AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 2004
REGISTRATION NO. 333-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRIDE INTERNATIONAL, INC.
(Exact name of each registrant as specified in its charter)
DELAWARE 1389 76-0069030
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or classification code number) identification number)
organization)
5847 SAN FELIPE, SUITE 3300 W. GREGORY LOOSER
HOUSTON, TEXAS 77057 VICE PRESIDENT AND GENERAL COUNSEL
(713) 789-1400 PRIDE INTERNATIONAL, INC.
(Address, including zip code, and telephone number, including area code, 5847 SAN FELIPE, SUITE 3300
of each registrant's principal executive offices) HOUSTON, TEXAS 77057
(713) 789-1400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
TULL R. FLOREY
BAKER BOTTS L.L.P.
ONE SHELL PLAZA
910 LOUISIANA
HOUSTON, TEXAS 77002
(713) 229-1234
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act of 1933
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 of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier registration
statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
7 3/8% Senior Notes due 2014............ $500,000,000 100% $500,000,000 $63,350
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 10, 2004
PROSPECTUS
[PRIDE INTERNATIONAL LOGO]
$500,000,000
OFFER TO EXCHANGE
7 3/8% SENIOR NOTES DUE 2014
FOR ALL OUTSTANDING
7 3/8% SENIOR NOTES DUE 2014
THE NEW NOTES
- - will be freely tradeable and otherwise substantially identical to the old
notes
- - will accrue interest at 7 3/8% per annum, payable semiannually on each
January 15 and July 15
- - will not be listed on any securities exchange or on any automated dealer
quotation system, but may be sold in the over-the-counter market, in
negotiated transactions or through a combination of those methods
THE EXCHANGE OFFER
- - expires at 5:00 p.m., New York City time, on ____ , 2004, unless extended
- - is not conditioned upon any minimum aggregate principal amount of old
notes being tendered
YOU SHOULD NOTE THAT
- - we will exchange all old notes that are validly tendered and not validly
withdrawn for an equal principal amount of new notes that we have
registered under the Securities Act of 1933
- - you may withdraw tenders of old notes at any time prior to the expiration
of the exchange offer
- - the exchange of old notes for new notes in the exchange offer should not
be a taxable event for U.S. federal income tax purposes
- - the exchange offer is subject to customary conditions, which we may waive
in our sole discretion
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 8
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 THE NEW NOTES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2004.
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THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT.
SEE "WHERE YOU CAN FIND MORE INFORMATION" BEGINNING ON PAGE 69 FOR A LISTING OF
DOCUMENTS WE INCORPORATE BY REFERENCE. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST DIRECTED TO PRIDE INTERNATIONAL, INC., 5847
SAN FELIPE, SUITE 3300, HOUSTON, TEXAS 77057, ATTENTION: W. GREGORY LOOSER, VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, TELEPHONE: (713) 789-1400. TO ENSURE
TIMELY DELIVERY OF THESE DOCUMENTS, ANY REQUEST BY SHAREHOLDERS SHOULD BE MADE
BY_________, 2004. THE EXHIBITS TO THESE DOCUMENTS WILL GENERALLY NOT BE MADE
AVAILABLE UNLESS THEY ARE SPECIFICALLY INCORPORATED BY REFERENCE IN THE
DOCUMENTS.
TABLE OF CONTENTS
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 8
Forward-Looking Information............................................... 16
Ratio of Earnings to Fixed Charges........................................ 18
Private Placement......................................................... 18
Use of Proceeds........................................................... 18
The Exchange Offer........................................................ 19
Description of Notes...................................................... 29
United States Federal Income Tax Consequences............................. 69
Plan of Distribution...................................................... 69
Transfer Restrictions on Old Notes........................................ 71
Legal Matters............................................................. 71
Experts................................................................... 71
Independent Registered Public Accounting Firm............................. 71
Where You Can Find More Information....................................... 71
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION
WE HAVE PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. WE
ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE ON THE FRONT OF THIS DOCUMENT AND THAT ANY
INFORMATION WE HAVE INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE OF
THE DOCUMENT INCORPORATED BY REFERENCE.
PROSPECTUS SUMMARY
The following summary should be read together with the information
contained in other parts of this prospectus and the documents we incorporate by
reference. You should carefully read this prospectus and the documents we
incorporate by reference to fully understand the terms of the exchange offer and
the new notes as well as the other considerations that are important to you in
making an investment decision. In this prospectus, we refer to Pride
International, Inc. and its subsidiaries as "we," "us" or "Pride," unless we
specifically indicate otherwise or the context clearly indicates otherwise.
OUR COMPANY
We are a leading international provider of contract drilling and related
services. We provide contract drilling services to oil and gas exploration and
production companies through the use of mobile offshore and land-based drilling
rigs in both U.S. offshore and international offshore and land markets. As of
June 30, 2004, we operated a global fleet of 328 rigs, including two
ultra-deepwater drillships, 11 semisubmersible rigs, 35 jackup rigs, 31
tender-assisted, barge and platform rigs and 249 land-based drilling and
workover rigs. We operate in more than 30 countries and marine provinces.
We are a Delaware corporation with our principal executive offices located
at 5847 San Felipe, Suite 3300, Houston, Texas 77057. Our telephone number at
such address is (713) 789-1400.
THE EXCHANGE OFFER
On July 7, 2004, we issued $500 million aggregate principal amount of the
outstanding 7 3/8% Senior Notes due 2014. We sold the old notes in transactions
that were exempt from or not subject to the registration requirements under the
Securities Act of 1933. Accordingly, the old notes are subject to transfer
restrictions. In general, you may not offer or sell the old notes unless either
they are registered under the Securities Act or the offer or sale is exempt from
or not subject to registration under the Securities Act and applicable state
securities laws.
In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers of the old notes. We
agreed to use our reasonable best efforts to have the registration statement of
which this prospectus is a part declared effective by the SEC within 180 days
after the issue date of the old notes and to complete the exchange offer for the
notes within 45 days after the registration statement becomes effective. In the
exchange offer, you are entitled to exchange your old notes for new notes with
substantially identical terms, except that the existing transfer restrictions
will be removed. You should read the discussion under the headings " -- Terms of
the New Notes" and "Description of Notes" for further information about the new
notes.
We have summarized the terms of the exchange offer below. You should read
the discussion under the heading "The Exchange Offer" for further information
about the exchange offer and resale of the new notes. IF YOU FAIL TO EXCHANGE
YOUR OLD NOTES FOR NEW NOTES IN THE EXCHANGE OFFER, THE EXISTING TRANSFER
RESTRICTIONS WILL REMAIN IN EFFECT AND THE MARKET VALUE OF YOUR OLD NOTES LIKELY
WILL BE ADVERSELY AFFECTED BECAUSE OF A SMALLER FLOAT AND REDUCED LIQUIDITY.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where such old notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such new
notes. Please read "Plan of Distribution."
Expiration Date............................... The exchange offer will expire at 5:00 p.m., New York City time, on , 2004, or
such later date and time to which we extend it.
Withdrawal of Tenders......................... You may withdraw your tender of old notes at any time prior to the expiration date.
We will return to you, without charge, promptly after the expiration or termination
of the exchange offer, any old notes that you tendered but that were not accepted
for exchange.
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Conditions to the Exchange Offer.............. We will not be required to accept old notes for exchange:
- if the exchange offer would be unlawful or would violate any interpretation of
the staff of the SEC; or
- if any legal action has been instituted or threatened that would impair our
ability to proceed with the exchange offer.
The exchange offer is not conditioned upon any minimum aggregate principal amount
of old notes being tendered. Please read "The Exchange Offer -- Conditions to the
Exchange Offer" for more information about the conditions to the exchange offer.
Procedures for Tendering Old Notes............ If you wish to participate in the exchange offer, you must complete, sign and date
the letter of transmittal that we are providing with this prospectus and mail or
deliver the letter of transmittal, together with the old notes, to the exchange
agent. If your old notes are held through The Depository Trust Company, you may
effect delivery of the old notes by book-entry transfer.
In the alternative, if your old notes are held through DTC, you may participate in
the exchange offer through DTC's automated tender offer program. If you tender
under this program, you will agree to be bound by the letter of transmittal as
though you had signed it.
By signing or agreeing to be bound by the letter of transmittal, you will represent
to us that, among other things:
- any new notes that you receive will be acquired in the ordinary course of your
business;
- you have no arrangement or understanding with any person to participate in the
distribution of the old notes or the new notes;
- you are not our "affiliate," as defined in Rule 405 of the Securities Act, or,
if you are our 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, you are not engaged in, and do not intend to
engage in, the distribution of the new notes;
- if you are a broker-dealer, you will receive new notes for your own account in
exchange for old notes that you acquired as a result of market-making
activities or other trading activities, and you will deliver a prospectus in
connection with any resale of such new notes;
- if you are a broker-dealer, you did not purchase the old notes to be exchanged
for the new notes from us; and
- you are not acting on behalf of any person who could not truthfully and
completely make the foregoing representations.
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Special Procedures for Beneficial
Owners........................................ If you own a beneficial interest in old notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish to
tender the old notes in the exchange offer, please contact the registered holder as
soon as possible and instruct it to tender on your behalf and to comply with our
instructions described in this prospectus.
Guaranteed Delivery Procedures................ You must tender your old notes according to the guaranteed delivery procedures
described in "The Exchange Offer -- Guaranteed Delivery Procedures" if any of the
following apply:
- you wish to tender your old notes but they are not immediately available;
- you cannot deliver your old notes, the letter of transmittal or any other
required documents to the exchange agent prior to the expiration date; or
- you cannot comply with the applicable procedures under DTC's automated tender
offer program prior to the expiration date.
United States Federal Income Tax The exchange of old notes for new notes in the exchange offer should not be a
Consequences.................................. taxable event for U.S. federal income tax purposes. Please read "United States
Federal Income Tax Consequences."
Use of Proceeds............................... We will not receive any cash proceeds from the issuance of new notes in the
exchange offer.
THE EXCHANGE AGENT
We have appointed JPMorgan Chase Bank as exchange agent for the exchange
offer. Please direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent. If you are
not tendering under DTC's automated tender offer program, you should send the
letter of transmittal and any other required documents to the exchange agent as
follows:
JPMORGAN CHASE BANK
(214) 468-6464
BY REGISTERED OR CERTIFIED MAIL:
JPMorgan Chase Bank
Institutional Trust Services
P.O. Box 2320
Dallas, Texas 75221-2320
Attention: Beth Mullin
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BY HAND OR OVERNIGHT COURIER:
JPMorgan Chase Bank
Institutional Trust Services
2001 Bryan Street, 9th Floor
Dallas, Texas 75201
Attention: Beth Mullin
BY FACSIMILE TRANSMISSION (ELIGIBLE INSTITUTIONS ONLY):
(214) 468-6494
Attention: Beth Mullin
Confirm by Telephone:
(214) 468-6464
For information call (214) 468-6464.
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TERMS OF THE NEW NOTES
The new notes will be freely tradeable and otherwise substantially
identical to the old notes. The new notes will not have registration rights or
provisions for additional interest. The new notes will evidence the same debt as
the old notes, and the old notes and the new notes will be governed by the same
indenture. The old notes and the new notes will vote together as a single
separate class under the indenture.
Notes Offered................................. $500 million aggregate principal amount of 7 3/8% Senior Notes due 2014.
Maturity Date................................. July 15, 2014.
Interest Payment Dates........................ January 15 and July 15 of each year, beginning January 15, 2005.
Ranking....................................... The new notes will rank senior in right of payment to all of our existing and
future subordinated debt and will rank equally in right of payment with all of our
existing and future senior debt. The new notes will be effectively subordinated to
all our existing and future secured debt, to the existing and future debt of our
subsidiaries that do not guarantee the new notes and to the existing and future
secured debt of any subsidiaries that guarantee the new notes. Initially, there
will be no subsidiary guarantors of the new notes. See "Description of Notes --
Ranking."
Guarantees.................................... In the circumstances described under "Description of Notes -- Restrictive Covenants
-- Limitation on Non-Guarantor Subsidiaries," some of our subsidiaries, if they
guarantee the payment of any of our debt (other than debt under our credit
facilities), will be required to guarantee the new notes on a senior unsecured
basis. Initially, there will be no subsidiary guarantors of the new notes.
Optional Redemption........................... We may redeem some or all of the new notes at any time on or after July 15, 2009.
Prior to July 15, 2009, we may redeem some or all of the new notes at 100% of the
principal amount plus a make-whole premium. In addition, prior to July 15, 2007, we
may redeem up to 35% of the new notes from the proceeds of certain equity offerings
at a specified redemption price. The redemption prices are discussed under the
caption "Description of Notes -- Optional Redemption."
Change in Control............................. If a change in control that results in a ratings decline (as described under
"Description of Notes -- Repurchase at Option of the Holder Upon a Change in
Control") occurs prior to maturity, you may require us to purchase all or part of
your new notes at a repurchase price equal to 101% of their principal amount, plus
accrued and unpaid interest.
Covenants..................................... The new notes will be issued under an indenture supplement that will limit our
ability and the ability of our subsidiaries to:
- enter into transactions with affiliates;
- pay dividends or make other restricted payments;
- incur more debt or issue preferred stock;
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- incur dividend or other payment restrictions affecting our subsidiaries;
- sell assets;
- engage in sale and leaseback transactions;
- create liens; and
- consolidate, merge or transfer all or substantially all of our assets.
Many of these restrictions will terminate if the new notes are rated investment
grade by either Standard & Poor's Ratings Services or Moody's Investors Service,
Inc and, in either case, the new notes have a specified rating by the other rating
agency.
Rights under Registration Rights Agreement.... If we fail to complete the exchange offer as required by the registration rights
agreement, we may be obligated to pay additional interest to holders of the old
notes. Please read "Description of Notes -- Registration Rights of the Noteholders"
for more information regarding your rights as a holder of old notes.
Risk Factors.................................. You should consider carefully all of the information included or incorporated by
reference in this prospectus. In particular, you should evaluate the risks set
forth under "Risk Factors" of this prospectus before making an investment decision.
Trading....................................... The notes will not be listed on any securities exchange or included in any
automated quotation system. Therefore, we cannot assure you as to the development
of an active market for the new notes or as to the liquidity of any such market.
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The trading price of the notes could decline due to any of
these risks, and you may lose all or part of your investment.
This prospectus and the documents we incorporate by reference herein also
contain forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risks faced by us described below
and elsewhere in this prospectus and in the documents we incorporate by
reference herein. See "Forward-Looking Information."
RISKS RELATED TO THE EXCHANGE OFFER
IF YOU FAIL TO EXCHANGE YOUR OLD NOTES, THE EXISTING TRANSFER RESTRICTIONS
WILL REMAIN IN EFFECT AND THE MARKET VALUE OF YOUR OLD NOTES MAY BE
ADVERSELY AFFECTED BECAUSE THEY MAY BE MORE DIFFICULT TO SELL.
If you fail to exchange your old notes for new notes under the exchange
offer, then you will continue to be subject to the existing transfer
restrictions on the old notes. In general, the old notes may not be offered or
sold unless they are registered or exempt from registration under the Securities
Act and applicable state securities laws. Except in connection with this
exchange offer or as required by the registration rights agreement, we do not
intend to register resales of the old notes.
The tender of old notes under the exchange offer will reduce the principal
amount of the old notes outstanding. Due to the corresponding reduction in
liquidity, this may have an adverse effect upon, and increase the volatility of,
the market price of any old notes that you continue to hold following completion
of the exchange offer.
RISKS RELATED TO OUR BUSINESS
COST OVERRUNS ON OUR LUMP-SUM CONSTRUCTION CONTRACTS HAVE RESULTED IN
LOSSES ON THOSE CONTRACTS AND MAY CONTINUE TO DO SO IN THE FUTURE.
Our Technical Services segment is performing four deepwater platform rig
construction projects under lump-sum contracts with our customers. As of July
31, 2004, three of these rigs had been delivered to the customers. We recorded
loss provisions totaling $98.4 million during 2003, and additional loss
provisions totaling $31.8 million during the first six months of 2004, as a
result of cost overruns on these projects. The loss provisions included costs
incurred plus our estimate of costs we expected to incur to complete the
projects. In connection with the preparation of our quarterly consolidated
financial statements, following the end of each quarter we update our evaluation
of our contract price and cost estimates related to the projects, and we reflect
in our results of operations any revisions in these estimates based on that
evaluation. A variety of events we evaluate could require us to revise these
estimates and could result in further cost overruns to complete these projects,
which could be material and which would require us to record additional loss
provisions. Such events could include variations in labor and equipment
productivity over the remaining construction period, unanticipated cost
increases, engineering changes, shipyard or systems problems, project management
issues, shortages of equipment, materials or skilled labor, weather delays,
unscheduled delays in the delivery of ordered materials and equipment, work
stoppages, shipyard unavailability or other delays.
WE RECOGNIZE REVENUES AND RELATED COSTS UNDER OUR CONTRACTS IN THE
TECHNICAL SERVICES SEGMENT ON A PERCENTAGE-OF-COMPLETION BASIS.
ADJUSTMENTS IN ESTIMATES COULD RESULT IN A CHARGE AGAINST EARNINGS, WHICH
COULD BE MATERIAL.
We recognize revenues and related costs under contracts in our Technical
Services segment on a percentage-of-completion basis. Accordingly, we review
contract price and cost estimates quarterly and reflect adjustments in income
(1) to recognize income proportionate to the percentage of completion in the
case of projects showing an estimated profit at completion and (2) to recognize
the entire amount of the loss in the case of projects showing an estimated loss
at completion. To the extent these adjustments result in an increase in
previously reported losses or a reduction in or an elimination of previously
reported profits with respect to a project, we would recognize a charge against
current earnings, which could be material.
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A MATERIAL OR EXTENDED DECLINE IN EXPENDITURES BY OIL AND GAS COMPANIES,
DUE TO A DECLINE OR VOLATILITY IN OIL AND GAS PRICES, A DECREASE IN DEMAND
FOR OIL AND GAS OR OTHER FACTORS, MAY REDUCE DEMAND FOR OUR SERVICES AND
SUBSTANTIALLY REDUCE OUR PROFITABILITY OR RESULT IN OUR INCURRING LOSSES.
The profitability of our operations depends upon conditions in the oil and
gas industry and, specifically, the level of exploration and production
expenditures of oil and gas company customers. The oil and gas industry is
cyclical. The demand for contract drilling and related services is directly
influenced by many factors beyond our control, including:
- oil and gas prices and expectations about future prices;
- the demand for oil and gas;
- the cost of producing and delivering oil and gas;
- advances in exploration, development and production technology;
- government regulations;
- local and international political and economic conditions;
- the ability of the Organization of Petroleum Exporting Countries
("OPEC") to set and maintain production levels and prices;
- the level of production by non-OPEC countries; and
- the policies of various governments regarding exploration and
development of their oil and gas reserves.
Depending on the market prices of oil and gas, companies exploring for oil
and gas may cancel or curtail their drilling programs, thereby reducing demand
for drilling services. Such a reduction in demand may erode daily rates and
utilization of our rigs. Any significant decrease in daily rates or utilization
of our rigs, particularly our high-specification semisubmersible rigs or jackup
rigs, could materially reduce our revenues and profitability.
AN OVERSUPPLY OF COMPARABLE RIGS IN THE GEOGRAPHIC MARKETS IN WHICH WE
COMPETE COULD DEPRESS THE UTILIZATION RATES AND DAYRATES FOR OUR RIGS AND
MATERIALLY REDUCE OUR REVENUES AND PROFITABILITY.
Utilization rates, which are the number of days a rig actually works
divided by the number of days the rig is available for work, and dayrates, which
are the contract prices customers pay for rigs per day, are also affected by the
total supply of comparable rigs available for service in the geographic markets
in which we compete. Improvements in demand in a geographic market may cause our
competitors to respond by moving competing rigs into the market, thus
intensifying price competition. Significant new rig construction could also
intensify price competition. In the past, there have been prolonged periods of
rig oversupply with correspondingly depressed utilization rates and dayrates
largely due to earlier, speculative construction of new rigs. Improvements in
dayrates and expectations of longer-term, sustained improvements in utilization
rates and dayrates for offshore drilling rigs may lead to construction of new
rigs. These increases in the supply of rigs could depress the utilization rates
and dayrates for our rigs and materially reduce our revenues and profitability.
WARRANTY CLAIMS ASSERTED AGAINST US IN THE FUTURE COULD MATERIALLY AFFECT
OUR BUSINESS.
In connection with our deepwater platform rig construction projects, we
have provided our customers with a limited warranty against manufacturing
defects on the rigs and have included in the construction losses a provision for
warranty claims. However, our actual level of warranty claims could be greater
than the level of warranty claims we estimated at the time of the provision,
which would result in further losses on the projects.
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IF WE ARE UNABLE TO OBTAIN NEW OR FAVORABLE CONTRACTS FOR RIGS WHOSE
CONTRACTS ARE EXPIRING, OUR REVENUES AND PROFITABILITY COULD BE MATERIALLY
REDUCED.
We have a number of contracts that will expire in 2004. Our ability to
renew these contracts or obtain new contracts and the terms of any such
contracts will depend on market conditions. We may be unable to renew our
expiring contracts or obtain new contracts for the rigs, and the dayrates under
any new contracts may be substantially below the existing dayrates, which could
materially reduce our revenues and profitability.
WORLDWIDE POLITICAL AND ECONOMIC DEVELOPMENTS MAY HURT OUR OPERATIONS
MATERIALLY.
In 2003, we derived approximately 39% of our revenues from operations in
countries within South America and an additional approximately 48% of our
revenues from operations in all other countries outside the United States. Our
operations in these areas are subject to the following risks, among others:
- foreign currency fluctuations and devaluation;
- new economic policies;
- restrictions on currency repatriation;
- political instability, war and civil disturbances;
- uncertainty or instability resulting from armed hostilities or other
crises in the Middle East or other geographic areas in which we
operate; and
- acts of terrorism.
Continued hostilities in the Middle East and the occurrence or threat of
future terrorist attacks such as those against the United States on September
11, 2001 could cause a downturn in the economies of the United States and other
developed countries. A lower level of economic activity could result in a
decline in energy consumption, which could cause our revenues and margins to
decline and limit our future growth prospects. More specifically, these risks
could lead to increased volatility in prices for crude oil and natural gas and
could affect the markets for our drilling services. In addition, these risks
could increase instability in the financial and insurance markets and make it
more difficult for us to access capital and to obtain insurance coverages that
we consider adequate or are otherwise required by our contracts.
We attempt to limit the risks of currency fluctuation and restrictions on
currency repatriation where possible by obtaining contracts providing for
payment in U.S. dollars or freely convertible foreign currency. To the extent
possible, we seek to limit our exposure to local currencies by matching the
acceptance of local currencies to our expense requirements in those currencies.
Although we have done this in the past, we may not be able to take these actions
in the future, thereby exposing us to foreign currency fluctuations that could
cause our results of operations and financial condition to deteriorate
materially.
During 2003, approximately 25% of our consolidated revenues were derived
from our operations in Argentina and Venezuela. Over the past two years, these
two countries experienced political and economic instability that resulted in
significant changes in their general economic policies and regulations.
During 2002, the Argentine peso declined in value against the U.S. dollar
following the Argentine government's decisions to abandon the country's fixed
dollar-to-peso exchange rate, requiring private sector, dollar-denominated loans
and contracts to be paid in pesos and placing restrictions on the convertibility
of the Argentine peso. The devaluation, coupled with the government's mandated
conversion of all dollar-based contracts to pesos, severely pressured our
margins. During 2002, we engaged in discussion with all of our Argentine
customers regarding the recovery of losses sustained from the devaluation of
accounts receivable and the basis on which new business would be contracted. We
have restructured most of our contracts on a basis that we believe limits our
exposure to further devaluations. However, further devaluations may cause our
results to suffer materially.
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Since the second quarter of 2002, Venezuela has experienced political,
economic and social instability, including prolonged labor strikes,
demonstrations and an attempt to overthrow the government. Much of the
instability negatively impacted Petroleos de Venezuela, S.A., or PDVSA, which is
our principal customer in Venezuela, and led to the dismissal of more than
18,000 employees by the government. Exchange controls, together with employee
dismissals and reorganization within PDVSA, led to a slower rate of collection
of our trade receivables in early 2003. The instability in Venezuela has had and
may in the future have an adverse effect on our business.
Although foreign exchange in the other countries where we operate is
currently carried out on a free-market basis, local monetary authorities in
these countries may, in the future, implement exchange controls or other
economic measures that would limit or restrict our rights to receive payments or
to otherwise conduct business in these countries.
From time to time, certain of our foreign subsidiaries operate in
countries that are subject to sanctions and embargoes imposed by the U.S.
government and the United Nations. Although these sanctions and embargoes do not
prohibit those subsidiaries from completing existing contracts or from entering
into new contracts to provide drilling services in such countries, they do
prohibit us and our domestic subsidiaries, as well as employees of our foreign
subsidiaries who are U.S. citizens, from participating in or approving any
aspect of the business activities in those countries. These constraints on our
ability to have U.S. persons, including our senior management, provide
managerial oversight and supervision may negatively affect the financial or
operating performance of such business activities. We have received a request
for information from the U.S. Department of Treasury's Office of Foreign Assets
Control regarding our involvement in the business activities of certain of our
foreign subsidiaries in Libya and Iran, and we have provided information
pursuant to that request.
Our international operations are also subject to other risks, including
foreign monetary and tax policies, expropriation, nationalization and
nullification or modification of contracts. Additionally, our ability to compete
in international contract drilling markets may be limited by foreign
governmental regulations that favor or require the awarding of contracts to
local contractors or by regulations requiring foreign contractors to employ
citizens of, or purchase supplies from, a particular jurisdiction. Furthermore,
our foreign subsidiaries may face governmentally imposed restrictions from time
to time on their ability to transfer funds to us.
For further information about our international operations, including our
results of operations by geographic area, please refer to "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and to
note 15 of our notes to consolidated financial statements included in our annual
report on Form 10-K for the year ended December 31, 2003 and in our periodic
reports filed with the SEC.
OUR CUSTOMERS MAY SEEK TO CANCEL OR RENEGOTIATE SOME OF OUR DRILLING
CONTRACTS DURING PERIODS OF DEPRESSED MARKET CONDITIONS OR IF WE
EXPERIENCE OPERATIONAL DIFFICULTIES.
Substantially all our contracts with major customers are dayrate
contracts, where we charge a fixed charge per day regardless of the number of
days needed to drill the well. During depressed market conditions, a customer
may no longer need a rig that is currently under contract or may be able to
obtain a comparable rig at a lower daily rate. As a result, customers may seek
to renegotiate the terms of their existing drilling contracts or avoid their
obligations under those contracts. In addition, our customers may have the right
to terminate existing contracts if we experience operational problems. The
likelihood that a customer may seek to terminate a contract for operational
difficulties is increased during periods of market weakness. The cancellation of
a number of our drilling contracts could materially reduce our revenues and
profitability.
OUR SIGNIFICANT DEBT LEVELS AND DEBT AGREEMENT RESTRICTIONS MAY LIMIT OUR
LIQUIDITY AND FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN
PURSUING OTHER BUSINESS OPPORTUNITIES.
As of June 30, 2004, we had approximately $1.8 billion in long-term debt
and capital lease obligations. The level of our indebtedness will have several
important effects on our future operations, including:
- a significant portion of our cash flow from operations will be
dedicated to the payment of interest and principal on such debt and
will not be available for other purposes;
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- covenants contained in our debt arrangements require us to meet
certain financial tests, which may affect our flexibility in
planning for, and reacting to, changes in our business and may limit
our ability to dispose of assets, withstand current or future
economic or industry downturns and compete with others in our
industry for strategic opportunities; and
- our ability to obtain additional financing for working capital,
capital expenditures, acquisitions, general corporate and other
purposes may be limited.
Our ability to meet our debt service obligations and to reduce our total
indebtedness will be dependent upon our future performance, which will be
subject to general economic conditions, industry cycles and financial, business
and other factors affecting our operations, many of which are beyond our
control.
WE ARE SUBJECT TO A NUMBER OF OPERATING HAZARDS INCLUDING THOSE SPECIFIC
TO MARINE OPERATIONS. WE MAY NOT HAVE INSURANCE TO COVER ALL THESE
HAZARDS.
Our operations are subject to the many hazards customary in the oilfield
services industry. Contract drilling and well servicing require the use of heavy
equipment and exposure to hazardous conditions, which may subject us to
liability claims by employees, customers and third parties. These hazards can
cause personal injury or loss of life, severe damage to or destruction of
property and equipment, pollution or environmental damage and suspension of
operations. Our offshore fleet is also subject to hazards inherent in marine
operations, either while on site or during mobilization, such as capsizing,
sinking and damage from severe weather conditions. We customarily provide
contract indemnity to our customers for:
- claims that could be asserted by us relating to damage to or loss of
our equipment, including rigs;
- claims that could be asserted by us or our employees relating to
personal injury or loss of life; and
- legal and financial consequences of spills of industrial waste and
other liquids, but only to the extent (1) the waste or other liquids
were in our control at the time of the spill or (2) our level of
culpability is greater than mere negligence.
We maintain insurance for injuries to our employees, damage to or loss of
our equipment and other insurance coverage for normal business risks, including
general liability insurance. Any insurance protection may not be sufficient or
effective under all circumstances or against all hazards to which we may be
subject. In addition, some of our primary insurance policies have substantial
per occurrence or annual deductibles and/or self-insured aggregate amounts. The
occurrence of a significant event against which we are not fully insured, or of
a number of lesser events against which we are insured, but subject to
substantial deductibles, could materially increase our costs and impair our
profitability and financial condition. Moreover, worldwide terrorist attacks
have significantly increased premiums for some types of coverage. We may not be
able to maintain adequate insurance at rates or on terms that we consider
reasonable or acceptable.
WE ARE SUBJECT TO NUMEROUS GOVERNMENTAL REGULATIONS, INCLUDING THOSE THAT
MAY IMPOSE SIGNIFICANT LIABILITY ON US FOR ENVIRONMENTAL DAMAGE.
Many aspects of our operations are subject to governmental regulations
that may relate directly or indirectly to the contract drilling and well
servicing industries, including those requiring us to control the discharge of
oil and other contaminants or otherwise relating to protection of the
environment. Our operations and activities are subject to numerous environmental
laws and regulations, including the U.S. Oil Pollution Act of 1990, the U.S.
Outer Continental Shelf Lands Act, and the Comprehensive Environmental Response,
Compensation and Liability Act. Additionally, other countries where we operate
have laws and regulations covering the discharge of oil and other contaminants
in connection with operations. Laws and regulations protecting the environment
have become more stringent in recent years and may in certain circumstances
impose strict liability, rendering us liable for environmental damage without
regard to negligence or fault on our part. These laws and regulations may expose
us to liability for the conduct of, or conditions caused by, others or for acts
that were in compliance with all applicable laws at the time the acts were
performed. The application of these requirements, the modification of existing
laws or regulations or the adoption of new laws or regulations curtailing
exploratory or development drilling for oil and gas could materially limit
future contract drilling opportunities or materially increase our costs or both.
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WE MAY HAVE DIFFICULTY IMPLEMENTING IN A TIMELY MANNER INTERNAL CONTROL
PROCEDURES NECESSARY TO ALLOW OUR MANAGEMENT TO REPORT ON THE
EFFECTIVENESS OF OUR INTERNAL CONTROLS. IN ADDITION, OUR INDEPENDENT
AUDITORS MAY NOT BE ABLE TO ISSUE AN ATTESTATION REPORT ON MANAGEMENT'S
ASSESSMENT.
Beginning with our report for the year ending December 31, 2004, Section
404 of the Sarbanes-Oxley Act of 2002 will require us to include an internal
control report of management with our annual report on Form 10-K, which is to
include management's assessment of the effectiveness of our internal control
over financial reporting as of the end of the fiscal year. That report will also
be required to include a statement that our independent auditors have issued an
attestation report on management's assessment of our internal control over
financial reporting. Our independent auditors, PricewaterhouseCoopers LLP,
issued a letter to our audit committee dated August 13, 2003 noting certain
matters in our Technical Services segment that they considered to be a material
weakness in internal control.
In order to achieve compliance with Section 404 within the prescribed
period, management has formed an internal control steering committee, engaged
outside consultants and adopted a detailed project work plan to assess the
adequacy of our internal control over financial reporting, remediate any control
weaknesses that may be identified, validate through testing that controls are
functioning as documented and implement a continuous reporting and improvement
process for internal control over financial reporting. We may not, however, be
able to complete the work necessary for our management to issue its management
report in a timely manner, or any work that will be required for our management
to be able to report that our internal control over financial reporting is
effective. In addition, our independent auditors may not be able to issue an
attestation report on management's assessment.
MANY OF OUR CONTRACTS WITH OUR CUSTOMERS FOR OUR OFFSHORE RIGS ARE FIXED
DAYRATE CONTRACTS. INCREASES IN OUR COSTS, WHICH ARE UNPREDICTABLE AND
FLUCTUATE BASED ON EVENTS OUTSIDE OUR CONTROL, COULD ADVERSELY IMPACT OUR
PROFITABILITY ON THOSE CONTRACTS.
A number of our contracts with our customers for our offshore rigs are on
a fixed dayrate basis. However, many of our costs, such as labor costs, are
unpredictable and fluctuate based on events outside our control. The gross
margin we realize on these fixed dayrate contracts will often fluctuate based
on, among other things, variations in labor and other costs over the term of the
contract. A substantial increase in our costs associated with these contracts
would adversely impact our profitability.
RISKS RELATED TO THE NOTES
THE NOTES ARE OUR SENIOR UNSECURED OBLIGATIONS. AS SUCH, THE NOTES ARE
EFFECTIVELY SUBORDINATED TO ALL OUR EXISTING AND FUTURE SECURED DEBT, TO
THE EXISTING AND FUTURE DEBT OF OUR SUBSIDIARIES THAT DO NOT GUARANTEE THE
NOTES AND TO THE EXISTING AND FUTURE SECURED DEBT OF ANY SUBSIDIARIES THAT
GUARANTEE THE NOTES. FURTHERMORE, AS A HOLDING COMPANY, WE DEPEND ON CASH
WE OBTAIN FROM OUR SUBSIDIARIES TO MEET OUR DEBT SERVICE OBLIGATIONS.
The notes constitute our senior unsecured debt and rank equally in right
of payment with all of our other existing and future senior debt and senior in
right of payment to all of our existing and future subordinated debt. The notes
are effectively subordinated to all our existing and future secured debt, to the
existing and future debt of our subsidiaries that do not guarantee the notes and
to the existing and future secured debt of any subsidiaries that guarantee the
notes. There currently are no subsidiary guarantors. If we are involved in any
dissolution, liquidation or reorganization, our secured debt holders would be
paid before you receive any amounts due under the notes to the extent of the
value of the assets securing their debt. In that event, you may not be able to
recover any principal or interest you are due under the notes.
13
We currently conduct our operations through both U.S. and foreign
subsidiaries, and our operating income and cash flow are generated by our
subsidiaries. As a result, cash we obtain from our subsidiaries is the principal
source of funds necessary to meet our debt service obligations. Contractual
provisions or laws, as well as our subsidiaries' financial condition and
operating requirements, may limit our ability to obtain cash from our
subsidiaries that we require to pay our debt service obligations, including
payments on the notes. In addition, holders of the notes will have a junior
position to the claims of creditors, including trade creditors and tort
claimants, of our subsidiaries that do not guarantee the notes and to all
secured creditors of our subsidiaries, whether or not they guarantee the notes,
with respect to the assets securing the claims of those secured creditors.
As of June 30, 2004, as adjusted for the issuance of the old notes,
completion of our new revolving credit facility and term loan on the same date
as the issuance of the old notes and the use of the net proceeds from these
transactions, including borrowings of $147.4 million under the revolving credit
facility, to repay debt as described under "Private Placement," we would have
had outstanding $1.1 billion of unsecured and unsubordinated indebtedness, no
secured debt and $1.1 million of subordinated indebtedness (in each case
excluding guarantees of indebtedness of our subsidiaries), and our subsidiaries
would have had outstanding $2.2 million of unsecured and unsubordinated
indebtedness, $1.0 billion of secured indebtedness and no subordinated
indebtedness, in each case excluding intercompany indebtedness.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO
VOID SUBSIDIARY GUARANTEES.
The indenture governing the notes does not require any subsidiary to
guarantee the notes unless that subsidiary guarantees any of our other
indebtedness (excluding our indebtedness under credit facilities) as described
under "Description of Notes -- Restrictive Covenants -- Limitation on
Non-Guarantor Subsidiaries." There currently are no subsidiary guarantors.
Various fraudulent conveyance laws have been enacted for the protection of
creditors, and a court may use these laws to subordinate or avoid any subsidiary
guarantee that may be delivered in the future. A court could avoid or
subordinate a subsidiary guarantee in favor of that subsidiary guarantor's other
creditors if the court found that either:
- the guarantee was incurred with the intent to hinder, delay or
defraud any present or future creditor or the subsidiary guarantor
contemplated insolvency with a design to favor one or more creditors
to the exclusion in whole or in part of others; or
- the subsidiary guarantor did not receive fair consideration or
reasonably equivalent value for issuing its subsidiary guarantee;
and, in either case, the subsidiary guarantor, at the time it issued the
subsidiary guarantee:
- was insolvent or rendered insolvent by reason of the issuance of the
subsidiary guarantee;
- was engaged or about to engage in a business or transaction for
which its remaining assets constituted unreasonably small capital;
or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured.
Among other things, a legal challenge of the subsidiary guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
subsidiary guarantor as a result of our issuance of the notes or the delivery of
the subsidiary guarantee. To the extent the subsidiary guarantee was avoided as
a fraudulent conveyance or held unenforceable for any other reason, the holders
of the notes would cease to have any claim against that subsidiary guarantor and
would be solely creditors of the parent company and of any subsidiary guarantors
whose subsidiary guarantees were not avoided or held unenforceable. In that
event, the claims of the holders of the notes against the issuer of an invalid
subsidiary guarantee would be subject to the prior payment of all liabilities of
that subsidiary guarantor.
WE ARE REQUIRED TO PURCHASE THE NOTES IN CONNECTION WITH A CHANGE IN
CONTROL ONLY IF THE RATINGS ON THE NOTES DECLINE. IN ADDITION, IT MAY NOT
BE POSSIBLE FOR US TO PURCHASE THE NOTES ON THE OCCURRENCE OF SUCH A
CHANGE IN CONTROL.
14
We are required to offer to repurchase the notes only in connection with
specified change in control events that result in a ratings decline. Change in
control provisions of other outstanding debt may require a repurchase if a
change in control occurs without requiring a ratings decline. Accordingly, if a
change in control were to occur that does not result in a rating decline, we
could be required to repurchase other outstanding debt, but we would not be
required to offer to repurchase the notes. We may not have sufficient funds
available or be able to obtain the financing necessary to make any of the debt
payments, including purchases of the notes, described above.
If we were required to purchase the notes and we did not have the funds or
financing available to make the debt payments, including purchases of the notes,
an event of default would be triggered under the indenture governing the notes
and certain other debt instruments. Each of these defaults could have a material
adverse effect on us and the holders of the notes. See "Description of Notes --
Repurchase at Option of the Holder Upon a Change in Control."
BECAUSE THERE IS NO PUBLIC MARKET FOR THE NOTES, YOU MAY NOT BE ABLE TO
RESELL THE NOTES EASILY OR AT A FAVORABLE PRICE.
There is no public market for the notes. A market for the notes may not
develop, and we are not certain of the liquidity of any market they may develop,
the ability of the holders to sell their notes or the price at which holders
would be able to sell their notes. If a market were to develop, the market price
for the notes may be adversely affected by changes in our financial performance,
changes in the overall market for similar securities and performances or
prospects for companies in our industry.
15
FORWARD-LOOKING INFORMATION
This prospectus, including the information we incorporate by reference,
includes "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements, other than statements of historical fact, included in this
prospectus or the documents we incorporate by reference that address activities,
events or developments that we expect, project, believe or anticipate will or
may occur in the future are forward-looking statements. These include such
matters as:
- market conditions, expansion and other development trends in the
contract drilling industry;
- our ability to enter into new contracts for our rigs and future
utilization rates and contract rates for rigs;
- future capital expenditures and investments in the construction,
acquisition and refurbishment of rigs (including the amount and
nature thereof and the timing of completion thereof);
- estimates of profit or loss from performance of lump-sum rig
construction contracts;
- future asset sales;
- completion and employment of rigs under construction;
- repayment of debt;
- utilization of net operating loss carryforwards and future effective
income tax rates;
- business strategies;
- expansion and growth of operations;
- future exposure to currency devaluations or exchange rate
fluctuations;
- expected outcomes of legal and administrative proceedings and their
expected effects on our financial position, results of operations
and cash flows;
- future operating results and financial condition; and
- the effectiveness of our disclosure controls and procedures and
internal control over financial reporting.
We have based these statements on our assumptions and analyses in light of
our experience and perception of historical trends, current conditions, expected
future developments and other factors we believe are appropriate in the
circumstances. These statements are subject to a number of assumptions, risks
and uncertainties, including those described above under "Risk Factors" and in
our SEC filings and the following:
- general economic business conditions;
- prices of oil and gas and industry expectations about future prices;
- cost overruns in our lump-sum rig construction and other turnkey
contracts;
- adjustments in estimates affecting our revenue recognition under
percentage-of-completion accounting;
- foreign exchange controls and currency fluctuations;
- political stability in the countries in which we operate;
- the business opportunities (or lack thereof) that may be presented
to and pursued by us;
- changes in laws or regulations;
- the validity of the assumptions used in the design of our disclosure
controls and procedures; and
16
- our ability to implement in a timely manner internal control
procedures necessary to allow our management to report on the
effectiveness of our internal control over financial reporting.
Most of these factors are beyond our control. We caution you that
forward-looking statements are not guarantees of future performance and that
actual results or developments may differ materially from those projected in
these statements.
17
RATIO OF EARNINGS TO FIXED CHARGES
We have presented in the table below our historical consolidated ratio of
earnings to fixed charges for the periods shown.
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED ------------------------------------
JUNE 30,
2004 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges....................... 1.3x 1.0x 1.1x 1.9x 1.7x --
We have computed the ratios of earnings to fixed charges by dividing
earnings by fixed charges. For this purpose, "earnings" consist of earnings
before income taxes and minority interest plus fixed charges less capitalized
interest. "Fixed charges" consist of interest expense, capitalized interest and
that portion of operating lease rental expense we have deemed to represent the
interest factor. For the year ended December 31, 1999, earnings were inadequate
to cover fixed charges by $114.6 million.
PRIVATE PLACEMENT
On July 7, 2004, we issued the $500 million principal amount of the
outstanding 7 3/8% Senior Notes due 2014 to the initial purchasers of those
notes and received proceeds, after discounts but before other expenses, of
$491.1 million. We issued the old notes to the initial purchasers in
transactions exempt from or not subject to registration under the Securities
Act. The initial purchasers then offered and resold the notes to qualified
institutional buyers and non-U.S. persons initially at 99.474% of the principal
amount of the old notes. In addition, on the same date, we entered into new
senior secured credit facilities with a group of banks and institutional lenders
for aggregate availability of up to $800 million, consisting of a revolving
credit facility with availability of up to $500 million and a $300 million term
loan.
We used the net proceeds from the offering of the old notes, together with
proceeds from the new term loan and initial borrowings of approximately $95
million under the revolving credit facility, to retire our 9 3/8% Senior Notes
due 2007, 10% Senior Notes due 2009 and 9% senior convertible notes, together
with the applicable prepayment premium and accrued and unpaid interest, and to
refinance amounts outstanding under other credit facilities.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes.
In consideration for issuing the new notes, we will receive in exchange a like
principal amount of old notes. The old notes surrendered in exchange for the new
notes will be retired and canceled and cannot be reissued. Accordingly, issuance
of the new notes will not result in any change in our capitalization.
18
THE EXCHANGE OFFER
Participation in the exchange offer is voluntary, and we urge you to
carefully consider whether to accept. Please consult your financial and tax
advisors in making your own decision on what action to take.
We are offering to issue new registered 7 3/8% Senior Notes due 2014 in
exchange for a like principal amount of our outstanding 7 3/8% Senior Notes due
2014. We may extend, delay or terminate the exchange offer. Holders of old notes
who wish to exchange their notes will need to complete the exchange offer
documentation related to the exchange.
PURPOSE OF THE EXCHANGE OFFER
We sold the old notes in transactions that were exempt from or not subject
to the registration requirements under the Securities Act. Accordingly, the old
notes are subject to transfer restrictions. In general, you may not offer or
sell the old notes unless either they are registered under the Securities Act or
the offer or sale is exempt from or not subject to registration under the
Securities Act and applicable state securities laws.
In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers of the old notes. In
that agreement, we agreed to use our reasonable best efforts to file a
registration statement relating to an offer to exchange the old notes for new
notes and to have that registration statement declared effective by the SEC
within 180 days after the issue date of the old notes. We also agreed to use our
reasonable best efforts to complete the exchange offer within 45 days after the
registration statement becomes effective. We are offering the new notes under
this prospectus in an exchange offer for the old notes to satisfy our
obligations under the registration rights agreement.
RESALE OF NEW NOTES
Based on interpretations of the SEC staff in "no action letters" issued to
third parties, we believe that each new note issued in the exchange offer may be
offered for resale, resold and otherwise transferred by you without compliance
with the registration and prospectus delivery provisions of the Securities Act
if:
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act;
- you acquire such new notes in the ordinary course of your business;
and
- you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of new notes.
The SEC has not, however, considered the legality of our exchange offer in
the context of a "no action letter," and there can be no assurance that the
staff of the SEC would make a similar determination with respect to our exchange
offer as it has in other interpretations to other parties.
If you tender your old notes in the exchange offer with the intention of
participating in any manner in a distribution of the new notes, you:
- cannot rely on such interpretations by the SEC staff; and
- must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary
resale transaction of the new notes.
19
Unless an exemption from registration is otherwise available, the resale
by any securityholder intending to distribute new notes should be covered by an
effective registration statement under the Securities Act containing the selling
securityholder's information required by Item 507 or Item 508, as applicable, of
Regulation S-K under the Securities Act. This prospectus may be used for an
offer to resell, resale or other retransfer of new notes only as specifically
described in this prospectus. Failure to comply with the registration and
prospectus delivery requirements by a holder subject to these requirements could
result in that holder incurring liability for which it is not indemnified by us.
With respect to broker-dealers, only those that acquired the old notes for their
own account as a result of market-making activities or other trading activities
may participate in the exchange offer. Each broker-dealer that receives new
notes for its own account in exchange for old notes acquired as a result of
market-making activities or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must acknowledge that
it will deliver a prospectus in connection with any resale of such new notes.
Please read "Plan of Distribution" for more details regarding the transfer of
new notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any old notes
properly tendered and not withdrawn prior to the expiration date of the exchange
offer. We will issue $1,000 principal amount of new notes in exchange for each
$1,000 principal amount of old notes surrendered under the exchange offer. Old
notes may be tendered only in integral multiples of $1,000. The exchange offer
is not conditioned upon any minimum aggregate principal amount of old notes
being tendered for exchange.
As of the date of this prospectus, $500 million principal amount of 7 3/8%
Senior Notes due 2014 is outstanding. This prospectus and the letter of
transmittal are being sent to all registered holders of old notes. There will be
no fixed record date for determining registered holders of old notes entitled to
participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934 and the rules and
regulations of the SEC. Old notes that are not tendered for exchange in the
exchange offer will:
- remain outstanding;
- continue to accrue interest; and
- be entitled to the rights and benefits that holders have under the
indenture relating to the old notes and, if applicable, the
registration rights agreement.
However, these old notes will not be freely tradable. See " -- Consequences of
Failure to Exchange" below.
By signing or agreeing to be bound by the letter of transmittal, you
acknowledge that, upon request, you will execute and deliver any additional
documents deemed by the exchange agent or us to be necessary or desirable to
complete the exchange, assignment and transfer of the old notes tendered by you,
including the transfer of such old notes on the account books maintained by DTC.
We will be deemed to have accepted for exchange properly tendered old
notes when we have given oral or written notice of the acceptance to the
exchange agent and complied with the applicable provisions of the registration
rights agreement. The exchange agent will act as agent for the tendering holders
for the purposes of receiving the new notes from us.
If you tender old notes in the exchange offer, you will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes. We
will pay all charges and expenses, other than certain applicable taxes described
below, in connection with the exchange offer. It is important that you read the
section " -- Fees and Expenses" for more details about fees and expenses
incurred in the exchange offer.
We will return any old notes that we do not accept for exchange for any
reason without expense to the tendering holder as promptly as practicable after
the expiration or termination of the applicable exchange offer.
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EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time, on
, 2004, unless in our sole discretion we extend it.
EXTENSIONS, DELAY IN ACCEPTANCE, TERMINATION OR AMENDMENT
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. We may delay
acceptance for exchange of any old notes by giving oral or written notice of the
extension to their holders. During any such extensions, all old notes you have
previously tendered and not withdrawn will remain subject to the exchange offer,
and we may accept them for exchange.
To extend an exchange offer, we will notify the exchange agent orally or
in writing of any extension. We also will make a public announcement of the
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
If any of the conditions described below under " -- Conditions to the
Exchange Offer" have not been satisfied with respect to the exchange offer, we
reserve the right, in our sole discretion to:
- delay accepting for exchange any old notes;
- extend the exchange offer; or
- terminate the exchange offer.
We will give oral or written notice of such delay, extension or termination to
the exchange agent. Subject to the terms of the registration rights agreement,
we also reserve the right to amend the terms of the exchange offer in any
manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of the old notes. If we amend the exchange offer in a manner
that we determine to constitute a material change, we will promptly disclose
that amendment by means of a prospectus supplement. We will distribute the
supplement to the registered holders of the old notes. Depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, we will extend the exchange offer if the exchange offer would otherwise
expire during such period.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, if in our reasonable
judgment the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation of the
staff of the SEC (due to a change in its current interpretations) or would be
impaired by any action or proceeding that has been instituted or threatened in
any court or by or before any governmental agency with respect to the exchange
offer:
- we will not be required to accept for exchange, or exchange any new
notes for, any old notes; and
- we may terminate the exchange offer before accepting any old notes
for exchange.
In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made to us:
- the representations described below under " -- Procedures for
Tendering" and in the letter of transmittal; and
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- such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make
available to us an appropriate form for registering the new notes
under the Securities Act.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any old notes not previously accepted for exchange in
the exchange offer, upon the occurrence of any of the conditions to the exchange
offer specified above.
These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole discretion.
Our failure at any time to exercise any of these rights will not mean that we
have waived our rights. Each right will be deemed an ongoing right that we may
assert at any time or at various times.
In addition, we will not accept for exchange any old notes tendered, and
will not issue new notes in exchange for any such old notes, if at that time any
stop order has been threatened or is in effect with respect to the registration
statement of which this prospectus constitutes a part or the qualification of
the indenture relating to the notes under the Trust Indenture Act of 1939.
PROCEDURES FOR TENDERING
HOW TO TENDER GENERALLY
Only a registered holder of old notes may tender its old notes in the
exchange offer. If you are a beneficial owner of old notes and wish to have the
registered owner tender on your behalf, please read " -- How to Tender If You
Are a Beneficial Owner." To tender in the exchange offer, a holder must either
(1) comply with the procedures for physical tender or (2) comply with the
automated tender offer program procedures of The Depository Trust Company, or
DTC, described below.
To complete a physical tender, a holder must:
- complete, sign and date the letter of transmittal or a facsimile of
the letter of transmittal;
- have the signature on the letter of transmittal guaranteed if the
letter of transmittal so requires; and
- mail or deliver the letter of transmittal or facsimile and deliver
the old notes to the exchange agent prior to the expiration date.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address provided above under "Prospectus Summary -- The Exchange Agent" prior to
the expiration date. To complete a tender through DTC's automated tender offer
program, the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such old notes into the exchange agent's
account at DTC according to the procedure for book-entry transfer described
below and a properly transmitted agent's message.
If you wish to tender your old notes and cannot comply with the
requirement to deliver the letter of transmittal and your old notes (including
by book-entry transfer) or use the automated tender offer program of DTC
described below before the expiration date, you must tender your outstanding
notes according to the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the expiration date
and our acceptance of that tender will constitute an agreement between the
holder and us in accordance with the terms and subject to the conditions
described in this prospectus and in the letter of transmittal.
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THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND
THE LETTER OF TRANSMITTAL OR OLD NOTES TO US. YOU MAY REQUEST YOUR BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE ABOVE
TRANSACTIONS FOR YOU.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the old notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus. Any financial institution participating in
DTC's system may make book-entry delivery of old notes by causing DTC to
transfer such old notes into the exchange agent's account at DTC in accordance
with DTC's procedures for transfer. If you are unable to deliver confirmation of
the book-entry tender of your old notes into the exchange agent's account at DTC
or all other documents required by the letter of transmittal to the exchange
agent on or prior to the expiration date, you must tender your old notes
according to the guaranteed delivery procedures described below.
TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender its old notes. Accordingly, participants in the program may,
instead of physically completing and signing the letter of transmittal and
delivering it to the exchange agent, transmit their acceptance of the exchange
offer electronically. They may do so by causing DTC to transfer the old notes to
the exchange agent in accordance with its procedures for transfer. DTC will then
send an agent's message to the exchange agent.
An "agent's message" is a message transmitted by DTC to and received by
the exchange agent and forming part of the book-entry confirmation, stating
that:
- DTC has received an express acknowledgment from a participant in
DTC's automated tender offer program that is tendering old notes
that are the subject of such book-entry confirmation;
- the participant has received and agrees to be bound by the terms of
the letter of transmittal or, in the case of an agent's message
relating to guaranteed delivery, the participant has received and
agrees to be bound by the applicable notice of guaranteed delivery;
and
- we may enforce the agreement against the participant.
HOW TO TENDER IF YOU ARE A BENEFICIAL OWNER
If you beneficially own old notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish to
tender those notes, you should contact the registered holder as soon as possible
and instruct the registered holder to tender on your behalf. If you are a
beneficial owner and wish to tender on your own behalf, you must, prior to
completing and executing the letter of transmittal and delivering your old
notes, either:
- make appropriate arrangements to register ownership of the old notes
in your name; or
- obtain a properly completed bond power from the registered holder of
your old notes.
The transfer of registered ownership may take considerable time and may
not be completed prior to the expiration date.
SIGNATURES AND SIGNATURE GUARANTEES
You must have signatures on a letter of transmittal or a notice of
withdrawal described below guaranteed by an "eligible institution" unless the
old notes are tendered:
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- by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal and the new notes are being issued
directly to the registered holder of the old notes tendered in the
exchange offer for those new notes; or
- for the account of an eligible institution.
An "eligible institution" is a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act, in each case that is a member of one
of the recognized signature guarantee programs identified in the letter of
transmittal.
WHEN ENDORSEMENTS OR BOND POWERS ARE NEEDED
If a person other than the registered holder of any old notes signs the
letter of transmittal, the old notes must be endorsed or accompanied by a
properly completed bond power. The registered holder must sign the bond power as
the registered holder's name appears on the old notes. An eligible institution
must guarantee that signature.
If the letter of transmittal or any old notes or bond powers are signed 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. Unless we waive this requirement, they
also must submit evidence satisfactory to us of their authority to deliver the
letter of transmittal.
DETERMINATIONS UNDER THE EXCHANGE OFFER
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered old notes and
withdrawal of tendered old notes. Our determination will be final and binding.
We reserve the absolute right to reject any old notes not properly tendered or
any old notes our acceptance of which, in the opinion of our counsel, might be
unlawful. We also reserve the right to waive any defects, irregularities or
conditions of the exchange offer as to particular old 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
old notes must be cured within the time we determine. Neither we, the exchange
agent nor any other person will be under any duty to give notification of
defects or irregularities with respect to tenders of old notes, nor will we or
those persons incur any liability for failure to give such notification. Tenders
of old notes will not be deemed made until such defects or irregularities have
been cured or waived. Any old notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
WHEN WE WILL ISSUE NEW NOTES
In all cases, we will issue new notes for old notes that we have accepted
for exchange in the exchange offer only after the exchange agent timely
receives:
- old notes or a timely book-entry confirmation of such old notes into
the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
RETURN OF OLD NOTES NOT ACCEPTED OR EXCHANGED
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If we do not accept any tendered old notes for exchange for any reason
described in the terms and conditions of the exchange offer or if old notes are
submitted for a greater principal amount than the holder desires to exchange, we
will return the unaccepted or non-exchanged old notes without expense to their
tendering holder. In the case of old notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described above,
such non-exchanged old notes will be credited to an account maintained with DTC.
These actions will occur as promptly as practicable after the rejection of
tender or the expiration or termination of the exchange offer.
YOUR REPRESENTATIONS TO US
By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
- any new notes that you receive will be acquired in the ordinary
course of your business;
- you have no arrangement or understanding with any person to
participate in the distribution of the old notes or the new notes;
- you are not our "affiliate," as defined in Rule 405 of the
Securities Act, or, if you are our 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, you are not engaged in, and do not
intend to engage in, the distribution of the new notes;
- if you are a broker-dealer, you will receive new notes for your own
account in exchange for old notes that you acquired as a result of
market-making activities or other trading activities, and you will
deliver a prospectus in connection with any resale of such new
notes;
- if you are a broker-dealer, you did not purchase the old notes to be
exchanged for the new notes from us; and
- you are not acting on behalf of any person who could not truthfully
and completely make the foregoing representations.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your old notes but they are not immediately
available or if you cannot deliver your old notes, the letter of transmittal or
any other required documents to the exchange agent or comply with the applicable
procedures under DTC's automated tender offer program prior to the expiration
date, you may tender if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from that
eligible institution either a properly completed and duly executed
notice of guaranteed delivery by facsimile transmission, mail or
hand delivery or a properly transmitted agent's message relating to
a notice of guaranteed delivery:
- stating your name and address, the registration number or
numbers of your old notes and the principal amount of old
notes tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of
transmittal or facsimile thereof or agent's message in lieu
thereof, together with the old notes or a book-entry
confirmation, and any other documents required by the letter
of transmittal will be deposited by the eligible institution
with the exchange agent; and
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- the exchange agent receives such properly completed and executed
letter of transmittal or facsimile or agent's message, as well as
all tendered old notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the letter of
transmittal, within three New York Stock Exchange trading days after
the expiration date.
Upon request to the exchange agent, the exchange agent will send a notice
of guaranteed delivery to you if you wish to tender your old notes according to
the guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to 5:00 p.m., New York City time, on the expiration
date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at
the address listed above under "Prospectus Summary -- The Exchange
Agent"; or
- the withdrawing holder must comply with the appropriate procedures
of DTC's automated tender offer program.
Any notice of withdrawal must:
- specify the name of the person who tendered the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the registration
number or numbers and the principal amount of such old notes;
- be signed by the person who tendered the old notes in the same
manner as the original signature on the letter of transmittal used
to deposit those old notes, or be accompanied by documents of
transfer sufficient to permit the trustee to register the transfer
into the name of the person withdrawing the tender; and
- specify the name in which such old notes are to be registered, if
different from that of the person who tendered the old notes.
If old notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn old notes and
otherwise comply with the procedures of DTC.
We will determine in our sole discretion all questions as to the validity,
form, eligibility and time of receipt of notice of withdrawal, and our
determination will be final and binding on all parties. We will deem any old
notes so withdrawn not to have been validly tendered for exchange for purposes
of the exchange offer.
Any old notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of old notes tendered by book-entry transfer into the
exchange agent's account at DTC according to the procedures described above,
such old notes will be credited to an account maintained with DTC for the old
notes. This return or crediting will take place as soon as practicable after
withdrawal. You may retender properly withdrawn old notes by following one of
the procedures described under " -- Procedures for Tendering" above at any time
on or prior to the expiration date.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make additional solicitation
by facsimile, email, telephone or in person by our officers and regular
employees and those of our affiliates.
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We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses. 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 old notes and in handling
or forwarding tenders for exchange.
We will pay the cash expenses to be incurred in connection with the
exchange offer. They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of old
notes in the exchange offer. The tendering holder will, however, be required to
pay any transfer taxes, whether imposed on the registered holder or any other
person, if:
- certificates representing new notes or old notes for principal
amounts not tendered or accepted for exchange are to be delivered
to, or are to be issued in the name of, any person other than the
registered holder of old notes tendered;
- tendered old notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
old notes in the exchange offer.
If satisfactory evidence of payment of any transfer taxes payable by a tendering
holder is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to that tendering holder. The exchange
agent will retain possession of new notes with a face amount equal to the amount
of the transfer taxes due until it receives payment of the taxes.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not tender your old notes for new notes in the exchange offer,
or if you tender your old notes but subsequently withdraw them, your old notes
will remain outstanding and continue to accrue interest, but will not retain any
rights under the registration rights agreement (except in limited circumstances
involving the initial purchasers and specified broker-dealers) or accrue
additional interest under that agreement. IN ADDITION, YOU WILL REMAIN SUBJECT
TO THE EXISTING RESTRICTIONS ON TRANSFER OF THE OLD NOTES. IN GENERAL, YOU MAY
NOT OFFER OR SELL THE OLD NOTES UNLESS EITHER THEY ARE REGISTERED UNDER THE
SECURITIES ACT OR THE OFFER OR SALE IS EXEMPT FROM OR NOT SUBJECT TO
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
Except as required by the registration rights agreement, we do not intend to
register resales of the old notes under the Securities Act.
THE TENDER OF OLD NOTES IN THE EXCHANGE OFFER WILL REDUCE THE PRINCIPAL
AMOUNT OF THE OLD NOTES OUTSTANDING. DUE TO THE CORRESPONDING REDUCTION IN
LIQUIDITY, THIS MAY HAVE AN ADVERSE EFFECT UPON, AND INCREASE THE VOLATILITY OF,
THE MARKET PRICE OF ANY OLD NOTES THAT YOU CONTINUE TO HOLD FOLLOWING COMPLETION
OF THE EXCHANGE OFFER.
ACCOUNTING TREATMENT
We will not recognize a gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize our expenses of the
exchange offer over the term of the new notes in accordance with U.S. generally
accepted accounting principles.
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OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your decision on what action to take. In the future, we may
seek to acquire untendered old notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. We have no
present plan to acquire any old notes that are not tendered in the exchange
offer or to file a registration statement to permit resales of any untendered
old notes, except as required by the registration rights agreement.
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DESCRIPTION OF NOTES
We will issue the new notes, and we issued the old notes, under an
indenture, dated as of July 1, 2004, between Pride International, Inc., as
issuer, and JPMorgan Chase Bank, as trustee, as supplemented by the First
Supplemental Indenture thereto dated as of July 7, 2004. In this prospectus, we
sometimes refer to the Indenture and the First Supplemental Indenture as the
"indenture." In connection with the issuance of the old notes, we also entered
into a registration rights agreement with the initial purchasers of the old
notes. This description is a summary of the material provisions of the notes,
the indenture and the registration rights agreement. It does not purport to be
complete. We urge you to read the notes, the indenture and the registration
rights agreement in their entirety because those documents, and not this
description, define your rights as holders of the notes.
We have filed the indenture and the registration rights agreement as
exhibits to the registration statement of which this prospectus is a part. The
terms of the indenture include those stated in the indenture and those made part
of the indenture by reference to the Trust Indenture Act of 1939. Debt
securities may be issued under the indenture from time to time in separate
series, each up to the aggregate amount authorized for each series, and the
notes are the initial series of debt securities to be issued under the
indenture.
The old notes and the new notes issued in the exchange offer will together
constitute a single class of securities under the indenture. If the exchange
offer for notes is consummated, holders of old notes who do not exchange their
old notes for new notes in the exchange offer will vote together with holders of
new notes for all relevant purposes under the indenture. Accordingly, in
determining whether the required holders have given any notice, consent or
waiver or taken any other action permitted under the indenture, any old notes
that remain outstanding after the exchange offer will be aggregated with the new
notes, and the holders of those old notes and new notes will vote together as a
single class.
As used in this "Description of Notes" section, references to "Pride,"
"we," "our" or "us" refer solely to Pride International, Inc. and not to its
subsidiaries. In addition, we have used in this description capitalized and
other terms that we have defined below under " -- Glossary" and in other parts
of this description.
GENERAL
The notes are limited initially to $500 million aggregate principal amount
and are senior unsecured obligations of Pride. We may issue additional notes
from time to time without the consent of holders. Any issuance of additional
notes is subject to the covenant described below under the caption " --
Restrictive Covenants -- Limitation on Indebtedness," if in effect at the time
of such issuance. The notes and any additional notes subsequently issued under
the indenture will be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. We will issue notes in denominations of $1,000 and integral
multiples of $1,000. The notes will mature on July 15, 2014.
Interest on the notes will accrue at the rate of 7 3/8% per annum from
July 7, 2004 or, if interest has already been paid, from the date it was most
recently paid. We will pay interest on January 15 and July 15 of each year,
beginning January 15, 2005, to holders of record at the close of business on
January 1 or July 1, as the case may be, immediately preceding the interest
payment date. Interest will be computed on the basis of a 360-day year composed
of twelve 30-day months.
We will maintain an office or agency in The City of New York where notes
may be presented for payment, which will initially be the office of the trustee
at 4 New York Plaza, 15th Floor, New York, New York 10004. We will make payments
on the notes either:
- by check mailed to your address as it appears in the note register,
provided that, if you are a holder with an aggregate principal
amount in excess of $2.0 million, you will be paid, if you so elect
in writing, according to the immediately following bullet point; or
- by wire transfer of immediately available funds to an account
maintained by you in the United States.
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Payments on notes registered in the name of The Depository Trust Company,
New York, New York, which we refer to as DTC, will be made according to the
second bullet point above to the account of DTC or its nominee in the United
States.
The registered holder of a note will be treated as its owner for all
purposes, and all references in this description to "holders" mean holders of
record, unless otherwise indicated.
RANKING
The notes will constitute our senior unsecured indebtedness and will rank
equally in right of payment with all of our other unsubordinated indebtedness
and senior in right of payment to all of our subordinated indebtedness. The
notes will be effectively subordinated to our secured indebtedness with respect
to the assets securing that indebtedness.
We currently conduct our operations through both U.S. and foreign
subsidiaries, and our operating income and cash flow are generated by our
subsidiaries. As a result, cash we obtain from our subsidiaries is the principal
source of funds necessary to meet our debt service obligations. Contractual
provisions or laws, as well as our subsidiaries' financial condition and
operating requirements, may limit our ability to obtain cash from our
subsidiaries that we require to pay our debt service obligations, including
payments on the notes. In addition, holders of the notes will have a junior
position to the claims of creditors, including trade creditors and tort
claimants, of our subsidiaries that do not guarantee the notes and to all
secured creditors of our subsidiaries that guarantee the notes with respect to
the assets securing the claims of those secured creditors.
We and our subsidiaries are subject to some restrictions in the notes on
incurring indebtedness, though any indebtedness that we or our subsidiaries may
incur could still be substantial. As of June 30, 2004, as adjusted for the
issuance of the old notes, completion of our new revolving credit facility and
term loan on the same date as the issuance of the old notes and the use of the
net proceeds from these transactions, including borrowings of $147.4 million
under the revolving credit facility, to repay debt as described under "Private
Placement," we would have had outstanding $1.1 billion of unsecured and
unsubordinated indebtedness, no secured debt and $1.1 million of subordinated
indebtedness (in each case excluding guarantees of indebtedness of our
subsidiaries), and our subsidiaries would have had outstanding $2.2 million of
unsecured and unsubordinated indebtedness, $1.0 billion of secured indebtedness
and no subordinated indebtedness, in each case excluding intercompany
indebtedness.
TERMINATION OF COVENANTS UPON ACHIEVEMENT OF INVESTMENT GRADE STATUS
If at any time the notes achieve an Investment Grade Status and no Event
of Default has occurred and is then continuing, which occurrence we call an
"Investment Grade Status Event," then certain covenants described below under "
- -- Restrictive Covenants," together with clause (3) of the covenant described
below under " -- Consolidation, Merger and Sale of Assets," will terminate and
thereafter will no longer apply to us and our Subsidiaries. See " -- Restrictive
Covenants."
SUBSIDIARY GUARANTEES OF NOTES
Under the circumstances described below, our payment obligations under the
notes may in the future be jointly and severally guaranteed by our existing or
future Subsidiaries as subsidiary guarantors. Although there currently are no
subsidiary guarantors, covenants described below may require a Subsidiary in the
future to guarantee the notes simultaneously with its guarantee of our other
Indebtedness (except Indebtedness under a Credit Facility). See " -- Restrictive
Covenants -- Limitation on Non-Guarantor Subsidiaries."
Under its subsidiary guarantee, each subsidiary guarantor will guarantee,
jointly and severally, to each holder and the trustee, the full and prompt
performance of our obligations under the indenture and the notes, including the
payment of principal of (or premium, if any, on) and interest, if any, on the
notes.
The subsidiary guarantees will be unsecured senior obligations of each
subsidiary guarantor and will:
- rank equally in right of payment with all other unsubordinated
indebtedness of that subsidiary guarantor,
- rank senior in right of payment to all subordinated indebtedness of
that subsidiary guarantor, and
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- be effectively subordinated to all secured indebtedness of the
subsidiary guarantor with respect to the assets securing that
indebtedness.
The obligations of each subsidiary guarantor will be limited to the
maximum amount that will not render that subsidiary guarantor insolvent or leave
it with unreasonably small capital under federal or state law, after giving
effect to the following:
- all other indebtedness of that subsidiary guarantor,
- the right of the subsidiary guarantor to contribution from other
subsidiary guarantors, and
- any other rights the subsidiary guarantor may have.
Each subsidiary guarantor that makes a payment or distribution under a
subsidiary guarantee will be entitled to a contribution from each other
subsidiary guarantor in a pro rata amount based on the Adjusted Net Assets of
each subsidiary guarantor.
Each subsidiary guarantor may consolidate with or merge with or into or
sell or otherwise dispose of all or substantially all of its assets to us or
another subsidiary guarantor without limitation, except to the extent any
transaction is subject to the covenants described below under " -- Restrictive
Covenants" or the "Consolidation, Merger and Sale of Assets" covenant described
below. Each subsidiary guarantor may consolidate with or merge with or into
another entity (whether or not affiliated with the subsidiary guarantor) only
if:
- the surviving entity, if not the subsidiary guarantor, agrees to
assume the subsidiary guarantor's subsidiary guarantee and all its
other obligations under the indenture, except to the extent the
subsidiary guarantee and such obligations are released as described
below, and
- the transaction does not result in a Default or Event of Default
that is continuing.
A subsidiary guarantor will be released from its subsidiary guarantee and
all of its other obligations under the indenture upon:
- the sale or other disposition, by merger or otherwise, of the
subsidiary guarantor or all or substantially all of its assets to a
person other than us or another Subsidiary and in a transaction that
is otherwise in compliance with the indenture,
- the release of all guarantees by the subsidiary guarantor of our
other Indebtedness (except our Indebtedness under any Credit
Facility), or
- the designation of the subsidiary guarantor as a Non-Recourse
Subsidiary.
Any release pursuant to the first bullet point above will occur, however,
only to the extent that all obligations of the subsidiary guarantor under all of
its guarantees of our other Indebtedness also terminate or are released upon the
sale or other disposition.
OPTIONAL REDEMPTION
At any time prior to July 15, 2007, we may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes issued under the
indenture at a redemption price of 107.375% of the principal amount, plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of holders on a record date to receive interest due on the relevant
interest payment date), with the net cash proceeds of one or more Equity
Offerings, provided that:
- at least 65% of the aggregate principal amount of notes issued under
the indenture remains outstanding immediately after the occurrence
of such redemption (excluding notes held by Pride and its
Subsidiaries); and
- the redemption occurs within 180 days of the date of the closing of
such Equity Offering.
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On and after July 15, 2009, we may redeem all or a part of the notes at
the redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest, if any, on the notes redeemed to the
applicable redemption date (subject to the right of holders on a record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on July 15 of the years indicated below:
YEAR PERCENTAGE
- ---------------------- ----------
2009.................. 103.688%
2010.................. 102.458%
2011.................. 101.229%
2012 and thereafter... 100.000%
In addition, we may redeem all or a part of the notes, at any time prior
to July 15, 2009, at a redemption price equal to the greater of:
- 100% of the principal amount of the notes to be redeemed plus
accrued but unpaid interest to the date of redemption; and
- (a) the sum of the present values of the remaining scheduled
payments of principal and interest thereon from the date of
redemption to July 15, 2009 (except for currently accrued but unpaid
interest) (assuming the notes are redeemed, and based on the
applicable redemption price, on that date) discounted to the date of
redemption, on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months), at the Treasury Rate, plus 50
basis points, plus (b) accrued but unpaid interest to the date of
redemption (subject to the right of holders on a record date to
receive interest due on the relevant interest payment date).
The actual redemption price, calculated as provided in this paragraph, will be
calculated and certified to the trustee and us by the Independent Investment
Banker. For purposes of determining the optional redemption price pursuant to
this paragraph, the following definitions are applicable:
"Comparable Treasury Issue" means the United States Treasury security or
securities selected by the Independent Investment Banker as having an actual or
interpolated maturity comparable to the remaining term of the notes to July 15,
2009 that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of a comparable maturity.
"Comparable Treasury Price" means, for any redemption date, (1) the
average of five Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average of all such quotations.
"Independent Investment Banker" means Citigroup Global Markets Inc. and
any successor firm, or if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking institution of
national standing appointed by the trustee after consultation with us.
"Reference Treasury Dealer" means each of Citigroup Global Markets Inc.,
Banc of America Securities LLC, Deutsche Bank Securities Inc. and their
respective successors, plus two other dealers selected by the Independent
Investment Banker that are primary U.S. government securities dealers in New
York City; provided, if any of Citigroup Global Markets Inc., Banc of America
Securities LLC, Deutsche Bank Securities Inc. or any primary U.S. government
securities dealer selected by the Independent Investment Banker shall cease to
be a primary U.S. government securities dealer, then such other primary U.S.
government securities dealers as may be substituted by the Independent
Investment Banker.
"Reference Treasury Dealer Quotations" means, for each Reference Treasury
Dealer and any redemption date, the average, as determined by the trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) at 3:30 p.m., New York City time,
on the third business day preceding such redemption date, as quoted in writing
to the trustee by such Reference Treasury Dealer.
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"Treasury Rate" means, with respect to any redemption date, (1) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the remaining term of the notes, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue shall be
determined and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month) or (2) if such
release (or any successor release) is not published during the week in which the
calculation date falls (or in the immediately preceding week if the calculation
date falls on any day prior to the usual publication date for such release) or
does not contain such yields, the rate per year equal to the semi- annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated using
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated on the third business day preceding
the redemption date. Any weekly average yields calculated by interpolation or
extrapolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward.
We are required to give notice of redemption by mail to holders not more
than 60 but not less than 30 days prior to the redemption date. If we specify
that less than all of the outstanding notes are to be redeemed, the trustee will
select the notes to be redeemed in principal amounts of $1,000 or integral
multiples of $1,000 either pro rata, by lot or by such other method the trustee
considers appropriate in accordance with industry standards at the time of the
redemption.
REPURCHASE AT OPTION OF THE HOLDER UPON A CHANGE IN CONTROL
In the event of any Change in Control of Pride resulting in a Rating
Decline, each holder of notes will have the right, at the holder's option,
subject to the terms and conditions of the indenture, to require us to purchase
all or any portion (provided that the principal amount must be $1,000 or an
integral multiple thereof) of the holder's notes as of the date that is 35
business days after the occurrence of such Change in Control, which we refer to
as the "Change in Control Purchase Date," at a cash price equal to 101% of the
outstanding principal amount of those notes plus accrued and unpaid interest, if
any, through and including the Change in Control Purchase Date (subject to the
right of holders on a record date to receive interest due on the relevant
interest payment date), which we refer to as the "Change in Control Purchase
Price."
Within 15 business days after the Change in Control resulting in a Rating
Decline, Pride will mail to the trustee and to each holder (and to beneficial
owners if required by applicable law) a notice regarding such Change in Control,
which notice will state, among other things:
- the date of such Change in Control and, briefly, the events causing
such Change in Control,
- the date by which the Change in Control Purchase Notice must be
given,
- the Change in Control Purchase Date,
- the Change in Control Purchase Price,
- the name and address of the paying agent,
- the procedures that holders must follow to exercise their rights,
and
- the procedures for withdrawing a Change in Control Purchase Notice.
To exercise the purchase right, the holder must deliver written notice of
the exercise of such right, which we refer to as a "Change in Control Purchase
Notice," to the paying agent prior to the close of business on the Change in
Control Purchase Date. The Change in Control Purchase Notice must state:
- the certificate number of any note in certificated form to be
delivered by the holder thereof for purchase by Pride,
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- the portion of the principal amount of notes to be purchased, which
portion must be $1,000 or an integral multiple thereof, and
- that such notes are to be purchased by Pride pursuant to the
applicable provisions of the notes.
Any Change in Control Purchase Notice may be withdrawn by the holder by a
written notice of withdrawal delivered to the paying agent prior to the close of
business on the Change in Control Purchase Date. The notice of withdrawal must
state the principal amount and the certificate numbers of the notes as to which
the withdrawal notice relates and the principal amount, if any, which remains
subject to a Change in Control Purchase Notice.
Payment of the Change in Control Purchase Price for a note for which a
Change in Control Purchase Notice has been delivered and not validly withdrawn
is conditioned upon delivery of such note (together with necessary endorsements)
to the paying agent at any time (whether prior to, on or after the Change in
Control Purchase Date) after the delivery of such Change in Control Purchase
Notice. Payment of the Change in Control Purchase Price for such note will be
made promptly following the later of the business day following the Change in
Control Purchase Date or the time of delivery of such note. If the paying agent
holds, in accordance with the terms of the indenture, money sufficient to pay
the Change in Control Purchase Price of such note on the business day following
the Change in Control Purchase Date, then, after the Change in Control Purchase
Date, such note will cease to be outstanding, interest on such note will cease
to accrue and will be deemed paid and all other rights of the holder will
terminate (other than the right to receive the Change in Control Purchase Price
upon delivery of such note), whether or not such note is delivered to the paying
agent.
One of the events that constitutes a Change in Control under the indenture
is a sale, conveyance, transfer or lease of all or substantially all of the
assets of Pride and its Subsidiaries, taken as a whole. New York law will govern
the indenture and the notes, and there is no established quantitative definition
under New York law of "substantially all" of the assets of a corporation.
Accordingly, if we engaged in a transaction in which we disposed of less than
all of our assets, a question of interpretation could arise as to whether that
disposition was of "substantially all" of our assets and whether we were
required to purchase notes at the option of the holders.
We will comply with the provisions of the Exchange Act that may then be
applicable to our offer to purchase notes at the option of the holders thereof
upon a Change in Control and, if required, will file a Schedule TO or any other
required schedule.
The Change in Control purchase feature of the notes may, in certain
circumstances, make more difficult or discourage a takeover of Pride and, thus,
the removal of incumbent management. The Change in Control purchase feature,
however, is not the result of management's knowledge of any specific effort to
accumulate shares of common stock or to obtain control of Pride by means of a
merger, tender offer, solicitation or otherwise, or part of a plan by management
to adopt a series of anti-takeover provisions. The terms of such feature result
from negotiations between Pride and the initial purchasers of the old notes.
The provisions of the indenture relating to a Change in Control may not
afford the holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger, spin-off or similar transaction that may
adversely affect holders, if such transaction does not constitute a Change in
Control.
We are required to offer to repurchase the notes only in the event that a
Change in Control results in a Rating Decline. Change in control provisions of
other outstanding debt may require only that a change in control occurs.
Accordingly, if a Change in Control were to occur that does not result in a
Rating Decline, we could be required to repurchase other outstanding debt but
would not be required to offer to repurchase the notes. If a Change in Control
were to occur, there can be no assurance that we would have funds sufficient to
pay the Change in Control Purchase Price for all of the notes that might be
delivered by holders seeking to exercise the purchase right. In addition, our
ability to purchase notes with cash may be limited by the terms of our
then-existing borrowing agreements.
34
RESTRICTIVE COVENANTS
The covenants described in this section of the prospectus will terminate
upon the occurrence of an Investment Grade Status Event, except for the
covenants described under the captions " -- Limitation on Sale and Lease-Back
Transactions," " -- Limitation on Liens," " -- Limitation on Non-Guarantor
Subsidiaries" and " -- Reports." See " -- Termination of Covenants Upon
Achievement of Investment Grade Status." In addition, upon the occurrence of an
Investment Grade Status Event, clause (3) of the covenant described under " --
Consolidation, Merger and Sale of Assets" will also terminate.
The indenture will contain, among others, the following covenants:
Transactions with Affiliates. We will, and will permit any Subsidiary to,
conduct any business or enter into any transaction or series of related
transactions, including the purchase, sale or exchange of Property, the making
of any Investment, the giving of any guarantee or the rendering of any service
with any of our Affiliates (other than transactions among Pride and any of its
Wholly Owned Subsidiaries or among its Wholly Owned Subsidiaries) only if:
(1) the transaction or series of related transactions is on terms
which are no less favorable in all material respects to us or the
Subsidiary than those that could be obtained in a comparable arm's length
transaction with a person that is not such an Affiliate, and
(2) if the transaction or series of related transactions has a Fair
Market Value:
- in excess of $10 million per year but less than $25 million
per year, we certify to the trustee that the transaction or
series of related transactions complies with clause (1) above,
or
- in excess of $25 million per year, then:
(a) the transaction or series of related transactions is
approved by a majority of our Board of Directors, including a
majority of the disinterested directors, which approval is evidenced
by a board resolution that the transaction or series of related
transactions complies with clause (1) above, or
(b) we receive a favorable opinion from a nationally
recognized investment banking or similar firm of our choice (having
expertise in the specific area which is the subject of the opinion)
that the payments to be made are fair consideration for the
transaction or series of related transactions.
These provisions will not apply to the following:
- sales by Pride of its common stock to any of its Affiliates,
- reasonable compensation (including amounts paid pursuant to employee
benefit plans) and indemnification paid or made available to an
officer, director or employee of Pride or a Subsidiary for services
rendered in that person's capacity as an officer, director or
employee, or
- the making of any Restricted Payment otherwise permitted by the
indenture.
Limitation on Restricted Payments. We will, and will permit any Subsidiary
to, make any Restricted Payment only if, at the time of and after giving effect
to the proposed Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would result from the Restricted Payment,
(2) we could incur at least $1.00 of additional Indebtedness under
the Consolidated Interest Coverage Ratio test described in the first
sentence under the caption " -- Limitation on Indebtedness," and
(3) the aggregate amount of such Restricted Payment and all
Restricted Payments (the amount of any Restricted Payment not made in cash
will be based on Fair Market Value) declared or made on or after the 1999
Issue Date by us or any Subsidiary does not exceed the sum of:
35
- 50% of our aggregate Consolidated Net Income accrued during
the period beginning on April 1, 1999 and ending on the last
day of the fiscal quarter ending immediately prior to the date
of such proposed Restricted Payment (or if such Consolidated
Net Income is a deficit, minus 100% of the deficit), plus
- an amount equal to (a) the aggregate net cash proceeds and the
Fair Market Value of securities or other Property other than
cash we have received, after the 1999 Issue Date, from the
issuance or sale (other than to a Subsidiary or an employee
stock ownership plan or trust established by us for the
benefit of our employees) of shares of our Capital Stock,
excluding Redeemable Stock but including the Capital Stock
issued upon the exercise of options, warrants or rights to
purchase our Capital Stock (other than Redeemable Stock) and
(b) the liability (expressed as a positive number) in
accordance with GAAP for any of our Indebtedness or carrying
value of Redeemable Stock that has been issued after the 1999
Issue Date and converted into, exchanged for or satisfied by
the issuance of shares of our Capital Stock (other than
Redeemable Stock) after the 1999 Issue Date, plus
- to the extent not otherwise included in Consolidated Net
Income, the net reduction in Investments in Non-Recourse
Subsidiaries or joint ventures or other persons resulting from
dividends, repayments of loans or advances, releases or
discharges of guarantees or other obligations or other
transfers of Property or return of capital, in each case to or
in favor of us or a Subsidiary after the 1999 Issue Date from
any Non-Recourse Subsidiary or joint venture or other person
or from the redesignation of a Non-Recourse Subsidiary as a
Subsidiary (valued in each case as provided in the definition
of Investment), not to exceed, in the case of any Non-Recourse
Subsidiary or joint venture or other person, the total amount
of Investments (other than Permitted Investments permitted by
clauses (1)-(10) of the definition of "Permitted Investments")
in such Non-Recourse Subsidiary or joint venture or other
person made by us and our Subsidiaries in such Non-Recourse
Subsidiary or joint venture or other person existing on or
made after the 1999 Issue Date, plus
- to the extent not otherwise included in our Consolidated Net
Income or in the previous bullet point, the total amount of
Investments existing on or made after the 1999 Issue Date in
persons which have become Subsidiaries subsequent to the 1999
Issue Date (calculated as of the date they become
Subsidiaries), plus
- $50 million.
These provisions will not prevent:
(A) the payment of any dividend on the Capital Stock of any class
within 60 days after the date of its declaration if at the date of
declaration the payment would be permitted by the indenture, provided that
at the time of the declaration of such dividend, no Default shall have
occurred and be continuing,
(B) any repurchase or redemption of our Capital Stock or
Subordinated Indebtedness made by exchange for our Capital Stock (other
than Redeemable Stock), or out of the net cash proceeds from the
substantially concurrent issuance or sale (other than to a Subsidiary) of
our Capital Stock (other than Redeemable Stock), if the net cash proceeds
from the sale are excluded from computations under the second bullet point
under (3) above to the extent such proceeds are applied to purchase or
redeem such Capital Stock or Subordinated Indebtedness, and
(C) any repurchase or redemption of Subordinated Indebtedness solely
in exchange for, or out of the net cash proceeds from the substantially
concurrent sale of, new Subordinated Indebtedness, so long as the new
Subordinated Indebtedness:
- is subordinated to the notes or the subsidiary guarantees, as
the case may be, at least to the same extent as the
Subordinated Indebtedness so exchanged, purchased or redeemed,
- has a stated maturity later than the stated maturity of the
Subordinated Indebtedness so exchanged, purchased or redeemed,
and
- has an Average Life at the time incurred that is greater than
the remaining Average Life of the Subordinated Indebtedness so
exchanged, purchased or redeemed.
36
Restricted Payments permitted to be made as described in (B) and (C) above will
be excluded in calculating the amount of Restricted Payments thereafter;
Restricted Payments made as described in (A) above will be included.
Limitation on Indebtedness. We will, and will permit any Subsidiary to,
create, incur, assume, suffer to come into existence, guarantee or otherwise
become liable with respect to the payment of (collectively, "incur") any
Indebtedness only if, after giving effect to the incurrence of that
Indebtedness, no Default or Event of Default would occur and the Consolidated
Interest Coverage Ratio for the Determination Period preceding the applicable
transaction date is at least 2.0 to 1.0. We or any Subsidiary may, however,
incur Permitted Indebtedness. Any Indebtedness of a person existing at the time
that person becomes a Subsidiary (or is consolidated or merged with or into a
Subsidiary or Pride) will be deemed to be incurred at the time such person
becomes a Subsidiary (or the merger or consolidation occurs).
Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. We will not, and will not permit any Subsidiary to, create, enter
into any agreement with any person or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind that by
its terms restricts the ability of any Subsidiary to:
- pay dividends or make any other distributions on its Capital Stock
to us or any Subsidiary,
- pay any Indebtedness owed to us or any Subsidiary,
- make loans or advances to us or any Subsidiary, or
- transfer any of its Property to us or any Subsidiary.
This restriction will not apply to any encumbrance or restriction
contained in any agreement or instrument:
(1) existing on the Issue Date,
(2) relating to any Property acquired after the Issue Date, so long
as the encumbrance or restriction relates only to the Property so
acquired,
(3) relating to any Indebtedness of any person at the date on which
the person was merged or consolidated with or into, or acquired by, Pride
or a Subsidiary or became a Subsidiary (other than Indebtedness incurred
as a result of, or in anticipation of, such transaction),
(4) effecting a renewal, extension, refinancing, refund, repurchase
or replacement (or successive extensions, renewals, refinancings,
refundings, repurchases or replacements) of Indebtedness issued under an
agreement referred to in clauses (1) through (3) above, so long as the
encumbrances and restrictions contained in any such renewal, extension,
refinancing, refund, repurchase or replacement agreement, taken as a
whole, are not materially more restrictive than the encumbrances and
restrictions contained in the original agreement, as determined in good
faith by the Board of Directors,
(5) constituting customary provisions restricting subletting or
assignment of any lease of Pride or any Subsidiary or provisions in
agreements that restrict the assignment of such agreement or any rights
thereunder,
(6) constituting restrictions on the sale or other disposition of
any Property securing Indebtedness as a result of a Permitted Lien on such
Property,
(7) constituting any temporary encumbrance or restriction with
respect to a Subsidiary under an agreement that has been entered into for
the sale or disposition of all or substantially all of the outstanding
Capital Stock of or assets of such Subsidiary, provided that such sale or
disposition is otherwise permitted under the indenture,
(8) constituting customary restrictions on cash, other deposits or
assets imposed by customers and other persons under contracts entered into
in the ordinary course of business,
37
(9) constituting provisions contained in agreements or instruments
relating to Indebtedness that prohibit the transfer of all or
substantially all of the assets of the obligor under that agreement or
instrument unless the transferee assumes the obligations of the obligor
under such agreement or instrument or such assets may be transferred
subject to such prohibition,
(10) relating to Limited Recourse Indebtedness,
(11) constituting a requirement that a certain amount of
Indebtedness be maintained between a Subsidiary and Pride or another
Subsidiary,
(12) constituting any encumbrance or restriction with respect to
Property under an agreement that has been entered into for the sale or
disposition of such Property, provided that such sale or disposition is
otherwise permitted under the indenture,
(13) relating to a person existing at the time that person is merged
or consolidated with or into, or acquired by, Pride or a Subsidiary or
becomes a Subsidiary (and not entered into as a result of, or in
anticipation of, such transaction),
(14) constituting any encumbrance or restriction with respect to
Property under a charter, lease or other agreement that has been entered
into in the ordinary course of business for the employment of such
Property, or
(15) in the case of Subsidiaries that are not Wholly Owned
Subsidiaries, constituting a shareholders or other similar agreement.
Limitation on Asset Sales. We will engage in, and will permit any
Subsidiary to engage in, any Asset Sale only if:
(1) we or the 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 Property subject to such Asset Sale, except in the case of:
- an Asset Sale resulting from the requisition of title to,
seizure or forfeiture of any Property or any actual or
constructive total loss or an agreed or compromised total
loss, or
- a Bargain Purchase Contract,
(2) the Fair Market Value of all forms of consideration other than
Cash Proceeds, Liquid Securities, Replacement Assets and Investments
permitted by the "Limitation on Restricted Payments" covenant received for
all Asset Sales (excluding those described in the two bullet points in
clause (1) above) since the Issue Date does not exceed in the aggregate
10% of our Consolidated Net Tangible Assets at the time of such Asset Sale
(before giving effect thereto), and
(3) we certify to the trustee that such Asset Sale complies with
clauses (1) and (2) above.
We or such Subsidiary, as the case may be, may apply the Net Available
Proceeds from each Asset Sale:
- to the acquisition of one or more Replacement Assets, or
- to repurchase or repay Senior Debt (other than Indebtedness owed to
us or our Affiliates) (with a permanent reduction of availability in
the case of revolving credit borrowings).
Such acquisition or such repurchase or repayment is, however, required to be
made within 365 days after the consummation of the relevant Asset Sale.
In addition to the items referred to in the definition of "Cash Proceeds"
below, the following amounts will be deemed to be cash or cash equivalents for
purposes of this provision:
- any of our liabilities or of any Subsidiary (as shown on our or such
Subsidiary's most recent balance sheet or in the notes thereto),
other than liabilities that by their terms are subordinated to the
notes or the applicable subsidiary guarantee, that are assumed by
the transferee of any such Property, and
38
- any Indebtedness or other obligations received by us or any such
Subsidiary from such transferee that are converted by us or such
Subsidiary into cash (to the extent of the cash received) within 180
days of such Asset Sale.
Any Net Available Proceeds from any Asset Sale that are not used to
acquire Replacement Assets or to repurchase or repay Senior Debt within 365 days
after consummation of the relevant Asset Sale constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $50 million, we will, or at any
time after receipt of Excess Proceeds, we may, at our option, make a pro rata
offer to all holders of notes and other Indebtedness that ranks by its terms
equally in right of payment with the notes and the terms of which contain
substantially similar requirements with respect to the application of net
proceeds from asset sales as are contained in the indenture, which we refer to
as an "Asset Sale Offer," to purchase on a pro rata basis the maximum principal
amount of the notes and other such Indebtedness in integral multiples of $1,000
that may be purchased out of the Excess Proceeds, at an offer price in cash
equal to 100% of the outstanding principal amount thereof plus any accrued and
unpaid interest through and including the purchase date (subject to the right of
holders on a record date to receive interest due on the relevant interest
payment date). Upon completion of any Asset Sale Offer, the amount of Excess
Proceeds will be reset to zero, and we may use any remaining amount for general
corporate purposes.
Within five business days after we are obligated to make an Asset Sale
Offer, we will send a written notice to holders, accompanied by such information
that we in good faith believe will enable holders to make an informed decision
with respect to the Asset Sale Offer.
We will comply with any applicable tender offer rules, including any
applicable requirements of Rule 14e-l under the Exchange Act, in the event that
an Asset Sale Offer is required under the circumstances described above, and we
will file Schedule TO or any other required schedule.
Limitation on Sale and Lease-Back Transactions. We will, and will permit
any Subsidiary to, enter into, assume, guarantee or otherwise become liable with
respect to any Sale and Lease-Back Transaction only if:
- the proceeds from the Sale and Lease-Back Transaction are at least
equal to the Fair Market Value of the Property being transferred,
and
- we or the Subsidiary would have been permitted to enter into the
transaction under the covenants described under the captions " --
Limitation on Indebtedness" (prior to an Investment Grade Status
Event only) and " -- Limitation on Liens" (in each case, if the Sale
and Lease-Back Transaction is a Capital Lease Obligation).
This restriction does not apply to any Sale and Lease-Back Transaction if:
(1) the transaction is for a period, including renewal rights, not
in excess of three years;
(2) the sale of the Property that is the subject of the Sale and
Lease-Back Transaction is made within 270 days after its acquisition,
construction or improvement;
(3) the transaction is between us and a Subsidiary or between
Subsidiaries; or
(4) we or a Subsidiary, as the case may be, applies the Net
Available Proceeds from the transaction to the acquisition of one or more
Replacement Assets or to repurchase or repay Senior Debt (other than
Indebtedness owed to us or our Affiliates) (with a permanent reduction of
availability in the case of revolving credit borrowings), all in
accordance with the covenant described under the caption "Limitation on
Asset Sales" as if such covenant applied to the transaction.
39
Limitation on Liens. We will not, and will not permit any Subsidiary to,
create, incur, assume or suffer to come into existence any Liens on or with
respect to any Property of Pride or that Subsidiary or any interest in that
Property or any income or profits from that Property to secure (a) any
Indebtedness of Pride or a Subsidiary (if it is not also a guarantor of the
notes), unless prior to, or contemporaneously therewith, the notes are equally
and ratably secured, or (b) any Indebtedness of any subsidiary guarantor unless
prior to, or contemporaneously therewith, the subsidiary guarantees of the notes
are equally and ratably secured; provided, however, that if such Indebtedness is
expressly subordinated to the notes or the subsidiary guarantees, the Lien
securing such Indebtedness will be subordinated and junior to the Lien securing
the notes or the subsidiary guarantees, as the case may be, with the same
relative priority as such Indebtedness has with respect to the notes or the
subsidiary guarantees. This restriction will not apply to Permitted Liens.
Limitation on Non-Guarantor Subsidiaries. We will permit any Subsidiary
that is not a subsidiary guarantor to incur a guarantee of any of our
Indebtedness (except Indebtedness under a Credit Facility) only if:
(1) both
- such Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a guarantee of the notes
by such Subsidiary, and
- with respect to any guarantee of our Subordinated Indebtedness
by a Subsidiary, any such guarantee will be subordinated to
that Subsidiary's guarantee of the notes at least to the same
extent as such Subordinated Indebtedness is subordinated to
the notes,
(2) such Subsidiary waives, and agrees not in any manner whatsoever
to exercise any right or claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights
against us or any other Subsidiary as a result of any payment by such
Subsidiary under its subsidiary guarantee until such time as the
obligations guaranteed thereby are paid in full, and
(3) such Subsidiary delivers to the trustee an opinion of outside
legal counsel to the effect that such supplemental indenture has been duly
executed and authorized and that such subsidiary guarantee constitutes a
valid, binding and enforceable obligation of the Subsidiary, except
insofar as enforcement may be:
- limited by bankruptcy, insolvency or similar laws (including
all laws relating to fraudulent transfers), and
- subject to general principles of equity.
This covenant will not, however, apply to any guarantee of any Subsidiary
that:
- existed at the time such person became one of our Subsidiaries, and
- was not incurred in connection with, or in contemplation of, that
person becoming one of our Subsidiaries.
A pledge of assets to secure any Indebtedness for which the pledgor is not
otherwise liable will not be considered a guarantee.
Reports. So long as any notes are outstanding, we will:
- file with the SEC, so long as it accepts our filings and whether or
not we are required to do so under the Exchange Act, the annual
reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K that we would be required to file if we were
subject to Section 13 or 15 of the Exchange Act, in each case on or
before the dates on which such reports would have been required to
have been filed with the SEC if we had been subject to Section 13 or
15 of the Exchange Act; and
- file with the trustee (with exhibits) copies of such reports within
15 days after the date on which we file the reports with the SEC or
the date on which we would be required to file the reports if we
were so required or, if the SEC will not accept the filings, supply
copies of the reports (including any exhibits) to any holder
promptly upon written request.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
We will consolidate with or merge into any other entity, or sell, lease,
convey, assign, transfer or otherwise dispose of all or substantially all of our
and our Subsidiaries' assets, taken as a whole, to any person, only if:
(1) either
- we are the continuing entity, or
- the resulting entity is organized under the laws of the United
States of America or any State thereof or the District of
Columbia, the Bahamas, Barbados, Bermuda, the British Virgin
Islands, the Cayman Islands, any of the Channel Islands,
France, any other member of the European Union, or the
Netherlands Antilles, and assumes by a supplemental indenture
the due and punctual payments on the notes and the performance
of our covenants and obligations under the indenture,
(2) immediately after giving effect to the transaction on a pro
forma basis (including any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), no Default
or Event of Default under the indenture has occurred and is continuing or
would result from the transaction,
(3) immediately after giving effect to the transaction on a pro
forma basis as if the transaction had occurred on the first day of the
Determination Period, we or the resulting entity would:
- be permitted to incur $1.00 of additional Indebtedness under
the Consolidated Interest Coverage Ratio test described in the
first sentence under the caption " -- Restrictive Covenants --
Limitation on Indebtedness," or
- have a Consolidated Interest Coverage Ratio that is no less
than such ratio for us immediately prior to the transaction,
in which event we will be deemed to have complied with the
test described in the first sentence under the caption " --
Restrictive Covenants -- Limitation on Indebtedness," and
(4) in the case of the second bullet point under clause (1) above,
in the event that the resulting entity is organized in a jurisdiction
other than the United States of America, any State thereof or the District
of Columbia that is different from the jurisdiction in which the obligor
on the notes was organized immediately before giving effect to the
transaction:
- such resulting entity delivers to the trustee an opinion of
counsel stating that (a) the obligations of the resulting
entity under the indenture are enforceable under the laws of
the new jurisdiction of its formation subject to customary
exceptions and (b) the holders of notes will not recognize any
income, gain or loss for U.S. federal income tax purposes as a
result of the transaction and will be subject to U.S. federal
income tax on the same amount and in the same manner and at
the same times as would have been the case if such transaction
had not occurred,
- the resulting entity agrees in writing to submit to New York
jurisdiction and appoints an agent for the service of process
in New York, each under terms satisfactory to the trustee, and
- our board of directors or the comparable governing body of the
resulting entity determines in good faith that such
transaction will not adversely affect the interests of the
holders of notes in any material respect and a board
resolution to that effect is delivered to the trustee.
This covenant will not apply to any merger of another entity into Pride.
In addition, the provision described in clause (3) above will not apply to any
merger into, or consolidation with, or any disposition of all or substantially
all of our and our Subsidiaries' assets taken as a whole to, Pride or any of its
Wholly Owned Subsidiaries.
In connection with any consolidation, merger, asset transfer or other
transaction subject to this restriction, we will deliver or cause to be
delivered to the trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, asset transfer or transaction and
the supplemental indenture in respect thereof comply with the provisions of the
indenture and that all conditions precedent in the indenture relating to such
transaction have been complied with.
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Upon any transaction of the type described in and effected in accordance
with this section, the resulting entity will succeed to and be substituted for
and may exercise every right and power of Pride under the indenture and the
notes with the same effect as if the resulting entity had been named as Pride in
the indenture. In the case of any asset transfer or disposition other than a
lease, when the resulting entity assumes all the obligations and covenants of
Pride under the indenture and the notes, we will be relieved of all such
obligations.
EVENTS OF DEFAULT
If an Event of Default occurs and is continuing, either the trustee or the
holders of at least 25% in aggregate principal amount of the outstanding notes
may declare the principal of and accrued and unpaid interest on the notes to be
due and payable immediately, except that, in the case of an Event of Default
specified in item (d) below, if the Event of Default affects more than one
series of debt securities issued under the indenture, the trustee or the holders
of at least 25% in aggregate outstanding principal amount of all series affected
by the default (voting as one class) are required to make such declaration. In
the case of certain events of bankruptcy or insolvency, the principal amount,
together with all accrued and unpaid interest on the notes, will automatically
become immediately due and payable without any action on the part of either the
trustee or any holder. At any time after a declaration of acceleration has been
made, the holders of a majority in aggregate principal amount of the outstanding
notes or of all the outstanding debt securities issued under the indenture that
are affected by the default, as applicable, may, under certain circumstances,
rescind any such acceleration and its consequences. Interest will, to the extent
permitted by law, accrue at the annual rate of 1% above the coupon rate and be
payable on demand upon a default in the payment of principal amount, accrued and
unpaid interest or any redemption price or Change in Control Purchase Price, and
such interest will be compounded semiannually. The accrual of such interest on
overdue amounts will be in lieu of, and not in addition to, the continued
accrual of interest.
An Event of Default with respect to the notes includes any of the
following:
(a) our failure to pay interest on any note for 30 days;
(b) our failure to pay principal of or any premium on any note when
due, whether at stated maturity, upon redemption or repurchase or
otherwise;
(c) our failure to comply with any of our covenants or agreements
described in " -- Consolidation, Merger and Sale of Assets," " --
Restrictive Covenants -- Limitations on Asset Sales" and " -- Repurchase
at Option of the Holder Upon a Change in Control";
(d) the failure in the performance or breach of any covenant or
agreement by Pride contained in the notes or the indenture (other than a
covenant or agreement a default in performance or breach of which is
specifically dealt with) for 60 days after written notice has been mailed
to Pride by the trustee or to Pride and the trustee by the holders of at
least 25% of the aggregate principal amount of the outstanding notes (or,
if the default affects more than one series of debt securities issued
under the indenture, the holders of at least 25% in aggregate outstanding
principal amount of all series so affected);
(e) the failure by Pride or any Subsidiary to pay its Indebtedness
(other than Limited Recourse Indebtedness) when due within the applicable
grace period or the acceleration of any such Indebtedness by the holders
thereof and, in either case, the aggregate principal amount of the due and
unpaid or accelerated Indebtedness exceeds $50 million;
(f) the entry by a court of competent jurisdiction of one or more
judgments or orders against Pride or any Subsidiary in an uninsured or
unindemnified aggregate amount in excess of $50 million that remain
undischarged or unsatisfied for 60 consecutive days after the right to
appeal them has expired;
(g) any subsidiary guarantee for any reason ceases to be, or is
asserted by Pride or any subsidiary guarantor, as applicable, not to be,
in full force and effect (except pursuant to the release of any such
subsidiary guarantee in accordance with the indenture); and
(h) events of bankruptcy, insolvency or reorganization involving
Pride or any of its Significant Subsidiaries.
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If a Default or Event of Default occurs, is continuing and is known to the
trustee, the trustee will notify the holders of the notes within 90 days after
it occurs. The trustee may withhold notice to the holders of the notes of any
Default or Event of Default, except in any payment on the notes, if the trustee
in good faith determines that withholding notice is in the interests of the
holders of the notes.
A holder of a note may pursue any remedy under the indenture only if:
- the holder gives the trustee written notice of a continuing Event of
Default with respect to the notes;
- the holders of at least 25% in principal amount of the outstanding
notes make a written request to the trustee to pursue the remedy;
- the holders offer the trustee indemnity satisfactory to the trustee
against any loss, liability or expense;
- the trustee does not comply with the request within 60 days after
receipt of the request and offer of indemnity; and
- during that 60-day period, the holders of a majority in principal
amount of the outstanding notes do not give the trustee a direction
inconsistent with the request.
This provision does not, however, affect the right of a holder of any
notes to sue for the enforcement of any overdue payment.
In most cases, the trustee will be under no obligation to exercise any of
its rights or powers under the indenture at the request or direction of any of
the holders unless those holders have offered to the trustee indemnity
satisfactory to it. Subject to this provision for indemnification, the holders
of a majority in principal amount of the outstanding notes generally may direct
the time, method and place of:
- conducting any proceeding for any remedy available to the trustee;
or
- exercising any trust or power conferred on the trustee relating to
or arising under an Event of Default (other than an Event of Default
described under clauses (d) and (h) above).
In other cases, a majority in principal amount of all outstanding debt
securities issued under the indenture is required. If an Event of Default occurs
and is continuing, the trustee will be required to use the degree of care and
skill of a prudent person in the conduct of his own affairs.
The indenture will require us to furnish to the trustee annually a
statement as to our performance of certain of our obligations under the
indenture and as to any default in performance.
MODIFICATION AND WAIVER
We and the trustee may supplement or amend the indenture for purposes of
the notes with the consent of the holders of at least a majority in principal
amount of the notes then outstanding and of any other series of debt securities
issued under the indenture that are affected by the supplement or amendment
(voting as one class). Without the consent of each holder of an outstanding
note, however, no modification may:
- reduce the amount of notes whose holders must consent to an
amendment, supplement or waiver;
- reduce the rate of or change the time for payment of interest on the
note;
- reduce the principal of the note or change its stated maturity;
- reduce any premium payable on the redemption of the note or change
the time at which the note may or must be redeemed;
- make payments on the note payable in currency other than U.S.
dollars;
- impair the holder's right to institute suit for the enforcement of
any payment on or with respect to the note;
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- make any change in the percentage of principal amount of notes
necessary to waive compliance with certain provisions of the
indenture or to make any change in the provision related to
modification;
- waive a continuing Default or Event of Default regarding any payment
on the note;
- subordinate in right of payment, or otherwise subordinate, the note
or any subsidiary guarantee of the note to any other Indebtedness;
or
- materially and adversely affect the right provided in the indenture
to require us to repurchase the note upon a Change in Control.
We and the trustee may supplement or amend the indenture or waive any
provision of the indenture without the consent of any holders of notes in
certain circumstances, including:
- to cure any ambiguity, omission, defect or inconsistency;
- to provide for the assumption of our obligations under the indenture
by a successor upon any merger, consolidation or asset transfer
permitted under the indenture;
- to provide for uncertificated notes in addition to or in place of
certificated notes or to provide for bearer notes;
- to provide any security for, any guarantees of or any additional
obligors on the notes;
- to comply with any requirement to effect or maintain the
qualification of the indenture under the Trust Indenture Act of
1939;
- to add covenants that would benefit the holders of the notes or to
surrender any rights we have under the indenture;
- to add Events of Default with respect to the notes; and
- to make any change that does not adversely affect any outstanding
notes in any material respect; provided, however, that any change to
conform the indenture to the offering memorandum relating to the old
notes will not be deemed to adversely affect the notes.
The holders of a majority in principal amount of the outstanding notes
(or, in some cases, of all debt securities issued under the indenture that are
affected, voting as one class) may waive any existing or past Default or Event
of Default with respect to those notes (or debt securities). Those holders may
not, however, waive any Default or Event of Default in any payment on any note
or compliance with a provision that cannot be amended or supplemented without
the consent of each holder affected.
DEFEASANCE AND DISCHARGE
The notes will be subject to legal defeasance, to covenant defeasance and
to satisfaction and discharge, in each case at our option.
Defeasance. When we use the term defeasance, we mean discharge from some
or all of our obligations under the indenture. If we deposit with the trustee
any combination of money or U.S. Government Obligations sufficient to make
payments on the notes on the dates those payments are due, then, at our option,
either of the following will occur:
- we will be discharged from our obligations with respect to the notes
("legal defeasance"); or
- we will no longer have any obligation to comply with the covenants
described in " -- Restrictive Covenants" and " -- Consolidation,
Merger and Sale of Assets" and other specified covenants under the
indenture, and the related Events of Default will no longer apply
("covenant defeasance").
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If the notes are defeased, the holders of the notes will not be entitled
to the benefits of the indenture, except for obligations to register the
transfer or exchange of notes, replace stolen, lost or mutilated notes or
maintain paying agencies and hold money for payment in trust. In the case of
covenant defeasance, our obligation to pay principal, premium and interest on
the notes will also survive.
We will be required to deliver to the trustee an opinion of counsel that
the deposit and related defeasance would not cause the holders of the notes to
recognize income, gain or loss for U.S. federal income tax purposes and that the
holders would be subject to U.S. federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if the deposit and
related defeasance had not occurred. If we elect legal defeasance, that opinion
of counsel must be based upon a ruling from the United States Internal Revenue
Service or a change in law to that effect.
Under current United States federal income tax law, legal defeasance would
likely be treated as a taxable exchange of notes to be defeased for interests in
the defeasance trust. As a consequence, a United States holder would recognize
gain or loss equal to the difference between the holder's cost or other tax
basis for the notes and the value of the holder's interest in the defeasance
trust, and thereafter would be required to include in income a share of the
income, gain or loss of the defeasance trust. Under current United States
federal income tax law, covenant defeasance would not be treated as a taxable
exchange of such debt securities.
Satisfaction and Discharge. In addition, the indenture will cease to be of
further effect with respect to the notes, subject to exceptions relating to
compensation and indemnity of the trustee and repayment to us of excess money or
U.S. Government Obligations, when:
- either
(a)all outstanding notes have been delivered to the trustee for
cancellation; or
(b)all outstanding notes not delivered to the trustee for
cancellation either:
- have become due and payable;
- will become due and payable at their stated maturity
within one year; or
- are to be called for redemption within one year; and
- we have deposited with the trustee any combination of money or U.S.
Government Obligations in trust sufficient to pay the entire
indebtedness on the notes when due; and
- we have paid all other sums payable by us with respect to the notes.
REGISTRATION RIGHTS OF THE NOTEHOLDERS
In connection with the issuance of the old notes, we and the initial
purchasers of the old notes entered into a registration rights agreement. This
agreement provides for the filing of the registration statement of which this
prospectus is a part and, when that registration statement is effective, our
offer to the holders who are able to make certain representations the
opportunity to exchange their old notes for new notes according to the exchange
offer.
The registration rights agreement provides that, unless the exchange offer
would not be permitted by applicable law or SEC policy, we will (1) use our
reasonable best efforts to cause the registration statement relating to the
exchange offer to be declared effective under the Securities Act within 180 days
after the Issue Date; (2) commence the exchange offer promptly after the
exchange offer registration statement has been declared effective; (3) use our
reasonable best efforts to keep the exchange offer registration statement
effective until the closing of the exchange offer; and (4) keep the exchange
offer open for not less than 20 business days and use our reasonable best
efforts to cause the exchange to be completed within 45 days after the SEC
declares the exchange offer registration statement effective, or longer if
required by applicable law.
The registration rights agreement also provides that we will:
45
- use our reasonable best efforts to make available, for up to 180
days after the consummation of the exchange offer, a prospectus for
use in connection with any resale of the new notes received by
broker-dealers in exchange for old notes acquired as a result of
market-making activities or other trading activities, as described
below under "Plan of Distribution"; and
- pay certain expenses incident to the exchange offer and indemnify
specified holders of the new notes (including broker-dealers)
against certain liabilities, including liabilities under the
Securities Act.
A broker-dealer that delivers this prospectus to purchasers in connection
with resales of new notes will be subject to civil liability provisions under
the Securities Act in connection with those sales and will be bound by the
applicable provisions of the registration rights agreement, including the
indemnification obligations.
If (1) upon advice of our outside counsel, we determine we are not
permitted to effect the exchange offer due to any change in applicable law or
SEC policy, (2) for any other reason the exchange offer is not consummated
within 225 days after the Issue Date, (3) any initial purchaser of the old notes
requests before the date that is 90 days after consummation of the exchange
offer with respect to old notes that are not eligible to be exchanged for new
notes in the exchange offer and that are held by it following consummation of
the exchange offer, (4) any holder (other than an initial purchaser or any of
our affiliates) is not eligible to participate in the exchange offer because of
any applicable law or interpretations thereof, or (5) in the case of any initial
purchaser that participates in the exchange offer, such initial purchaser does
not receive freely tradable new notes (as determined under the registration
rights agreement) in exchange for old notes constituting any portion of an
unsold allotment, we will file with the SEC a shelf registration statement to
cover resales of the notes by the holders who satisfy certain conditions
relating to the provision of information in connection with the shelf
registration statement. In the case of clause (2), we may terminate the shelf
registration statement at any time, without penalty, if the exchange offer is
consummated.
We will use our reasonable best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
SEC after the filing thereof. For each of the old notes surrendered according to
the exchange offer, the holder who surrendered such note will receive an new
note having a principal amount equal to that of the surrendered note. Interest
on each new note will accrue from the last interest payment date on which
interest was paid on the old note surrendered in exchange or, if no interest has
been paid on such note, from the Issue Date.
If we are obligated to file the shelf registration statement, we will use
our reasonable best efforts to file the shelf registration statement with the
SEC on or before the later of 60 days after such filing obligation arises and 90
days after the Issue Date and to cause the shelf registration statement to be
declared effective by the SEC no later than 90 days after the date on which we
are required to file the shelf registration statement.
46
If (1) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such filing,
(2) any of the registration statements is not declared effective by the SEC on
or before the date specified for such effectiveness, (3) we fail to consummate
the exchange offer on or prior to the date specified for completion, or (4) any
registration statement required by the registration rights agreement is declared
effective but later ceases to be effective or usable in connection with its
intended purpose prior to specified times except during limited periods as a
result of the exercise by us of our right to suspend the use of such
registration statement and the related prospectus as set forth in the
registration rights agreement (each such event referred to in clauses (1)
through (4) immediately above, a "Registration Default"), then we will pay to
each affected holder of the notes additional interest that will accrue and be
payable semiannually on the notes (in addition to the stated interest on the
notes) from and including the date such Registration Default occurs to, but
excluding, the date on which the applicable registration statement is filed or
is declared effective, the exchange offer is consummated, or the applicable
registration statement is again declared effective or made usable. During the
time that additional interest is accruing, the rate of additional interest will
be 0.25% per annum during the first 90-day period and will increase by 0.25% per
annum for each subsequent 90-day period, but in no event will the rate exceed
1.00% per annum in the aggregate regardless of the number of Registration
Defaults. No additional interest will accrue if we timely file an exchange offer
registration statement but are unable to complete the exchange offer because of
a change in applicable law and we then proceed timely with the filing and
effectiveness of the shelf registration statement. If, after the cure of all
Registration Defaults then in effect, there is a subsequent Registration
Default, the rate of additional interest for such subsequent Registration
Default will initially be 0.25%, regardless of the additional interest rate in
effect with respect to any prior Registration Default at the time of the cure of
the Registration Default. We will not be required to pay additional interest for
more than one Registration Default at a time. In addition, a holder will not be
entitled to receive any additional interest on any notes if that holder was, at
the time of consummation of the exchange offer, eligible to exchange, but did
not validly tender, old notes for new notes in the exchange offer.
If you wish to exchange your old notes for new notes in the exchange
offer, you will be required to make to us the representations described under
"The Exchange Offer -- Procedures for Tendering -- Your Representations to Us."
In connection with any resales under a shelf registration statement, the
holder will be required to be named as a selling securityholder in the
prospectus, will be required to deliver the prospectus and will be subject to
civil liabilities under the Securities Act. Holders also will be bound by
applicable provisions of the registration rights agreement, including
indemnification obligations. Upon the occurrence of events that would require an
amendment or supplement to the prospectus, public resales will not be permitted
under the shelf registration statement until the amendment or supplement is
provided to holders.
This summary of the registration rights agreements does not include all of
the information included in the registration rights agreements and may not
include all the information that you would find important. The summary is
subject to, and is qualified in its entirety by reference to, all provisions of
the registration rights agreement, which we have filed as an exhibit to the
registration statement of which this prospectus is a part.
GOVERNING LAW
The indenture and the notes are governed by and construed in accordance
with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
We have appointed JPMorgan Chase Bank as the trustee under the indenture
and as paying agent, security registrar and custodian for the notes. JPMorgan
Chase Bank serves as trustee under indentures relating to approximately $1.0
billion of our senior notes as of June 30, 2004. JPMorgan Chase Bank and its
affiliates may perform certain commercial banking services for us from time to
time for which they receive customary fees.
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The indenture contains certain limitations on the rights of the trustee,
if it or any of its affiliates is then our creditor, to obtain payment of claims
in certain cases or to realize on certain property received on any claim, as
security or otherwise. The trustee and its affiliates are permitted to engage in
other transactions with us. However, if the trustee acquires any conflicting
interest and a Default occurs with respect to the notes, the trustee must
eliminate such conflict or resign within 90 days after ascertaining that it has
a conflicting interest, unless the Default has been cured, waived or otherwise
eliminated within the 90-day period.
EXCHANGE, REGISTRATION AND TRANSFER
Notes will be exchangeable for other notes of the same total principal
amount and the same terms but in different authorized denominations in
accordance with the indenture. Holders may present notes for registration of
transfer at the office of the security registrar. The security registrar will
effect the transfer or exchange if its requirements and the requirements of the
indenture are met. There will be no service charge for any registration of
transfer or exchange of the notes. However, payment of any transfer tax or
similar governmental charge payable for that registration may be required.
In the case of any redemption or repurchase, we will not be required to
register the transfer or exchange of:
- any note during a period beginning 15 business days prior to the
mailing of the relevant notice of redemption or repurchase and
ending on the close of business on the day of mailing of such
notice; or
- any note that has been selected for redemption in whole or in part,
except the unredeemed portion of any note being redeemed in part.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the new notes will be issued in registered,
global form (the "Global Notes"). The Global Notes will be deposited upon
issuance with the trustee as custodian for DTC, in New York, New York, and
registered in the name of DTC's nominee, Cede & Co., in each case for credit to
an account of a direct or indirect participant in DTC as described below.
Beneficial interests in the Global Notes may be held through the Euroclear
System ("Euroclear") and Clearstream Banking, S.A. ("Clearstream") (as indirect
participants in DTC).
Except as set forth below, the Global Notes may be transferred, in whole
but 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 registered certificated form ("Certificated Notes") except in the limited
circumstances described below. See " -- Exchange of Global Notes for
Certificated Notes." Except in the limited circumstances described below, owners
of beneficial interests in the Global Notes will not be entitled to receive
physical delivery of Certificated Notes.
Transfers of beneficial interests in the Global Notes will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Clearstream),
which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Clearstream 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.
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DTC has advised us that DTC 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.
We expect that, pursuant to procedures established by DTC:
(1) upon deposit of the Global Notes, DTC will credit the accounts
of Participants exchanging old notes for new notes 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 of these interests 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 interests 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 therein indirectly through
organizations (including Euroclear and Clearstream) which are Participants in
such system. Euroclear and Clearstream may hold interests in the Global Notes on
behalf of their participants through customers' securities accounts in their
respective names on the books of their respective depositories, which are
Euroclear Bank S.A./N.V., as operator of Euroclear, and Citibank, N.A., as
operator of Clearstream. All interests in a Global Note, including those held
through Euroclear or Clearstream, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Clearstream may
also be subject to the procedures and requirements of such systems.
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 such 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 such interests to persons
that do not participate in the DTC system, or otherwise take actions in respect
of such interests, may be affected by the lack of a physical certificate
evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF AN INTEREST IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
CERTIFICATED NOTES 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 premium, if any, and interest
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, we and the trustee 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 ours 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 interests 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.
49
We expect that, under DTC's current practice, at the due date of any
payment in respect of securities such as the notes, DTC will 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 such payment date. Each
relevant Participant is credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the notes 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 Clearstream will be effected in accordance with
their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Clearstream,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Clearstream, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream
participants may not deliver instructions directly to the depositories for
Euroclear or Clearstream.
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 such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the notes, DTC reserves the right to exchange the
Global Notes for Certificated Notes, and to distribute such notes to its
Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform such procedures, and may discontinue such
procedures at any time. None of us, the trustee or any of our respective agents
will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective participants or 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 Certificated Notes in minimum
denominations of $1,000 and in integral multiples of $1,000, if:
(1) DTC (a) notifies us that it is unwilling or unable to continue
as depositary for the Global Notes or (b) has ceased to be a clearing
agency registered under the Exchange Act and in either event we fail to
appoint a successor depositary within 90 days; or
(2) there has occurred and is continuing an Event of Default and DTC
notifies the trustee of its decision to exchange the Global Note for
Certificated Notes.
In all cases, Certificated Notes delivered in exchange for any Global Note
or beneficial interests in Global Notes will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
50
Neither we nor the trustee will be liable for any delay by the depositary
or its nominee in identifying the holders of beneficial interests in the Global
Notes, and each such person may conclusively rely on, and will be protected in
relying on, instructions from the depositary for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Certificated Notes to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, and interest) by wire transfer of
immediately available funds to the account specified by the depositary. The
notes represented by the Global Notes will trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
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.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised
us that cash received in Euroclear or Clearstream as a result of sales of
interests in a Global Note by or through a Euroclear or Clearstream participant
to a Participant in DTC will be received with value on the settlement date of
DTC but will be available in the relevant Euroclear or Clearstream cash account
only as of the business day for Euroclear or Clearstream following DTC's
settlement date.
If the principal of or any premium or interest on the notes is payable on
a day that is a legal holiday, the payment will be made on the following
business day.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent will pay to us upon written request any money held by
them for payments on the notes that remains unclaimed for two years after the
date upon which that payment has become due. After payment to us, holders
entitled to the money must look to us for payment. In that case, all liability
of the trustee or paying agent with respect to that money will cease.
GLOSSARY
"Adjusted Net Assets" of a subsidiary guarantor at any date means the
amount by which the Fair Value of the Properties of such subsidiary guarantor
exceeds the total amount of liabilities, including contingent liabilities (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), but excluding liabilities under its subsidiary guarantee, of such
subsidiary guarantor at such date.
"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"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), 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 that person, whether through the
ownership of voting securities, by agreement or otherwise. Beneficial ownership
of 10% or more of the Voting Stock of a person will, however, be deemed to be
control.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease or other disposition (including any disposition by means of a merger or
consolidation) by us or any of our Subsidiaries to any person other than us or a
Wholly Owned Subsidiary, in one transaction or a series of related transactions,
of:
(1) any Capital Stock of any Subsidiary, except for directors'
qualifying shares or certain minority interests sold to other persons
solely due to local law requirements that there be more than one
stockholder, but which are not in excess of what is required for such
purpose, or
(2) any of our or our Subsidiaries' other Property other than:
51
(A) sales of drill-string components or obsolete or worn out
equipment in the ordinary course of business or other assets that,
in our reasonable judgment, are no longer used or useful in the
conduct of our or our Subsidiaries' business,
(B) any drilling contract, charter (bareboat or otherwise) or
other lease of Property entered into by us or any of our
Subsidiaries in the ordinary course of business, other than any
Bargain Purchase Contract,
(C) a Permitted Investment or Restricted Payment permitted
under " -- Restrictive Covenants -- Limitation on Restricted
Payments,"
(D) a Change in Control,
(E) a consolidation, merger or disposition of all or
substantially all of our and our Subsidiaries' assets, taken as a
whole, in compliance with the provisions of the indenture described
in " -- Consolidation, Merger and Sale of Assets,"
(F) any trade or exchange by us or any of our Subsidiaries of
one or more drilling rigs or other vessels or equipment for one or
more other Replacement Assets owned or held by another person, if:
- the Fair Value of the Property traded or exchanged by us
or such Subsidiary (including cash or cash equivalents
to be delivered by us or such Subsidiary) is reasonably
equivalent to the Fair Value of the asset (together with
cash or cash equivalents to be received by us or such
Subsidiary) acquired, as determined in good faith by the
principal financial officer of Pride for Fair Values
less than or equal to $25 million, in good faith by the
Board of Directors of Pride for Fair Values greater than
$25 million but less than or equal to $100 million and
by written appraisal by a nationally (or industry)
recognized investment banking firm or appraisal firm for
Fair Values greater than $100 million, and
- such exchange is approved by a majority of our
disinterested directors,
(G) transfers of the Pride Illinois, Pride Kentucky, Pride
West Virginia and Pride Pennsylvania,
(H) Securitization Transactions and Sale and Lease-Back
Transactions permitted under the "Limitation on Sale and Lease-Back
Transactions" covenant, and
(I) any transaction or series of related transactions that,
but for this clause (I), would be Asset Sales, if:
- we elect to designate such transaction or series of
related transactions as not constituting an Asset Sale,
and
- the aggregate Net Available Proceeds from such
transaction or any such series of related transactions
so designated do not exceed $10,000,000.
An Asset Sale also includes the requisition of title to, seizure of or
forfeiture of any Property, or any actual or constructive total loss or an
agreed or compromised total loss of any Property.
"Average Life" means, as of any date, the quotient obtained by dividing:
(1) the sum of the products of
- the number of years from such date to the date of each
scheduled principal payment (including any sinking fund
or mandatory redemption payment requirements) of the
applicable debt security or preferred stock multiplied
in each case by
- the amount of such principal payment by
(2) the sum of all such principal payments.
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"Bargain Purchase Contract" means a drilling contract, charter (bareboat
or otherwise) or lease that provides for acquisition of Property by the other
party to the agreement during or at the end of its term for less than Fair
Market Value of the Property at the time such right to acquire the Property is
granted.
"Capital Lease Obligation" means, at any time as to any person with
respect to any Property leased by that person as lessee, the amount of the
liability with respect to the lease that would be required at such time to be
capitalized and accounted for as a capital lease on the balance sheet of such
person prepared in accordance with GAAP. For purposes of " -- Restrictive
Covenants -- Limitation on Liens," a Capital Lease Obligation shall be deemed
secured by a Lien on the Property being leased.
"Capital Stock" in any entity means any and all shares, interests,
partnership interests, participations or other equivalents in the equity
interest (however designated) in such entity and any rights (other than debt
securities convertible into an equity interest), warrants or options to acquire
an equity interest in such entity.
"Cash Proceeds" means, with respect to any Asset Sale or Sale and
Lease-Back Transaction by any person, the aggregate consideration received for
such transaction by such person in the form of cash or cash equivalents
(including any amounts of insurance or other proceeds received in connection
with an Asset Sale of the type described in the last sentence of the definition
of Asset Sale), including payments for deferred payment obligations when
received in the form of cash or cash equivalents (except to the extent that such
obligations are financed or sold with recourse to such person or any subsidiary
thereof). For purposes of this definition, "cash or cash equivalents" are deemed
to include noncash consideration received with respect to an Asset Sale to the
extent that such noncash consideration consists of:
(1) publicly traded debt securities rated as "BBB-" or higher by S&P
and "Baa3" or higher by Moody's, or
(2) other Indebtedness of a person if:
- the lowest rated long-term, unsecured debt obligation issued
by such person is rated "BBB-" or higher by S&P and "Baa3" or
higher by Moody's, or
- in the case of other Indebtedness, the payment of such other
Indebtedness is secured by an irrevocable letter of credit
issued by a commercial bank having capital and surplus in
excess of $100 million and long-term, unsecured debt
obligations rated at least "A-" by S&P and "A3" by Moody's, or
(3) the items described in clauses (1), (2), (3), (4) and (5) under
the definition of "Permitted Investments."
"Change in Control" means:
(1) a determination by us that any person or group (as defined in
Section 13(d)(3) or 14(d)(2) of the Exchange Act) other than a Parent
Holding Company has become the direct or indirect beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of our
Voting Stock;
(2) we are merged with or into or consolidated with another entity
and, immediately after giving effect to the merger or consolidation, less
than 50% of the outstanding Voting Stock of the surviving or resulting
entity is then beneficially owned (within the meaning of Rule 13d-3 of the
Exchange Act) in the aggregate by:
- our stockholders immediately prior to such merger or
consolidation;
- if the record date has been set to determine our stockholders
entitled to vote on such merger or consolidation, our
stockholders as of such record date; or
- a Parent Holding Company;
(3) we, either individually or in conjunction with one or more
Subsidiaries, sell, convey, transfer or lease, or the Subsidiaries sell,
convey, transfer or lease, all or substantially all of our and our
Subsidiaries' assets, taken as a whole (either in one transaction or a
series of related transactions), including Capital Stock of the
Subsidiaries, to any person or entity (other than a Wholly Owned
Subsidiary of Pride or a Parent Holding Company);
53
(4) the liquidation or dissolution of our company; or
(5) the first day on which a majority of the individuals who
constitute the Board of Directors are not Continuing Directors.
The term "common stock" means common stock, par value $.01 per share, of
Pride as it exists on the Issue Date or any other Capital Stock of Pride into
which such common stock shall be reclassified or changed.
"Consolidated Current Liabilities" of any entity means, as of any date,
the total liabilities (including tax and other proper accruals) of such entity
and its subsidiaries (other than Non-Recourse Subsidiaries) on a consolidated
basis at such date which may properly be classified as current liabilities in
accordance with GAAP, after eliminating (1) all intercompany items between such
entity and its subsidiaries (other than Non-Recourse Subsidiaries) or between
subsidiaries (other than between a subsidiary that is not a Non-Recourse
Subsidiary and Non-Recourse Subsidiaries) and (2) all current maturities of
long-term Indebtedness.
"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio, the ratio of:
(1) our aggregate amount of EBITDA for the latest four fiscal
quarters for which financial information is available immediately prior to
the applicable transaction date (the "Determination Period") to
(2) our aggregate Consolidated Interest Expense that is anticipated
to accrue during a period consisting of the fiscal quarter in which the
transaction date occurs and the three subsequent fiscal quarters (based
upon the pro forma amount and maturity of, and interest payments on,
Indebtedness of ourselves and our consolidated Subsidiaries expected by us
to be outstanding on the transaction date and reasonably anticipated by us
to be outstanding from time to time during such period), assuming for the
purposes of this measurement the continuation of market interest rates
prevailing on the transaction date and base interest rates on floating
interest rate obligations equal to the base interest rates on such
obligations in effect as of the transaction date.
This calculation is subject to the following qualifications:
(1) if Pride or any of its consolidated Subsidiaries is a party to
any Interest Swap Obligation that would have the effect of changing the
interest rate on any Indebtedness of Pride or any of its consolidated
Subsidiaries for such four-quarter period (or a portion thereof), the
resulting rate will be used for such four-quarter period or portion
thereof;
(2) any Consolidated Interest Expense of Pride with respect to
Indebtedness incurred or retired by Pride or any of its Subsidiaries
during the fiscal quarter in which the transaction date occurs will be
calculated as if such Indebtedness were so incurred or retired on the
first day of the fiscal quarter in which the transaction date occurs; and
(3) if the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio would have the effect of increasing
or decreasing EBITDA in the future and if such increase or decrease is
readily quantifiable and is directly attributable to such transaction,
EBITDA will be calculated on a pro forma basis as if the transaction had
occurred on the first day of the Determination Period, and if, during the
same four fiscal quarters:
- Pride or any of its consolidated Subsidiaries have engaged in
any Asset Sale, EBITDA for such period will be reduced by an
amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly
attributable to the Property that is the subject of the Asset
Sale for such period calculated on a pro forma basis as if
such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period or
- Pride or any of its consolidated Subsidiaries have acquired
any material assets other than in the ordinary course of
business, EBITDA and Consolidated Interest Expense (if
Indebtedness is incurred or assumed in connection with such
acquisition) will be calculated on a pro forma basis as if
such acquisition and related financing had occurred on the
first day of the period.
54
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of:
(1) the aggregate amount of cash and noncash interest expense
(including capitalized interest) of such person and its subsidiaries
(other than Non-Recourse Subsidiaries) for such period as determined on a
consolidated basis in accordance with GAAP for Indebtedness, including,
without limitation:
- any amortization of debt discount;
- net costs associated with Interest Swap Obligations (including
any amortization of discounts);
- the interest portion of any deferred payment obligation;
- all accrued interest; and
- all commissions, discounts and other fees and charges owed
with respect to letters of credit, bankers acceptances or
similar facilities paid or accrued, or scheduled to be paid or
accrued, during such period other than for Non-Recourse
Indebtedness;
(2) dividends on preferred stock of such person (and preferred stock
of its subsidiaries (other than Non-Recourse Subsidiaries) if paid to a
person other than such person or its subsidiaries) declared and payable in
cash;
(3) the portion of any rental obligation of such person or its
subsidiaries (other than Non-Recourse Subsidiaries) for any Capital Lease
Obligation allocable to interest expense in accordance with GAAP;
(4) the portion of any rental obligation of such person or its
subsidiaries (other than Non-Recourse Subsidiaries) in respect of any Sale
and Lease-Back Transaction allocable to interest expense (determined as if
such were treated as a Capital Lease Obligation); and
(5) to the extent any debt of any other person is guaranteed by such
person or any of its subsidiaries (other than Non-Recourse Subsidiaries),
the aggregate amount of interest paid, accrued or scheduled to be paid or
accrued, by such other person during such period attributable to any such
debt.
We will exclude from the calculation of Consolidated Interest Expense, to the
extent included above, amortization or writeoff of deferred financing costs of
such person and its subsidiaries during such period and any charge related to or
any premium or penalty paid in connection with redeeming or retiring any
Indebtedness of such person and its subsidiaries prior to its stated maturity.
In each case, we will calculate Consolidated Interest Expense after elimination
of intercompany accounts among such person and its subsidiaries and as
determined in accordance with GAAP.
"Consolidated Net Income" of any person means, for any period, the
aggregate net income (or net loss, as the case may be) of such person and its
subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP. We will exclude from the calculation the following, without
duplication:
(1) any net income of any Non-Recourse Subsidiary, except that
Pride's or any Subsidiary's equity in the net income of such Non-Recourse
Subsidiary for such period will be included in such Consolidated Net
Income up to the aggregate amount of cash or cash equivalents actually
distributed by such Non-Recourse Subsidiary during such period to Pride or
such Subsidiary as a dividend or other distribution;
(2) gains and losses from Asset Sales or reserves relating thereto;
(3) items classified as extraordinary (other than the tax benefit,
if any, of the utilization of net operating loss carryforwards or
alternative minimum tax credits) and expenses for early retirement of
debt;
55
(4) in the case of any computation of Consolidated Net Income for
purposes of determining compliance with the covenant described under the
caption " -- Restrictive Covenants -- Limitation on Restricted Payments,"
the net income of any person acquired by such specified person (other than
a Non-Recourse Subsidiary) or any of its subsidiaries in a
pooling-of-interests transaction for any period prior to the date of such
acquisition;
(5) any gain or loss, net of taxes, realized on the termination of
any employee pension benefit plan;
(6) the net income of any subsidiary of such specified person to the
extent that the transfer to that person of that income is not at the time
permitted, directly or indirectly, by any means (including by dividend,
distribution, advance or loan or otherwise), by operation of the terms of
its charter or any agreement with a person other than with such specified
person, instrument held by a person other than by such specified person,
judgment, decree, order, statute, law, rule or governmental regulations
applicable to such subsidiary or its stockholders, except for any
dividends or distributions actually paid during such period by such
subsidiary to such person;
(7) the cumulative effect of changes in accounting principles; and
(8) non-cash compensation expense for management stock options and
other incentive or benefit plans.
"Consolidated Net Tangible Assets" of any person means, as of any date,
Consolidated Tangible Assets of such person at such date, after deducting
(without duplication of deductions) all Consolidated Current Liabilities of such
person at such date.
"Consolidated Tangible Assets" of any person means, as of any date, the
consolidated assets of such person and its subsidiaries (other than Non-Recourse
Subsidiaries) at such date, after eliminating intercompany items between such
person and its subsidiaries (other than Non-Recourse Subsidiaries) or between
subsidiaries (other than between a subsidiary that is not a Non-Recourse
Subsidiary and Non-Recourse Subsidiaries) and after deducting from such total:
(1) the net book value of all assets that would be classified as
intangibles under GAAP (including, without limitation, goodwill,
organizational expenses, trademarks, trade names, copyrights, patents,
licenses and any rights in any thereof) and
(2) any prepaid expenses, deferred charges and unamortized debt
discount and expense, each such item determined in accordance with GAAP.
"Continuing Director" means an individual who is a member of the Board of
Directors of Pride and either:
(1) who was a member of the Board of Directors on the Issue Date or
(2) whose nomination for election or election to the Board of
Directors was approved by vote of at least a majority of the directors
then still in office who were either directors on the Issue Date or whose
election or nomination for election was previously so approved.
"Credit Facilities" means the one or more credit facilities to which Pride
or one or more Subsidiaries is a party entered into from time to time, together
with any related notes, guarantees, collateral documents and other instruments
and other documents, in each case as amended, restated, supplemented, increased
or otherwise modified from time to time, and any renewal, extension,
refinancing, refund, repurchase or replacement (or successive extensions,
renewals, refinancings, refundings, repurchases or replacements) of any of the
foregoing.
"Currency Hedge Obligations" means, at any time as to any person, the
obligations of such person at such time incurred in the ordinary course of
business pursuant to any foreign currency exchange agreement, option or future
contract or other similar agreement or arrangement designed to protect against
or manage such person's or any of its subsidiaries' exposure to fluctuations in
foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
56
"Determination Period" has the meaning specified under clause (1) of the
definition of "Consolidated Interest Coverage Ratio."
"EBITDA" means, with respect to any person for any period, the
Consolidated Net Income of such person, for such period, plus to the extent
reflected in the income statement of such person for such period from which
Consolidated Net Income is determined, without duplication:
(1) Consolidated Interest Expense,
(2) income tax expense,
(3) depreciation expense,
(4) amortization expense,
(5) any other non-cash charges, and
(6) reasonable expenses related to financings, asset sales and other
transactions outside the ordinary course of business.
"Equity Offering" means any public or private sale made after the Issue
Date by Pride of its common stock for cash on a primary basis.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor statute.
"Fair Market Value" means Fair Value as determined in good faith by (a)
the principal financial officer of Pride if less than or equal to $25 million
and (b) the Board of Directors of Pride if greater than $25 million.
"Fair Value" means the price that could be negotiated in an arm's-length
free market transaction, for cash, between a willing seller and a willing buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction.
"GAAP" means United States generally accepted accounting principles,
consistently applied, that are applicable to the circumstances as of the date of
determination. All calculations made for purposes of determining compliance with
the terms of the covenants set forth in " -- Restrictive Covenants" will,
however, use GAAP in effect at the Issue Date.
A "holder," when used with respect to any note, means the person in whose
name the note is registered in the security register.
"Indebtedness" as applied to any person means, at any time, without
duplication:
(1) any obligation of such person, contingent or otherwise, for
borrowed money;
(2) any obligation of such person evidenced by bonds, debentures,
notes or other similar instruments;
(3) any obligation of such person upon which interest charges are
customarily paid (other than accounts payable incurred in the ordinary
course of business);
(4) any obligation of such person issued or assumed as the deferred
purchase price of Property (other than accounts payable incurred in the
ordinary course of business);
(5) any Capital Lease Obligation;
(6) any Indebtedness of any other person secured by (or for which
the obligee thereof has an existing right, contingent or otherwise, to be
secured by) any Lien on Property owned or acquired, whether or not any
Indebtedness secured thereby has been assumed, by such person, the amount
of such Indebtedness being deemed to be the lesser of the Fair Market
Value of such Property or the amount of the Indebtedness so secured;
57
(7) any reimbursement obligation of such person in respect of any
letter of credit or bankers acceptance;
(8) the maximum fixed repurchase price of any Redeemable Stock of
such person (or, if such person is a subsidiary, any preferred stock of
such person);
(9) any Interest Swap Obligation or Currency Hedge Obligation of
such person; and
(10) any obligation that is in economic effect a guarantee,
regardless of its characterization (other than an endorsement in the
ordinary course of business or any performance guarantee), with respect to
any Indebtedness of another person, to the extent guaranteed.
For purposes of this definition, the maximum fixed repurchase price of any
Redeemable Stock or subsidiary preferred stock that does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Redeemable Stock or subsidiary preferred stock as if such Redeemable Stock or
subsidiary preferred stock were repurchased on any date on which Indebtedness
will be required to be determined pursuant to the indenture; provided, however,
that if such Redeemable Stock or subsidiary preferred stock is not then
permitted to be repurchased, the repurchase price will be the book value of such
Redeemable Stock or subsidiary preferred stock. The amount of Indebtedness of
any person at any date will be:
(1) the outstanding book value at such date of all unconditional
obligations as described above, and
(2) the maximum liability at such date of all contingent obligations
as described above.
"Interest Swap Obligation" means, with respect to any person, its
obligation pursuant to any interest rate swap agreement, interest rate cap,
collar or floor agreement or other similar agreement or arrangement designed to
protect against or manage such person's or any of its subsidiaries' exposure to
fluctuations in interest rates.
"Investment" means, with respect to any person, any investment in another
person, whether by means of:
- a share purchase;
- a capital contribution;
- a loan;
- an advance (other than advances to employees for moving and travel
expenses, drawing accounts and similar expenditures or prepayments
or deposits in the ordinary course of business) or similar credit
extension constituting Indebtedness of such other person; or
- any guarantee of Indebtedness of any other person.
The term "Investment" will not, however, include any transaction involving the
purchase or other acquisition (including by way of merger) of Property
(including Capital Stock) by Pride or any Subsidiary in exchange for Capital
Stock (other than Redeemable Stock) of Pride. The amount of any person's
Investment will be the original cost of such Investment to such person, plus the
cost of all additions thereto paid by such person, and minus the amount of any
portion of such Investment repaid to such person as a dividend, repayment of
loan or advance, release or discharge of a guarantee or other obligation or
other transfer of Property or return of capital, as the case may be, but without
any other adjustments for increases or decreases in value, or writeups,
writedowns or writeoffs with respect to such Investment. In determining the
amount of any Investment involving a transfer of any Property other than cash,
such Property shall be valued at its Fair Value at the time of such transfer as
determined in good faith by the board of directors (or comparable body) of the
person making such transfer.
"Investment Grade Status" exists as of any time if at such time either:
- the rating assigned to the notes by Moody's is Baa3 (or the
equivalent) or higher and by S&P is BB+ (or the equivalent) or
higher, or
- the rating assigned to the notes by Moody's is Ba1 (or the
equivalent) or higher and by S&P is BBB- (or the equivalent) or
higher.
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"Issue Date" means July 7, 2004, the date on which the notes are first
authenticated and delivered under the indenture.
"Lien" means:
- any mortgage,
- pledge,
- hypothecation,
- charge,
- assignment,
- deposit arrangement,
- encumbrance,
- security interest,
- lien (statutory or other), or
- preference, priority or other security or similar agreement or
preferential arrangement of any kind or nature whatsoever.
The definition of "Lien" includes any agreement to give or grant a Lien or
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the above.
"Limited Recourse Indebtedness" means
(1) Indebtedness with respect to the two drilling/workover barge
rigs owned by Pride's Venezuelan Subsidiary as in effect on the Issue Date
(the "Venezuelan Barge Financing"),
(2) Indebtedness incurred under the facility agreement dated as of
March 25, 2004 among Martin Maritime Ltd., Andre Maritime Ltd., certain
other parties and the lenders thereunder and related instruments and other
documents as in effect on the Issue Date (the "Angola/Africa Drillship
Financing"),
(3) Indebtedness incurred to finance all or a part of the purchase,
acquisition, renovation or construction of capital assets and related
items (including interest added to principal), or renewals, extensions,
refinancings, refunds, repurchases or replacements (or successive
extensions, renewals, refinancings, refundings, repurchases or
replacements) thereof or of the Venezuelan Barge Financing or the
Angola/Africa Drilling Financing,
- for which the recourse of the holder of such Indebtedness is
effectively limited to such capital assets and related items
(including the Capital Stock of persons that own, whether
directly or indirectly, such capital assets and related items
and no other significant Property), or
- in which the recourse and security are similar to (or more
favorable to Pride and its Subsidiaries than) the Venezuelan
Barge Financing or the Angola/Africa Drillship Financing.
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"Liquid Securities" means securities (1) of an issuer that is not an
Affiliate of Pride, (2) that are publicly traded on the New York Stock Exchange,
the American Stock Exchange, the Toronto Stock Exchange, the London Stock
Exchange or the Nasdaq National Market and (3) as to which (a) Pride is not
subject to any restrictions on sale or transfer (including any volume
restrictions under Rule 144 under the Securities Act or any other restrictions
imposed by the Securities Act), (b) a registration statement under the
Securities Act covering the resale thereof is in effect, (c) Pride or a
Subsidiary is entitled to registration rights under the Securities Act, or (d)
in the case of any securities traded on the Toronto Stock Exchange or London
Stock Exchange, Pride or a Subsidiary has rights comparable to those referred to
in subclauses (b) and (c) of this clause (3), in each case in this clause (3)
for as long as the securities are held; provided, however, that securities
meeting the requirements of clauses (1), (2) and (3) of this definition shall be
treated as Liquid Securities from the date of receipt thereof until and only
until the earlier of (x) the date on which such securities are sold or exchanged
for cash or cash equivalents and (y) one year following the date of receipt of
such securities. If such securities are not sold or exchanged for cash or cash
equivalents within one year of receipt thereof, then, for purposes of
determining whether the transaction pursuant to which Pride or a Subsidiary
received the securities complied with the provisions of the indenture described
under " -- Restrictive Covenants -- Limitation on Asset Sales," such securities
shall be deemed not to have been Liquid Securities at any time.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Available Proceeds" means
(1) as to any Asset Sale (other than a Bargain Purchase Contract) or
Sale and Lease-Back Transaction, the Cash Proceeds from that sale, net of:
- all legal and title expenses, commissions and other fees and
expenses incurred,
- all taxes payable as a consequence of such Asset Sale or Sale
and Lease-Back Transaction,
- all payments made to any person other than Pride or a
Subsidiary on any Indebtedness (a) in accordance with the
terms of any Lien upon or with respect to such Property or (b)
which must, by its terms or in order to obtain a necessary
consent to such Asset Sale or Sale and Lease-Back Transaction
or by applicable law, be repaid out of the proceeds from such
Asset Sale or Sale and Lease-Back Transaction, excluding,
however, any payments of revolving credit Indebtedness that
are not accompanied by a permanent reduction of availability
of revolving credit borrowings,
- with respect to any Asset Sale or Sale and Lease-Back
Transaction by a Subsidiary, the equity interest in such Cash
Proceeds of any holder of Capital Stock of such Subsidiary
(other than Pride or any other Subsidiary),
- appropriate amounts to be provided by Pride or any Subsidiary,
as the case may be, as a reserve required in accordance with
GAAP against any liabilities associated with such Asset Sale
or Sale and Lease-Back Transaction and retained by Pride or
any Subsidiary, as the case may be, after such Asset Sale or
Sale and Lease-Back Transaction including pension and other
post- employment benefit liabilities, liabilities related to
environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale or
Sale and Lease-Back Transaction,
- Cash Proceeds pursuant to the first bullet point of the third
paragraph under " -- Restrictive Covenants -- Limitation on
Asset Sales," and
(2) as to any Bargain Purchase Contract, an amount equal to:
- that portion of the rental or other payment stream arising
under a Bargain Purchase Contract that represents an amount in
excess of the Fair Market Value of the rental or other
payments with respect to the pertinent Property, and
- the Cash Proceeds from the sale of such Property, net of the
amounts set forth in clause (1) above, in each case as and
when received.
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"1999 Issue Date" means May 26, 1999, the date of original issue of our
10% Senior Notes due 2009.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of a Non-Recourse Subsidiary as to which neither Pride nor any
Subsidiary provides credit support constituting Indebtedness of Pride or any
Subsidiary or is otherwise directly or indirectly liable (other than
Indebtedness permitted to be incurred under the definition of Non-Recourse
Subsidiary).
"Non-Recourse Subsidiary" means:
- any subsidiary of Pride that at the time of determination will be
designated a Non-Recourse Subsidiary by the Board of Directors of
Pride as provided below, and
- any subsidiary of a Non-Recourse Subsidiary.
The Board of Directors of Pride may designate any subsidiary of Pride as a
Non-Recourse Subsidiary so long as:
(1) neither Pride nor any Subsidiary is directly or indirectly
liable pursuant to the terms of any Indebtedness of such subsidiary or has
made an Investment in such subsidiary, subject to the proviso described
below, and
(2) such designation does not result in the creation or imposition
of any Lien on any Property of Pride or any Subsidiary (other than any
Permitted Lien or any Lien the creation or imposition of which is in
compliance with the "Limitation on Liens" covenant).
With respect to clause (1) of this definition, however, Pride or a
Subsidiary may be liable for Indebtedness of, and may have an Investment in, a
Non-Recourse Subsidiary if:
- such liability or Investment constituted a Permitted Investment or a
Restricted Payment permitted by the "Limitation on Restricted
Payments" covenant, in each case at the time of incurrence, or
- the liability or Investment would be a Permitted Investment or a
Restricted Payment permitted by the "Limitation on Restricted
Payments" covenant, in each case at the time of designation of such
Subsidiary as a Non-Recourse Subsidiary.
The Board of Directors of Pride may designate any Non-Recourse Subsidiary
as a Subsidiary if, immediately after giving effect to such designation:
- no Default or Event of Default has occurred and is continuing,
- Pride could incur $1.00 of additional Indebtedness (not including
the incurrence of Permitted Indebtedness) under the "Limitation on
Indebtedness" covenant, and
- if any Property of Pride or any of its Subsidiaries would, upon such
designation, become subject to any Lien (other than a Permitted
Lien), the creation or imposition of such Lien is in compliance with
the "Limitation on Liens" covenant.
"Parent Holding Company" means (a) from and after the time the common
stock is not listed on a United States or foreign national or regional
securities exchange or traded through the National Association of Securities
Dealers Automated Quotation System or similar system or another entity succeeds
to and is substituted for Pride under the indenture, an entity which,
immediately after such time, had substantially the same stockholders, directly
or indirectly, as Pride immediately prior to such time with holdings in
substantially the same proportion as such stockholders' holdings in Pride
immediately prior to such time, (b) from and after the sale, conveyance,
assignment, transfer, lease or other disposition of all or substantially all of
our and our Subsidiaries' assets, taken as a whole, Pride (as determined prior
to the transaction) and (c) each Wholly Owned Subsidiary of another Parent
Holding Company.
"Permitted Indebtedness" means
(1) Indebtedness of Pride under the notes issued on the Issue Date
(including any new notes),
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(2) Indebtedness of Pride or any Subsidiary incurred under one or
more Credit Facilities (in addition to any such Indebtedness incurred in
compliance with the Consolidated Interest Coverage Ratio under the
"Limitation on Indebtedness" covenant) in an aggregate principal amount at
any one time outstanding not to exceed the greater of:
- $800 million, and
- an amount equal to 20% of our Consolidated Net Tangible Assets
determined as of the date of the incurrence of such
Indebtedness (plus interest and fees under such Credit
Facilities),
(3) Indebtedness of Pride or any Subsidiary under Interest Swap
Obligations if:
- such Interest Swap Obligations are related to payment
obligations on Indebtedness otherwise permitted under the
covenant described in " -- Restrictive Covenants -- Limitation
on Indebtedness," and
- the notional principal amount of such Interest Swap
Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligations relate,
(4) Indebtedness of Pride or any Subsidiary under Currency Hedge
Obligations if
- such Currency Hedge Obligations are related to payment
obligations on Indebtedness otherwise permitted under the
covenant described in " -- Restrictive Covenants -- Limitation
on Indebtedness" or to the foreign currency cash flows
reasonably expected to be generated by Pride and the
Subsidiaries, and
- the notional principal amount of such Currency Hedge
Obligations does not exceed the principal amount of the
Indebtedness and the amount of the foreign currency cash flows
to which such Currency Hedge Obligations relate,
(5) Indebtedness of Pride or any Subsidiary outstanding on the Issue
Date,
(6) any subsidiary guarantees of the notes or any other Indebtedness
of Pride and any assumption of the obligations guaranteed thereby,
(7) Indebtedness of Pride to any of its Wholly Owned Subsidiaries,
but only so long as it remains a Wholly Owned Subsidiary of Pride,
(8) Indebtedness of any Subsidiary to Pride or any of its Wholly
Owned Subsidiaries, but only so long as it remains a Wholly Owned
Subsidiary of Pride,
(9) Indebtedness of Pride in connection with a purchase of the notes
as a result of a Change in Control if:
- the aggregate principal amount of such Indebtedness does not
exceed the aggregate Change in Control Purchase Price plus the
related expenses of such purchase, and
- such Indebtedness has an Average Life equal to or greater than
the remaining Average Life of the notes and does not mature
prior to one year following the stated maturity of the notes,
(10) Indebtedness in respect of completion bonds, performance bonds,
bid bonds, appeal bonds, surety bonds, bankers acceptances, letters of
credit, insurance obligations or bonds and other similar bonds and
obligations incurred by Pride or any Subsidiary that do not support any
obligation for borrowed money, including any guarantees or letters of
credit functioning as or supporting any of the foregoing bonds or
obligations,
(11) Permitted Refinancing Indebtedness incurred with respect to
Indebtedness of Pride (excluding any Indebtedness described in clause (7)
above) described in clause (1), (2), (5), (6) or (9) above, this clause
(11) or the first sentence under the caption " -- Restrictive Covenants --
Limitation on Indebtedness,"
(12) Permitted Subsidiary Refinancing Indebtedness incurred with
respect to Indebtedness of any Subsidiary (excluding any Indebtedness
described in clause (8) above) described in clause (1), (2), (5), (6) or
(9) above, this clause (12) or the first sentence under the caption " --
Restrictive Covenants -- Limitation on Indebtedness,"
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(13) Indebtedness of Pride or any Subsidiary represented by Capital
Lease Obligations, Indebtedness of Pride or any Subsidiary described in
clause (5) of the definition of "Permitted Liens" and Permitted
Refinancing Indebtedness and Permitted Subsidiary Refinancing Indebtedness
incurred with respect to either of the foregoing (in addition to any such
Indebtedness incurred in compliance with the Consolidated Interest
Coverage Ratio under the "Limitation on Indebtedness" covenant), in an
aggregate principal amount that does not exceed 5% of our Consolidated Net
Tangible Assets determined as of the date of the incurrence thereof (plus
imputed interest and fees with respect to such Capital Lease Obligations
and interest and fees under such other Indebtedness), and
(14) in addition to the items referred to in clauses (1) through
(13) above, Indebtedness of Pride or any Subsidiary in an aggregate
outstanding principal amount which, when taken together with the principal
amount of all other Indebtedness described in this clause (14) and then
outstanding, will not exceed $100 million at any one time outstanding.
For purposes of determining compliance with the "Limitation on Indebtedness"
covenant, in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Indebtedness described in clauses (1)
through (14) above, or is entitled to be incurred pursuant to the Consolidated
Interest Coverage Ratio test of such covenant, Pride will be permitted to
classify (or later classify or reclassify in whole or in part in its sole
discretion) such item of Indebtedness in any manner that complies with the
covenant. To avoid duplication in determining the amount of Permitted
Indebtedness under any clause of this definition, guarantees of, or obligations
for letters of credit supporting, Indebtedness otherwise included in the
determination of such amount will not also be included.
"Permitted Investments" means
(1) certificates of deposit, bankers acceptances, time deposits,
Eurocurrency deposits and similar types of Investments routinely offered
by commercial banks with final maturities of one year or less issued by
commercial banks having capital and surplus in excess of $100 million,
(2) commercial paper issued by any corporation, if such commercial
paper has credit ratings of at least "A-l" by S&P and at least "P-l" by
Moody's,
(3) U.S. Government Obligations with a maturity of four years or
less,
(4) repurchase obligations for instruments of the type described in
clause (3),
(5) shares of money market mutual or similar funds having assets in
excess of $100 million,
(6) payroll advances in the ordinary course of business,
(7) other advances and loans to officers and employees of Pride or
any Subsidiary, so long as the aggregate principal amount of such advances
and loans does not exceed $2 million at any one time outstanding,
(8) Investments represented by proceeds from Asset Sales,
(9) Investments made by Pride in its Subsidiaries (or any person
that will be a Subsidiary as a result of such Investment) or by a
Subsidiary in Pride or in one or more Subsidiaries (or any person that
will be a Subsidiary as a result of such Investment),
(10) Investments in stock, obligations or securities received in
settlement of debts owing to Pride or any Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection
or enforcement of any Lien in favor of Pride or any Subsidiary, in each
case as to debt owing to Pride or any Subsidiary that arose in the
ordinary course of business of Pride or any such Subsidiary; for these
purposes, any stocks, obligations or securities received in settlement of
debts that arose in the ordinary course of business (and received other
than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within 30
days of receipt, converted into cash or cash equivalents will be treated
as having been cash or cash equivalents at the time received, and
63
(11) other Investments having an aggregate Fair Market Value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value) that, when taken together with all
other Investments made pursuant to this clause (11) since the Issue Date,
do not exceed 10% of our Consolidated Net Tangible Assets determined as of
the same date.
"Permitted Liens" means
(1) Liens in existence on the Issue Date,
(2) Liens created for the benefit of the notes,
(3) Liens on Property of a person existing at the time such person
is merged or consolidated with or into, or acquired by, Pride or a
Subsidiary or becomes a Subsidiary (and not incurred as a result of, or in
anticipation of, such transaction), if such Liens relate solely to such
Property and the proceeds thereof and accessories and upgrades thereto,
(4) Liens on Property existing at the time of the acquisition
thereof (and not incurred as a result of, or in anticipation of, such
transaction), if such Liens relate solely to such Property and the
proceeds thereof and accessories and upgrades thereto,
(5) Liens to secure Indebtedness incurred for the purpose of
financing all or a part of the purchase price or construction cost of
Property (including the cost of upgrading or refurbishing rigs or
drillships) acquired or constructed after the Issue Date, if:
- the principal amount of Indebtedness secured by such Liens
does not exceed 100% of the lesser of cost or Fair Market
Value of the Property so acquired or constructed (including
upgrade or refurbishment) plus transaction costs related
thereto,
- such Liens do not encumber any other Property of Pride or any
Subsidiary (other than the proceeds thereof and improvements,
accessions and upgrades thereto and the Capital Stock of
persons that own, whether directly or indirectly, principally
such Property), and
- such Liens attach to such Property within 270 days of the
later of commencement of commercial operations of such
Property and completion of the acquisition or construction
(including upgrade or refurbishment) of such Property,
(6) Liens securing Indebtedness of Pride or a Subsidiary represented
by Capital Lease Obligations in an aggregate principal amount not to
exceed 5% of our Consolidated Net Tangible Assets determined as of the
date of the incurrence of such Liens (plus imputed interest and fees with
respect to such Indebtedness),
(7) Liens to secure any extension, renewal, refinancing, refunding,
repurchase or replacement (or successive extensions, renewals,
refinancings, refundings, repurchases or replacements), in whole or in
part, of any Indebtedness secured by Liens permitted by this definition,
if such Liens do not extend to any other Property of Pride or any
Subsidiary (other than the proceeds thereof and accessions and upgrades
thereto) and the principal amount of the Indebtedness secured by such
Liens is not increased,
(8) Liens granted by Pride to any of its Wholly Owned Subsidiaries,
but only so long as it remains a Wholly Owned Subsidiary of Pride,
(9) Liens granted by any Subsidiary to Pride or any of its Wholly
Owned Subsidiaries, but only so long as it remains a Wholly Owned
Subsidiary of Pride,
(10) Liens securing Non-Recourse Indebtedness,
(11) Liens securing Indebtedness incurred under one or more Credit
Facilities,
(12) Liens securing Permitted Indebtedness described in clauses (3),
(4) and (10) of the definition of "Permitted Indebtedness,"
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(13) rights of set-off of banks and other persons,
(14) Liens or equitable encumbrances deemed to exist by reason of
fraudulent conveyance or transfer laws or negative pledge or similar
agreements to refrain from permitting Liens,
(15) Liens in existence on the occurrence of an Investment Grade
Status Event,
(16) Liens in connection with any Securitization Transaction, and
(17) Liens not otherwise permitted by clauses (1) -- (16) above
securing up to $100 million of other Indebtedness at any one time
outstanding.
"Permitted Refinancing Indebtedness" means Indebtedness of Pride incurred
in exchange for, or the net proceeds of which are used to renew, extend,
refinance, refund, repurchase or replace, outstanding Indebtedness of Pride or a
Subsidiary, which outstanding Indebtedness was incurred in accordance with, or
is otherwise permitted by, the terms of the indenture, if:
(1) if the Indebtedness being renewed, extended, refinanced,
refunded, repurchased or replaced is equal or subordinated in right of
payment to the notes, then such new Indebtedness is equal or subordinated,
as the case may be, in right of payment (without regard to its being
secured) to the notes at least to the same extent as the Indebtedness
being renewed, extended, refinanced, refunded, repurchased or replaced,
(2) such new Indebtedness is scheduled to mature later than the
Indebtedness being renewed, extended, refinanced, refunded, repurchased or
replaced,
(3) such new Indebtedness has an Average Life at the time such
Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed, extended, refinanced, refunded, repurchased or
replaced, and
(4) such new Indebtedness is in an aggregate principal amount (or,
if such Indebtedness is issued at a price less than the principal amount
thereof, the aggregate amount of gross proceeds therefrom is) not in
excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded, repurchased or
replaced (or if the Indebtedness being renewed, extended, refinanced,
refunded, repurchased or replaced was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses and any premium incurred by Pride or any
Subsidiary in connection therewith.
"Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any
Subsidiary incurred in exchange for, or the net proceeds of which are used to
renew, extend, refinance, refund, repurchase or replace, outstanding
Indebtedness of such Subsidiary or any other Subsidiary, which outstanding
Indebtedness was incurred in accordance with or is otherwise permitted by the
terms of the indenture, if:
(1) if the Indebtedness being renewed, extended, refinanced,
refunded, repurchased or replaced is equal or subordinated in right of
payment to the subsidiary guarantees of the notes, then such new
Indebtedness is equal or subordinated, as the case may be, in right of
payment (without regard to its being secured) to the subsidiary guarantees
of the notes at least to the same extent as the Indebtedness being
renewed, extended, refinanced, refunded, repurchased or replaced,
(2) such new Indebtedness is scheduled to mature later than the
Indebtedness being renewed, extended, refinanced, refunded, repurchased or
replaced,
(3) such new Indebtedness has an Average Life at the time such
Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed, extended, refinanced, refunded, repurchased or
replaced, and
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(4) such new Indebtedness is in an aggregate principal amount (or,
if such Indebtedness is issued at a price less than the principal amount
thereof, the aggregate amount of gross proceeds therefrom is) not in
excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded, repurchased or
replaced (or if the Indebtedness being renewed, extended, refinanced,
refunded, repurchased or replaced was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses and any premium incurred by Pride or such
Subsidiary in connection therewith.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Rating Decline" means that, at any time within 90 days (which period
shall be extended so long as the rating of the notes is under publicly announced
consideration for possible downgrade by either Moody's or S&P) after the date of
public notice of a Change in Control, or of public notice of our intention or
that of any other person to effect a Change in Control, the rating of the notes
is decreased by both Moody's and S&P by one or more ratings categories and the
notes following such downgrade do not qualify for Investment Grade Status.
"Redeemable Stock" means, with respect to any person, any equity security
that by its terms or otherwise is required to be redeemed, or is redeemable at
the option of the holder thereof, at any time prior to one year following the
stated maturity of the notes or is exchangeable into Indebtedness of such person
or any of its subsidiaries.
"Related Business" means any business related, similar, ancillary or
complementary to the business of Pride and its Subsidiaries on the Issue Date.
"Replacement Asset" means any Property that, as determined by the Board of
Directors of Pride evidenced by a board resolution, is used or is useful in a
Related Business.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Payment" means to
(1) declare or pay any dividend on, or make any distribution in
respect of, or purchase, redeem, retire or otherwise acquire for value any
Capital Stock of Pride or any parent of Pride, or warrants, rights or
options to acquire such Capital Stock, other than:
- dividends payable solely in the Capital Stock (other than
Redeemable Stock) of Pride, or in warrants, rights or options
to acquire such Capital Stock and
- dividends or distributions by a Subsidiary to Pride or to a
Wholly Owned Subsidiary of Pride,
(2) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, scheduled sinking fund payment or other stated maturity,
Subordinated Indebtedness of Pride or any subsidiary guarantor or
(3) make any Restricted Investment in any person.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor to the rating agency business
thereof.
"Sale and Lease-Back Transaction" means, with respect to any person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such person or a subsidiary of such person and is thereafter leased back from
the purchaser or transferee thereof by such person or one of its subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor statute.
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"Securitization Transaction" means any transaction in which Pride or any
Subsidiary sells or otherwise transfers an interest in accounts receivable (i)
to one or more third party purchasers or (ii) to a special purpose entity
(including, without limitation, a Subsidiary) that borrows against such accounts
receivable or sells such accounts receivable (or an undivided interest therein)
to one or more third party purchasers, but only to the extent that amounts
received in connection with the sale or other transfer of such accounts
receivable would not under GAAP be accounted for as liabilities on a
consolidated balance sheet of Pride.
"Senior Debt" means any Indebtedness incurred by Pride or any subsidiary
guarantor, unless the instrument under which such Indebtedness is incurred
expressly provides that it is subordinated in right of payment to the notes or
the subsidiary guarantees, as the case may be. Senior Debt will not include:
(1) any liability for taxes owed or owing by Pride,
(2) any Indebtedness owing to any Subsidiaries,
(3) any obligations with respect to Capital Stock of Pride,
(4) any trade payables, or
(5) any Indebtedness that is incurred in violation of the indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the SEC, as
such Regulation is in effect on the Issue Date.
"Subordinated Indebtedness" means any Indebtedness of Pride or any
subsidiary guarantor (other than intercompany Indebtedness) that is subordinated
in right of payment to the notes or the subsidiary guarantees, as the case may
be, pursuant to a written agreement to that effect and does not mature prior to
one year following the stated maturity of the notes.
The term "subsidiary" means, with respect to any person:
(1) any corporation more than 50% of the outstanding Voting Stock of
which is owned, directly or indirectly, by such person, or by one or more
other subsidiaries of such person, or by such person and one or more other
subsidiaries of such person,
(2) any general partnership, limited liability company, joint
venture or similar entity more than 50% of the outstanding partnership or
similar interests of which is owned, directly or indirectly, by such
person, or by one or more other subsidiaries of such person, or by such
person and one or more other subsidiaries of such person, and
(3) any limited partnership of which such person or any subsidiary
of such person is a general partner.
The term "Subsidiary" means a subsidiary of Pride other than a
Non-Recourse Subsidiary.
"U.S. Government Obligations" means securities that are:
(1) direct obligations of the United States of America the payment
of which its full faith and credit is pledged,
(2) obligations of a person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, or
(3) depository receipts issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligations or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a
depository receipt, if (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation evidenced by such depository
receipt.
67
In either case under clause (1) or (2) above, "U.S. Government Obligations"
includes only those obligations that are not callable or redeemable at the
option of the issuer thereof.
"Voting Stock" means, with respect to any person, securities of any class
or classes of Capital Stock of such person entitling the holders thereof
(whether at all times or at the times that such class of Capital Stock has
voting power by reason of the happening of any contingency) to vote in the
election of members of the board of directors or comparable body of such person.
"Wholly Owned Subsidiary" means, with respect to a person, any subsidiary
of that person to the extent
(1) all of the Voting Stock of such subsidiary, other than any
director's qualifying shares mandated by applicable law, is owned directly
or indirectly by such person or
(2) such subsidiary is organized in a foreign jurisdiction and is
required by the applicable laws and regulations of such foreign
jurisdiction to be partially owned by the government of such foreign
jurisdiction or individual or corporate citizens of such foreign
jurisdiction in order for such subsidiary to transact business in such
foreign jurisdiction, if such person:
- directly or indirectly owns the remaining Capital Stock of
such subsidiary and
- by contract or otherwise, controls the management and business
of such subsidiary and derives the economic benefits of
ownership of such subsidiary to substantially the same extent
as if such subsidiary were a wholly owned subsidiary.
68
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
We have based the following discussion on the current provisions of the
Internal Revenue Code of 1986, applicable Treasury regulations, judicial
authority and administrative rulings. We have not obtained an opinion of counsel
and have not sought a ruling from the Internal Revenue Service, and we can give
you no assurance that the IRS will agree with the following discussion. Changes
in the applicable law may occur that may be retroactive and could affect the tax
consequences to you of the receipt of new notes in exchange for old notes in the
exchange offer. We do not discuss the effect of special rules such as those that
apply to insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations, and a person who is not a citizen or
resident of the United States. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF RECEIVING NEW NOTES IN EXCHANGE
FOR OLD NOTES IN THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN TAX LAW.
We believe that the receipt of new notes in exchange for old notes in the
exchange offer should not be treated as an exchange for United States federal
income tax purposes because the new notes and the old notes are not materially
different in kind or in extent, and as a result on the receipt of new notes in
exchange for old notes in the exchange offer you should not recognize gain or
loss, your initial tax basis in the new notes should be the same as your
adjusted tax basis in the old notes immediately before such exchange, and your
holding period for the new notes should include your holding period for the old
notes.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC in no-action letters
issued to third parties, we believe that you may transfer new notes issued in
the exchange offer in exchange for the old notes if:
- you acquire the new notes in the ordinary course of your business;
and
- you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of new notes.
We believe that you may not transfer new notes issued in the exchange offer
in exchange for the old notes if you are:
- our "affiliate" within the meaning of Rule 405 under the Securities
Act;
- a broker-dealer that acquired old notes directly from us; or
- a broker-dealer that acquired old notes as a result of market-making
activities or other trading activities, unless you comply with the
registration and prospectus delivery provisions of the Securities
Act.
If you wish to exchange your old notes for new notes in the exchange
offer, you will be required to make representations to us as described in "The
Exchange Offer -- Procedures for Tendering -- Your Representations to Us" of
this prospectus and in the letter of transmittal. In addition, each
broker-dealer that receives new notes for its own account in the exchange offer
must acknowledge that it will deliver a prospectus in connection with any resale
of those new 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 new
notes received in exchange for old notes where such old notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that, for a period of 180 days after the expiration date of the exchange offer,
we will make this prospectus, as it may be amended or supplemented, available to
any broker-dealer for use in connection with any such resale. Any broker-dealers
required to use this prospectus and any amendments or supplements to this
prospectus for resales of the new notes must notify us of this fact by checking
the box on the letter of transmittal requesting additional copies of these
documents.
We are entitled under the registration rights agreement to suspend the use
of this prospectus by broker-dealers under specified circumstances. For example,
we may suspend the use of this prospectus if:
69
- the SEC requests an amendment or supplement to this prospectus or
the related registration statement or additional information;
- the SEC issues any stop order suspending the effectiveness of the
registration statement or initiates proceedings for that purpose;
- we receive notification of the suspension of the qualification of
the new notes for sale in any jurisdiction or the initiation of any
proceeding for that purpose;
- we determine that the suspension is required by law or the
suspension is taken by us in good faith and for valid business
reasons, including the acquisition or divestiture of assets or a
material corporate transaction or event; or
- the happening of any event makes any statement made in this
prospectus untrue in any material respect or constitutes an omission
to state a material fact in this prospectus.
If we suspend the use of this prospectus, the 180-day period referred to above
will be extended by a number of days equal to the period of the suspension.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account under
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 those notes; or
- a combination of those methods of resale.
The prices at which these sales occur may be:
- at market prices prevailing at the time of resale;
- at prices related to prevailing market prices; or
- at negotiated prices.
Any resales 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 the selling broker-dealer and/or the purchasers of the new notes. Any
broker-dealer that resells new notes received by it for its own account under
the exchange offer and any broker or dealer that participates in a distribution
of the new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any resale of new notes and any commissions or
concessions received by these persons may be deemed to be 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 deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the expiration date, 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 reasonable expenses incidental to the
exchange offer, including the reasonable expenses of one counsel for the holders
of old notes, other than commissions and concessions of any broker or dealer. We
also have agreed that we will indemnify specified holders of the notes,
including broker-dealers, against certain liabilities, including liabilities
under the Securities Act.
70
TRANSFER RESTRICTIONS ON OLD NOTES
The old notes were not registered under the Securities Act. Accordingly,
we offered and sold the old notes only in private sales exempt from or not
subject to the registration requirements of the Securities Act:
- to "qualified institutional buyers" under Rule 144A under the
Securities Act; and
- outside the United States in compliance with Regulation S under the
Securities Act.
You may not offer or sell those old notes in the United States or to, or for the
account or benefit of, U.S. persons except in transactions exempt from or not
subject to the Securities Act registration requirements.
LEGAL MATTERS
Baker Botts L.L.P., Houston, Texas, our outside legal counsel, has issued
an opinion about the legality of the new notes.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the audited historical financial statements included as exhibit 99.1 to Pride
International, Inc.'s Current Report on Form 8-K dated August 10, 2004 (which
contains (1) an explanatory paragraph that Pride has changed its policies for
consolidation of variable interest entities and for presentation of gains and
losses on debt retirement and, in 2002, changed the manner in which it accounts
for goodwill and (2) an explanatory paragraph that Pride has restated its
segment information set forth in note 15 to reflect its segments on a basis
consistent with its current operating organization), have been so incorporated
in reliance on the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
With respect to the unaudited interim consolidated financial information
of Pride International, Inc. for the three-month periods ended March 31, 2004
and 2003 and the three-month and six-month periods ended June 30, 2004 and 2003
incorporated by reference in this prospectus, PricewaterhouseCoopers LLP
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
reports dated May 10, 2004 and August 6, 2004 incorporated by reference herein
state that they did not audit and they do not express an opinion on that
unaudited consolidated financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers LLP
is not subject to the liability provisions of Section 11 of the Securities Act
of 1933 for their reports on the unaudited interim consolidated financial
information because such reports are not a "report" or a "part" of the
registration statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Securities Act of 1933.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. You
may read and copy any document we file with the SEC at the SEC's public
reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. You
may obtain further information regarding the operation of the SEC's public
reference room by calling the SEC at 1-800-SEC-0330. Our filings are also
available to the public on the SEC's Internet site located at
http://www.sec.gov. You can also obtain information about us at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
This prospectus is part of a registration statement we have filed with the
SEC relating to the notes. As permitted by SEC rules, this prospectus does not
contain all of the information we have included in the registration statement
and the accompanying exhibits and schedules we file with the SEC. You may refer
to the registration statement, exhibits and schedules for more information about
us and these securities. The registration statement, exhibits and schedules are
available at the SEC's public reference room or through its Internet site.
71
The SEC allows us to "incorporate by reference" into this prospectus
information we file with the SEC, which means we can disclose important
information to you by referring you to the documents containing the information.
The information we incorporate by reference in this prospectus is considered to
be part of this prospectus. Information that we file later with the SEC that is
deemed incorporated by reference into this prospectus (but not information filed
with or furnished to the SEC and not deemed incorporated) will automatically
update and supersede information previously included.
We are incorporating by reference into this prospectus the documents
listed below and any subsequent filings we make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act (excluding information
deemed to be furnished and not filed with the SEC) until the offering made by
this prospectus terminates:
- our annual report on Form 10-K for the fiscal year ended December
31, 2003;
- our quarterly reports on Form 10-Q for the quarters ended March 31,
2004 and June 30, 2004; and
- our current reports on Form 8-K filed with the SEC on January 12,
2004, April 13, 2004, June 15, 2004, June 23, 2004, June 29, 2004,
July 13, 2004 and August 10, 2004, in each case other than
information furnished under Items 9 or 12 of Form 8-K.
You may request a copy of these filings (other than an exhibit to those
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:
Pride International, Inc.
5847 San Felipe, Suite 3300
Houston, Texas 77057
Attention: W. Gregory Looser
Vice President, General Counsel and Secretary
Telephone: (713) 789-1400
72
[PRIDE INTERNATIONAL LOGO]
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, inter alia, empowers
a Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such persons against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the shareholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. Pride expects
to maintain policies insuring its and its subsidiaries' officers and directors
against certain liabilities for actions taken in such capacities, including
liabilities under the Securities Act of 1933, as amended.
Article Seventh of the Certificate of Incorporation of Pride eliminates
the personal liability of each director of Pride to Pride and its stockholders
for monetary damages for breach of fiduciary duty as a director; provided,
however, that such provision does not eliminate or limit the liability of a
director (i) for any breach of such director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Title 8, Section 174 of the Delaware General Corporation Law, as the same exists
or as such provision may hereafter be amended, supplemented or replaced, or (iv)
for any transactions from which such director derived an improper personal
benefit.
The Bylaws of Pride provide that Pride will indemnify and hold harmless,
to the fullest extent permitted by applicable law in effect as of the date of
the adoption of the Bylaws and to such greater extent as applicable law may
thereafter permit, any person who was or is made or is threatened to be made a
party or is otherwise involved in any action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director, officer, employee, agent or
fiduciary of (i) Pride, (ii) any predecessor of Pride, (iii) Pride Oil Well
Service Company, a Texas corporation ("Pride Oil Well"), (iv) Pride
International, Inc., a Louisiana corporation ("Old Pride"), (v) Marine Drilling
Companies, Inc., a Texas corporation ("Marine"), (vi) any subsidiary of Pride,
Pride Oil Well, Old Pride or Marine or (vii) any other corporation, partnership,
limited liability company, association, joint venture, trust, employee benefit
plan or other enterprise which the person is or was serving at the request of
Pride ("corporate status") against any and all losses, liabilities, costs,
claims, damages and expenses actually and reasonably incurred by him or on his
behalf by reason of his corporate status.
The Bylaws further provide that Pride will pay the expenses reasonably
incurred in defending any proceeding in advance of its final disposition,
provided, however, that the payment of expenses will be made only upon receipt
of (i) a written undertaking executed by or on behalf of the person to be
indemnified to repay all amounts advanced if it should be ultimately determined
that the person is not entitled to be indemnified by Pride and (ii) satisfactory
evidence as to the amount of such expenses.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following instruments and documents are included as Exhibits to this
Registration Statement. Exhibits incorporated by reference are so indicated by
parenthetical information.
EXHIBIT NO. EXHIBIT
- ----------- -------
4.1 -- Indenture, dated as of July 1, 2004, between Pride and
JPMorgan Chase Bank, as trustee.
4.2 -- First Supplemental Indenture dated as of July 7, 2004,
between Pride and JPMorgan Chase Bank, including the form of
note.
4.3 -- Registration Rights Agreement dated July 7, 2004, among
Pride, Citigroup Global Markets Inc. and the other initial
purchasers named therein.
5.1 -- Opinion of Baker Botts L.L.P. as to the legality of the
securities.
12.1 -- Computation of ratio of earnings to fixed charges
for each of the years in the five-year period ended December
31, 2003 (incorporated by reference to Exhibit 12 to our
annual report on Form 10-K for the year ended December 31,
2003, SEC File No. 001-13289).
12.2 -- Computation of ratio of earnings to fixed charges for the
six-month period ended June 30, 2004 (incorporated by
reference to Exhibit 12 to our quarterly report on Form 10-Q
for the quarter ended June 30, 2004, SEC File No. 001-13289).
15.1 -- Awareness Letter of PricewaterhouseCoopers LLP.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Baker Botts L.L.P. (contained in Exhibit 5.1).
24.1 -- Powers of Attorney (included on the signature page of the
Registration Statement).
25.1 -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of JPMorgan Chase Bank, as
trustee under the Indenture, on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Depository Trust Company Participants.
99.4 -- Form of Letter to Clients.
- ------------------
(b) Financial Statement Schedules
Not applicable.
II-2
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under
the Securities Act if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless, in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
(d) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the undersigned Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on August 10, 2004.
PRIDE INTERNATIONAL, INC.
By: /s/ Louis A. Raspino
--------------------------------
Louis A. Raspino
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Paul A. Bragg, Louis A.
Raspino and W. Gregory Looser, and each of them, severally, as his or her true
and lawful attorney or attorneys-in-fact and agent or agents, each of whom shall
be authorized to act with or without the other, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead in
his or her capacity as a director or officer or both, as the case may be, of
Pride International, Inc., to sign any and all amendments (including
post-effective amendments) to this Registration Statement and all documents or
instruments necessary or appropriate to enable Pride International, Inc. to
comply with the Securities Act of 1933, as amended, and to file the same with
the Securities and Exchange Commission, with full power and authority to each of
said attorneys-in-fact and agents to do and perform in the name and on behalf of
each such director or officer, or both, as the case may be, each and every act
whatsoever that is necessary, appropriate or advisable in connection with any or
all of the above-described matters and to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their substitutes, may lawfully
do or cause to be done by virtue hereof.
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 AUGUST 10, 2004.
SIGNATURE TITLE
--------- -----
/s/ Paul A. Bragg Chief Executive Officer and Director
- -------------------------------- (Principal Executive Officer)
Paul A. Bragg
/s/ Louis A. Raspino Executive Vice President and Chief Financial Officer
- -------------------------------- (Principal Financial Officer)
Louis A. Raspino
/s/ Douglas G. Smith Vice President, Controller and Chief Accounting Officer
- -------------------------------- (Principal Accounting Officer)
Douglas G. Smith
/s/ William E. Macaulay Chairman of the Board
- --------------------------------
William E. Macaulay
/s/ Robert L. Barbanell Director
- --------------------------------
Robert L. Barbanell
/s/ David A.B. Brown Director
- --------------------------------
David A. B. Brown
/s/ J. C. Burton Director
- --------------------------------
J. C. Burton
Director
- --------------------------------
Jorge E. Estrada
/s/ Ralph D. McBride Director
- --------------------------------
Ralph D. McBride
/s/ David B. Robson Director
- --------------------------------
David B. Robson
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
- ----------- -------
4.1 -- Indenture, dated as of July 1, 2004, between Pride and
JPMorgan Chase Bank, as trustee.
4.2 -- First Supplemental Indenture dated as of July 7, 2004,
between Pride and JPMorgan Chase Bank, including the form of
note.
4.3 -- Registration Rights Agreement dated July 7, 2004, among
Pride, Citigroup Global Markets Inc. and the other initial
purchasers named therein.
5.1 -- Opinion of Baker Botts L.L.P. as to the legality of the
securities.
12.1 -- Computation of ratio of earnings to fixed charges for each of
the years in the five-year period ended December 31, 2003
(incorporated by reference to Exhibit 12 to our annual report
on Form 10-K for the year ended December 31, 2003, SEC File
No. 001-13289).
12.2 -- Computation of ratio of earnings to fixed charges for the
six-month period ended June 30, 2004 (incorporated by
reference to Exhibit 12 to our quarterly report on Form 10-Q
for the quarter ended June 30, 2004, SEC File No. 001-13289).
15.1 -- Awareness Letter of PricewaterhouseCoopers LLP.
23.1 -- Consent of PricewaterhouseCoopers LLP.
23.2 -- Consent of Baker Botts L.L.P. (contained in Exhibit 5.1).
24.1 -- Powers of Attorney (included on the signature page of the
Registration Statement).
25.1 -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of JPMorgan Chase Bank, as
trustee under the Indenture, on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Depository Trust Company Participants.
99.4 -- Form of Letter to Clients.