e424b3
Filed pursuant to Rule 424(b)(3)
Registration No. 333-126669
Prospectus
$50,000,000
Parker Drilling Company
Offer to Exchange
95/8% Senior
Notes due 2013
which have been registered under
the Securities Act of 1933
for
all outstanding unregistered
95/8% Senior
Notes due 2013
issued on April 21, 2005
Parker Drilling Company is hereby offering, upon the terms and
subject to the conditions set forth in this prospectus and the
accompanying letter of transmittal, to exchange $50,000,000
aggregate principal amount of its outstanding, unregistered
95/8% Senior
Notes due 2013 (CUSIP Number 701081 AQ 4) (which we refer
to as the private notes) that you now hold for an equal
principal amount of
95/8% Senior
Notes due 2013 (which we refer to as the exchange notes) with
substantially identical terms. The exchange notes are registered
under the Securities Act of 1933, as amended, and, as a result,
will generally not be subject to the transfer restrictions
applicable to the private notes. This exchange offer will expire
at 5:00 p.m., New York City time, on November 17,
2005, unless we extend the expiration date. You must tender your
private notes by the expiration date to obtain exchange notes
and the liquidity benefits the exchange notes offer.
We have agreed with the initial purchaser of the private notes
to make this exchange offer and to register the issuance of the
exchange notes after the initial sale of the private notes. This
exchange offer applies to any and all private notes tendered by
the expiration date.
The exchange notes will be our general unsecured obligations and
will rank pari passu with all of our existing and future
senior indebtedness. The exchange notes will be guaranteed by
substantially all of our direct and indirect domestic
subsidiaries. The guarantees will rank pari passu with
all of the existing and future senior indebtedness of our
guarantor subsidiaries. The exchange notes will effectively rank
junior in right of payment to all of our existing and future
secured debt to the extent of the value of the assets securing
such debt. The exchange notes will be effectively subordinated
to the indebtedness and other liabilities of our non-guarantor
subsidiaries.
We will not list the exchange notes on any securities exchange.
The exchange notes will have the same financial terms and
covenants as the private notes. This prospectus includes
additional information on the terms of the exchange notes,
including, but not limited to, redemption and repurchase prices
and covenants.
Investing in the exchange notes involves risks. See
Risk Factors, beginning on page 7, for a
discussion of certain factors that you should consider before
deciding to exchange private notes for exchange notes pursuant
to this exchange offer.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is October 18, 2005
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act, and in accordance therewith file annual, quarterly and
special reports, proxy statements and other information with the
Securities and Exchange Commission, or the SEC, on a regular
basis. You may read and copy this information or obtain copies
of this information by mail from the Public Reference Room of
the SEC, Station Place, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. Further
information on the operation of the SECs Public Reference
Room in Washington, D.C. can be obtained by calling the SEC
at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that
contains reports, proxy statements and other information about
issuers, like us, who file electronically with the SEC. The
address of that site is http://www.sec.gov.
The SEC allows us to incorporate by reference the
documents that we file with the SEC. This means that we can
disclose important information to you by referring you to
another document filed separately with the SEC. This information
incorporated by reference is a part of this prospectus, unless
we provide you with different information in this prospectus or
the information is modified or superseded by a subsequently
filed document.
This prospectus incorporates by reference:
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Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, as filed with the SEC on March 16,
2005; and |
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Our Quarterly Reports on Form 10-Q for the quarter ended
March 31, 2005, as filed with the SEC on May 9, 2005,
and for the quarter ended June 30, 2005, as filed with the
SEC on August 9, 2005; |
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Our Proxy Statement on Schedule 14A, as filed with the SEC
on March 23, 2005; and |
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Our Current Reports on Form 8-K as filed with the SEC on
January 6, 2005, February 8, 2005, February 28,
2005 (including the amendment thereto also filed on
February 28, 2005), April 22, 2005, May 3, 2005,
May 12, 2005, June 17, 2005, July 18, 2005,
August 4, 2005 and October 17, 2005 (other than, in
each case, information that is furnished rather than filed in
accordance with SEC rules). |
This prospectus also incorporates by reference additional
documents that we may file with the SEC under
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
after the time of filing of the initial registration statement
and before effectiveness of the registration statement, and
after the date of this prospectus and before the termination of
this exchange offer. These documents include annual reports,
quarterly reports and other current reports, as well as proxy
statements.
You can obtain documents incorporated by reference in this
prospectus by requesting them in writing or by telephone at the
following address or telephone number:
Parker Drilling Company
1401 Enclave Parkway, Suite 600
Houston, Texas 77077
Attention: Investor Relations
Telephone: (281) 406-2000
You will not be charged for any of these documents that you
request. In order to ensure timely delivery of the documents,
any request should be made at least five days prior to the
expiration date.
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PROSPECTUS SUMMARY
This summary highlights selected information about Parker
Drilling Company, the exchange offer and the exchange notes.
This summary is not complete and does not contain all of the
information that is important to you. To understand the exchange
offer fully and for a more complete description of the legal
terms of the exchange notes, you should carefully read this
entire prospectus, the accompanying letter of transmittal and
the documents incorporated herein by reference, especially the
risks of investing in the exchange notes discussed under
Risk Factors. In this prospectus, other than in
Description of the Exchange Notes and unless the
context requires otherwise, Parker Drilling,
we, us and our refer to
Parker Drilling Company and its subsidiaries and consolidated
joint ventures.
Parker Drilling Company
We are a leading worldwide provider of contract drilling and
drilling related services. Our principal executive offices are
located at 1401 Enclave Parkway, Suite 600, Houston, Texas
77077, and our telephone number at that location is
(281) 406-2000.
Summary of the Exchange Offer
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The Exchange Offer |
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We are offering to exchange |
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$1,000 principal amount of our
95/8% Senior
Notes due 2013 registered under the Securities Act, which we
refer to as exchange notes, |
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For |
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each $1,000 principal amount of our unregistered
95/8% Senior
Notes due 2013 issued on April 21, 2005 in a private
offering (CUSIP Number 701081 AQ 4), which we refer to as
private notes. |
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We sometimes will refer to the exchange notes and the private
notes together as the notes. As of the date of this prospectus,
there is $50,000,000 aggregate principal amount of private notes
outstanding. See The Exchange Offer. |
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Expiration Date |
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The exchange offer will expire at 5:00 p.m., New York City
time, on November 17, 2005, unless we extend the expiration
date. In that case, the phrase expiration date will
mean the latest date and time to which we extend the exchange
offer. We will issue exchange notes on the expiration date or
promptly after that date. |
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Conditions to the Exchange Offer |
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The exchange offer is subject to customary conditions which
include, among other things the absence of , any applicable law
or any applicable interpretation of the staff of the SEC which,
in our reasonable judgment, would materially impair our ability
to proceed with the exchange offer. The exchange offer is not
conditioned upon any minimum principal amount of private notes
being submitted for exchange. See The Exchange
Offer Conditions. |
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Procedures for Participating in the Exchange Offer |
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If you wish to participate in the exchange offer, you must
complete, sign and date an original or faxed letter of
transmittal in accordance with the instructions contained in the
letter of transmittal accompanying this prospectus. Then you
must mail, fax or deliver the completed letter of transmittal,
together with the notes you wish to exchange and any other
required documentation to JPMorgan Chase Bank, National
Association, |
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which is acting as exchange agent, on or before the expiration
date. By signing the letter of transmittal, you will represent
to and agree with us that, |
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you are acquiring the exchange notes in the ordinary
course of your business; |
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you are not participating, do not intend to
participate, and have no arrangement or understanding with
anyone to participate in a distribution of the exchange
notes; and |
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you are not an affiliate, as defined in
Rule 405 under the Securities Act, of Parker Drilling
Company, or a broker-dealer tendering the private notes acquired
directly from Parker Drilling Company for its own account. |
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If you are a broker-dealer who will receive exchange notes for
your own account in exchange for private notes that you acquired
as a result of your market-making or other trading activities,
you will be required to acknowledge in the letter of transmittal
that you will deliver a prospectus in connection with any resale
of such exchange notes. |
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Resale of Exchange Notes |
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We believe that you may offer for resale, resell and transfer
your exchange notes without registering them under the
Securities Act and delivering a prospectus, if you can make the
same three representations that appear above under the heading
Procedures for Participating in the Exchange Offer.
Our belief is based on interpretations of the SEC staff for
other exchange offers that the SEC staff expressed in some of
the SECs no-action letters to other issuers in exchange
offers like ours. |
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We cannot guarantee that the SEC would make a similar decision
about this exchange offer. If our belief is wrong, or if you
cannot truthfully make the representations mentioned above, and
you transfer any exchange note issued to you in the exchange
offer without meeting the registration and prospectus delivery
requirements of the Securities Act, or without an exemption from
such requirements, you could incur liability under the
Securities Act. We are not indemnifying you for any such
liability and we will not protect you against any loss incurred
as a result of any such liability under the Securities Act. |
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If you are a broker-dealer that has received exchange notes for
your own account in exchange for private notes that were
acquired as a result of market-making or other trading
activities, you must acknowledge in the letter of transmittal
that you will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of the exchange
notes. We have agreed that for a period of up to one year after
the registration statement is declared effective, we will make
this prospectus, as amended or supplemented, available to any
such broker-dealer that requests copies of this prospectus in
the letter of transmittal for use in connection with any such
resale. |
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Special Procedures for Beneficial Owners |
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If your private notes are held through a broker, dealer,
commercial bank, trust company or other nominee and you wish to
surrender such private notes, you should contact your |
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intermediary promptly and instruct it to surrender your private
notes on your behalf. |
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If you wish to tender on your own behalf, you must, before
completing and executing the letter of transmittal for the
exchange offer and delivering your private notes, either arrange
to have your private notes registered in your name or obtain a
properly completed bond power from the registered holder. The
transfer of registered ownership may take a long time. |
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Guaranteed Delivery Procedures |
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If you wish to tender your private notes and you cannot meet the
expiration date deadline, or you cannot deliver your private
notes, the letter of transmittal or any other documentation on
time, then you must surrender your private notes according to
the guaranteed delivery procedures appearing below under
The Exchange Offer Guaranteed Delivery
Procedures. |
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Acceptance of Private Notes and Delivery of Exchange Notes |
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We will accept for exchange any and all private notes that are
properly surrendered in the exchange offer and not withdrawn
prior to the expiration date, if you comply with the procedures
of the exchange offer. The exchange notes will be delivered
promptly after the expiration date. |
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Withdrawal Rights |
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You may withdraw the surrender of your private notes at any time
prior to the expiration date, by complying with the procedures
for withdrawal described in The Exchange Offer
Withdrawal of Tenders. |
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Accounting Treatment |
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We will not recognize a gain or loss for accounting purposes as
a result of the exchange. |
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Material Federal Income Tax Considerations |
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The exchange of private notes for exchange notes should not be a
taxable transaction for United States Federal income tax
purposes. You should not have to pay federal income tax as a
result of your participation in the exchange offer. See
Material United States Federal Income Tax
Considerations. |
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Exchange Agent |
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JPMorgan Chase Bank, National Association is serving as the
exchange agent in connection with the exchange offer. JPMorgan
Chase Bank, National Association also serves as trustee under
the indenture governing the notes. The address, telephone number
and facsimile number of the exchange agent are listed under the
heading The Exchange Offer Exchange
Agent. |
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Failure to Exchange Private Notes Will Adversely Affect You |
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If you are eligible to participate in this exchange offer and
you do not surrender your private notes as described in this
prospectus, you will not have any further registration or
exchange rights. In that event, your private notes will continue
to accrue interest until maturity in accordance with the terms
of the private notes but will continue to be subject to
restrictions on transfer. As a result of such restrictions and
the availability of registered exchange notes, your private
notes are likely to be a much less liquid security than before. |
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The Exchange Notes
The exchange notes have the same financial terms and
covenants as the private notes. In this prospectus we sometimes
refer to the private notes and the exchange notes together as
the notes. The exchange notes will evidence the same
debt as the outstanding private notes which they replace. The
private notes are, and the exchange notes will be, governed by
the same indenture. The brief summary below describes the
principal terms of the exchange notes. Some of the terms and
conditions described below are subject to important limitations
and exceptions. The Description of the Exchange
Notes section of this prospectus contains a more detailed
description of the terms and conditions of the exchange
notes.
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Issuer |
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Parker Drilling Company |
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Notes Offered |
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$50,000,000 in aggregate principal amount of
95/8% senior
notes due 2013. |
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Maturity Date |
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October 1, 2013. |
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Interest Payment Dates |
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April 1 and October 1 of each year, with the next
interest payment date being April 1, 2006. |
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Change of Control |
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If we experience specified kinds of changes of control, we must
offer to repurchase the notes at 101% of the principal amount of
the notes, plus accrued and unpaid interest, if any, to the date
of repurchase. See Description of the Exchange
Notes Repurchase at the Option of
Holders Change of Control. |
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Ranking |
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The exchange notes will be our general unsecured obligations.
The exchange notes will rank equal in right of payment with all
of our existing and future senior unsecured indebtedness.
However, the exchange notes will effectively rank junior to all
of our existing and future secured indebtedness to the extent of
the value of the assets securing that indebtedness. As of
June 30, 2005, we had approximately $446.1 million of
indebtedness outstanding on a consolidated basis (including the
private notes), none of which would have been secured
indebtedness. Although no indebtedness was outstanding under our
senior secured credit facility as of June 30, 2005, any
borrowings thereunder would be secured indebtedness. |
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Subsidiary Guarantees |
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The exchange notes will be jointly and severally guaranteed by
substantially all of our domestic subsidiaries. The exchange
notes will also be guaranteed by Parker Drilling Offshore
International, Inc., one of our foreign subsidiaries, for so
long as it also guarantees our 10.125% senior notes due
2009. None of our other foreign subsidiaries guarantee the
exchange notes. The subsidiary guarantees rank: |
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equal in right of payment with all of the existing
and future senior unsecured indebtedness of our guarantor
subsidiaries including the guarantees of our senior unsecured
indebtedness; |
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effectively subordinated to all existing and future
secured indebtedness of our subsidiaries and all existing and
future indebtedness and other liabilities of our non-guarantor
subsidiaries (other than indebtedness and other liabilities owed
to us, if any); and |
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senior in right of payment to any future
subordinated indebtedness of our guarantor subsidiaries. |
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As of June 30, 2005, the subsidiary guarantees would rank: |
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equal in right of payment to $446.1 million of
senior indebtedness of our guarantor subsidiaries, consisting of
guarantees of our other unsecured senior indebtedness (including
the guarantees of the private notes); and |
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effectively subordinated to future secured debt of
our subsidiaries and all existing and future debt of our
non-guarantor subsidiaries (excluding indebtedness and other
liabilities owed to us, if any). |
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For information about our corporate structure, see note 5
to our consolidated financial statements for the year ended
December 31, 2004, incorporated by reference into this
prospectus and note 12 to our consolidated financial
statements for the quarter ended June 30, 2005,
incorporated by reference into this prospectus. |
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Mandatory Redemption |
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We will not be required to make mandatory redemption or sinking
fund payments with respect to the exchange notes. |
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Optional Redemption |
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On and after October 1, 2008, we may redeem some or all of
the exchange notes at the redemption prices set forth under
Description of the Exchange Notes Optional
Redemption. |
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Before October 1, 2006, we may redeem up to 35% of the
notes with the proceeds of certain equity offerings at the
redemption prices set forth under Description of the
Exchange Notes Optional Redemption. |
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Certain Covenants |
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The private notes were, and the exchange notes will be, issued
under an indenture between us and JPMorgan Chase Bank, as
trustee. The indenture will, among other things, restrict our
ability and the ability of our restricted subsidiaries to: |
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sell assets; |
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pay dividends or make other distributions on capital
stock or redeem or repurchase capital stock or subordinated
indebtedness; |
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make investments; |
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incur or guarantee additional indebtedness; |
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create or incur liens; |
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enter into sale and leaseback transactions; |
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incur dividend or other payment restrictions
affecting subsidiaries; |
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merge or consolidate with other entities; |
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enter into transactions with affiliates; and |
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engage in certain business activities. |
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These covenants are subject to a number of important exceptions
and qualifications. |
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Absence of Established Market for the Notes |
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The exchange notes will be new securities for which there is
currently no market. Although Lehman Brothers Inc. has informed
us that they intend to make a market in the exchange notes, they
are not obligated to do so and may discontinue market-making at
any time without notice. Accordingly, we cannot assure you that
a liquid market for the exchange notes will develop or be
maintained. |
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Use of Proceeds |
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We will not receive any proceeds from the issuance of the
exchange notes. |
Risk Factors
For a discussion of certain risks that should be considered in
connection with an investment in the exchange notes, see
Risk Factors beginning on page 7 of this
prospectus.
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RISK FACTORS
An investment in the exchange notes involves a high degree of
risk. You should consider carefully the risks and uncertainties
described below and the other information included in or
incorporated by reference into this prospectus, including the
financial statements and related notes incorporated by reference
into this prospectus, before deciding to exchange your private
notes for exchange notes pursuant to this exchange offer. While
these are the risks and uncertainties we believe are most
important for you to consider, you should know that they are not
the only risks or uncertainties facing us or which may adversely
affect our business. If any of the following risks or
uncertainties actually occur, our business, financial condition
or results of operations would likely suffer.
Risk Factors Related to Our Business
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We have substantial indebtedness. Our ability to service
our debt obligations is primarily dependent upon our future
financial performance. |
We have substantial indebtedness in relation to our
stockholders equity. As of June 30, 2005, we had
stockholders equity of approximately $177.4 million
compared to approximately:
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$446.1 million of long-term debt; |
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$13.3 million of operating lease commitments; and |
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$10.3 million of standby letters of credit. |
Our ability to meet our debt service obligations depends on our
ability to generate positive cash flows from operations.
We realized positive cash flows from operating activities of
$49.4 million in the first six months of 2005,
$28.8 million in 2004, $62.5 million in 2003 and
$33.2 million in 2002. However, we have in the past, and
may in the future, incur negative cash flows from operating
activities. Our future cash flows from operating activities will
be influenced by the demand for our drilling services, the
utilization of our rigs, the dayrates that we receive for our
rigs, general economic conditions and by financial, business and
other factors affecting our operations, many of which are beyond
our control, some of which are specified below. If we are unable
to service our debt obligations, we may have to:
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delay spending on maintenance projects and other capital
projects, including the acquisition of additional rigs and other
assets; |
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sell equity securities; |
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sell additional assets; or |
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restructure or refinance our debt. |
Our substantial debt could have important consequences to you.
For example, it could:
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result in a reduction of our credit rating, which would make it
more difficult for us to obtain additional financing on
acceptable terms; |
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require us to dedicate a substantial portion of our cash flows
from operating activities to the repayment of our debt and the
interest associated with our debt; |
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limit our operating flexibility due to financial and other
restrictive covenants, including restrictions on incurring
additional debt and creating liens on our properties; |
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place us at a competitive disadvantage compared with our
competitors that have relatively less debt; |
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expose us to interest rate risk because certain of our
borrowings, primarily under our senior secured credit facility
and the notes offered hereby, or interest rate swaps related to
those borrowings, are at variable rates of interest; and |
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make us more vulnerable to downturns in our business. |
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We cannot give you any assurances that, if we are unable to
service our debt obligations, we will be able to sell equity
securities, sell additional assets or restructure or refinance
our debt. Our ability to generate sufficient cash flow from
operating activities to pay the principal of and interest on our
indebtedness is uncertain. Further, we may not be able to
refinance any of our indebtedness on commercially reasonable
terms or at all.
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Our current operations and future growth may require
significant additional capital, and our substantial indebtedness
could impair our ability to fund our capital
requirements. |
Our business requires substantial capital. We anticipate that
our capital expenditures will be approximately
$60.0 million in 2005. We believe that we have or will
generate sufficient funds to finance our planned capital
expenditures, but we may require additional capital in the event
of significant departures from our current business plan or
unanticipated expenses. Sources of funding for our future
capital requirements may include any or all of the following:
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public offerings or private placements of equity and debt
securities; |
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commercial bank loans; |
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capital leases; and |
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sales of assets. |
Due to our highly leveraged capital structure, additional
financing may not be available to us, or, if it were available,
it may not be available on a timely basis, on terms acceptable
to us and within the limitations contained in the indentures
governing the notes, our senior floating rate notes and our
10.125% senior notes and the documentation governing our
senior secured credit facility. Failure to obtain appropriate
financing, should the need for it develop, could impair our
ability to fund our capital expenditure requirements and meet
our debt service requirements and could have an adverse effect
on our business.
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Rig upgrades, refurbishment and construction projects are
subject to risks, including delays and cost overruns, which
could have an adverse impact on our results of operations and
cash flows. |
We often have to make upgrade and refurbishment expenditures for
our rig fleet, such as when we move a rig from one location to
another or when repairs are required in response to an
inspection by a governmental authority. For example, in 2002, we
were required to make repairs to two of our barge rigs in
Nigeria due to inspections by the American Bureau of Shipping,
resulting in downtime of a total of five months during which
time we received no revenues from contracts for the use of these
rigs. We may also make significant expenditures when we move
rigs from one location to another, such as when we moved eight
rigs to Mexico from South America and the U.S. Gulf of
Mexico in 2004. Additionally, we may make substantial
expenditures for the construction of additional new rigs. Rig
upgrade, refurbishment and construction projects are subject to
the risks of delay or cost overruns inherent in any large
construction project, including the following:
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shortages of material or skilled labor; |
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unforeseen engineering problems; |
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unanticipated actual or purported change orders; |
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work stoppages; |
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adverse weather conditions; |
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long lead times for manufactured rig components; |
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unanticipated cost increases; and |
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inability to obtain the required permits or approvals. |
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Significant cost overruns or delays would adversely affect our
financial condition and results of operations. Additionally,
capital expenditures for rig upgrades, refurbishment or
construction projects could exceed our planned capital
expenditures, impairing our ability to service our debt
obligations.
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Volatile oil and natural gas prices impact demand for our
drilling and related services. |
The success of our drilling operations is materially dependent
upon the exploration and development activities of the major,
independent and national oil and gas companies that comprise our
customer base. Oil and natural gas prices and market
expectations can be extremely volatile, and therefore the level
of exploration and production activities can be extremely
volatile. Increases or decreases in oil and natural gas prices
and expectations of future prices could have an impact on our
customers long-term exploration and development
activities, which in turn could materially affect our business
and financial performance. Generally, changes in the price of
oil have a greater impact on our international operations while
changes in the price of natural gas have a greater effect on our
operations in the Gulf of Mexico.
Demand for our drilling and related services also depends on
other factors that are beyond our control, including:
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the cost of producing and delivering oil and natural gas; |
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advances in exploration, development and production technology; |
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laws and government regulations, both in the United States and
elsewhere; |
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the imposition or lifting of economic sanctions against foreign
countries; |
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local and worldwide military, political and economic events,
including events in the oil producing countries in the Middle
East; |
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the ability of the Organization of Petroleum Exporting
Countries, or OPEC, to set and maintain production levels and
prices; |
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the level of production by non-OPEC countries; |
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weather conditions; |
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levels of consumer demand; |
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the rate of discovery of new oil and gas reserves; |
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the availability of pipeline capacity; and |
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the policies of various governments regarding exploration and
development of their oil and gas reserves. |
Oil and gas prices have increased significantly since 2003 based
primarily on worldwide demand and to a lesser extent on the
devaluation of the United States dollar. There is historical
support that current prices are not sustainable over the long
term. Based on recent history of our industry, fluctuations
during the past several years in the demand and supply of oil
and natural gas have contributed to, and are likely to continue
to contribute to price volatility. Any actual or anticipated
reduction in oil and natural gas prices would depress the level
of exploration and production activity. This would in turn
result in a corresponding decline in the demand for our drilling
and related services and would adversely affect our business and
financial performance.
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Most of our contracts are subject to cancellation by our
customers without penalty with little or no notice. |
Most of our contracts are terminable by our customers without
penalty with relatively little or no notice, and customers are
more likely to exercise their termination rights during
depressed market conditions. A customer may decide to terminate
a contract because they no longer need a rig or may be able to
obtain a comparable rig at a lower dayrate. For instance, in
Colombia, we had four drilling rigs
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working for a customer when the operator terminated our drilling
contract in May 2002 without cause. Also, customers may seek to
renegotiate the terms of their existing drilling contracts
during depressed market conditions.
Our customers may also seek to terminate drilling contracts if
we experience operational problems. We specialize in drilling
geologically challenging wells in locations that are difficult
to access or involve harsh environmental conditions. If our
equipment fails to function properly and cannot be repaired
promptly, we will not be able to engage in drilling operations,
and customers may have the right to terminate the drilling
contracts. The likelihood that a customer may seek to terminate
a contract for operational difficulties is increased during
periods of market weakness. The cancellation or renegotiation of
a number of our drilling contracts could adversely affect our
financial performance.
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We rely on a small number of customers, and the loss of a
significant customer could adversely affect us. |
A substantial percentage of our sales has been made to a
relatively small number of customers, and the loss of a major
customer would adversely affect us. For the six months ended
June 30, 2005, Tengizchevroil, a consortium led by
ChevronTexaco Corporation, accounted for 13 percent of our
total revenues and Exxon Mobil Corporation and ventures and
Halliburton de Mexico S. de R.L. de C.V. each accounted for
11 percent of our total revenues. Our ten most significant
customers collectively accounted for approximately
61 percent of our total revenues in the first six months of
2005. Our results of operations could be adversely affected if
any of our major customers terminate their contracts with us,
fail to renew our existing contracts or refuse to award new
contracts to us.
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Contract drilling is highly competitive and there is
currently significant excess drilling capacity, which depresses
prices and rig utilization and adversely affects our financial
performance. The rental tools market is also highly
competitive. |
The drilling and rental tools markets are highly competitive,
and no single competitor is dominant. In the drilling market, a
general oversupply of rigs has lasted for well over a decade.
This oversupply has adversely affected our utilization rates.
Our utilization rate increased significantly in 2004 and the
first six months of 2005 due to increased demand and was
75 percent as of June 30, 2005. We anticipate that
current demand for oil and gas will result in higher utilization
rates for the foreseeable future. However, if commodity prices
decline, our utilization rates will be adversely affected as
will our financial performance. Contract drilling companies
compete primarily on a regional basis, and competition may vary
significantly from region to region at any particular time. Many
drilling and workover rigs can be moved from one region to
another in response to changes in levels of activity and
provided market conditions warrant, which may result in an
oversupply of rigs in an area. In many markets in which we
operate, the number of rigs available for use has for extended
periods of time exceeded the demand for rigs, resulting in
intense price competition. Most drilling and workover contracts
are awarded on the basis of competitive bids, which also results
in price competition. Despite historically high commodity prices
at present, we believe that competition for drilling contracts
will continue to be intense for the foreseeable future. If we
cannot keep our rigs utilized, our financial performance will be
adversely impacted. The rental tools market is also
characterized by vigorous competition among several competitors.
Many of our competitors in both the contract drilling and rental
tools business possess significantly greater financial resources
than we do.
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Our international operations could be adversely affected
by terrorism, war, civil disturbances, political instability and
similar events. |
We have operations in Bangladesh, Bolivia, Chad, China,
Colombia, Indonesia, Kazakhstan, Kuwait, Mexico, New Zealand,
Nigeria, Papua New Guinea, Peru, Russia and Turkmenistan. Our
international operations are subject to interruption, suspension
and possible expropriation due to terrorism, war, civil
disturbances, political instability and similar events. We may
not be able to obtain insurance policies covering such risks, or
such policies may only be available with premiums that are not
commercially justifiable. For example, significant civil unrest
in Nigeria, which is continuing, has resulted in the suspension
of drilling operations of our rigs in Nigeria for substantial
periods during the past two years and
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in 2003 resulted in the total loss of one of our rigs in
Nigeria, a portion of which loss we recovered from insurance. We
do not currently maintain insurance coverage for political
violence in Nigeria. Terrorism, war, civil disturbances and
other hostilities are likely to occur in other foreign
countries, including in the developing countries in which we
have operations, and could adversely affect our business and
financial performance.
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Our international operations are also subject to
governmental regulation and other risks. |
We derive a significant portion of our revenues from our
international operations. In 2004 and the first six months of
2005, we derived approximately 59 percent of our revenues
from operations in countries outside the United States. Our
international operations are subject to the following risks,
among others:
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foreign laws and governmental regulation; |
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expropriation, confiscatory taxation and nationalization of our
assets located in areas in which we operate; |
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terrorism, war, civil disturbances and other political events; |
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hiring and retaining skilled and experienced workers, many of
which are represented by foreign labor unions; |
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unfavorable changes in foreign monetary and tax policies and
unfavorable and inconsistent interpretation of foreign tax
laws; and |
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foreign currency fluctuations and restrictions on currency
repatriation. |
Our international operations are subject to the laws and
regulations of a number of foreign countries. Additionally, our
ability to compete in international contract drilling markets
may be adversely affected by foreign governmental regulations or
other policies that favor the awarding of contracts to
contractors in which nationals of those foreign countries have
substantial ownership interests. In response to such
governmental action, we formed a joint venture, AralParker CJSC,
with a local Kazakhstan company, which owns two rigs that
operate in the Tengiz field in Kazakhstan. Furthermore, our
foreign subsidiaries may face governmentally imposed
restrictions from time to time on their ability to transfer
funds to us. While we attempt to limit these risks by
transferring the risk of loss to the operators under our
contracts, we cannot completely eliminate such risk.
A significant portion of the workers we employ in our
international operations are members of labor unions or
otherwise subject to collective bargaining. We may not be able
to hire and retain a sufficient number of skilled and
experienced workers for wages and other benefits that we believe
are commercially reasonable.
Tax and other laws and regulations applicable to us in many of
the countries in which we have operations are not always
interpreted consistently among local, regional and national
authorities. For example, in 2001, the Ministry of State
Revenues of the Republic of Kazakhstan, or MSR, issued an Act of
Audit to the Kazakhstan branch of one of our wholly-owned
subsidiaries, PKD Kazakhstan, assessing additional taxes of
approximately $29.0 million for the years 1998 through
2000. We filed an Act of Non-Agreement that reimbursements for
rig modifications should not be taxable in Kazakhstan and
requested that the Act of Audit be revised accordingly. In 2002,
the Supreme Court of Kazakhstan held that no additional taxes
were payable by us. The MSR had until the end of March 2003 to
appeal the decision. Although no appeal was filed, the Ministry
of Finance recently filed a request for re-hearing by the
Supreme Court of Kazakhstan claiming that it had new evidence to
present to the court. We filed an objection to this hearing on
the basis that the purported new evidence was already considered
by the Supreme Court during the initial appeal and on the basis
that this matter has been referred to Competent Authority, which
is a diplomatic process governed by the tax treaty between the
United States and Kazakhstan. On April 12, 2005, the
Supreme Court denied the Ministry of Finances request for
a re-hearing. The ultimate outcome of this dispute is not
certain, and it is possible that the outcome could have an
adverse effect on our financial performance. It is also possible
that in the future we will be subject to
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similar disputes concerning taxation and other matters in
Kazakhstan and other countries in which we do business, which
disputes could have a material adverse effect on our financial
performance.
We have historically been successful in limiting the risks of
currency fluctuation and restrictions on currency repatriation
by obtaining contracts providing for payment in
U.S. dollars or freely convertible foreign currencies.
However, some countries in which we may operate could require
that all or a portion of our revenues be paid in local
currencies that are not freely convertible. In addition, some
parties with which we do business may require that all or a
portion of our revenues be paid in local currencies. To the
extent possible, we limit our exposure to potentially
devaluating 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
obtain such contractual terms in the future, thereby exposing us
to foreign currency fluctuations that could have a material
adverse effect upon our results of operations and financial
condition.
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We are subject to hazards customary for drilling
operations, which could adversely affect our financial
performance if we are not adequately indemnified or
insured. |
Substantially all of our operations are subject to hazards that
are customary for oil and gas drilling operations, including
blowouts, reservoir damage, loss of well control, cratering, oil
and gas well fires and explosions, natural disasters, pollution
and mechanical failure. Our offshore operations also are subject
to hazards inherent in marine operations, such as capsizing,
grounding, collision and damage from severe weather conditions.
Our international operations are also subject to risks of
terrorism, war, civil disturbances and other political events.
Any of these risks could result in damage to or destruction of
drilling equipment, personal injury and property damage,
suspension of operations or environmental damage. We have had
accidents in the past demonstrating some of these hazards. For
example, in September 2003 a malfunction occurred on one of our
jackup rigs in the Gulf of Mexico, which caused one side of the
rig to become submerged in the water and resulted in the loss of
certain drilling equipment overboard, in November 2003, we
experienced a well control incident during completion operations
on one of our workover barge rigs, in June 2005, a well control
incident resulted in a fire and damage to a substantial portion
of our rig in Bangladesh and in July 2005, we suffered
damage to a deep drilling barge rig which ran aground and
overturned. Generally, drilling contracts provide for the
division of responsibilities between a drilling company and its
customer, and we generally seek to obtain indemnification from
our customers by contract for some of these risks. However, the
laws of certain countries place significant limitations on the
enforceability of indemnification. To the extent that we are
unable to transfer such risks to customers by contract or
indemnification agreements, we generally seek protection through
insurance. However, we are self-insured for certain losses
relating to workers compensation, employers losses
relating to workers compensation, employers
liability, general liability (for onshore liability), protection
and indemnity (for offshore liability), and property damage. For
further information, see note 12 to our consolidated
financial statements for the year ended December 31, 2004
incorporated herein by reference. There is no assurance that
such insurance or indemnification agreements will adequately
protect us against liability from all of the consequences of the
hazards and risks described above. The occurrence of an event
not fully insured or indemnified against, or the failure of a
customer or insurer to meet its indemnification or insurance
obligations, could result in substantial losses. In addition,
there can be no assurance that insurance will be available to
cover any or all of these risks, or, even if available, that
insurance premiums or other costs will not rise significantly in
the future, so as to make the cost of such insurance
prohibitive. For example, we are currently unable to obtain
political violence coverage at commercially reasonable premiums
for rigs while they are operating in Nigeria, but if the
insurance market and political climate in Nigeria change,
political violence coverage may become available for a
reasonable premium.
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Government regulations and environmental risks, which
reduce our business opportunities and increase our operating
costs, might worsen in the future. |
Government regulations control and often limit access to
potential markets and impose extensive requirements concerning
employee safety, environmental protection, pollution control and
remediation of
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environmental contamination. Environmental regulations, in
particular, prohibit access to some markets and make others less
economical, increase equipment and personnel costs and often
impose liability without regard to negligence or fault. In
addition, governmental regulations may discourage our
customers activities, reducing demand for our products and
services. We may be liable for damages resulting from pollution
of offshore waters and, under United States regulations, must
establish financial responsibility in order to drill offshore.
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We are routinely involved in litigation, some of which may
be material. |
We are routinely involved in litigation, claims and disputes
incidental to our business, which at times involve claims for
significant monetary amounts, some of which would not be covered
by insurance. For example, in August 2004, we were notified that
certain of our subsidiaries have been named, along with other
defendants, in several complaints that have been filed in the
Circuit Courts of the State of Mississippi by several hundred
persons that allege that they were employed by some of the named
defendants between approximately 1965 and 1986. The complaints
name as defendants numerous other companies that are not
affiliated with us, including companies that allegedly
manufactured drilling related products containing asbestos that
are the subject of the complaints. The complaints allege that
our subsidiaries and other drilling contractors used those
asbestos-containing products in offshore drilling operations,
land based drilling operations and in drilling structures,
drilling rigs, vessels and other equipment and assert claims
based on, among other things, negligence and strict liability
and claims under the Jones Act. We have not yet had an
opportunity to conduct sufficient discovery to determine the
number of plaintiffs, if any, that were employed by us or
otherwise have any connection with our drilling operations
during the relevant period. In addition, on March 18, 2005,
a case was filed by a single plaintiff in the Circuit Court of
Madison County, Illinois against approximately 125 defendants,
including Parker Drilling Company, alleging that the plaintiff
suffers from asbestos-related diseases, including mesothelioma,
as a result of exposure to asbestos and asbestos-containing
products. The plaintiffs in these cases seek, among other
things, awards of unspecified compensatory and punitive damages.
We intend to defend ourselves vigorously and, based on the
information available to us at this time, we do not expect the
outcome of these lawsuits to have a material adverse effect on
our financial condition, results of operations or cash flows;
however, there can be no assurance as to the ultimate outcome of
these lawsuits.
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Failure to retain key personnel could hurt our
operations. |
We require highly skilled and experienced personnel to provide
technical services and support for our drilling operations. As
the demand for drilling services and the size of the worldwide
rig fleet has recently increased, it has become more difficult
to retain existing personnel and shortages of qualified
personnel have arisen, which could create upward pressure on
wages and prevent us from retaining or attracting qualified
personnel in a cost-effective manner.
Additionally, we depend significantly on the experience of our
senior management team, including, in particular, Robert L.
Parker, Robert L. Parker Jr., James W. Whalen and David C.
Mannon. The unexpected loss of the services of any one of these
persons could result in operating inefficiencies and lost
business opportunities.
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Our debt instruments contain restrictive covenants that
may limit our operating flexibility. |
The indentures governing the notes, our senior floating rate
notes and our 10.125% senior notes, and the agreement
governing our senior secured credit facility, contain
significant covenants that limit our ability to engage in
various transactions. Our senior secured credit facility also
requires satisfaction of specified financial performance
criteria. In addition, under each of these documents, the
occurrence of specific events, in some cases after notice and
grace periods, would constitute an event of default permitting
acceleration of the respective indebtedness. These events
include:
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failure to comply with certain financial covenants; |
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material inaccuracies of representations and warranties; |
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specified defaults under or acceleration of other
indebtedness; and |
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events of bankruptcy or insolvency. |
The limitations imposed by our outstanding indebtedness are
substantial, and failure to comply with them could have a
material adverse effect on our business. We are in full
compliance with our debt covenants as of the date of this
offering memorandum.
Risks Related to the Exchange Notes
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Payment of principal and interest on the exchange notes
will be effectively subordinated to our senior secured debt to
the extent of the value of the assets securing that debt. |
The exchange notes and the guarantees related to the exchange
notes are senior unsecured obligations of Parker Drilling
Company and certain of our domestic subsidiaries that rank
senior in right of payment to all current and future
subordinated debt. Holders of our secured obligations, including
obligations under our senior secured credit facility, will have
claims that are prior to claims of the holders of the exchange
notes with respect to the assets securing those obligations. In
the event of a liquidation, dissolution, reorganization,
bankruptcy or any similar proceeding, our assets and those of
our subsidiaries will be available to pay obligations on the
notes and the guarantees only after holders of our senior
secured debt have been paid the value of the assets securing
such debt. Accordingly, there may not be sufficient funds
remaining to pay amounts due on all or any of the notes.
We have granted the lenders under our senior secured credit
facility a security interest in (i) all accounts
receivable, and certain deposit accounts, of (a) Parker
Drilling Company and (b) substantially all of our material
direct and indirect domestic subsidiaries; (ii) the stock
of all of our direct and indirect domestic subsidiaries; and
(iii) substantially all of the personal property assets of
our rental tool business. In the event of a default on secured
indebtedness, the parties granted security interests will have a
prior secured claim on such assets. If the parties should
attempt to foreclose on their collateral, our financial
condition and the value of the notes would be adversely affected.
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We are a holding company and conduct substantially all of
our operations through our subsidiaries, which may affect our
ability to make payments on the notes. |
We conduct substantially all of our operations through our
subsidiaries. As a result, our cash flows and our ability to
service our debt, including the notes, is dependent upon the
earnings of our subsidiaries. In addition, we are dependent on
the distribution of earnings, loans or other payments from our
subsidiaries to us. Any payment of dividends, distributions,
loans or other payments from our subsidiaries to us could be
subject to statutory restrictions. In addition, payment of
dividends or distributions from our joint ventures are subject
to contractual restrictions. Payments to us by our subsidiaries
also will be contingent upon the profitability of our
subsidiaries. If we are unable to obtain funds from our
subsidiaries we may not be able to pay interest or principal on
the notes when due, or to redeem the notes upon a change of
control, and we cannot assure you that we will be able to obtain
the necessary funds from other sources.
The notes will be guaranteed by substantially all of our direct
and indirect domestic subsidiaries. The notes will also be
guaranteed by Parker Drilling Offshore International, Inc., one
of our foreign subsidiaries, for so long as it also guarantees
our 10.125% senior notes. None of our other foreign
subsidiaries guarantee the notes. As of June 30, 2005, our
non-guarantor subsidiaries and joint ventures collectively owned
approximately 19 percent of our consolidated total assets
and held approximately $18.1 million of our consolidated
cash and cash equivalents of approximately $71.0 million.
During the first six months of 2005, our non-guarantor
subsidiaries and joint ventures had drilling and rental revenues
of approximately $71.5 million and total operating income
of approximately $1.7 million. The amount of our
consolidated total assets and cash and cash equivalents held by,
and the amount of our consolidated drilling and rental revenues
and operating income derived from, our non-guarantor
subsidiaries and joint ventures has increased in each of the
last three years, and we expect that this trend will continue as
we
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expand our international operations. Parker Drilling Offshore
International, Inc. owned approximately 15 percent of our
consolidated total assets as of June 30, 2005. For further
information about our corporate structure, see note 5 to
our consolidated financial statements for the year ended
December 31, 2004, incorporated by reference into this
prospectus.
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The subsidiary guarantees could be deemed fraudulent
conveyances under certain circumstances, and a court may try to
subordinate or void the subsidiary guarantees. |
Under the federal bankruptcy laws and comparable provisions of
state fraudulent transfer laws, a guarantee could be voided, or
claims in respect of a guarantee could be subordinated to all
other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by
its guarantee:
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received less than reasonably equivalent value or fair
consideration for the incurrence of such guarantee; and |
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was insolvent or rendered insolvent by reason of such
incurrence; or |
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was engaged in a business or transaction for which the
guarantors remaining assets constituted unreasonably small
capital; or |
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intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they mature. |
In addition, any payment by that guarantor pursuant to its
guarantee could be voided and required to be returned to the
guarantor, or to a fund for the benefit of the creditors of the
guarantor. The measures of insolvency for purposes of these
fraudulent transfer laws will vary depending upon the law
applied in any proceeding to determine whether a fraudulent
transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all of its assets; |
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the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability,
including contingent liabilities, on its existing debts, as they
become absolute and mature; or |
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it could not pay its debts as they become due. |
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We may not be able to repurchase the notes upon a change
of control. |
Upon the occurrence of specific change of control events
affecting us, you will have the right to require us to
repurchase the notes at 101% of their principal amount, plus
accrued and unpaid interest. Our ability to repurchase the notes
upon such a change of control event would be limited by our
access to funds at the time of the repurchase and the terms of
our other debt agreements. Upon a change of control event, we
may be required immediately to repay the outstanding principal,
any accrued interest on and any other amounts owed by us under
our senior secured credit facilities, the notes and other
outstanding indebtedness. The source of funds for these
repayments would be our available cash or cash generated from
other sources. However, we cannot assure you that we will have
sufficient funds available upon a change of control to make any
required repurchases of this outstanding indebtedness.
In addition, the change of control provisions in the indenture
may not protect you from certain important corporate events,
such as a leveraged recapitalization (which would increase the
level of our indebtedness), reorganization, restructuring,
merger or other similar transaction, unless such transaction
constitutes a Change of Control under the indenture.
Such a transaction may not involve a change in voting power or
beneficial ownership or, even if it does, may not involve a
change that constitutes a Change of Control as
defined in the indenture that would trigger our obligation to
repurchase the notes. Therefore, if an event occurs that does
not constitute a Change of Control as defined in the
indenture,
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we will not be required to make an offer to repurchase the notes
and you may be required to continue to hold your notes despite
the event. See Description of Certain Indebtedness
and Description of the Exchange Notes
Repurchase at the Option of Holders Change of
Control.
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There will be no public trading market for the exchange
notes, and your ability to sell your exchange notes is
limited. |
The exchange notes are new securities, and there is no existing
public market for the exchange notes. We cannot assure you as to
the liquidity of any markets that may develop for the exchange
notes, the ability of holders of the exchange notes to sell
their exchange notes or the price at which holders would be able
to sell their exchange notes. Future trading prices of the
exchange notes will depend on many factors, including, among
other things, prevailing interest rates, our operating results,
the number of holders of the exchange notes and the market for
similar securities. Lehman Brothers Inc. has advised us that it
currently intends to make a market in the exchange notes.
However, they are not obligated to do so and any market-making
activities may be discontinued by them at any time without
notice. We do not intend to apply for listing of the exchange
notes on any securities exchange.
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If you wish to tender your private notes for exchange, you
must comply with the requirements described in this
prospectus. |
You will receive exchange notes in exchange for private notes
only after the exchange agent receives such private notes, a
properly completed and duly executed letter of transmittal and
all other required documentation within the time limits
described below. If you wish to tender your private notes in
exchange for exchange notes, you should allow sufficient time
for delivery. Neither the exchange agent nor Parker Drilling has
any duty to give you notice of defects or irregularities with
respect to tenders of private notes for exchange. Private notes
that are not tendered or are tendered but not accepted will,
following consummation of the exchange offer, continue to be
subject to the existing restrictions upon transfer relating to
the private notes.
In addition, if you tender your private notes in the exchange
offer for the purpose of participating in a distribution of the
exchange notes, you will be required to comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each
broker-dealer who holds private notes acquired for its own
account as a result of market-making or other trading activities
and who receives exchange notes for its own account in exchange
for such private notes pursuant to the exchange offer must
acknowledge in the letter of transmittal that it will deliver a
prospectus in connection with any resale of such exchange notes.
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If you do not exchange your private notes, you may have
difficulty transferring them at a later time. |
We will issue exchange notes in exchange for the private notes
after the exchange agent receives your private notes, the letter
of transmittal and all related documents. You should allow
adequate time for delivery if you choose to tender your notes
for exchange. Notes that are not exchanged will remain subject
to restrictions on transfer and will not have rights to
registration.
If you do not participate in the exchange offer for the purpose
of participating in the distribution of the exchange notes, you
must comply with the registration and prospectus delivery
requirements of the Securities Act for any resale transaction.
Each broker-dealer who holds private notes for its own account
due to market-making or other trading activities and who
receives exchange notes for its own account must acknowledge
that it will deliver a prospectus in connection with any resale
of the exchange notes. If any private notes are not tendered in
the exchange or are tendered but not accepted, the trading
market for such notes could be negatively affected due to the
limited amount of notes expected to remain outstanding following
the completion of the exchange offer.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated herein by
reference contain statements that are forward-looking
statements. All statements contained in or incorporated by
reference into this prospectus, other than statements of
historical facts, are forward-looking statements, including any
statements regarding:
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prices and demand for oil and natural gas; |
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levels of oil and natural gas exploration and production
activities; |
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demand for contract drilling and drilling related services and
demand for rental tools; |
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our future operating results, including our efforts to reduce
costs, our expectations concerning profitability in 2005 and our
projected net income per share for 2005; |
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our future rig utilization, dayrates and rental tool activity; |
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entering into new, or extending existing, drilling contracts and
our expectations concerning when our rigs will commence
operations under such contracts; |
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growth of the company through acquisitions; |
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entering into joint venture agreements with local companies; |
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our future capital expenditures and investments in the
acquisition and refurbishment of rigs and equipment; |
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our future liquidity; |
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availability and sources of funds to reduce our debt and
expectations of when debt will be reduced; |
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future sales of our assets and the gains or losses that we may
recognize as a result of any such sales, including our
expectations concerning the sale of land rigs in Africa; |
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the outcome of pending and future legal proceedings, including
the outcome of our dispute with the Ministry of Finance of the
Republic of Kazakhstan; |
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our recovery of insurance proceeds in respect of our damaged rig
in Nigeria; |
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compliance with covenants under our credit facilities; and |
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expansion and growth of our operations. |
In some cases, you can identify these statements by
forward-looking words such as anticipate,
believe, could, estimate,
expect, intend, outlook,
may, should, will and
would or similar words. Forward-looking statements
are based on certain assumptions and analyses made by our
management in light of their experience and perception of
historical trends, current conditions, expected future
developments and other factors they believe are relevant.
Although our management believes that their assumptions are
reasonable based on information currently available, those
assumptions are subject to significant risks and uncertainties,
many of which are outside of our control. The factors listed in
the Risk Factors section of this prospectus, as well
as any other cautionary language included in or incorporated by
reference into this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our
forward-looking statements. Each forward-looking statement
speaks only as of the date of this prospectus, and we undertake
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise. Before you decide to exchange your private
notes for exchange notes, you should be aware that the
occurrence of the events described in these risk factors and
elsewhere in this prospectus and the documents incorporated by
reference herein could have a material adverse effect on our
business, results of operations and financial condition.
17
USE OF PROCEEDS
The exchange offer is intended to satisfy certain obligations of
Parker Drilling under our registration rights agreement. We will
not receive any proceeds from the issuance of the exchange
notes. In exchange for issuing the exchange notes as
contemplated in this exchange offer, we will receive private
notes in the same principal amount. The form and terms of the
exchange notes are identical in all material respects to the
form and terms of the private notes, except as described below
under the heading The Exchange Offer Terms of
the Exchange Offer. The private notes surrendered in
exchange for the exchange notes will be retired and cancelled
and cannot be re-issued. Accordingly, issuance of the exchange
notes will not result in any increase in our outstanding debt.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings
to fixed charges for the periods indicated. For more information
on our consolidated ratios of earnings to fixed charges, see our
Annual Report on Form 10-K for the year ended
December 31, 2004, and our Quarterly Report for the quarter
ended June 30, 2005, each of which is incorporated by
reference into this prospectus as described under Where
You Can Find More Information.
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Six Months Ended |
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June 30, |
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Year Ended December 31, |
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2005 |
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2004 |
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2004 |
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2003 |
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2002 |
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2001 |
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2000 |
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2.4x |
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0.4 |
x |
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0.3 |
x |
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0.3 |
x |
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0.6 |
x |
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1.3 |
x |
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0.8 |
x |
The ratio of earnings to fixed charges is computed by dividing
fixed charges into earnings, as defined. Earnings include income
(loss) from continuing operations before income taxes, minority
interest and income (loss) from equity investees, plus fixed
charges. Fixed charges include interest expense and the interest
factor of lease obligations. Fixed charges exceeded earnings by
approximately $15.7 million for the six months ended
June 30, 2004, approximately $34.5 million for the
year ended December 31, 2004, approximately
$35.8 million for the year ended December 31, 2003,
approximately $19.1 million for the year ended
December 31, 2002 and approximately $9.0 million for
the year ended December 31, 2000.
As of the date of this prospectus, we have no preferred stock
outstanding.
18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables present summary condensed financial data
derived from the unaudited financial statements of Parker
Drilling for the six months ended June 30, 2005 and 2004,
from the audited financial statements of Parker Drilling for the
years ended December 31, 2004, 2003, 2002 and 2001, and
from the unaudited financial statements of Parker Drilling for
the year ended December 31, 2000. The following financial
data is qualified by reference to and should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations and the
financial statements and related notes incorporated by reference
into this prospectus.
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Six Months Ended | |
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June 30, | |
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Year Ended December 31, | |
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2005 | |
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2004 | |
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2004 | |
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2003 | |
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2002 | |
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2001 | |
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2000 | |
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(Dollars in thousands) | |
Total drilling and rental revenues
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$ |
254,197 |
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$ |
178,780 |
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$ |
376,525 |
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$ |
338,653 |
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$ |
385,714 |
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$ |
452,944 |
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$ |
339,334 |
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Income (loss) from continuing operations
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24,032 |
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(23,616 |
) |
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(50,565 |
) |
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(52,434 |
) |
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(21,193 |
) |
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2,327 |
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(15,371 |
) |
Net income (loss)(1)(2)
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24,109 |
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(18,389 |
) |
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(47,083 |
) |
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(109,699 |
) |
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(114,054 |
) |
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11,059 |
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(19,045 |
) |
Income (loss) from continuing operations per share
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0.25 |
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(0.25 |
) |
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(0.54 |
) |
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(0.56 |
) |
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(0.23 |
) |
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0.03 |
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(0.19 |
) |
Net income (loss) per share(1)(2)
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0.25 |
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(0.20 |
) |
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(0.50 |
) |
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(1.17 |
) |
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(1.23 |
) |
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0.12 |
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(0.23 |
) |
Total assets(3)
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728,556 |
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782,870 |
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726,590 |
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847,632 |
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953,325 |
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1,105,777 |
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1,107,419 |
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Total long-term debt and capital leases, including current
portion(3)
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$ |
446,107 |
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$ |
525,823 |
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$ |
481,063 |
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$ |
571,625 |
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$ |
589,930 |
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$ |
592,172 |
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$ |
597,627 |
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(1) |
In 2003, Parker Drilling recognized a $53.8 million
impairment charge related to its plan to sell its U.S. Gulf of
Mexico offshore assets. See Note 2 in the notes to the
consolidated financial statements incorporated by reference
herein. |
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(2) |
In 2002, Parker Drilling adopted Statement Financial Accounting
Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets and recorded a goodwill impairment
of $73.1 million as a cumulative effect of a change in
accounting principle. See Note 3 in the notes to the
consolidated financial statements incorporated herein by
reference. |
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(3) |
Balance sheet data is as of the ends of the periods presented. |
19
THE EXCHANGE OFFER
Purpose of the Exchange Offer
We sold the private notes on April 21, 2005, to Lehman
Brothers, Inc., as the initial purchaser, in a private offering
pursuant to a purchase agreement. The initial purchaser
subsequently sold the private notes to:
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qualified institutional buyers (QIBs),
as defined in Rule 144A under the Securities Act, in
reliance on Rule 144A; and |
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persons in offshore transactions in reliance on
Regulation S under the Securities Act. |
As a condition to the initial sale of the private notes, we and
the initial purchaser entered into a registration rights
agreement on April 21, 2005. Pursuant to the registration
rights agreement, we agreed to:
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file with the SEC a registration statement under the Securities
Act with respect to the exchange notes no later than
90 days after April 21, 2005; |
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use our commercially reasonable best efforts to cause the
registration statement to become effective under the Securities
Act within 180 days after April 21, 2005; and |
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unless the exchange offer would not be permitted by applicable
law or SEC policy, to commence the exchange offer and to use our
commercially reasonable best efforts to issue on or prior to 30
business days, or longer, if required by the federal securities
laws, after the date on which the registration statement was
declared effective by the SEC, exchange notes in exchange for
all private notes tendered prior thereto in the exchange offer. |
The registration rights agreement provides, among other things,
that if we default in our obligations to take required actions
to make the exchange offer within the required time periods
described above, then we will pay liquidated damages to each
holder of notes, with respect to the first 90-day period
immediately following the occurrence of the first default in an
amount equal to $.05 per week per $1,000 principal amount
of notes held by such holder. The amount of the liquidated
damages will increase by an additional $.05 per week per
$1,000 principal amount of notes with respect to each subsequent
90-day period until all defaults have been cured, up to a
maximum amount of liquidated damages for all defaults of
$.50 per week per $1,000 principal amount of notes.
We agreed to issue and exchange the exchange notes for all
private notes properly surrendered and not withdrawn before the
expiration of the exchange offer. The summary in this document
of the registration rights agreement is not complete and is
subject to, and is qualified in its entirety by, all the
provisions of the registration rights agreement. We urge you
to read the entire registration rights agreement carefully.
A copy of the registration rights agreement has been filed as an
exhibit to the registration statement which includes this
prospectus. The registration statement is intended to satisfy
some of our obligations under the registration rights agreement
and the purchase agreement.
Terms of the Exchange Offer
Based on the terms and conditions in this prospectus and in the
letter of transmittal, we will issue $1,000 principal amount of
exchange notes in exchange for each $1,000 principal amount of
outstanding private notes properly surrendered pursuant to the
exchange offer and not withdrawn prior to the expiration date.
Private notes may be surrendered only in integral multiples of
$1,000. The form and terms of the exchange notes are the same as
the form and terms of the private notes except that:
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the exchange notes will have a different CUSIP number from the
private notes; |
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the exchange notes will be registered for the exchange offer
under the Securities Act and, therefore, the exchange notes will
not bear legends restricting the transfer of the exchange
notes; and |
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holders of the exchange notes will not be entitled to any of the
registration rights of holders of private notes under the
registration rights agreement, which will terminate upon the
consummation of the exchange offer. |
20
The exchange notes will evidence the same indebtedness as the
private notes, which they replace, and will be issued under, and
be entitled to the benefits of, the same indenture, that
authorized the issuance of the private notes. As a result, both
series of notes will be treated as a single class of debt
securities under the indenture.
As of the date of this prospectus, $50,000,000 in aggregate
principal amount of the private notes is outstanding. All of it
is registered in the name of Cede & Co., as nominee for
The Depository Trust Company (DTC). Solely for
reasons of administration, we have fixed the close of business
on October 18, 2005 as the record date for the exchange
offer for purposes of determining the persons to whom this
prospectus and the letter of transmittal will be mailed
initially. There will be no fixed record date for determining
holders of the private notes entitled to participate in this
exchange offer.
In connection with the exchange offer, neither the General
Corporation Law of the State of Delaware nor the indenture
governing the notes gives you any appraisal or dissenters
rights nor any other right to seek monetary damages in court. We
intend to conduct the exchange offer in accordance with the
provisions of the registration rights agreement and the
applicable requirements of the Exchange Act and the related SEC
rules and regulations.
For all relevant purposes, we will be regarded as having
accepted properly surrendered private notes if and when we give
oral or written notice of our acceptance to the exchange agent.
The exchange agent will act as agent for the surrendering
holders of private notes for the purposes of receiving the
exchange notes from us.
If you surrender private notes in the exchange offer, you will
not be required to pay brokerage commissions or fees. In
addition, subject to the instructions in the letter of
transmittal, you will not have to pay transfer taxes for the
exchange of private notes. We will pay all charges and expenses,
other than certain applicable taxes described under
Fees and Expenses below.
By executing or otherwise becoming bound by the letter of
transmittal, you will be making the representations described
under Representations on Tendering Private
Notes below.
Expiration Date; Extensions; Amendments
The expiration date is 5:00 p.m., New York City
time on November 17, 2005, unless we, in our sole
discretion, extend the exchange offer, in which case the
expiration date is the latest date and time to which we extend
the exchange offer.
In order to extend the exchange offer, we will:
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notify the exchange agent of any extension by oral or written
notice; and |
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issue a press release or other public announcement which will
include disclosure of the approximate number of private notes
deposited; such press release or announcement would be issued
prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. |
We expressly reserve the right:
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to delay accepting any private notes; |
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to extend the exchange offer; or |
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if, in the opinion of our counsel, the consummation of the
exchange offer would violate any law or interpretation of the
staff of the SEC, to terminate or amend the exchange offer by
giving oral or written notice to the exchange agent. |
Any delay in acceptance, extension, termination or amendment
will be followed as soon as practicable by a press release or
other public announcement. If the exchange offer is amended in a
manner determined by us to constitute a material change, we will
promptly disclose that amendment by means of a prospectus
supplement that will be distributed to the holders. We will also
extend the exchange offer for a period of five
21
to ten business days, depending upon the significance of the
amendment and the manner of disclosure to the holders, if the
exchange offer would otherwise expire during the five to ten
business days period.
We will have no obligation to publish, advertise, or otherwise
communicate any public announcement of any delay, extension,
amendment or termination that we may choose to make, other than
by making a timely release to an appropriate news agency.
Interest on the Exchange Notes
The exchange notes will accrue interest on the same terms as the
private notes, i.e., at the rate of
95/8% per
year from April 1, 2005, payable semi-annually in arrears
on April 1 and October 1 of each year, with the next
interest payment date being April 1, 2006.
Resale of the Exchange Notes
We believe that you will be allowed to resell the exchange notes
to the public without registration under the Securities Act, and
without delivering a prospectus that satisfies the requirements
of the Securities Act, if you can make the three representations
set forth above under Prospectus Summary
Summary of the Exchange Offer Procedures for
Participating in the Exchange Offer. However, if you
intend to participate in a distribution of the exchange notes,
you must comply with the registration requirements of the
Securities Act and deliver a prospectus, unless an exemption
from registration is otherwise available. In addition, you
cannot be an affiliate of Parker Drilling Company as
defined under Rule 405 of the Securities Act, or a
broker-dealer tendering the private notes acquired directly from
Parker Drilling Company for its own account. You are required to
represent to us in the letter of transmittal accompanying this
prospectus that you meet these conditions exempting you from the
registration requirements.
We base our view on interpretations by the staff of the SEC in
no-action letters issued to other issuers in exchange offers
like ours. We have not, however, asked the SEC to consider this
particular exchange offer in the context of a no-action letter.
Therefore, you cannot be sure that the SEC will treat this
exchange offer in the same way as it has treated others in the
past. If our belief is wrong, or if you cannot truthfully make
the representations described above, and you transfer any
exchange note issued to you in the exchange offer without
meeting the registration and prospectus delivery requirements of
the Securities Act, or without an exemption from such
requirements, you could incur liability under the Securities
Act. We are not indemnifying you for any such liability and we
will not protect you against any loss incurred as a result of
any such liability under the Securities Act.
A broker-dealer that has bought private notes for market-making
or other trading activities has to deliver a prospectus in order
to resell any exchange notes it has received for its own account
in the exchange. This prospectus may be used by a broker-dealer
to resell any of its exchange notes. In addition, a
broker-dealer which has acquired the private notes for its own
account as a result of market-making or other trading activities
may participate in the exchange offer if it has not entered into
any arrangement or understanding with us or any of our
affiliates to distribute the exchange notes. We have agreed in
the registration rights agreement to make this prospectus, and
any amendment or supplement to this prospectus, available to any
broker-dealer that requests copies in the letter of transmittal
for a period of up to one year after the registration statement
relating to this exchange offer is declared effective. See
Plan of Distribution for more information regarding
broker-dealers.
Procedures For Tendering
If you wish to surrender private notes you must do the following:
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properly complete, sign and date the letter of transmittal (or a
facsimile of the letter of transmittal); |
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have the signatures on the letter of transmittal (or facsimile)
guaranteed if required by the letter of transmittal; and |
22
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mail or deliver the letter of transmittal (or facsimile)
together with your private notes and any other required
documents to the exchange agent at the address appearing below
under Exchange Agent for receipt prior
to 5:00 p.m., New York City time, on the expiration date. |
In addition, either:
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certificates for such private notes must be received by the
exchange agent along with the letter of transmittal; |
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a timely confirmation of a book-entry transfer of the private
notes into the exchange agents account at DTC pursuant to
the procedure for book-entry transfer described below under
Book-Entry Transfer, must be received by
the exchange agent prior to the expiration date; or |
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you must comply with the procedures described below under
Guaranteed Delivery Procedures. |
In order for the tender to be effective, the exchange agent must
receive the private notes, a completed letter of transmittal and
all other required documents before 5:00 p.m., New York
City time, on the expiration date.
The method of delivery of private notes and the letter of
transmittal and all other required documents to the exchange
agent is at your election and risk, and the delivery will be
deemed made only when actually received or confirmed by the
exchange agent.
As an alternative to delivery by mail, you may wish to consider
overnight or hand delivery service, properly insured. In all
cases, you should allow sufficient time to assure delivery to
the exchange agent before the expiration date. Do not send
the letter of transmittal or any private notes to us. You may
ask your broker, dealer, commercial bank, trust company or
nominee to perform these transactions for you.
If you do not withdraw your surrender of private notes prior to
the expiration date, you will be regarded as agreeing to
surrender the exchange notes in accordance with the terms and
conditions in this exchange offer.
If you are a beneficial owner of the private notes and your
private notes are held through a broker, dealer, commercial
bank, trust company or other nominee and you want to surrender
your private notes, you should contact your intermediary
promptly and instruct it to surrender the private notes on your
behalf. If you wish to tender on your own behalf, you must,
before completing and executing the letter of transmittal for
the exchange offer and delivering your private notes, either
arrange to have your private notes registered in your name or
obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take a long
time.
By tendering, you will make the representations described below
under Representations on Tendering Private
Notes. In addition, each participating broker-dealer must
acknowledge that it will deliver a prospectus in connection with
any resale of the new notes. See Plan of
Distribution.
Your tender and our acceptance of the tender will constitute the
agreement between you and us set forth in this prospectus and in
the letter of transmittal.
Signature on Letter Of Transmittal
Signatures on a letter of transmittal or a notice of withdrawal
described below under Withdrawal of
Tenders, as the case may be, must generally be guaranteed
by an eligible institution. You can submit the letter of
transmittal without guarantee if you surrender your private
notes (i) as a registered holder and you have not completed
the box titled Special Delivery Instruction on the
letter of transmittal or (ii) for the account of an
eligible institution. In the event that signatures on a letter
of transmittal or a notice of withdrawal are required to be
guaranteed, the guarantee must be made by:
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a member firm of a registered national securities exchange or of
the NASD; |
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a commercial bank or trust company having an office or
correspondent in the United States; or |
23
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an eligible guarantor institution within the meaning
of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in
the letter of transmittal. |
If you sign the letter of transmittal even though you are not
the registered holder of any private notes listed in the letter
of transmittal, your private notes must be endorsed or
accompanied by a properly completed bond power. The bond power
must authorize you to tender the private notes on behalf of the
registered holder and must be signed by the registered holder as
the registered holders name appears on the private notes.
In connection with any surrender of private notes in definitive
certificated form, if you sign the letter of transmittal or any
private notes or bond powers in your capacity as trustee,
executor, administrator, guardian, attorney-in-fact or officer
of a corporation or if you are otherwise acting in a fiduciary
or representative capacity, you should indicate this when
signing. Unless waived by us, you must submit with the letter of
transmittal evidence satisfactory to us of your authority to act
in the particular capacity.
Acceptance of Tendered Private Notes
All questions as to the validity, form, acceptance, withdrawal
and eligibility, including time of receipt of surrendered
private notes, will be determined by us in our sole discretion,
which will be final and binding.
We reserve the absolute right:
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to reject any and all private notes not properly surrendered; |
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to reject any private notes if our acceptance of them would, in
the opinion of our counsel, be unlawful; and |
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to waive any defects, irregularities or conditions of surrender
as to particular private notes. |
Unless waived, you must cure any defects or irregularities in
connection with surrenders of private notes within the time
period we will determine. Although we intend to notify holders
of defects or irregularities in connection with surrenders of
private notes, neither we, the exchange agent nor anyone else
will be liable for failure to give such notice. Surrenders of
private notes will not be deemed to have been made until any
defects or irregularities have been cured or waived.
We do not currently intend to acquire any private notes that are
not surrendered in the exchange offer or to file a registration
statement to permit resales of any private notes that are not
surrendered pursuant to the exchange offer. We reserve the right
in our sole discretion to purchase or make offers for any
private notes that remain outstanding after the expiration date.
To the extent permitted by applicable law, we also reserve the
right in our sole discretion to purchase private notes in the
open market, in privately negotiated transactions or otherwise.
The terms of any future purchases or offers could differ from
the terms of the exchange offer.
Representations on Tendering Private Notes
By surrendering private notes pursuant to the exchange offer,
you will be telling us that, among other things,
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you have full power and authority to surrender, sell, assign and
transfer the private notes tendered; |
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you are acquiring the exchange notes in the ordinary course of
your business; |
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you are not an affiliate, as defined in
Rule 405 under the Securities Act, of Parker Drilling
Company, or a broker-dealer tendering the private notes acquired
directly from us for its own account; |
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you are not participating, do not intend to participate and have
no arrangement or understanding with any person to participate
in the distribution of the exchange notes; |
24
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you acknowledge and agree that if you are a broker-dealer
registered under the Exchange Act or you are participating in
the exchange offer for the purposes of distributing the exchange
notes, you must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale of the exchange notes, and you cannot rely on
the position of the SEC staff in their no-action letters; |
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you understand that a secondary resale transaction described
above and any resales of exchange notes obtained by you in
exchange for private notes acquired by you directly from us
should be covered by an effective registration statement
containing the selling security holder information required by
Item 507 or Item 508, as applicable, of
Regulation S-K of the SEC; and |
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we will acquire good, marketable and unencumbered title to the
private notes being tendered, free and clear of all security
interests, liens, restrictions, charges, encumbrances,
conditional sale agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim
when the private notes are accepted by us. |
If you are a broker-dealer and you will receive exchange notes
for your own account in exchange for private notes that were
acquired as a result of market-making activities or other
trading activities, you will be required to acknowledge in the
letter of transmittal that you will deliver a prospectus in
connection with any resale of such exchange notes.
Return of Private Notes
If any surrendered private notes are not accepted for any reason
described here or if private notes are withdrawn or are
submitted for a greater principal amount than you desire to
exchange, those private notes will be returned, at our cost, to
(i) the person who surrendered them or (ii) in the
case of private notes surrendered by book-entry transfer, the
exchange agents account at DTC. Any such private notes
will be returned to the surrendering person or credited to an
account maintained with DTC promptly.
Book-Entry Transfer
The exchange agent will make a request to establish an account
with respect to the private notes at DTC for purposes of
facilitating the exchange offer within two business days after
the date of this prospectus. Subject to the establishment of the
account, any financial institution that is a participant in
DTCs systems may make book-entry delivery of private notes
by causing DTC to transfer the private notes into the exchange
agents account at DTC in accordance with DTCs
procedures for transfer. However, although delivery of private
notes may be effected through book-entry transfer at DTC, you
must transmit the letter of transmittal with any required
signature guarantees and any other required documents to the
exchange agent at the address appearing below under
Exchange Agent for its receipt on or
prior to the expiration date or pursuant to the guaranteed
delivery procedures described below.
Guaranteed Delivery Procedures
If you wish to surrender your private notes and (i) your
private notes are not readily available so you cannot meet the
expiration date deadline or (ii) you cannot deliver your
private notes, the letter of transmittal or any other required
documents to the exchange agent prior to the expiration date,
you may still participate in the exchange offer if:
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the surrender is made through an eligible institution; |
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prior to the expiration date, the exchange agent receives from
such eligible institution a properly completed and duly executed
notice of guaranteed delivery substantially in the form provided
by us, by facsimile transmission, mail or hand delivery,
containing: |
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the name and address of the holder, the certificate number(s) of
the private notes, if applicable, and the principal amount of
private notes surrendered; and |
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a statement that the surrender is being made thereby; |
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a guarantee that, within five New York Stock Exchange
(NYSE) trading days after the expiration date, the
letter of transmittal, together with the certificate(s)
representing the private notes in proper form for transfer or a
book-entry confirmation, and any other required documents, will
be deposited by the eligible institution with the exchange
agent; and |
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the properly executed letter of transmittal, as well as the
certificate(s) representing all surrendered private notes in
proper form for transfer or a book-entry confirmation, and all
other documents required by the letter of transmittal are
received by the exchange agent within five NYSE trading days
after the expiration date. |
The exchange agent will send you a notice of guaranteed delivery
upon your request if you wish to surrender your private notes
according to the guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may
withdraw your surrender of private notes at any time prior to
5:00 p.m., New York City time, on the expiration date.
To withdraw a surrender of private notes in the exchange offer,
the exchange agent must receive a written or facsimile
transmission notice of withdrawal at its address set forth below
under Exchange Agent prior to
5:00 p.m., New York City time, on the expiration date. Any
notice of withdrawal must:
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specify the name of the person having deposited the private
notes to be withdrawn; |
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identify the private notes to be withdrawn, including the
certificate number or numbers, if applicable, and principal
amount of the private notes; and |
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be signed by the holder in the same manner as the original
signature on the letter of transmittal by which the private
notes were tendered. |
All questions as to the validity, form, eligibility and time of
receipt of notices will be determined by us, in our sole
discretion, and our determination shall be final and binding
upon all parties. Any private notes so withdrawn will be deemed
not to have been validly surrendered for purposes of the
exchange offer, and no exchange notes will be issued unless the
private notes so withdrawn are validly re-tendered. Properly
withdrawn private notes may be re-tendered by following one of
the procedures described above under
Procedures for Tendering at any time
prior to the expiration date.
Conditions
Despite any other term of the exchange offer, we will not be
required to accept for exchange, or exchange the exchange notes
for, any private notes, and we may terminate the exchange offer
as provided in this prospectus before the acceptance of those
private notes if, in our judgment, any of the following
conditions has occurred or exists or has not been satisfied or
waived prior to the expiration of the exchange offer:
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any law, statute, rule or regulation is proposed, adopted or
enacted, or the staff of the SEC interprets any existing law,
statute, rule or regulation in a manner, which, in our
reasonable judgment, would materially impair our ability to
proceed with the exchange offer; |
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any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to
the exchange offer which, in our reasonable judgment, would
materially impair our ability to proceed with the exchange
offer; or |
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any governmental approval, which we deem necessary for the
consummation of the exchange offer, has not been obtained. |
26
If we determine in our sole discretion that any of these
conditions are not satisfied, we may:
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refuse to accept any private notes and return all tendered
private notes to the tendering holders; |
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extend the exchange offer and retain all private notes tendered
prior to the expiration of the exchange offer, subject, however,
to the rights of holders who tendered the private notes to
withdraw their tendered private notes; or |
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waive the unsatisfied conditions with respect to the exchange
offer and accept all properly tendered private notes which have
not been withdrawn. If that waiver constitutes a material change
to the exchange offer, we will promptly disclose the waiver by
means of a prospectus supplement that will be distributed to the
registered holders, and we will extend the exchange offer to the
extent required by law. |
The conditions listed above are for our sole benefit and we may
assert these rights regardless of the circumstances giving rise
to any of these conditions. We may waive these conditions in our
reasonable discretion in whole or in part at any time and from
time to time. If we fail at any time to exercise any of the
above rights, the failure will not be deemed a waiver of these
rights, and these rights will be deemed ongoing rights which may
be asserted at any time and from time to time.
The exchange offer is not conditioned upon any minimum principal
amount of private notes being submitted for exchange.
Termination of Certain Rights
All registration rights under the registration rights agreement
benefiting the holders of the private notes will terminate when
we consummate the exchange offer. That includes all rights to
receive additional interest in the event of a registration
default under the registration rights agreement. In any case we
are under a continuing obligation, for a period of up to one
year after the expiration date of this exchange offer, to use
our commercially reasonable best efforts to keep the
registration statement effective and to make this prospectus,
and any amendment or supplement to this prospectus, available to
any broker-dealer that requests copies in the letter of
transmittal for use in a resale.
Exchange Agent
We have appointed JPMorgan Chase Bank, National Association as
the exchange agent for the exchange offer. You should direct any
questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and
requests for notice of guaranteed delivery to the exchange
agent, addressed as follows:
By mail, hand or overnight courier:
JPMorgan Chase Bank, National Association
2001 Bryan Street, Floor 10
Dallas, Texas 75201
Attention: Frank Ivins
By facsimile:
(214) 468-6494
Confirm by telephone:
(800) 275-2048
JPMorgan Chase Bank, National Association also serves as trustee
under the indenture governing the notes.
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Fees and Expenses
We will pay for the expenses of this exchange offer. The
principal solicitation for tenders of private notes is being
made by mail. However, additional solicitation may be made by
telegraph, facsimile transmission, e-mail, telephone or in
person by our officers and regular employees.
We have not retained a dealer-manager in connection with the
exchange offer, and will not make any payments to brokers,
dealers or others soliciting acceptances of the exchange offer.
We will, however, pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection with providing
the services.
We will pay any transfer taxes applicable to the exchange of
private notes. If, however, a transfer tax is imposed for any
reason other than the exchange, then the amount of any transfer
taxes will be payable by the person surrendering the notes. If
you do not submit satisfactory evidence of payment of taxes or
of an exemption with the letter of transmittal, the amount of
those transfer taxes will be billed directly to you.
Accounting Treatment
We will record the exchange notes at the same carrying value as
the private notes as reflected in our accounting records on the
date of exchange. Therefore, we will not recognize a gain or
loss for accounting purposes. We will amortize the expenses of
the exchange offer and the unamortized expenses related to the
issuance of the private notes over the remaining term of the
notes.
Consequence of Failure to Exchange
You do not have to participate in the exchange offer. You
should carefully consider whether to accept the terms and
conditions of this exchange offer. We urge you to consult your
financial and tax advisors in deciding what action to take with
respect to the exchange offer.
Private notes that are not exchanged will remain
restricted securities within the meaning of
Rule 144(a)(3)(iii) of the Securities Act. Accordingly,
they may not be offered, sold, pledged or otherwise transferred
except:
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so long as the private notes are eligible for resale under
Rule 144A under the Securities Act, to a person who the
seller reasonably believes is a qualified institutional
buyer within the meaning of Rule 144A, purchasing for
its own account or for the account of a qualified institutional
buyer in a transaction meeting the requirements of
Rule 144A; |
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outside the U.S. to a foreign person in accordance with the
requirements of Regulation S under the Securities Act; |
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pursuant to an exemption from registration under the Securities
Act provided by Rule 144, if available; |
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pursuant to an effective registration statement under the
Securities Act; or |
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pursuant to another available exemption from the registration
requirements of the Securities Act, |
in each case in accordance with all other applicable securities
laws.
See Risk Factors for more information about the
risks of not participating in the exchange offer.
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DESCRIPTION OF THE EXCHANGE NOTES
The private notes were, and the exchange notes will be, issued
under an indenture among Parker Drilling Company, the Guarantors
and JPMorgan Chase Bank, as trustee. The terms of the notes
include those stated in the indenture and those made part of the
indenture by reference to the United States Trust Indenture
Act of 1939, as amended.
On April 21, 2005, Parker Drilling Company issued
$50,000,000 in aggregate principal amount of its
95/8%
Senior Notes due 2013, which we refer to as the private notes.
The private notes constituted an additional issuance of
95/8%
Senior Notes due 2013 pursuant to the indenture. Prior to
issuing the private notes, Parker Drilling Company had issued
$175.0 million in aggregate principal amount of
95/8%
Senior Notes due 2013 under the indenture. The exchange notes
will be pari passu with, and vote on any matter submitted to
noteholders with, our previously issued
95/8
Senior Notes due 2013, including the private notes. The exchange
notes have the same financial terms and covenants as our
previously issued
95/8
Senior Notes due 2013, including the private notes. In this
prospectus we sometimes refer to the private notes, the exchange
notes and our previously issued
95/8%
Senior Notes due 2013 together as the notes. The
exchange notes will evidence the same debt as the outstanding
private notes which they replace.
The following description is a summary of the material
provisions of the indenture and the registration rights
agreement. It does not restate those agreements in their
entirety. We urge you to read the indenture and the registration
rights agreement because they, and not this description, define
your rights as holders of the notes. Copies of the indenture and
the registration rights agreement have been filed with the SEC
as exhibits to the registration statement of which this
prospectus forms a part and are available to you as set forth
under Where You Can Find More Information. You can
find the definitions of certain terms used in this description
under the subheading Certain Definitions. In this
description of the exchange notes, the terms
Company, we, us and
our refer only to Parker Drilling Company and not to
any of its subsidiaries or consolidated joint ventures.
The registered holder of a note will be treated as the owner of
it for all purposes. Only registered holders will have rights
under the indenture. See Book-Entry, Delivery
and Form Depositary Procedures.
Brief Description of the Notes and the Guarantees
The notes will be:
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general unsecured obligations of the Company; |
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senior in right of payment to all existing and future
subordinated Indebtedness of the Company; |
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pari passu in right of payment with any existing and
future senior unsecured Indebtedness of the Company; |
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effectively junior in right of payment to the Companys
existing and future secured Indebtedness, including Indebtedness
under our senior secured credit facility, to the extent of the
value of the collateral securing that Indebtedness; |
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unconditionally guaranteed by the Guarantors on a senior
basis; and |
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effectively junior in right of payment to Indebtedness of our
non-guarantor subsidiaries. |
As of June 30, 2005, the Company (excluding its
subsidiaries) had total Indebtedness of approximately
$446.1 million, all of which was pari passu with the
notes.
The notes are guaranteed by all of the Companys Domestic
Subsidiaries. In addition, the notes will be guaranteed by
Parker Drilling Offshore International, Inc., one of the
Companys foreign Subsidiaries,
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for so long as it guarantees the Companys
10.125% senior notes due 2009. These subsidiaries are the
same subsidiaries that guarantee the senior floating rate notes
due 2010 and the 10.125% senior notes and are substantially
the same subsidiaries that guarantee the Companys senior
secured credit facility.
Each guarantee of the notes is:
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a general unsecured obligation of the Guarantor; |
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senior in right of payment to all existing and future
subordinated Indebtedness of that Guarantor; |
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pari passu in right of payment with any existing and
future senior unsecured Indebtedness of that Guarantor; and |
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effectively junior in right of payment to that Guarantors
existing and future secured Indebtedness, including its
guarantee of Indebtedness under our senior secured credit
facility, to the extent of the value of the collateral securing
that Indebtedness. |
As of June 30, 2005, the Guarantors had total Indebtedness
of approximately $446.1 million, all of which was pari
passu with their guarantees of the Companys
obligations under the notes.
Not all of our subsidiaries will guarantee the notes. In the
event of a bankruptcy, liquidation or reorganization of any of
these non-guarantor subsidiaries, the non-guarantor subsidiaries
will pay the holders of their debt and their trade creditors
before they will be able to distribute any of their assets to
us. None of our foreign subsidiaries guarantee the notes, except
for Parker Drilling Offshore International, Inc., which will
guarantee the notes only for so long as it also guarantees our
10.125% senior notes. As of June 30, 2005, our
non-guarantor subsidiaries and joint ventures collectively owned
approximately 19 percent of our consolidated total assets
and held approximately $18.1 million of our consolidated
cash and cash equivalents of approximately $71.0 million.
In the first six months of 2005, our non-guarantor subsidiaries
and joint ventures had drilling and rental revenues of
approximately $71.5 million and total operating income of
approximately $1.7 million. The amount of our consolidated
total assets and cash and cash equivalents held by, and the
amount of our consolidated drilling and rental revenues and
operating income derived from, our non-guarantor subsidiaries
and joint ventures has increased in each of the last three
years, and we expect that this trend will continue as we expand
our international operations. Parker Drilling Offshore
International, Inc. owned approximately 15 percent of our
consolidated total assets as of June 30, 2005. For further
information about the division of the revenues and assets
between the Company, the Guarantors and our non-guarantor
subsidiaries, see note 12 to our consolidated financial
statements for the six-months ended June 30, 2005,
incorporated by reference into this prospectus.
The indenture permits us and our Subsidiaries to incur
additional Indebtedness, including senior secured Indebtedness
under our senior secured credit facility. The indenture does not
impose any limitation on the incurrence by our subsidiaries of
liabilities that are not considered Indebtedness.
As of the date notes were first issued, substantially all of our
subsidiaries were Restricted Subsidiaries. However,
under the circumstances described below under the subheading
Certain Covenants Designation of
Restricted and Unrestricted Subsidiaries, we are permitted
to designate certain of our subsidiaries as Unrestricted
Subsidiaries. Our Unrestricted Subsidiaries are not
subject to many of the restrictive covenants in the indenture.
Our Unrestricted Subsidiaries will not guarantee the notes.
Principal, Maturity and Interest
The Company has previously issued and sold $225.0 million
of notes, including the private notes. The Company may issue
further additional notes (Additional Notes) from
time to time after this exchange offer. Any subsequent offering
of Additional Notes is subject to the covenant described below
under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock. The private notes, the exchange 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. Unless the context otherwise
requires, for purposes of
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this Description of the Exchange Notes section,
reference to the notes includes the private notes, the exchange
notes and any Additional Notes actually issued. The Company will
issue exchange notes in denominations of $1,000 and integral
multiples of $1,000. The notes will mature on October 1,
2013.
Interest on the notes will accrue from April 1, 2005 at the
rate of
95/8% per
annum and will be payable semi-annually in arrears on
April 1 and October 1, with the next interest payment
date being April 1, 2006. The Company will make each
interest payment to the holders of record on the immediately
preceding March 15 and September 15.
Interest on the notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a holder of record has given wire transfer instructions to
the Company, the Company will pay all principal, interest and
premium and Liquidated Damages, if any, on that holders
notes in accordance with those instructions. All other payments
on notes will be made at the office or agency of the paying
agent and registrar within the City and State of New York unless
the Company elects to make interest payments by check mailed to
the holders at their address set forth in the register of
holders. See Book-Entry, Delivery and
Form Depositary Procedures.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar.
The Company may change the paying agent or registrar without
prior notice to the holders of the notes, and the Company or any
of its Subsidiaries may act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the
indenture. The registrar and the trustee may require a holder to
furnish appropriate endorsements and transfer documents in
connection with a transfer of notes. Holders will be required to
pay all taxes due on transfer. The Company is not required to
transfer or exchange any note selected for redemption. Also, the
Company is not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be
redeemed. See Book Entry, Delivery and
Form.
Subsidiary Guarantees
The notes will be guaranteed by each of the Companys
current and future Domestic Subsidiaries. In addition, Parker
Drilling Offshore International, Inc., one of the Companys
foreign subsidiaries, will guarantee the notes for so long as it
guarantees the Companys 10.125% senior notes due
2009. These Subsidiary Guarantees will be joint and several
obligations of the Guarantors. The obligations of each Guarantor
under its Subsidiary Guarantee will be limited as necessary to
prevent that Subsidiary Guarantee from constituting a fraudulent
conveyance under applicable law. See Risk
Factors Risks Related to the Exchange
Notes The subsidiary guarantees could be deemed
fraudulent conveyances under certain circumstances, and a court
may try to subordinate or void the subsidiary guarantees.
A Guarantor may not sell or otherwise dispose of all or
substantially all of its assets to, or consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person), another Person, other than the Company or another
Guarantor, unless:
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(1) immediately after giving effect to that transaction, no
Default exists; and |
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(2) either: |
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(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger assumes all the obligations of that
Guarantor |
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under the indenture, its Subsidiary Guarantee and the
registration rights agreement, pursuant to a supplemental
indenture satisfactory to the trustee; or |
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(b) the Net Proceeds of such sale or other disposition are
applied in accordance with the covenant described under
Repurchase at the Option of
Holders Asset Sales. |
Notwithstanding the foregoing, any Guarantor may merge with
another Subsidiary that has no significant assets or liabilities
and was incorporated solely for the purpose of reincorporating
that Guarantor in another jurisdiction so long as the amount of
our Indebtedness and the Indebtedness of our Restricted
Subsidiaries is not increased as a result of the merger.
The Subsidiary Guarantee of a Guarantor will be released:
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(3) in connection with any sale or other disposition of all
or substantially all of the assets of that Guarantor (including
by way of merger or consolidation) to a Person that is not
(either before or after giving effect to such transaction) a
Subsidiary of the Company, if the sale or other disposition
complies with the covenant described under
Repurchase at the Option of
Holders Asset Sales; or |
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(4) in connection with any sale of such amount of Capital
Stock as would result in such Guarantor no longer being a
Subsidiary to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary of the Company,
if the sale complies with the covenant described under
Repurchase at the Option of
Holders Asset Sales; or |
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(5) if the Company designates any Restricted Subsidiary
that is a Guarantor as an Unrestricted Subsidiary in accordance
with the provisions described under Certain
Covenants Designation of Restricted and Unrestricted
Subsidiaries; or |
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(6) upon Legal Defeasance or Covenant Defeasance as
described under Legal Defeasance and Covenant
Defeasance. |
In addition, the Subsidiary Guarantee of Parker Drilling
Offshore International, Inc. shall be automatically released and
terminated upon the release, termination or satisfaction of
Parker Drilling Offshore International, Inc.s guarantee of
the Companys 10.125% senior notes due 2009.
Optional Redemption
At any time prior to October 1, 2006, the Company 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 109.625% of the principal amount, plus
accrued and unpaid interest and Liquidated Damages, if any, to
the redemption date, with the net cash proceeds of one or more
Equity Offerings by the Company; provided that:
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(1) 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 the
Company and its Subsidiaries); and |
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(2) the redemption occurs within 120 days of the date
of the closing of such Equity Offering. |
Except pursuant to the preceding paragraph, the notes will not
be redeemable at the Companys option prior to
October 1, 2008.
On and after October 1, 2008, the Company may redeem all or
a part of the notes upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, on the notes
redeemed,
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to the applicable redemption date, if redeemed during the
twelve-month period beginning on October 1 of the years
indicated below:
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2008
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104.813% |
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2009
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103.208% |
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2010
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101.604% |
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2011 and thereafter
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100.000% |
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If less than all of the notes are to be redeemed at any time,
the trustee will select notes for redemption as follows:
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(1) if the notes are listed on any national securities
exchange, in compliance with the requirements of the principal
national securities exchange on which the notes are
listed; or |
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(2) if the notes are not listed on any national securities
exchange, on a pro rata basis, by lot or by such method as the
trustee deems fair and appropriate. |
No notes of $1,000 or less can be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
holder of notes to be redeemed at its registered address, except
that redemption notices may be mailed more than 60 days
prior to a redemption date if the notice is issued in connection
with a defeasance of the notes or a satisfaction and discharge
of the indenture. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of
redemption that relates to that note will state the portion of
the principal amount of that note that is to be redeemed. A new
note in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the holder of notes
upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on notes or
portions of them called for redemption.
Mandatory Redemption; Open Market Purchases
The Company is not required to make mandatory redemption or
sinking fund payments with respect to the notes. However, under
certain circumstances we are required to offer to purchase the
notes as set forth below under Repurchase at
the Option of Holders. We may at any time and from time to
time purchase notes in the open market or otherwise.
Repurchase at the Option of Holders
If a Change of Control occurs, each holder of notes will have
the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple of $1,000) of that
holders notes pursuant to an offer by the Company (a
Change of Control Offer) on the terms described
below. In the Change of Control Offer, the Company will offer a
payment in cash (the Change of Control Payment)
equal to 101% of the aggregate principal amount of notes
repurchased plus accrued and unpaid interest and Liquidated
Damages, if any, for the notes repurchased, to the date of
purchase. Within 30 days following any Change of Control,
the Company will mail a notice to each registered holder of
notes describing the transaction or transactions that constitute
the Change of Control and offering to repurchase notes on the
date specified in the notice, which date will be no earlier than
30 days and no later than 60 days from the date such
notice is mailed (the Change of Control Payment
Date), pursuant to the procedures described below and in
such notice.
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The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with the repurchase of the notes as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the indenture, the Company
will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under
the Change of Control provisions of the indenture by virtue of
such conflict.
On the Change of Control Payment Date, the Company will, to the
extent lawful:
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(1) accept for payment all notes or portions of notes
properly tendered pursuant to the Change of Control Offer; |
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(2) deposit with the paying agent an amount equal to the
Change of Control Payment in respect of all notes or portions of
notes properly tendered; and |
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(3) deliver or cause to be delivered to the trustee the
notes properly accepted together with an officers
certificate stating the aggregate principal amount of notes or
portions of notes being purchased by the Company. |
The paying agent will promptly mail to each holder of notes
properly tendered the Change of Control Payment for such notes,
and the trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each holder a new note equal in
principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each new note will be
in a principal amount of $1,000 or an integral multiple of
$1,000.
Our senior secured credit facility restricts the Company from
redeeming or purchasing any notes, when the total extensions of
credit under the senior secured credit facility equal or exceed
$25,000,000 and also provides that certain change of control
events with respect to the Company would constitute a default
under the senior secured credit facility. Any future credit
agreements or other agreements relating to Indebtedness to which
the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time
when those agreements prohibit the Company from purchasing
notes, the Company could seek the consent of its lenders to the
purchase of notes or could attempt to refinance the borrowings
that contain the prohibition. If the Company does not obtain
such a consent or repay those borrowings, the Company will
remain prohibited from purchasing notes. In such case, the
Companys failure to comply with the foregoing provisions
would constitute an Event of Default under the indenture, which
would in turn constitute a default under our senior secured
credit facility and could also constitute a default under those
other agreements. See Risk Factors Risks
Related to the Exchange Notes We may not be able to
repurchase the notes upon a change of control.
The provisions described above that require the Company to make
a Change of Control Offer following a Change of Control will be
applicable whether or not any other provisions of the indenture
are applicable.
Except as described above with respect to a Change of Control,
the indenture does not contain provisions that permit the
holders of the notes to require that the Company repurchase or
redeem the notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the indenture
applicable to a Change of Control Offer made by the Company and
purchases all notes properly tendered and not withdrawn under
the Change of Control Offer.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, transfer, conveyance or other
disposition of all or substantially all of the
properties or assets of the Company and its Restricted
Subsidiaries taken as a whole. Although there is a limited body
of case law interpreting the phrase substantially
all, there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a
holder of notes to require the Company to repurchase its notes
as a result of a
34
sale, transfer, conveyance or other disposition of less than all
of the assets of the Company and its Subsidiaries taken as a
whole to another Person or group may be uncertain.
The Change of Control provisions of the indenture may be waived
or modified with the consent of the holders of a majority in
principal amount of the notes.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
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(1) the Company (or the Restricted Subsidiary, as the case
may be) receives consideration at the time of the Asset Sale at
least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of; |
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(2) the fair market value is determined by (a) an
executive officer of the Company if the value is less than
$10.0 million and evidenced by an officers
certificate delivered to the trustee or (b) the
Companys Board of Directors if the value is
$10.0 million or more and evidenced by a resolution of such
Board of Directors delivered to the trustee; and |
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(3) at least 75% of the consideration received in the Asset
Sale by the Company or such Restricted Subsidiary is in the form
of cash, or Cash Equivalents, or any combination thereof. For
purposes of this provision, each of the following will be deemed
to be cash: |
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(a) any liabilities, as shown on the Companys or such
Restricted Subsidiarys most recent balance sheet, of the
Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated
to the notes or any Subsidiary Guarantee) that are assumed by
the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted
Subsidiary from further liability; and |
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(b) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted
Subsidiary into cash or Cash Equivalents within 180 days
following the closing of such Asset Sale, to the extent of the
cash or Cash Equivalents received in that conversion. |
Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply those Net Proceeds at its
option:
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(1) to repay, repurchase, redeem, defease or otherwise
acquire or retire Senior Debt of the Company or any Indebtedness
of a Restricted Subsidiary; |
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(2) to acquire all or substantially all of the assets of,
or a majority of the Voting Stock of, another Permitted Business; |
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(3) to make a capital expenditure in a Permitted
Business; or |
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(4) to acquire other long-term assets that are used or
useful in a Permitted Business. |
Pending the final application of any Net Proceeds, the Company
may temporarily reduce revolving credit borrowings or otherwise
invest the Net Proceeds in any manner that is not prohibited by
the indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph will constitute
Excess Proceeds. When the aggregate amount of Excess
Proceeds exceeds $20.0 million, the Company will make an
offer (an Asset Sale Offer) to all holders of notes
and to the extent required, to all holders of other Indebtedness
that is pari passu with the notes containing provisions
similar to those set forth in the indenture with respect to
offers to purchase or redeem with the proceeds of sales of
assets, to purchase the maximum principal amount of notes (in
integral multiples of $1,000) and such other pari passu
Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal
to 100% of the principal amount of notes and other pari
passu
35
Indebtedness to be purchased or the lesser amount required under
agreements governing such other pari passu Indebtedness,
plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase, and will be payable in cash. If any
Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use those Excess Proceeds for any purpose
not otherwise prohibited by the indenture. If the aggregate
principal amount of notes and other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the
amount of Excess Proceeds, the trustee will select the notes and
such other pari passu Indebtedness to be purchased on a
pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.
The Asset Sale Offer will remain open for a period of at least
20 Business Days following its commencement and not more than 30
Business Days, except to the extent that a longer period is
required by applicable law (the Asset Sale Offer
Period). No later than three Business Days after the
termination of the Asset Sale Offer Period (the Asset Sale
Payment Date), the Company will apply all Excess Proceeds
to the purchase of notes and the other pari passu
Indebtedness to be purchased (on a pro rata basis, if
applicable) or, if notes and such other pari passu
Indebtedness in an aggregate principal amount less than the
Excess Proceeds has been tendered, all notes and pari
passu Indebtedness tendered in response to the Asset Sale
Offer.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the indenture, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the
Asset Sale provisions of the indenture by virtue of such
conflict.
The paying agent will promptly (but in any case not later than
three Business Days after termination of the Asset Sale Offer
Period) mail to each holder of notes properly tendered the
payment for such notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book entry)
to each holder a new note equal in principal amount to any
unpurchased portion of the notes surrendered, if any;
provided that each new note will be in a principal amount
of $1,000 or an integral multiple of $1,000.
Our senior secured credit facility restricts the Company from
purchasing any notes when the total extensions of credit under
the senior secured credit facility equal or exceed $25,000,000,
and also provide that certain asset sales would constitute a
default. Any future credit agreements or other agreements
relating to Indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event an
Asset Sale occurs at a time when the Company is prohibited from
purchasing notes, the Company could seek the consent of its
lenders to the purchase of notes or could attempt to refinance
the borrowings that contain the prohibition. If the Company does
not obtain such a consent or repay those borrowings, the Company
will remain prohibited from purchasing notes. In such case, the
Companys failure to comply with the foregoing provisions
would constitute an Event of Default under the indenture which
would, in turn, constitute a default under our senior secured
credit facility and could also constitute a default under such
other agreements.
The Asset Sale provisions of the indenture may be waived or
modified with the consent of the holders of a majority in
principal amount of the notes.
Certain Covenants
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
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(1) declare or pay any dividend or make any other payment
or distribution on account of the Companys or any of its
Restricted Subsidiaries Equity Interests (including,
without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the
Companys or any of its Restricted Subsidiaries
Equity Interests in their capacity as such (other than dividends
or distributions payable |
36
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in Equity Interests (other than Disqualified Stock) of the
Company or to the Company or a Restricted Subsidiary of the
Company); |
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(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the
Company; |
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(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the notes or the Subsidiary
Guarantees, except a payment of interest or principal at the
Stated Maturity thereof; or |
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(4) make any Restricted Investment |
(all such payments and other actions set forth in
clauses (1) through (4) above being collectively
referred to as Restricted Payments), unless, at the
time of and after giving effect to such Restricted Payment:
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(1) no Default has occurred and is continuing or would
occur as a consequence of such Restricted Payment; |
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(2) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock; and |
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(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after October 10, 2003
(excluding Restricted Payments permitted by clauses (2),
(3), (4) and (6) of the next succeeding paragraph), is
less than the sum, without duplication, of: |
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(a) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from October 1,
2003 to the end of the Companys most recently ended fiscal
quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such
deficit), plus |
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(b) 100% of the aggregate net cash proceeds (or the fair
market value of any Permitted Business or assets used or useful
in a Permitted Business to the extent acquired in consideration
of Equity Interests (other than Disqualified Stock) of the
Company) received by the Company since October 10, 2003 as
a contribution to its common equity capital or from the issue or
sale of Equity Interests of the Company (other than Disqualified
Stock) or from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt
securities of the Company that have been converted into or
exchanged for such Equity Interests (other than Equity Interests
(or Disqualified Stock or debt securities) sold to a Subsidiary
of the Company), plus |
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(c) to the extent that any Restricted Investment that was
made after October 10, 2003 is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (i) the cash
return of capital with respect to such Restricted Investment,
including without limitation repayment of principal of any
Restricted Investment constituting a loan or advance (less the
cost of disposition, if any) and (ii) the initial amount of
such Restricted Investment, plus |
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(d) to the extent that any Unrestricted Subsidiary of the
Company is redesignated as a Restricted Subsidiary after
October 10, 2003, the lesser of (i) the fair market
value of the Companys Investment in such Subsidiary as of
the date of such redesignation or (ii) the aggregate fair
market value of the Companys Investment in such Subsidiary
as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary and all Investments
made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary |
37
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that were treated as Restricted Payments since such designation,
in each case as of the date of such Investment. |
The preceding provisions will not prohibit:
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(1) the payment of any dividend or distribution within
60 days after the date of declaration of the dividend or
distribution, if at the date of declaration the dividend payment
or distribution within 60 days would have complied with the
provisions of the indenture; |
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(2) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness of the
Company or any Guarantor or of any Equity Interests of the
Company or any of its Restricted Subsidiaries in exchange for,
or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, Equity
Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition will be excluded
from clause (3)(b) of the preceding paragraph; |
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(3) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness or Disqualified Stock
of the Company or any Guarantor with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; |
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(4) the payment of any dividend or distribution by a
Restricted Subsidiary of the Company to the holders of its
Equity Interests on a pro rata basis; |
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(5) so long as no Default has occurred and is continuing or
would be caused thereby, the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of
the Company or any Restricted Subsidiary of the Company held by
any existing or former employee of the Company (or any of its
Restricted Subsidiaries) pursuant to any equity subscription
agreement, stock option agreement or similar agreement;
provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may
not exceed $2.0 million in any twelve-month period; |
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(6) so long as no Default has occurred and is continuing or
would be caused thereby, the declaration and payment of
dividends to holders of any class or series of Disqualified
Stock of the Company issued in accordance with the terms of the
indenture to the extent such dividends are included in the
definition of Fixed Charges; |
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(7) the acquisition of Equity Interests by the Company in
connection with the exercise of stock options or stock
appreciation rights by way of cashless exercise or in connection
with the satisfaction of withholding tax obligations; and |
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(8) so long as no Default has occurred and is continuing or
would be caused thereby, other Restricted Payments in an
aggregate amount since the date notes are first issued not to
exceed $20.0 million. |
The amount of all Restricted Payments (other than cash) will be
the fair market value on the date of the Restricted Payment of
the asset(s) or securities proposed to be transferred or issued
by the Company or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment. The fair market value of
any assets or securities that are required to be valued by this
covenant will be determined in good faith by the Board of
Directors, whose resolution with respect thereto will be
delivered to the trustee. The Board of Directors
determination must be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of
national standing if the fair market value exceeds
$10.0 million. Not later than the date of making any
Restricted Payment, the Company will deliver to the trustee an
officers certificate stating that such Restricted Payment
is permitted and setting forth the basis upon which the
calculations required by this Restricted Payments
covenant were computed, together with a copy of any fairness
opinion or appraisal required by the indenture.
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Incurrence of Indebtedness and Issuance of Preferred
Stock |
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to
(collectively, incur) any Indebtedness (including
Acquired Debt), and the Company will not issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however,
that the Company and any Restricted Subsidiary may incur
Indebtedness (including Acquired Debt) and the Company may issue
Disqualified Stock, if the Fixed Charge Coverage Ratio for the
Companys most recently ended four full fiscal quarters for
which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or Disqualified
Stock had been issued, as the case may be, at the beginning of
such four quarter period.
The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness
(collectively, Permitted Debt):
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(1) the incurrence by the Company and any Restricted
Subsidiary of Indebtedness and letters of credit under one or
more Credit Facilities in an aggregate principal amount at any
one time outstanding under this clause (1) (with letters of
credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries
thereunder) not to exceed $175.0 million; |
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(2) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness; |
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(3) the incurrence by the Company and the Guarantors of
Indebtedness represented by the notes issued on the date notes
are first issued and the Exchange Notes, including, in each
case, the related Subsidiary Guarantees to be issued pursuant to
the registration rights agreement and Subsidiary Guarantees of
any additional notes that may be issued in the future in
accordance with this covenant; |
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(4) the incurrence by the Company and any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations,
in each case, incurred for the purpose of financing all or any
part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business
of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4), not to
exceed $5.0 million at any time outstanding; |
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(5) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance
or replace Indebtedness (other than intercompany Indebtedness)
that was permitted by the indenture to be incurred under the
first paragraph of this covenant or clauses (2), (3),
(5) or (14) of this paragraph; |
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(6) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries; provided
that: |
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(a) if the Company or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated
to the prior payment in full in cash of all Obligations with
respect to the notes, in the case of the Company, or the
Subsidiary Guarantee, in the case of a Guarantor; and |
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(b) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person
other than the Company or a Restricted Subsidiary of the Company
and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company will be deemed, in each
case, to |
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constitute an incurrence of such Indebtedness by the Company or
a Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6); |
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(7) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations in the normal course of
business and not for speculative purposes, designed to protect
the Company or its Restricted Subsidiary against fluctuations in
interest rates or currency exchange rates with respect to
Indebtedness incurred or against fluctuations in the price of
commodities used by that entity at the time; |
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(8) the Guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or any Restricted Subsidiary that
was permitted to be incurred by another provision of this
covenant; provided that in the event the Indebtedness
that is being Guaranteed is subordinated in right of payment to
the notes or a Subsidiary Guarantee, then the Guarantee of that
Indebtedness by the Company or the Guarantor shall be
subordinated in right of payment to the notes or the
Guarantors Subsidiary Guarantee, as the case may be; |
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(9) the accrual of interest, the accretion or amortization
of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock
in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes
of this covenant; provided, in each such case, that the
amount thereof is included in Fixed Charges of the Company as
accrued; |
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(10) the incurrence by the Companys Unrestricted
Subsidiaries of Non-Recourse Debt; provided that if any
such Indebtedness ceases to be Non-Recourse Debt of an
Unrestricted Subsidiary, such event will be deemed to constitute
an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (10); |
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(11) Indebtedness incurred in respect of workers
compensation claims, self-insurance obligations, bid,
performance, surety and similar bonds and completion guarantees
provided by the Company or a Restricted Subsidiary in the
ordinary course of business; |
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(12) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business;
provided that such Indebtedness is extinguished within
five business days of incurrence; |
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(13) Indebtedness represented by agreements of the Company
or a Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the disposition of
any business, assets or Capital Stock of the Company or any
Restricted Subsidiary; provided that the maximum
aggregate liability in respect of all such Indebtedness shall at
no time exceed the gross proceeds actually received by the
Company and its Restricted Subsidiaries in connection with such
disposition; |
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(14) Indebtedness of a Restricted Subsidiary incurred and
outstanding on the date on which such Restricted Subsidiary was
acquired by the Company (other than Indebtedness incurred in
connection with, or in contemplation of, such acquisition);
provided that at the time such Restricted Subsidiary is
acquired by the Company, the Company would have been able to
incur $1.00 of additional Indebtedness pursuant to the first
paragraph of this covenant after giving effect to the incurrence
of such Indebtedness pursuant to this clause (14); and |
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(15) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (15), not to exceed
$30.0 million. |
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of Indebtedness
(including Acquired Debt) at any
40
time meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through
(15) above, or is entitled to be incurred pursuant to the
first paragraph of this covenant, the Company will be permitted
to classify (and later reclassify) in whole or in part in its
sole discretion such item of Indebtedness in any manner that
complies with this covenant.
For purposes of determining compliance with any
U.S. dollar-denominated restriction on the incurrence of
Indebtedness, the U.S. dollar-equivalent principal amount
of Indebtedness denominated in a foreign currency will be
calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred, in the case
of term Indebtedness, or first committed, in the case of
revolving credit Indebtedness; provided that if such
Indebtedness is incurred to refinance other Indebtedness
denominated in the same foreign currency, and such refinancing
would cause the applicable U.S. dollar-denominated
restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such
refinancing, the U.S. dollar-denominated restriction will
be deemed not to have been exceeded so long as the principal
amount of the refinancing Indebtedness does not exceed the
principal amount of the Indebtedness being refinanced.
Notwithstanding any other provision of this covenant, the
maximum amount of Indebtedness that the Company may incur
pursuant to this covenant will not be deemed to be exceeded
solely as a result of fluctuations in the exchange rate of
currencies.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind (other
than Permitted Liens) securing Indebtedness, Attributable Debt
or trade payables upon any of their property or assets, now
owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom,
unless all payments due under the indenture and the notes are
secured on an equal and ratable basis (or on a senior basis to,
in the case of obligations subordinated in right of payment to
the notes or Subsidiary Guarantee, as the case may be) with the
obligations so secured until such time as such obligations are
no longer secured by a Lien.
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Sale and Leaseback Transactions |
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or any Restricted Subsidiary
may enter into a sale and leaseback transaction if:
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(1) the Company or that Restricted Subsidiary, as
applicable, could have (a) incurred Indebtedness in an
amount equal to the Attributable Debt relating to such sale and
leaseback transaction under the covenant described above under
the caption Incurrence of Indebtedness and
Issuance of Preferred Stock and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant described
above under the caption Liens; |
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(2) the gross cash proceeds of that sale and leaseback
transaction are at least equal to the fair market value, as
determined in good faith by the Board of Directors and set forth
in an officers certificate delivered to the trustee, of
the property that is the subject of that sale and leaseback
transaction; and |
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(3) the transfer of assets in that sale and leaseback
transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with, the covenant
described above under the caption Repurchase
at the Option of Holders Asset Sales. |
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Dividend and Other Payment Restrictions Affecting
Subsidiaries |
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
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(1) pay dividends or make any other distributions on its
Capital Stock to the Company or any of its Restricted
Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted
Subsidiaries; |
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(2) make loans or advances to the Company or any of its
Restricted Subsidiaries; or |
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(3) transfer any of its properties or assets to the Company
or any of its Restricted Subsidiaries. |
However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
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(1) agreements governing Existing Indebtedness and Credit
Facilities as in effect on the date notes are first issued and
any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
of those agreements; provided that the amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and
other payment restrictions than those contained in those
agreements on the date notes are first issued; |
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(2) the indenture, the notes and the Subsidiary Guarantees; |
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(3) applicable law or any applicable rule, regulation or
order of any court or governmental authority; |
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(4) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Capital Stock was
incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so
acquired; provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the indenture to
be incurred; |
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(5) customary non-assignment provisions in any contract or
lease entered into in the ordinary course of business and
consistent with past practices; |
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(6) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on that
property of the nature described in clause (3) of the
preceding paragraph; |
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(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition; |
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(8) Permitted Refinancing Indebtedness; provided
that the encumbrances or restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are
no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced; |
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(9) Liens securing Indebtedness otherwise permitted to be
incurred under the provisions of the covenant described above
under the caption Liens that limit the
right of the debtor to dispose of the assets subject to such
Liens; |
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(10) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements,
asset sale agreements, stock sale agreements and other similar
agreements entered into in the ordinary course of business; |
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(11) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business; and |
42
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(12) secured Indebtedness otherwise permitted to be
incurred pursuant to the provisions of the covenant described
above under the caption Liens that
limits the right of the debtor to dispose of the assets securing
the Indebtedness. |
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Merger, Consolidation or Sale of Assets |
The Company may not, directly or indirectly:
(1) consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation) or
(2) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries taken as a whole, in one
or more related transactions, to another Person unless:
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(1) either: (a) the Company is the surviving
corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, conveyance or other
disposition has been made is a corporation organized or existing
under the laws of the United States, any state of the United
States or the District of Columbia; |
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(2) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, conveyance or
other disposition has been made assumes all the obligations of
the Company under the notes, the indenture and the registration
rights agreement pursuant to agreements reasonably satisfactory
to the trustee; |
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(3) immediately after such transaction no Default
exists; and |
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(4) immediately after such transaction after giving pro
forma effect thereto and any related financing transactions as
if the same had occurred at the beginning of the applicable
four-quarter period, either the Company or the Person formed by
or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer,
conveyance or other disposition has been made would be permitted
to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock or the Fixed Charge Coverage Ratio of the
Company or the surviving Person, as applicable, or of the Person
to which such sale, assignment, transfer, conveyance or other
disposition has been made, would not be less than the Fixed
Charge Coverage Ratio of the Company immediately prior to the
transaction. |
In addition, the Company may not, directly or indirectly, lease
all or substantially all of its properties or assets, in one or
more related transactions, to any other Person.
Notwithstanding the preceding clause (4), (i) any
Restricted Subsidiary of the Company may consolidate with, merge
into or sell, assign, transfer or convey all or part of its
properties and assets to the Company and (ii) the Company
may merge with an Affiliate that has no significant assets or
liabilities and was formed solely for the purpose of changing
the jurisdiction of organization of the Company to another state
of the United States so long as the amount of our Indebtedness
and the Indebtedness of our Restricted Subsidiaries is not
increased thereby.
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Transactions with Affiliates |
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate
(each, an Affiliate Transaction), unless:
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(1) the Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an
unrelated Person; and |
43
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(2) the Company delivers to the trustee: |
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(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $10.0 million, a resolution of the Board of
Directors of the Company set forth in an officers
certificate certifying that such Affiliate Transaction complies
with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board
of Directors of the Company; and |
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(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $20.0 million, an opinion issued by an
accounting, appraisal or investment banking firm of national
standing as to the fairness to the holders of such Affiliate
Transaction from a financial point of view or that the terms of
the Affiliate Transaction are no less favorable to the Company
or the relevant Restricted Subsidiary than terms that would have
been obtained in a comparable transaction with an unrelated
person or entity. |
The following items will not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
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(1) any employment agreement entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of
business and consistent with past practices; |
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(2) transactions between or among the Company and/or its
Restricted Subsidiaries; |
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(3) transactions with a Person that is an Affiliate of the
Company solely because the Company owns an Equity Interest in,
or controls, such Person; |
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(4) payment of reasonable directors fees to Persons who are
not otherwise Affiliates of the Company; |
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(5) sales of Equity Interests (other than Disqualified
Stock) to Affiliates of the Company; |
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(6) Restricted Payments that are permitted by the covenant
described above under the caption Restricted
Payments; |
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(7) any issuance of securities, or other payments, awards
or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements or stock option or stock
ownership plans approved by the Board of Directors; |
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(8) loans or advances to employees in the ordinary course
of business and consistent with past practices, but in any event
not to exceed $2.0 million in the aggregate outstanding at
any one time; |
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(9) indemnification agreements with, and payments made, to
officers, directors and employees of the Company or any of its
Restricted Subsidiaries pursuant to charter, bylaw, statutory or
contractual provisions; and |
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(10) the performance of obligations of the Company or any
of its Restricted Subsidiaries under the terms of any agreement
to which the Company or any of its Restricted Subsidiaries is a
party as of or on the date notes are first issued, and any
amendments, modifications, supplements, extensions or renewals
of those agreements; provided that the amendments,
modifications, supplements, extensions or renewals are no more
disadvantageous, taken as a whole, to the holders of the notes
than the terms of the agreements in effect on the date notes are
first issued. |
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Designation of Restricted and Unrestricted
Subsidiaries |
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if that designation would not
cause a Default. If a Restricted Subsidiary is designated as an
Unrestricted Subsidiary, the aggregate fair market value of all
outstanding Investments owned by the Company and its Restricted
Subsidiaries in the Subsidiary properly designated will be
deemed to be an Investment made as of the time of the
designation and will reduce the amount available for Restricted
Payments under the first or second paragraph of the covenant
described above under the caption Restricted
Payments or
44
Permitted Investments, as determined by the Company. That
designation will only be permitted if the Investment would be
permitted at that time and if the Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The Board of Directors may redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default.
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Additional Subsidiary Guarantees |
If any Restricted Subsidiary that is not a Guarantor guarantees,
assumes or in any other manner becomes liable with respect to
Indebtedness of the Company or any Guarantor, then that
Restricted Subsidiary will become a Guarantor and execute a
supplemental indenture and deliver an opinion of counsel
satisfactory to the trustee within 10 Business Days of the date
on which it so became liable with respect to such Indebtedness;
provided that the foregoing shall not apply to any
Subsidiary that has properly been designated as an Unrestricted
Subsidiary in accordance with the provisions described under
Designation of Restricted and Unrestricted
Subsidiaries for so long as it continues to constitute an
Unrestricted Subsidiary. Upon the release, termination or
satisfaction of that Restricted Subsidiarys guarantee or
assumption of such Indebtedness, that Restricted
Subsidiarys Subsidiary Guarantee shall automatically be
released and terminated.
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to
the Company and its Subsidiaries taken as a whole.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any holder of notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to
all holders of the notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Whether or not required by the SEC, so long as any notes are
outstanding, the Company will furnish to the trustee and
registered holders of notes, within the time periods specified
in the SECs rules and regulations:
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(1) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to
file such Forms, including a Managements Discussion
and Analysis of Financial Condition and Results of
Operations and, with respect to the annual information
only, a report on the annual financial statements by the
Companys independent registered public accounting
firm; and |
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(2) all current reports that would be required to be filed
with the SEC on Form 8-K if the Company were required to
file such reports. |
In addition, following the consummation of the exchange offer
contemplated by the registration rights agreement, whether or
not required by the SEC, the Company will file a copy of all of
the information and reports referred to in clauses (1) and
(2) above with the SEC for public availability within the
time periods specified in the SECs rules and regulations
(unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective
investors upon request. The Company and the Guarantors have also
agreed that, for so long as any notes remain outstanding, they
will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
45
Events of Default and Remedies
Each of the following is an Event of Default:
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(1) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the notes; |
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(2) default in payment when due of the principal of, or
premium, if any, on the notes; |
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(3) failure by the Company or any of its Restricted
Subsidiaries to comply with the provisions described under the
captions Repurchase at the Option of
Holders Change of Control, or
Certain Covenants Merger,
Consolidation or Sale of Assets; |
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(4) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice to comply with the
provisions described under the captions
Certain Covenants Restricted
Payments, Repurchase at the Option of
Holders Asset Sales, or
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock; |
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(5) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice to comply with any of
the other agreements in the indenture; |
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(6) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company
or any of its Restricted Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the date notes are first issued, if that
default: |
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(a) is caused by a failure to pay principal of, or interest
or premium, if any, on such Indebtedness prior to the expiration
of the grace period provided in such Indebtedness on the date of
such default (a Payment Default); or |
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(b) results in the acceleration of such Indebtedness prior
to its Stated Maturity, |
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and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$15.0 million or more; |
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(7) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $15.0 million,
which judgments are not paid, discharged or stayed for a period
of 60 days; |
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(8) except as permitted by the indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason (other
than in accordance with the terms of that guarantee and the
indenture) to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary
Guarantee; and |
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(9) certain events of bankruptcy or insolvency described in
the indenture with respect to the Company or any of its
Significant Subsidiaries or any group of Restricted Subsidiaries
that, taken as a whole, would constitute a Significant
Subsidiary. |
In the case of an Event of Default arising from certain events
of bankruptcy or insolvency with respect to the Company, all
outstanding notes will become due and payable immediately
without further action or notice. If any other Event of Default
occurs and is continuing, the trustee or the holders of at least
25% in principal amount of the then outstanding notes may
declare all the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes
except as provided in the indenture. Subject to certain
limitations, holders of a majority in principal amount of the
then outstanding notes may direct the trustee in its exercise of
any trust or power. The holders of a majority in aggregate
principal amount of the notes then outstanding by notice to the
trustee may on behalf of the holders of all of the
46
notes (i) waive any existing Default and its consequences
under the indenture except a continuing Default in the payment
of principal of, or interest or premium or Liquidated Damages,
if any, on, the notes and (ii) rescind an acceleration and
its consequences, if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have
been cured or waived.
The Company is required to deliver to the trustee annually a
statement regarding compliance with the indenture. Upon becoming
aware of any Default, the Company is required to deliver to the
trustee a statement specifying such Default. The trustee may
withhold from holders of the notes notice of any continuing
Default if it determines that withholding notice is in their
interest, except a Default relating to the payment of principal
of, or interest or premium or Liquidated Damages, if any, on,
the notes.
No Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of
the Company or any Guarantor, as such, will have any liability
for any obligations of the Company or the Guarantors under the
notes, the indenture, the Subsidiary Guarantees, or for any
claim based on, in respect of, or by reason of, such obligations
or their creation. Each holder of notes by accepting a note
waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes. The
waiver may not be effective to waive liabilities under the
federal securities laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding notes and all obligations of the Guarantors
discharged with respect to their Subsidiary Guarantees
(Legal Defeasance) except for:
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(1) the rights of holders of outstanding notes to receive
payments in respect of the principal of, or interest or premium
and Liquidated Damages, if any, on such notes when such payments
are due from the trust referred to below; |
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(2) the Companys obligations with respect to the
notes concerning issuing temporary notes, registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance
of an office or agency for payment and money for security
payments held in trust; |
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(3) the rights, powers, trusts, duties and immunities of
the trustee, and the Companys and the Guarantors
obligations in connection therewith; and |
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(4) the Legal Defeasance provisions of the indenture. |
In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors
released with respect to certain covenants (including its
obligations to make Change of Control Offers and Asset Sale
Offers) that are described in the indenture (Covenant
Defeasance) and thereafter any omission to comply with
those covenants will not constitute a Default with respect to
the notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under
Events of Default and Remedies will no longer
constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
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(1) the Company must irrevocably deposit with the trustee,
in trust, for the benefit of the holders of the notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, or interest and premium
and Liquidated Damages, if any, on the outstanding notes on the
Stated Maturity or on the applicable redemption date, as the
case may be, and the Company must specify whether the notes are
being defeased to maturity or to a particular redemption date; |
47
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(2) in the case of Legal Defeasance, the Company has
delivered to the trustee an opinion of counsel reasonably
acceptable to the trustee confirming that: |
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(a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling; or |
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(b) since October 10, 2003, there has been a change in
the applicable federal income tax law, |
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in either case to the effect that, and based thereon such
opinion of counsel will confirm that, the holders of the
outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; |
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(3) in the case of Covenant Defeasance, the Company has
delivered to the trustee an opinion of counsel reasonably
acceptable to the trustee confirming that the holders of the
outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; |
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(4) no Default has occurred and is continuing on the date
of such deposit (other than a Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as
Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day
after the day of deposit; |
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(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than the
indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound; |
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(6) the Company must have delivered to the trustee an
opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights
generally; |
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(7) the Company must deliver to the trustee an
officers certificate stating that the deposit was not made
by the Company with the intent of preferring the holders of
notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the
Company or others; and |
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(8) the Company must deliver to the trustee an
officers certificate and an opinion of counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with. |
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further
effect as to all notes issued thereunder, when:
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(a) all notes that have been authenticated, except lost,
stolen or destroyed notes that have been replaced or paid and
notes for whose payment money has been deposited in trust and
thereafter repaid to the Company, have been delivered to the
trustee for cancellation; or |
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(b) all notes that have not been delivered to the trustee
for cancellation have become due and payable or will become due
and payable within one year by reason of the mailing of a notice
of redemption or otherwise and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the trustee
as trust funds in trust solely for the benefit of the holders, |
48
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cash in U.S. dollars, non-callable Government Securities,
or a combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient, without
consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the notes not delivered to
the trustee for cancellation for principal, premium and
Liquidated Damages, if any, and accrued interest to the date of
maturity or redemption; |
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(2) no Default has occurred and is continuing on the date
of the deposit or will occur as a result of the deposit and the
deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound; |
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(3) the Company or any Guarantor has paid or caused to be
paid all sums payable by it under the indenture; and |
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(4) the Company has delivered irrevocable instructions to
the trustee under the indenture to apply the deposited money
toward the payment of the notes at maturity or the redemption
date, as the case may be. |
In addition, the Company must deliver an officers
certificate and an opinion of counsel to the trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
indenture or the notes may be amended or supplemented with the
consent of the holders of a majority in principal amount of the
notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or
exchange offer for, notes), and, subject to certain exceptions,
any existing default or compliance with any provision of the
indenture or the notes may be waived with the consent of the
holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or
exchange offer for, notes).
Without the consent of each holder affected, an amendment,
supplement or waiver may not (with respect to any notes held by
a non-consenting holder):
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(1) reduce the principal amount of notes whose holders must
consent to an amendment, supplement or waiver; |
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(2) reduce the principal of or change the fixed maturity of
any note or alter the provisions with respect to the redemption
of the notes (other than provisions relating to the covenants
described above under the caption Repurchase
at the Option of Holders); |
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(3) reduce the rate of or change the time for payment of
interest on any note; |
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(4) waive a Default in the payment of principal of, or
interest or premium or Liquidated Damages, if any, on the notes
(except a rescission of acceleration of the notes by the holders
of at least a majority in aggregate principal amount of the
notes and a waiver of the payment default that resulted from
such acceleration); |
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(5) make any note payable in currency other than that
stated in the notes; |
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(6) make any change in the provisions of the indenture
relating to waivers of past Defaults or the rights of holders of
notes to receive payments of principal of, or interest or
premium or Liquidated Damages, if any, on the notes; |
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(7) waive a redemption payment with respect to any note
(other than a payment required by one of the covenants described
above under the caption Repurchase at the
Option of Holders); |
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(8) make any change in the ranking or priority of any note
that would adversely affect the noteholder; |
49
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(9) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or the indenture, except in accordance
with the terms of the indenture; or |
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(10) make any change in the preceding amendment and waiver
provisions. |
Notwithstanding the preceding, without the consent of any holder
of notes, the Company, the Guarantors and the trustee may amend
or supplement the indenture or the notes:
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(1) to cure any ambiguity, defect or inconsistency; |
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(2) to provide for uncertificated notes in addition to or
in place of certificated notes; |
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(3) to provide for the assumption of the Companys
obligations to holders of notes in the case of a merger or
consolidation or sale of all or substantially all of the
Companys assets; |
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(4) to make any change that would provide any additional
rights or benefits to the holders of notes or that does not
adversely affect the legal rights under the indenture of any
such holder; |
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(5) to provide for the issuance of additional notes in
accordance with the provisions set forth in the
indenture; or |
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(6) to comply with requirements of the SEC in order to
effect or maintain the qualification of the indenture under the
Trust Indenture Act. |
The consent of the holders is not necessary under the indenture
to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the
proposed amendment.
As permitted by Delaware law, our certificate of incorporation
contains a provision pursuant to which application may be made
to a court of equitable jurisdiction within the State of
Delaware to order a meeting of our creditors or a class of our
creditors whenever a compromise or arrangement is proposed
between us and our creditors or a class of our creditors. If 75%
of our creditors or that class of creditors, as the case may be,
agrees to any compromise or arrangement, such compromise or
arrangement, if sanctioned by the court, will be binding on all
of our creditors or that class of creditors and on us. This
provision is also applicable to any compromise or arrangement
between us and our shareholders or a class of our shareholders.
The certificates of incorporation of certain subsidiary
guarantors also contain similar provisions.
Concerning the Trustee
If the trustee becomes a creditor of the Company or any
Guarantor, the indenture limits its right to obtain payment of
claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise.
The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC
for permission to continue or resign.
The holders of a majority in principal amount of the then
outstanding notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the trustee, subject to certain exceptions. The
indenture provides that in case an Event of Default occurs and
is continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the
trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any
holder of notes, unless such holder has offered to the trustee
security and indemnity satisfactory to it against any loss,
liability or expense.
Book-Entry, Delivery and Form
The exchange notes initially will be represented by one or more
permanent global notes in registered form without interest
coupons. The global notes will be deposited upon issuance with
the Trustee as custodian for The Depository Trust Company
(DTC), in New York, New York, and registered in the
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name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described
below.
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 certificated form
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 notes in
certificated form.
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, which may change from time to
time.
The following description of the operations and procedures of
DTC is provided solely as a matter of convenience. These
operations and procedures are solely within the control of DTC
and are subject to changes by DTC. We take no responsibility for
these operations and procedures and urge investors to contact
DTC or their participants directly to discuss these matters.
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
purchaser), banks, trust companies, clearing corporations and
certain other organizations. Access to DTCs system is also
available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly
(collectively, the Indirect Participants). Persons
who are not Participants may beneficially own securities held by
or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers
of ownership interests in, each security held by or on behalf of
DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised us that, pursuant to procedures established
by it:
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(1) upon deposit of the global notes, DTC will credit the
accounts of Participants designated by the initial purchaser
with portions of the principal amount of the global
notes; and |
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(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). |
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 notes in certificated form and will
not be considered the registered owners or holders
thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and
premium and Liquidated Damages, if any, on a global note
registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered holder under the
indenture. Under the terms of the indenture, the Company 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 the
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Company, the trustee nor any agent of the Company or the trustee
has or will have any responsibility or liability for:
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(1) any aspect of DTCs records or any
Participants or Indirect Participants records
relating to or payments made on account of beneficial ownership
interest in the global notes or for maintaining, supervising or
reviewing any of DTCs records or any Participants or
Indirect Participants records relating to the beneficial
ownership interests in the global notes; or |
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(2) any other matter relating to the actions and practices
of DTC or any of its Participants or Indirect Participants. |
DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the
notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not
receive payment on 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 relevant
security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial
owners of notes will be governed by standing instructions and
customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the
responsibility of DTC, the trustee or the Company. Neither the
Company 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 the Company 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 DTCs procedures, and will be settled in
same-day funds.
DTC has advised the Company 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 legended notes in certificated form, and to distribute such
notes to its Participants.
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Exchange of Global Notes for Certificated Notes |
A global note is exchangeable for definitive notes in registered
certificated form (certificated notes) if:
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(1) DTC (a) notifies us that it is unwilling or unable
to continue as depositary for the global notes and the Company
fails to appoint a successor depositary or (b) has ceased
to be a clearing agency registered under the Exchange Act; |
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(2) the Company, at its option, notifies the trustee in
writing that it elects to cause the issuance of the certificated
notes; or |
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(3) there has occurred and is continuing a Default with
respect to the notes. |
In addition, beneficial interests in a global note may be
exchanged for certificated notes upon prior written notice given
to the trustee by or on behalf of DTC in accordance with the
indenture. In all cases, certificated notes delivered in
exchange for any global note or beneficial interests in 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) and
will bear the applicable restrictive legend referred to in
Notice to Investors, unless that legend is not
required by applicable law.
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Same-Day Settlement and Payment |
The Company will make payments in respect of the notes
represented by the global notes (including principal, premium,
if any, interest and Liquidated Damages, if any) by wire
transfer of immediately available funds to the accounts
specified by the global note holder. The Company will make all
payments of principal, interest and premium and Liquidated
Damages, if any, with respect to certificated notes by wire
transfer of immediately available funds to the accounts
specified by the holders of the certificated notes or, if no
such account is specified, by mailing a check to each such
holders registered address. The notes represented by the
global notes are expected to be eligible to trade in the PORTAL
market and to trade in DTCs 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. The Company expects that secondary
trading in any certificated notes will also be settled in
immediately available funds.
Registration Rights; Liquidated Damages
The following description is a summary of the material
provisions of the registration rights agreement. It does not
restate that agreement in its entirety. We urge you to read the
registration rights agreement because it, and not this
description, defines your registration rights as holders of
these notes. See Where You Can Find More
Information.
The Company, the Guarantors and the initial purchaser of the
private notes entered into the registration rights agreement on
the closing of the offering of the private notes. Pursuant to
the registration rights agreement, the Company and the
Guarantors have agreed to file with the SEC a registration
statement on the appropriate form for the Exchange Offer under
the Securities Act with respect to the Exchange Notes. Upon the
effectiveness of the Exchange Offer registration statement, the
Company and the Guarantors will offer to the holders of Transfer
Restricted Securities pursuant to the Exchange Offer who are
able to make certain representations the opportunity to exchange
their Transfer Restricted Securities for Exchange Notes.
A holder of notes (other than certain specified holders) who
wishes to exchange such notes for Exchange Notes in the Exchange
Offer will be required to represent that any Exchange Notes to
be received by it will be acquired in the ordinary course of its
business, that at the time of the commencement of the Exchange
Offer it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and that it is not an
affiliate of the Company or, if it is an affiliate,
that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent
applicable.
Broker-dealers receiving Exchange Notes in the Exchange Offer
will have a prospectus delivery requirement with respect to
resales of such Exchange Notes. Under the registration rights
agreement, the Company is required to allow such broker-dealers
and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the Exchange
Offer registration statement in connection with the resale of
such Exchange Notes for 180 days following the effective
date of such registration statement (or such shorter period
during which such broker-dealers are required by law to deliver
such prospectus).
If:
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(1) the Company and the Guarantors are not: |
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(a) required to file the Exchange Offer registration
statement; or |
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(b) permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or SEC
policy; or |
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(2) any holder of Transfer Restricted Securities notifies
the Company within 20 business days following consummation of
the Exchange Offer that: |
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(a) it is prohibited by law or SEC policy from
participating in the Exchange Offer; or |
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(b) that it may not resell the Exchange Notes acquired by
it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer
registration statement is not appropriate or available for such
resales; or |
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(c) that it is a broker-dealer and owns notes acquired
directly from the Company or an affiliate of the Company, |
the Company and the Guarantors will file with the SEC a shelf
registration statement to cover resales of the notes by the
holders of the notes who satisfy certain conditions in
connection with the shelf registration statement.
Holders reselling notes pursuant to the shelf registration
statement will be required to deliver certain information to be
used in connection with the shelf registration statement and to
provide comments on the shelf registration statement within the
time periods set forth in the registration rights agreement in
order to have their notes included in the shelf registration
statement and benefit from the provisions regarding Liquidated
Damages described below. By acquiring Transfer Restricted
Securities, a holder will be deemed to have agreed to indemnify
the Company and the Guarantors against certain losses arising
out of information furnished by such holder in writing for
inclusion in any shelf registration statement.
A holder reselling notes pursuant to the shelf registration
statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to
purchasers, and will be subject to certain of the civil
liability provisions under the Securities Act in connection with
such resales. Holders of notes will also be required to suspend
their use of the prospectus included in the shelf registration
statement under certain circumstances upon receipt of written
notice to that effect from the Company.
The Company and the Guarantors will use their commercially
reasonable best efforts to cause the applicable registration
statement to be declared effective at the earliest possible time
by the SEC.
For purposes of the foregoing, Transfer Restricted
Securities means each note until:
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(1) the date on which such note has been exchanged by a
Person other than a broker-dealer for an Exchange Note in the
Exchange Offer and is entitled to be resold to the public by
such Person without complying with the prospectus delivery
requirements of the Securities Act; |
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(2) following the exchange by a broker-dealer in the
Exchange Offer of a note for an Exchange Note, the date on which
such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer registration
statement; |
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(3) the date on which such note has been effectively
registered under the Securities Act and disposed of in
accordance with the shelf registration statement; or |
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(4) the date on which such note is sold pursuant to
Rule 144 or may be sold pursuant to Rule 144(k) under
the Securities Act. |
The registration rights agreement provides that:
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(1) the Company and the Guarantors will file an Exchange
Offer registration statement with the SEC on or prior to
90 days after the closing of this offering; |
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(2) the Company and the Guarantors will use their
commercially reasonable best efforts to have the Exchange Offer
registration statement declared effective by the SEC on or prior
to 180 days after the closing of this offering; |
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(3) unless the Exchange Offer would not be permitted by
applicable law or SEC policy, the Company and the Guarantors
will: |
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(a) commence the Exchange Offer; and |
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(b) use their commercially reasonable best efforts to issue
on or prior to 30 business days, or longer, if required by the
federal securities laws, after the date on which the Exchange
Offer registration statement was declared effective by the SEC,
Exchange Notes in exchange for all notes tendered prior thereto
in the Exchange Offer; and |
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(4) if obligated to file the shelf registration statement,
the Company and the Guarantors will use their commercially
reasonable best efforts to file the shelf registration statement
with the SEC on or prior to 60 days after such filing
obligation arises and to cause the shelf registration statement
to be declared effective by the SEC on or prior to 180 days
after such obligation arises. |
If:
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(1) the Company and the Guarantors fails to file any of the
registration statements required by the registration rights
agreement on or before the date specified for such
filing; or |
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(2) any of such registration statements is not declared
effective by the SEC on or prior to the date specified for such
effectiveness; or |
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(3) the Company and the Guarantors fail to consummate the
Exchange Offer within 30 business days after the Exchange Offer
registration statement is declared effective by the SEC; or |
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(4) the shelf registration statement or the Exchange Offer
registration statement is declared effective but thereafter
ceases to be effective or fails to be usable for its intended
purpose during the periods specified in the registration rights
agreement |
(each such event referred to in clauses (1) through
(4) above, a Registration Default), then the
Company and the Guarantors will pay Liquidated Damages to each
holder of notes, with respect to the first 90-day period
immediately following the occurrence of the first Registration
Default in an amount equal to $.05 per week per $1,000
principal amount of notes held by such holder. The amount of the
Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of notes with respect to each
subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages for all
Registration Defaults of $.50 per week per $1,000 principal
amount of notes. Liquidated Damages will not accrue under more
than one of the preceding clauses (1) through (4) at
any one time.
All accrued Liquidated Damages will be paid by the Company and
the Guarantors on each day that interest is payable under the
notes or the Exchange Notes to the global note holder by wire
transfer of immediately available funds or by federal funds
check and to holders of certificated notes by wire transfer to
the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Certain Definitions
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all
such terms, as well as any other capitalized terms used herein
for which no definition is provided.
Acquired Debt means, with respect to any
specified Person:
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(1) Indebtedness of any other Person existing at the time
such other Person is merged with or into or became a Restricted
Subsidiary of such specified Person, whether or not such
Indebtedness is |
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incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Restricted Subsidiary
of, such specified Person; and |
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(2) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person. |
Affiliate of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, control, as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For
purposes of this definition, the terms controlling,
controlled by and under common control
with have correlative meanings.
Asset Sale means:
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(1) the sale, lease, conveyance or other disposition of any
assets or rights, including by means of a merger, consolidation
or similar transaction; provided that the sale,
conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken
as a whole will be governed by the provisions of the indenture
described above under the caption Repurchase
at the Option of Holders Change of Control
and/or the provisions described above under the caption
Certain Covenants Merger,
Consolidation or Sale of Assets and not by the provisions
of the Asset Sale covenant; and |
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(2) the issuance of Equity Interests in any of the
Companys Restricted Subsidiaries or the sale of Equity
Interests in any of its Subsidiaries (other than directors
qualifying shares). |
Notwithstanding the preceding, the following items will not be
deemed to be Asset Sales:
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(1) any single transaction or series of related
transactions that involves assets having a fair market value of
less than $2.0 million; |
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(2) a transfer of assets between or among the Company and
its Restricted Subsidiaries, |
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(3) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary; |
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(4) the sale or lease of equipment, inventory, accounts
receivable, services or other assets in the ordinary course of
business or the sale of inventory to any joint venture, in which
the Company owns directly or indirectly at least 50% of the
Equity Interests, for resale by such joint venture to its
customers in the ordinary course of business of its business. |
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(5) the sale or other disposition of cash or Cash
Equivalents; |
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(6) a Restricted Payment or Permitted Investment that is
permitted by the covenant described above under the caption
Certain Covenants Restricted
Payments; |
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(7) dispositions in connection with Permitted Liens; |
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(8) the sale of a rig built by the Company or any of its
Restricted Subsidiaries for the purpose of sale to a customer
where the sale proceeds are recorded in the Companys
consolidated financial statements as operating income in
accordance with generally accepted accounting principles in the
United States. |
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(9) sales of damaged, worn-out or obsolete equipment or
assets that, in the Companys reasonable judgment, are
either (A) no longer used or (B) no longer useful in the
business of the Company or its Restricted Subsidiaries; |
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(10) any trade or exchange by the Company or any Restricted
Subsidiary of one or more drilling rigs for one or more other
drilling rigs owned or held by another Person, provided that
(A) the fair market value of the drilling rig or rigs
traded or exchanged by the Company or such Restricted Subsidiary
(including any cash or Cash Equivalents to be delivered by the
Company or such |
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Restricted Subsidiary) is reasonably equivalent to the fair
market value of the drilling rig or rigs (together with any cash
or Cash Equivalents) to be received by the Company or such
Restricted Subsidiary, in each case as determined as provided in
the final paragraph of the covenant described above under the
caption Certain Covenants
Restricted Payments and (B) such exchange is approved
by a majority of the disinterested members of the Board of
Directors of the Company; and |
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(11) any transfer by the Company or any Restricted
Subsidiary to its customers of drill pipe, tools and associated
drilling equipment utilized in connection with a drilling
contract for the employment of a drilling rig in the ordinary
course of business and consistent with past practice. |
Attributable Debt in respect of a sale and
leaseback transaction means, at the time of determination, the
present value of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which
such lease has been extended or may, at the option of the
lessor, be extended. Such present value shall be calculated
using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with GAAP.
Beneficial Owner has the meaning assigned to
such term in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that in calculating the beneficial
ownership of any particular person (as that term is
used in Sections 13(d) and 14(d) of the Exchange Act), such
person will be deemed to have beneficial ownership
of all securities that such person has the right to
acquire by conversion or exercise of other securities, whether
such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition. The terms
Beneficially Owns and Beneficially Owned
have correlative meanings.
Board of Directors means:
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(1) with respect to a corporation, the board of directors
of the corporation; |
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(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership; and |
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(3) with respect to any other Person, the board or
committee of such Person serving a similar function. |
Business Day means each day that is not a
Saturday, Sunday or other day on which banking institutions in
New York, New York are authorized or required by law to close.
Capital Lease Obligation means, at the time
any determination is to be made, the amount of the liability in
respect of a capital lease that would at that time be required
to be capitalized on a balance sheet in accordance with GAAP.
Capital Stock means:
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(1) in the case of a corporation, corporate stock; |
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(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock; |
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(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and |
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(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person. |
Cash Equivalents means:
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(1) United States dollars; |
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(2) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or
instrumentality of the United States government (provided that
the full faith and |
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credit of the United States is pledged in support of those
securities) having maturities of not more than one year from the
date of acquisition; |
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(3) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of
acquisition, bankers acceptances with maturities not
exceeding six months and overnight bank deposits, in each case,
with any lender party to the Credit Agreement (or any affiliate
of such lender party meeting such requirements) or with any
commercial bank organized under the laws of any country that is
a member of the Organization for Economic Cooperation and
Development (or any affiliate of such commercial bank meeting
such requirements), having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of
B or better; |
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(4) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in
clauses (2) and (3) above entered into with any financial
institution meeting the qualifications specified in
clause (3) above; |
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(5) commercial paper having the highest rating obtainable
from Moodys Investors Service, Inc. or Standard &
Poors Rating Services and in each case maturing within
270 days after the date of acquisition; and |
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(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in
clauses (1) through (5) of this definition. |
Change of Control means the occurrence of any
of the following:
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(1) the direct or indirect sale, transfer, conveyance or
other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries taken as a whole to any
person (as that term is used in Sections 13(d) and
14(d) of the Exchange Act); |
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(2) the adoption of a plan by the stockholders of the
Company relating to the liquidation or dissolution of the
Company; |
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(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that any person (as that term is used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the
Beneficial Owner, directly or indirectly, of more than 50% of
the voting power of the Voting Stock of the Company; or |
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(4) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors. |
Consolidated Cash Flow means, with respect to
any specified Person for any period, the Consolidated Net Income
of such Person for such period plus:
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(1) an amount equal to any extraordinary loss plus any net
loss realized by such Person or any of its Subsidiaries in
connection with an Asset Sale, to the extent such losses were
deducted in computing such Consolidated Net Income; plus |
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(2) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing
such Consolidated Net Income; plus |
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(3) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of
letter of credit or bankers acceptance financings), and
net of the effect of all payments made or received pursuant to
Hedging Obligations incurred with |
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respect to Indebtedness, to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus |
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(4) depreciation, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(including impairment charges recorded in connection with the
application of Financial Accounting Standard No. 142
Goodwill and Other Intangible Assets but excluding
any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated
Net Income; plus |
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(5) all extraordinary, unusual or non-recurring items of
loss or expense; minus |
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(6) all extraordinary, unusual or non-recurring items of
gain or revenue; minus |
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(7) non-cash items increasing such Consolidated Net Income
for such period, other than the accrual of revenue in the
ordinary course of business, |
in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, amounts in
clauses (1), (2), (4), (5) and (6) relating to
any Restricted Subsidiary that is not a Guarantor will be added
to Consolidated Net Income to compute Consolidated Cash Flow
only to the extent (and in the same proportion) that the Net
Income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would
be permitted at the date of determination to be dividended to
the Company by such Restricted Subsidiary without any prior
governmental approval (that has not been obtained) and by
operation of the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
Consolidated Net Income means, with respect
to any specified Person for any period, the aggregate of the Net
Income of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with
GAAP; provided that:
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(1) the Net Income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the
amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary of the Person; |
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(2) the Net Income of any Restricted Subsidiary that is not
a Guarantor will be excluded to the extent that the declaration
or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
or its stockholders; and |
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(3) the cumulative effect of a change in accounting
principles will be excluded. |
Continuing Directors means, as of any date of
determination, any member of the Board of Directors of the
Company who:
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(1) was a member of such Board of Directors on the date
notes are first issued under the indenture; or |
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(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the
time of such nomination or election. |
Credit Agreement means that certain Credit
Agreement, dated as October 10, 2003, among the Company and
the lenders parties thereto, providing for up to
$100.0 million of term loan borrowings and
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$50.0 million of revolving credit borrowings, including any
related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith.
Credit Facilities means, one or more debt
facilities (including, without limitation, the Credit Agreement)
or commercial paper facilities, in each case with banks or other
institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or
letters of credit, including any related notes, guarantees,
collateral documents, instruments and agreements executed in
connection therewith, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or
in part from time to time (and whether or not with the original
lender or lenders or another lender or lenders and whether
provided under the original Credit Facility or any other credit
or other agreement or indenture).
Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Disqualified Stock means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each case
at the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91 days
after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders of the Capital
Stock have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or an
asset sale will not constitute Disqualified Stock if the terms
of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to such
provisions prior to compliance by the Company with the Change of
Control Offer and Asset Sale Offer provisions of the indenture
described above under the caption Repurchase at the Option
of Holders and unless such repurchase or redemption
complies with the covenant described above under the caption
Certain Covenants Restricted
Payments.
Domestic Subsidiary means any Restricted
Subsidiary of the Company that was formed under the laws of the
United States or any state of the United States or the District
of Columbia.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
Equity Offering means any public or private
sale of Capital Stock (other than Disqualified Stock) made for
cash on a primary basis by the Company after the date notes are
first issued.
Exchange Notes means the notes issued in the
Exchange Offer pursuant to the indenture.
Exchange Offer has the meaning set forth for
such term in the registration rights agreement.
Existing Indebtedness means any Indebtedness
of the Company and its Restricted Subsidiaries (other than any
other Permitted Debt) in existence on the date notes are first
issued, until such amounts are repaid.
Fixed Charges means, with respect to any
specified Person for any period, the sum, without duplication,
of:
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(1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers
acceptance financings), and net of the effect of all payments
made or received pursuant to Hedging Obligations incurred with
respect to Indebtedness; plus |
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(2) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period;
plus |
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(3) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus |
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(4) the product of (a) all dividends, whether paid or
accrued and whether or not in cash, on any series of
Disqualified Stock or preferred stock of such Person or any of
its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of the Company
(other than Disqualified Stock) or to the Company or a
Restricted Subsidiary of the Company, times (b) a fraction,
the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP. |
Fixed Charge Coverage Ratio means, with
respect to any specified Person for any four-quarter reference
period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such
period. In the event that the specified Person or any of its
Subsidiaries incurs, assumes, Guarantees, repays, repurchases or
redeems any Indebtedness (other than ordinary working capital
borrowings) or issues, repurchases or redeems any Disqualified
Stock or preferred stock subsequent to the commencement of the
applicable four-quarter reference period and on or prior to the
date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made occurs (the Calculation
Date), then the Fixed Charge Coverage Ratio will be
calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance, repurchase or redemption of
Disqualified Stock or preferred stock, and the use of the
proceeds therefrom as if the same had occurred at the beginning
of such period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
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(1) acquisitions that have been made by the specified
Person or any of its Restricted Subsidiaries, including through
mergers or consolidations and including any related financing
transactions, subsequent to the commencement of the applicable
four-quarter reference period and on or prior to the Calculation
Date will be given pro forma effect as if they had occurred on
the first day of such period including any pro forma expense and
cost reductions that have occurred or are reasonably expected to
occur, in the reasonable judgment of the chief financial officer
of the Company (regardless of whether those expense and cost
reductions could then be reflected in pro forma financial
statements in accordance with Regulation S-X promulgated
under the Securities Act or any other regulation or policy of
the Commission related thereto); |
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(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, will be excluded; and |
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(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, will be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date. |
GAAP means generally accepted accounting
principles in the United States set forth in the opinions and
pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity
as have been approved by a significant segment of the accounting
profession, which are in effect on the date notes are first
issued.
Guarantee means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, of all or any
part of any Indebtedness in any manner
61
including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect
thereof.
Guarantors means each of:
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(1) the Companys Domestic Subsidiaries in existence
of the date on the indenture; |
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(2) Parker Drilling Offshore International, Inc., but only
for so long as it guarantees the Companys
10.125% senior notes due 2009; and |
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(3) any other subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of the indenture; |
and their respective successors and assigns.
Hedging Obligations means, with respect to
any specified Person, the obligations of such Person incurred
under:
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(1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; |
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(2) foreign exchange contracts and currency protection
agreements; |
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(3) any commodity futures contract, commodity option or
other similar agreement or arrangement; and |
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(4) other similar agreements or arrangements. |
Indebtedness means, with respect to any
specified Person, any indebtedness of such Person, whether or
not contingent:
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(1) in respect of borrowed money; |
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(2) evidenced by bonds, notes, debentures or similar
instruments; |
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(3) in respect of bankers acceptances or letters of
credit (or reimbursement agreements in respect thereof) or
similar instruments; |
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(4) representing Capital Lease Obligations; |
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(5) representing the balance deferred and unpaid of the
purchase price of any property, except any such balance that
constitutes an accrued expense or trade payable; or |
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(6) representing the net obligations of such Person under
any Hedging Obligations (the amount of any such obligations to
be equal at any time to the termination value of the agreement
or arrangement giving rise to such obligation that would be
payable by such Person at such time). |
if and to the extent any of the preceding items (other than
letters of credit, Hedging Obligations) would appear as a
liability upon a balance sheet of the specified Person prepared
in accordance with GAAP. In addition, the term
Indebtedness includes all Indebtedness of others to
the extent secured by a Lien on any asset of the specified
Person (whether or not such Indebtedness is assumed by the
specified Person) and, to the extent not otherwise included, the
Guarantee by the specified Person of any indebtedness of any
other Person.
The amount of any Indebtedness outstanding as of any date will
be:
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(1) the accreted value of the Indebtedness, in the case of
any Indebtedness issued with original issue discount; and |
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(2) the principal amount of the Indebtedness, together with
any interest on the Indebtedness that is more than 30 days
past due, in the case of any other Indebtedness. |
Investments means, with respect to any
Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the forms of loans
(including Guarantees or other obligations),
62
advances or capital contributions (excluding
(x) commission, travel and similar advances to officers and
employees made in the ordinary course of business and
(y) advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance
sheet of the lender), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be
classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, such Person
is no longer a Subsidiary of the Company, the Company will be
deemed to have made an Investment on the date of any such sale
or disposition in an amount equal to the fair market value of
the Equity Interests of and other Investments in such Subsidiary
not sold or disposed of in an amount determined as provided in
the final paragraph of the covenant described above under the
caption Certain Covenants
Restricted Payments. The acquisition by the Company or any
Subsidiary of the Company of a Person that holds an Investment
in a third Person will be deemed to be an Investment made by the
Company or such Subsidiary in such third Person in an amount
equal to the fair market value of the Investment held by the
acquired Person in such third Person on the date of any such
acquisition in an amount determined as provided in the final
paragraph of the covenant described above under the caption
Certain Covenants Restricted
Payments.
Lien means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in such asset and any filing of
or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
Net Income means, with respect to any
specified Person, the net income (loss) of such Person,
determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
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(1) any gain (but not loss), other than gains associated
with reimbursements for lost or damaged tools in the ordinary
course of business, together with any related provision for
taxes on such gain (but not loss), realized in connection with:
(a) any Asset Sale; or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its
Subsidiaries; and |
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(2) any extraordinary gain (but not loss), together with
any related provision for taxes on such extraordinary gain (but
not loss). |
Net Proceeds means the aggregate cash
proceeds received by the Company or any of its Restricted
Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition
of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale, including,
without limitation, legal, accounting and investment banking
fees, and sales commissions, and any relocation expenses
incurred as a result of the Asset Sale, taxes paid or payable as
a result of the Asset Sale, in each case, after taking into
account any available tax credits or deductions and any tax
sharing arrangements, any amounts required to be applied to the
repayment of Senior Debt secured by a Lien on the asset or
assets that were the subject of such Asset Sale, and any reserve
for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
Non-Recourse Debt means Indebtedness:
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(1) as to which neither the Company nor any of its
Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) is
the lender; |
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(2) no default with respect to which (including any rights
that the holders of the Indebtedness may have to take
enforcement action against an Unrestricted Subsidiary) would
permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the notes) of the Company or |
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any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment of the Indebtedness to
be accelerated or payable prior to its stated maturity; and |
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(3) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of
the Company or any of its Restricted Subsidiaries. |
Obligations means any principal, premium and
Liquidated Damages, if any, interest (including interest
accruing on or after the filing of any petition in bankruptcy or
for reorganization, whether or not a claim for post-filing
interest is allowed in such proceeding), penalties, fees,
charges, expenses, indemnifications, reimbursement obligations,
damages, guarantees, and other liabilities or amounts payable
under the documentation governing any Indebtedness or in respect
thereof.
Permitted Business means the lines of
business conducted by us and our Restricted Subsidiaries on the
date hereof and any business incidental or reasonably related
thereto or which is a reasonable extension thereof as determined
in good faith by our Board of Directors.
Permitted Investments means:
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(1) any Investment in the Company or in a Restricted
Subsidiary of the Company; |
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(2) any Investment in Cash Equivalents; |
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(3) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment: |
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(a) such Person becomes a Restricted Subsidiary of the
Company; or |
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(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets
to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company; |
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(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales; |
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(5) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of
the Company; |
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(6) any Investments received (a) in satisfaction of
judgments or in compromise of obligations of trade creditors or
customers that were incurred in the ordinary course of business,
including pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of any trade
creditor or customer or (b) as a result of a foreclosure by
the Company or any of its Restricted Subsidiaries with respect
to any secured Investment in default; |
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(7) guarantees (including Subsidiary Guarantees) of
Indebtedness permitted under the covenant described above under
the caption Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock; |
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(8) Hedging Obligations permitted to be incurred under the
covenant described above under the caption
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock covenant; |
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(9) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in
the ordinary course of business; |
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(10) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company
or such Restricted Subsidiary not to exceed $2.0 million at
any one time outstanding; |
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(11) other Investments in any Person having an aggregate
fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to
this clause (8) that are at the time outstanding, not to
exceed $35.0 million. |
Permitted Liens means:
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(1) Liens securing Indebtedness and other obligations under
any Credit Facility permitted to be incurred under the indenture; |
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(2) Liens securing the notes and Subsidiary Guarantees; |
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(3) Liens existing on the date notes are first issued; |
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(4) Liens in favor of the Company or the Guarantors; |
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(5) Liens to secure Indebtedness of any Restricted
Subsidiaries that are not Guarantors; provided that the
Indebtedness is permitted by the terms of the indenture to be
incurred; |
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(6) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the Company
or any Restricted Subsidiary of the Company or otherwise becomes
a Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or
consolidation or such Person becoming a Restricted Subsidiary of
the Company and do not extend to any assets other than those of
such Person; |
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(7) Liens on property existing at the time of acquisition
of the property by the Company or any Restricted Subsidiary of
the Company; provided that such Liens were in existence
prior to the contemplation of such acquisition and do not extend
to any assets other than such acquired property; |
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(8) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock covering only the assets acquired with
such Indebtedness; |
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(9) Liens securing Permitted Refinancing Indebtedness
Incurred to refinance Indebtedness that was previously so
secured; provided that any such Lien is limited to all or
part of the same property or assets (plus improvements,
accessions, proceeds or distributions in respect thereof) that
secured or, under the written arrangements under which the
original Lien arose, could secure the Indebtedness being
refinanced; |
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(10) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; |
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(11) Liens securing Hedging Obligations related to
Indebtedness permitted under the indenture; |
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(12) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business; |
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(13) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business for sums not delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in respect
thereof; |
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(14) Liens incurred or deposits made in the ordinary course
of business in connection with workers compensation,
unemployment insurance and other types of social security, or to
secure the payment or performance of tenders, statutory or
regulatory obligations, surety and appeal bonds, bids,
government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); |
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(15) judgment Liens not giving rise to an Event of Default
so long as any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such
proceeding may be initiated shall not have expired; |
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(16) Liens upon specific items of inventory or other goods
of any Person securing such Persons obligations in respect
of bankers acceptances issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such
inventory or other goods; |
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(17) Liens securing reimbursement obligations with respect
to commercial letters of credit that encumber documents and
other property or assets relating to such letters of credit and
products and proceeds thereof; |
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(18) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off; |
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(19) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; provided that any reserve
or other appropriate provision as is required in conformity with
GAAP has been made therefor; and |
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(20) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $10.0 million at any one
time outstanding. |
Notwithstanding the foregoing, Permitted Liens will
not include any Lien described in clause (6), (7) or
(8) above to the extent such Lien applies to any Additional
Assets acquired directly or indirectly from Net Proceeds
pursuant to the covenant described above under the caption
Repurchase at Option of Holders
Asset Sales. For purposes of this definition, the term
Indebtedness will be deemed to include interest on
such Indebtedness.
Permitted Refinancing Indebtedness means any
Indebtedness of the Company or any of its Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness
of the Company or any of its Subsidiaries (other than
intercompany Indebtedness); provided that:
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(1) the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the
Indebtedness extended, refinanced, renewed, replaced, defeased
or refunded (plus all accrued interest on the Indebtedness and
the amount of all expenses and premiums incurred in connection
therewith); |
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(2) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; |
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(3) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the notes, such Permitted Refinancing Indebtedness
is subordinated in right of payment to, the notes on terms at
least as favorable to the holders of notes as those contained in
the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and |
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(4) such Permitted Refinancing Indebtedness is incurred
either by (i) the Company or a Guarantor or (ii) by
the Subsidiary that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded. |
Person means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Restricted Investment means an Investment
other than a Permitted Investment.
Restricted Subsidiary means any Subsidiary of
the Company that is not an Unrestricted Subsidiary.
SEC means the United States Securities and
Exchange Commission.
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Senior Debt means:
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(1) all Indebtedness of the Company or any Restricted
Subsidiary outstanding under Credit Facilities and all Hedging
Obligations with respect thereto; |
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(2) any other Indebtedness of the Company or any Restricted
Subsidiary permitted to be incurred under the terms of the
indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is subordinated in right
of payment to the notes or any Subsidiary Guarantee; and |
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(3) all Obligations with respect to the items listed in the
preceding clauses (1) and (2). Notwithstanding anything to
the contrary in the preceding sentence, Senior Debt will not
include: |
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(a) any liability for federal, state, local or other taxes
owed or owing by the Company; |
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(b) any intercompany Indebtedness of the Company or any of
its Subsidiaries to the Company or any of its Affiliates; |
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(c) any trade payables; |
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(d) any Indebtedness that is incurred in violation of the
indenture. |
Significant Subsidiary means any Restricted
Subsidiary that would be a significant subsidiary as
defined in Article 1, Rule 1-02(w) of
Regulation S-X, promulgated pursuant to the Securities Act,
as such Regulation is in effect on the date hereof; provided
that all Unrestricted Subsidiaries will be excluded from all
calculations under Rule 1-02(w) of Regulation S-X.
Stated Maturity means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which the payment of interest or
principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment
thereof.
Subsidiary means, with respect to any
specified Person:
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(1) any corporation, association or other business entity
of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees of the corporation, association or other business
entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and |
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(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are that Person or one or more Subsidiaries of that
Person (or any combination thereof). |
Subsidiary Guarantee means any Guarantee by a
Guarantor of the Companys payment Obligations under the
indenture and on the notes, executed pursuant to the provisions
of the indenture.
Total Assets means the total assets of the
Company and its Restricted Subsidiaries on a consolidated basis
determined in accordance with GAAP, as shown on the most
recently available consolidated balance sheet of the Company and
its Restricted Subsidiaries.
Unrestricted Subsidiary means any Subsidiary
of the Company that is designated by the Board of Directors as
an Unrestricted Subsidiary pursuant to a Board Resolution, but
only to the extent that such Subsidiary:
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(1) has no Indebtedness other than Non-Recourse Debt; |
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(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, |
67
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arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the
Company; |
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(3) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity
Interests or (b) to maintain or preserve such Persons
financial condition or to cause such Person to achieve any
specified levels of operating results; and |
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(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries. |
Any designation of a Subsidiary of the Company as an
Unrestricted Subsidiary will be evidenced to the trustee by
filing with the trustee a certified copy of the Board Resolution
giving effect to such designation and an officers
certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described
above under the caption Certain
Covenants Restricted Payments. If, at any
time, any Unrestricted Subsidiary would fail to meet the
preceding requirements as an Unrestricted Subsidiary, it will
thereafter cease to be an Unrestricted Subsidiary for purposes
of the indenture and any Indebtedness of such Subsidiary will be
deemed to be incurred by a Restricted Subsidiary of the Company
as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the
caption Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred
Stock, the Company will be in default of such covenant.
The Board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation will be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if
(1) such Indebtedness is permitted under the covenant
described under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock, calculated on a pro forma basis as if
such designation had occurred at the beginning of the
four-quarter reference period and (2) no Default would be
in existence following such designation.
Voting Stock of any Person as of any date
means the Capital Stock of such Person that is at the time
entitled to vote in the election of the Board of Directors of
such Person.
Weighted Average Life to Maturity means, when
applied to any Indebtedness or Disqualified Stock or preferred
stock of a Guarantor at any date, the number of years obtained
by dividing:
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(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect of the
Indebtedness or redemption or similar payment in respect of the
Disqualified Stock or preferred stock of a Guarantor by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making
of such payment; by |
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(2) the then outstanding principal amount of such
Indebtedness. |
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PLAN OF DISTRIBUTION
We are not using any underwriters for this exchange offer. We
are also bearing the expenses of the exchange.
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 any exchange notes received in exchange for private
notes acquired by such broker-dealer as a result of
market-making or other trading activities. Each such
broker-dealer that receives exchange notes for its own account
in exchange for such private notes pursuant to the exchange
offer must acknowledge in the letter of transmittal that it will
deliver a prospectus in connection with any resale of such
exchange notes. We have agreed that for a period of up to one
year after the registration statement is declared effective, we
will use our commercially reasonable best efforts to keep the
registration statement effective and will make this prospectus,
as amended or supplemented, available to any such broker-dealer
that requests copies of this prospectus in the letter of
transmittal for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes
by broker-dealers or any other persons. Exchange notes received
by broker-dealers for their own account pursuant to the exchange
offer may be sold from time to time in one or more transactions:
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in the over-the-counter market; |
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in negotiated transactions; |
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through the writing of options on the exchange notes; or |
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a combination of such methods of resale. |
The exchange notes may be sold from time to time:
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at market prices prevailing at the time of resale; |
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at prices related to such prevailing market prices; or |
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at negotiated prices. |
Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the
form of commissions or concessions from any such broker-dealer
and/or the purchasers of any such exchange notes.
Any broker-dealer that resells exchange notes that were received
by it for its own account pursuant to the exchange offer in
exchange for private notes acquired by such broker-dealer as a
result of market-making or other trading activities and any
broker-dealer that participates in a distribution of such
exchange notes may be deemed to be an underwriter
within the meaning of the Securities Act. Any profit on these
resales of exchange notes and any commissions or concessions
received by any person 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.
We have agreed to pay all expenses incident to our performance
of, or compliance with, the registration rights agreement and
will indemnify the holders of the private notes, including any
broker-dealers, and certain parties related to these holders,
against certain liabilities, including liabilities under the
Securities Act, as set forth in the registration rights
agreement.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of private notes for exchange notes should not be
treated as a taxable transaction for United States Federal
income tax purposes because the terms of the exchange notes
should not be considered to differ materially in kind or in
extent from the terms of the private notes. Rather, the exchange
notes received by a holder of private notes should be treated as
a continuation of such holders investment in the private
notes. As a result, there should be no material United States
Federal income tax consequences to holders exchanging private
notes for exchange notes.
If you are considering an exchange of your private notes for the
exchange notes, you should consult your own tax advisor(s)
concerning the tax consequences arising under state, local, or
foreign laws of such an exchange.
Notice Pursuant to IRS Circular 230
To comply with Internal Revenue Service Circular 230, you are
hereby notified that: (a) any discussion of federal tax
issues in this prospectus is not intended or written to be
relied upon, and cannot be relied upon by you, for the purpose
of avoiding penalties that may be imposed on you under the
Internal Revenue Code; (b) any such discussion is included
herein by the issuer in connection with the promotion or
marketing (within the meaning of Circular 230) by the
issuer of the transactions or matters addressed herein by the
issuer; and (c) you should seek advice based on your
particular circumstances from an independent tax advisor.
VALIDITY OF THE EXCHANGE NOTES
The validity of the exchange notes will be passed upon for
Parker Drilling Company by Bracewell & Giuliani LLP,
Houston, Texas.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31,
2004, 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 consolidated financial information
of Parker Drilling Company for the three-month periods ended
March 31, 2005 and 2004 and for the three-month and
six-month periods ended June 30, 2005 and 2004,
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 6, 2005 and August 8, 2005, incorporated by
reference herein, state that they did not audit and they do not
express an opinion on that unaudited 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
financial information because those reports are not
reports 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.
70
You
should rely only on the information contained in this prospectus
or that we have referred you to. We have not authorized anyone
to provide you with information that is different. Neither the
making of the exchange offer pursuant to this prospectus nor the
acceptance of private notes for exchange pursuant thereto shall
under any circumstances create any implication that there has
been no change in the affairs of Parker Drilling Company and its
subsidiaries since the date hereof or that the information
contained herein is correct as of any time subsequent to the
date hereof.
Each
broker-dealer who holds private notes acquired for its own
account as a result of market-making or other trading activities
and who receives exchange notes for its own account in exchange
for such private notes pursuant to the exchange offer must
deliver a copy of this prospectus in connection with any resale
of such exchange notes.
TABLE OF CONTENTS
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$50,000,000
Parker Drilling Company
PROSPECTUS
Offer to Exchange
95/8% Senior
Notes due 2013
which have been registered under
the Securities Act of 1933
for
all outstanding unregistered
95/8% Senior
Notes due 2013
issued on April 21, 2005