1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 2001
REGISTRATION NUMBER 333-52624
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GRANT PRIDECO, INC. DELAWARE 76-0312499
GP EXPATRIATE SERVICES, INC. DELAWARE 76-0632330
GRANT PRIDECO HOLDING, LLC DELAWARE 76-0635560
GRANT PRIDECO, L.P. DELAWARE 76-0635557
GRANT PRIDECO USA, LLC DELAWARE 51-0397748
STAR OPERATING COMPANY DELAWARE 76-0655528
TA INDUSTRIES, INC. DELAWARE 76-0497435
TEXAS ARAI, INC. DELAWARE 74-2150314
TUBE-ALLOY CAPITAL CORPORATION TEXAS 76-0012315
TUBE-ALLOY CORPORATION LOUISIANA 72-0714357
XL SYSTEMS INTERNATIONAL, INC. DELAWARE 76-0602808
XL SYSTEMS, L.P. TEXAS 76-0324868
(Exact name of registrants as (States or other jurisdictions (I.R.S. Employer
specified in their charters) of incorporation or Identification Nos.)
organization)
1450 LAKE ROBBINS DRIVE, SUITE 600
THE WOODLANDS, TEXAS 77380
(281) 297-8500
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
MR. PHILIP A. CHOYCE
VICE PRESIDENT AND GENERAL COUNSEL
GRANT PRIDECO, INC.
1450 LAKE ROBBINS DRIVE, SUITE 600
THE WOODLANDS, TEXAS 77380
(281) 297-8500
(Name, address, including zip code, and telephone number including area code, of
agent for service)
Copy to:
CHARLES H. STILL
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
(713) 651-5151
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: Approximately 30 days after this registration statement becomes
effective or as soon as practicable thereafter.
If any of 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. [ ]
If this Form is filed to register additional Securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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.
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PROSPECTUS
[GRANT PRIDECO LOGO]
OFFER TO EXCHANGE
9 5/8% SENIOR NOTES DUE 2007, SERIES B
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR
ANY AND ALL OUTSTANDING
9 5/8% SENIOR NOTES DUE 2007, SERIES A
($200,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)
THE EXCHANGE OFFER
The exchange offer expires at 5:00 p.m., New York City time, on
, 2001, unless extended.
The exchange offer is not conditioned upon a minimum aggregate principal
amount of outstanding notes being tendered.
All outstanding notes tendered according to the procedures in this
prospectus and not withdrawn will be exchanged for an equal principal amount of
exchange notes.
The exchange offer is not subject to any condition other than that it not
violate applicable laws or any applicable interpretation of the staff of the
Securities and Exchange Commission.
THE EXCHANGE NOTES
The terms of the exchange notes to be issued in the exchange offer are
identical to the outstanding notes, except that we have registered the exchange
notes with the Securities and Exchange Commission. In addition, the exchange
notes will not be subject to the transfer restrictions applicable to the
outstanding notes. We will not apply for listing any of the exchange notes on
any securities exchange or to arrange for them to be quoted on any quotation
system.
The exchange notes will be senior unsecured obligations of Grant Prideco,
Inc. and will be guaranteed by Grant Prideco's present and future U.S.
restricted subsidiaries on a senior unsecured basis. The exchange notes and
guarantees will rank equally with any other unsecured indebtedness of Grant
Prideco and the subsidiary guarantors but will be effectively junior to any
secured indebtedness of Grant Prideco and the subsidiary guarantors to the
extent of the value of the security for that indebtedness. In addition, the
exchange notes will be effectively junior to any indebtedness of our non-U.S. or
unrestricted subsidiaries, none of which will guarantee the exchange notes.
Interest on the exchange notes will accrue from December 4, 2000 or, if
later, from the most recent date of payment of interest on the outstanding
notes, at the rate of 9 5/8% per year, payable semi-annually in arrears on each
June 1 and December 1.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April , 2001.
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TABLE OF CONTENTS
PAGE
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Forward-Looking Statements.................................. i
Summary..................................................... 1
Risk Factors................................................ 11
The Exchange Offer.......................................... 15
Use of Proceeds............................................. 24
Description of Exchange Notes............................... 25
Book-Entry, Delivery and Form............................... 55
Certain United States Federal Income Tax Considerations..... 58
Plan of Distribution........................................ 62
Legal Matters............................................... 62
Experts..................................................... 62
Where You Can Find More Information......................... 63
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You should rely only on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information included or incorporated by reference in this prospectus or any
documents incorporated by reference herein is accurate as of any date other than
the date on the front of such documents.
FORWARD-LOOKING STATEMENTS
In this prospectus, we make forward-looking statements. We cannot assure
you that the plans, intentions or expectations upon which our forward-looking
statements are based will occur. Our forward-looking statements are subject to
risks, uncertainties and assumptions, including those discussed elsewhere in
this prospectus and the documents that are incorporated by reference into this
prospectus. In particular, you should read the section entitled "Risk Factors"
beginning on page 11 of this Prospectus as well as our "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Forward-
Looking Statements and Exposures" included in our Annual Report on Form 10-K for
the year ended December 31, 2000, which is incorporated by reference into this
Prospectus and outlines many of our assumptions upon which our forward-looking
statements are based and the risks associated with such assumptions and
statements.
Should one or more of these risks or uncertainties materialize, or should
the assumptions prove incorrect, actual results may vary in material respects
from those currently anticipated and reflected in our forward-looking
statements. We urge you to carefully consider those factors.
Our forward-looking statements are expressly qualified in their entirety by
this cautionary statement.
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SUMMARY
This summary highlights some basic information from this prospectus to help
you understand our business, the exchange notes and the exchange offer. You
should read this prospectus carefully to understand fully the terms of the
exchange notes and the other considerations that may be important to you.
GRANT PRIDECO
Grant Prideco is the world's largest manufacturer and supplier of oilfield
drill pipe and other drill stem products and one of the leading North American
providers of high-performance engineered connections and premium tubing and
casing. Our drill stem products are used to drill oil and gas wells while our
engineered connections and premium tubing and casing are products used to
complete oil and gas wells once they have been successfully drilled. Our
customers include major, independent and state-owned oil companies, drilling
contractors, oilfield service companies and North American oil country tubular
goods (OCTG) distributors. We operate 22 manufacturing facilities located in the
United States, Mexico, Canada, Europe, and Asia and 30 sales, service and repair
locations globally.
We conduct our operations through two business segments:
Drilling Products. Our drilling products segment manufactures and sells a
full range of proprietary and API drill pipe, drill collars, heavy weight drill
pipe and accessories. These drill stem products make up the principal tools
(other than the rig) used for the drilling of an oil or gas well that are
located between the rig floor and the bit. Our drilling products are highly
engineered tools specifically designed for today's difficult and harsh drilling
environments and include a wide variety of sizes, designs and metallurgy. This
segment also manufactures drill pipe and other products used in the industrial
markets for fiber optic cable installation and water well drilling.
With increased offshore and natural gas drilling activity, demand for our
proprietary line of eXtreme(TM) drilling products has grown. This value-added
product line is specifically designed for extreme drilling conditions such as
extended reach, directional, horizontal, deep gas, offshore and ultra-deepwater
drilling as well as high-temperature, high-pressure and corrosive well
conditions. Operators and drilling contractors have embraced this product line
as a way to improve their efficiency and assure performance when drilling under
these conditions. We believe that our eXtreme product line offers some of the
highest-performance drilling products ever brought to market and provides our
customers with engineered solutions for some of the most challenging drilling
applications.
Sales of our drilling products are materially affected by the domestic and
worldwide rig counts and customer drill pipe inventory levels. Demand for
drilling products was very depressed during 1999 and early 2000 due to extremely
low drilling activity. Demand increased slowly during 2000 as the North American
rig count increased and our customers began to re-deploy their rigs and utilize
their existing drill pipe inventory. As we entered into 2001, the demand for all
of our drilling products improved significantly such that we currently have a
drill pipe backlog of around six months. We expect that this demand and backlog
will grow throughout 2001 and into 2002 as offshore and international drilling
increases and older drill pipe on existing rigs is replaced.
Engineered Connections. Our engineered connections segment designs,
manufactures and sells a complete line of premium engineered connections and
associated premium tubular products and accessories. The term "engineered"
connections refers to threaded connections with a gas-tight seal and the ability
to handle high torque, tension and pressure. "Premium" tubulars are seamless
casing and tubing (as opposed to rolled welded) with high-alloy chemistry and
superior burst and collapse-resistance characteristics under harsh conditions.
Our connections and premium products are used primarily for the completion of
gas wells and offshore and other wells that are drilled in harsh high
temperature or high-pressure environments or in environmentally sensitive areas.
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Our premium connection and tubular product offerings include Atlas
Bradford(R) premium engineered connections and tubing, TCA(TM) premium casing,
Tube-Alloy(TM) vacuum insulated tubing and tubular accessories, and XL
Systems(TM) large diameter marine conductors and related installation services.
We also provide premium and API threaded couplings and third party connections
on specialty, completion and other products. We have been involved in the design
and development of premium oilfield connections for over 40 years and are
recognized in the industry as one of the leading providers of premium connection
technology.
We generally market and sell our connections either as a service where our
connection is threaded on a customer's tubular or tool or as a part of a
complete product manufactured or supplied by us, e.g. when we sell our own
premium casing, tubing or couplings threaded with our premium connections. The
market for premium connections and tubulars is heavily dependent on oil and gas
completion activity and, in the case of tubing and casing, the level of
distributor inventories of oil country tubular goods.
For additional information about us and our operations, you should read our
Annual Report on Form 10-K for the year ended December 31, 2000, which we have
incorporated into this Prospectus by reference.
BUSINESS STRATEGY
Our principal objective is to maximize shareholder value. In the short
term, we intend to accomplish this objective by focusing on the financial
performance of our existing businesses and assets. We are currently
concentrating on improving the pricing of our products, increasing our sales
through increased manufacturing capabilities and market innovation and reducing
our manufacturing and other costs. We are beginning to see the preliminary
results from actions that were recently implemented and we expect that our
efforts will result in higher returns to our shareholders and will allow us to
compete effectively in both strong and weak markets.
Longer term, we believe that our company must position itself for growth
beyond that of the rest of the industry. To achieve this goal, our strategy is
to build on our core strengths and to take advantage of new opportunities in our
industry as they present themselves. In doing so, we intend to:
- Continually maintain and strengthen our position as the world's leading
provider of drill stem products. We expect to accomplish this objective by
adding new technologies and products and improving our manufacturing
processes and cost structure. We are currently implementing a capital
improvement program aimed at improving our efficiency and automating much
of our drill pipe manufacturing, with the goal of substantially reducing
our manufacturing costs and making our Navasota drill pipe operations the
lowest cost operation in the industry. We also intend to pursue additional
international expansion opportunities and may seek further integration
opportunities where desirable.
- Improve our threaded connection technology and market position by
developing new thread designs either alone or through joint ventures with
other industry leaders, such as our connection project for expandable
tubulars with Enventure Global Technology, LLC.
- Add new capabilities that are complimentary to our existing product lines
through acquisitions, internal development and strategic joint venture and
alliance arrangements, such as our titanium drill pipe joint venture with
RTI Energy Systems, Inc. We expect that these new capabilities will build
on our strengths in the areas of manufacturing, drilling and natural gas
and offshore development and production. We also intend to look for new
technologies that will add value to our customers and distinguish us from
our competitors.
- Grow through future opportunistic-based acquisitions. Although future
opportunities cannot easily be predicted, our future acquisitions would
likely seek to reduce some of the cyclical exposure of our drilling
products operations by focusing on secular growth opportunities and
businesses that participate in different phases of the drilling and
production cycle than we currently do.
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THE SPINOFF
Until April 14, 2000, we were a wholly owned subsidiary of Weatherford
International, Inc. We were spun off from Weatherford on April 14, 2000, through
a distribution by Weatherford to its stockholders of all of our common stock. As
a result Weatherford no longer has an ownership interest in us.
We were spun off from Weatherford to allow us to develop our own strategy
for growth and to fund that growth through our own capital resources. We believe
that although many opportunities existed for us to pursue new opportunities and
acquisitions in the tubular and drilling industry before the spinoff, we were
unable to take full advantage of those opportunities as part of Weatherford. As
a business segment of Weatherford, we competed with Weatherford's other
businesses for capital, and additional material investments in our businesses
were considered to be inconsistent with the strategic direction and focus of
Weatherford's other businesses.
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Our principal executive offices are located at 1450 Lake Robbins Drive,
Suite 600, The Woodlands, Texas 77380, and our telephone number is (281)
297-8500. Our common stock is traded on the New York Stock Exchange under the
symbol "GRP."
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THE EXCHANGE OFFER
BACKGROUND OF THE
OUTSTANDING NOTES.......... We issued $200,000,000 aggregate principal amount
of our 9 5/8% Senior Notes due 2007 (the
"outstanding notes") to Lehman Brothers Inc.,
Deutsche Bank Securities Inc., UBS Warburg LLC and
Simmons & Company International (the "initial
purchasers") on December 4, 2000 in transactions
not registered under the Securities Act of 1933 in
reliance on exemptions from registration under that
act. The initial purchasers then sold the
outstanding notes to qualified institutional buyers
in reliance on Rule 144A under the Securities Act.
Because they have been sold pursuant to exemptions
from registration, the outstanding notes are
subject to transfer restrictions.
In connection with the issuance of the outstanding
notes, we entered into an exchange and registration
rights agreement in which we agreed to deliver to
you this prospectus and to use our best efforts to
complete the exchange offer or to file and cause to
become effective a registration statement covering
the resale of the outstanding notes.
THE EXCHANGE OFFER......... We are offering to exchange up to $200,000,000
principal amount of exchange notes for an identical
principal amount of outstanding notes. Outstanding
notes may be exchanged only in $1,000 increments.
The terms of the exchange notes are identical in
all material respects to the outstanding notes
except that the exchange notes have been registered
under the Securities Act. Because we have
registered the exchange notes, the exchange notes
will not be subject to transfer restrictions and
holders of exchange notes will have no registration
rights.
RESALE OF EXCHANGE NOTES... We believe you may offer, sell or otherwise
transfer the exchange notes you receive in the
exchange offer without compliance with the
registration and prospectus delivery provisions of
the Securities Act provided that:
- you acquire the exchange notes you receive in the
exchange offer in the ordinary course of your
business;
- you are not participating and have no
understanding with any person to participate in
the distribution of the exchange notes issued to
you in the exchange offer; and
- you are not an affiliate of ours.
Each broker-dealer issued exchange notes in the
exchange offer for its own account in exchange for
outstanding notes acquired by the broker-dealer as
a result of market-making or other trading
activities must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of the
exchange notes issued in the exchange offer. A
broker-dealer may use this prospectus for an offer
to resell, resale or other retransfer of the
exchange notes issued to it in the exchange offer.
EXPIRATION DATE............ 5:00 p.m., New York City time, on , 2001,
unless we extend the exchange offer. It is possible
that we will extend the exchange offer until all
outstanding notes are tendered. You may withdraw
outstanding notes you tendered at any time before
5:00 p.m.,
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New York City time, on the expiration date. See
"The Exchange Offer -- Expiration Date; Extensions;
Amendments."
WITHDRAWAL RIGHTS.......... You may withdraw outstanding notes you tendered by
furnishing a notice of withdrawal to the exchange
agent or by complying with applicable ATOP
procedures at any time before 5:00 p.m. New York
City time on the expiration date. See "The Exchange
Offer -- Withdrawal of Tenders."
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
OUTSTANDING NOTES........ The exchange notes will bear interest from December
4, 2000 or, if later from the most recent date of
payment of interest on the outstanding notes.
CONDITIONS TO THE EXCHANGE
OFFER.................... The exchange offer is subject only to the following
conditions:
- the compliance of the exchange offer with
securities laws;
- the proper tender of the outstanding notes;
- the representation by the holders of the
outstanding notes that they are not our
affiliate, that the exchange notes they will
receive are being acquired by them in the
ordinary course of their business and that at the
time the exchange offer is completed the holder
had no plan to participate in the distribution of
the exchange notes; and
- no judicial or administrative proceeding shall
have been threatened that would limit us from
proceeding with the exchange offer.
REPRESENTATIONS AND
WARRANTIES............... By participating in the exchange offer, you
represent to us that, among other things:
- you will acquire the exchange notes you receive
in the exchange offer in the ordinary course of
your business;
- you are not participating and have no
understanding with any person to participate in
the distribution of the exchange notes issued to
you in the exchange offer; and
- you are not an affiliate of ours or, if you are
an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES........ To accept the exchange offer, you must send the
exchange agent either
- a properly completed and executed letter of
transmittal; or
- a computer-generated message transmitted by means
of DTC's Automated Tender Offer Program (ATOP)
system that, when received by the exchange agent
will form a part of a confirmation of book-entry
transfer in which you acknowledge and agree to be
bound by the terms of the letter of transmittal;
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and either
- a timely confirmation of book-entry transfer of
your outstanding notes into the exchange agent's
account at DTC; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
Other procedures may apply to holders of
certificated notes. For mor information, see "The
Exchange Offer -- Procedures for Tendering."
TENDERS BY BENEFICIAL
OWNERS..................... If you are a beneficial owner whose outstanding
notes are registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and wish to tender those outstanding notes
in the exchange offer, please contact the
registered holder as soon as possible and instruct
them to tender on your behalf and comply with the
instructions in this prospectus.
GUARANTEED DELIVERY
PROCEDURES............... If you are unable to comply with the procedures for
tendering, you may tender your outstanding notes
according to the guaranteed delivery procedures
described in this prospectus under the heading "The
Exchange Offer -- Guaranteed Delivery Procedures."
ACCEPTANCE OF OUTSTANDING
NOTES AND DELIVERY OF
EXCHANGE NOTES........... If the conditions described under "The Exchange
Offer -- Conditions" are satisfied, we will accept
for exchange any and all outstanding notes that are
properly tendered before the expiration date. If we
close the exchange offer, the exchange notes will
be delivered promptly following the expiration
date. Otherwise, we will promptly return any
outstanding notes tendered.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS........... See "Certain Federal Income Tax Considerations" for
a discussion of U.S. federal income tax
considerations you should consider before tendering
outstanding notes in the exchange offer.
EXCHANGE AGENT............. United States Trust Company of New York is serving
as exchange agent for the exchange offer. The
address for the exchange agent is listed under "The
Exchange Offer -- Exchange Agent."
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THE EXCHANGE NOTES
The form and terms of the exchange notes to be issued in the exchange offer
are the same as the form and terms of the outstanding notes except that the
exchange notes will be registered under the Securities Act and, accordingly,
will not bear legends restricting their transfer. The notes issued in the
exchange offer will evidence the same debt as the outstanding notes, and both
the outstanding notes and the exchange notes are governed by the same indenture.
The following terms are applicable to both the outstanding notes and the
exchange notes. In this document, the term "notes" refers to both the
outstanding notes and the exchange notes. We define capitalized terms used in
this summary in the "Description of Exchange Notes -- Certain Definitions"
section of this prospectus.
SECURITIES OFFERED......... $200.0 million of 9 5/8% Senior Notes due 2007,
Series B.
ISSUER..................... Grant Prideco, Inc., a Delaware corporation.
GUARANTEES................. All payments with respect to the notes (including
principal and interest) will be fully,
unconditionally and irrevocably guaranteed on a
senior basis, jointly and severally, by all our
present and future U.S. restricted subsidiaries.
The guarantees are general unsecured obligations of
the subsidiary guarantors and rank equally with
their existing and future senior unsecured
indebtedness, but are effectively junior to all the
secured indebtedness of the subsidiary guarantors
to the extent of the value of the security for that
indebtedness.
MATURITY DATE.............. December 1, 2007.
INTEREST PAYMENT DATES..... June 1 and December 1, commencing on June 1, 2001.
OPTIONAL REDEMPTION........ We may redeem the notes, in whole or in part, at
any time at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if
any, to the date of redemption plus a make-whole
premium as described under "Description of Exchange
Notes -- Optional Redemption."
CHANGE OF CONTROL.......... If a change of control occurs, as described under
"Description of Exchange Notes -- Mandatory
Redemption; Offers to Purchase; Open Market
Purchases -- Change of Control," each holder of
notes will have the right to require us to purchase
all or a portion of his or her notes at 101% of the
principal amount, plus accrued and unpaid interest
to the date of repurchase.
RANKING.................... The outstanding notes are, and the exchange notes
will be, senior unsecured obligations of Grant
Prideco, Inc., ranking equally with the existing
and future senior unsecured indebtedness of Grant
Prideco, Inc. However, the outstanding notes are,
and the exchange notes will be, effectively junior
to all our secured indebtedness to the extent of
the value of the security for that indebtedness. At
December 31, 2000, we had approximately $257.3
million of indebtedness outstanding on a
consolidated basis (including the notes), of which
$36.2 million is secured indebtedness, and $1.1
million is debt of our non-U.S. subsidiaries,
excluding the credit facility, and effectively
senior to the notes. However, the indenture permits
certain of our subsidiaries to borrow additional
debt under one or more credit facilities, all of
which could be secured and could therefore be
effectively senior to the notes. Further, the
outstanding notes are, and the exchange notes will
be, effectively junior to all indebtedness of our
existing and future non-U.S. subsidiaries and any
subsidiaries we
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designate as unrestricted subsidiaries, because
they will not guarantee the notes.
COVENANTS.................. The indenture limits our ability and the ability of
our restricted subsidiaries to
- sell assets,
- make restricted payments,
- incur additional indebtedness,
- issue or sell preferred stock of restricted
subsidiaries,
- create or incur liens,
- place restrictions on distributions and other
payments from restricted subsidiaries,
- merge or consolidate with or transfer substantial
assets to another entity,
- engage in transactions with related persons,
- engage in sale and leaseback transactions or
- engage in any business other than permitted
businesses.
These covenants are subject to exceptions, and some
of these covenants will be suspended before the
notes mature if the notes attain an
investment-grade rating in the future and no event
of default exists under the indenture. See
"Description of Exchange Notes -- Certain
Covenants."
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SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain of our historical financial data.
Until we were spun off on April 14, 2000, we were a wholly owned subsidiary of
Weatherford International, Inc. This information has been prepared as if we had
been a stand-alone company for the periods presented. This information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our Financial Statements and the Notes
thereto, all of which are incorporated by reference herein from our Annual
Report on Form 10-K for the year ended December 31, 2000. The following
information may not be indicative of our future operating results.
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT AS INDICATED)
OPERATING DATA:
Revenues.............................. $367,336 $630,021 $646,454 $286,370 $498,481
Selling, General and Administrative
Expense............................. 24,417 41,886 46,393 45,742 57,568
Interest Expense(a)................... 7,371 12,976 12,008 11,343 17,005
Operating Income (Loss)(b), (c),
(d)................................. 46,322 115,436 112,884 (33,014) (4,736)
Net Income (Loss)(b), (c), (d), (e)... 23,588 61,514 65,720 (33,511) (16,485)
OTHER DATA:
EBITDA, Before Other Charges(f)....... $ 58,840 $142,487 $179,007 $ 6,954 $ 49,231
Cash Provided (Used) By Operating
Activities.......................... 9,338 9,872 10,727 65,240 (32,615)
Cash Used by Investing Activities..... (54,716) (85,660) (49,479) (34,118) (86,769)
Cash Provided (Used) by Financing
Activities.......................... 44,087 82,688 36,619 (30,988) 121,495
Capital Expenditures(g)............... 16,829 34,813 38,102 19,046 20,891
Ratio of EBITDA to Interest
Expense(a).......................... 8.0x 11.0x 14.9x 0.6x 2.9x
Ratio of Earnings to Fixed Charges(h),
(i)................................. 5.5x 8.4x 8.8x -- --
Ratio of Earnings to Fixed Charges,
Before Other Charges(j)............. 5.5x 8.4x 11.4x -- 0.7x
Drill Pipe Sold (in thousands of
feet)............................... 6,833 9,336 11,076 2,639 4,951
Average Price per Foot (in dollars)... $ 23.10 $ 25.90 $ 30.90 $ 30.10 $ 31.30
Backlog at Year End (in millions)..... $ 170.3 $ 359.8 $ 88.9 $ 60.4 $ 161.2
AT DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total Assets.......................... $396,693 $662,598 $738,314 $734,575 $892,564
Current Assets........................ 209,527 351,245 350,296 272,038 377,033
Current Liabilities................... 106,969 156,199 144,268 107,401 178,585
Long-Term Debt(k)..................... 103,432 127,387 109,265 124,276 219,104
Stockholders' Equity.................. 164,220 332,722 445,211 453,856 431,503
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(a) Interest expense includes interest attributed to $100.0 million in debt
owed to Weatherford for each period presented based on Weatherford's
long-term debt rates of 7.25% through April 14, 2000 and thereafter at 10%
per annum, the interest rate on our note issued to Weatherford. This does
not necessarily represent what our actual cost of debt would have been had
we been a stand-alone entity in each of the periods presented. See Note 8
and 9 to our Financial Statements which are incorporated by reference from
our Annual Report on Form 10-K for the year ended December 31, 2000.
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(b) The year ended December 31, 1998 includes $35.0 million of other charges
($22.8 million net of tax) relating to a reorganization and rationalization
of our business in light of our industry conditions.
(c) The year ended December 31, 1999 includes $9.5 million of other charges
($6.1 million net of tax) relating to the decision in the fourth quarter of
1999 to terminate our manufacturing arrangement in India, of which $7.8
million involved a purchase deposit that we will not be able to use and
$1.7 million represented equipment in India that we do not believe we will
be able to recover.
(d) The year ended December 31, 2000 includes $22.1 million of other charges
($14.4 million net of tax). This includes $11.0 million ($7.2 million net
of tax) related to inventory write-offs classified as cost of sales and
$11.1 million ($7.2 million net of tax) related to asset impairments and
other reductions. You should read "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Notes 4 and 20 to our
Financial Statements, which are incorporated by reference from our Annual
Report on Form 10-K for the year ended December 31, 2000.
(e) The year ended December 31, 2000 includes cumulative effect of accounting
change related to SEC Staff Accounting Bulletin No. 101 of $1.8 million,
net of tax.
(f) We calculate EBITDA by taking operating income (loss) and adding back
depreciation and amortization and excluding the impact of the other charges
discussed in (b), (c) and (d) above for the respective periods of those
charges. We have included an EBITDA calculation here because, when we look
at the performance of our businesses, we give consideration to their
EBITDA. Calculations of EBITDA should not be viewed as a substitute for
calculations under generally accepted accounting principles (GAAP), in
particular cash flows from operations, operating income (loss) and net
income (loss). In addition, EBITDA calculations by our company may not be
comparable to those of another company.
(g) Capital expenditures for property, plant and equipment. Excludes the costs
related to acquisitions of businesses.
(h) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). "Fixed charges" represent
interest incurred (whether expensed or capitalized), amortization of debt
expense, and that portion of rental expense on operating leases deemed to
be the equivalent of interest. For the year ended December 31, 1999 and
2000, earnings were insufficient to cover fixed charges by $44.5 million
and $27.6 million, respectively. We were a wholly-owned subsidiary of
Weatherford until April 14, 2000. The ratios for periods before that date
are based on earnings and fixed charges attributable to us during the
periods presented, and reflect allocations of certain expenses to us.
Although we believe these allocations are reasonable, they are not
necessarily indicative of the costs we would have incurred had we not been
owned by Weatherford during the periods presented. See Note 1 to our
Financial Statements which are incorporated by reference from our Annual
Report on Form 10-K for the year ended December 31, 2000. In particular,
our cost of capital, and therefore our fixed charges, may have been higher
than those reflected in these ratios had we not been owned by Weatherford
during the periods presented.
(i) Giving effect to the offering of the outstanding notes and the repayment in
full of the Weatherford note and the credit facility as of January 1, 2000,
our pro forma Ratio of Earnings to Fixed Charges for the year ended
December 31, 2000 would have been less than 1 to 1 and additional earnings
of $32.0 million would be necessary to provide a 1 to 1 ratio. Excluding
other charges of $22.1 million discussed in (d) above, our proforma Ratio
of Earnings to Fixed Charges for the year ended December 31, 2000 would
have been 0.6 to 1.
(j) Excludes other charges discussed in (b), (c) and (d) above. For the year
ended December 31, 1999, earnings were insufficient to cover fixed charges
by $35.4 million.
(k) Includes $100.0 million indebtedness to Weatherford at December 31, 1996,
1997, 1998 and 1999.
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RISK FACTORS
Your investment in the exchange notes will involve risk. You should
carefully consider the following risk factors and the other information set
forth or incorporated by reference in this prospectus. In particular, you should
read the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Forward-Looking Statements and Exposures"
included in our Annual Report on Form 10-K for the year ended December 31, 2000,
which describes various risks and exposures of our businesses and operations.
WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE
OBLIGATIONS.
Because our earnings and cash flows have varied significantly from year to
year following trends in our industry, an amount of debt that we can manage in
some periods may not be appropriate for us in other periods. Our future cash
flow may be insufficient to meet our debt obligations and commitments, and any
insufficiency could negatively impact our business. Our ability to generate cash
flow from operations to pay our debt will depend on our future financial
performance, which will be affected by a range of economic, competitive and
business factors. We cannot control many of these factors, such as general
economic and financial conditions in the oil and gas industry and the economy at
large or competitive initiatives of our competitors.
If we do not generate sufficient cash flow from operations to satisfy our
debt obligations, we may have to undertake alternative financing plans, such as
refinancing or restructuring our debt, selling assets, reducing or delaying
capital investments or seeking to raise additional capital. We cannot assure you
that any refinancing would be possible, that any assets could be sold, or, if
sold, of the timing of the sales and the amount of proceeds realized from those
sales, or that additional financing could be obtained on acceptable terms, if at
all. Our inability to generate sufficient cash flow to satisfy our debt
obligations, or to refinance our indebtedness on commercially reasonable terms,
would materially adversely affect our business, financial condition, results of
operations and prospects and our ability to satisfy our obligations under the
notes.
WE COULD INCUR A SUBSTANTIAL AMOUNT OF DEBT, WHICH COULD MATERIALLY ADVERSELY
AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS PROSPECTS AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We had approximately $257.3 million of indebtedness outstanding at December
31, 2000. However, we are permitted under our revolving credit facility and the
indenture governing the notes to incur additional debt, subject to certain
limitations. If we incur additional debt, our increased leverage could, for
example
- make it more difficult for us to satisfy our obligations under the notes
or other indebtedness and, if we fail to comply with the requirements of
the indebtedness, could result in an event of default,
- require us to dedicate a substantial portion of our cash flow from
operations to required payments on indebtedness, thereby reducing the
availability of cash flow for working capital, capital expenditures and
other general business activities,
- limit our ability to obtain additional financing in the future for
working capital, capital expenditures and other general corporate
activities,
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate,
- detract from our ability to successfully withstand a downturn in our
business or the economy generally and
- place us at a competitive disadvantage against other less leveraged
competitors.
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The occurrence of any one of these events could have a material adverse
effect on our business, financial condition, results of operations, prospects
and ability to satisfy our obligations under the notes.
WE ARE A HOLDING COMPANY, AND WE ARE DEPENDENT ON THE ABILITY OF OUR
SUBSIDIARIES TO DISTRIBUTE FUNDS TO US.
We are a holding company, and our subsidiaries conduct all of our
operations and own all of our operating assets. We have no significant assets
other than the equity interests of our subsidiaries. As a result, our ability to
make required payments on the notes depends on the performance of our
subsidiaries and their ability to distribute funds to us. The ability of our
subsidiaries to make distributions to us may be restricted by, among other
things, applicable state corporate and partnership laws and other laws and
regulations. If we are unable to obtain funds from our subsidiaries as a result
of restrictions under our other debt instruments, state law or otherwise, we may
not be able to pay interest or principal on the notes when due, or to redeem the
notes upon a change of control, and we cannot assure you that we will be able to
obtain the necessary funds from other sources.
IN THE EVENT OF OUR BANKRUPTCY OR LIQUIDATION, HOLDERS OF THE NOTES WILL BE PAID
FROM ANY ASSETS REMAINING AFTER PAYMENTS TO ANY HOLDERS OF SECURED DEBT AND DEBT
OF OUR NON-GUARANTOR SUBSIDIARIES.
The notes will be general unsecured senior obligations of us and our
subsidiary guarantors, effectively junior to any secured debt that we may have
in the future to the extent of the value of the assets securing that debt. In
addition, not all of our subsidiaries will guarantee the notes, which will be
effectively junior to the liabilities of any of these non-guarantor
subsidiaries. Specifically, none of our present or future non-U.S. subsidiaries
and none of our future unrestricted subsidiaries will guarantee the notes. For
more information regarding our guarantor and non-guarantor subsidiaries, see
Note 22 to our Financial Statements which are incorporated by reference from our
Annual Report on Form 10-K for the year ended December 31, 2000.
If we are declared bankrupt or insolvent, or are liquidated, the holders of
our secured debt, and any debt of our non-guarantor subsidiaries, will be
entitled to be paid from our assets before any payment may be made with respect
to the notes. If any of the foregoing events occurs, we cannot assure you that
we will have sufficient assets to pay amounts due on our secured debt, the debt
of our non-guarantor subsidiaries and the notes. As a result, holders of the
notes may receive less, ratably, than the holders of secured debt of the debt of
our non-guarantor subsidiaries in the event of our bankruptcy or liquidation.
OUR DEBT INSTRUMENTS IMPOSE RESTRICTIONS ON US THAT MAY AFFECT OUR ABILITY TO
SUCCESSFULLY OPERATE THE BUSINESS.
Our revolving credit facility restricts us, and the terms of the indenture
restricts us, from taking various actions, such as incurring additional
indebtedness, paying dividends, repurchasing junior indebtedness, making
investments, entering into transactions with affiliates, merging or
consolidating with other entities and selling all or substantially all of our
assets. In addition, our revolving credit facility requires us to maintain
certain financial ratios and satisfy certain financial condition tests, a number
of which will become more restrictive over time and may require us to take
action to reduce our debt or take some other action in order to comply with
them. These restrictions could also limit our ability to obtain future
financings, make needed capital expenditures, withstand a future downturn in our
business or the economy in general, or otherwise conduct necessary corporate
activities. We may also be prevented from taking advantage of business
opportunities that arise because of the limitations imposed on us by the
restrictive covenants under the revolving credit facility and the indenture. A
breach of any of these provisions will likely result in a default under the
indenture governing the notes and under our revolving credit facility that would
allow those lenders to declare that indebtedness immediately due and payable. If
we were unable to pay those amounts because we do not have sufficient cash on
hand or are unable to obtain alternative financing on acceptable terms, the
lenders could initiate a bankruptcy or liquidation proceeding or proceed against
any assets that serve as collateral to secure that indebtedness. Our assets may
not be sufficient to repay that amount and the amounts due under the notes in
full.
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WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL.
If a change of control under the indenture occurs in the future, we will be
required to make an offer to purchase all the outstanding notes at a premium,
plus any accrued and unpaid interest to the date of purchase. In such a
situation, we cannot assure you that we will have enough funds to pay for all of
the notes that are tendered under the offer to purchase. If a significant amount
of notes are tendered, we will almost certainly have to obtain financing to pay
for the tendered notes; however, we cannot be sure we will be able to obtain
such financing on acceptable terms, if at all. A change of control may also
result in an event of default under our credit facility and agreements governing
our future indebtedness and may result in the acceleration of that indebtedness,
in which case we will be required to pay that indebtedness. If that indebtedness
is secured debt, we will be required to pay that debt to the extent of the value
of the assets securing the debt before repurchasing the notes. We urge you to
read the information under "Description of Notes -- Mandatory Redemption; Offers
to Purchase; Open Market Purchases -- Change of Control" for more information
regarding the treatment of a change of control under the indenture.
THE SUBSIDIARY GUARANTEES COULD BE DEEMED FRAUDULENT CONVEYANCES UNDER CERTAIN
CIRCUMSTANCES, AND A COURT MAY TRY TO SUBORDINATE OR AVOID THE SUBSIDIARY
GUARANTEES.
Under various fraudulent conveyance or fraudulent transfer laws, a court
could subordinate or avoid the subsidiary guarantees. Generally, to the extent
that a United States court were to find that at the time one of our subsidiaries
entered into a subsidiary guarantee either (x) the subsidiary incurred the
guarantee with the intent to hinder, delay or defraud any present or future
creditor or contemplated insolvency with a design to favor one or more creditors
to the exclusion of others or (y) the subsidiary did not receive fair
consideration or reasonably equivalent value for issuing the subsidiary
guarantee and, at the time it issued the subsidiary guarantee, the subsidiary
(i) was insolvent or became insolvent as a result of issuing of the subsidiary
guarantee, (ii) was engaged or about to engage in a business or transaction for
which the remaining assets of the subsidiary constituted unreasonably small
capital, or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay those debts as they matured, the court could avoid or
subordinate the subsidiary guarantee in favor of the subsidiary's other
obligations. Among other things, a legal challenge of a subsidiary guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
subsidiary as a result of the issuance of the notes by us. To the extent a
subsidiary guarantee is voided as a fraudulent conveyance or held unenforceable
for any other reason, the holders of the notes would not have any claim against
that subsidiary and would be creditors solely of us and any other subsidiary
guarantors whose guarantees are not held unenforceable.
YOU MAY SUFFER ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE OUTSTANDING NOTES.
The outstanding notes that are not exchanged for exchange notes have not
been registered with the SEC or in any state. Unless the outstanding notes are
registered, they may only be offered and sold pursuant to an exemption from, or
in a transaction that is not subject to, the registration requirements of the
Securities Act. Depending upon the percentage of outstanding notes exchanged for
exchange notes, the liquidity of the outstanding notes may be adversely
affected.
THERE MAY NOT BE A LIQUID MARKET FOR RESALE OF THE EXCHANGE NOTES.
The exchange notes are new securities for which there currently is no
market. Although the initial purchasers have informed us that they 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. In addition,
the market making activity may be limited during the pendency of the exchange
offer. Accordingly, there can be no assurance as to the development or liquidity
of any market for the exchange notes. We do not intend to apply for listing of
the exchange notes on any securities exchange or for quotation through the
Nasdaq National Market.
The liquidity of, and trading market for the exchange notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of our financial performance and prospects.
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THE IRS MAY TREAT OUR RECENT SPINOFF AS TAXABLE IF REPRESENTATIONS MADE TO THE
IRS WERE INACCURATE OR IF WE AND WEATHERFORD DO NOT COMPLY WITH THE UNDERTAKINGS
MADE TO THE IRS; TAXABLE TREATMENT OF OUR SPINOFF WOULD RESULT IN SIGNIFICANT
INDEMNIFICATION LIABILITIES TO US.
In connection with our spinoff from Weatherford International, Inc. in
April 2000, Weatherford sought and received a favorable ruling from the Internal
Revenue Service to the effect that, for United States federal income tax
purposes, the spinoff generally would be tax-free to Weatherford and its
stockholders. It is possible that Weatherford and its stockholders could be
subject to a material amount of taxes as a result of the spinoff if the
representations and undertakings we and Weatherford made to the IRS in
connection with obtaining the tax ruling are determined to be inaccurate. In
addition, under the Internal Revenue Code of 1986, as amended, and Treasury
regulations promulgated thereunder (including proposed regulations), the spinoff
could be determined to be taxable if within two years following the spinoff
there were to be a change of control of either Weatherford or Grant Prideco and
Weatherford and Grant Prideco were not able to rebut the presumption that the
change in control was contemplated at the time of the spinoff.
Under the terms of an agreement we entered into with Weatherford in
contemplation of the spinoff, we will be responsible and liable to Weatherford
for any and all corporate-level taxes or liabilities incurred by Weatherford
relating to the spinoff except to the extent the spinoff is determined to be
taxable solely as a result of a change of control of Weatherford following the
spinoff. Our obligation and liability will apply under all other circumstances,
regardless of the reason for the spinoff being determined to be taxable. This
liability would extend to circumstances within the control of Weatherford as
well as circumstances under which it is alleged or determined that there was a
breach or misrepresentation, negligent or otherwise, by Weatherford in
connection with the expected tax ruling. We also are restricted under another
agreement with Weatherford from engaging in certain transactions without the
consent of Weatherford that could affect the taxability of the spinoff unless
Weatherford receives a supplemental tax ruling or an acceptable tax opinion.
WE HAVE A CONTINUING BUSINESS RELATIONSHIP WITH WEATHERFORD, OUR FORMER PARENT
COMPANY, AND CONFLICTS MAY ARISE THAT WE ARE UNABLE TO RESOLVE IN A MANNER AS
FAVORABLE TO US AS THEY MIGHT HAVE BEEN WITH AN UNRELATED THIRD PARTY.
The terms of the agreements we entered into with Weatherford in
contemplation of the spinoff were not negotiated on an arm's-length basis and
were proposed by Weatherford as our sole stockholder at the time we entered into
those agreements. As a result, the terms of those agreements may not reflect the
terms that an unrelated third party would have provided to us. Weatherford, as
our then sole stockholder, ratified the terms of these agreements before the
spinoff, and we have acknowledged that the agreements constitute our valid
obligations.
Persons associated with Weatherford also have a continuing relationship
with us. Five current directors of Weatherford, Messrs. Bernard J. Duroc-Danner,
Sheldon B. Lubar, William E. Macaulay, Robert K. Moses, Jr. and Robert A. Rayne,
represent a majority of our board of directors. In addition, Mr. Duroc-Danner,
President, Chief Executive Officer and Chairman of the Board of Directors of
Weatherford, serves as our Chairman of the Board.
As a result of these relationships with Weatherford, conflicts of interest
between us and Weatherford may arise and we cannot assure you that those
conflicts will be resolved in a manner as favorable to us as they might have
been with an unrelated third party.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We issued $200,000,000 aggregate principal amount of outstanding notes to
the initial purchasers on December 4, 2000 in transactions not registered under
the Securities Act of 1933 in reliance on exemptions from registration under
that act. The initial purchasers then sold the outstanding notes to qualified
institutional buyers in reliance on Rule 144A under the Securities Act. Because
they have been sold pursuant to exemptions from registration, the outstanding
notes are subject to transfer restrictions.
In connection with the issuance of the outstanding notes, we agreed with
the initial purchasers that promptly following the issuance of the outstanding
notes, we would:
- file with the SEC a registration statement related to the exchange notes;
- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act; and
- offer to the holders of the outstanding notes the opportunity to exchange
their outstanding notes for a like principal amount of exchange notes
upon the effectiveness of the registration statement.
Our failure to comply with these agreements within certain time periods
would result in additional interest being due on the outstanding notes. A copy
of the agreements with the initial purchasers have been filed as exhibits to the
registration statement of which this prospectus is a part.
Based on existing interpretations of the Securities Act by the staff of the
SEC described in several no-action letters to third parties, and subject to the
following sentence, we believe that the exchange notes issued in the exchange
offer may be offered for resale, resold and otherwise transferred by their
holders, other than broker-dealers or our "affiliates," without further
compliance with the registration and prospectus delivery provisions of the
Securities Act. However, any holder of outstanding notes who is an affiliate of
ours, who is not acquiring the exchange notes in the ordinary course of such
holder's business or who intends to participate in the exchange offer for the
purpose of distributing the exchange notes:
- will not be able to rely on the interpretations by the staff of the SEC
described in the above-mentioned no-action letters;
- will not be able to tender outstanding notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the
outstanding notes unless the sale or transfer is made under an exemption
from these requirements.
We do not intend to seek our own no-action letter, and there is no
assurance that the staff of the SEC would make a similar determination regarding
the exchange notes as it has in these no-action letters to third parties.
As a result of the filing and effectiveness of the registration statement
of which this prospectus is a part, we will not be required to pay an increased
interest rate on the outstanding notes. Following the closing of the exchange
offer, holders of outstanding notes not tendered will not have any further
registration rights except in limited circumstances requiring the filing of a
shelf registration statement, and the outstanding notes will continue to be
subject to restrictions on transfer. Accordingly, the liquidity of the market
for the outstanding notes will be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions stated in this prospectus and
in the letter of transmittal, we will accept all outstanding notes properly
tendered and not withdrawn before 5:00 p.m. New York City time, on the
expiration date. After authentication of the exchange notes by the trustee or an
authenticating
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agent, we will issue $1,000 principal amount of exchange notes in exchange for
each $1,000 principal amount of outstanding notes accepted in the exchange
offer.
By tendering your outstanding notes for exchange notes in the exchange
offer and signing or agreeing to be bound by the letter of transmittal, you will
represent to us that:
- you will acquire the exchange notes you receive in the exchange offer in
the ordinary course of your business;
- you are not participating and have no understanding with any person to
participate in the distribution of the exchange notes issued to you in
the exchange offer;
- you are not an affiliate of ours or, if you are an affiliate, you will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable;
- if you are not a broker-dealer, that you are not engaged in and do not
intend to engage in the distribution of the exchange notes; and
- if you are a broker-dealer that will receive exchange notes for your own
account in exchange for outstanding notes that were acquired as a result
of market-making or other trading activities, that you will deliver a
prospectus, as required by law, in connection with any resale of those
exchange notes.
Broker-dealers that are receiving exchange notes for their own account must
have acquired the outstanding notes as a result of market-making or other
trading activities in order to participate in the exchange offer. Each
broker-dealer that receives exchange notes for its own account under the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. The letter of transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
admitting that it is an "underwriter" within the meaning of the Securities Act.
We will be required to allow broker-dealers to use this prospectus following the
exchange offer in connection with the resale of exchange notes received in
exchange for outstanding notes acquired by broker-dealers for their own account
as a result of market-making or other trading activities. If required by
applicable securities laws, we will, upon written request, make this prospectus
available to any broker-dealer for use in connection with a resale of exchange
notes for a period of 90 days after the consummation of the exchange offer. See
"Plan of Distribution."
The exchange notes will evidence the same debt as the outstanding notes and
will be issued under and entitled to the benefits of the same indenture. The
form and terms of the exchange notes are identical in all material respects to
the form and terms of the outstanding notes except that:
- the exchange notes will be issued in a transaction registered under the
Securities Act;
- the exchange notes will not be subject to transfer restrictions; and
- provisions providing for an increase in the stated interest rate on the
outstanding notes will be eliminated.
As of the date of this prospectus, $200,000,000 aggregate principal amount
of the outstanding notes was outstanding. In connection with the issuance of the
outstanding notes, we arranged for the outstanding notes to be issued and
transferable in book-entry form through the facilities of DTC, acting as
depositary. The exchange notes will also be issuable and transferable in
book-entry form through DTC.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business on
, 2001. We intend to conduct the exchange offer as required by the
Exchange Act, and the rules and regulations of the SEC under the Exchange Act,
including Rule 14e-1, to the extent applicable.
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Rule 14e-1 describes unlawful tender practices under the Exchange Act. This
section requires us, among other things:
- to hold our exchange offer open for twenty business days;
- to give ten days notice of any change in the terms of this offer; and
- to issue a press release in the event of an extension of the exchange
offer.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered, and holders of the outstanding 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. We shall be considered to have accepted outstanding notes
tendered according to the procedures in this prospectus when, as and if we have
given oral or written notice of acceptance 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 us and delivering
exchange notes to those holders.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender or the occurrence of other events described in this
prospectus, certificates for these unaccepted outstanding notes will be
returned, at our cost, to the tendering holder of the outstanding notes or, in
the case of outstanding notes tendered by book-entry transfer, into the holder's
account at DTC according to the procedures described below, as promptly as
practicable after the expiration date.
Holders who tender outstanding 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 related to the exchange of outstanding
notes in the exchange offer. We will pay all charges and expenses, other than
applicable taxes, in connection with the exchange offer. See "-- Solicitation of
Tenders; Fees and Expenses."
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO HOLDERS
OF OUTSTANDING NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR
ANY PORTION OF THEIR OUTSTANDING NOTES TO THE EXCHANGE OFFER. MOREOVER, NO ONE
HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OUTSTANDING
NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER IN THE EXCHANGE OFFER AND,
IF SO, THE AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING THIS PROSPECTUS
AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED
ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 2001, unless we, in our sole discretion, extend the exchange
offer, in which case the term "expiration date" shall mean the latest date to
which the exchange offer is extended.
We expressly reserve the right, in our sole discretion:
- to delay acceptance of any outstanding notes or to terminate the exchange
offer and to refuse to accept outstanding notes not previously accepted,
if any of the conditions described under "-- Conditions" shall have
occurred and shall not have been waived by us;
- to extend the expiration date of the exchange offer;
- to amend the terms of the exchange offer in any manner;
- to purchase or make offers for any outstanding notes that remain
outstanding subsequent to the expiration date;
- to the extent permitted by applicable law, to purchase outstanding notes
in the open market, in privately negotiated transactions or otherwise.
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The terms of the purchases or offers described in the fourth and fifth
clauses above may differ from the terms of the exchange offer.
Any delay in acceptance, termination, extension, or amendment will be
followed as promptly as practicable by oral or written notice to the exchange
agent and by making a public announcement. If the exchange offer is amended in a
manner determined by us to constitute a material change, we will promptly
disclose the amendment in a manner reasonably calculated to inform the holders
of the amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, termination, extension, or amendment
of the exchange offer, we shall have no obligation to publish, advise, or
otherwise communicate any public announcement, other than by making a timely
release to the Dow Jones News Service.
You are advised that we may extend the exchange offer because some of the
holders of the outstanding notes do not tender on a timely basis. In order to
give these noteholders the ability to participate in the exchange and to avoid
the significant reduction in liquidity associated with holding an unexchanged
note, we may elect to extend the exchange offer.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from December 4, 2000 or the most
recent date on which interest was paid or provided for on the outstanding notes
surrendered for the exchange notes. Accordingly, holders of outstanding notes
that are accepted for exchange will not receive interest that is accrued but
unpaid on the outstanding notes at the time of tender. Interest on the exchange
notes will be payable semi-annually on each June 1 and December 1, commencing on
June 1, 2001.
PROCEDURES FOR TENDERING
Only a holder may tender its outstanding notes in the exchange offer. Any
beneficial owner whose outstanding notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee or are held in
book-entry form and who wishes to tender should contact the registered holder
promptly and instruct the registered holder to tender on his behalf. If the
beneficial owner wishes to tender on his own behalf, the beneficial owner must,
before completing and executing the letter of transmittal and delivering his
outstanding notes, either make appropriate arrangements to register ownership of
the outstanding notes in the owner's name or obtain a properly completed bond
power from the registered holder. The transfer of record ownership may take
considerable time.
The tender by a holder will constitute an agreement between the holder, us
and the exchange agent according to the terms and subject to the conditions
described in this prospectus and in the letter of transmittal.
A holder who desires to tender outstanding notes and who cannot comply with
the procedures set forth herein for tender on a timely basis or whose
outstanding notes are not immediately available must comply with the procedures
for guaranteed delivery set forth below.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDERS. DELIVERY OF SUCH DOCUMENTS WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT OR DEEMED RECEIVED UNDER THE ATOP
PROCEDURES DESCRIBED BELOW. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO US. HOLDERS MAY ALSO REQUEST
THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES EFFECT THE TENDER FOR HOLDERS IN EACH CASE AS DESCRIBED IN THIS
PROSPECTUS AND IN THE LETTER OF TRANSMITTAL.
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Outstanding notes Held in Certificated Form
For a holder to validly tender outstanding notes held in physical form, the
exchange agent must receive, before 5:00 p.m. New York city time on the
expiration date, at its address set forth in this prospectus:
- a properly completed and validly executed letter of transmittal, or a
manually signed facsimile thereof, together with any signature guarantees
and any other documents required by the instructions to the letter of
transmittal, and
- certificates for tendered outstanding notes.
Outstanding notes Held in Book-Entry Form
We understand that the exchange agent will make a request promptly after
the date of the prospectus to establish accounts for the outstanding notes at
DTC for the purpose of facilitating the exchange offer, and subject to their
establishment, any financial institution that is a participant in DTC may make
book-entry delivery of outstanding notes by causing DTC to transfer the
outstanding notes into the exchange agent's account for the outstanding notes
using DTC's procedures for transfer.
If you desire to transfer outstanding notes held in book-entry form with
DTC, the exchange agent must receive, before 5:00 p.m. New York City time on the
expiration date, at its address set forth in this prospectus, a confirmation of
book-entry transfer of the outstanding notes into the exchange agent's account
at DTC, which is referred to in this prospectus as a "book-entry confirmation,"
and:
- a properly completed and validly executed letter of transmittal, or
manually signed facsimile thereof, together with any signature guarantees
and other documents required by the instructions in the letter of
transmittal; or
- an agent's message transmitted pursuant to DTC's Automated Tender Offer
Program.
Tender of Outstanding notes Using DTC's Automated Tender Offer Program (ATOP)
The exchange agent and DTC have confirmed that the exchange offer is
eligible for DTC's Automated Tender Offer Program. Accordingly, DTC participants
may electronically transmit their acceptance of the exchange offer by causing
DTC to transfer outstanding notes held in book-entry form to the exchange agent
in accordance with DTC's ATOP procedures for transfer. DTC will then send a
book-entry confirmation, including an agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, which states
that DTC has received an express acknowledgment from the participant in DTC
tendering outstanding notes that are the subject of that book-entry confirmation
that the participant has received and agrees to be bound by the terms of the
letter of transmittal, and that we may enforce such agreement against such
participant. If you use ATOP procedures to tender outstanding notes you will not
be required to deliver a letter of transmittal to the exchange agent, but you
will be bound by its terms just as if you had signed it.
SIGNATURES
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, unless the outstanding notes tendered with the
letter of transmittal are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" in the
letter of transmittal; or
- for the account of an institution eligible to guarantee signatures.
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If the letter of transmittal is signed by a person other than the
registered holder or DTC participant who is listed as the owner, the outstanding
notes must be endorsed or accompanied by appropriate bond powers which authorize
the person to tender the outstanding notes on behalf of the registered holder or
DTC participant who is listed as the owner, in either case signed as the name of
the registered holder(s) who appears on the outstanding notes or the DTC
participant who is listed as the owner. If the letter of transmittal or any
outstanding 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, those persons should so
indicate when signing, and unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with the letter of transmittal.
If you tender your notes through ATOP, signatures and signature guarantees
are not required.
DETERMINATIONS OF VALIDITY
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of the tendered outstanding notes will be
determined by us in our sole discretion. This determination will be final and
binding. We reserve the absolute right to reject any and all outstanding notes
not properly tendered or any outstanding notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any irregularities or conditions of tender as to particular outstanding
notes. Our 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 outstanding notes must be cured within the time we
shall determine. Although we intend to notify holders of defects or
irregularities related to tenders of outstanding notes, neither we, the exchange
agent nor any other person shall be under any duty to give notification of
defects or irregularities related to tenders of outstanding notes nor shall any
of them incur liability for failure to give notification. Tenders of outstanding
notes will not be considered to have been made until the irregularities have
been cured or waived. Any outstanding notes received by the exchange agent that
we determine are not properly tendered or the tender of which is otherwise
rejected by us and as to which the defects or irregularities have not been cured
or waived by us 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.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and:
- whose outstanding notes are not immediately available;
- who cannot complete the procedure for book-entry transfer on a timely
basis;
- who cannot deliver their outstanding notes, the letter of transmittal or
any other required documents to the exchange agent before the expiration
date; or
- who cannot complete a tender of outstanding notes held in book-entry form
using DTC's ATOP procedures on a timely basis;
may effect a tender if they tender through an eligible institution described
under "-- Procedures for Tendering -- Signatures," or, if they tender using
ATOP's guaranteed delivery procedures.
A tender of outstanding notes made by or through an eligible institution
will be accepted if:
- before 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives from an eligible institution a properly completed
and duly executed notice of guaranteed delivery, by facsimile
transmittal, mail or hand delivery, that: (1) sets forth the name and
address of the holder, the certificate number or numbers of the holder's
outstanding notes and the principal amount of the outstanding notes
tendered, (2) states that the tender is being made, and (3) guarantees
that, within five business days after the expiration date, a properly
completed and validly executed letter
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of transmittal or facsimile, together with a certificate(s) representing
the outstanding notes to be tendered in proper form for transfer, or a
confirmation of book-entry transfer into the exchange agent's account at
DTC of outstanding notes delivered electronically, and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent; and
- the properly completed and executed letter of transmittal or a facsimile,
together with the certificate(s) representing all tendered outstanding
notes in proper form for transfer, or a book-entry confirmation, and all
other documents required by the letter of transmittal are received by the
exchange agent within five business days after the expiration date.
A tender made through DTC's Automated Tender Offer Program will be accepted
if:
- before 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives an agent's message from DTC stating that DTC has
received an express acknowledgment from the participant in DTC tendering
the outstanding notes that they have received and agree to be bound by
the notice of guaranteed delivery; and
- the exchange agent receives, within five business days after the
expiration date, either: (1) a book-entry conformation, including an
agent's message, transmitted via DTC's ATOP procedures; or (2) a properly
completed and executed letter of transmittal or a facsimile, together
with the certificate(s) representing all tendered outstanding notes in
proper form for transfer, or a book-entry confirmation, and all other
documents required by the letter of transmittal.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time before 5:00 p.m., New York City time, on the
expiration date. To withdraw a tender of outstanding notes in the exchange
offer:
- a written or facsimile transmission of a notice of withdrawal must be
received by the exchange agent at its address listed below before 5:00
p.m., New York City time, on the expiration date; or
- you must comply with the appropriate procedures of DTC's Automated Tender
Offer Program.
Any notice of withdrawal must:
- specify the name of the person having deposited the outstanding notes to
be withdrawn;
- identify the outstanding notes to be withdrawn, including the certificate
number or numbers and principal amount of the outstanding notes or, in
the case of outstanding notes transferred by book-entry transfer, the
name and number of the account at the depositary to be credited;
- be signed by the same person and in the same manner as the original
signature on the letter of transmittal by which the outstanding notes
were tendered, including any required signature guarantee, or be
accompanied by documents of transfer sufficient to permit the trustee for
the outstanding notes to register the transfer of the outstanding notes
into the name of the person withdrawing the tender; and
- specify the name in which any of these outstanding notes are to be
registered, if different from that of the person who deposited the
outstanding notes to be withdrawn.
All questions as to the validity, form and eligibility, including time of
receipt, of the withdrawal notices will be determined by us, whose determination
shall be final and binding on all parties. Any outstanding notes so withdrawn
will be judged not to have been tendered according to the procedures in
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this prospectus for purposes of the exchange offer, and no exchange notes will
be issued in exchange for those outstanding notes unless the outstanding notes
so withdrawn are validly retendered. Any outstanding notes that have been
tendered but are not accepted for exchange will be returned to the holder of the
outstanding notes without cost to the holder or, in the case of outstanding
notes tendered by book-entry transfer into the holder's account at DTC according
to the procedures described above. This return or crediting will take place as
soon as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn outstanding notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time before the Expiration Date.
CONDITIONS
The exchange offer is subject only to the following conditions:
- the compliance of the exchange offer with securities laws;
- the tender of the outstanding notes;
- the representation by the holders of the outstanding notes that they are
not our affiliate, that the exchange notes they will receive are being
acquired by them in the ordinary course of their business and that at the
time the exchange offer is completed the holder had no plan to
participate in the distribution of the exchange notes; and
- no judicial or administrative proceeding is pending or shall have been
threatened that would limit us from proceeding with the exchange offer.
EXCHANGE AGENT
United States Trust Company of New York, the trustee under the indenture,
has been appointed as exchange agent for the exchange offer. In this capacity,
the exchange agent has no fiduciary duties and will be acting solely on the
basis of our directions. Requests for assistance and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent. You should send certificates for outstanding notes, letters
of transmittal and any other required documents to the exchange agent addressed
as follows:
By Registered or
By Hand Delivery: By Overnight Courier: Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
111 Broadway 770 Broadway Box 843
Lower Level 13th Floor Peter Cooper Station
New York, NY 10005 New York, NY 10003 New York, NY 10276
Attn: Corporate Trust Attn: Corporate Trust Service Attn: Corporate Trust
Window
By Facsimile Transmission
(For Eligible Institutions Only):
United States Trust Company of New York
(212) 420-6152
Confirm: (800) 548-6565
For Information:
(800) 548-6565
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS LISTED
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS DESCRIBED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
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SOLICITATION OF TENDERS; FEES AND EXPENSES
We will bear the expenses of requesting that holders of outstanding notes
tender those notes for exchange notes. The principal solicitation under the
exchange offer is being made by mail. Additional solicitations may be made by
our officers and regular employees and our affiliates in person, by telegraph,
telephone or telecopier.
We have 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. We, 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
with the exchange offer and will indemnify the exchange agent for all losses and
claims incurred by it as a result of the exchange offer. We 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
outstanding notes and in handling or forwarding tenders for exchange.
We will pay 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.
You will not be obligated to pay any transfer tax in connection with the
exchange, except if you instruct us to register exchange notes in the name of,
or request that notes not tendered or not accepted in the exchange offer be
returned to, a person other than you, you will be responsible for the payment of
any applicable transfer tax.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
outstanding notes, as reflected in our accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by us upon the closing of the exchange offer. We will amortize the
expenses of the exchange offer over the term of the exchange notes.
PARTICIPATION IN THE EXCHANGE OFFER; UNTENDERED NOTES
Participation in the exchange offer is voluntary. Holders of the
outstanding 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
outstanding notes tendered under the terms of, this exchange offer, we will have
fulfilled a covenant contained in the terms of the registration agreement.
Holders of the outstanding notes who do not tender in the exchange offer will
continue to hold their outstanding notes and will be entitled to all the rights,
and subject to the limitations, applicable to the outstanding notes under the
indenture. Holders of outstanding notes will no longer be entitled to any rights
under the registration agreement that by their term terminate or cease to have
further effect as a result of the making of this exchange offer. See
"Description of the Exchange Notes." All untendered outstanding notes will
continue to be subject to the restrictions on transfer described in the
indenture. To the extent that outstanding notes are tendered and accepted in the
exchange offer, the trading market for untendered outstanding notes could be
adversely affected. This is because there will probably be many fewer remaining
outstanding notes outstanding following the exchange, significantly reducing the
liquidity of the untendered notes.
We may in the future seek to acquire untendered outstanding notes in the
open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. We intend to make any acquisitions of outstanding
notes following the applicable requirements of the Exchange Act, and the rules
and regulations of the SEC under the Exchange Act, including Rule 14e-1, to the
extent applicable. We have no present plan to acquire any outstanding notes that
are not tendered in the exchange offer or to file a registration statement to
permit resales of any outstanding notes that are not tendered in the exchange
offer.
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USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. We used the
proceeds from the issuance of the outstanding notes
- to repay the Weatherford note and
- to repay outstanding indebtedness under our revolving credit agreement,
some of which was incurred to finance recent acquisitions.
SOURCES AND USES FOR THE OFFERING OF THE OUTSTANDING NOTES
(in millions)
SOURCE OF FUNDS AMOUNT
- --------------- ------
Proceeds of the offering............ $198.8
------
Total............................... $198.8
======
USES OF FUNDS AMOUNT
- ------------- ------
Weatherford note.................... $100.0
Credit facility..................... 80.3
Fees and expenses................... 5.7
General corporate purposes.......... 12.8
------
Total............................... $198.8
======
Our $100.0 million note to Weatherford was unsecured, subordinated debt
bearing interest at 10% per annum and maturing March 31, 2002. We executed that
note in contemplation of our spinoff to represent a portion of historical
intercompany indebtedness we owed to Weatherford. At that time, we owed
Weatherford approximately $494.7 million, which we incurred for various purposes
including (a) the funding of approximately $275.0 million for our acquisitions
with cash and stock provided by Weatherford, (b) $129.6 million for purchases of
capital equipment for manufacturing and (c) $90.1 million for funding of working
capital and third party debt requirements. After we issued the note, but before
the spinoff, Weatherford contributed to us substantially all remaining
intercompany indebtedness that we owed to Weatherford. The note to Weatherford
required that we use a portion of the net proceeds from any debt or equity
financing to repay that note, together with any accrued and unpaid interest, in
full.
At December 4, 2000, we had outstanding borrowings of $80.3 million under
our revolving credit facility, with an average interest rate of 9.1%. We
incurred this debt primarily in connection with increasing our working capital
and manufacturing capacity over the past six months and also to fund
acquisitions. During October 2000, we purchased a tubular accessories producer
for approximately $2.5 million in cash and $1.9 million in deferred and
contingent payments and the assets of a manufacturer of drilling tools for the
water well, construction and utility boring industries, for approximately $12.3
million in cash, all of which we funded under our credit facility. During
November 2000, we also funded under our credit facility a $30.6 million
investment in a European metalworking operation.
Although we repaid our credit facility in connection with the issuance of
the outstanding notes, that facility did not terminate. At December 31, 2000,
amounts outstanding under the credit facility totaled $32.2 million. We may use
future borrowings under our credit facility to make additional acquisitions in
the drill stem and engineered connections and premium tubing industries or
related businesses. Companies that we acquire outside the U.S. will not
guarantee the notes.
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DESCRIPTION OF EXCHANGE NOTES
We issued the outstanding notes and will issue the exchange notes under an
indenture (the "indenture") by and among us, the Subsidiary Guarantors and
United States Trust Company of New York, as trustee. The terms of the notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act").
The following description is a summary of those provisions of the indenture
that we consider material. It does not restate that agreement in its entirety.
The indenture has been filed as an exhibit to the registration statement of
which this prospectus forms a part. We urge you to read the indenture because
it, and not this description, define your rights as holders of the notes. Copies
of the indenture are available as set forth below under "Where You Can Find More
Information." You can find the definitions of capitalized terms used in this
description under the subheading "Certain Definitions." In this description,
"the issuer," "we," "us" and "our" refer only to Grant Prideco, Inc. and not to
any of its subsidiaries.
BRIEF DESCRIPTION OF THE SECURITIES
The exchange notes will have identical terms as the outstanding notes,
except that they will not be subject to the same restrictions on transfer as the
outstanding notes. Any outstanding notes remaining after the exchange offer will
be treated as a single issuance of notes with the exchange notes for all
practical purposes.
The outstanding notes are and the exchange notes will be:
- our senior unsecured obligations;
- senior in right of payment to any of our future subordinated
Indebtedness;
- pari passu in right of payment to our existing and future unsecured
Indebtedness that is not by its terms expressly subordinated to the
notes;
- effectively junior in right of payment to our existing and future secured
Indebtedness to the extent of the value of the collateral securing that
Indebtedness; and
- guaranteed by all of our existing and future domestic restricted
subsidiaries.
Each guarantee of the notes is:
- a senior unsecured obligation of the Guarantor;
- senior in right of payment to any future subordinated Indebtedness of
that Guarantor;
- pari passu in right of payment to any future Indebtedness of that
Guarantor that is not by its terms expressly subordinated to the
guarantee of the notes; and
- effectively junior in right of payment to the existing and future secured
Indebtedness of that Guarantor to the extent of the value of the
collateral securing that Indebtedness.
All of our existing subsidiaries are "Restricted Subsidiaries" and bound by
the covenants contained in the indenture. However, under the circumstances
described below under the subheading "-- Certain Covenants -- Designation of
Restricted and Unrestricted Subsidiaries," we are permitted to designate our
Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will
not be subject to the restrictive covenants in the indenture, and will not
guarantee the notes. Moreover, only our U.S. Restricted Subsidiaries guarantee
the notes. See "Subsidiary Guarantees."
PRINCIPAL, MATURITY AND INTEREST
The outstanding notes and exchange notes combined have a maximum aggregate
principal amount of $200.0 million. The notes will mature on December 1, 2007.
We will issue the exchange notes in denominations of $1,000 and integral
multiples of $1,000.
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Interest on the notes will accrue at the rate of 9 5/8% per annum and will
be payable semi-annually in arrears on each June 1 and December 1, commencing on
June 1, 2001, to holders of record on the immediately preceding May 15 and
November 15. The registered holder of a note will be treated as the owner of the
note for all purposes. Only registered holders will have rights under the
indenture.
Interest on the notes will accrue from December 4, 2000 or, if interest has
been paid, from the date it was most recently paid. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. Accrued interest
on outstanding notes exchanged for exchange notes pursuant to the exchange offer
will be applied to the exchange notes, and will not be paid at the time of
exchange.
On one or more occasions, we may issue under the indenture up to $200.0
million aggregate principal amount of additional notes having substantially
identical terms to the outstanding notes and exchange notes. Any issuance of
additional notes will be subject to the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant described below. The notes and any additional notes
would be treated as a single class for all purposes under the indenture,
including, without limitation, waivers, amendments, redemptions and offers to
purchase. Unless the context requires otherwise, for purposes of the indenture
and this Description of Exchange Notes, references to the notes include any
additional notes actually issued.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to us, we will pay all
principal, interest and premium, if any, on that holder's notes in accordance
with those instructions. All other payments on notes will be made at the office
or agency of the paying agent and registrar within the City and State of New
York unless we elect to make interest payments by check mailed to the holders at
their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders of the notes,
and we or any of our Subsidiaries may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. We are not required
to transfer or exchange any note selected for redemption. Also, we are not
required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed.
SUBSIDIARY GUARANTEES
Each of our existing and future Domestic Subsidiaries, except future
Domestic Subsidiaries that we designate as Unrestricted Subsidiaries at the time
we create them, will jointly and severally guarantee, on a senior unsecured
basis, our obligations under the notes. The obligations of each Guarantor under
its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary
Guarantee from constituting a fraudulent conveyance under applicable law. See
"Risk Factors -- Risks Relating to the Notes -- The subsidiary guarantees could
be deemed fraudulent conveyances under certain circumstances, and a court may
try to subordinate or avoid the subsidiary guarantees."
In the event of a bankruptcy, liquidation or reorganization of any of our
Subsidiaries that are not Guarantors, the non-guarantor Subsidiaries will pay
the holders of their Indebtedness, their trade creditors and their preferred
stockholders, if any, before they will be able to distribute any of their assets
to us. In the event of a bankruptcy, liquidation or reorganization of any of our
Guarantor Subsidiaries, our Guarantor Subsidiaries will pay the holders of their
secured Indebtedness, if any, to the extent of the value
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of the assets securing that Indebtedness before they will be able to distribute
any of their assets to us. The Guarantor Subsidiaries generated 90% of our
consolidated revenues for the year ended December 31, 2000 and held 71% of our
consolidated total assets as of December 31, 2000. See Note 22 to our Financial
Statements incorporated by reference from our Annual Report on Form 10-K for
more detail about the division of our revenues and assets between our Guarantor
and non-guarantor Subsidiaries.
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving person), another person, other than us or another
Guarantor, unless:
1. immediately after giving effect to that transaction, no Default or
Event of Default exists; and
2. either:
(a) the person acquiring the property in any such sale or
disposition or the person formed by or surviving any such consolidation
or merger assumes all the obligations of that Guarantor under the
indenture and its Subsidiary Guarantee pursuant to a supplemental
indenture satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the indenture.
The Subsidiary Guarantee of a Guarantor will be released:
1. upon the sale or other disposition of all or substantially all of
the assets of that Guarantor (including by way of merger or consolidation)
to a person that is not (either before or after giving effect to such
transaction) our Subsidiary, if the sale or other disposition complies with
the "Asset Sales" provisions of the indenture;
2. upon the sale or disposition of all of the Capital Stock of a
Guarantor to a person that is not (either before or after giving effect to
such transaction) our Subsidiary, if the sale complies with the "Asset
Sales" provisions of the indenture; or
3. if we designate any Restricted Subsidiary that is a Guarantor as an
Unrestricted Subsidiary in accordance with the applicable provisions of the
indenture.
See "-- Mandatory Redemption; Offers to Purchase; Open Market Purchases -- Asset
Sales" and "Designation of Restricted and Unrestricted Subsidiaries."
OPTIONAL REDEMPTION
We may redeem notes on any one or more occasions prior to their maturity at
a redemption price equal to the sum of 100% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, plus a make-whole
premium, if any, described below. In no event will a redemption price be less
than 100% of the principal amount of the notes plus accrued and unpaid interest,
if any, to the date of redemption.
The amount of the make-whole premium with respect to any note, or portion
thereof, to be redeemed will be equal to the excess, if any, of:
1. the sum of the present values, calculated as of the date of
redemption, of:
a. each interest payment that, but for such redemption, would have
been payable on the note (or portion thereof) being redeemed on each
payment date occurring after the redemption date; and
b. the principal amount that, but for such redemption, would have
been payable at the final maturity of the note (or portion thereof)
being redeemed; over
2. the principal amount of the note (or portion thereof) being
redeemed.
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The present values of the interest and principal payments referred to in
clause (1) above will be determined in accordance with generally accepted
principles of financial analysis. These present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
date of redemption at a discount rate equal to the treasury yield described
below plus 50 basis points.
The make-whole premium will be calculated by an independent investment
banking institution of national standing appointed by us; provided, however,
that if we fail to make the appointment at least 30 days prior to the date of
redemption, or if the institution so appointed is unwilling or unable to make
the calculation, the calculation will be made by an independent investment
banking institution of national standing appointed by the trustee.
For purposes of determining the make-whole premium, the treasury yield
shall be a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity that
corresponds to the remaining term to maturity of the notes, calculated to the
nearest 1/12th of a year. The treasury yield will be determined as of the third
business day immediately preceding the applicable date of redemption.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15 (519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the remaining term of the
notes, then the treasury yield will be equal to such weekly average yield. In
all other cases, the treasury yield will be calculated by interpolation, on a
straightline basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
remaining term of the notes and the United States Treasury notes that have a
constant maturity closest to and less than the remaining term of the notes (in
each case as set forth in the H.15 Statistical Release). Any weekly average
yields so calculated by interpolation will be rounded to the nearest 1/100th of
1%, with any figure of 1/200th of 1% or above being rounded upward. If weekly
average yields for United States Treasury Notes are not available in the H.15
Statistical Release or otherwise, then the treasury yield will be calculated by
interpolation of comparable rates selected by the independent investment banking
institution.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
1. if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
2. if the notes are not listed on any national securities exchange, on
a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the holder of notes
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption unless we
default in our obligation to redeem the notes.
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SUSPENDED COVENANTS
During any period of time that the notes have an Investment Grade Rating
from either of the Rating Agencies and no Default has occurred and is continuing
under the indenture, we and our Restricted Subsidiaries will not be subject to
the provisions of the indenture described below under the following headings
under "-- Certain Covenants:
- "-- Mandatory Redemption; Offers to Purchase; Open Market
Purchases -- Asset Sales,"
- "-- Restricted Payments,"
- "-- Incurrence of Indebtedness and Issuance of Preferred Stock,"
- "-- Sale and Leaseback Transactions" (except as set forth in that
covenant),
- "-- Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries,"
- "-- Merger, Consolidation or Sale of Assets" (except as set forth in that
covenant),
- "-- Transactions with Affiliates" and
- "-- Business Activities"
(collectively, the "Suspended Covenants"); provided, however, that the
provisions of the indenture described below under the following headings under
"-- Certain Covenants":
- "-- Mandatory Redemption; Offers to Purchase; Open Market Purchases --
Change of Control,"
- "-- Additional Subsidiary Guarantees,"
- "-- Liens,"
- "-- Designation of Restricted and Unrestricted Subsidiaries,"
- "-- Payments for Consent" and
- "-- Reports" and
will not be so suspended; and provided further, that if we and our Restricted
Subsidiaries are not subject to the Suspended Covenants for any period of time
as a result of the preceding sentence and, subsequently, either of the Rating
Agencies withdraws its ratings or downgrades the ratings assigned to the notes
below the Investment Grade Ratings so that the notes do not have an Investment
Grade Rating from either Rating Agency, or a Default (other than with respect to
the Suspended Covenants) occurs and is continuing, we and our Restricted
Subsidiaries will thereafter again be subject to the Suspended Covenants,
subject to the terms, conditions and obligations set forth in the indenture
(each such date of reinstatement being the "Reinstatement Date"), including the
preceding sentence. Compliance with the Suspended Covenants with respect to
Restricted Payments made after the Reinstatement Date will be calculated in
accordance with the terms of the covenant described under "-- Limitation on
Restricted Payments" as though such covenant had been in effect during the
entire period of time from which the notes are issued. As a result, during any
period in which we and our Restricted Subsidiaries are not subject to the
Suspended Covenants, the notes will be entitled to substantially reduced
covenant protection.
MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES
We are not required to make any mandatory redemption or sinking fund
payments with respect to the notes. However, under certain circumstances, we may
be required to offer to purchase the notes as described in the sections entitled
"-- Mandatory Redemption; Offers to Purchase; Open Market Purchases -- Change of
Control" and "-- Asset Sales." We may at any time and from time to time purchase
notes in the open market or otherwise.
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CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event, each holder of
notes will have the right to require us to repurchase all or any part, equal to
$1,000 or an integral multiple of $1,000, of that holder's notes pursuant to the
offer described below (a "Change of Control Offer") at a price in cash
(the"Change of Control Payment") equal to 101% of the aggregate principal amount
of notes repurchased plus accrued and unpaid interest on the notes repurchased,
to the date of purchase. Within 15 business days following any Change of Control
Triggering Event, we will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control Triggering
Event and offering to repurchase notes on the date specified in the notice,
which date will be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (a "Change of Control Payment Date"), pursuant to the
procedures required by the indenture and described in such notice.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with the repurchase of the
notes as a result of a Change of Control Triggering Event. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the indenture, we will comply with the applicable
securities laws and regulations and will not be deemed to have breached our
obligations under the Change of Control provisions of the indenture by virtue of
such conflict.
On the Change of Control Payment Date, we will, to the extent lawful:
1. accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;
2. deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes properly
tendered; and
3. deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased.
The paying agent will promptly deliver to each holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and deliver (or cause to be transferred by book entry) to
each holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
The Change of Control provisions described above that require us to make a
Change of Control Offer will be applicable whether or not any other provisions
of the indenture are applicable. Except as described above with respect to a
Change of Control Triggering Event, the indenture does not contain provisions
that permit the holders of the notes to require that we repurchase or redeem the
notes in the event of a takeover, recapitalization or similar transaction.
The Revolving Credit Facility provides that certain events that would
constitute a Change of Control Triggering Event with respect to us would
constitute a default under the credit facility. Any future Credit Facilities or
other agreements relating to Indebtedness to which we become a party may contain
similar restrictions. If a Change of Control Triggering Event occurs, and our
lenders under our secured debt are entitled to demand the repayment of that
debt, we may be unable to repay that debt and repurchase notes from holders
entitled to require us to do so. However, our failure to comply with the
foregoing requirement, after appropriate notice and lapse of time, would
constitute an Event of Default under each of the indenture and the Revolving
Credit Facility. See "Risk Factors -- Risks Relating to the Notes -- We may not
be able to repurchase the notes upon a change of control."
We will not be required to make a Change of Control Offer upon a Change of
Control Triggering Event if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in
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compliance with the requirements set forth in the indenture applicable to a
Change of Control Offer made by us and purchases all notes properly tendered and
not withdrawn under the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of us and our
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of notes to require us to repurchase its notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of us and our Subsidiaries taken as a whole to another person or group may be
uncertain.
ASSET SALES
We will not, and will not permit any of our Restricted Subsidiaries to,
consummate an Asset Sale unless:
1. we, or the Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
2. in the case of Asset Sales for consideration exceeding $5.0
million, the fair market value is determined by our Board of Directors and
evidenced by a resolution of our Board of Directors set forth in an
officer's certificate delivered to the trustee; and
3. at least 75% of the consideration received in the Asset Sale by us
or such Subsidiary is in the form of cash. For purposes of this provision,
each of the following will be deemed to be cash:
(a) any of our or a Guarantor's secured Indebtedness and any
Indebtedness of a Restricted Subsidiary that is not a Guarantor that are
assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases us or such Restricted Subsidiary from
further liability; and
(b) any securities, notes or other obligations received by us or
any such Restricted Subsidiary from such transferee that we or our
Restricted Subsidiaries contemporaneously, subject to ordinary
settlement periods, convert into cash, to the extent of the cash
received, in that conversion.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
we may apply those Net Proceeds at our option:
1. to permanently repay any of our or a Guarantor's secured
Indebtedness, or any Indebtedness of a Restricted Subsidiary that is not a
Guarantor and, if any Indebtedness repaid under this clause (1) is
revolving credit Indebtedness, to correspondingly reduce commitments with
respect thereto; provided, however, that for purposes of this clause (1)
only, Indebtedness includes accrued but unpaid interest thereon;
2. to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, another Permitted Business;
3. to make a capital expenditure; or
4. to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any Net Proceeds, we may temporarily reduce
revolving credit borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, we will make a pro
rata offer to purchase (an "Asset Sale Offer") to all holders of notes and
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all holders of other Indebtedness that is pari passu with the notes containing
provisions similar to those set forth in the indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of notes and such other pari passu Indebtedness that may be
purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of principal amount plus accrued and unpaid interest to
the date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, we may use those Excess Proceeds for
any purpose not otherwise prohibited by the indenture. If the aggregate
principal amount of notes and other pari passu Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee will select
the notes and such other pari passu Indebtedness to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
will be deemed to have been reset at zero.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with repurchases of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sale provisions of the
indenture, we will comply with the applicable securities laws and regulations
and will not be deemed to have breached our obligations under the Asset Sale
provisions of the indenture by virtue of that conflict.
The Revolving Credit Facility currently prohibits us from purchasing any
notes. Any future Credit Facilities or other agreements relating to Indebtedness
to which we become a party may contain similar restrictions and provisions.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly:
1. declare or pay any dividend or make any other payment or
distribution on account of our or any of our Restricted Subsidiaries'
Equity Interests, including, without limitation, any payment in connection
with any merger or consolidation involving us or any of our Restricted
Subsidiaries, or to the direct or indirect holders of our or any of our
Restricted Subsidiaries' Equity Interests in their capacity as such, except
for dividends or distributions that are payable in our Equity Interests
(other than Disqualified Stock) or payable to us or any of our Restricted
Subsidiaries;
2. purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving us, any of our Equity Interests;
3. make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
4. make any Restricted Investment;
all such payments and other actions set forth in these clauses (1) through (4)
above being collectively referred to as "Restricted Payments," unless, at the
time of and after giving effect to such Restricted Payment:
1. no Default or Event of Default has occurred and is continuing or
would occur as a consequence of such Restricted Payment; and
2. we would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
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3. the aggregate amount of that Restricted Payment and all other
Restricted Payments made by us and our Restricted Subsidiaries after the
date we first issue the notes, excluding Restricted Payments permitted by
clauses (2), (3), (4), (6) and (7) of the next succeeding paragraph, is
less than or equal to the sum, without duplication, of:
(a) 50% of our Consolidated Net Income for the period (taken as one
accounting period) from the beginning of our fiscal quarter commenced
immediately prior to the date we first issue the notes to the end of our
most recently ended fiscal quarter for which we have filed financial
statements with the Commission (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by us since
the date we first issue the notes as a contribution to our common equity
capital or from the issue or sale (other than to a Subsidiary) of our or
any of our Restricted Subsidiaries' Equity Interests (other than
Disqualified Stock) or from the issue or sale (other than to a
Subsidiary) of our convertible or exchangeable Disqualified Stock or our
convertible or exchangeable debt securities that have been converted
into or exchanged for Equity Interests (other than Disqualified Stock),
plus
(c) to the extent that any Restricted Investment that we or any of
our Restricted Subsidiaries makes after the date we first issue the
notes is sold for cash or otherwise liquidated or repaid for cash, an
amount equal to the lesser of (i) the cash return of capital with
respect to any such Restricted Investment (less the cost of disposition,
if any) and (ii) the initial amount of such Restricted Investment, plus
(d) if we redesignate any Unrestricted Subsidiary as a Restricted
Subsidiary after the date we first issue the notes, an amount equal to
the lesser of (i) the net book value of our Investment in the
Unrestricted Subsidiary at the time the Unrestricted Subsidiary was
designated as such and (ii) the fair market value of our Investment in
the Unrestricted Subsidiary at the time of the redesignation.
The preceding provisions will not prohibit:
1. the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the dividend
payment would have complied with the provisions of the indenture;
2. the redemption, repurchase, retirement, defeasance or other
acquisition of any of (a) our Indebtedness or any Indebtedness of any
Guarantor that is subordinated to the notes or the guarantees, or (b) our
Equity Interests or any Equity Interests of any of our Restricted
Subsidiaries, in either case in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to one of our
Subsidiaries) of, our Equity Interests (other than Disqualified Stock);
provided, however, that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;
3. the defeasance, redemption, repurchase or other acquisition of our
Indebtedness or Indebtedness of any Guarantor that is subordinated to the
notes or the guarantees with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
4. the payment of any dividend by one of our Restricted Subsidiaries
to the holders of that Restricted Subsidiary's common Equity Interests on a
pro rata basis, so long as we or one of our Restricted Subsidiaries
receives at least a pro rata share (and in like form) of the dividend or
distribution in accordance with its common Equity Interests;
5. the repurchase, redemption or other acquisition or retirement for
value of any of our or any of our Restricted Subsidiaries' Equity Interests
held by any member of our or any of our Restricted Subsidiaries' management
pursuant to any management equity subscription agreement, stock option
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agreement or similar agreement, provided, however, that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests may not exceed $1.0 million in any twelve-month period;
6. in connection with an acquisition by us or any of our Restricted
Subsidiaries, the return to us or any of our Restricted Subsidiaries of
Equity Interests of us or our Restricted Subsidiary constituting a portion
of the purchase consideration in settlement of indemnification claims;
7. the purchase by us of fractional shares arising out of stock
dividends, splits or combinations or business combinations;
8. the acquisition in open-market purchases of our common Equity
Interests for matching contributions to our employee stock purchase and
deferred compensation plans in the ordinary course of business and
consistent with past practices; or
9. other Restricted Payments in an aggregate amount since the date we
first issue the notes not to exceed $10.0 million.
provided that, with respect to clauses (2), (3), (5), (8) and (9) above, no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by us or such Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
assets or securities that are required to be valued by this covenant will be
determined by our Board of Directors whose resolution with respect thereto will
be delivered to the trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $10.0
million. Not later than the date of making any Restricted Payment, we will
deliver to the trustee an officers' certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this "Restricted Payments" covenant were computed, together with a
copy of any fairness opinion or appraisal required by the indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and we will
not issue any Disqualified Stock and will not permit any of our Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that (a)
we and any Guarantor may incur Indebtedness (including Acquired Debt) and (b) we
may issue Disqualified Stock, if, in each case, our Fixed Charge Coverage Ratio
for our most recently ended four full fiscal quarters for which we have filed
financial statements with the Commission preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.25 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
1. the incurrence by us or any Guarantor of additional Indebtedness
and letters of credit under one or more Credit Facilities and guarantees
thereof by the Guarantors; provided, however, that the aggregate principal
amount of all Indebtedness incurred by us and the Guarantors pursuant to
this clause (1) (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of us and our Restricted
Subsidiaries thereunder) outstanding at any one time does not exceed $125.0
million;
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2. the incurrence by us and our Restricted Subsidiaries of the
Existing Indebtedness;
3. the incurrence by us of Indebtedness represented by the notes
issued and sold in this offering and the incurrence by the Guarantors of
the Subsidiary Guarantees of those notes;
4. the incurrence by us of, or by any of our Restricted Subsidiaries
that is a Guarantor, of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each
case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in our business or the business of that Restricted
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at
any time outstanding;
5. the incurrence by us or any of our Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was incurred under the first paragraph of
this covenant or clauses (2), (3) or (4) of this paragraph; provided,
however, that none of our Restricted Subsidiaries that is not a Guarantor
may refund, refinance or replace Indebtedness previously incurred by us or
by any of our Restricted Subsidiaries that is a Guarantor;
6. the incurrence by us or any of our Restricted Subsidiaries of
intercompany Indebtedness between or among us and any of our Restricted
Subsidiaries; provided, however, that:
(a) if we or a Guarantor is the obligor on such intercompany
Indebtedness, such intercompany Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to, in our case, the notes, and, in the case of a
Guarantor, the guarantees; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a person other than
us or one of our Restricted Subsidiaries that is a Guarantor and (ii)
any sale or other transfer of any such Indebtedness to a person that is
not either us or one of our Restricted Subsidiaries that is a Guarantor
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by us or such Restricted Subsidiary, as the case may be,
that was not permitted by this clause (6);
7. the incurrence by us or any of our Restricted Subsidiaries of
Hedging Obligations;
8. the guarantee by us or any of the Guarantors of Indebtedness of us
or of any of the Guarantors that was permitted to be incurred by another
provision of this "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant; and
9. the incurrence by us or any of our Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (9), not to exceed $35.0
million.
The maximum amount of Indebtedness that we or one of our Restricted
Subsidiaries may incur pursuant to this "-- Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness, due solely to fluctuations in the
exchange rates of currencies.
For purposes of determining compliance with this covenant, in the event
that an item of proposed Indebtedness, including Acquired Debt, meets the
criteria of more than one of the categories of Permitted Debt described in
clauses (1) through (9) above as of the date of incurrence thereof, or is
entitled to be incurred pursuant to the first paragraph of this covenant as of
the date of incurrence thereof or pursuant to any combination of the foregoing
as of the date of incurrence thereof, we shall, in our sole discretion, classify
(or later classify or reclassify) in whole or in part, in our sole discretion,
such item of Indebtedness in any manner that complies with this covenant.
Accrual of interest or dividends, the accretion of accreted value or liquidation
preference and the payment of interest or dividends in the form of additional
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Indebtedness or Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant.
LIENS
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, or assume any Lien of any kind securing
Indebtedness, Attributable Debt or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens, unless all payments due under the
indenture and the notes, or the Subsidiary Guarantees, as applicable, are
secured on an equal and ratable basis (or prior to any subordinated
Indebtedness) with the obligations so secured until such time as such
obligations are no longer secured by a Lien. Under the Revolving Credit
Facility, we are not permitted to grant Liens to secure the notes.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
1. pay dividends or make any other distributions on its Capital Stock
to us or any of our Restricted Subsidiaries, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to us or any of our Restricted Subsidiaries;
2. make loans or advances to us or any of our Restricted Subsidiaries;
or
3. transfer any of its properties or assets to us or any of our
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
1. agreements governing Existing Indebtedness, or any Credit
Facilities, as in effect on the date we first issue the notes and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of those agreements, provided that
the amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings of any of the
foregoing are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in those
agreements on the date of the indenture;
2. the indenture, the notes and the Subsidiary Guarantees, or any
other indenture governing debt securities that are no more restrictive,
taken as a whole, with respect to dividend and other payment restrictions
than those contained in the indenture and the notes;
3. applicable law or any applicable rule, regulation or order;
4. any instrument governing Indebtedness or Capital Stock of a person
acquired by us or any of our Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person,
or the property or assets of the person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the
indenture to be incurred;
5. customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
6. purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on that property of the nature
described in clause (3) of the preceding paragraph;
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7. any agreement (A) for the sale or other disposition of all of the
Equity Interests in or all or substantially all of the assets of one of our
Restricted Subsidiaries that restricts distributions or asset transfers by
that Restricted Subsidiary pending that sale or other disposition or (B)
for the sale of a particular asset or line of business of a Restricted
Subsidiary that imposes restrictions on the property subject to an
agreement of the nature described in clause (3) of the preceding paragraph;
or
8. Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced and that such Permitted Refinancing Indebtedness was permitted
to be incurred under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock";
9. Liens securing Indebtedness otherwise permitted to be incurred
under the provisions of the covenant described above under the caption
"-- Liens" that limit the right of the debtor to dispose of the assets
subject to such Liens; and
10. provisions with respect to the disposition of specific assets or
property in asset sale agreements entered into in the ordinary course of
business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
We will not, directly or indirectly: (1) consolidate or merge with or into
another person (whether or not we are the surviving corporation) or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of us and our Restricted Subsidiaries taken as a whole, in
one or more related transactions, to another person; unless:
a. either: (i) we are the surviving corporation or (ii) the person
formed by or surviving any such consolidation or merger (if other than us)
or to which such sale, assignment, transfer, conveyance or other
disposition has been made is a corporation organized or existing under the
laws of the United States, any state of the United States or the District
of Columbia;
b. the person formed by or surviving any such consolidation or merger
(if other than us) or the person to which such sale, assignment, transfer,
conveyance or other disposition has been made assumes all of our
obligations under the notes and the indenture pursuant to agreements
reasonably satisfactory to the trustee;
c. immediately before and after such transaction no Default or Event
of Default exists; and
d. we or the person formed by or surviving any such consolidation or
merger (if other than us), or to which such sale, assignment, transfer,
conveyance or other disposition has been made will, on the date of such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock;" provided,
however, that this clause (d) shall be suspended during any period in which
we and our Restricted Subsidiaries are not subject to the Suspended
Covenants.
In addition, we may not, directly or indirectly, lease all or substantially
all of our properties or assets, in one or more related transactions, to any
other person.
The entity or person formed by or surviving any consolidation or merger (if
other than us), or the person to which such sale, assignment, transfer,
conveyance or other disposition, as the case may be, has been made, will succeed
to, and be substituted for, and may exercise our every right and power under the
indenture, but, in the case of a lease of all or substantially all its assets,
we will not be released from the obligation to pay the principal of and interest
on the notes.
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DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary (or any
person that upon its acquisition otherwise would become a Restricted Subsidiary)
to be an Unrestricted Subsidiary if that designation would not cause a Default.
If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned by us and our
Restricted Subsidiaries in the Subsidiary properly designated will be deemed to
be an Investment made as of the time of the designation and will reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "-- Restricted Payments" or Permitted
Investments, as determined by us. That designation will only be permitted if the
Investment would be permitted at that time and if the Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. The Board of
Directors may redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary if the redesignation would not cause a Default.
TRANSACTIONS WITH AFFILIATES
We will not, and will not permit any of our Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
1. the Affiliate Transaction is on terms that are no less favorable to
us or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by us or such Restricted Subsidiary
with an unrelated person; and
2. we deliver to the trustee:
a. with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of our Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of our Board of
Directors; and
b. with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
1. any employment agreement entered into by us or any of our
Restricted Subsidiaries in the ordinary course of business and consistent
with our past practice or the past practice of the relevant Restricted
Subsidiary;
2. transactions between or among us and/or our Restricted
Subsidiaries;
3. transactions with a person that is an Affiliate of ours solely
because we own an Equity Interest in such person;
4. payment of reasonable directors fees and reasonable indemnitees to
persons who are not otherwise Affiliates of ours;
5. sales of Equity Interests (other than Disqualified Stock) to
Affiliates of ours;
6. transactions with Weatherford (a) to repay $100.0 million of
outstanding Indebtedness, plus accrued and unpaid interest, to Weatherford
with the proceeds of this offering, (b) pursuant to agreements as in effect
on the date we first issue the notes, and (c) in commercial transactions in
the
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ordinary course of business on terms no less favorable to us or the
relevant Restricted Subsidiary than we could obtain in an arm's length
transaction with an unrelated person;
7. Restricted Payments or Permitted Investments that are permitted by
the provisions of the indenture described above under the caption
"-- Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
If we or any of our Restricted Subsidiaries acquires or creates another
Domestic Subsidiary after the date of the indenture, then that newly acquired or
created Domestic Subsidiary will become a Guarantor and execute a supplemental
indenture and deliver an opinion of counsel satisfactory to the trustee within
ten Business Days of the date on which it was acquired or created; provided,
however, that the foregoing shall not apply to Subsidiaries that have properly
been designated as Unrestricted Subsidiaries in accordance with the indenture
for so long as they continue to constitute Unrestricted Subsidiaries; provided
further, however, that if one of our Subsidiaries that is not a Guarantor
guarantees any of our or a Guarantor's Indebtedness, that Subsidiary will be
required to provide us with a guarantee that ranks pari passu with (or, if that
Indebtedness is subordinated Indebtedness, prior to) that Indebtedness.
SALE AND LEASEBACK TRANSACTIONS
We will not, and will not permit any of our Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided, however, that we or any
of our Restricted Subsidiaries may enter into a sale and leaseback transaction
if:
1. we or that Restricted Subsidiary, as the case may be, could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Fixed Charge
Coverage Ratio test in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described under the caption "-- Liens;" provided, however, that
clause (a) of this clause (1) shall be suspended during any period in which
we and our Restricted Subsidiaries are not subject to the Suspended
Covenants;
2. the gross cash proceeds of that sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by us
and set forth in an officers' certificate delivered to the trustee of the
property that is the subject of that sale and leaseback transaction;
provided, however, that in the case of any sale and leaseback transaction
for consideration exceeding $5.0 million, the fair market value shall be
determined by our Board of Directors and set forth in an officers'
certificate delivered to the trustee; and
3. the transfer of assets in that sale and leaseback transaction is
permitted by, and we apply or the Restricted Subsidiary applies, as the
case may be, the proceeds of such transaction in compliance with, the
covenant described above under the caption "-- Mandatory Redemption; Offers
to Purchase; Open Market Purchases -- Asset Sales"; provided, however,
that, in the event that we or any of our Restricted Subsidiaries
consummates a sale and leaseback transaction during a period in which we
are not subject to the Suspended Covenants, within twelve months of that
sale and leaseback transaction, we will apply the Net Cash Proceeds thereof
to permanently repay secured Indebtedness of us or a Guarantor, or any
Indebtedness of any of our Restricted Subsidiaries that is not a Guarantor,
and if any Indebtedness repaid under this clause (3) is revolving credit
Indebtedness, to correspondingly reduce commitments with respect thereto.
BUSINESS ACTIVITIES
We will not, and will not permit any Restricted Subsidiary to, engage in
any business other than Permitted Businesses, except to such extent as would not
be material to us and our Restricted Subsidiaries taken as a whole.
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PAYMENTS FOR CONSENT
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
such consideration is offered to be paid and is paid to all holders of the notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the Commission, so long as any notes are
outstanding, we will file with the Commission (unless it will not accept the
same for filing), within the times periods specified in the Commission's rules
and regulations, all reports, statements and other information required to be
filed by a company subject to Section 13(a) of the Exchange Act. In the event
that the Commission will not accept those reports for filing, we will
nonetheless furnish to the holders of the notes within the same time period:
1. all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by our certified independent accountants; and
2. all current reports that would be required to be filed with the
Commission on Form 8-K is we were required to file such reports.
If we have designated any of our Subsidiaries as Unrestricted Subsidiaries,
then the quarterly and annual financial information required by the preceding
paragraph will include a reasonably detailed presentation, either on the face of
the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of the
financial condition and results of operation of us and our Restricted
Subsidiaries separate from the financial condition and results of operations of
our Unrestricted Subsidiaries, if materially different.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
1. default for 30 days in the payment when due of interest on the
notes;
2. default in payment when due of the principal of or premium, if any,
on the notes;
3. failure by us or any of our Restricted Subsidiaries to comply with
the provisions described under the captions "-- Restricted Payments,"
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" or
"-- Merger, Consolidation or Sale of Assets";
4. failure by us or any of our Restricted Subsidiaries for 30 days
after notice to comply with the provisions described under the captions
"Mandatory Redemption; Offers to Purchase; Open Market Purchases -- Asset
Sales," "Mandatory Redemption; Offers to Purchase; Open Market Purchases --
Change of Control";
5. failure by us or any of our Restricted Subsidiaries for 60 days
after notice to comply with any of its other agreements in the indenture or
the notes;
6. default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our Restricted Subsidiaries
(or the payment of which is guaranteed by us or any of our Restricted
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Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, if that default:
a. is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
b. results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
7. failure by us or any of our Subsidiaries to pay final judgments
aggregating in excess of $10.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; and
8. except as permitted by the indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor,
or any person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and
9. certain events of bankruptcy or insolvency described in the
indenture with respect to us or any of our Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to us, any Restricted Subsidiary that is
a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or Event of Default
relating to the payment of principal, premium, if any, or interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest, or the principal and premium, if any, on, the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on our behalf with the intention of
avoiding payment of the premium that we would have had to pay if we then had
elected to redeem the notes pursuant to the optional redemption provisions of
the indenture, an equivalent premium will also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, we are required to deliver to the trustee a statement specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of us or any
Guarantor, as such, will have any liability for any of our or our Guarantors'
obligations under the notes, the indenture, the Subsidiary Guarantees, or for
any claim based on, in respect of, or by reason of, such obligations or their
creation.
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Each holder of notes by accepting a note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the notes.
The waiver may not be effective to waive liabilities under the federal
securities laws.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):
1. reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
2. reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the caption
"-- Mandatory Redemption; Offers to Purchase; Open Market Purchases");
3. reduce the rate of or change the time for payment of interest on
any note;
4. waive a Default or Event of Default in the payment of principal of,
or interest or premium, if any, on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration);
5. make any note payable in money other than that stated in the notes;
6. make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium, if any, on the notes;
7. waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Mandatory Redemption; Offers to Purchase; Open Market Purchases");
8. release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the indenture, except in accordance with the terms
of the indenture; or
9. make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any holder of notes,
we, the Guarantors and the trustee may amend or supplement the indenture or the
notes:
1. to cure any ambiguity, defect or inconsistency;
2. to provide for uncertificated notes in addition to or in place of
certificated notes;
3. to provide for the assumption of our obligations to holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;
4. to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder; or
5. to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
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CONCERNING THE TRUSTEE
If the trustee becomes a creditor of us or any Guarantor, the indenture
limits its right 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 will be permitted to engage in other transactions; however, if it
acquires any conflicting interest, it must (i) eliminate such conflict within 90
days, (ii) apply to the Commission for permission to continue or (iii) resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder has offered to the trustee indemnity
satisfactory to it against any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for the full text of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified person:
1. Indebtedness of any other person existing at the time such other
person is merged with or into or became a Subsidiary of such specified
person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other person merging with or into, or becoming a
Subsidiary of, such specified person; and
2. Indebtedness secured by a Lien encumbering any asset acquired by
such specified person.
"Affiliate" of any specified person means any other 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,"
as used with respect to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings.
"Asset Sale" means:
1. the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory or equipment in the ordinary course
of business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of our assets
and our Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under the caption "-- Mandatory
Redemption; Offers to Purchase; Open Market Purchases -- Change of Control"
and/or the provisions described above under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
2. the issuance of Equity Interests in any of our Restricted
Subsidiaries or the sale of Equity Interests in any of our Restricted
Subsidiaries.
Notwithstanding the preceding, the following items will not be deemed to be
Asset Sales:
1. any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
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2. a transfer of assets between or among us and our Restricted
Subsidiaries,
3. an issuance of Equity Interests by a Restricted Subsidiary to us or
to another Restricted Subsidiary; and
4. a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
1. with respect to a corporation, the board of directors or a duly
authorized committee of the board of directors of the corporation;
2. with respect to a partnership, the board of directors or a duly
authorized committee of the board of directors of the general partner of
the partnership; and
3. with respect to any other person, the board or committee of such
person serving a similar function.
"Board Resolution" means, with respect to any entity, a copy of a
resolution certified by the Secretary or Assistant Secretary of that entity to
have been duly adopted by the Board of Directors of that entity and to be in
full force and effect on the date of certification, and delivered to the
trustee.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
1. in the case of a corporation, corporate stock;
2. in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
3. in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
4. any other interest or participation that confers on a person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.
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"Cash Equivalents" means:
1. United States dollars;
2. securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality of the United
States government (provided that the full faith and credit of the United
States is pledged in support of those securities) having maturities of not
more than six months from the date of acquisition;
3. certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any lender party to a Credit Facility or with
any domestic commercial bank having capital and surplus in excess of $500.0
million and a Thomson Bank Watch Rating of "B" or better;
4. repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
5. commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within six months after the date of
acquisition; and
6. money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
1. the direct or indirect sale, transfer, conveyance or other
disposition, other than by way of merger or consolidation, in one or a
series of related transactions, of all or substantially all of the
properties or assets of us and our Restricted Subsidiaries, taken as a
whole, to any "person," as that term is used in Section 13(d)(3) of the
Exchange Act;
2. the adoption of a plan relating to our liquidation or dissolution;
3. the consummation of any transaction, including, without limitation,
any merger or consolidation, the result of which is that any "person," as
defined in clause (1) above becomes the ultimate Beneficial Owner, directly
or indirectly, of more than 50% of our Voting Stock, measured by voting
power rather than number of shares;
4. the first day on which a majority of the members of our entire
Board of Directors are not Continuing Directors; or
5. our consolidation or merger with or into, any person, or the
consolidation or merger of any person with or into, us, in any such event
pursuant to a transaction in which any of our outstanding Voting Stock or
such other person is converted into or exchanged for cash, securities or
other property, other than any such transaction where our Voting Stock
outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving
or transferee person, or the direct parent company of the surviving or
transferee person, which, immediately after giving effect to such issuance,
constitutes a majority of the outstanding shares of such Voting Stock of
such surviving or transferee person, or the direct parent company of the
surviving or transferee person.
For the purposes of this definition of "Change of Control," any transfer of
any equity of an entity that was formed for the purpose of acquiring our Voting
Stock will be deemed to be a transfer of an Equity Interest in us.
"Change of Control Triggering Event" means, the occurrence of a Change of
Control, or if we are not subject to the Suspended Covenants, there occurs both
a Change of Control and a Rating Decline.
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"Commission" means the Securities and Exchange Commission.
"Consolidated Cash Flow" means, with respect to any specified person for
any period, the Consolidated Net Income of such person for such period:
1. plus an amount equal to any extraordinary loss plus any net loss
realized by such person or any of its Subsidiaries in connection with an
Asset Sale or in connection with a future write-down of our or our
Restricted Subsidiaries' investment in Oil Country Tubular Limited in an
amount not to exceed $17.6 million, in either case to the extent such
losses were deducted in computing such Consolidated Net Income;
2. plus provision for taxes based on income or profits of such person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
3. plus consolidated interest expense of such person and its
Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net of the effect
of all payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated
Net Income;
4. plus depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses (excluding
any such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period) of such person and its
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income;
5. minus non-cash items increasing such Consolidated Net Income for
such period, other than the accrual of revenue in the ordinary course of
business,
in each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified person for
any period, the aggregate of the Net Income of such person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that:
1. the Net Income (but not loss) of any person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount of dividends
or distributions paid in cash to the specified person or a Restricted
Subsidiary of the person;
2. the Net Income of any Restricted Subsidiary will be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument (other than those
permitted under the "Dividend and Other Payment Restrictions Affecting
Subsidiaries" covenant), judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders;
3. the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded; and
4. the cumulative effect of a change in accounting principles will be
excluded.
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"Continuing Directors" means, as of any date of determination, any member
of our Board of Directors who:
1. was a member of such Board of Directors on the date of the
indenture; or
2. was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Revolving Credit Facility) or commercial paper facilities, in
each case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event (other than upon an optional redemption by us),
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91 days after the date on
which the notes mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because the holders of the
Capital Stock have the right to require us to repurchase such Capital Stock upon
the occurrence of a change of control or an asset sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide that we may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with the covenant described above under
the caption "-- Certain Covenants -- Restricted Payments."
"Domestic Subsidiary" means any one of our Subsidiaries that was formed
under the laws of the United States or any state of the United States or the
District of Columbia.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means the Indebtedness of us and our Subsidiaries
(other than Indebtedness under the Revolving Credit Facility) in existence on
the date we first issue the notes, until such amounts are repaid.
"Fixed Charges" means, with respect to any specified person for any period,
the sum, without duplication, of:
1. the consolidated interest expense of such person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations; plus
2. the consolidated interest of such person and its Restricted
Subsidiaries that was capitalized during such period; plus
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3. any interest expense on Indebtedness of another person that is
guaranteed by such person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such person or one of its Restricted Subsidiaries,
whether or not such guarantee or Lien is called upon; plus
4. the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock of such person or
any of its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in our Equity Interests (other than Disqualified
Stock) or to us or one of our Restricted Subsidiaries, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate
of such person, expressed as a decimal,
in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified person
for any period, the ratio of the Consolidated Cash Flow of such person and its
Restricted Subsidiaries for such period to the Fixed Charges of such person and
its Restricted Subsidiaries for such period. In the event that the specified
person or any of its Restricted Subsidiaries incurs, assumes, guarantees,
repays, repurchases or redeems any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the"Calculation Date"),
then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect
to such incurrence, assumption, guarantee, repayment, repurchase or redemption
of Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
1. acquisitions that have been made by the specified person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date will be given pro forma effect (calculated in
accordance with Regulation S-X) as if they had occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period will be calculated without giving effect to clause (3) of
the proviso set forth in the definition of Consolidated Net Income;
2. the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded; and
3. the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"Government Securities" means direct obligations of, or obligations fully
and unconditionally guaranteed or insured by, the United States of America or
any agency or instrumentality thereof for the payment of which obligations or
guarantee the full faith and credit of the United States is pledged and which
are not callable or redeemable at the issuer's option (unless, for purposes of
"Cash Equivalents" only, the obligations are redeemable or callable at a price
not less than the purchase price paid by us or
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any of our Restricted Subsidiaries, together with all accrued and unpaid
interest, if any, on such Government Securities).
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
1. the Domestic Subsidiaries; and
2. any other Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified person, the
obligations of such person incurred in the normal course of business and
consistent with past practices and not for speculative purposes under:
1. interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
2. foreign exchange contracts and currency protection agreements
entered into with one of more financial institutions is designed to protect
the person or entity entering into the agreement against fluctuations in
interest rates or currency exchange rates with respect to Indebtedness
incurred and not for purposes of speculation;
3. any commodity futures contract, commodity option or other similar
agreement or arrangement designed to protect against fluctuations in the
price of commodities used by that entity at the time; and
4. other agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency exchange rates.
"Indebtedness" means, with respect to any specified person, any
indebtedness of such person, whether or not contingent:
1. in respect of borrowed money;
2. evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
3. in respect of banker's acceptances;
4. representing Capital Lease Obligations;
5. representing the balance deferred and unpaid of the purchase price
of any property, except any such balance that constitutes an accrued
expense or trade payable; or
6. representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified person (whether or not such Indebtedness is assumed by
the specified person) and, to the extent not otherwise included, the guarantee
by the specified person of any indebtedness of any other person.
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The amount of any Indebtedness outstanding as of any date will be:
1. the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and
2. the principal amount of the Indebtedness, together with any
interest on the Indebtedness that is more than 30 days past due, in the
case of any other Indebtedness.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's or BBB- (or the equivalent) by S&P.
"Investments" means, with respect to any person, all direct or indirect
investments by such person in other persons (including Affiliates) in the forms
of loans (including guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If we or any of
our Restricted Subsidiaries sells or otherwise disposes of any Equity Interests
of any of our direct or indirect Subsidiaries such that, after giving effect to
any such sale or disposition, such person is no longer our Subsidiary, we will
be deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption"-- Certain
Covenants -- Restricted Payments." The acquisition by us or any of our
Restricted Subsidiaries of a person that holds an Investment in a third person
will be deemed to be an Investment by us or such Restricted Subsidiary in such
third person in an amount equal to the fair market value of the Investment held
by the acquired person in such third person in an amount determined as provided
in the final paragraph of the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."
"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,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Income" means, with respect to any specified person, the net income
(loss) of such person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by us or any of
our Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales or brokerage commissions, and any relocation expenses
incurred as a result of the Asset Sale, taxes paid or payable as a result of the
Asset Sale, in each case, after taking into account any available tax credits or
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deductions and any tax sharing arrangements, and amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that
were the subject of such Asset Sale, and any reserve for adjustment in respect
of the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither we nor any of our Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement
or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the
lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice,lapse of time of both any holder of
any other Indebtedness (other than the notes) of us or any of our
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of us or any of our
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means the lines of business conducted by us and our
Restricted Subsidiaries on the date hereof and any business incidental or
reasonably related thereto or which is a reasonable extension thereof as
determined in good faith by our Board of Directors and set forth in an officers'
certificate delivered to the trustee.
"Permitted Investments" means:
(1) any Investment in us or in any of our Restricted Subsidiaries;
(2) any Investment in Cash Equivalents;
(3) any Investment by us or any of our Restricted Subsidiaries in a
person engaged in a Permitted Business, if as a result of such Investment:
(a) such person becomes one of our Restricted Subsidiaries; or
(b) such person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, us or any of our Restricted Subsidiaries;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Mandatory Redemption; Offers to Purchase; Open Market
Purchases -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
our Equity Interests (other than Disqualified Stock);
(6) any Investments received in compromise of obligations of such
persons incurred in the ordinary course of trade creditors or customers
that were incurred in the ordinary course of business, including pursuant
to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer;
(7) Hedging Obligations permitted to be incurred under the "Incurrence
of Indebtedness and Issuance of Preferred Stock" covenant; and
(8) other Investments in any person having an aggregate fair market
value (measured on the date each such investment was made and without
giving effect to subsequent changes in value), when
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taken together with all other Investments made pursuant to this clause (8)
that are at the time outstanding, not to exceed $15.0 million.
"Permitted Liens" means:
(1) Liens on assets of us and any Guarantor securing Credit
Facilities;
(2) Liens in favor of us or the Guarantors;
(3) Liens on property of a person existing at the time such person is
merged with or into or consolidated with us or any of our Subsidiaries;
provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the person merged into or consolidated with us
or the Subsidiary;
(4) Liens on property existing at the time of acquisition of the
property by us or any of our Subsidiaries; provided, however, that such
Liens were in existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness;
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor; and
(9) Liens incurred by us or any of our Restricted Subsidiaries in the
ordinary course of business with respect to obligations that do not exceed
$5.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of us or any of
our Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of us or any of our Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest on the
Indebtedness and the amount of all expenses and premiums incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by us or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
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"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both
shall not make a rating on the notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by us (as
certified by a resolution of our Board of Directors) which shall be substituted
for S&P or Moody's, or both, as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's any of the following categories: Aaa,
Aa, A, Baa, Ba, B, Caa, Ca and C (or equivalent successor categories) and (iii)
the equivalent of any such category of S&P and Moody's used by another Rating
Agency. In determining whether the rating of the notes has decreased by one or
more gradations, gradations within Rating Categories (+ and -- for S&P: 1, 2 and
3 for Moody's; or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to
BB, as well from BB- to B, will constitute a decrease of one gradation).
"Rating Decline" means (i) a decrease of two or more gradations (including
gradations within Rating Categories as well as between Rating Categories) in the
rating of the notes by either Rating Agency or (ii) a withdrawal of the rating
of the notes by either Rating Agency, provided, however, that such decrease or
withdrawal occurs on, or within 90 days following, the date of public notice of
the occurrence of a Change of Control or of the intention by us to effect a
Change of Control, which period shall be extended so long as the rating of the
notes is under publicly announced consideration for downgrade by either Rating
Agency.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any Subsidiary of such person
that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means that certain Revolving Credit and Letter
of Credit Agreement, dated as of April 14, 2000, by and among us and a syndicate
of United States and Canadian banks, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time.
"S&P" means Standard & Poor's Ratings Group, Inc., or any successor to the
rating agency business thereof.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that person or one or more of the other Subsidiaries of that
person (or a combination thereof); and
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(2) any partnership (a) the sole general partner or the managing
general partner of which is such person or a Subsidiary of such person or
(b) the only general partners of which are that person or one or more
Subsidiaries of that person (or any combination thereof).
"Subsidiary Guarantee" means the guarantee of the notes by each of the
Guarantors pursuant to the indenture and in the form of the guarantee endorsed
on the form of note attached as Exhibit A to the indenture and any additional
guarantee of the notes to be executed by any of our Subsidiaries pursuant to the
covenant described above under the caption "-- Additional Subsidiary
Guarantees."
"Unrestricted Subsidiary" means any one of our Subsidiaries (or any
successor to any of them) that is designated by our Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent
that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with us or any of our Restricted Subsidiaries unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to us or such Restricted Subsidiary than those that might be
obtained at the time from persons who are not our Affiliates;
(3) is a person with respect to which neither we nor any of our
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such person's financial condition or to cause such person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of us or any of our Restricted
Subsidiaries; and
(5) has at least one director on its Board of Directors that is not a
director or executive officer of us or any of our Restricted Subsidiaries
and has at least one executive officer that is not a director or executive
officer of us or any of our Restricted Subsidiaries.
Any designation of any of our Subsidiaries as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by one of our Restricted Subsidiaries as of such date and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," we will be in default of such
covenant. Our Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation will be
deemed to be an incurrence of Indebtedness by one of our Restricted Subsidiaries
of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation will only be permitted if (1) such Indebtedness is permitted under
the covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the Board of
Directors of such person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of
such payment; by
(2) the then outstanding principal amount of such Indebtedness.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, exchange notes will be issued in registered,
global form in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof.
The exchange notes initially will be represented by one or more notes in
registered, global form without interest coupons (the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the trustee as custodian for
the Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes."
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Cedel are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. We take no responsibility
for these operations and procedures and urge investors to contact the system or
their participants directly to discuss these matters.
DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the initial purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests in
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the Global Notes indirectly through organizations which are Participants in that
system. All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Note to those persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants, the ability
of a person having beneficial interests in a Global Note to pledge those
interests to persons that do not participate in DTC's system, or otherwise take
actions in respect of those interests, may be affected by the lack of a physical
certificate evidencing those interests.
EXCEPT AS DESCRIBED BELOW UNDER THE CAPTION "-- EXCHANGE OF GLOBAL NOTES
FOR CERTIFICATED NOTES," OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE
NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS"
THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium and
liquidated damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, DTC, the trustee and us
will treat the persons in whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of receiving payments and
for all other purposes. Consequently, neither we, the trustee nor any agent of
us or the trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes: or
(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
that payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the trustee or us. Neither we nor the trustee will
be liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the notes, and we and the trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee for all
purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of the portion of the aggregate principal amount of the notes as to which the
Participant or Participants has or have given direction. However, if there is an
Event of Default under the notes, DTC reserves the right to exchange the Global
Notes for legended notes in certificated form, and to distribute those notes to
its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among participants in DTC, they are under no
obligation to perform or to continue to perform these procedures, and may
discontinue these procedures at any time. Neither we nor the trustee nor any of
our or their respective agents will have any responsibility for the performance
by DTC or their participants or
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indirect participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under the
Exchange Act;
(2) we, at our option, notify the trustee in writing that we elect to
cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in a Global
Note will be registered in the names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures)
and will bear the applicable restrictive legend referred to in "Notice to
Investors," unless that legend is not required by applicable law.
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and liquidated damages, if
any) by wire transfer of immediately available funds to the accounts specified
by the Global Note holder. We will make all payments of principal, interest and
premium and liquidated damages, if any, with respect to Certificated Notes by
wire transfer of immediately available funds to the accounts specified by the
holders of those notes. If no account is specified by a holder, we will mail a
check to that holder's registered address. The notes represented by the Global
Notes are expected to trade in DTC's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in the notes will, therefore, be
required by DTC to be settled in immediately available funds. We expect that
secondary trading in any Certificated Notes will also be settled in immediately
available funds.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of the notes to
purchasers and beneficial owners of notes who are United States Holders (as
defined below) and the principal United States federal income and estate tax
consequences of the purchase, ownership and disposition of the notes to
purchasers and beneficial owners of notes who are Foreign Holders (as defined
below). This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, and administrative and judicial interpretations thereof,
all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. This discussion
is limited to purchasers of notes who hold the notes as capital assets, within
the meaning of section 1221 of the Code. This discussion does not address the
tax consequences to Foreign Holders that are subject to United States federal
income tax on a net basis on income realized with respect to a note because such
income is effectively connected with the conduct of a U.S. trade or business.
Such Foreign Holders are generally taxed in a similar manner to United States
Holders, but certain special rules apply. This discussion does not address the
tax consequences to persons who hold the notes through a partnership or similar
pass-through entity. Moreover, this discussion is for general information only
and does not address all of the tax consequences that may be relevant to
particular purchasers of notes in light of their personal circumstances or to
certain types of purchasers (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities, former U.S. citizens and
long-term residents or persons who have hedged the risk of owning a note) or the
effect of any applicable state, local or foreign tax laws.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS
OR INTERPRETATIONS THEREOF.
EXCHANGE OF OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER
The exchange of outstanding notes for exchange notes pursuant to the
exchange offer will not be a taxable event for United States federal income tax
purposes. You will not recognize gain or loss upon the receipt of exchange
notes. If you are not exempt from United States federal income tax, you will be
subject to such tax on the same amount, in the same manner and at the same time
as you would have been as a result of holding the outstanding notes. If you are
a cash-basis holder who is exchanging outstanding notes for exchange notes, you
will not recognize in income any accrued and unpaid interest on the outstanding
notes by reason of the exchange. The basis and holding period of the exchange
notes will be the same as the basis and holding period of the corresponding
outstanding notes.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of a note
that is, for United States federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation or other entity (other than a
partnership) created or organized in or under the laws of the United States or
any political subdivision thereof, (c) an estate the income of which is subject
to United States federal income taxation regardless of source or (d) a trust if
(i) a U.S. court is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have authority to control all
substantial decisions of the trust or (ii) the trust has elected to be treated
as a United States Holder pursuant to applicable Treasury regulations.
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Payment of Interest
A United States Holder will be required to include in gross income interest
on a note at the time that such interest accrues or is received, in accordance
with the United States Holder's regular method of accounting for United States
federal income tax purposes.
Market Discount
Under the market discount rules, if a United States Holder of a note (other
than a Holder who purchased the note upon original issuance) purchases the note
at a market discount (i.e., at a price below its stated principal amount) in
excess of a statutorily-defined de minimis amount and thereafter recognizes gain
upon a disposition or retirement of the note, then the lesser of the gain
recognized or the portion of the market discount that accrued on a ratable basis
(or, if elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount in
a note may be taxable to a United States Holder to the extent of appreciation in
the value of the note at the time of certain otherwise nontaxable transactions
(e.g., gifts). Absent an election to include market discount in income as it
accrues, a United States Holder of a market discount note may be required to
defer a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such note until the
United States Holder disposes of the note in a taxable transaction.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant interest method), in which case the rule
described above regarding deferral of interest deductions will not apply. This
election to include market discount in income currently, once made, applies to
all market discount obligations acquired after the first taxable year to which
the election applies and may not be revoked without the consent of the Internal
Revenue Service ("IRS").
Amortizable Bond Premium
A United States Holder that purchases a note for an amount in excess of the
principal amount will be considered to have purchased the note at a "premium,"
equal to such excess, and may elect to amortize the premium over the remaining
term of the note on a constant yield method. However, if the note is purchased
at a time when the note may be optionally redeemed by the Company for an amount
that is in excess of its principal amount, special rules may apply that could
result in a deferral of the amortization of bond premium until later in the term
of the note. The amount amortized in any year will be treated as a reduction of
the United States Holder's interest income from the note. A United States Holder
that elects to amortize bond premium must reduce its tax basis in the note by
the premium amortized. Bond premium on a note held by a United States Holder
that does not make such election will decrease the gain or increase the loss
otherwise recognized on disposition of the note. The election to amortize
premium on a constant yield method, once made, applies to all debt obligations
held or subsequently acquired by the electing United States Holder on or after
the first day of the first taxable year to which the election applies and may
not be revoked without the consent of the IRS.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a note, a United States Holder generally will recognize taxable
gain or loss equal to the difference between the sum of cash plus the fair
market value of all other property received on such disposition (except to the
extent such cash or property is attributable to accrued interest not previously
included in income, which amount will be taxable as ordinary income) and such
United States Holder's adjusted tax basis in the note. A United States Holder's
adjusted tax basis in a note generally will equal the cost of the note to such
United States Holder, decreased by the amount of any payments (other than
interest) received by such United States Holder.
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Gain or loss recognized on the disposition of a note generally will be
capital gain or loss and will be long-term capital gain or loss if, at the time
of such disposition, the United States Holder's holding period for the note is
more than one year. The deduction of capital losses is subject to certain
limitations. United States Holders of notes should consult tax advisors
regarding the treatment of capital gains and losses.
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements may apply to
certain payments ("reportable payments") of principal and interest on a note,
and to proceeds of the sale or redemption of a note before maturity. We, our
agent, a broker, the Trustee or any paying agent, as the case may be, will be
required to withhold from any reportable payment that is subject to backup
withholding a tax equal to 31% of such payment if, among other things, a United
States Holder fails to furnish his taxpayer identification number (social
security or employer identification number), certify that such number is
correct, certify that such holder is not subject to backup withholding or
otherwise comply with the applicable requirements of the backup withholding
rules. Certain United States Holders, including all corporations, are not
subject to backup withholding and information reporting requirements for
payments made in respect of the notes. Any amounts withheld under the backup
withholding rules from a reportable payment to a United States Holder will be
allowed as a credit against such United States Holder's United States federal
income tax and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
The amount of any reportable payments, including interest, made to the
record United States Holders of notes (other than to holders which are exempt
recipients) and the amount of tax withheld, if any, with respect to such
payments will be reported to such United States Holders and to the IRS for each
calendar year.
UNITED STATES FEDERAL INCOME TAXATION OF FOREIGN HOLDERS
As used herein, the term "Foreign Holder" means a holder of a note that is,
for United States federal income tax purposes, neither a United States Holder,
as defined above nor a former U.S. citizen or long-term resident, as defined in
section 877 of the Code.
Payment of Interest on Notes
In general, payments of interest received by a Foreign Holder will not be
subject to a United States federal withholding tax, provided that (a)(i) the
Foreign Holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Grant Prideco entitled to vote,
(ii) the Foreign Holder is not a controlled foreign corporation that is related
to Grant Prideco actually or constructively through stock ownership, (iii) the
Foreign Holder is not a bank receiving interest described in section
881(c)(3)(A) of the Code, and (iv) either (A) the beneficial owner of the note,
under penalties of perjury, provides us or our agent with such beneficial
owner's name and address and certifies on IRS Form W-8BEN (or a suitable
substitute form) that it is not a United States Holder or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") holds the note and provides a statement to us or our agent under
penalties of perjury in which it certifies that such an IRS Form W-8BEN (or a
suitable substitute) has been received by it from the beneficial owner of the
note or qualifying intermediary and furnishes us or our agent a copy thereof or
(b) the Foreign Holder is entitled to the benefits of an income tax treaty under
which interest on the notes is exempt from United States withholding tax and the
Foreign Holder or such Foreign Holder's agent provides a properly executed IRS
Form W-8BEN claiming the exemption. Payments of interest not exempt from United
States federal withholding tax as described above will be subject to such
withholding tax at the rate of 30% (subject to reduction under an applicable
income tax treaty). Certain Foreign Holders who claim benefits of a treaty may
be required in certain circumstances to obtain a taxpayer identification number
and to provide certain
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documentary evidence issued by foreign governmental authorities to establish
residence in a foreign country. Special procedures apply to payments through
intermediaries.
Sale, Exchange or Retirement of the Notes
A Foreign Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain realized
on the sale, exchange, redemption, retirement at maturity or other disposition
of a note (including any gain representing accrued market discount) unless (a)
the Foreign Holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and, generally, either has a "tax home" or an "office or other fixed
place of business" in the United States or (b) the Foreign Holder is not exempt
from United States federal withholding tax on payments of interest on the note,
in which case the interest may be subject to withholding tax at the rate of 30%
(subject to reduction under an applicable income tax treaty).
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements do not apply to
payments of interest made by us or a paying agent to Foreign Holders if the
certification described above under "-- United States Federal Income Taxation of
Foreign Holders -- Payment of Interest on Notes" is received, provided that the
payor does not have actual knowledge that the holder is a United States Holder.
If any payments of principal and interest are made to the beneficial owner of a
note by or through the foreign office of a foreign custodian, foreign nominee or
other foreign agent of such beneficial owner, or if the foreign office of a
foreign "broker" (as defined in applicable Treasury regulations) pays the
proceeds of the sale of a note to the seller thereof, backup withholding and
information reporting will not apply. Information reporting requirements (but
not backup withholding) will apply, however, to a payment by a foreign office of
a broker that is (a) a United States person, (b) a foreign person that derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the United States, (c) a "controlled foreign corporation"
(generally, a foreign corporation controlled by certain United States
shareholders) with respect to the United States, or, (d) a foreign partnership
with certain connections to the United States, unless the broker has documentary
evidence in its records that the holder is a Foreign Holder and certain other
conditions are met or the holder otherwise establishes an exemption. Payment by
a United States office of a broker is subject to both backup withholding at a
rate of 31% and information reporting unless the holder certifies under
penalties of perjury that it is a Foreign Holder or otherwise establishes an
exemption.
Federal Estate Taxes
Subject to applicable estate tax treaty provisions, notes held at the time
of death (or notes transferred before death but subject to certain retained
rights or powers) by an individual who at the time of death is a Foreign Holder
will not be included in such Foreign Holder's gross estate for United States
federal estate tax purposes provided that the individual does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of Grant Prideco entitled to vote or hold the notes in connection with
a U.S. trade or business.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
the outstanding notes were acquired as a result of market-making activities or
other trading activities. We have agreed that, for a period of 90 days after the
consummation of the exchange offer, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale, if required under applicable securities laws and upon prior written
request.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes or a combination of these methods of resale, at
market prices prevailing at the time of resale, at prices related to those
prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account in the exchange offer and any
broker or dealer that participates in a distribution of the exchange notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of exchange notes and any commission or concessions
received by such person may be considered underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
regarded as admitting that it is an "underwriter," within the meaning of the
Securities Act.
For a period of 90 days after the consummation of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer, including the expenses of one counsel for the holders of the
outstanding notes, other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the outstanding notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the issuance of the exchange notes will be passed upon by
our Vice President and General Counsel, Philip A. Choyce.
EXPERTS
The audited financial statements incorporated by reference into this
prospectus and this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
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WHERE YOU CAN FIND MORE INFORMATION
This prospectus contains information about certain contracts or other
documents that is not necessarily complete. When we make such statements, we
refer you to the actual copies of the contracts or documents (that we will make
available upon request), because the information is qualified in all respects by
reference to those documents.
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Securities and Exchange Commission at (800) SEC-0330 for further
information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public at the Securities and
Exchange Commission's web site at http://www.sec.gov. In addition, documents we
file can be inspected at the offices of the New York Stock Exchange, Inc., New
York, New York.
Our Annual Report on Form 10-K for the year ended December 31, 2000 is
hereby incorporated into this document by reference. We also hereby incorporate
by reference into this prospectus any filings we make with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus until the expiration of the exchange offer.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request, copies of the documents to which we
refer you in this prospectus or which we expressly incorporate herein. Requests
for such documents should be directed to Philip A. Choyce, Corporate Secretary,
Grant Prideco Inc., 1450 Lake Robbins Drive, Suite 600, The Woodlands, Texas
77380; telephone number: (281) 297-8500. TO OBTAIN TIMELY DELIVERY OF ANY COPIES
OF FILINGS REQUESTED, PLEASE WRITE OR TELEPHONE NO LATER THAN FIVE DAYS BEFORE
THE EXPIRATION DATE.
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PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
State corporate laws and our charter documents include provisions designed
to limit the liability of our officers and directors and, in certain
circumstances, to indemnify our officers and directors against certain
liabilities. These provisions are designed to encourage qualified individuals to
serve as our officers and directors.
Exculpation Of Monetary Liability
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that relieve its directors of monetary liability for breaches
of their fiduciary duty to the corporation, except under certain circumstances,
including
- a breach of the director's duty of loyalty,
- acts or omissions of the director not in good faith or which involve
intentional misconduct or a knowing violation of law,
- the approval of an improper payment of a dividend or an improper purchase
by the corporation of the corporation's stock or
- any transaction from which the director derived an improper personal
benefit.
Under Texas law, a corporation may provide similar exculpation provisions
except in cases of: liability for breach of the director's duty of loyalty, acts
or omissions not in good faith or involving intentional misconduct, knowing
violations of law, actions leading to improper personal benefit to the director,
and payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Texas law.
Our certificates of incorporation provide that our directors are not liable
to us or our stockholders for monetary damages for breach of their fiduciary
duty, subject to the restrictions above. The limited partnership agreements of
Grant Prideco, L.P. and XL Systems, L.P. and the limited liability company
agreements of Grant Prideco USA, LLC and Grant Prideco Holding, LLC contain
provisions for similar indemnification of their officers and managers, as
applicable. These limitations of liability may not affect claims arising under
the federal securities laws.
Indemnification
Under Section 145 of the Delaware General Corporation Law and our charter
documents, we are obligated to indemnify our present and former directors and
officers and may indemnify other employees and individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation, a "derivative action"), if the person to whom
indemnity is granted acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to our best interests, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A similar standard of care is applicable in the case of
derivative actions, except that indemnification extends only to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such an action, and the Delaware General Corporation Law requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to us. Texas laws, and the charter documents of our Texas
entities, contain similar provisions.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers and controlling persons pursuant to
the foregoing provisions, we have been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
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ITEM 21. EXHIBITS.
2.1 (b) -- Distribution Agreement, dated as of March 22, 2000,
between Weatherford and Grant
3.1 (b) -- Restated Certificate of Incorporation of Grant Prideco,
Inc.
3.2 (a) -- Restated Bylaws of Grant Prideco, Inc.
3.3 (c) -- Certificate of Incorporation of GP Expatriate Services,
Inc.
3.4 (c) -- By-laws of GP Expatriate Services, Inc.
3.5 (c) -- Limited Liability Company Agreement of Grant Prideco
Holding, LLC
3.6 (c) -- Agreement of Limited Partnership of Grant Prideco, LP
3.7 (c) -- Limited Liability Company Agreement of Grant Prideco USA,
LLC
3.8 (c) -- Certificate of Incorporation of Star Operating Company
3.9 (c) -- By-laws of Star Operating Company
3.10(c) -- Certificate of Incorporation of TA Industries, Inc.
3.11(c) -- By-laws of TA Industries, Inc.
3.12(c) -- Certificate of Incorporation of Texas Arai, Inc.
3.13(c) -- By-laws of Texas Arai, Inc.
3.14(c) -- Restated Articles of Incorporation of Tube-Alloy Capital
Corporation
3.15(c) -- Amended and Restated By-laws of Tube-Alloy Capital
Corporation
3.16(c) -- Articles of Incorporation of Tube-Alloy Corporation and
Amendment thereto
3.17(c) -- Amended and Restated By-laws of Tube-Alloy Corporation
3.18(c) -- Certificate of Incorporation of XL Systems International,
Inc.
3.19(c) -- Amended and Restated By-laws of XL Systems International,
Inc.
3.20(c) -- Agreement of Limited Partnership of XL Systems, L.P.
4.1 (f) -- Amended and Restated Loan and Security Agreement
4.2 (f) -- First Amendment to Loan and Security Agreement
4.3 (f) -- Second Amendment to Loan and Security Agreement
4.4 (f) -- Third Amendment to Loan and Security Agreement
4.5 (b) -- Guaranty, dated April 14, 2000, by Grant Prideco, Inc.'s
subsidiaries in favor of Transamerica Business Credit
Corporation, as agent
4.6 (f) -- Amended and Restated Pledge Agreement
4.7 (f) -- Indenture for 9 5/8% Senior Notes due 2007
4.8 (f) -- Form of 9 5/8% Senior Notes due 2007 (included in Exhibit
4.7)
5.1* -- Opinion of Philip A. Choyce, Vice President and General
Counsel of Grant Prideco, regarding legality
10.1 -- See exhibits 2.1 and 4.1 through 4.7 for certain items
constituting material contracts.
10.2 (a) -- Grant Prideco, Inc. 2000 Non-Employee Director Stock
Option Plan
10.3 (a) -- Grant Prideco, Inc. 2000 Employee Stock Option and
Restricted Stock Plan
10.4 (a) -- Grant Prideco, Inc. Executive Deferred Compensation Plan
10.5 (a) -- Grant Prideco, Inc. Foreign Executive Deferred
Compensation Plan
10.6 (a) -- Grant Prideco, Inc. Deferred Compensation Plan for
Non-Employee Directors
10.7 (d) -- Employment Agreement dated April 14, 2000 with Bernard J.
Duroc-Danner
10.8 (d) -- Employment Agreement with Frances R. Powell
10.9 (f) -- Employment Agreement with Curtis W. Huff
10.10(d) -- Change of Control Agreement dated April 14, 2000 with
William Chunn
10.11(e) -- Preferred Supplier Agreement dated April 14, 2000,
between Grant Prideco, Inc. and Weatherford
International, Inc.
10.12(e) -- Tax Allocation Agreement dated April 14, 2000 between
Grant Prideco and Weatherford
10.13(f) -- Exchange and Registration Rights Agreement dated as of
December 4, 2000, among the registrants and Lehman
Brothers Inc.
10.14(a) -- Grant Prideco, Inc. 401(k) Savings Plan
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10.15(a) -- Investment Agreement, dated as of April 29, 1999, by and between Grant Prideco, Inc.
and Voest-Alpine Schienen GmbH & Co KG
10.16(a) -- Operating Agreement, dated as of July 23, 1999, by and between Grant Prideco, Inc. and
Voest-Alpine Schienen GmbH & Co KG
+10.17(a) -- Supply Agreement, dated as of July 23, 1999, by and between Voest-Alpine Stahlrohr
Kindberg GmbH & Co KG and Grant Prideco, Inc.
10.18(a) -- Manufacturing and Sales Agreement, dated as of January 1, 1996, by and between Grant
Prideco, S.A. and Oil Country Tubular Limited
10.19(a) -- Stock Purchase Agreement, dated as of June 19, 1998, by and among Weatherford,
Pridecomex Holding, S.A. de C.V., Tubos de Acero de Mexico S.A. and Tamsider S.A. de
C.V.
+10.20(a) -- Master Technology License Agreement, dated as of June 19, 1998, by and between Grant
Prideco, Inc. and DST Distributors of Steel Tubes Limited
10.21(a) -- Agreement, dated as of November 12, 1998, by and between Tubos de Acero de Mexico,
Tamsider S.A. de C.V., DST Distributors of Steel Tubes Limited, Techint Engineering
Company, Weatherford, Grand Prideco, Pridecomex Holding, S.A. de C.V. and Grant
Prideco, S.A. de C.V.
10.22(a) -- Agreement, dated as of December 1, 1998, by and between Tubos de Acero de Mexico,
Tamsider S.A. de C.V., Weatherford and Pridecomex Holdings, S.A. de C.V.
12.1* -- Statements re Computation of Ratios
21.1 (f) -- Subsidiaries of Registrant
23.1* -- Consent of Arthur Andersen LLP
23.2* -- Consent of Philip A. Choyce (included in exhibit 5.1)
24.1 -- Powers of Attorney (included on page II-5)
25.1* -- Statement of Eligibility of Trustee
99.1* -- Letter of Transmittal and Notice of Guaranteed Delivery
- ---------------
* Included herein.
+ Certain portions of these exhibits were intentionally excluded pursuant to
a request for confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934.
(a) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form 10 (file No. 00115423).
(b) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form S-3 (Registration No. 333-35272).
(c) Incorporated by reference to the registrants' Registration Statement on
Form S-3 (Registration No. 333-48722).
(d) Incorporated by reference to Grant Prideco Inc.'s Quarterly Report on Form
10-Q for the quarter ended March 31, 2000.
(e) Incorporated by reference from Weatherford International, Inc.'s Quarterly
Report on Form 10-Q for the three months ended March 31, 2000.
(f) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2000.
ITEM 22. UNDERTAKINGS.
The registrants hereby undertake 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
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Securities offered therein, and the offering of such Securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 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 prompt means. This includes information contained in
documents filed subsequent to the effective date of responding to the request.
Each of the undersigned registrants hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction that was not
the subject of and included in the registration statement when it became
effective.
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Curtis W. Huff and Frances R. Powell, and each of
them, either one of whom may act without joinder of the other, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any all capacities,
to sign any or all pre- and post-effective amendments to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or the substitute or substitutes
of any or all of them, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
have duly caused this registration statement to be signed on their behalf by the
undersigned, thereunto duly authorized, on April 9, 2001.
in the City of The Woodlands, State of Texas:
GRANT PRIDECO, INC.
GP EXPATRIATE SERVICES, INC.
GRANT PRIDECO HOLDING, LLC
GRANT PRIDECO, L.P.
STAR OPERATING COMPANY
TA INDUSTRIES, INC.
TEXAS ARAI, INC.
TUBE-ALLOY CAPITAL CORPORATION
TUBE-ALLOY CORPORATION
XL SYSTEMS INTERNATIONAL, INC.
XL SYSTEMS, L.P.
By: /s/ CURTIS W. HUFF
------------------------------------
Curtis W. Huff
President and Chief Executive
Officer
or President of each
in the City of Wilmington, State of Delaware:
GRANT PRIDECO USA, LLC
By: /s/ SAL SEGRETO
------------------------------------
Sal Segreto,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on April 9, 2001.
With respect to Grant Prideco, Inc.:
/s/ CURTIS W. HUFF Chief Executive Officer, President and
- --------------------------------------------- Director (principal executive officer)
Curtis W. Huff
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72
/s/ FRANCES R. POWELL Chief Financial Officer, Vice President and Treasurer
------------------------------------------------------ (principal financial and accounting officer)
Frances R. Powell
Chairman of the Board, Director
------------------------------------------------------
Bernard J. Duroc-Danner
Director
------------------------------------------------------
Eliot M. Fried
/s/ SHELDON B. LUBAR Director
------------------------------------------------------
Sheldon B. Lubar
/s/ WILLIAM E. MACAULAY Director
------------------------------------------------------
William E. Macaulay
/s/ ROBERT K. MOSES, JR. Director
------------------------------------------------------
Robert K. Moses, Jr.
Director
------------------------------------------------------
Robert A. Rayne
With respect to GP Expatriate Services, Inc., Grant Prideco Holding, LLC,
Grant Prideco, L.P. Star Operating Company, TA Industries, Inc., Texas Arai,
Inc., Tube-Alloy Capital Corporation, Tube-Alloy Corporation, XL Systems
International, Inc. and XL Systems, L.P.:
/s/ CURTIS W. HUFF President (principal executive officer) of
- --------------------------------------------- each and Director of each corporation and
Curtis W. Huff manager of Grant Prideco Holding, LLC
/s/ FRANCES R. POWELL Treasurer (principal financial officer) of
- --------------------------------------------- each and Director of each corporation and
Frances R. Powell manager of Grant Prideco Holding, LLC
/s/ PHILIP A. CHOYCE Director of each corporation and manager of
- --------------------------------------------- Grant Prideco Holding, LLC
Philip A. Choyce
With respect to Grant Prideco USA, LLC:
/s/ SAL SEGRETO President (principal executive officer) and
- --------------------------------------------- manager
Sal Segreto
/s/ LINDA BUBACZ Treasurer (principal financial officer) and
- --------------------------------------------- manager
Linda Bubacz
/s/ DAVE WEIGEL Manager
- ---------------------------------------------
Dave Weigel
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INDEX TO EXHIBITS
2.1 (b) -- Distribution Agreement, dated as of March 22, 2000,
between Weatherford and Grant
3.1 (b) -- Restated Certificate of Incorporation of Grant Prideco,
Inc.
3.2 (a) -- Restated Bylaws of Grant Prideco, Inc.
3.3 (c) -- Certificate of Incorporation of GP Expatriate Services,
Inc.
3.4 (c) -- By-laws of GP Expatriate Services, Inc.
3.5 (c) -- Limited Liability Company Agreement of Grant Prideco
Holding, LLC
3.6 (c) -- Agreement of Limited Partnership of Grant Prideco, LP
3.7 (c) -- Limited Liability Company Agreement of Grant Prideco USA,
LLC
3.8 (c) -- Certificate of Incorporation of Star Operating Company
3.9 (c) -- By-laws of Star Operating Company
3.10(c) -- Certificate of Incorporation of TA Industries, Inc.
3.11(c) -- By-laws of TA Industries, Inc.
3.12(c) -- Certificate of Incorporation of Texas Arai, Inc.
3.13(c) -- By-laws of Texas Arai, Inc.
3.14(c) -- Restated Articles of Incorporation of Tube-Alloy Capital
Corporation
3.15(c) -- Amended and Restated By-laws of Tube-Alloy Capital
Corporation
3.16(c) -- Articles of Incorporation of Tube-Alloy Corporation and
Amendment thereto
3.17(c) -- Amended and Restated By-laws of Tube-Alloy Corporation
3.18(c) -- Certificate of Incorporation of XL Systems International,
Inc.
3.19(c) -- Amended and Restated By-laws of XL Systems International,
Inc.
3.20(c) -- Agreement of Limited Partnership of XL Systems, L.P.
4.1 (f) -- Amended and Restated Loan and Security Agreement
4.2 (f) -- First Amendment to Loan and Security Agreement
4.3 (f) -- Second Amendment to Loan and Security Agreement
4.4 (f) -- Third Amendment to Loan and Security Agreement
4.5 (b) -- Guaranty, dated April 14, 2000, by Grant Prideco, Inc.'s
subsidiaries in favor of Transamerica Business Credit
Corporation, as agent
4.6 (f) -- Amended and Restated Pledge Agreement
4.7 (f) -- Indenture for 9 5/8% Senior Notes due 2007
4.8 (f) -- Form of 9 5/8% Senior Notes due 2007 (included in Exhibit
4.7)
5.1* -- Opinion of Philip A. Choyce, Vice President and General
Counsel of Grant Prideco, regarding legality
10.1 -- See exhibits 2.1 and 4.1 through 4.7 for certain items
constituting material contracts.
10.2 (a) -- Grant Prideco, Inc. 2000 Non-Employee Director Stock
Option Plan
10.3 (a) -- Grant Prideco, Inc. 2000 Employee Stock Option and
Restricted Stock Plan
10.4 (a) -- Grant Prideco, Inc. Executive Deferred Compensation Plan
10.5 (a) -- Grant Prideco, Inc. Foreign Executive Deferred
Compensation Plan
10.6 (a) -- Grant Prideco, Inc. Deferred Compensation Plan for
Non-Employee Directors
10.7 (d) -- Employment Agreement dated April 14, 2000 with Bernard J.
Duroc-Danner
10.8 (d) -- Employment Agreement with Frances R. Powell
10.9 (f) -- Employment Agreement with Curtis W. Huff
10.10(d) -- Change of Control Agreement dated April 14, 2000 with
William Chunn
10.11(e) -- Preferred Supplier Agreement dated April 14, 2000,
between Grant Prideco, Inc. and Weatherford
International, Inc.
10.12(e) -- Tax Allocation Agreement dated April 14, 2000 between
Grant Prideco and Weatherford
10.13(f) -- Exchange and Registration Rights Agreement dated as of
December 4, 2000, among the registrants and Lehman
Brothers Inc.
10.14(a) -- Grant Prideco, Inc. 401(k) Savings Plan
74
10.15(a) -- Investment Agreement, dated as of April 29, 1999, by and between Grant Prideco, Inc.
and Voest-Alpine Schienen GmbH & Co KG
10.16(a) -- Operating Agreement, dated as of July 23, 1999, by and between Grant Prideco, Inc. and
Voest-Alpine Schienen GmbH & Co KG
+10.17(a) -- Supply Agreement, dated as of July 23, 1999, by and between Voest-Alpine Stahlrohr
Kindberg GmbH & Co KG and Grant Prideco, Inc.
10.18(a) -- Manufacturing and Sales Agreement, dated as of January 1, 1996, by and between Grant
Prideco, S.A. and Oil Country Tubular Limited
10.19(a) -- Stock Purchase Agreement, dated as of June 19, 1998, by and among Weatherford,
Pridecomex Holding, S.A. de C.V., Tubos de Acero de Mexico S.A. and Tamsider S.A. de
C.V.
+10.20(a) -- Master Technology License Agreement, dated as of June 19, 1998, by and between Grant
Prideco, Inc. and DST Distributors of Steel Tubes Limited
10.21(a) -- Agreement, dated as of November 12, 1998, by and between Tubos de Acero de Mexico,
Tamsider S.A. de C.V., DST Distributors of Steel Tubes Limited, Techint Engineering
Company, Weatherford, Grand Prideco, Pridecomex Holding, S.A. de C.V. and Grant
Prideco, S.A. de C.V.
10.22(a) -- Agreement, dated as of December 1, 1998, by and between Tubos de Acero de Mexico,
Tamsider S.A. de C.V., Weatherford and Pridecomex Holdings, S.A. de C.V.
12.1* -- Statements re Computation of Ratios
21.1(f) -- Subsidiaries of Registrant
23.1* -- Consent of Arthur Andersen LLP
23.2* -- Consent of Philip A. Choyce (included in exhibit 5.1)
24.1 -- Powers of Attorney (included on page II-5)
25.1* -- Statement of Eligibility of Trustee
99.1* -- Letter of Transmittal and Notice of Guaranteed Delivery
- ---------------
* Included herein.
+ Certain portions of these exhibits were intentionally excluded pursuant to
a request for confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934.
(a) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form 10 (file No. 00115423).
(b) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form S-3 (Registration No. 333-35272).
(c) Incorporated by reference to the registrants' Registration Statement on
Form S-3 (Registration No. 333-48722).
(d) Incorporated by reference to Grant Prideco Inc.'s Quarterly Report on Form
10-Q for the quarter ended March 31, 2000.
(e) Incorporated by reference from Weatherford International, Inc.'s Quarterly
Report on Form 10-Q for the three months ended March 31, 2000.
(f) Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2000.