the person(s) so indicated.
The undersigned understands that the Company has no obligations pursuant to the
"Special Registration Instructions" or "Special Delivery Instructions" to
transfer any Existing Notes from the name of the registered Holder(s) thereof
if the Company does not accept for exchange any of the Existing Notes so
tendered.
Holders who wish to tender the Existing Notes and (i) whose Existing
Notes are not immediately available or (ii) who cannot deliver their Existing
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date, may tender their Existing Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of the Letter of Transmittal.
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<PAGE> 7
PLEASE SIGN HERE WHETHER OR NOT
EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
AND WHETHER OR NOT TENDER IS TO BE MADE
PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES
This Letter of Transmittal must be signed by the registered holder(s)
as their name(s) appear on the Existing Notes or, if tendered by a participant
in DTC, exactly as such participant's name appears on a security listing as the
owner of Existing Notes, or by person(s) authorized to become registered
holder(s) by a properly completed bond power from the registered holder(s), a
copy of which must be transmitted with this Letter of Transmittal. If Existing
Notes to which this Letter of Transmittal relate are held of record by two or
more joint holders, then all such holders must sign this Letter of Transmittal.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, then such person must (i) set forth his
or her full title below and (ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's authority so to act. See
Instruction 4 herein.
<TABLE>
<S> <C>
X___________________________________________________________________ _________________________
Date
X___________________________________________________________________ _________________________
Date
</TABLE>
Signature(s) of Holder(s) or
Authorized Signatory
<TABLE>
<S> <C> <C>
Name(s): __________________________________________ Address: ____________________________________________________
__________________________________________ _____________________________________________________
(Please Print) (including Zip Code)
</TABLE>
<TABLE>
<S> <C>
Capacity: _________________________________ Area Code and Telephone Number: _____________________________
Social Security No.: ______________________
</TABLE>
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 1 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code) of
Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
Printed Name)
________________________________________________________________________________
(Title)
Date: ___________________
-7-
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal
need not be guaranteed if (a) this Letter of Transmittal is signed by the
registered holder(s) of the Existing Notes tendered herewith and such holder(s)
have not completed the box set forth herein entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" or (b) such
Existing Notes are tendered for the account of an Eligible Institution. See
Instruction 6. Otherwise, all signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by a member firm of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17 Ad-15 under the Securities Exchange Act of 1934
(an "Eligible Institution"). All signatures on bond powers and endorsements on
certificates must also be guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Existing Notes.
Certificates for all physically delivered Existing Notes or confirmation of any
book-entry transfer to the Exchange Agent at DTC of Existing Notes tendered by
book-entry transfer, as well as, in each case (including cases where tender is
affected by book-entry transfer), a properly completed and duly executed copy
of this Letter of Transmittal or facsimile hereof and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent
at its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date.
The method of delivery of the tendered Existing Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and the delivery will be deemed made only when
actually received by the Exchange Agent. If Existing Notes are sent by mail,
registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Existing Notes should be sent to the
Company.
Holders who wish to tender their Existing Notes and (i) whose Existing
Notes are not immediately available, or (ii) who cannot deliver their Existing
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Existing Notes according to the
guaranteed delivery procedures set forth in the Prospectus. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, overnight courier, mail or hand
delivery) setting forth the name and address of the Holder of the Existing
Notes, the certificate number or numbers of such Existing Notes and the
principal amount of Existing Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, this Letter of Transmittal (or facsimile
hereof) together with the certificate(s) representing the Existing Notes and
any other required documents will be deposited by the Eligible Institution with
the Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal (or facsimile hereof), as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all tendered
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at DTC), must
be received by the Exchange Agent within five New York Stock Exchange trading
days after the Expiration Date, all as provided in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder who
wishes to tender his Existing Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the
Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Existing Notes
according to the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Existing Notes, and withdrawal of tendered
Existing Notes will be determined by the Company in its sole discretion, which
-8-
<PAGE> 9
determination will be final and binding. All tendering holders, by execution of
this Letter of Transmittal (or facsimile thereof), shall waive any right to
receive notice of the acceptance of the Existing Notes for exchange. The
Company reserves the absolute right to reject any and all Existing Notes not
properly tendered or any Existing Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to
particular Existing Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Existing Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Existing Notes will not be deemed to have been made until such
defects or irregularities have been cured to the Company's satisfaction or
waived. Any Existing Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders pursuant
to the Company's determination, unless otherwise provided in this Letter of
Transmittal as soon as practicable following the Expiration Date. The Exchange
Agent has no fiduciary duties to the Holders with respect to the Exchange Offer
and is acting solely on the basis of directions of the Company.
3. Inadequate Space. If the space provided is inadequate, the
certificate numbers and/or the number of Existing Notes should be listed on a
separate signed schedule attached hereto.
4. Tender by Holder. Only a Holder of Existing Notes may tender
such Existing Notes in the Exchange Offer. Any beneficial owner of Existing
Notes who is not the registered bolder and who wishes to tender should arrange
with such holder to execute and deliver this Letter of Transmittal on such
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such owner's name
or obtain a properly completed bond power from the registered holder or
properly endorsed certificates representing such Existing Notes.
5. Partial Tenders; Withdrawals. Tenders of Existing Notes will
be accepted only in integral multiples of $1,000. If less than the entire
principal amount of any Existing Notes is tendered, the tendering Holder should
fill in the principal amount tendered in the third column of the box entitled
"Description of 7% Series A Notes due 2006" above. The entire principal amount
of any Existing Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of
all Existing Notes is not tendered, then Existing Notes for the principal
amount of Existing Notes not tendered and a certificate or certificates
representing Exchange Notes issued in exchange for any Existing Notes accepted
will be sent to the Holder at his or her registered address, unless a different
address is provided in the "Special Delivery Instructions" box above on this
Letter of Transmittal or unless tender is made through DTC, promptly after the
Existing Notes are accepted for exchange.
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. To withdraw a tender of Existing Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Existing Notes, or,
in the case of Existing Notes transferred by book-entry transfer the name and
number of the account at DTC to be credited), (iii) be signed by the Holder in
the same manner as the original signature on the Letter of Transmittal by which
such Existing Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Registrar
with respect to the Existing Notes register the transfer of such Existing Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Existing Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Existing
Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Existing Notes so withdrawn are
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<PAGE> 10
validly retendered. Any Existing Notes which have been tendered but which are
not accepted for exchange by the Company will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Existing
Notes may be retendered by following one of the procedures described above
under "Procedures for Tendering" at any time prior to the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered holder(s) of the Existing Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the Existing Note
without alteration, enlargement or any change whatsoever.
If any of the Existing Notes tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Existing Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many copies of
this Letter of Transmittal as there are different registrations of Existing
Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holders or Holders (which term, for the Purposes described herein,
shall include a book-entry transfer facility whose name appears on a security
listing as the owner of the Existing Notes) of Existing Notes tendered and the
certificate or certificates for Exchange Notes issued in exchange therefor is
to be issued (or any untendered principal amount of Existing Notes to be
reissued) to the registered holder, then such holder need not and should not
endorse any tendered Existing Notes, nor provide a separate bond power. In any
other case, such holder must either properly endorse the Existing Notes
tendered or transmit a properly completed separate bond power with this Letter
of Transmittal with the signatures on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Existing Notes
listed, such Existing Notes must be endorsed or accompanied by appropriate bond
powers in each case signed as the name of the registered holder or holders
appears on the Existing Notes.
If this Letter of Transmittal (or facsimile hereof) or any Existing
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Existing Notes or signatures on bond powers required
by this Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering
Holders should indicate, in the applicable box or boxes, the name and address
to which Exchange Notes or substitute Existing Notes for principal amounts not
tendered or not accepted for exchange are to be issued or sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or social
security number of the person named must also be indicated.
8. Backup Federal Income Tax Withholding and Substitute Form W-9.
Under the federal income tax laws, payments that may be made by the Company on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter of Transmittal and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (i) the holder has not been notified
by the Internal Revenue Service (the "IRS") that the holder is subject to
backup withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer subject to
backup withholding; or (b) provide an adequate basis for exemption. If the
tendering
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<PAGE> 11
holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such holder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Paying Agent under the Indenture governing the Exchange Notes) shall retain
31% of payments made to the tendering holder during the sixty-day period
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent or the Company with its TIN within sixty days after the date of
the Substitute Form W-9, the Company (or the Paying Agent) shall remit such
amounts retained during the sixty-day period to the holder and no further
amounts shall be retained or withheld from payments made to the holder
thereafter. If, however, the holder has not provided the Exchange Agent or the
Company with its TIN within such sixty-day period, the Company (or the Paying
Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a holder is an individual, the TIN is the Social
Security number of such individual. If the Exchange Agent or the Company are
not provided with the correct TIN, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. Certain holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, such holder must submit a
statement (generally, IRS Form W-8), signed under penalties of perjury,
attesting to that individual's exempt status. Such statements can be obtained
from the Exchange Agent. For further information concerning backup withholding
and instructions for completing the Substitute Form W-9 (including how to
obtain a taxpayer identification number if you do not have one and how to
complete the Substitute Form W-9 if Existing Notes am registered in more than
one name), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require the Company (or
the Paying Agent) to withhold 31% of the amount of any payments made on account
of the Exchange Notes. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if
any, imposed by Article 12 of the New York State Tax Law applicable to the
exchange of Existing Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Existing Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered in the name of, any person other than the registered holder of
the Existing Notes tendered hereby, or if tendered Existing Notes are
registered in the name of a person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Existing Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed an the registered holder or on any
other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this Letter
of Transmittal.
10. Waiver of Conditions. The Company reserves the right, in
their sole discretion, to amend, waive or modify specified conditions in the
Exchange Offer in the case of any Existing Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Existing Notes. Any
tendering Holder whose Existing Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated herein for
further instructions.
12. Requests for Assistance or Additional Copies. Requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
in the Prospectus. Holder may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
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<PAGE> 12
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
<S> <C> <C>
CERTIFICATE SURRENDERED EXISTING NOTES TENDERED EXISTING NOTES ACCEPTED
_________________________ _________________________ _________________________
_________________________ _________________________ _________________________
</TABLE>
<TABLE>
<S> <C> <C>
Date Received ____________________ Accepted by _____________ Checked by ______________
Delivery Prepared by _____________ Checked by ______________ Date ____________________
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Existing Notes
are accepted for payment is required to provide the Exchange Agent (as payer)
with such Holder's correct TIN on Substitute Form W-9 below or otherwise
establish a basis for exemption from backup withholding. If such Holder is an
individual, the TIN is his social security number. If the Exchange Agent is
not provided with the correct TIN, a $50 penalty may be imposed by the Internal
Revenue Service, and payments made with respect to Existing Notes purchased
pursuant to the Exchange Offer may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 20% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the
Exchange Offer, the Holder is required to provide the Exchange Agent with
either: (i) the Holder's correct TIN by completing the form below, certifying
that the TIN provided on Substitute Form W-9 is correct (or that such Holder is
awaiting a TIN) and that (A) the Holder has been notified by the Internal
Revenue Service that the Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (B) the Internal Revenue Service
has notified the Holder that the Holder is no longer subject to backup
withholding, or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the registered
Holder of the Existing Notes. If the Existing Notes are held in more than one
name or are held not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
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<PAGE> 13
CERTIFICATION OF PAYEE AWAITING TAXPAYER INDEMNIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31% of all payments made
to me on account of the Exchange Notes shall be retained until I provide a
Taxpayer Identification Number to the payer and that, if I do not provide my
Taxpayer Identification Number within sixty days, such retained amounts shall
be remitted to the Internal Revenue Service as backup withholding and 31% of
all reportable payments made to me thereafter will be withheld and remitted to
the Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE __________________________________ DATE__________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE
EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
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<PAGE> 14
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYERS' NAME: BJ SERVICES COMPANY
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I - Taxpayer Identification
Number
Form W-9 Enter your taxpayer identification
Department of the Treasury number in the appropriate box. For
Internal Revenue Service most individuals, this is your social ______________________________________
security number. If you do not have Social Security Number
a number, see how to obtain a "TIN"
in the enclosed Guidelines.
OR
NOTE: If the account is in more than
one name, see the chart on page 2 of
Payer's Request for Taxpayer the enclosed Guidelines to determine ______________________________________
Identification Number (TIN) what number to give. Employee Identification Number
and Certification
</TABLE>
Part II-For Payees Exempt from Backup Withholding
CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am writing for a number to be
issued to me), and
(2) I am not subject to backup withholding either because I
have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends or
the IRS has notified me that I am no longer subject to
backup withholding.
SIGNATURE_______________________ DATE ___________________
Certification Guidelines - You must cross out item (2) of the above
certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2).
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<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR 7% SERIES A NOTES DUE 2006 OF BJ SERVICES COMPANY
A form substantially equivalent to that set forth below must be used
to accept the Exchange Offer (as defined below) if the certificates for the
outstanding 7% Series A Notes due 2006 (the "Existing Notes") of BJ SERVICES
COMPANY (the "Company"), and all other documents required by the Letter of
Transmittal cannot be delivered to the Exchange Agent by the expiration of the
Exchange Offer or compliance with book-entry transfer procedures cannot be
effected on a timely basis. Such form may be delivered by hand or transmitted
by facsimile transmission, telex or mail to the Exchange Agent, and must
include a signature guarantee by an Eligible Institution as set forth below.
TO:
Bank of Montreal Trust Company
For Information Call:
[_______________________]
<TABLE>
<CAPTION>
By Mail: By Hand:
<S> <C>
Bank of Montreal Trust Company Bank of Montreal Trust Company
Transfer and Exchange Agent Transfer and Exchange Agent
77 Water Street, 4th Floor 77 Water Street, 4th Floor
New York, New York 10005 New York, New York 10005
By Facsimile Transmission: By Overnight Courier:
Bank of Montreal Trust Company Bank of Montreal Trust Company
[______________________________] Transfer and Exchange Agent
77 Water Street, 4th Floor
Confirm by Telephone: New York, New York 10005
[______________________________]
</TABLE>
Delivery of this instrument to an address other than as set forth
above does not constitute a valid delivery. The method of delivery of all
documents, including certificates, is at the risk of the Holder. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended. The instructions accompanying this Letter of Transmittal should
be read carefully before this Letter of Transmittal is completed.
This Notice of Guaranteed Delivery is not used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instruction thereto, such
signatures must appear in the applicable space provided on the Letter of
Transmittal for Guarantee of Signature(s).
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus and the related
Letter of Transmittal which describes the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of a new series of 7% Series B
Notes due 2006 for each $1,000 in principal amount of the Existing Notes.
The undersigned hereby tenders to the Company the aggregate principal
amount of Existing Notes set forth below on the terms and conditions set forth
in the Prospectus and the related Letter of Transmittal pursuant to the
guaranteed delivery procedure set forth in the "The Exchange Offer--Guaranteed
Delivery Procedures" section set forth in the Prospectus.
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<PAGE> 2
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Owner(s) or Authorized Name(s) of Registered Holder(s)
Signatory: ________________________________________ ___________________________________________________
___________________________________________________ ___________________________________________________
___________________________________________________ ___________________________________________________
Principal Amount of Exchange Notes Tendered: ______ Address:___________________________________________
___________________________________________________ ___________________________________________________
Certificate No(s). of Existing Notes (if Area Code and Telephone No.:
available): _______________________________________ If Existing Notes will be delivered by book-entry
___________________________________________________ transfer at The Depository Trust Company, insert
___________________________________________________ Depository Account No.: ___________________________
Date: _____________________________________________
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered Holder(s)
of Existing Notes exactly as its (their) name(s) appear on certificates for
Existing Notes or on a security position listing as the owner of Existing
Notes, or by person(s) authorized to become registered Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
_______________________________________________________________
_______________________________________________________________
Capacity: _______________________________________________________________
Address(es): _______________________________________________________________
_______________________________________________________________
_______________________________________________________________
Do not send Existing Notes with this form. Debentures should be sent to the
Exchange Agent together with a properly completed and duly executed Letter of
Transmittal.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States , hereby (a) represents that each holder of Existing
Notes on whose behalf this tender is being made "own(s)" the Existing Notes
covered hereby within the meaning of Rule l4e-4 under the Securities Exchange
Act of 1934, as amended, (b) represents that such tender of Existing Notes
complies with such Rule 14e-4, and (c) guarantees that, within five New York
Stock Exchange trading days from the expiration date of the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), together with certificates representing the Existing Notes covered
hereby in proper form for transfer (or confirmation of the book-entry transfer
of such Existing Notes into the Exchange Agent's account at The Depository
Trust Company, pursuant to the procedure for book-entry transfer set forth in
the Prospectus) and required documents will be deposited by the undersigned
with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Existing Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in financial
loss to the undersigned.
<TABLE>
<S> <C>
Name of Firm: _____________________________________ ___________________________________________________
Authorized Signature
Address: __________________________________________ Name: _____________________________________________
___________________________________________________ Title: ____________________________________________
Area Code and Telephone No.: ______________________ Date: _____________________________________________
</TABLE>
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