-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pwwv+jS/4MaMaLjC97hKBNZoT/ra/fywf5BuPCSB58TjBBMhiL6SG5myyql0MfG6 5IZHXa3oBtqvqP1/UrGVkg== 0000890566-99-000428.txt : 19990412 0000890566-99-000428.hdr.sgml : 19990412 ACCESSION NUMBER: 0000890566-99-000428 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIDE INTERNATIONAL INC CENTRAL INDEX KEY: 0000833081 STANDARD INDUSTRIAL CLASSIFICATION: 1389 IRS NUMBER: 760069030 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13289 FILM NUMBER: 99584250 BUSINESS ADDRESS: STREET 1: 5847 SAN FELIPE ST ST 3300 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137891400 MAIL ADDRESS: STREET 1: 1500 CITY WEST BLVD STREET 2: SUITE 400 CITY: HOUSTON STATE: TX ZIP: 77042 FORMER COMPANY: FORMER CONFORMED NAME: PRIDE PETROLEUM SERVICES INC DATE OF NAME CHANGE: 19920703 10-K405 1 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NUMBER: 1-13289 ------------------------ PRIDE INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) LOUISIANA 76-0069030 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 5847 SAN FELIPE, SUITE 3300 HOUSTON, TEXAS 77057 (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 789-1400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - - ------------------------------------- ------------------------------------------------------ Common Stock, no par value New York Stock Exchange Rights to Purchase Preferred Stock New York Stock Exchange 6 1/4% Convertible Subordinated New York Stock Exchange Debentures due 2006
Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X} The aggregate market value of the voting stock held by non-affiliates of the registrant at March 18, 1998, based on the closing price on the New York Stock Exchange on such date, was $334.7 million. (The officers and directors of the registrant are considered affiliates for the purposes of this calculation.) The number of shares of the registrant's Common Stock outstanding on March 18, 1999 was 50,426,673. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement for the Annual Meeting of Shareholders to be held in May 1999 are incorporated by reference into Part III of this report. ================================================================================ TABLE OF CONTENTS PART I
PAGE ---- Item 1. Business............................. 1 Item 2. Property............................. 11 Item 3. Legal Proceedings.................... 11 Item 4. Submission of Matters to a Vote of Security Holders................... 11 Executive Officers of the Registrant......................... 12
PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.... 13 Item 6. Selected Financial Data.............. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 15 Item 7A Quantitative and Qualitative Disclosures About Market Risk...... 22 Forward-Looking Statements........... 22 Item 8. Financial Statements and Supplementary Data................. 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 49
PART III Item 10. Directors and Executive Officers of the Registrant..................... 49 Item 11. Executive Compensation............... 49 Item 12. Security Ownership of Certain Beneficial Owners and Management... 49 Item 13. Certain Relationships and Related Transactions....................... 49
PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 49
i PART I ITEM 1. BUSINESS IN THIS ANNUAL REPORT ON FORM 10-K, WE REFER TO PRIDE INTERNATIONAL, INC. AND ITS SUBSIDIARIES AS "WE," THE "COMPANY" OR "PRIDE," UNLESS THE CONTEXT CLEARLY INDICATES OTHERWISE. GENERAL Pride is a leading international provider of contract drilling and related services, operating both offshore and on land. In recent years, we have focused our growth strategy on the higher margin offshore and international drilling markets. Offshore and international markets generally have greater profit potential than domestic land-based markets, primarily as a result of less competition, higher utilization rates and stronger demand resulting from a general trend by oil and gas companies to shift expenditures to exploration and development activities abroad and in the Gulf of Mexico. For these reasons, we actively sought to diversify beyond our former domestic land-based operations, which prior to mid-1993 accounted for substantially all of our revenues and earnings. Since 1993, through a series of strategic transactions, we have transformed Pride from solely a provider of domestic land-based workover and related services into a diversified international drilling contractor operating both offshore and on land. During 1997 and 1998, we completed the following strategic transactions: o DIVESTITURE OF U.S. LAND-BASED OPERATIONS. In February 1997, we completed the divestiture of our domestic land-based well servicing operations, which included 407 workover rigs operating in Texas, California, New Mexico and Louisiana, for approximately $136 million. We retained 14 of our larger land-based rigs for redeployment to international markets, ten of which have since been redeployed to South America. o FORASOL ACQUISITION. In March 1997, we acquired the operating subsidiaries of Forasol-Foramer N.V. (collectively, "Forasol") for approximately $113 million in cash and 11 million shares of our common stock. The transaction provided entry into new international markets while contributing additional capacity in our existing South American markets, as well as a deepwater asset base and expertise. Forasol provided drilling, workover and engineering services in more than 15 countries, including substantial operations in South America, Africa, the Middle East and Southeast Asia. o PURCHASE OF JACKUP RIGS. In May 1997, we purchased 13 mat-supported jackup rigs for approximately $269 million. The purchase of these rigs positioned us as the second largest operator in the Gulf of Mexico of mat-supported jackup rigs capable of operating in water depths of 200 feet or greater. o PURCHASE OF ADDITIONAL OFFSHORE ASSETS. In April 1997, we purchased and substantially upgraded a tender-assisted rig, which we deployed to Southeast Asia. In October 1997, we purchased an independent-leg, cantilevered jackup rig for approximately $35 million. The jackup rig, capable of operating in water depths of up to 300 feet, is currently under contract in India. o BOLIVIAN ACQUISITION. In July 1998, we acquired 60% of a Bolivian company, Compania Boliviana de Perforacion S.A.M. ("CBP"), in a joint initiative with the Bolivian national oil company, Yacimientos Petroliferos Fiscales Bolivianos ("YPFB"). CBP was capitalized through the contribution of 13 land-based drilling and workover rigs, oilfield trucks and other related drilling assets by YPFB and $17 million in cash by us. Currently, we operate a global fleet of 308 rigs, including three semisubmersible rigs, 17 jackup rigs, nine tender-assisted rigs, five barge rigs, 23 offshore platform rigs and 251 land-based drilling and workover rigs. The significant diversity of our rig fleet enables us to provide a broad range of services and to take advantage of market upturns while reducing our exposure to sharp downturns in any particular market sector or geographic region. 1 Most recently, we have focused on increasing the size of our fleet capable of drilling in deeper waters. We are participating in the following offshore rig acquisition and construction projects: o AMETHYST 1 PURCHASE. In October 1998, we purchased for approximately $85 million the AMETHYST 1, a dynamically positioned, self-propelled semisubmersible drilling rig capable of working in water depths of up to 4,000 feet. The AMETHYST 1 is currently working offshore Brazil under a charter and service contract that expires in 2001. o DRILLSHIP JOINT VENTURES. We have entered into joint ventures to construct, own and operate the PRIDE AFRICA and the PRIDE ANGOLA, two ultra-deepwater drillships currently under construction in South Korea. The drillships, which will be capable of operating in water depths of up to 10,000 feet, are contracted to work for Elf Exploration Angola ("Elf Angola") for initial terms of five and three years, respectively. We expect that the PRIDE AFRICA will commence operations in mid-1999 and that the PRIDE ANGOLA will commence operations by early 2000. The joint ventures have entered into financing arrangements with a group of banks providing that approximately $400 million of the drillships' total estimated construction cost of $470 million will be financed by loans that are, upon delivery of the drillships, without recourse to the joint venture participants. We estimate that our total equity investment in the projects will be approximately $38 million, which represents a 51% ownership interest in each joint venture. o AMETHYST JOINT VENTURES. We have a 30% equity interest in a joint venture company organized to construct, own and operate four Amethyst-class dynamically positioned semisubmersible drilling rigs. The rigs, which will be larger, enhanced versions of the AMETHYST 1, are currently under construction at shipyards in South Korea and the United States. Upon their completion, the rigs will be operated under charter and service contracts with Petroleo Brasilerio S.A. ("Petrobras") having initial terms of six to eight years. The total estimated cost to construct, equip and mobilize the four rigs is approximately $700 million. Delivery of the rigs is expected in mid-2000. We have made aggregate equity contributions to the joint venture of approximately $45 million as of December 31, 1998. The joint venture has contracts with Petrobras to provide two additional deepwater rigs. The joint venture originally intended to build two additional Amethyst-class rigs. Construction contracts with respect to those two rigs were terminated, however, after the shipyard at which the rigs were to be constructed filed for protection from its creditors. The joint venture partners are currently evaluating alternatives relating to these two contracts, which include: (a) chartering other rigs currently available in the market to fulfill the related Petrobras charter and service contracts, (b) constructing these two additional Amethyst-class rigs at another shipyard or (c) undertaking other mutually acceptable means of fulfilling the charter and service contracts for those two rigs. We can give no assurance, however, that any of these efforts will be successful. We intend to continue to pursue expansion of our offshore and international drilling operations through acquisitions, rig upgrades and redeployment of assets to active geographic regions, as well as through participation in strategic new projects such as those described above. We are a Louisiana corporation with our principal executive offices located at 5847 San Felipe, Suite 3300, Houston, Texas 77057. Our telephone number at such address is (713) 789-1400. OPERATIONS SOUTH AMERICA Through a series of acquisitions and the deployment of underutilized domestic assets, we have significantly expanded our South American operations and now operate two semisubmersible rigs, three jackup rigs, two tender-assisted rigs, four floating barge rigs and 230 land-based rigs in the region. BRAZIL. In September 1997, our semisubmersible rig NYMPHEA began drilling offshore Brazil for Petrobras. The rig is working under a contract expiring in 2001. In October 1998, we purchased the AMETHYST 1 for approximately $85 million. The rig, which is equipped to provide offshore drilling, subsea well intervention, well tie-back and related construction services, is currently working offshore Brazil under a charter and service contract that expires in 2001. 2 VENEZUELA. Our offshore fleet in Venezuela includes three jackup rigs, two tender-assisted rigs and four barge rigs operating on Lake Maracaibo. Two of the jackup rigs that we operate under contracts expiring in 1999 are owned by Petroleos de Venezuela, S.A. ("PDVSA"). The other jackup rig is owned by us and operates under a contract expiring in December 2000. In 1995, we placed two floating barge rigs into service on Lake Maracaibo that are working under ten-year contracts with PDVSA. We also operate two other floating barge rigs and two tender-assisted rigs under management contracts with PDVSA that expire in 2000. Our land-based fleet in Venezuela currently consists of 48 rigs, of which 14 are drilling rigs and 34 are workover rigs. ARGENTINA. In Argentina, we currently operate 142 land-based rigs, which we believe represent approximately 50% of the land-based rigs in the Argentine market. Of these rigs, 36 are drilling rigs and 106 are workover rigs. Argentine rig operations are generally conducted in remote regions of the country and require substantial fixed infrastructure and operating support costs. We believe that our established infrastructure and scale of operations provide us with a competitive advantage in this market. COLOMBIA. In Colombia, we currently operate 13 land-based drilling rigs and eight land-based workover rigs under contracts with the national oil company and with major international oil operators. We believe we are well positioned to capitalize on opportunities in Colombia. BOLIVIA. Demand for rig services has increased in Bolivia as a result of the privatization of components of the Bolivian national oil company, as well as significant sales of exploration blocks to private-sector operators. In addition, exploration activity for natural gas in Bolivia has increased as a result of the recent construction of a major gas pipeline from Bolivia to markets in Brazil. In July 1998, we acquired a 60% interest in CBP, which operates seven land-based drilling and six land-based workover rigs in Bolivia. In addition, we have recently mobilized three land-based drilling and three land-based workover rigs from Argentina for jobs in Bolivia. GULF OF MEXICO In May 1997, we acquired 13 mat-supported jackup rigs, 11 of which are currently located in the Gulf of Mexico. The remaining two rigs are located in West Africa and Southeast Asia. This acquisition positioned us as the second largest operator in the Gulf of Mexico of mat-supported jackup rigs capable of operating in water depths of 200 feet or greater. We also operate a fleet of 23 offshore modular platform rigs in the Gulf of Mexico. We believe our fleet is one of the most technologically advanced fleets in the industry. The recent declines experienced in the offshore drilling markets have had their greatest impact on demand for our platform and jackup fleets. For further discussion, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Outlook" in Item 7 of this Report. OTHER INTERNATIONAL OFFSHORE. Our semisubmersible rig, SOUTH SEAS DRILLER, is currently operating offshore South Africa under a contract extending through April 2000, with a three-well option thereafter. We also operate seven tender-assisted rigs. The BARRACUDA is currently contracted through May 1999. The ILE DE SEIN is under contract in Indonesia through the end of 1999, with a one-year option, and the PIRANHA is contracted in Brunei through the end of November 1999, with a two-well option. Through a joint venture, we own a 12.5% interest in the self-erecting tender AL BARAKA I. In addition to our ownership interest, we also manage the rig. The ALLIGATOR is currently idle. The CORMORANT and the ILE DE LA MARTINIQUE are stacked. We operate one swamp barge rig, the BINTANG KALIMANTAN, in Nigeria, which is currently contracted through April 1999. LAND. We currently operate six land-based rigs in North Africa and four in the Middle East. 3 RIG FLEET OFFSHORE RIGS We have presented in the table below information about our offshore rig fleet as of March 18, 1999: OFFSHORE RIGS
BUILT/UPGRADED WATER DRILLING OR EXPECTED DEPTH DEPTH RIG NAME RIG TYPE/DESIGN COMPLETION RATING RATING LOCATION - - ------------------------------------- -------------------------- -------------- ------ -------- -------------- (feet) (feet) DRILLSHIPS - 2 Pride Africa(1) Gusto 10,000 1999 10,000 30,000 Korea Pride Angola(1) Gusto 10,000 1999 10,000 30,000 Korea SEMISUBMERSIBLE RIGS - 7 Nymphea F&G Pacesetter 1987 1,500 25,000 Brazil South Seas Driller Aker H-3 1977/1997 1,000 20,000 South Africa Amethyst 1(2) Amethyst Class 1989 4,000 20,000 Brazil Amethyst 4(3) Amethyst Class 2000 5,000 25,000 Mississippi Amethyst 5(3) Amethyst Class 2000 5,000 25,000 Mississippi Amethyst 6(3) Amethyst Class 2000 5,000 25,000 Korea Amethyst 7(3) Amethyst Class 2000 5,000 25,000 Korea JACKUP RIGS - 17 Pride Pennsylvania Independent leg cantilever 1973/1998 300 20,000 India Ile du Levant Independent leg cantilever 1991 270 20,000 Venezuela GP-19(4) Independent leg cantilever 1987 150 20,000 Venezuela GP-20(4) Independent leg cantilever 1987 200 20,000 Venezuela Pride Alabama Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Pride Alaska Mat-supported cantilever 1982 250 25,000 Gulf of Mexico Pride Arkansas Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Pride Colorado Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Pride Kansas Mat-supported cantilever 1999 250 25,000 Gulf of Mexico Pride Mississippi Mat-supported cantilever 1990 200 25,000 Gulf of Mexico Pride New Mexico Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Pride Texas Mat-supported cantilever 1999 300 20,000 Gulf of Mexico Pride California Mat-supported slot 1997 250 20,000 Malaysia Pride Louisiana Mat-supported slot 1981 250 25,000 Gulf of Mexico Pride Oklahoma Mat-supported slot 1996 250 20,000 Gulf of Mexico Pride Wyoming Mat-supported slot 1976 250 25,000 Gulf of Mexico Pride Utah Mat-supported slot 1990/1998 45 20,000 Nigeria TENDER-ASSISTED RIGS - 9 Alligator Self-erecting barge 1992/1998 330 20,000 Cabinda Barracuda Self-erecting barge 1992 330 20,000 Middle East Al Baraka I(5) Self-erecting barge 1994 650 20,000 Middle East Ile de Sein Self-erecting barge 1990/1997 450 16,000 Indonesia Piranha Self-erecting barge 1978/1998 600 20,000 Brunei Cormorant Converted ship 1991 300 16,400 Angola Ile de la Martinique Converted ship 1985 400 16,000 UAE GP-14(4) Tender barge 1985 150 20,000 Venezuela GP-18(4) Tender barge 1985 150 20,000 Venezuela BARGE RIGS - 5 Pride I Floating cantilever 1995 150 20,000 Venezuela Pride II Floating cantilever 1995 150 20,000 Venezuela GP-24(4) Floating cantilever 1992 150 20,000 Venezuela Galileo II(4) Floating cantilever 1992/1997 150 20,000 Venezuela Bintang Kalimantan Posted swamp barge 1995 N/A 16,000 Nigeria RIG NAME STATUS - - ------------------------------------- ------------- DRILLSHIPS - 2 Pride Africa(1) Shipyard Pride Angola(1) Shipyard SEMISUBMERSIBLE RIGS - 7 Nymphea Working South Seas Driller Working Amethyst 1(2) Working Amethyst 4(3) Shipyard Amethyst 5(3) Shipyard Amethyst 6(3) Shipyard Amethyst 7(3) Shipyard JACKUP RIGS - 17 Pride Pennsylvania Working Ile du Levant Working GP-19(4) Working GP-20(4) Working Pride Alabama Available Pride Alaska Available Pride Arkansas Working Pride Colorado Working Pride Kansas Working Pride Mississippi Working Pride New Mexico Working Pride Texas Available Pride California Available Pride Louisiana Working Pride Oklahoma Stacked Pride Wyoming Available Pride Utah Available TENDER-ASSISTED RIGS - 9 Alligator Available Barracuda Working Al Baraka I(5) Working Ile de Sein Working Piranha Working Cormorant Stacked Ile de la Martinique Stacked GP-14(4) Working GP-18(4) Working BARGE RIGS - 5 Pride I Working Pride II Working GP-24(4) Working Galileo II(4) Working Bintang Kalimantan Working
(TABLE CONTINUED ON FOLLOWING PAGE) 4
WATER DRILLING BUILT/UPGRADED DEPTH DEPTH RIG NAME RIG TYPE/DESIGN OR COMPLETION RATING RATING LOCATION - - ------------------------------------- -------------------------- -------------- ------ -------- -------------- PLATFORM RIGS - 23 Rig 1501E Heavy electrical 1996 N/A 25,000 Gulf of Mexico Rig 1502E Heavy electrical 1998 N/A 25,000 Gulf of Mexico Rig 1002E Heavy electrical 1996 N/A 20,000 Gulf of Mexico Rig 1003E Heavy electrical 1996 N/A 20,000 Gulf of Mexico Rig 1004E Heavy electrical 1997 N/A 20,000 Gulf of Mexico Rig 1005E Heavy electrical 1998 N/A 20,000 Indonesia Rig 750E Heavy electrical 1992 N/A 16,500 Gulf of Mexico Rig 751E Heavy electrical 1995 N/A 16,500 Gulf of Mexico Rig 650E Intermediate electrical 1994 N/A 15,000 Gulf of Mexico Rig 651E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico Rig 653E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico Rig 951 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico Rig 952 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico Rig 30 Intermediate mechanical 1986 N/A 15,000 Gulf of Mexico Rig 100 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico Rig 110 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico Rig 130 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico Rig 170 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico Rig 200 Intermediate mechanical 1993 N/A 15,000 Gulf of Mexico Rig 210 Intermediate mechanical 1996 N/A 15,000 Gulf of Mexico Rig 220 Intermediate mechanical 1995 N/A 15,000 Gulf of Mexico Rig 14 Light mechanical 1994 N/A 10,000 Gulf of Mexico Rig 15 Light mechanical 1994 N/A 10,000 Gulf of Mexico RIG NAME STATUS - - ------------------------------------- ------------- PLATFORM RIGS - 23 Rig 1501E Working Rig 1502E Working Rig 1002E Working Rig 1003E Working Rig 1004E Working Rig 1005E Working Rig 750E Working Rig 751E Working Rig 650E Working Rig 651E Available Rig 653E Working Rig 951 Working Rig 952 Available Rig 30 Stacked Rig 100 Stacked Rig 110 Stacked Rig 130 Available Rig 170 Stacked Rig 200 Available Rig 210 Available Rig 220 Available Rig 14 Working Rig 15 Stacked
- - ------------ (1) Currently under construction. These rigs will be owned by joint ventures in which we have a 51% interest. (2) In February 1999, we completed a transaction in which we sold the rig to a third party and leased the rig back under a charter expiring in 2012. (3) Currently under construction. These rigs will be owned by a joint venture in which we have a 30% interest. (4) Operated but not owned by us. (5) Owned by a joint venture in which we have a 12.5% interest. DRILLSHIPS. The PRIDE AFRICA and PRIDE ANGOLA, currently under construction, are ultra-deepwater self-propelled drillships that can be positioned over a drill site through the use of a computer-controlled thruster (dynamic positioning) system. Drillships normally require water depths of at least 200 feet to conduct operations. Drillships are suitable for deepwater drilling in moderate weather environments and in remote locations because of their mobility and large load-carrying capacity. SEMISUBMERSIBLE RIGS. Our semisubmersible rigs are floating platforms that, by means of a water ballasting system, can be submerged to a predetermined depth so that a substantial portion of the lower hulls, or pontoons, are below the water surface during drilling operations. The rig is "semisubmerged," remaining afloat in a position where the lower hull is about 60 to 80 feet below the water line and the upper deck protrudes well above the surface. This type of rig maintains its position over the well through the use of either an anchoring system or a computer-controlled thruster system similar to those described above. JACKUP RIGS. The jackup rigs we operate are mobile, self-elevating drilling platforms equipped with legs that can be lowered to the ocean or lake floor until a foundation is established to support the drilling platform. The rig legs may have a lower hull or mat attached to the bottom to provide a more stable foundation in soft bottom areas. Independent leg rigs are better suited for harsher or uneven seabed conditions. Jackup rigs are generally subject to a maximum water depth of approximately 350 to 400 feet, while some jackup rigs may drill in water depths as shallow as ten feet. The water depth limit of a particular rig is determined by the length of the rig's legs and the operating environment. Moving a rig from one drill site to another involves lowering the hull into the water until it is afloat and then jacking up its legs with the hull floating on the surface of the water. The hull is then towed to the new drilling site. A cantilever jackup has a feature that allows the drilling platform to be extended out from the hull, allowing it to perform drilling or workover operations over a preexisting platform or structure. Certain cantilever jackup rigs have "skid-off" capability, which allows the derrick equipment to be skidded onto an adjacent platform, thereby 5 increasing the operational capacity of the rig. Slot type jackup rigs are configured for drilling operations to take place through a slot in the hull. Slot type rigs are usually used for exploratory drilling because their configuration makes them difficult to position over existing platforms or structures. TENDER-ASSISTED RIGS. Our tender-assisted rigs are generally non-self-propelled barges moored alongside a platform and containing crew quarters, mud pits, mud pumps and power generation systems. The only equipment transferred to the platform for drilling or workover operations is the derrick equipment set consisting of the substructure, drillfloor, derrick and drawworks. As a result, tender-assisted rigs are less hazardous and allow smaller, less costly platforms to be used for development projects. Self-erecting tenders carry their own derrick equipment set and have a crane capable of erecting the derrick on the platform, thereby eliminating the cost associated with a separate derrick barge and related equipment. BARGE RIGS. We operate barge rigs on Lake Maracaibo, Venezuela that have been designed to work in a floating mode with a cantilever feature and a mooring system that enables the rig to operate in waters up to 150 feet deep. In Nigeria, we operate a posted swamp barge rig. This rig is held on location by legs or posts that are jacked down into the sea floor before commencement of work. PLATFORM RIGS. Our platform rigs consist of drilling equipment and machinery arranged in modular packages that are transported to and assembled and installed on fixed offshore platforms owned by the customer. Fixed offshore platforms are steel, tower-like structures that stand on the ocean floor, with the top portion, or platform, above the water level, providing the foundation upon which the platform rig is placed. Platform rigs are often used to provide drilling and horizontal reentry services using top drives, enhanced pumps and solids control equipment for drilling fluids, as well as for workover services. LAND-BASED RIGS We have presented in the table below information about our land-based rig fleet as of March 18, 1999: LAND-BASED RIGS
COUNTRY TOTAL DRILLING WORKOVER - - ------------------------------------- ----- -------- -------- SOUTH AMERICA -- 230 Argentina....................... 142 36 106 Venezuela....................... 48 14 34 Colombia........................ 21 13 8 Bolivia......................... 19 10 9 AFRICA/MIDDLE EAST -- 10 Algeria......................... 4 4 -- Libya........................... 2 1 1 Oman............................ 3 3 -- Bahrain......................... 1 1 -- OTHER -- 11.......................... 11 3 8 ----- --- --- Total Land-Based Rigs...... 251 85 166 ===== === ===
A land-based drilling rig consists of engines, drawworks, a mast substructure, pumps to circulate the drilling fluid, blowout preventers, drill string and related equipment. The engines power a rotary table that turns the drill string, causing the drill bit to bore through the subsurface rock layers. Rock cuttings are carried to the surface by the circulating drilling fluid. The intended well depth and the drilling site conditions are the principal factors that determine the size and type of rig most suitable for a particular drilling job. A land-based well servicing rig consists of a mobile carrier, engine, drawworks and derrick. The primary function of a well servicing rig is to act as a hoist so that pipe, rods and down-hole equipment can be run into and out of a well. All of our well servicing rigs can be readily moved between well sites and between geographic areas of operations. 6 SERVICES PROVIDED DRILLING SERVICES We provide contract drilling services to oil and gas exploration and production companies through the use of mobile offshore and land-based drilling rigs. Generally, land-based rigs and offshore platform rigs operate with crews of six to 17 persons while semisubmersible rigs, jackup rigs, tender-assisted rigs and barge rigs operate with crews of 15 to 25 persons. We provide the rig and drilling crew and are responsible for the payment of operating and maintenance expenses. MAINTENANCE AND WORKOVER SERVICES Maintenance services are required on producing oil and gas wells to ensure efficient, continuous operation. These services consist of mechanical repairs necessary to maintain production from the well, such as repairing parted sucker rods, replacing defective down-hole pumps in an oil well or replacing defective tubing in a gas well. We provide the rigs, equipment and crews for these maintenance services, which are performed on both oil and gas wells but which are more often required on oil wells. Many of our rigs also have pumps and tanks that can be used for circulating fluids into and out of the well. Typically, maintenance jobs are performed on a series of wells in geographic proximity to each other, take less than 48 hours per well to complete and require little, if any, revenue-generating equipment other than a rig. In addition to periodic maintenance, producing oil and gas wells occasionally require major repairs or modifications, called "workovers." Workover services include the opening of new producing zones in an existing well, recompletion of a well in which production has declined, drilling out plugs and packers and the conversion of a producing well to an injection well during enhanced recovery operations. These extensive workover operations are normally performed by a well servicing rig with additional specialized accessory equipment, which may include rotary drilling equipment, mud pumps, mud tanks and blowout preventers, depending upon the particular type of workover operation. Most of our rigs are designed and equipped to handle the more complex workover operations. A workover may last from a few days to several weeks. ENGINEERING SERVICES We employ a technical staff dedicated to industry research and development and to designing specialized drilling equipment to fulfill specific customer requirements. The engineering staff has designed and managed the fabrication of several of the rigs in our offshore rig fleet and is actively involved in our newbuild projects. We also provide turnkey, project management and other engineering services, which enhance our contract drilling services. COMPETITION Competition in the international markets in which we operate ranges from large multinational competitors offering a wide range of well servicing and drilling services to smaller, locally owned businesses. We believe that we are competitive in terms of pricing, performance, equipment, safety, availability of equipment to meet customer needs and availability of experienced, skilled personnel in those international areas in which we operate. Drilling contracts are generally awarded on a competitive bid basis and, while an operator may consider quality of service and equipment, intense price competition is the primary factor in determining which contractor, among those with suitable rigs, is awarded a job. Certain of our competitors have greater financial resources than us, which may enable them to better withstand periods of low utilization, to compete more effectively on the basis of price, to build new rigs or to acquire existing rigs. CUSTOMERS We work for large multinational oil and gas companies, government-owned oil companies and independent oil and gas producers. In 1998, we had two customers, PDVSA and Perez Companc S.A., that accounted for more than 10% of our consolidated revenues. 7 CONTRACTS Our drilling contracts are awarded through competitive bidding or on a negotiated basis. The contract terms and rates vary depending on competitive conditions, the geographical area, the geological formation to be drilled, the equipment and services to be supplied, the on-site drilling conditions and the anticipated duration of the work to be performed. Oil and gas well drilling contracts are carried out on either a dayrate, footage or turnkey basis. Under dayrate contracts, we charge the customer a fixed charge per day regardless of the number of days needed to drill the well. In addition, dayrate contracts usually provide for a reduced day rate (or lump sum amount) for mobilizing the rig to the well location and for assembling and dismantling the rig. Under dayrate contracts, we ordinarily bear no part of the costs arising from down-hole risks (such as time delays for various reasons, including a stuck or broken drill string or blowouts). Most of our contracts are on a dayrate basis. Other contracts provide for payment on a footage basis, whereby we are paid a fixed amount for each foot drilled regardless of the time required or the problems encountered in drilling the well. We may also enter into turnkey contracts, whereby we agree to drill a well to a specific depth for a fixed price and to bear some of the well equipment costs. Compared to dayrate contracts, footage and turnkey contracts involve a higher degree of risk to us and, accordingly, normally provide greater profit potential. In international offshore markets, contracts generally provide for longer terms than contracts in domestic offshore markets. When contracting abroad, we are faced with the risks of currency fluctuation and, in certain cases, exchange controls. Typically, we limit these risks by obtaining contracts providing for payment in U.S. dollars or freely convertible foreign currency. To the extent possible, we seek to limit our exposure to potentially devaluating currencies by matching our acceptance thereof to our expense requirements in such local currencies. We can give no assurance that we will be able to continue to take such actions 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. Currently, foreign exchange in the countries where we operate is carried out on a free-market basis. We can give no assurances, however, that the local monetary authorities in these countries will not implement exchange controls in the future. Please read "Quantitative and Qualitative Disclosure About Market Risk." SEASONALITY In general, our business activities are not significantly affected by seasonal fluctuations. Our rigs are located in geographical areas that are not subject to severe weather that would halt operations for prolonged periods. EMPLOYEES We currently employ approximately 7,500 employees. Approximately 1,200 of our employees are located in the United States and 6,300 are located abroad. Hourly rig crew members constitute the vast majority of employees. None of our U.S. employees are represented by a collective bargaining unit. Many of our international employees are subject to industry-wide labor contracts within their respective countries. Management believes that our employee relations are good. SEGMENT INFORMATION Information with respect to revenues, earnings from operations and identifiable assets attributable to our industry segments and geographic areas of operations for the last three fiscal years is presented in Note 14 to our Consolidated Financial Statements included in Item 8 of this Report. RISK FACTORS LOW OIL AND GAS PRICES HAVE NEGATIVELY AFFECTED OUR FINANCIAL RESULTS AND MAY CONTINUE TO DO SO IN THE FUTURE. The profitability of our operations depends significantly upon conditions in the oil and gas industry and, specifically, the level of ongoing exploration and production expenditures of oil and gas company customers. The demand for contract drilling and related services is directly influenced by oil and gas prices, 8 expectations about future prices, the cost of producing and delivering oil and gas, government regulations, local and international political and economic conditions, as well as the ability of the Organization of Petroleum Exporting Countries to set and maintain production levels and prices, the level of production by non-OPEC countries and the policies of the various governments regarding exploration and development of their oil and gas reserves. The continuing weakness in worldwide oil and gas prices, which began in the fourth quarter of 1997, is depressing both offshore drilling activity, particularly in the U.S. Gulf of Mexico, and international land-based activity. As product prices have declined, companies exploring for oil and gas have curtailed or cancelled some of their drilling programs, thereby reducing demand for drilling services. This reduction in demand has significantly eroded dayrates and utilization of our rigs, particularly in our offshore Gulf of Mexico and, to a lesser extent, our onshore South American operations. This erosion in dayrates and utilization is currently having a negative impact on our financial results. We expect that current market conditions will continue at least through 1999 and that these conditions will adversely affect our results for the year. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Outlook" in Item 7 of this Report for further information about how we expect the current business environment to affect our future financial results. INTERNATIONAL EVENTS MAY HURT OUR OPERATIONS. We derive a significant portion of our revenues from international operations. Risks associated with operating in international markets include the following: o foreign exchange restrictions and currency fluctuations o changes in foreign tax rates o political instability o foreign and domestic monetary and tax policies o expropriation o nationalization o nullification or modification of contracts o war and civil disturbances Additionally, our ability to compete in international contract drilling markets may be adversely affected by foreign governmental regulations that favor or require the awarding of contracts to local contractors or by regulations requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Furthermore, our foreign subsidiaries may face governmentally imposed restrictions from time to time on their ability to transfer funds to us. DELAYS OR COST OVERRUNS IN OUR CONSTRUCTION AND REFURBISHMENT PROJECTS COULD MATERIALLY AFFECT OUR RESULTS OF OPERATIONS. We have expended, and in 1999 will continue to expend, significant amounts to complete construction of new rigs, including our two drillships, and, to a lesser extent, to upgrade and refurbish other rigs. In addition, we have made and may continue to make equity contributions to the AMETHYST joint ventures, which are constructing four new semisubmersible rigs. These projects are subject to the risks of delay or cost overruns inherent in construction projects. These risks include: o unforeseen engineering problems o work stoppages o weather interference o unanticipated cost increases o delays in receipt of necessary equipment o inability to obtain the requisite permits or approvals 9 Significant construction cost overruns could have a material adverse effect on our financial position and cash flows. Significant delays could also have a material adverse effect on our contract commitments for such rigs. OUR DEBT ARRANGEMENTS MAY LIMIT OUR FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN PURSUING OTHER BUSINESS OPPORTUNITIES. As of December 31, 1998, we had approximately $970.5 million in long-term debt, net of current portion. The level of our indebtedness will have several important effects on our future operations, including: o a significant portion of our cash flow from operations will be dedicated to the payment of interest and principal on such debt and will not be available for other purposes o covenants contained in our existing debt arrangements require us to meet financial tests, which may affect our flexibility in planning for, and reacting to, changes in our business o our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited. Our ability to meet our debt service obligations and to reduce our total indebtedness will be dependent upon our future performance, which will be subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. WE ARE SUBJECT TO HAZARDS CUSTOMARY IN THE OILFIELD SERVICE INDUSTRY AND TO THOSE MORE SPECIFIC TO MARINE OPERATIONS. WE MAY NOT HAVE INSURANCE TO COVER ALL THESE HAZARDS. Our operations are subject to the many hazards customary in the oilfield services industry. Contract drilling and well servicing require the use of heavy equipment and exposure to hazardous conditions, which may subject us to liability claims by employees, customers and third parties. These hazards can cause personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations. Our offshore fleet is also subject to hazards inherent in marine operations, either while on site or during mobilization, such as capsizing, sinking and damage from severe weather conditions. In certain instances, contractual indemnification of customers or others is required of us. We maintain workers' compensation insurance for our employees and other insurance coverage for normal business risks, including general liability insurance. Although we believe our insurance coverage to be adequate and in accordance with industry practice against normal risks in our operations, any insurance protection may not be sufficient or effective under all circumstances or against all hazards to which we may be subject. The occurrence of a significant event against which we are not fully insured, or of a number of lesser events against which we are insured, but subject to substantial deductibles, could materially and adversely affect our operations and financial condition. Moreover, we may not be able to maintain adequate insurance in the future at rates or on terms we consider reasonable or acceptable. GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL LIABILITIES MAY ADVERSELY AFFECT OUR OPERATIONS. Many aspects of our operations are subject to numerous governmental regulations that may relate directly or indirectly to the contract drilling and well servicing industries, including those relating to the protection of the environment. Laws and regulations protecting the environment have become more stringent in recent years and may impose strict liability, rendering us liable for environmental damage 10 without regard to negligence or fault on our part. These laws and regulations may expose us to liability for the conduct of, or conditions caused by, others or for acts that were in compliance with all applicable laws at the time the acts were performed. The application of these requirements or the adoption of new requirements could have a material adverse effect on us. In addition, the modification of existing laws or regulations or the adoption of new laws or regulations curtailing exploratory or development drilling for oil and gas could have a material adverse effect on our operations by limiting future contract drilling opportunities. From time to time, certain of our foreign subsidiaries operate in countries such as Libya and Iran that are subject to sanctions and embargoes imposed by the U.S. Government. Although these sanctions and embargoes do not prohibit those subsidiaries from completing existing contracts or from entering into new contracts to provide drilling services in such countries, they do prohibit us and our domestic subsidiaries, as well as employees of our foreign subsidiaries who are U.S. citizens, from participating in or approving any aspect of the business activities in those countries. These constraints on our ability to have U.S. persons provide managerial oversight and supervision may adversely affect the financial or operating performance of such business activities. ITEM 2. PROPERTY Our property consists primarily of mobile offshore and land-based drilling rigs, well servicing rigs and ancillary equipment, most of which we own. We operate some rigs under joint venture arrangements, operating agreements or lease agreements. We also own and operate transport and heavy-duty trucks and other ancillary equipment. We own approximately 775 vehicles and lease approximately 100 others. Our corporate office in Houston, Texas occupies approximately 40,000 square feet of leased space under leases that expire in February 2005. In Argentina, we lease 4,500 square feet of office space in Buenos Aires and own five operating bases and lease three others. In Venezuela, we lease two operating bases with an office facility at one. In Colombia, we lease office space in Bogota and two operating bases. In France, we lease approximately 18,000 square feet of office space. Shore-based operations for our Gulf of Mexico operations are conducted from our owned facility in Houma, Louisiana. The shore facility is located on the Intracoastal waterway and provides direct access to the Gulf of Mexico. ITEM 3. LEGAL PROCEEDINGS We are routinely involved in litigation incidental to our business, which often involves claims for significant monetary amounts, some of which would not be covered by insurance. In the opinion of management, none of the existing litigation will have a material adverse effect on our financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of our security holders during the fourth quarter of 1998. 11 EXECUTIVE OFFICERS OF THE REGISTRANT We have presented below information about our executive officers as of March 18, 1999. Officers are elected annually by the Board of Directors and serve until their successors are chosen or until their resignation or removal.
NAME AGE POSITION - - ------------------------------------- --- ----------------------------------------------------------- Paul A. Bragg........................ 43 President, Chief Executive Officer and Chief Operating Officer James W. Allen....................... 55 Senior Vice President -- Operations Gerard Godde......................... 56 Vice President -- Business Development John O'Leary......................... 43 Vice President -- International Marketing Earl W. McNiel....................... 40 Vice President and Chief Financial Officer Robert W. Randall.................... 57 Vice President -- General Counsel and Secretary Steven R. Tolson..................... 41 Vice President -- U.S. Operations -- Offshore
PAUL A. BRAGG was appointed Chief Executive Officer of Pride in March 1999 upon the retirement of Ray H. Tolson. He has been our President and Chief Operating Officer since February 1997. He joined Pride in July 1993 as its Vice President and Chief Financial Officer. From 1988 until he joined Pride, Mr. Bragg was an independent business consultant and managed private investments. He previously served as Vice President and Chief Financial Officer of Energy Service Company, Inc. (now ENSCO International, Inc.) ("ENSCO"), an oilfield services company, from 1983 through 1987. JAMES W. ALLEN was named Senior Vice President -- Operations in February 1996. He joined Pride in January 1993 as its Vice President -- International Operations (Latin America). From 1988 through 1992, Mr. Allen was an independent business consultant and managed private investments. From 1984 to 1988, he was Vice President Latin America for ENSCO. Mr. Allen has approximately 30 years of oilfield experience with several different companies. GERARD GODDE was appointed Vice President -- Business Development in September 1998. Mr. Godde joined Pride as a Senior Vice President in March 1997 in connection with the Forasol transaction. Mr. Godde served as Senior Vice President and Chief Operating Officer of Forasol from April 1996 until September 1998. He was Managing Director of Forasol from 1987 until September 1998. Mr. Godde joined Forasol in 1968 and has been involved with the management of its various offshore and land operations in Africa, the Middle East and North America. JOHN O'LEARY was named Vice President -- International Marketing in March 1997 in connection with the Forasol transaction. Mr. O'Leary had been Manager, Marketing and Business Development of Forasol since June 1993, with primary responsibility for worldwide business development. Mr. O'Leary joined Forasol S.A. in August 1985. EARL W. MCNIEL has been Vice President and Chief Financial Officer of Pride since February 1997. He joined Pride in September 1994 as its Chief Accounting Officer. From 1990 to 1994, Mr. McNiel served as Chief Financial Officer of several publicly owned waste management companies. From 1987 to 1990, he was employed by ENSCO as Manager, Finance. ROBERT W. RANDALL has been Vice President and General Counsel of Pride since May 1991. He was elected Secretary in 1993. Prior to 1991, he was Senior Vice President, General Counsel and Secretary for Tejas Gas Corporation, a natural gas transmission company. STEVEN R. TOLSON was named Vice President -- U.S. Operations -- Offshore in February 1997. Mr. Tolson has held various management and engineering positions with Pride since 1994. Prior to 1994, Mr. Tolson held various engineering positions with Conoco Inc. 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our common stock is listed on the New York Stock Exchange under the symbol "PDE." Prior to September 10, 1997, our common stock traded on The Nasdaq Stock Market under the symbol "PRDE." As of March 18, 1999, there were 1,913 shareholders of record. We have presented in the table below the range of high and low sales prices of our common stock for the periods shown:
PRICE ----------------- HIGH LOW ---- --- 1997 First Quarter........................ $24 3/8 $ 16 1/4 Second Quarter....................... 24 16 1/2 Third Quarter........................ 37 7/16 22 7/8 Fourth Quarter....................... 37 3/4 20 1998 First Quarter........................ $25 1/2 $ 18 1/8 Second Quarter....................... 27 1/2 16 7/16 Third Quarter........................ 17 1/8 7 11/16 Fourth Quarter....................... 12 5/8 6 1/8
We have not paid any cash dividends on our common stock since becoming a publicly held corporation in September 1988. We currently have a policy of retaining all available earnings for the development and growth of our business and do not anticipate paying dividends on our common stock at any time in the foreseeable future. Our ability to pay cash dividends in the future is restricted by the covenants related to our debt. The desirability of paying dividends could also be materially affected by U.S. and foreign tax considerations. 13 ITEM 6. SELECTED FINANCIAL DATA We have derived the following selected consolidated financial information as of December 31, 1998 and 1997, and for each of the years in the three-year period ended December 31, 1998, from our audited consolidated financial statements included in this Report. You should read this information in conjunction with those consolidated financial statements and the notes thereto. We have derived the selected consolidated financial information as of December 31, 1996, 1995 and 1994, and for each of the years in the two-year period ended December 31, 1995, from our audited consolidated financial statements that are not included herein. Please read "Management's Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 1994 1995 1996 1997 1998 ---------- ---------- ---------- ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Revenues............................. $ 182,336 $ 263,599 $ 407,174 $ 699,788 $ 835,563 Operating costs...................... 139,653 187,203 292,599 458,861 529,844 Depreciation and amortization........ 9,550 16,657 29,065 58,661 79,931 Selling, general and administrative..................... 25,105 32,418 45,368 73,881 84,825 ---------- ---------- ---------- ------------ ------------ Earnings from operations............. 8,028 27,321 40,142 108,385 140,963 Other income (expense) net(1)........ 106 (4,898) (9,323) 47,249 (38,720) ---------- ---------- ---------- ------------ ------------ Earnings before income taxes(1)...... 8,134 22,423 30,819 155,634 102,243 Income tax provision................. 1,920 7,064 8,091 51,639 24,726 ---------- ---------- ---------- ------------ ------------ Net earnings(1)(2)................... $ 6,214 $ 15,359 $ 22,728 $ 103,995 $ 77,517 ========== ========== ========== ============ ============ Net earnings per share(1)(2) Basic........................... $ .30 $ .63 $ .85 $ 2.42 $ 1.55 ========== ========== ========== ============ ============ Diluted......................... $ .30 $ .61 $ .77 $ 2.16 $ 1.39 ========== ========== ========== ============ ============ Weighted average shares outstanding Basic........................... 20,418 24,551 26,719 43,036 50,135 Diluted......................... 20,650 25,128 33,755 49,143 60,851 BALANCE SHEET DATA (AS OF DECEMBER 31): Working capital...................... $ 26,640 $ 31,302 $ 62,722 $ 103,733 $ 84,603 Property and equipment, net.......... 139,899 178,488 375,249 1,171,647 1,725,787 Total assets......................... 205,193 257,605 542,062 1,541,501 2,192,167 Long-term debt, net of current portion............................ 42,096 61,136 106,508 435,100 630,520 Zero coupon convertible subordinated debentures......................... -- -- -- -- 237,327 6 1/4% convertible subordinated debentures......................... -- -- 80,500 52,500 52,480 Shareholders' equity................. 111,385 131,239 201,797 685,157 763,402
- - ------------ (1) Other income (expense) net, earnings before income taxes and net earnings for the year ended December 31, 1997 include a pretax gain of $83.6 million ($53.5 million, net of income tax) on the divestiture of our U.S. land-based well servicing business. The gain was partially offset by non-recurring charges totaling $4.2 million, net of income taxes, relating principally to the induced conversion of $28.0 million principal amount of our 6 1/4% convertible subordinated debentures. Excluding such non-recurring items, net earnings for the year ended December 31, 1997 were $54.7 million, or $1.16 per share. (2) Net earnings for the year ended December 31, 1998 include charges totaling $3.8 million, net of income taxes, related to work force reductions primarily in response to decreased activity levels. 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis in conjunction with our consolidated financial statements as of December 31, 1998 and 1997, and for the years ended December 31, 1998, 1997 and 1996, included in this Report. The following information contains forward-looking statements. Please read "Forward-Looking Statements" for a discussion of limitations inherent in such statements. GENERAL Our operations have been, and our future results will be, significantly affected by a series of strategic transactions that have transformed us from solely a provider of land-based workover and related well services in the United States into a diversified international drilling contractor operating both offshore and on land. With the sale of our domestic land-based well servicing operations in February 1997, we have ceased to provide rig services onshore in the United States. Since 1996, we entered into a number of transactions that have significantly expanded our international and domestic offshore operations, including the following: o In April 1996, we acquired Quitral-Co S.A.I.C. ("Quitral-Co") from Perez Companc S.A. and other shareholders. The 23 land-based drilling and 57 land-based workover rigs in Argentina and seven land-based drilling and 23 land-based workover rigs in Venezuela operated by Quitral-Co were combined with our existing land-based operations in those countries. We have further expanded international operations by deploying 35 rigs from our former U.S. land-based fleet primarily to Argentina and Venezuela and by acquiring four rigs from an Argentine competitor. o In October 1996, we expanded our Colombian operations through the acquisition of Ingeser de Colombia, S.A. ("Ingeser"), which operated seven land-based drilling rigs and six workover rigs in Colombia. o In November 1996, we added three land-based drilling rigs and support assets to our operations in Argentina through the acquisition of the assets of another contractor. o In February 1997, we completed the divestiture of our domestic land-based well servicing operations, which included 407 workover rigs operating in Texas, California, New Mexico and Louisiana. o In March 1997, we completed the Forasol acquisition, adding two semisubmersible rigs, three jackup rigs, seven tender-assisted rigs, four barge rigs and 29 land-based rigs operating in various locations in South America, Africa, the Middle East and Southeast Asia. o In May 1997, we purchased 13 mat-supported jackup drilling rigs, 11 of which are currently located in the Gulf of Mexico, one of which is located in West Africa and one of which is located in Southeast Asia. o In July 1998, we acquired 60% of a Bolivian company, Compania Boliviana de Perforacion S.A.M. ("CBP"), in a joint initiative with the Bolivian national oil company, Yacimientos Petroliferos Fiscales Bolivianos ("YPFB"). CBP was capitalized through the contribution of 13 land-based drilling and workover rigs, oilfield trucks and other related drilling assets by YPFB and $17 million in cash by us. o In October 1998, we purchased the AMETHYST 1, a dynamically positioned, self-propelled semisubmersible drilling rig. The rig is currently working offshore Brazil under a charter and service contract that expires in 2001. OUTLOOK With industry conditions at depressed levels, management anticipates that we will experience a continuation of relatively low dayrates and utilization in the near term. We expect our aggregate dayrates and utilization to continue to decrease as higher margin long-term contracts now ongoing expire. In addition, we currently have five jackup rigs and nine platform rigs idle in the Gulf of Mexico, where our 15 contracts have traditionally been and continue to be short-term. Accordingly, we currently anticipate that our financial results for the next several quarters will be significantly lower than the results for the same periods in 1998. Due to the short-term nature of many of our contracts, primarily in the Gulf of Mexico, and the unpredictable nature of oil and gas prices, which affect the demand for drilling activity, we cannot predict the extent of such adverse change accurately. The duration of this market downturn also depends on many factors that cannot be accurately predicted. Management anticipates that the offshore drilling markets will be unsettled for at least the balance of 1999, and possibly longer, but remains positive on the long-term outlook for the industry and for us. The deteriorating industry conditions over the latter part of 1998 led us to reduce our workforce significantly. In the fourth quarter of 1998, we recorded charges totaling $3.8 million, net of income taxes, related to these workforce reductions. We are continuing to reduce operating costs in 1999 through regional base consolidations, downsizing of administrative staff and other reductions in personnel throughout the company. In connection with this effort, we expect to incur additional non-recurring charges in the range of $20 to $25 million during the first quarter of 1999, which are expected to result in a similar amount of annual cost savings. RESULTS OF OPERATIONS We have presented in the following table selected consolidated financial information by operating segment for the periods indicated:
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1996 1997 1998 --------------------- --------------------- --------------------- (DOLLARS IN THOUSANDS) Revenues: United States land.............. $ 117,142 28.8% $ 16,485 2.4% $ -- -- % United States offshore.......... 57,450 14.1 135,281 19.3 160,829 19.2 International land.............. 218,562 53.7 385,590 55.1 401,899 48.1 International offshore.......... 14,020 3.4 162,432 23.2 272,835 32.7 ---------- --------- ---------- --------- ---------- --------- Total revenues............. $ 407,174 100.0% $ 699,788 100.0% $ 835,563 100.0% ========== ========= ========== ========= ========== ========= Operating Costs: United States land.............. $ 88,955 30.4% $ 12,776 2.8% $ -- -- % United States offshore.......... 41,755 14.3 72,927 15.9 90,311 17.1 International land.............. 156,833 53.6 276,185 60.2 293,073 55.3 International offshore.......... 5,056 1.7 96,973 21.1 146,460 27.6 ---------- --------- ---------- --------- ---------- --------- Total operating costs...... $ 292,599 100.0% $ 458,861 100.0% $ 529,844 100.0% ========== ========= ========== ========= ========== ========= Gross Margin: United States land.............. $ 28,187 24.6% $ 3,709 1.5% $ -- -- % United States offshore.......... 15,695 13.7 62,354 25.9 70,518 23.1 International land.............. 61,729 53.9 109,405 45.4 108,826 35.6 International offshore.......... 8,964 7.8 65,459 27.2 126,375 41.3 ---------- --------- ---------- --------- ---------- --------- Total gross margin......... $ 114,575 100.0% $ 240,927 100.0% $ 305,719 100.0% ========== ========= ========== ========= ========== =========
1998 COMPARED WITH 1997 REVENUES. Revenues for 1998 increased $135.8 million, or 19%, as compared to 1997. Of this increase approximately $73.0 million was due to a full year of operations for the Forasol acquisition completed in March 1997 and the 13 mat-supported jackup rigs acquired in May 1997. Also, during 1998, we placed four previously idle jackup rigs into service accounting for approximately $53.0 million of the increase. Additionally, $28.0 million of the increase in revenues is related to increased contract dayrates and utilization for our two semisubmersible rigs. In South America, we had a 29% increase in average dayrates, 16 or approximately $10 million, offset by a 16% decrease in overall utilization, or approximately $8 million. The remaining decrease, or $16 million, relates to the sale of our domestic land-based well servicing operations in February 1997. OPERATING COSTS. Operating costs for 1998 increased $71.0 million, or 15%, as compared to 1997. Of this increase approximately $52.0 million was due to a full year of operations for the assets acquired in the Forasol acquisition completed in March 1997 and the 13 mat-supported jackup rigs acquired in May 1997. We also incurred charges of $3.8 million, net of income taxes, related to workforce reductions primarily in response to decreased activity levels. Also, during 1998, we placed four jackup rigs into service accounting for approximately $20.0 million of the increase. These increases were partially offset by $12.8 million in reduced costs due to the sale of the domestic land-based servicing operations. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1998 increased $21.3 million, or 36%, as compared to 1997, primarily as a result of a full year of depreciation for the Forasol assets acquired in March 1997 and the 13 mat-supported jackup rigs acquired in May 1997 and four jackup rigs placed into service during 1998. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative costs in 1998 increased $10.9 million, or 15%, as compared to 1997, primarily as a result of a full year of operations for the Forasol acquisition completed in March 1997 and the 13 mat-supported jackup rigs acquired in May 1997. As a percentage of revenues, total selling, general and administrative costs decreased to 10.2% for 1998 from 10.6% for 1997. OTHER INCOME (EXPENSE). Interest expense for 1998 increased $11.4 million, or 33%, as compared to 1997. This increase is due to higher debt levels in 1998, resulting primarily from the issuance of $230 million of Zero Coupon Subordinated Debentures in April 1998, and from recognition of a full year of interest expense in 1998 on $325 million of 9 3/8% Senior Notes issued in May 1997. During 1998 we capitalized approximately $16.3 million in interest expense related to capital projects, as compared to approximately $5.7 million in 1997. INCOME TAX PROVISION (BENEFIT). Our consolidated effective income tax rate for 1998 was approximately 24%, as compared to approximately 33% for 1997. The decrease was attributable to the significant increase in income from foreign operations, which is taxed at lower statutory rates, and the reduction in U.S. income, which is taxed at a higher statutory rate. In addition, the effective tax rate for 1997 was significantly impacted by the gain from the sale of our U.S. land-based well servicing operations, which was taxed at an effective rate of 36%. 1997 COMPARED WITH 1996 REVENUES. Revenues for 1997 increased $292.6 million, or 72%, as compared to 1996. This increase was due primarily to the expansion of our Gulf of Mexico and international operations as follows: (i) $201.3 million was related to the operations acquired in the Forasol acquisition in March 1997, (ii) $70.2 million was related to the operations of the mat-supported jackup rigs acquired in May 1997 and (iii) $50.0 million was related to the incremental full-year effect of the operations acquired in the April 1996 acquisition of Quitral-Co. The remaining increase in revenue was due to the net addition of five land-based drilling rigs and two barge rigs in South America combined with increased contract drilling dayrates from ongoing operations. This increase was partially offset by a reduction of $100.0 million in revenue related to the divestiture of our domestic land-based well servicing operations. OPERATING COSTS. Operating costs for 1997 increased $166.3 million, or 57%, as compared to 1996. This increase was due primarily to the acquisitions and asset purchases discussed above as follows: (i) $130.4 million was related to the operations acquired in the Forasol acquisition in March 1997, (ii) $30.1 million was related to the operations of the mat-supported jackup rigs acquired in May 1997 and (iii) $20.0 million was related to the incremental full-year effect of the operations acquired in the April 1996 acquisition of Quitral-Co. The remaining increase in operating costs was due to the net addition of four land-based drilling rigs and two barge rigs in South America combined with increased labor costs from ongoing operations in Venezuela. This increase in operating costs was partially offset by a reduction of $90.0 million related to the divestiture of our domestic land-based well servicing operations. 17 DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1997 increased $29.6 million, or 102%, as compared to 1996, primarily as a result of the acquisitions of Forasol, Quitral-Co and the mat-supported jackup rigs, and depreciation of new, refurbished and upgraded rigs placed in service during the year, which increase was partially offset by the sale of our domestic land-based well servicing operations. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative costs in 1997 increased approximately $28.5 million, or 63%, as compared to 1996, primarily as a result of the acquisitions of Forasol, Quitral-Co and the mat-supported jackup rigs, which increase was partially offset by the sale of our domestic land-based well servicing operations. As a percentage of revenues, total selling, general and administrative costs decreased from 11.1% for 1996 to 10.5% for 1997. OTHER INCOME (EXPENSE). Other income (expense) resulted in income of $47.2 million in 1997 as compared to expense of $9.3 million in 1996. Other income and expense included interest income, interest expense, net gains or losses from sale of assets, minority interests, foreign exchange gains or losses and other sources. We incurred a gain of $83.6 million from the sale of our domestic land-based well servicing operations in February 1997. This gain was partially offset by a charge of approximately $3.7 million relating to the induced conversion of $28.0 million of our 6 1/4% convertible subordinated debentures and other charges. Interest expense for 1997 increased $20.7 million, or 152%, as compared to 1996. This increase was due primarily to our issuance of $325 million in senior notes in May 1997. During 1997 we capitalized approximately $5.7 million in interest expense related to capital projects, as compared to approximately $2.0 million in 1996. INCOME TAX PROVISION (BENEFIT). Our consolidated effective income tax rate for 1997 was approximately 33%, as compared to approximately 26% for 1996. The increase in the effective tax rate resulted from the effects of (i) certain non-deductible amounts, primarily $3.7 million of costs related to the induced conversion of $28.0 million of our 6 1/4% convertible subordinated debentures, (ii) an estimated effective combined U.S. federal and state income tax rate of 36% on the gain from the sale of our U.S. land-based well servicing operations and (iii) an estimated effective income tax rate of 29% on ongoing operations. LIQUIDITY AND CAPITAL RESOURCES We had net working capital of $84.6 million and $103.7 million at December 31, 1998 and 1997, respectively. Our current ratio was 1.3 and 1.5 at December 31, 1998 and December 31, 1997, respectively. Capital expenditures in 1998 consisted primarily of the following (in millions): New Construction..................... $ 313 Enhancements......................... 176 Sustaining........................... 59 Other................................ 7 --------- 555 --------- Acquisitions: AMETHYST 1...................... 85 CPB (60% ownership)............. 17 --------- 102 --------- Total 1998 capital expenditures................. $ 657 =========
We expect to spend an additional $235 million during 1999 to complete construction of the PRIDE AFRICA and the PRIDE ANGOLA and an additional $35 million to complete certain other construction and refurbishment projects begun in 1998. We expect enhancement and sustaining capital expenditures in 1999 to be substantially lower than in 1998. In March 1997, we entered into a senior secured revolving credit facility with a group of banks (as amended and restated, the "Credit Facility") under which up to $100 million (including $25.0 million for letters of credit) was initially available. Availability under the Credit Facility is limited to a borrowing base 18 based on the value of collateral. The Credit Facility is collateralized by our accounts receivable, inventory and other assets and those of our domestic subsidiaries, two-thirds of the stock of our foreign subsidiaries, the stock of our domestic subsidiaries and certain other assets. The Credit Facility terminates in December 2000. Borrowings under the Credit Facility bear interest at a variable rate based on either the prime rate or LIBOR, which was 9.00% at December 31, 1998. The Credit Facility limits our ability to incur additional indebtedness, create liens, enter into mergers and consolidations, pay cash dividends on our capital stock, make acquisitions, sell assets or change our business without prior consent of the lenders. Under the Credit Facility, we must maintain certain financial ratios, including (i) funded debt to EBITDA, (ii) funded debt to capitalization, (iii) adjusted EBITDA to debt service and (iv) minimum tangible net worth. As of December 31, 1998, advances totaling $39 million were outstanding under the Credit Facility. In September 1998, the credit facility was amended to allow the funding of the equipment loan for the PRIDE AFRICA. In connection with such amendment, availability under the Credit Facility was reduced to $50 million. In December 1998, the Credit Facility was further amended to allow, among other things, (i) the funding of the construction loan for the PRIDE ANGOLA, (ii) the sale and leaseback of the AMETHYST 1, and (iii) the giving of certain limited guarantees in connection with the financing of two of the newbuild Amethyst rigs. In connection with the construction of two new ultra-deepwater drillships, the PRIDE AFRICA and the PRIDE ANGOLA, the two joint venture companies in which we have a 51% interest have entered into financing arrangements with a group of banks providing that approximately $400 million of the drillships' total estimated construction cost of $470 million will be financed by loans that are, upon delivery of the drillships, without recourse to the joint venture participants. During the construction period, the lenders could have recourse to us with respect to an aggregate of up to $310 million of such loans. As of December 31, 1998, $120 million was outstanding under the construction period loans. We estimate that our total equity investment in the joint ventures will be approximately $38 million. We can give no assurance, however, that additional capital will not be required to complete construction of the drillships. A joint venture company in which we have a 30% interest has entered into a financing arrangement with a group of foreign lenders to provide up to $240 million of the $370 million estimated cost of the two Amethyst rigs under construction in South Korea. Equity contributions by us and our joint venture partner have provided $30 million of such cost. We and our joint venture partner also have committed to find, by October 30, 1999, a third-party funding source for the remaining $100 million or to fund any shortfall in proportion to our respective ownership interests. Accordingly, our liability under such commitment is limited to $30 million. We are pursuing alternative sources for such financing, but there is no assurance that third-party funds will be obtained. In addition, we have provided certain other guarantees, including (1) a guarantee of payment of up to $32.4 million of the loans; (2) a guarantee of cost overruns of up to an aggregate of $6 million; (3) a guarantee of the cost of the two rigs in excess of related refund guarantees supporting their construction contracts and (4) certain other financial and operating-related guarantees. The financing is structured as separate loans to the subsidiaries of the joint venture owning the rigs, cross-collateralized and cross-guaranteed, with a nine-year term. The interest rate for the loans is 12.0% during the construction period and 11.0% upon commencement of operations. As of December 31, 1998, the lenders had advanced $94.7 million. Future advances are subject to the satisfaction of conditions specified in the loan agreements, including satisfactory progress in the rigs' construction. In addition, the joint venture has received a commitment from the United States Maritime Administration ("MARAD") to provide a guarantee of obligations for both construction period and mortgage period financing relating to the construction of the two Amethyst rigs under construction in the United States. The MARAD guarantee covers approximately $300 million of the estimated $340 million cost of the vessels. The joint venture has engaged an arranger for the construction period financing and a placement agent for the mortgage period financing. In connection with the MARAD financing, we have agreed to guarantee payment of up to $20.5 million of late delivery penalties that are accruing and may be payable under the charter and service contracts related to these two rigs. 19 The joint venture has contracts with Petrobras to provide two additional deepwater rigs. The joint venture originally intended to build two additional Amethyst-class rigs. Construction contracts with respect to those two rigs were terminated, however, after the shipyard at which the rigs were to be constructed filed for protection from its creditors. The joint venture partners are currently evaluating alternatives relating to these two contracts, which include: (a) chartering other rigs currently available in the market to fulfill the related Petrobras charter and service contracts, (b) constructing these two additional Amethyst-class rigs at another shipyard or (c) undertaking other mutually acceptable means of fulfilling the charter and service contracts for those two rigs. We can give no assurance, however, that any of these efforts will be successful. In April 1998, we completed a public sale of zero coupon convertible subordinated debentures. The net proceeds from the sale, after deducting underwriting discounts and offering expenses, amounted to approximately $223.1 million. The debentures, which mature on April 24, 2018, are convertible into our common stock at a conversion rate of 13.794 shares of common stock per $1,000 principal amount at maturity. At maturity, the amortized aggregate amount payable under the debentures including accrued original issue discount would be approximately $588.1 million. The sale of the debentures was pursuant to a "shelf" registration statement under the Securities Act of 1933 pursuant to which we may issue up to an additional $270 million of securities consisting of any combination of our debt securities, common stock and preferred stock. In October 1998, we purchased the semisubmersible rig AMETHYST 1 for $85 million. The purchase price consisted of $63.7 million in cash, with the balance financed by a $21.3 million note convertible into our common stock at a conversion price of $28.50 per share for the first year and decreasing $1.00 per share annually thereafter until maturity. The convertible note also bears interest at 6% per annum for the first year and escalates 1% per annum annually commencing December 1, 1998. The note matures on September 1, 2001, and no principal payments are required until maturity. In February 1999, we completed the sale and leaseback of the AMETHYST 1, pursuant to which we received $97 million in cash. The lease is for a maximum term of 13 years, and we have options to purchase the rig exercisable at the end of 8 1/2 years and at the end of the maximum term. Annual rentals on this transaction range from $11.7 million to $15.9 million. Approximately $40 million of the proceeds were used to repay the balance outstanding under the Credit Facility, with the remainder being held for general corporate purposes. Management believes that the cash generated from our operations, together with borrowings under the Credit Facility, will be adequate to fund normal ongoing capital expenditure, working capital and debt service requirements. From time to time, we may review possible expansion and acquisition opportunities relating to our business segments. While we have no definitive agreements to acquire additional equipment, suitable opportunities may arise in the future. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable. From time to time, we have one or more bids outstanding for contracts that could require significant capital expenditures and mobilization costs. We expect to fund acquisitions and project opportunities primarily through a combination of working capital, cash flow from operations and full or limited recourse debt or equity financing. ACCOUNTING MATTERS We have adopted Statement of Financial Accounting Standards ("SFAS") No. 131 "Disclosures about Segments of an Enterprise and Related Information" and SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits" for the year ended December 31, 1998. The adoption of these disclosure standards did not have a material impact on our consolidated financial statements. YEAR 2000 ISSUE BACKGROUND. The "Year 2000" problem refers to the inability of certain computer systems and other equipment with embedded chips or processors to correctly interpret dates after December 31, 1999. Business systems that are not Year 2000 compliant would not be able to correctly process some date-sensitive data or, in extreme situations, could cause the entire system to be disabled. 20 OVERALL GOALS AND OBJECTIVES. Our goal is to have all of our significant systems functioning properly with respect to the Year 2000 problem and to develop contingency plans in the event of disruptions caused by the Year 2000 problem before December 31, 1999. We have established a global task force of key employees at each location to ensure the goal is met. We expect that we will upgrade or replace a majority of our existing significant systems during this process. The task force will also develop the contingency plans as required. These overall goals and objectives are referred to as our "Year 2000 Project Plan." YEAR 2000 PROJECT PLAN. The phases of our Year 2000 Project Plan include: o identifying, inventorying and assigning priorities to existing significant systems o determining and implementing the new Year 2000 compliant systems that we will use throughout the company o assessing all remaining Year 2000 risks o resolving and correcting remaining Year 2000 problems with upgrades or replacements o testing the Year 2000 upgrades or replacements o conducting Year 2000 surveys of significant customers, suppliers and business partners o developing and testing Year 2000 contingency plans Currently, each phase is in various stages of completion. We estimate that our Year 2000 Project Plan is at least 75% complete. BUSINESS SYSTEMS: OPERATIONAL. Part of the Year 2000 Project Plan includes performing an inventory of each drilling rig's critical systems. We are in the process of fully developing and evaluating this inventory, and compiling written documentation regarding compliance. We believe that most of our rigs are Year 2000 compliant, but a full assessment is currently being performed. At this time, we are not able to reasonably assess a likely worst case Year 2000 scenario related to our drilling rigs. KEY BUSINESS PARTNERS. We have initiated communication with our key business partners to seek Year 2000 readiness assurances and to determine the extent to which their failure to correct their own Year 2000 problems could affect us. Our key business partners include suppliers whose critical function is to provide drilling rig equipment essential to the operation of a rig. In the event replacement parts that we do not have in inventory are required for a rig and we are unsuccessful in purchasing the equipment from our suppliers, the rig could experience idle time resulting in loss of revenue. Key business partners also include our customers. Any disruption in the revenue stream generated by our customers could impact our cash flow, results of operations and financial position. Other key business partners also include strategic suppliers whose critical function is to provide systems that are Year 2000 compliant and consultants who can advise and assist us in the implementation of the systems. Any Year 2000 problems with these systems could affect us adversely in terms of lost time or even loss of revenues. We cannot guarantee that any Year 2000 problems in other key business partners' systems on which we rely will be timely resolved, nor can we inspect the companies' Year 2000 efforts or independently verify their representations to us. In addition, we cannot foretell the effect on our business operations from the failure of systems owned by others, from the delivery of inaccurate information from other companies or from the inability of their systems to interface with our systems. Accordingly, we cannot guarantee that other companies' failure to resolve their Year 2000 problems would not have a material adverse effect on us. We are, however, in the process of assessing these risks. COSTS. As of March 18, 1999, we had incurred approximately $8 million in costs primarily for new hardware, new software licenses and outside consultants. Such equipment and systems, which were planned for installation regardless of Year 2000 considerations, are Year 2000 compliant. We estimate that we will incur approximately $5 million of such additional costs in 1999. RISKS. Our expectations regarding the Year 2000 are subject to uncertainties that could affect our results of operations or financial condition. Success depends on many factors, some of which are outside our control. Despite reasonable efforts, we cannot assure that we will not experience any disruptions or 21 otherwise be adversely affected by Year 2000 problems. While we presently do not expect any catastrophic failures of any of our systems, we cannot provide any assurances that such failures will not occur. CONTINGENCY PLANS. We are developing contingency plans for systems and certain processes that are highly and moderately critical to the business operations. The contingency plans will encompass alternative courses of action, with limited reliance on computer software and hardware, in the event that certain of our systems or processes are not Year 2000 compliant. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks arising from the use of financial instruments in the ordinary course of business. These risks arise primarily as a result of potential changes in the fair market value of financial instruments that would result from adverse fluctuations in interest rates and foreign currency exchange rates as discussed below. We entered into these instruments other than for trading purposes. INTEREST RATE RISK. We are exposed to interest rate risk through our convertible and fixed rate long-term debt. The fair market value of fixed rate debt will increase as prevailing interest rates decrease. The fair value of our long-term debt is estimated based on quoted market prices, where applicable, or based on the present value of expected cash flows relating to the debt discounted at rates currently available to us for long-term borrowings with similar terms and maturities. The estimated fair value of our long-term debt as of December 31, 1998 was approximately $818 million, which is less than its carrying value of $947 million. A hypothetical 10% decrease in interest rates and a 10% increase in quoted market prices would increase the fair market value of our long-term debt by approximately $46 million. FOREIGN CURRENCY EXCHANGE RATE RISK. We operate in a number of international areas and are involved in transactions denominated in currencies other than U.S. dollars, which expose us to foreign exchange rate risk. We utilize forward exchange contracts, local currency borrowings and the payment structure of customer contracts to selectively hedge our exposure to exchange rate fluctuations in connection with monetary assets, liabilities and cash flows denominated in certain foreign currencies. A hypothetical 10% decrease in the U.S. dollar relative to the value of all foreign currencies as of December 31, 1998 would result in an approximate $3.0 million decrease in the fair value of our forward exchange contracts. We do not hold or issue forward exchange contracts or other derivative financial instruments for speculative purposes. FORWARD-LOOKING STATEMENTS This Report includes statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this Report that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future, including such matters as future capital expenditures and investments in the construction, acquisition and refurbishment of rigs (including the amount and nature thereof and the timing of completion thereof), repayment of debt, expansion and other development trends of the contract drilling industry, business strategies, expansion and growth of operations and other such matters, are forward-looking statements. These statements are based on assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, including those discussed herein, general economic and business conditions, prices of oil and gas, foreign exchange controls and currency fluctuations, the business opportunities (or lack thereof) that may be presented to and pursued by us, changes in laws or regulations and other factors, many of which are beyond our control. Please read "Business -- Risk Factors." We caution prospective investors that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Pride International, Inc.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, changes in the shareholders' equity and cash flows present fairly, in all material respects, the consolidated financial position of Pride International, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion expressed above. PricewaterhouseCoopers LLP Houston, Texas March 30, 1999 23 PRIDE INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, -------------------------- 1998 1997 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents....... $ 86,540 $ 74,395 Trade receivables, net.......... 187,351 194,973 Parts and supplies.............. 29,161 26,899 Deferred income taxes........... 1,320 2,252 Other current assets............ 65,410 35,691 ------------ ------------ Total current assets....... 369,782 334,210 ------------ ------------ PROPERTY AND EQUIPMENT, net.......... 1,725,787 1,171,647 ------------ ------------ OTHER ASSETS Investments in and advances to affiliates..................... 48,582 9,092 Goodwill and other intangibles, net............................ 3,418 3,623 Other assets.................... 44,598 22,929 ------------ ------------ Total other assets......... 96,598 35,644 ------------ ------------ $ 2,192,167 $ 1,541,501 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable................ $ 151,514 $ 94,736 Accrued expenses................ 79,794 64,994 Short-term borrowings........... 16,522 21,055 Current portion of long-term debt........................... 27,452 38,890 Current portion of long-term lease obligations.............. 9,897 10,802 ------------ ------------ Total current liabilities............ 285,179 230,477 ------------ ------------ OTHER LONG-TERM LIABILITIES.......... 48,987 28,911 LONG-TERM DEBT, net of current portion............................ 630,520 428,603 LONG-TERM LEASE OBLIGATIONS, net of current portion.................... 50,148 42,772 6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES......................... 52,480 52,500 ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES......................... 237,327 -- DEFERRED INCOME TAXES................ 101,302 72,313 MINORITY INTEREST.................... 22,822 768 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY................. Common stock, no par value; 100,000,000 shares authorized; 50,437,261 and 50,097,120 shares issued and 50,383,041 and 50,042,900 shares outstanding, respectively................... 1 1 Paid-in capital................. 523,674 522,946 Treasury stock, at cost......... (191) (191) Retained earnings............... 239,918 162,401 ------------ ------------ Total shareholders' equity................. 763,402 685,157 ------------ ------------ $ 2,192,167 $ 1,541,501 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. 24 PRIDE INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ---------- ---------- ---------- REVENUES............................. $ 835,563 $ 699,788 $ 407,174 OPERATING COSTS...................... 529,844 458,861 292,599 ---------- ---------- ---------- Gross Margin.................... 305,719 240,927 114,575 DEPRECIATION AND AMORTIZATION........ 79,931 58,661 29,065 SELLING, GENERAL AND ADMINISTRATIVE..................... 84,825 73,881 45,368 ---------- ---------- ---------- EARNINGS FROM OPERATIONS............. 140,963 108,385 40,142 ---------- ---------- ---------- OTHER INCOME (EXPENSE) Other income.................... 1,206 77,844 1,902 Interest income................. 5,850 3,773 2,410 Interest expense................ (45,776) (34,368) (13,635) ---------- ---------- ---------- Total other income (expense), net.......... (38,720) 47,249 (9,323) ---------- ---------- ---------- EARNINGS BEFORE INCOME TAXES......... 102,243 155,634 30,819 INCOME TAX PROVISION................. 24,726 51,639 8,091 ---------- ---------- ---------- NET EARNINGS......................... $ 77,517 $ 103,995 $ 22,728 ========== ========== ========== NET EARNINGS PER SHARE............... Basic........................... $ 1.55 $ 2.42 $ .85 Diluted......................... $ 1.39 $ 2.16 $ .77 WEIGHTED AVERAGE SHARES OUTSTANDING Basic........................... 50,135 43,036 26,719 Diluted......................... 60,851 49,143 33,755
The accompanying notes are an integral part of the consolidated financial statements. 25 PRIDE INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK TREASURY TOTAL ---------------- PAID-IN STOCK RETAINED SHAREHOLDERS' SHARES AMOUNT CAPITAL AT COST EARNINGS EQUITY ------ ------ -------- -------- -------- ------------- BALANCE -- DECEMBER 31, 1995............ 24,809 $ 1 $ 95,751 $ (191) $ 35,678 $ 131,239 Net earnings....................... -- -- -- -- 22,728 22,728 Issuance of common stock in public offerings........................ 3,450 -- 45,641 -- -- 45,641 Issuance of common stock in connection with acquisition...... 4 -- 29 -- -- 29 Exercise of stock options.......... 255 -- 1,338 -- -- 1,338 Tax benefit of non-qualified stock options.......................... -- -- 822 -- -- 822 ------ ------ -------- -------- -------- ------------- BALANCE -- DECEMBER 31,1996............. 28,518 1 143,581 (191) 58,406 201,797 Net earnings....................... -- -- -- -- 103,995 103,995 Issuance of common stock in public offerings........................ 7,257 -- 168,400 -- -- 168,400 Issuance of common stock in connection with acquisition...... 11,099 -- 172,422 -- -- 172,422 Issuance of common stock in connection with conversion of debentures....................... 2,286 -- 27,463 -- -- 27,463 Exercise of stock options.......... 883 -- 6,138 -- -- 6,138 Tax benefit of non-qualified stock options.......................... -- -- 4,942 -- -- 4,942 ------ ------ -------- -------- -------- ------------- BALANCE -- DECEMBER 31, 1997............ 50,043 1 522,946 (191) 162,401 685,157 Net earnings....................... -- -- -- -- 77,517 77,517 Issuance of common stock in connection with conversion of debentures....................... 2 -- 20 -- -- 20 Exercise of stock options.......... 338 -- 689 -- -- 689 Tax benefit of non-qualified stock options.......................... -- -- 19 -- -- 19 ------ ------ -------- -------- -------- ------------- BALANCE -- DECEMBER 31, 1998............ 50,383 $ 1 $523,674 $ (191) $239,918 $ 763,402 ====== ====== ======== ======== ======== =============
The accompanying notes are an integral part of the consolidated financial statements. 26 PRIDE INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------- 1998 1997 1996 ----------- ----------- ----------- OPERATING ACTIVITIES Net earnings.................... $ 77,517 $ 103,995 $ 22,728 Adjustments to reconcile net earnings to net cash provided by operating activities -- Depreciation and amortization............ 79,931 58,661 29,065 Discount amortization on zero coupon convertible subordinated debenture............... 7,327 -- -- Gain on sale of assets..... (2,626) (83,845) (815) Effect of exchange rates... (2,080) 3,736 (437) Deferred tax provision..... 34,414 13,692 5,882 Minority interest.......... (59) -- -- Changes in assets and liabilities, net of effects of acquisitions -- Trade receivables..... 7,622 (37,963) (16,438) Parts and supplies.... (2,262) 743 (2,303) Other current assets............. (22,819) -- (2,330) Other assets.......... (21,721) (11,696) -- Accounts payable...... 4,902 32,304 (735) Accrued expenses and other.............. 14,819 (19,063) (13,400) ----------- ----------- ----------- Net cash provided by operating activities.... 174,965 60,564 21,217 ----------- ----------- ----------- INVESTING ACTIVITIES Purchase of net assets of acquired entities, including acquisition costs, less cash acquired...................... (17,000) (360,412) (119,067) Purchases of property and equipment..................... (574,257) (268,307) (61,711) Proceeds from dispositions of property and equipment........ 14,948 131,536 14,438 Proceeds from sales of short-term investments........ -- 836 6,047 Investments in affiliates....... (44,906) (9,020) -- Purchases of short-term investments................... -- (686) (1,045) ----------- ----------- ----------- Net cash used in investing activities.... (621,215) (506,053) (161,338) ----------- ----------- ----------- FINANCING ACTIVITIES Proceeds from issuance of common stock......................... -- 168,400 45,641 Proceeds from exercise of stock options....................... 689 6,138 1,338 Proceeds from minority interest owners........................ 22,113 -- -- Proceeds from issuance of convertible subordinated debentures.................... 223,080 -- 77,585 Proceeds from debt borrowings... 372,886 533,145 89,362 Reduction of debt............... (160,393) (198,965) (72,066) Other........................... 20 856 (724) ----------- ----------- ----------- Net cash provided by financing activities.... 458,395 509,574 141,136 ----------- ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS........................ 12,145 64,085 1,015 CASH AND CASH EQUIVALENTS, beginning of period.......................... 74,395 10,310 9,295 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, end of period............................. $ 86,540 $ 74,395 $ 10,310 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 27 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND BASIS OF PRESENTATION Pride International, Inc. (the "Company") is a Louisiana corporation which was organized in 1988 as the successor to a company originally incorporated in 1968. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt instruments having maturities of three months or less at the date of purchase to be cash equivalents. PARTS AND SUPPLIES Parts and supplies consist of spare rig parts and supplies held for use in operations and are valued at the lower of weighted average cost or estimated market value. PROPERTY AND EQUIPMENT Property and equipment are carried at original cost or adjusted net realizable value, as applicable. Major renewals and improvements are capitalized and depreciated over the respective asset's useful life. Maintenance and repair costs are charged to expense as incurred. When assets are sold or retired, the remaining costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in income. For financial reporting purposes, depreciation of property and equipment is provided using primarily the straight line method based upon expected useful lives of each class of assets. Estimated useful lives of the assets for financial reporting purposes are as follows:
YEARS ----- Rigs and rig equipment............... 5-25 Transportation equipment............. 3-7 Buildings and improvements........... 10-20 Furniture and fixtures............... 5
Rigs and rig equipment have salvage values ranging from $150,000 to $8,000,000 with such values not exceeding 10% of the acquisition cost of the rig. GOODWILL AND OTHER INTANGIBLES Goodwill represents the cost in excess of fair value of the net assets of companies acquired and is being amortized using the straight line method over ten to fifteen years. Other intangible assets represent costs allocated to service contracts, employment contracts, covenants not to compete and client lists acquired in business acquisitions. Other intangible assets are being amortized using the straight line method over their estimated useful lives, which range from three to ten years. REVENUE RECOGNITION The Company recognizes revenue as services are performed based upon contracted day rates and the number of operating days during the period. Revenues from turnkey contracts are generally recognized upon completion. INCOME TAXES The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets 28 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) are determined based on the difference between the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the asset is recovered or the liability is settled. FOREIGN CURRENCY TRANSLATION The Company accounts for translation of foreign currency in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." The Company's Venezuelan and certain other foreign operations are in a "highly inflationary" economy resulting in the use of the U.S. dollar as the functional currency. Therefore, certain assets of this operation are translated at historical exchange rates and all translation gains or losses are reflected in the period's results of operations. In the other countries in which the Company operates, the local currency is considered the functional currency. Translation of assets and liabilities in these countries is made at the prevailing exchange rate as of the balance sheet date. Revenues and expenses are translated at the average rate of exchange on a monthly basis and the resulting gain or loss is included in the results of operations. To mitigate the effect of fluctuations in exchange rates, the Company utilizes a protective hedge program which is designed to hedge certain identifiable assets and obligations, primarily French denominated expenditures. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments in U.S. Government securities and in other high quality financial instruments. By policy, the Company limits the amount of credit exposure to any one financial institution or issuer. The Company's customer base consists primarily of major integrated and government-owned international oil companies as well as smaller independent oil and gas producers. Management believes the credit quality of its customers is generally high. The Company has in place insurance to cover certain exposure in its foreign operations and provides allowances for potential credit losses when necessary. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While it is believed that such estimates are reasonable, actual results could differ from those estimates. CONDITIONS AFFECTING ONGOING OPERATIONS The Company's current business and operations are substantially dependent upon conditions in the oil and gas industry and, specifically, the exploration and production expenditures of oil and gas companies. The demand for contract drilling and related services is influenced by oil and gas prices, expectations about future prices, the cost of producing and delivering oil and gas, government regulations and local and international political and economic conditions. There can be no assurance that current levels of exploration and production expenditures of oil and gas companies will be maintained or that demand for the Company's services will reflect the level of such activities. STOCK-BASED COMPENSATION Pursuant to APB No. 25, the Company measures the compensation cost, if any, associated with stock compensation transactions using the intrinsic value method. 29 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued by the Financial Accounting Standards Board to establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an entity recognize those instruments at fair value. The standard is effective for fiscal years beginning after June 15, 1999. This pronouncement is not anticipated to have a material effect on the Company's financial position, results of operations or cash flows. 2. PROPERTY AND EQUIPMENT Property and equipment as of December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, -------------------------- 1998 1997 ------------ ------------ (IN THOUSANDS) Land................................. $ 3,248 $ 2,812 Rigs and rig equipment............... 1,419,372 1,170,783 Transportation equipment............. 16,747 12,612 Buildings............................ 10,806 8,374 Other................................ 630 828 Construction-in-progress............. 440,487 77,918 ------------ ------------ 1,891,290 1,273,327 Accumulated depreciation and amortization....................... (165,503) (101,680) ------------ ------------ Net property and equipment...... $ 1,725,787 $ 1,171,647 ============ ============
As of December 31, 1998, construction-in-progress was primarily attributable to the construction of two drillships, the refurbishment of four offshore jackup drilling rigs, the refurbishment of sixteen land-based drilling and workover rigs and upgrades of the Company's computer systems. As of December 31, 1997, construction-in-progress was primarily attributable to the acquisition and refurbishment of a tender-assisted barge and a drillship, the construction and refurbishment of three platform offshore rigs and three land-based drilling and workover rigs and the refurbishment of certain newly acquired offshore jackup drilling rigs. The Company capitalizes interest applicable to the construction of significant additions to property and equipment. For the years ended December 31, 1998, 1997 and 1996, total interest incurred was $62,139,000, $40,018,000 and $15,550,000, respectively, of which $16,363,000, $5,650,000 and $1,915,000, respectively, was capitalized. During the years ended December 31, 1998, 1997 and 1996, maintenance and repair costs included in operating costs on the accompanying consolidated statement of operations were $61,699,000, $51,429,000 and $32,698,000, respectively. 3. ACQUISITIONS AND DISPOSITIONS In October 1998, the Company purchased for $85 million the AMETHYST 1, a dynamically positioned, self-propelled semisubmersible drilling rig. In July 1998, the Company acquired 60% of a Bolivian company, Compania Boliviana de Perforacion S.A.M. ("CBP"), pursuant to a joint initiative with the Bolivian national oil company, Yacimientos Petroliferos Fiscales Bolivianos ("YPFB"). CBP was capitalized through the contribution of 13 land-based drilling and workover rigs, oilfield trucks and other related drilling assets by YPFB and $17 million of cash by the Company. 30 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In May 1997, the Company acquired 13 mat-supported jackup drilling rigs (the "Jackup Rigs") for approximately $269,000,000 in cash. The acquisition was financed through the sale of Senior Notes (as defined below) and common stock, which was completed concurrently with the acquisition. In March 1997, the Company acquired the operating subsidiaries of Forasol-Foramer N.V. (collectively, "Forasol") for aggregate consideration of $285,644,000, consisting of $113,222,000 in cash and 11,099,191 shares of common stock valued at $172,422,000, based on the approximate market value of the common stock immediately prior to the date of the agreement of $15.50 per share. The assets acquired and liabilities assumed in the Forasol acquisition were as follows:
ASSETS (LIABILITIES) ---------------------- (IN THOUSANDS) Cash and cash equivalents............ $ 13,438 Trade receivables.................... 56,831 Deferred income taxes................ 2,012 Other current assets................. 18,624 Property and equipment............... 369,527 Investments in affiliates............ 9,431 Other assets......................... 5,227 Accounts payable..................... (30,514) Accrued expenses..................... (57,053) Short-term borrowings................ (15,354) Long-term debt....................... (31,361) Long-term lease obligations.......... (35,514) Other long-term liabilities.......... (4,805) Deferred income taxes................ (12,721) Minority interest.................... (2,124) ---------------------- Net assets acquired............. $285,644 ======================
In February 1997, the Company sold substantially all of the assets used in its U.S. land-based well servicing operations for $135,650,000 in cash. After federal and state income taxes of approximately $42,100,000, repayment of $3,877,000 of indebtedness collateralized by certain of the assets sold and $65,000 of interest accrued thereon, and repayment of $3,960,000 of lease payments on transferred assets subject to operating leases, the net proceeds to the Company were $85,648,000. The Company recognized a pretax gain on the sale of $83,553,000, which amount is included in other income on the accompanying consolidated statement of operations. Unaudited pro forma results of operations assuming the acquisitions of Forasol and the Jackup Rigs and the sale of the Company's U.S. land-based well servicing operations had occurred on January 1, 1997, are as follows:
YEAR ENDED DECEMBER 31, 1997 ---------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues............................. $755,952 Net earnings......................... $ 52,050 Earnings per share Basic........................... $ 1.12 Diluted......................... $ 1.03
31 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The pro forma results of operations presented above do not purport to be indicative of the results of operations of the Company that might have occurred if such transactions had occurred as of January 1, 1997, nor are they indicative of future results. 4. DEBT SHORT-TERM BORROWINGS The Company has agreements with several banks for short-term lines of credit denominated in U.S. dollars, French francs and Argentine pesos. The facilities are renewable annually and bear interest at variable rates based on LIBOR for the U.S. dollar and Argentine peso denominated facilities, and PIBOR for the French franc denominated facilities. The interest rates on such borrowings at December 31, 1998 range from 5.57% to 11.00%. As of December 31, 1998, $16,522,000 was outstanding under these facilities and $30,996,000 was available. LONG-TERM DEBT Long-term debt at December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- (IN THOUSANDS) Senior Notes......................... $ 325,000 $ 325,000 Collateralized term loans............ 70,558 79,009 Limited-recourse collateralized term loans.............................. 31,112 35,210 Senior convertible note.............. 21,250 -- Drillship construction loans......... 158,866 -- Other notes payable: Note payable to sellers......... -- 11,000 Eximbank notes payable.......... 5,396 6,533 Notes payable................... 3,881 6,704 Loan obligations to customers... 2,909 4,037 Revolving credit facility............ 39,000 -- ---------- ---------- 657,972 467,493 Current portion of long-term debt.... 27,452 38,890 ---------- ---------- Long-term debt, net of current portion........................ $ 630,520 $ 428,603 ========== ==========
SENIOR NOTES In May 1997, the Company issued $325,000,000 of 9 3/8% Senior Notes due May 1, 2007 (the "Senior Notes"). Interest on the Senior Notes is payable semi-annually on May 1 and November 1 of each year. The Senior Notes are not redeemable prior to May 1, 2002, after which they will be redeemable, in whole or in part, at the option of the Company at redemption prices starting at 104.688% and declining to 100% by May 1, 2005. In the event the Company consummates a public equity offering on or prior to May 1, 2000, the Company at its option may use all or a portion of the proceeds from such public equity offering to redeem up to $108,333,000 principal amount of the Senior Notes at a redemption price equal to 109.375% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of redemption. As of December 31, 1998, the outstanding principal amount of the Senior Notes had a fair value of approximately $303,200,000. The indenture governing the Senior Notes contains provisions which limit the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, enter into mergers and consolidations, pay cash dividends on its capital stock, make acquisitions, sell assets or change its business. 32 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) COLLATERALIZED TERM LOANS In April 1996, the Company completed two separate financing arrangements with lending institutions pursuant to which it borrowed an aggregate amount of $40,000,000 and an additional $6,500,000 in November 1996. The collateralized term loans bore interest initially at a floating rate of prime plus 0.5% and are repayable in monthly installments of principal and interest over a period of five to six years. In December 1996, the Company elected to convert the interest on the term loans to a fixed rate basis. As a result, the collateralized term loans currently bear interest at fixed rates ranging from 7.95% to 8.50% per annum. The loans are collateralized by certain of the Company's domestic offshore rig fleet and ancillary equipment. The loan agreement includes restrictive financial covenants with respect to cash flow coverage and tangible net worth. In connection with the March 1997 Forasol acquisition, the Company assumed certain borrowing arrangements with various banks, including a $20 million bank loan, payable in semi-annual installments beginning August 1995 through 2002. The loan bears interest at a stated rate of six-month LIBOR plus a margin ranging from 1.25% to 2.50%. In conjunction with this loan, the Company simultaneously entered into an interest rate swap agreement which fixed the rate of interest on this loan at 7.55% over the term of the debt agreement. A semisubmersible rig is pledged as security for this loan. The Company also assumed a $30 million bank loan, secured by another semisubmersible rig, payable in semi-annual installments beginning May 1997 through 2003, which bears interest at a rate of six-month LIBOR plus a margin ranging from 1.00% to 2.00%, depending on the day rate earned and the amount outstanding under the facility as it relates the market value of the rig. LIMITED-RECOURSE COLLATERALIZED TERM LOANS The limited-recourse collateralized term loans are collateralized by two of the Company's drilling/workover barge rigs and related charter contracts. The loans are being repaid from the proceeds of the related charter contracts in equal monthly installments of principal and interest through July 2004. In addition, a portion of contract proceeds is being held in trust to assure that timely payment of future debt service obligations is made. At December 31, 1998, $2,435,000 of such contract proceeds, which amount is included in cash and cash equivalents on the accompanying consolidated balance sheet, are being held in trust as security for the lenders, and are not presently available for use by the Company. SENIOR CONVERTIBLE NOTE In connection with the purchase of the AMETHYST 1 in October 1998, the Company issued to the seller a $21.3 million senior note convertible into common stock at a conversion price of $28.50 per share during the first year and decreasing $1.00 per share annually thereafter until maturity. The senior convertible note bears interest at 6% per annum for the first year and escalates 1% per annum thereafter until maturity. Interest is payable semi-annually on December 1 and June 1 of each year commencing December 1, 1998. The note matures on September 1, 2001 and no principal payments are required until maturity. DRILLSHIP CONSTRUCTION LOANS During 1998, the Company entered into two separate financing arrangements with a group of banks to provide up to $310 million in loans to acquire certain equipment currently being installed on the PRIDE AFRICA and PRIDE ANGOLA, two ultra-deepwater drillships under construction referred to in Note 2. The loans are secured by such equipment and bear interest at a rate of LIBOR plus 1.25% per annum, which was 6.53% at December 31, 1998. The Company has also utilized $40 million in certain short-term borrowings to acquire equipment also currently being installed on the two drillships. Upon acceptance (as defined) of this acquired equipment, these short-term borrowings will be repaid out of a portion of the drillship construction loans discussed above. 33 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has agreed to sell such equipment to the two joint ventures formed to construct, own and operate the drillships on or before the date of acceptance by the operator of the drillships, which is anticipated to be mid-1999 for the PRIDE AFRICA and early 2000 for the PRIDE ANGOLA. Through the two joint ventures in which the Company has a 51% ownership interest, the Company has arranged a commitment from a group of banks for long-term financing of the acquisition of the two drillships. The proceeds from that financing will be used to repay the drillship construction loans. Accordingly, the Company has classified these drillship construction loans and related short-term borrowings as long-term. OTHER NOTES PAYABLE Other notes payable consists of an acquisition note payable to sellers, Eximbank loans for the purchase and import of goods manufactured in the United States into other countries, notes payable in connection with financed insurance premiums and miscellaneous loan obligations to customers. REVOLVING CREDIT FACILITY The Company maintains a revolving credit facility with a group of banks (the "Credit Facility") which provides for availability of up to $50 million (including $25 million for letters of credit). Availability under the Credit Facility is limited to a borrowing base based on the value of collateral. The Credit Facility is collateralized by the accounts receivable, inventory and intangibles of the Company and its domestic subsidiaries, two-thirds of the stock of the Company's foreign subsidiaries, the stock of the Company's domestic subsidiaries and certain other assets. The Credit Facility terminates December 2000. Borrowings under the Credit Facility bear interest at a variable rate based on either the prime rate or LIBOR and was 9.00% at December 31, 1998. The Credit Facility limits the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, enter into mergers and consolidations, pay cash dividends on the Company's capital stock, make acquisitions, sell assets or change its business without prior consent of the lenders. Under the Credit Facility, the Company must maintain certain financial ratios, including (i) funded debt to pro forma EBITDA, (ii) funded debt to capitalization, (iii) adjusted EBITDA to debt service and (iv) minimum tangible net worth. 6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES In January 1996, the Company completed the public sale of $80,500,000 principal amount of 6 1/4% convertible subordinated debentures. The debentures, which are due February 15, 2006, are convertible into common stock of the Company at a price of $12.25 per share. The debentures are redeemable at the option of the Company, in whole or in part, at any time on or after March 1, 1999, at an initial redemption price of 103.125% of the principal amount and declining to 100% of the principal amount by February 15, 2002. Interest is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 1996. During 1997, an aggregate of $28,000,000 principal amount of the debentures were converted into 2,285,712 shares of common stock. In connection therewith, the Company paid an aggregate of $3,732,000 in cash to induce such conversions. Such amount has been included in other income in the accompanying consolidated statement of operations for 1997. In addition, $917,000 of deferred offering costs associated with the debentures converted has been charged against additional paid-in capital in the accompanying consolidated balance sheet at December 31, 1997. As of December 31, 1998, the outstanding principal amount of the debentures had a fair value of approximately $43,600,000. 34 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future maturities of long-term debt and convertible subordinated debentures are as follows:
AMOUNT -------------- (IN THOUSANDS) 1999................................. $ 27,452 2000................................. 85,112 2001................................. 62,616 2002................................. 35,503 2003................................. 31,174 Thereafter........................... 416,115 -------------- Total long-term debt............ $657,972 ==============
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES In April 1998, the Company completed a public sale of zero coupon convertible subordinated debentures. The net proceeds to the Company in connection with the sale, after deducting underwriting discounts and offering expenses, amounted to approximately $223,100,000. The issue price of $391.06 for each debenture represents a yield to maturity of 4.75% per annum (computed on a semiannual bond equivalent basis) calculated from the issue date. The debentures, which mature on April 24, 2018, are convertible into common stock of the Company at a conversion rate of 13.794 shares of common stock per $1,000 principal amount at maturity. At the maturity date, the aggregate amount payable would be $588,145,000. The Company will become obligated to purchase the debentures, at the option of the holders, in whole or in part, on April 24, 2003, 2008 and 2013 at a price per debenture of $494.52, $625.35 and $790.79, respectively, settled either in cash, common stock or a combination thereof at the option of the Company. On or subsequent to April 24, 2003, the debentures are redeemable at the option of the Company, in whole or in part, for cash at a price equal to the issue price plus accrued original issue discount to the date of redemption. As of December 31, 1998, the outstanding principal amount of the debentures had a fair value of approximately $139,700,000. 5. LEASES The Company has entered into agreements with a financial institution for the sale and leaseback of certain equipment used in the Company's business. The Company has received aggregate proceeds of $15,900,000 pursuant to these facilities attributable to two offshore platform rigs placed in service in 1996. The Company has purchase and lease renewal options at projected future fair market values under the agreements. The leases have been classified as operating leases for financial statement purposes. The net book value of the equipment has been removed from the balance sheet and the excess of funding over such net book value has been deferred and is being amortized as a reduction of lease expense over the maximum lease term of five years. Rentals on these transactions total $3,071,000 annually. Rental expense for operating leases for equipment, vehicles and various facilities of the Company for the years ended December 31, 1998, 1997 and 1996 were $21,191,000, $26,760,000 and $19,449,000, respectively. In connection with the acquisition of Forasol, the Company assumed a capital lease obligation pursuant to a sale and leaseback agreement of three tender-assisted rigs. The obligation is payable in semiannual installments through October 2002, and bears interest at 7.67%. In October 1997, the lease was increased by $11,000,000 attributable to the financing of a new derrick set for a tender-assisted rig. The obligation is repayable in semiannual installments through October 2002, and bears interest at 7.80%. 35 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future maturities of capital lease obligations are as follows:
AMOUNT -------------- (IN THOUSANDS) 1999................................. $ 14,466 2000................................. 14,466 2001................................. 14,466 2002................................. 14,466 2003................................. 4,315 Thereafter........................... 12,113 -------------- 74,292 Less amounts representing interest... (14,247) -------------- Total capital lease obligations...... 60,045 Current portion of long-term lease obligations........................ 9,897 -------------- Long-term lease obligations, net of current portion.................... $ 50,148 ==============
6. FINANCIAL INSTRUMENTS The Company's operations are subject to foreign exchange risk principally related to the Argentine peso, the French franc and the Venezuelan bolivar. The Company attempts to mitigate its exposure to foreign currency exchange risks in Argentina and Venezuela by matching the local currency component of its contracts to the amount of operating costs transacted in the local currency. Moreover, the Company purchases forward exchange contracts to hedge its French franc denominated expenses. These contracts are accounted for as hedges to the extent they relate to anticipated expenses. Realized and unrealized gains or losses on forward exchange contracts which are designated as, and are effective as, hedges are deferred and are recognized in results of operations when the related expenses are recognized. The cash flows from these transactions are classified with the cash flows for the transaction being hedged. Deferred gains and losses are recognized in results of operations if the hedge is no longer effective. As of December 31, 1998 and 1997, the Company had approximately $30 million and $41 million, respectively, in forward exchange contracts to buy foreign currency to hedge anticipated expenses. The fair market value of all forward exchange contracts based on quoted market prices of comparable instruments was a liability of $1,977,000 as of December 31, 1998 and a receivable of $2,278,000 as of December 31, 1997. The value of the contracts upon ultimate settlement is dependent upon actual currency exchange rates at the various maturity dates. 36 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. INCOME TAXES The components of the provision for income taxes were as follows:
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 ---------- --------- --------- (IN THOUSANDS) United States Federal: Current.................... $ (23,888) $ 27,221 $ (243) Deferred................... 28,322 6,427 2,762 ---------- --------- --------- Total -- Federal...... 4,434 33,648 2,519 ---------- --------- --------- State: Current.................... -- 1,601 (14) Deferred................... -- 378 203 ---------- --------- --------- Total -- State........ -- 1,979 189 ---------- --------- --------- Total -- United States............. -- 35,627 2,708 ---------- --------- --------- Foreign taxes Current......................... 14,200 9,125 2,466 Deferred........................ 6,092 6,887 2,917 ---------- --------- --------- Total -- Foreign...... 20,292 16,012 5,383 ---------- --------- --------- Income tax provision.......... $ 24,726 $ 51,639 $ 8,091 ========== ========= =========
The difference between the effective federal income tax rate reflected in the income tax provision and the amounts which would be determined by applying the statutory federal tax rate to earnings before income taxes is summarized as follows:
YEAR ENDED DECEMBER 31, ------------------------------- 1998 1997 1996 --------- --------- --------- U.S. statutory rate.................. 35.0% 35.0% 34.0% Foreign.............................. (14.9) (3.1) (8.0) State and local taxes................ -- 1.3 0.6 Other................................ 4.1 -- (0.3) --------- --------- --------- Effective tax rate......... 24.2% 33.2% 26.3% ========= ========= =========
The domestic and foreign components of earnings before income taxes were as follows:
YEAR ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 ---------- ---------- --------- (IN THOUSANDS) Domestic............................. $ 3,312 $ 96,560 $ 8,076 Foreign.............................. 98,931 59,074 22,743 ---------- ---------- --------- Earnings before income taxes................... $ 102,243 $ 155,634 $ 30,819 ========== ========== =========
37 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets as of December 31, 1998 and 1997 were as follows:
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- (IN THOUSANDS) Deferred tax liabilities: Depreciation.................... $ 96,833 $ 71,524 Other........................... 7,939 2,792 ---------- ---------- Total deferred tax liabilities............. 104,772 74,316 ---------- ---------- Deferred tax assets: Foreign net operating loss carryforwards................. (7,322) (8,256) Insurance claims................ -- (318) Bad debts....................... (53) (71) Other........................... (3,664) (1,859) ---------- ---------- Total deferred tax assets.................. (11,039) (10,504) Valuation allowance for deferred tax assets.................... 6,249 6,249 ---------- ---------- Net deferred tax assets.... (4,790) (4,255) ---------- ---------- Net deferred tax liability............... $ 99,982 $ 70,061 ========== ==========
Applicable U.S. income taxes have not been provided on approximately $145,000,000 of undistributed earnings of the Company's foreign subsidiaries. The Company considers such earnings to be permanently invested outside the U.S. These earnings could be subject to U.S. income tax if distributed to the Company as dividends or otherwise. The Company anticipates that foreign tax credits would reduce certain portions of the U.S. income tax that would be payable if these earnings were to be repatriated. The Company has recognized a valuation allowance as of December 31, 1998 and 1997 for certain foreign net operating loss carryforwards due to uncertainties regarding the Company's ability to realize such tax benefits. 8. NET EARNINGS PER SHARE Basic net earnings per share has been computed based on the weighted average number of shares of common stock outstanding during the applicable period. Diluted net earnings per share has been computed based on the weighted average number of shares of common stock and common stock equivalents outstanding during the period, as if the convertible debt were converted into common stock on the date of sale, after giving retroactive effect to the elimination of interest expense, net of income tax effect, applicable to the convertible subordinated debentures. 38 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents information necessary to calculate basic and diluted net earnings per share:
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 --------- ---------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net earnings......................... $ 77,517 $ 103,995 $ 22,728 Interest expense on convertible subordinated debentures............ 11,337 3,700 4,955 Income tax effect.................... (4,081) (1,335) (1,784) --------- ---------- --------- Adjusted net income.................. $ 84,773 $ 106,360 $ 25,899 ========= ========== ========= Weighted average shares outstanding........................ 50,135 43,036 26,719 Convertible debt..................... 10,401 4,779 6,104 Stock options and warrants........... 315 1,328 932 --------- ---------- --------- Adjusted weighted average shares outstanding................... 60,851 49,143 33,755 ========= ========== ========= Basic earnings per share... $ 1.55 $ 2.42 $ .85 ========= ========== ========= Diluted earnings per share................... $ 1.39 $ 2.16 $ .77 ========= ========== =========
As described in Note 4, the Company will become obligated to purchase its zero coupon convertible subordinated debentures, at the option of the holders, in whole or in part, on April 24, 2003, 2008 and 2013. The Company has the option to purchase the debentures for cash, common stock or a combination thereof. The Company does not anticipate using common stock to satisfy any such future purchase obligation. 9. EMPLOYEE BENEFITS The Company has a salary deferral plan covering its employees whereby employees may elect to contribute up to 15% of their annual compensation. The Company may at its discretion make matching contributions with respect to an employee's salary contribution of up to $1,000 or 6.00% of compensation, whichever is less. The Company made matching contributions to the plan for the years ended December 31, 1998, 1997 and 1996 totaling $1,600,000, $817,000 and $219,000, respectively. In 1993, the Company established a deferred compensation plan providing officers and key employees with the opportunity to participate in an unfunded deferred compensation program titled the "401(k) Restoration Plan." The 401(k) Restoration Plan is a non-qualified plan which allows certain employees to defer up to 100% of base compensation and bonuses earned. The majority of contributions are invested in mutual funds which are recorded at market value. The fair market value of the securities and the corresponding deferred compensation liability at December 31, 1998 and 1997 was $7,345,000 and $4,300,000, respectively. 10. SHAREHOLDERS' EQUITY COMMON STOCK In July 1996, the Company completed the public sale of 3,450,000 shares of common stock, which resulted in net proceeds to the Company of approximately $45,641,000. In May 1997, the Company sold 4,391,505 shares of common stock to the public, which resulted in net proceeds to the Company of approximately $70,881,000. In November 1997, the Company sold 2,865,000 shares of common stock to the public, which resulted in net proceeds to the Company of approximately $97,500,000. 39 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SHAREHOLDERS' RIGHTS PLAN On September 9, 1998, the Board of Directors of the Company adopted a shareholder rights plan and declared a dividend of one preferred share purchase right ("Right") for each share of the Company's common stock outstanding on September 30, 1998. Each Right initially entitled its holder to purchase 1/100th of a share of the Company's Series A Junior Participating Preferred Stock for $50.00, subject to adjustment. The Rights generally will not become exercisable until 10 days after a public announcement that a person or group has acquired 15% or more of the Company's common stock (thereby becoming an "Acquiring Person") or the commencement of a tender or exchange offer upon consummation of which such person or group would own 15% or more of the Company's common stock (the earlier of such dates being called the "Distribution Date"). Rights will be issued with all shares of the Company's common stock issued from September 30, 1998 to the Distribution Date. Until the Distribution Date, the Rights will be evidenced by the certificates representing the Company's common stock and will be transferrable only with the Company's common stock. If any person or group becomes an Acquiring Person, each Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter entitle its holder to purchase, at the Rights' then current exercise price, shares of the Company's common stock having a market value of two times the exercise price of the Right. If, after a person or group has become an Acquiring Person, the Company is acquired in a merger or other business combination transaction or 50% or more of its assets or earning power are sold, each Right (other than Rights owned by an Acquiring Person which will have become void) will entitle its holder to purchase, at the Rights' then current exercise price, that number of shares of common stock of the person with whom the company has engaged in the foregoing transaction (or its parent) which at the time of such transaction will have a market value of two times the exercise price of the Right. After any person or group has become an Acquiring Person, the Company's Board of Directors may, under certain circumstances, exchange each Right (other than Rights of the Acquiring Person) for shares of the Company's common stock having a value equal to the difference between the market value of the shares of the Company's common stocks receivable upon exercise of the Right and the exercise price of the Right. The Company will generally be entitled to redeem the Rights for $.01 per Right at any time until 10 days after a public announcement that a 15% position has been acquired. The Rights expire on September 9, 2008. STOCK OPTION PLANS The Company has a Long-Term Incentive Plan which provides for the granting or awarding of stock options, restricted stock, stock appreciation rights and stock indemnification rights to officers and other key employees. The number of shares authorized and reserved for issuance under the Long-Term Incentive Plan is limited to 13% of total issued and outstanding shares, subject to adjustment in the event of certain changes in the Company's corporate structure of capital stock. Stock options may be exercised within six months of termination of employment or one year after retirement, total disability or death of an employee. In 1993, the shareholders of the Company approved and ratified the 1993 Directors' Stock Option Plan. The purpose of the plan is to afford the Company's directors who are not full-time employees of the Company or any subsidiary of the Company an opportunity to acquire a greater proprietary interest in the Company. A maximum of 400,000 shares of the Company's common stock are to be available for purchase upon the exercise of options granted pursuant to the 1993 Directors' Stock Option Plan. The exercise price of options is the fair market value per share on the date the option is granted. Directors' stock options vest over two years at the rate of 50% per year and expire ten years from date of grant. 40 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock option transactions pursuant to the Long-Term Incentive Plan and the 1993 Directors' Stock Option Plan (the "Plans") for the last three years are summarized as follows:
LONG-TERM INCENTIVE PLAN 1993 DIRECTORS' PLAN ---------------------------- ------------------------------ PRICE SHARES PRICE SHARES ----------------- --------- ------------------- --------- Outstanding as of December 31, 1995...... 2,153,350 58,000 Granted.............. $9.125 - $14.125 924,000 $17.875 12,000 Exercised............ $2.25 - $9.13 (255,200) -- -- Forfeited............ -- -- -- -- --------- --------- Outstanding as of December 31, 1996...... 2,822,150 70,000 Granted.............. $17.25 - $22.75 1,835,200 $19.895 - $20.625 32,000 Exercised............ $2.25 - $14.125 (869,479) -- -- Forfeited............ -- -- -- -- --------- --------- Outstanding as of December 31, 1997...... 3,787,871 102,000 Granted.............. $8.00 - $10.44 2,024,040 $19.44 97,998 Exercised............ $2.25 - $14.00 (404,652) -- -- Forfeited............ $14.13 - $22.75 (20,000) -- -- --------- --------- Outstanding as of December 31, 1998...... 5,387,259 199,998 ========= ========= Exercisable as of December 31, 1998...... 3,126,467 86,000 ========= =========
The weighted average fair values per share of options granted during the years ended December 31, 1998, 1997 and 1996 were $4.36, $8.60 and $5.12, respectively. The fair values were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.00%; volatility of 45.12%; risk free rate of interest ranging from 5.16% to 6.90%; and an expected term of five years. The following table summarizes information on stock options outstanding and exercisable at December 31, 1998 pursuant to the Long-Term Incentive Plan:
OPTIONS OUTSTANDING --------------------------------------------- OPTIONS EXERCISABLE WEIGHTED ------------------------------ AVERAGE WEIGHTED WEIGHTED RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - - ------------------ ----------- ----------- --------------- ----------- --------------- $ 2.25 - $ 5.00... 51,000 4.35 $ 4.75 50,490 $ 4.75 $ 5.01 - $12.00... 3,391,459 8.25 $ 8.34 1,825,037 $ 7.88 $12.01 - $22.75... 1,944,800 8.24 $ 20.00 1,250,940 $ 18.75 ----------- ----------- $ 2.25 - $22.75... 5,387,259 8.20 $ 12.51 3,126,467 $ 12.18 =========== ===========
41 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information on stock options outstanding and exercisable at December 31, 1998 pursuant to the 1993 Directors' Plan:
OPTIONS OUTSTANDING --------------------------------------------- OPTIONS EXERCISABLE WEIGHTED ----------------------------- AVERAGE WEIGHTED WEIGHTED RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - - ------------------ ----------- ------------ -------------- ----------- -------------- $ 4.25 - $10.00... 58,000 5.25 $ 6.28 58,000 $ 6.28 $10.01 - $20.66... 141,998 8.73 $19.47 28,000 $19.18 ----------- ----------- $ 4.25 - $20.66... 199,998 7.72 $15.64 86,000 $10.48 =========== ===========
If the fair value based method of accounting prescribed by SFAS No. 123 had been applied, the Company's net income and earnings per share would approximate the pro forma amounts indicated below. The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 --------- ---------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net earnings......................... $ 74,654 $ 100,416 $ 21,999 Net earnings per share Basic........................... $ 1.49 $ 2.33 $ 0.82 Diluted......................... $ 1.35 $ 2.09 $ 0.75
11. COMMITMENTS AND CONTINGENCIES The Company is routinely involved in litigation incidental to its business, which at times involves claims for significant monetary amounts, some of which would not be covered by insurance. In the opinion of management, none of the Company's existing litigation will have any material adverse effect on the Company's financial position, results of operations or cash flows. DRILLSHIP JOINT VENTURES The Company has entered into joint ventures to construct, own and operate the PRIDE AFRICA and the PRIDE ANGOLA, two ultra-deepwater drillships currently under construction in South Korea. The drillships are contracted to work offshore Angola for initial terms of five and three years, respectively. The PRIDE AFRICA is expected to commence operations in mid-1999, and the PRIDE ANGOLA is expected to commence operations by early 2000. The joint ventures have entered into financing arrangements with a group of banks providing that approximately $400 million of the drillships' total estimated construction cost of $470 million will be financed by loans that are, upon delivery of the drillships, without recourse to the joint venture participants. During the construction period, the lenders could have recourse to the Company with respect to an aggregate of up to $310 million of such loans. The Company estimates that its total equity investment in the joint ventures will be approximately $38 million, which represents a 51% interest in each joint venture. There can be no assurance, however, that additional capital will not be required to complete the drillships. AMETHYST JOINT VENTURES The Company has a 30% equity interest in a joint venture company organized to construct, own and operate four Amethyst-class dynamically positioned semisubmersible drilling rigs. The rigs are currently under construction at shipyards in South Korea and the United States. Upon their completion, the rigs will be operated under charter and service contracts with Petroleo Brasilerio S.A. having initial terms of six to eight years. The total estimated cost to construct, equip and mobilize the four rigs is approximately 42 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $700 million. Delivery of the rigs is expected in mid 2000. As of December 31, 1998, the Company had made aggregate equity contributions to the joint venture of approximately $45 million. The joint venture company has entered into a financing arrangement with a group of foreign lenders to provide up to $240 million of the $370 million estimated cost of the two Amethyst rigs under construction in South Korea. Equity contributions by the Company and its joint venture partner have provided $30 million of such cost. The Company and its joint venture partner also have committed to find, by October 30, 1999, a third-party funding source for the remaining $100 million estimated cost or to fund any shortfall in proportion to their respective ownership interests. Accordingly, the Company's liability under such commitment is limited to $30 million. The Company is pursuing alternative sources for such financing, but there is no assurance that third-party funds will be obtained. In addition, the Company has provided certain other guarantees, including (1) a guarantee of payment of up to $32.4 million of the loans; (2) a guarantee of cost overruns of up to $6 million; (3) a guarantee of the cost of the two rigs in excess of related refund guarantees supporting their construction contracts and (4) certain other financial and operating-related guarantees. The financing is structured as separate loans to the subsidiaries of the joint venture owning the rigs, cross-collateralized and cross-guaranteed, with a nine-year term. The interest rate for the loans is 12.0% during the construction period and 11.0% upon commencement of operations. As of December 31, 1998, the lenders had advanced $94.7 million. Future advances are subject to the satisfaction of conditions specified in the loan agreements, including satisfactory progress in the rigs' construction. In addition, the joint venture has received a commitment from the United States Maritime Administration ("MARAD") to provide a guarantee of obligations for both construction period and mortgage period financing relating to the construction of the two Amethyst rigs under construction in the United States. The MARAD guarantee covers approximately $300 million of the estimated $340 million cost of the vessels. The joint venture has engaged an arranger for the construction period financing and a placement agent for the mortgage period financing. In connection with the MARAD financing, the Company has agreed to guarantee payment of up to $20.5 million of late delivery penalties that are accruing and may be payable under the charter and service contracts related to these two rigs. 12. SUBSEQUENT EVENT In February 1999, the Company completed the sale and leaseback of the semisubmersible rig AMETHYST I, pursuant to which it received $97 million in cash. The net book value of the rig has been removed from the balance sheet and the excess of funding over the net book value of the rig has been deferred and is being amortized as a reduction of lease expense over the lease term. The lease is for a maximum term of 13 years and the Company has options to purchase the rig at the end of eight years and at the end of the maximum term. Rentals on the rig range from $11.7 to $15.9 million annually. 43 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. SUPPLEMENTAL FINANCIAL INFORMATION OTHER CURRENT ASSETS Other current assets as of December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, -------------------- 1998 1997 --------- --------- (IN THOUSANDS) Income tax receivable................ $ 23,888 -- Receivable from affiliate............ 6,522 -- Other receivables.................... 24,418 21,376 Deferred mobilization costs.......... 821 -- Prepaid expenses..................... 9,761 14,315 --------- --------- Total other current assets...... $ 65,410 $ 35,691 ========= =========
GOODWILL AND OTHER INTANGIBLES Goodwill and other intangibles as of December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, -------------------- 1998 1997 --------- --------- (IN THOUSANDS) Goodwill............................. $ 2,944 $ 2,944 Other intangibles.................... 1,373 1,373 --------- --------- 4,317 4,317 --------- --------- Accumulated amortization............. (899) (694) --------- --------- Total goodwill and other intangibles................... $ 3,418 $ 3,623 ========= =========
Amortization expense amounted to $205,000, $198,000 and $198,000 for the years ended December 31, 1998, 1997 and 1996, respectively. OTHER ASSETS Other assets as of December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, -------------------- 1998 1997 --------- --------- (IN THOUSANDS) Prepaid expenses..................... $ 798 $ 1,156 Deferred financing costs............. 18,088 9,014 Deferred mobilization costs.......... 3,349 5,974 Employee savings plan................ 7,646 2,583 Other................................ 14,717 4,202 --------- --------- Total other assets.............. $ 44,598 $ 22,929 ========= =========
44 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACCRUED EXPENSES Accrued expenses as of December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, -------------------- 1998 1997 --------- --------- (IN THOUSANDS) Insurance............................ $ 1,111 $ 3,872 Payroll.............................. 15,087 5,504 Taxes, other than income............. 10,347 10,537 Foreign social benefits and vacation........................... 29,069 30,707 Interest............................. 6,705 6,582 Other................................ 17,475 7,792 --------- --------- Total accrued expenses.......... $ 79,794 $ 64,994 ========= =========
OTHER LONG-TERM LIABILITIES Other long-term liabilities as of December 31, 1998 and 1997 consisted of the following:
DECEMBER 31, -------------------- 1998 1997 --------- --------- (IN THOUSANDS) Foreign social benefits.............. $ 21,743 $ 25,210 Insurance............................ 43 897 Deferred compensation................ 7,646 2,583 Deferred mobilization revenue........ 19,555 221 --------- --------- Total other long-term liabilities................... $ 48,987 $ 28,911 ========= =========
OPERATING EXPENSES Operating expenses for the years ended December 31, 1997 and 1996 include gains on insurance recoveries from damaged or destroyed rigs of $1,800,000 and $1,085,000, respectively. OTHER INCOME Other income for the year ended December 31, 1997 included a gain of $83,553,000 as a result of the sale of substantially all of the Company's assets used in its U.S. land-based well servicing operations. Foreign exchange transaction (gains) losses included in other income were $(395,000), $(3,736,000) and $437,000 for the years ended December 31, 1998, 1997 and 1996, respectively. CASH FLOW INFORMATION Cash paid (received) for interest and income taxes during the years ended December 31, 1998, 1997 and 1996 was as follows:
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 ---------- --------- --------- (IN THOUSANDS) Cash paid (received) during the year for: Interest, net of amounts capitalized................... $ 45,776 $ 32,810 $ 11,220 Income taxes -- U.S............. (10,042) 34,117 (472) Income taxes -- foreign......... 8,616 8,433 5,844 Capital expenditures in accounts payable.............................. 51,876 11,845 2,706
45 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS The Company is a leading provider of contract drilling and related services, operating both offshore and on land. The Company has significant operations offshore in the Gulf of Mexico and in South America and significant land-based operations in South America. The Company also operates in South Africa, the Middle East and in Asia. The Company reports its operations by geographic area and land-based and offshore operations. The following table sets forth certain consolidated information with respect to the Company and its subsidiaries by operating segment:
UNITED STATES INTERNATIONAL --------------------- ---------------------- LAND OFFSHORE LAND OFFSHORE TOTAL -------- --------- -------- ---------- ---------- (IN THOUSANDS) 1998 Revenues............................. $ -- $ 160,829 $401,899 $ 272,835 $ 835,563 Earnings from operations............. -- 40,446 18,014 82,503 140,963 Segment assets....................... -- 423,858 588,273 1,180,036 2,192,167 Capital expenditures, including acquisitions....................... -- 122,281 140,888 394,757 657,926 Depreciation and amortization........ -- 20,233 34,895 24,803 79,931 1997 Revenues............................. $ 16,485 $ 135,281 $385,590 $ 162,432 $ 699,788 Earnings from operations............. 519 40,965 42,500 24,401 108,385 Segment assets....................... 1,503 395,598 519,327 625,073 1,541,501 Capital expenditures, including acquisitions....................... 8,465 330,252 132,729 418,538 889,984 Depreciation and amortization........ 818 13,076 33,801 10,966 58,661 1996 Revenues............................. $117,142 $ 57,450 $218,562 $ 14,020 $ 407,174 Earnings from operations............. 7,808 6,983 23,372 1,979 40,142 Segment assets....................... 94,559 61,251 331,462 54,790 542,062 Capital expenditures, including acquisitions....................... 8,666 18,618 211,834 17 239,135 Depreciation and amortization........ 5,738 3,665 12,677 6,985 29,065
46 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth certain information with respect to the Company and its subsidiaries by geographic area:
UNITED SOUTH OTHER STATES AMERICA INTERNATIONAL TOTAL ---------- -------- -------------- ------------ (IN THOUSANDS) 1998 - - ------------------------------------- Revenues............................. $ 160,829 $455,837 $ 218,897 $ 835,563 Earnings from operations............. 40,446 30,993 69,524 140,963 Long-lived assets.................... 392,675 596,411 833,299 1,822,385 Capital expenditures, including acquisitions....................... 122,281 147,788 387,857 657,926 Depreciation and amortization........ 20,233 38,149 21,549 79,931 1997 - - ------------------------------------- Revenues............................. $ 151,766 $451,693 $ 96,329 $ 699,788 Earnings from operations............. 41,484 53,302 13,599 108,385 Long-lived assets.................... 359,198 374,371 473,722 1,207,291 Capital expenditures, including acquisitions....................... 338,717 119,932 431,335 889,984 Depreciation and amortization........ 13,894 34,478 10,289 58,661 1996 - - ------------------------------------- Revenues............................. $ 174,592 $231,038 $ 1,544 $ 407,174 Earnings from operations............. 14,791 25,799 (448) 40,142 Long-lived assets.................... 60,637 325,018 -- 385,655 Capital expenditures, including acquisitions....................... 27,284 211,851 -- 239,135 Depreciation and amortization........ 9,403 19,394 268 29,065
SIGNIFICANT CUSTOMERS Two customers accounted for approximately 14% and 11% of consolidated revenues for the year ended December 31, 1998 and one customer accounted for approximately 14% and 16% of consolidated revenues for the years ended December 31, 1997 and 1996, respectively. 47 PRIDE INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Summarized quarterly financial data for the years ended December 31, 1998 and 1997 were as follows:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 Revenues............................. $213,686 $219,186 $209,964 $192,727 Earnings from operations............. 37,521 42,765 38,582 22,095 Net earnings......................... 21,434 24,516 20,808 10,759 Net earnings per share Basic........................... .43 .49 .42 .21 Diluted......................... .40 .43 .37 .21 Weighted average common shares outstanding Basic........................... 50,058 50,087 50,101 50,291 Diluted......................... 55,312 61,351 63,008 63,732 1997 Revenues............................. $131,376 $174,537 $182,908 $210,967 Earnings from operations............. 15,198 26,899 29,947 36,341 Net earnings......................... 57,494 13,053 14,032 19,416 Net earnings per share Basic........................... 1.82 .29 .30 .40 Diluted......................... 1.49 .27 .28 .37 Weighted average common shares outstanding Basic........................... 31,569 44,884 46,809 48,652 Diluted......................... 39,046 50,293 52,621 54,358
48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in or disagreements with the Company's independent accountants regarding accounting and financial disclosure matters. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated by reference to the Company's definitive proxy statement, which is to be filed with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") within 120 days of the end of the Company's fiscal year on December 31, 1998. Information with respect to the executives officers of the Company is set forth under the caption "Executive Officers of the Registrant" in Part I of the report. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the Company's definitive proxy statement, which is to be filed with the Commission pursuant to the Exchange Act within 120 days of the end of the Company's fiscal year on December 31, 1998. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to the Company's definitive proxy statement, which is to be filed with the Commission pursuant to the Exchange Act within 120 days of the end of the Company's fiscal year on December 31, 1998. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to the Company's definitive proxy statement, which is to be filed with the Commission pursuant to the Exchange Act within 120 days of the end of the Company's fiscal year on December 31, 1998. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are included as part of this report: (1) Financial Statements:
PAGE ---- Report of Independent Accountants.................... 23 Consolidated Balance Sheet -- December 31, 1998 and 1997.... 24 Consolidated Statement of Operations -- Years ended December 31, 1998, 1997, and 1996................. 25 Consolidated Statement of Changes in Shareholders' Equity -- Years ended December 31, 1998, 1997, and 1996................. 26 Consolidated Statement of Cash Flows -- Years ended December 31, 1998, 1997 and 1996.................. 27 Notes to Consolidated Financial Statements..................... 28
(2) Consolidated Financial Statement Schedules: All financial statement schedules have been omitted because they are not applicable or not required, or the information required thereby is included in the consolidated financial statements or the notes thereto included in this Report. 49 (3) Exhibits:
EXHIBIT NO. DESCRIPTION - - ------------------------ ------------------------------------------------------------------------------------------ 3.1 -- Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289). 3.2 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289). 3.3 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289). 3.4 -- Amendment to Restated Articles of Incorporation (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8 dated September 8, 1997, Registration No. 333-35089). 3.5 -- Amendment to Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). 3.6 -- Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). *4.1 -- Form of Common Stock Certificate. 4.2 -- Rights Agreement dated as of September 9, 1998 between the Company and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated September 10, 1998, File No. 1-13289). 4.3 -- Amended and Restated Credit Agreement dated as of December 22, 1997 among the Company, each of the banks that are or may be a party thereto, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, and Wells Fargo Bank (Texas), National Association, as administrative agent and documentation agent (incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 4.4 -- First Amendment to Credit Agreement dated as of April 24, 1998 among the Company, certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). 4.5 -- Second Amendment to Credit Agreement dated as of September 17, 1998 among the Company, certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, File No. 1-13289). *4.6 -- Third Amendment to Credit Agreement dated as of December 21, 1998 among the Company, certain of its subsidiaries, Bank One, Louisiana, N.A. (formerly named First National Bank of Commerce), as arranger and syndication agent, Wells Fargo Bank (Texas), National Association, as administrative and documentation agent, and the lenders named therein. 4.7 -- Indenture, dated as of May 1, 1997, by and between the Company and The Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289).
50
EXHIBIT NO. DESCRIPTION - - ------------------------ ------------------------------------------------------------------------------------------ 4.8 -- First Supplemental Indenture, dated as of May 1, 1997, by and between the Company and The Chase Manhattan Bank, as trustee, relating to $325,000,000 principal amount of 9 3/8% Senior Notes due 2007 (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289). 4.9 -- Indenture, dated as of April 1, 1998, between the Company and Marine Midland Bank, as Trustee, relating to subordinated debt securities (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-13289). 4.10 -- First Supplemental Indenture, dated as of April 24, 1998, between the Company and Marine Midland Bank, as Trustee, relating to Zero Coupon Convertible Subordinated Debentures Due 2018 (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-13289).
The Company is a party to several debt instruments under which the total amount of securities authorized does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, the Company agrees to furnish a copy of such instruments to the Commission upon request. 10.1 -- Form of Indemnity Agreement between the Company and certain executive officers and directors (incorporated by reference to Exhibit 10(g) to the Company's Registration Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233). 10.2 -- Pride International, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 4A to the Company's Registration Statement on Form S-8 dated February 6, 1989, Registration No. 33-26854). 10.3 -- First Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 dated September 8, 1997, Registration No. 333-35089). 10.4 -- Second Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 dated September 8, 1997, Registration No. 333-35089). 10.5 -- Third Amendment to Pride International, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 10.6 -- Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated by reference to Exhibit 10(i) to the Company's Registration Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233). 10.7 -- Summary of Pride Petroleum Services, Inc. Group Life Insurance and Accidental Death and Dismemberment Insurance (incorporated by reference to Exhibit 10(j) to the Company's Registration Statement on Form S-1 dated January 29, 1990, Registration No. 33-33233). 10.8 -- Pride International, Inc. 1993 Directors' Stock Option Plan (incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, File Nos. 0-16961 and 1-13289). 10.9 -- First Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan (incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 dated September 8, 1997, Registration No. 333-35093). 10.10 -- Second Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). *10.11 -- Third Amendment to Pride International, Inc. 1993 Directors' Stock Option Plan. 10.12 -- Pride Petroleum Services, Inc. 401(k) Restoration Plan (incorporated by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, File Nos. 0-16961 and 1-13289).
51
EXHIBIT NO. DESCRIPTION - - ------------------------ ------------------------------------------------------------------------------------------ 10.13 -- Pride Petroleum Services, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8 filed June 26, 1996, Registration No. 333-06825). 10.14 -- First Amendment to Pride International, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 10.15 -- Pride International, Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 10.16 -- First Amendment to Pride International, Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 10.17 -- Second Amendment to Pride International, Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-13289). 10.18 -- Pride International, Inc. 1998 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company's Proxy Statement on Schedule 14A for the 1998 Annual Meeting of Shareholders of the Company, File No. 1-13289). *10.19 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the Company and Paul A. Bragg. *10.20 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the Company and James W. Allen. *10.21 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the Company and John C.G. O'Leary. *10.22 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the Company and Steven R. Tolson. *10.23 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the Company and Robert W. Randall. *10.24 -- Employment/Non-Competition/Confidentiality Agreement dated February 5, 1999 between the Company and Earl W. McNiel. 10.25 -- Purchase Agreement dated as of December 16, 1996 by and among the Company, Forasol-Former N.V. and certain shareholders of Forasol-Foramer N.V. (incorporated by reference to Appendix A of the Company's Proxy Statement/Prospectus dated January 31, 1997, File Nos. 0-16961 and 1-13289). 10.26 -- Asset Purchase Agreement dated as of February 19, 1997 by and between the Company and Noble Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble Drilling (Mexico) Inc. and NN-1 Limited Partnership (incorporated by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289). 10.27 -- First Amendment to Asset Purchase Agreement, dated as of May 7, 1997, by and among Noble Drilling Corporation, Noble Drilling (U.S.) Inc., Noble Offshore Corporation, Noble Drilling (Mexico) Inc., NN-1 Limited Partnership and Mexico Drilling Partners Inc., and Pride Petroleum Services, Inc., Pride Offshore, Inc. and Forasol S.A. (incorporated by reference to Exhibit 2.2 of the Company's Current Report on Form 8-K dated May 22, 1997, File Nos. 0-16961 and 1-13289). *21 -- Subsidiaries of the Company. *23 -- Consent of PricewaterhouseCoopers LLP *27 -- Financial Data Schedule.
- - ------------ * Filed herewith. Compensatory plan or arrangement (b) Reports on Form 8-K None. 52 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON MARCH 31, 1999. PRIDE INTERNATIONAL, INC. By: /s/ PAUL A. BRAGG PAUL A. BRAGG PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER AND DIRECTOR PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 31, 1999.
SIGNATURE TITLE - - -------------------------------------------------------------------------- /s/ JAMES B. CLEMENT Chairman of the Board and Director JAMES B. CLEMENT /s/ PAUL A. BRAGG President, Chief Executive Officer, PAUL A. BRAGG Chief Operating Officer, and (PRINCIPAL EXECUTIVE OFFICER) Director /s/ EARL W. MCNIEL Vice President and Chief Financial EARL W. MCNIEL Officer (PRINCIPAL FINANCIAL OFFICER) /s/ M. TERRY MAY Chief Accounting Officer M. TERRY MAY (PRINCIPAL ACCOUNTING OFFICER) /s/ CHRISTIAN J. BOON FALLEUR Director CHRISTIAN J. BOON FALLEUR /s/ REMI DORVAL Director REMI DORVAL /s/ JORGE E. ESTRADA M. Director JORGE E. ESTRADA M. /s/ RALPH D. MCBRIDE Director RALPH D. MCBRIDE /s/ THOMAS H. ROBERTS, JR. Director THOMAS H. ROBERTS, JR. /s/ JAMES T. SNEED Director JAMES T. SNEED
53 EX-4.1 2 EXHIBIT 4.1 COMMON STOCK NO PAR VALUE RIGHTS ATTACHED TO THIS CERTIFICATE DESCRIBED ON REVERSE NUMBER SHARES PC [GRAPHIC] CUSIP 741932 10 7 INCORPORATED UNDER THE LAWS SEE REVERSE FOR OF THE STATE OF LOUISIANA CERTAIN DEFINITIONS PRIDE INTERNATIONAL, INC. THIS CERTIFIES that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Pride International, Inc., transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of Incorporation and By-Laws of the Corporation as from time to time amended, to all of which the holder by acceptance hereof assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. [PRIDE LOGO] [SEAL] Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: PRESIDENT AND CHIEF EXECUTIVE OFFICER SECRETARY COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE American Bank Note Company PRIDE INTERNATIONAL, INC. The Corporation will furnish to any shareholder on request and without charge a full statement of the designations, relative rights, preferences and limitations of the shares of each class of stock authorized to be issued and of each series of each class, and a full statement of the authority of the board of directors to establish other series and to fix the relative rights, preferences and limitations of the shares of any class or series by amendment of the Corporation's Articles of Incorporation. Such request may be made to the Corporation in Houston, Texas or to the Transfer Agent and Registrar. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT--___________Custodian___________ TEN ENT -- as tenants by the (Cust) (Minor) entireties under Uniform Gifts to Minors JT TEN -- as joint tenants with right of Act _________________________ survivorship and not (State) as tenants in common Additional abbreviations may also be used though not in the above list. For value received, _______________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE /----------------------------/ ------------------------------------------------- - - -------------------------------------------------------------------------------- PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- _________________________________________________________________________ Shares of the Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _____________________________________________ - - -------------------------------------------------------------------------------- Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated, _______________________ X_____________________________________ (Signature) NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE ---- CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. X_____________________________________ (Signature) ================================================================================ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN "ELIGIBLE GUARANTOR INSTITUTION" AS DEFINED IN RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. - - -------------------------------------------------------------------------------- SIGNATURE(S) GUARANTEED BY: ================================================================================ This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Pride International, Inc. (the "Company") and American Stock Transfer & Trust Company (the "Rights Agent") dated as of September 9, 1998 as it may from time to time be supplemented or amended (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire or may be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), AND CERTAIN TRANSFEREES THEREOF, WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE. EX-4.6 3 EXHIBIT 4.6 THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of December 21, 1998, is by and among PETROLEUM SUPPLY COMPANY, PRIDE INTERNATIONAL HOLDINGS, INC., RANGER WELL SERVICE, INC., PRIDE OFFSHORE, INC., and RANGER CORPORATION (each individually, a "BORROWER," and, collectively, the "BORROWERS"), PRIDE INTERNATIONAL, INC., (the "PARENT GUARANTOR"), each of the Lenders (as defined in the below-mentioned Credit Agreement) signatory hereto, BANK ONE, LOUISIANA, N.A. (formerly known as FIRST NATIONAL BANK OF COMMERCE), as arranger and syndication agent for the Lenders (in such capacity, together with its successors in such capacity, the "SYNDICATION AGENT"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as administrative and documentation agent for the Lenders (in such capacity, together with its successors in such capacity, the "ADMINISTRATIVE AGENT") and as issuer of Letters of Credit. R E C I T A L S: WHEREAS, the Borrowers, the Parent Guarantor, the Agents, and the Lenders signatory hereto entered into a Credit Agreement, dated as of December 22, 1997 (as amended as of April 24, 1998 and September 17, 1998, the "CREDIT AGREEMENT"), pursuant to which the Lenders made available to the Borrowers a revolving credit facility; WHEREAS, the Borrowers have requested that the Lenders and the Agents agree to amend the Credit Agreement to amend the definition of Funded Debt and to permit the incurrence of (i) certain Debt in connection with the construction, equipping and mobilization of the PRIDE ANGOLA ultra-deepwater drillship; (ii) Guarantees; (iii) Sale-Leaseback Debt relating to the PRIDE TEXAS and PRIDE KANSAS; and (iv) certain Sale-Leaseback Debt relating to the AMETHYST 1; WHEREAS, to induce the Agents and the Required Lenders to enter into this Amendment, the Borrowers have agreed to pay an amendment fee to those Lenders executing this Amendment by 5:00 p.m. Houston, Texas time on December 21, 1998 and to modify certain definitions and covenants found in the Credit Agreement; WHEREAS, the Required Lenders and the Agents are willing to amend the Credit Agreement as hereinafter provided; and WHEREAS, the Borrowers, the Parent Guarantor, the Lenders and the Agents now desire to amend the Credit Agreement as herein set forth. NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 1 ARTICLE I DEFINITIONS Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as in the Credit Agreement, as amended hereby. ARTICLE II AMENDMENTS Section 2.1 ADDITIONAL DEFINITIONS. Section 1.1 is amended by adding the following definitions in alphabetical order: "AMETHYST 1 LEASE" means Sale-Leaseback Debt of the Parent Guarantor or one of the Subsidiaries approved by the Administrative Agent that is incurred by March 31, 1999, not to exceed $100,000,000 in aggregate principal amount, for a term of at least 13.5 years with an early buyout option at eight and one half years (the indicative all-inclusive implicit interest rate quoted to the Parent Guarantor is 9.25% per annum), copies of which AMETHYST 1 Lease and related documents will be delivered to the Administrative Agent and its counsel for approval before execution. "CIC LOAN" means Limited Recourse Debt, not to exceed $205,000,000 in aggregate principal amount, to be issued in the future that will be used to repay the PRIDE ANGOLA Construction Loan. "MITSUBISHI GUARANTEES" means the guarantees (described on Schedule 1.1) issued by the Parent Guarantor in connection with the financing of Amethyst Financial Corporation, a foreign affiliate of the Parent Guarantor, pursuant to the Mitsubishi Loan Documents. "MITSUBISHI LOAN DOCUMENTS" means the (i) Loan Agreement dated December 19, 1998 among Petrodrill Six Limited, Mitsubishi Corporation (UK) PLC as Facility Agent and Security Agent (the "Petrodrill Agents") and the lenders party thereto and (ii) the Loan Agreement dated December 19, 1998 among Petrodrill Seven Limited, the Petrodrill Agents and the lenders party thereto, and related documents, copies of which Loan Agreements and related documents have been delivered to the Administrative Agent and its counsel. "PRIDE ANGOLA CONSTRUCTION LOAN" means the Debt, not to exceed $205,000,000 in aggregate principal amount, incurred or to be incurred by the Parent Guarantor, pursuant to the PRIDE ANGOLA Loan Documents, the purpose of which PRIDE ANGOLA Construction Loan is to provide financing to construct, equip and mobilize the ultra-deepwater drillship PRIDE ANGOLA before delivery. THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 2 "PRIDE ANGOLA LOAN DOCUMENTS" means the Loan Agreement among Compagnie Financiere de CIC et de l'Union Europeene, as Arranger, Facility Agent and Security Trustee and the banks and financial institutions that are "lenders" thereunder and related documents on terms similar to those contained in the PRIDE AFRICA Loan Documents, copies of which Loan Agreement and related documents have been delivered to the Administrative Agent and its counsel. "TEXAS/KANSAS LEASES" means Sale-Leaseback Debt of the Parent Guarantor or one of its Subsidiaries approved by the Administrative Agent that is incurred by March 31, 1999, not to exceed $80,000,000, with a seven year term in the transaction arranged by BTM Capital, copies of which Texas/Kansas Leases and related documents will be delivered to the Administrative Agent and its counsel for approval before execution. "WORKING" means that a Rig has operated under a drilling contract no less than 15 days of the 30 days prior to the date of the most recently delivered Borrowing Base Report upon fair and reasonable terms including day rate no less favorable than could be obtained in an arm's length transaction. Section 2.2 DEFINITIONAL AMENDMENTS. Section 1.1 is further amended by: (a) amending the definition of "Applicable Margin" as follows: (i) by adding the following sentence at the end thereof: "Until the Quarterly Payment Date first occurring after Debt evidenced by the PRIDE AFRICA OFE Loan and the PRIDE ANGOLA Construction Loan have been repaid in full with proceeds of Limited Recourse Debt and satisfactory proof of such repayment is received by the Administrative Agent, each Applicable Margin found in the above table shall be increased by 0.50% and such increase shall apply to all Advances until the Quarterly Payment Date first mentioned in this Sentence;" and THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 3 deleting the existing table therefrom and inserting the following table in lieu thereof:
S&P/MOODY'S RATING OF PARENT RATIO OF GUARANTOR'S APPLICABLE MARGIN APPLICABLE MARGIN FUNDED DEBT TO UNSECURED FOR EURODOLLAR FOR BASE EBITDA SENIOR DEBT ADVANCES RATE ADVANCES - - -------------------------------------------------------------------------------------- Less than 1.50 to 1.00 BBB-/Baa3 or higher 1.50% 0.75% Greater than or equal to 50 to BB to BB+/ 1.75% 0.75% 1.00, but less than 2.00 1.00 Ba1 to Ba2 Greater than or equal to 2.00 to BB-/Ba3 2.00% 0.75% 1.00, but less than 2.50 to 1.00 Greater than or equal to 2.50 to B+/B1 2.25% 0.75% 1.00 ======================================================================================
(b) deleting the definition of "Applicable Rig Advance Rate" and replacing it with the following: "'Applicable Rig Advance Rate' means 50 percent;" (c) amending the definition of "Borrowing Base" by adding the following words after the word "Rigs" in the last line thereof: "that are Working"; (d) amending the definition of "Coverage Ratio" by: (i) deleting the reference to "EBIT" and inserting in lieu thereof a reference to "EBITDA"; and (ii) adding to clause (b) after the word "expense" found on the third line the following parenthetical: "(excluding, however, non-cash interest expense attributable to the Zero Coupon Debentures)"; (e) by deleting from the definition of "Eligible Rigs" the reference to "Section 10.2" and inserting in lieu thereof a reference to "Section 10.2(c), (d), (e) or (f)"; (f) deleting from the definition in clause (a) of "Funded Debt" the words "the PRIDE AFRICA OFE Loan"; (g) by amending the definition of "Rigs" by inserting the following in the first line thereof after the word "hereto:" THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 4 "and all other drilling units in which Lien is granted by the Administrative Agent for the PRO RATa benefit of the Lenders pursuant to Loan Documents satisfactory to the Administrative Agent;" Section 2.3 AMENDMENT TO SECTION 10.1. Section 10.1 is amended by: (a) deleting from clause (e) the reference to "$120,000,000" and inserting in lieu thereof a reference to $40,000,000;" (b) adding the following at the end of clause (f): "PLUS the PRIDE ANGOLA Construction Loan;" (c) adding the following at the end of clause (g): "PLUS the AMEYTHST 1 Lease, the CIC Loan (once the Administrative Agent finds, in writing, that the terms thereof are acceptable and the CIC Loan constitutes Limited Recourse Debt) and the Texas/Kansas Leases;" and (d) adding the following at the end of clause (h): "PLUS the "Mitsubishi Guarantees." Section 2.4 AMENDMENT TO SECTION 2.8. Section 2.8 is amended by deleting the reference to "0.375%" and inserting in lieu thereof a reference to "0.625%." Section 2.5 AMENDMENT TO SECTION 11.1. Section 11.1 is amended by deleting therefrom clauses (a) and (b) and substituting the following in lieu thereof: "the following: ROLLING PERIOD ENDING REQUIRED RATIO 3/31/99 4.25x to 1.0 6/30/99 4.50x to 1.0 9/30/99 4.75x to 1.0 12/31/99 4.75x to 1.0 3/31/00 3.75x to 1.0 6/30/00 3.50x to 1.0 and thereafter 3.50x to 1.0" Section 2.6 AMENDMENT TO SECTION 11.2. Section 11.2 is amended by deleting therefrom clauses (a), (b) and (c) and substituting the following therefor: "(a) 0.60 for each determination made during the period to and including December 31, 1999 and (b) 0.50 for each quarter ending after December 31, 1999." THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 5 Section 2.7 AMENDMENT TO SECTION 11.3. Section 11.3 is amended by deleting therefrom the references to "1.35" and "1.50" and inserting in lieu thereof a reference to "2.0". Section 2.8 AMENDMENTS TO SECTION 12.1. Section 12.1 is amended by thereto two new clauses, reading as follows: "(p) failure of the Parent Guarantor to comply with the Guarantees. "(q) the PRIDE ANGOLA Construction Loan shall not be repaid with proceeds of the CIC Loan or the Parent Guarantor released from all liability thereunder by March 31, 2000. ARTICLE III CONDITIONS PRECEDENT Section 3.1 NECESSARY DOCUMENTATION. This Amendment shall be effective when the Administrative Agent shall have received this Amendment executed by the Borrowers, the Agent, the Parent Guarantor and the Required Lenders. The Parent Guarantor shall have paid to the Administrative Agent an amendment fee equal to 0.50% times the Commitments to be shared PRO RATA by the Lenders executing this Amendment by 5:00 p.m. on December 21, 1998. The Administrative Agent, upon receipt of the amendment fees, shall promptly distribute the PRO RATA shares of the Amendment fee to the Lenders entitled thereto. Section 3.2 REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in the Credit Agreement shall be true and correct in all material respects on and as of the date hereof with the same force and effect as if such representations and warranties had been made on and as of such date. ARTICLE IV MISCELLANEOUS Section 4.1 RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. Except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of, and as if made on, the date hereof. The Borrower, the Banks and the Agents agree that the Credit Agreement as amended hereby shall continue to be legal, valid, binding and enforceable in accordance with its terms, except as the enforceability thereof may be affected by general principles of equity or creditors' rights. THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 6 Section 4.2 SPECIAL REPRESENTATION. Each of the Parent Guarantor and each Borrower represents and warrants to the Agents and the Lenders that (a) the recourse of the holders of the CIC Loan (after the period of the PRIDE ANGOLA Construction Loan) is effectively limited to the Foreign Affiliate that is the obligor thereunder and to the security of the assets of such Foreign Affiliate and (b) the maximum exposure reasonably expected under the Mitsubishi Guarantees is $74,200,000. Section 4.3 ADDITIONAL COVENANT. Each of the Parent Guarantor and each Borrower agrees (a) during the term of the Agreement, to continue to cause all Eligible Accounts that are Domestic Accounts to be directed to a Parent Guarantor or a Borrower bank account maintained at the Syndication Agent; (b) to pledge as Collateral at least three Eligible Rigs that are Working no later than the delivery date of the January 31, 1999 Borrowing Base Report; (c) during the term of the Agreement, upon the request of the Administrative Agent, to cause all Eligible Accounts that are Foreign Accounts to be directed to a Parent Guarantor or a Borrower bank account maintained at the Administrative Agent; and (d) to permit, at the expense of the Parent Guarantor and the Borrowers, an examination, no later than January 31, 1999, of Eligible Accounts by the Administrative Agent or a third-party selected by the Administrative Agent. Section 4.4 REFERENCE TO THE CREDIT AGREEMENT. Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. Section 4.5 SEVERABILITY. Any provisions of this Amendment held by court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provisions so held to be invalid or unenforceable. Section 4.6 APPLICABLE LAW. This Amendment and all other Loan Documents executed pursuant hereto shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America. Section 4.7 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure to the benefit of the Lenders, the Agents, the Parent Guarantor and the Borrowers and their respective successors and assigns. Section 4.8 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original but all of which when taken together shall constitute one and the same instrument. Facsimile signatures shall be effective for all purposes. Section 4.9 HEADINGS. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 7 Section 4.10 NO ORAL AGREEMENTS. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 4.11 DETERMINATION OF CERTAIN DEBT AS LIMITED RECOURSE DEBT. The Administrative Agent hereby designates the CIC Loan (effective after repayment of the PRIDE ANGOLA Construction Loan or release of the Parent Guarantor from all liability thereunder) as Limited Recourse Debt for purposes of the Credit Agreement. [Balance of this page intentionally left blank.] THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 8 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. BORROWERS: PETROLEUM SUPPLY COMPANY By:/s/EARL W. MCNIEL _______________________________ Name:Earl W. McNiel Title: PRIDE INTERNATIONAL HOLDINGS, INC. By:/s/EARL W. MCNIEL ________________________________ Name:Earl W. McNiel Title: RANGER WELL SERVICE, INC. By:/s/EARL W. MCNIEL ________________________________ Name:Earl W. McNiel Title: PRIDE OFFSHORE, INC. By:/s/EARL W. MCNIEL ________________________________ Name:Earl W. McNiel Title: THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 9 RANGER CORPORATION By:/s/EARL W. MCNIEL ________________________________ Name:Earl W. McNiel Title: PARENT GUARANTOR: PRIDE INTERNATIONAL, INC. By:/s/EARL W. MCNIEL ________________________________ Earl W. McNiel Vice President AGENTS AND LENDERS: WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as Administrative Agent and a Lender By:/s/F. SCHAGEMAN ________________________________ Frank W. Schageman Vice President BANK ONE, LOUISIANA, N.A. as Syndication Agent and as a Lender By:/S/ J. KENNETH LE DOUX ________________________________ Name: J. Kenneth Le Doux Title:Vice President THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 10 HIBERNIA NATIONAL BANK By:/s/ B.ROSS ________________________________ Name:B. Ross Title:Senior Vice President THE FUJI BANK, LIMITED -HOUSTON AGENCY By:/s/ RAYMOND VENTURA ________________________________ Name:Raymond Ventura Title:Vice President and Manager per pro BROWN BROTHERS HARRIMAN & CO. By:/s/ KATHRYN C. GEORGE ________________________________ Name:Kathryn C. George Title:Senior Manager THIRD AMENDMENT TO CREDIT AGREEMENT - PAGE 11 EX-10.11 4 EXHIBIT 10.11 PRIDE INTERNATIONAL, INC. 1993 DIRECTORS' STOCK OPTION PLAN THIRD AMENDMENT Pride International, Inc. (the "Company") having previously established the Pride Petroleum Services, Inc. 1993 Directors' Stock Option Plan effective February 22, 1993, as thereafter amended effective May 22, 1997 and December 4, 1997 (the "Plan"), and having reserved the right under Section XVIII thereof to amend the Plan, does hereby amend Section 2.1 of the Plan in its entirety to read as follows, subject to shareholder approval: "2.1 The total number of shares of common stock of the Company which may be purchased pursuant to the exercise of Options granted under the Plan shall not exceed, in the aggregate, four hundred thousand (400,000) shares of common stock, no par value, of the Company (the 'Shares')." This Amendment shall be effective as of February 26, 1998. PRIDE INTERNATIONAL, INC. By: /s/ ROBERT W. RANDALL Robert W. Randall, Vice President ATTEST: /s/ FRIDA A. MARTINEZ Frida A. Martinez EX-10.19 5 EXHIBIT 10.19 PRIDE INTERNATIONAL, INC. EMPLOYMENT/NON-COMPETITION/ CONFIDENTIALITY AGREEMENT PAUL A. BRAGG EFFECTIVE FEBRUARY 5, 1999 INDEX I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS.................................6 1.01 Effect of Prior Agreements......................................6 II. DEFINITION OF TERMS...................................................6 2.01 Company.........................................................6 2.02 Executive/Officer/Employee......................................6 2.03 Office/Position/Title...........................................6 2.04 Effective Date..................................................6 2.05 Change in Control...............................................7 2.06 Termination.....................................................7 2.07 Customer........................................................9 III. EMPLOYMENT..........................................................10 3.01 Employment.....................................................10 3.02 Best Efforts And Other Employment Of Executive.................10 3.03 Term Of Employment.............................................10 3.04 Compensation And Benefits......................................11 3.05 Termination Without Change In Control..........................12 IV. CHANGE IN CONTROL....................................................14 4.01 Extension Of Employment Period.................................14 4.02 Change In Control Termination Payments & Benefits..............15 4.03 Voluntary Resignation Upon Change In Control...................15 V. NON-COMPETITION AND CONFIDENTIALITY...................................15 5.01 Consideration..................................................15 5.02 Non-Competition................................................16 5.03 Confidentiality................................................17 5.04 Geographical Area..............................................18 5.05 Company Remedies For Violation Of Non-Competition Or Confidentiality Agreement............................18 5.06 Termination Of Benefits For Violation Of Non- Competition And Confidentiality.....................19 Page 2 of 23 VI. GENERAL.............................................................19 6.01 Enforcement Costs...............................................20 6.02 Income, Excise or Other Tax Liability...........................20 6.03 Payment Of Benefits Upon Termination For Cause..................20 6.04 Non-Exclusive Agreement.........................................21 6.05 Notices.........................................................21 6.06 Non-Alienation..................................................21 6.07 Entire Agreement: Amendment.....................................22 6.08 Successors And Assigns..........................................22 6.09 Governing Law...................................................22 6.10 Venue...........................................................22 6.11 Headings........................................................22 6.12 Severability....................................................22 6.13 Partial Invalidity..............................................22 6.14 Counterparts....................................................23 Page 3 of 23 EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT DATE: FEBRUARY 5, 1999 COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation 5847 San Felipe, Suite 3300 Houston, Texas 77057 EXECUTIVE/EMPLOYEE: Paul A. Bragg 5435 Vanderbilt Houston, Texas 77005 This Agreement is made as of the date first above written and to become effective as herein provided. PREAMBLE WHEREAS, the Company wishes to attract and retain well-qualified Executive and key personnel and to assure itself of the continuity of its management; WHEREAS, Executive is an officer of the Company with significant management responsibilities in the conduct of its business; WHEREAS, the Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive; WHEREAS, the Company desires to obtain assurances that Executive will devote his best efforts to his employment with the Company and will not enter into competition with the Company in its business as now conducted and to be conducted, or solicit customers or other employees of the Company to terminate their relationships with the Company; WHEREAS, Executive is a key employee of the Company and he acknowledges that his talents and services to the Company are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company; Page 4 of 23 WHEREAS, the Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise; Executive may have concerns about the continuation of his employment status and responsibilities and may be approached by others offering competing employment opportunities; the Company, therefore, desires to provide Executive with assurances as to the continuation of his employment status and responsibilities in such event; WHEREAS, the Company further desires to assure Executive that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to his financial well-being; WHEREAS, Executive is willing to continue to serve as such but desires assurances that in the event of such a change in control he will continue to have the employment status and responsibilities he could reasonably expect absent such event and, that in the event this turns out not to be the case, he will have fair and reasonable severance protection on the basis of his service to the Company to that time; WHEREAS, different factors affect the Company and Executive under circumstances of regular employment between the Company and the Executive when there is no threat of change in control and/or none has occurred, as opposed to circumstances under which a change in control is rumored, threatened, occurring or has occurred. For this reason this Employment Agreement is primarily in two parts. One part deals with the regular employment of Executive under circumstances whereby no change in control is threatened, occurring or occurred; herein called "Regular Employment". The second part deals with circumstances whereby a change in control is threatened, occurring or has occurred. Other parts of the Agreement deal with matters affecting both Regular Employment and employment following change in control, including non-competition and confidentiality; and WHEREAS, Executive is willing to enter into and carry out the Non-Competition and Confidentiality Agreement set forth herein in consideration of the Employment Agreement set forth herein. Page 5 of 23 AGREEMENT NOW THEREFORE, the parties agree as follows: I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS. 1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the Effective Date all prior employment and non-competition contracts between Company and Executive are hereby amended, modified and superseded by this Agreement insofar as future employment, compensation, non- competition, confidentiality, accrual of payments or any form of compensation or benefits from the Company are concerned. This Agreement does not release or relieve Company from its liability or obligation with respect to any compensation, payments, or benefits already accrued to Executive, nor to any vesting of benefits or other rights which are attributable to length of employment, seniority or other such matters. This agreement does not relieve Executive of any prior non-competition or confidentiality obligations and agreements and the same are hereby modified and amended as to future matters and future confidentiality even as to matters accruing prior to the Effective Date hereof. II. DEFINITION OF TERMS. 2.01. COMPANY. Company means Pride International, Inc., a Louisiana corporation, as the same presently exists, as well as any and all successors, regardless of the nature of the entity or the State or Nation of organization, whether by reorganization, merger, consolidation, absorption or dissolution. For the purpose of the Non-Competition and Confidentiality Agreement, Company includes any subsidiary or affiliate of the Company to the extent it is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company. 2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Paul A. Bragg. 2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which the Executive is employed is that of President and Chief Operating Officer of the Company and carries with it the duties, responsibilities, rights, benefits and privileges presently held by the Executive, or as may reasonably be assigned to the Executive as are customary and usual for such position. 2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of February 5, 1999. Page 6 of 23 2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following: a. there occurs a Change in Control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; b. any "person" {as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934} is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; c. the individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; d. the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation; or e. the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person. 2.06. TERMINATION. The term "termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company {including death and disability (as described below)} for any reason other than cause (as described below) or voluntary resignation (as described below). Termination includes "Constructive Termination" as described below. Termination includes non-renewal or failure to extend this Agreement at the end of any employment term, except for cause. a. The term "disability" means physical or mental incapacity qualifying the Executive for a long-term disability under the Company's long-term disability plan. If no such plan exists on the Effective Date of this Agreement, the term "disability" means physical or mental incapacity as determined by a doctor jointly selected by the Executive and the Board of Directors of the Company qualifying the Executive for long-term disability under reasonable employment standards. b. The term "cause" means: (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties, (ii) willful misconduct materially and demonstrably injurious to the Company or (iii) material violation of the covenant not to compete (except after termination under the Change in Control provisions hereof and confidentiality provisions hereof.) No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, or other action by or at request of the Company in respect of his position, authority, or responsibility that is contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-fourths of the entire Board of Directors of the Company at a meeting of the Board of Directors called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board of Directors the Executive has been guilty thereof and specifying the particulars thereof. c. The term "Constructive Termination" means any circumstance by which the actions of the Company either reduce or change Executive's title, position, duties, responsibilities or authority to such an extent or in such a manner as to relegate Executive to a position not substantially similar to that which he presently holds; would degrade, embarrass or otherwise make it unreasonable for Executive Page 7 of 23 to remain in the employment of the Company; and includes violation of the employment provisions and conditions of this Agreement. d. The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) The Executive's resignation or retirement is requested by the Company other than for cause; (ii) Any significant adverse change in the nature or scope of the Executive's position, authorities or duties from those described in this Agreement; (iii) Any reduction in the Executive's total compensation or benefits from that provided in the Compensation and Benefits Section hereof; (iv) The material breach by the Company of any other provision of this Agreement; (v) Any action by the Company which would constitute Constructive Termination; or (vi) Non-renewal or failure to extend any employment term, contrary to the wishes of the Executive. Termination that entitles the Executive to the payments and benefits provided in the "Termination Payments and Benefits" Section hereof shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award, or eligibility, for the purpose of any plan, practice or agreement of the Company referred to in the Compensation and Benefits Section hereof. 2.07. CUSTOMER. The term "Customer" includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase. III. EMPLOYMENT. 3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the Page 8 of 23 Term of Employment ("Employment Period") herein specified. During the Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company and Executive may agree. 3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE. a. Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. Such duties shall be rendered at Houston, Texas, and such other place or places within or without the State of Texas as the Company and Executive shall agree. b. Executive shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for the Company. Such employment shall be considered "full time" employment. Executive shall have the right to make investments in businesses which engage in activities other than those engaged by the Company. Executive shall also have the right to devote such incidental and immaterial amount of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Executive shall have the right to make investments in the manner and to the extent authorized and set forth in the Non-Competition Section of this Agreement. 3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for successive terms of one (1) year each commencing February 5, 2001, and on February 5 of each year thereafter, unless Company or Executive gives Page 9 of 23 written notice to the other that employment will not be renewed or continued after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company. 3.04. COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits: a. He shall receive an annual base salary of not less than his annual base salary which is $334,000.00, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors. b. To the extent that such plans exist immediately prior to the Effective Date of this Agreement, he shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. c. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits and prerequisites which are the greater of: (i) the employee benefits and prerequisites provided by the Company to Executives with comparable duties and (ii) the employee benefits and prerequisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Agreement. d. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Date of this Agreement with respect to his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive such benefit) will be not less than it would be had all such plans and agreements were in effect immediately prior to the Effective Date of this Page 10 of 23 Agreement and continued to be in effect without change until and after he begins to receive such benefits. e. Paid vacations each year and use of a Company car or a car allowance to the same extent as he is presently receiving or the benefits provided to Executives with comparable duties whichever is greater. f. Participation in all other executive incentive stock and benefit plans approved by the Compensation Committee 3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including any extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change in Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive (or his Executor, Administrator or Estate in the event of death, as soon as reasonably practical): a. An amount equal to two full years of his base salary (including the amount allocated to the covenant not to compete), which base salary is here defined as twelve (12) times the then current monthly salary in effect for the Executive and all other benefits due him based upon the salary in effect on the Date of Termination (but not less than the highest annual base salary paid to the Executive during any of the three (3) years immediately preceding his Date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions. b. The Company shall provide to Executive for a period of two (2) full years following the Date of Termination, life, health, accident and disability insurance. These benefits are not to be less than the highest benefits furnished to the Executive during the term of this Agreement. c. An amount equal to two (2) times the target award for the Executive under the Company's annual bonus plan for the fiscal year in which termination occurs, provided that if the Executive has deferred his award for such year under a Company plan, the payment due the Executive under this subparagraph shall be paid in accordance with the terms of the deferral or as specified by the Executive. Page 11 of 23 d. The Company shall pay, distribute and otherwise provide to the Executive the amount and value of his entire plan account and interest under any retirement plan, employee benefit plan, investment plan or stock ownership plan, if any exists on the Date of Termination, and all employer contributions made or payable to any such plan for his account prior to the end of the month in which Termination occurs shall be deemed vested and payable to him. Such payment or distribution shall be in accordance with the elections made by the Executive with respect to distributions in accordance with the plan as if the Executive's employment with the Company terminated at the end of the month in which Termination occurs. e. All stock options and awards to which the Executive is entitled will immediately vest and the time for exercising any option will be as specified in the plan as if the Executive were still employed by the Company; provided however if the immediate vesting of all benefits under the plan is not permitted by the plan, then the benefits will be vested only to the extent authorized or permitted by the plan. f. If Executive elects to treat the termination as retirement then on the Date of Termination, the Executive shall be deemed to have retired from the Company. At that time, or at such later time as he may elect consistent with the terms of any applicable plan or benefit, in order to receive benefits or avoid or minimize any applicable early pension reduction provisions, he shall be entitled to commence to receive total combined qualified and non-qualified retirement benefits to which he is entitled hereunder; or, his total non-qualified retirement benefit hereunder if under the terms of the Company's qualified retirement plan for salaried employees he is not entitled to a qualified benefit. Executive may treat the termination as termination other than "retirement" if Executive so elects and may defer "retirement" to a later date if permitted by any applicable plan. g. The "Compensation and Benefits" section hereof shall be applicable in determining the payments and benefits due the Executive under this section and if Termination occurs after a reduction in all or part of the Executive's total compensation or benefits, the lump sum severance allowance and other compensation and benefits payable to him pursuant to this section shall be based upon his compensation and benefits before the reduction. h. If any provision of this Section cannot, in whole or in part, be implemented and carried out under the terms of the applicable compensation, benefit or other plan or arrangement of the Company Page 12 of 23 because the Executive has ceased to be an actual employee of the Company, due to insufficient or reduced credited service based upon his actual employment by the Company or because the plan or arrangement has been terminated or amended after the Effective Date of this Agreement, or for any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to the Executive, his dependents, beneficiaries and estate as if Executive's employment had not been terminated. i. All life, health, hospitalization, medical and accident benefits available to Executive's spouse and dependents shall continue for the same term as the Executive's benefits. If the Executive dies, all benefits will be provided for a term of two (2) years {or three (3) years if after a change in control} after the date of death of the Executive. j. The Company's obligation under this Section to continue to pay or provide health care, life, accident and disability insurance to the Executive, the Executive's spouse and Executive's dependents, during the remainder of the Employment Period shall be reduced when and to the extent any of such benefits are paid or provided to the Executive by another employer, provided that the Executive shall have all rights afforded to retirees to convert group insurance coverage to the individual insurance coverage as, to the extent of, and whenever his group insurance coverage under this Section is reduced or expires. Apart from this subparagraph, the Executive shall have and be subject to no obligation to mitigate. k. The Company shall deduct applicable withholding taxes in performing its obligations under this Section. Nothing in this Section is intended, nor shall be deemed or interpreted, to be an amendment to any compensation, benefit or other plan to the Company. To the extent the Company's performance under this Section includes the performance of the Company's obligations to the Executive under any other plan or under another agreement between the Company and the Executive, the rights of the Executive under such other plan or other agreements, which are discharged under this Agreement, are discharged, surrendered, or released PRO TANTO. IV. CHANGE IN CONTROL. 4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the Employment Period shall be immediately and without further action extended Page 13 of 23 for a term of three (3) years following the Effective Date of the Change in Control and will expire at 12:00 o'clock midnight on the last day of the month following three (3) years after the Change in Control. Thereafter, the Employment Period will be extended for successive terms of one (1) year each, unless terminated, all in the manner specified in the Term of Employment Section pertaining to regular employment. 4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS. In the event the Executive is terminated within three (3) years following a Change in Control, the Executive will receive the payments and benefits specified in the "Termination without Change in Control" Section in the same time and manner therein specified except as amended and modified hereby: a. The salary and benefits specified in Section 3.05a will be paid based upon a multiple of three (3) years {instead of two (2) years}. b. Life, health, accident and disability insurance specified in Section 3.05b will be provided until: (i) Executive becomes reemployed and receives similar benefits from a new employer, or (ii) three (3) years after the Date of Termination, whichever is earlier. c. An amount equal to three (3) times the maximum award that the Executive could receive under the Company's Annual Bonus Plan for the fiscal year in which the termination occurs, instead of the benefits provided in Section 3.05(c) hereof. d. All other rights and benefits specified in Section 3.05. 4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive voluntarily resigns his employment within twelve (12) months after a Change in Control (whether or not Company may be alleging the right to terminate employment for cause), he will receive the same payments, compensation and benefits as if he had been terminated on the date of resignation after Change in Control. V. NON-COMPETITION AND CONFIDENTIALITY. 5.01. CONSIDERATION. The base salary awarded to the Executive and to be paid to the Executive in the future includes consideration for the Non-Competition and Confidentiality Agreement set forth herein and the amount to be paid to Executive in the event of the termination of employment of Executive, voluntarily, involuntarily, or under a Change in Control, under Sections 3.05a and 4.02a hereof constitute payment, in part, for the Non-Competition and Confidentiality of the Executive. It is contracted, stipulated and agreed that Page 14 of 23 fifteen percent (15%) of such amount paid and to be paid to the Executive shall constitute the consideration for the Non-Competition and Confidentiality Agreement set forth herein. 5.02. NON-COMPETITION. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company could cause serious harm to the Company. Accordingly, the Executive agrees that during his employment with the Company and for a period of two (2) years after he is no longer employed by the Company (unless his employment is terminated after a Change in Control, in which event there will be no covenant not to compete and the provisions of the covenant not to compete herein contained will terminate on the date of termination of the Executive) the Executive will not, directly or indirectly, either as an individual, proprietor, stockholder {other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers}, partner, officer, employee or otherwise: a. work for, become an employee of, invest in, provide consulting services or in any way engage in any business which provides, produces, leases or sells products or services of the same or similar type provided, produced, leased or sold by the Company and with regard to which Executive was engaged, or over which Executive had direct or indirect supervision or control, within three (3) years preceding the Executive's termination of employment, in any area where the Company provided, produced, leased or sold such products or services at any time during the three (3) years preceding such termination of employment, or b. provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which the Executive had direct or indirect supervision or control, within three (3) years preceding Executive's termination of employment, to or from any person, firm or entity which was a customer for such products or services of the Company during the three (3) years preceding such termination from whom the Company had solicited business during such three (3) years; or c. solicit, aid, counsel or encourage any officer, director, employee or other individual to: (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) violate the terms of any employment, non-competition or similar agreement with the Company; or Page 15 of 23 d. employ, directly or indirectly; permit the employment of; contract for services or work to be performed by; or otherwise, use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the Date of Termination of employment of Executive with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever occurs earlier. 5.03. CONFIDENTIALITY. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Executive will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation (in any manner whatsoever) any information concerning any matter affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, the Executive may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of the Executive's duties as an employee of the Company, and the Executive may not make use of any information of the Company after he is no longer an employee of the Company. The Executive agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties. All information, whether written or otherwise, regarding the Company's business, including, but not limited to, information regarding customers, customer lists, costs, prices, earnings, products, services, formulae, compositions, machinery, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply, is PRIMA FACIE presumed to be important, material and confidential information of the Company for the purposes of this Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general public. The Executive further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, typed or printed materials, whether furnished by the Company or prepared by the Executive, which contain any information relating to the Company's business, and the Executive agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, the Executive will not be liable for any breach of these confidentiality provisions unless the same constitutes a material detriment to the Company, or due to the nature of the Page 16 of 23 information divulged and the manner in which it was divulged and the person to whom it was divulged would likely cause damage to the Company or constitute a material detriment to the Company. 5.04. GEOGRAPHICAL AREA. The geographical area within which the non- competition covenants of this Agreement shall apply is that territory within two hundred (200) miles of: (i) any of the Company's present offices, (ii) any of the Company's present rig yards, and (iii) any additional location where the Company, as of the date of any action taken in violation of the non- competition covenants of this Agreement, has an office, a rig yard, or definitive plans to locate an office or a rig yard. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country. 5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY AGREEMENT. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the covenants made by the Executive herein, it is agreed that: a. the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; b. because of the nature of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Agreement are reasonable; and a. the injury suffered by the Company by a violation of any covenant in this Agreement resulting from loss of profits created by the competitive use of such skills, experience and contacts that otherwise will make it difficult to calculate in damages in an action at law and cannot fully compensate the Company for any violation of any covenant in this Agreement, accordingly, (i) the Company shall be entitled to injunctive relief to prevent violations of such covenants or continuing violations thereof and to prevent Executive from rendering any services to any person, firm or entity in breach of such covenant and to prevent Executive from divulging any confidential information, and (ii) compliance with this Agreement is a condition precedent to the Company's obligation to make payments of any nature to the Page 17 of 23 Executive. 5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY. If the Executive's termination was not after a Change in Control and if the Executive shall have materially violated the Confidentiality and/or Non-Competition Agreement or any agreement he may have signed as an employee of the Company, the Executive agrees that there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in the Termination of Rights and Benefits Section hereof, subject to the provisions of Section 6.01 hereof. There will be no withholding of benefits or payments if the termination occurred after a Change in Control and the Executive will not be bound by the non-competition provisions if terminated while the Change in Control provisions hereof are applicable. VI. GENERAL. 6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a Change in Control, or under other circumstances even when a Change in Control has not occurred, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny Executive the benefits intended under this Agreement; or actions may be taken to enforce the non-competition or confidentiality provisions of this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of his rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to Executive hereunder nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such costs. Accordingly, if at any time after the Effective Date of this Agreement, it should appear to the Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable, that Executive has violated the terms of this Agreement, or for any other reason, or that the Company has purported to terminate his employment for cause or is in the course of doing so, or is withholding payments or benefits, or is threatening to withhold payments or benefits, contrary to this Agreement, or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to Page 18 of 23 recover from Executive the benefits provided or intended to be provided to him hereunder, and the Executive has acted in good faith to perform his obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company to represent him in connection with the protection and enforcement of his rights hereunder including, without limitation, representation in connection with termination of his employment or withholding of benefits or payments contrary to this Agreement or with the initiation or defense of any litigation or any other legal action, whether by or against the Executive or the Company or any Director, Officer, stockholder or other person affiliated with the Company, in any jurisdiction. Company is not authorized to withhold the periodic payments of attorney's fees and expenses hereunder based upon any belief or assertion by the Company that Executive has not acted in good faith or has violated this Agreement. If Company subsequently establishes that Executive was not acting in good faith and has violated this Agreement, Executive will be liable to the Company for reimbursement of amounts paid due to Executive's actions not based on good faith and in violation of this Agreement. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company, on a regular, periodic basis within thirty (30) days after presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $250,000.00. 6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and will pay all income tax liability by virtue of any payments made to the Executive under this Agreement, as if the same were earned and paid in the normal course of business and not the result of a Change in Control and not otherwise triggered by the "golden parachute" or excess payment provisions of the Internal Revenue Code of the United States, which would cause additional tax liability to be imposed. If any additional income tax, excise or other taxes are imposed on any amount or payment in the nature of compensation paid or provided to or on behalf of Executive, the Company shall "gross up" Executive for such tax liability by paying to Executive an amount sufficient so that after payment of all such taxes so imposed, Executive's position on an after-tax basis is what it would have been had no such additional taxes been imposed. Executive will cooperate with the company to minimize the tax consequences to the Executive and to the Company so long as the actions proposed to be taken by the Company do not cause any additional tax consequences to the Executive and do not prolong or delay the time that payments are to be made, or the amount of payments to be made, unless the Executive consents, in writing, to any delay or deferment of payment. Page 19 of 23 6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of the Executive is for cause and not after a Change in Control, the Company will have the right to withhold all payments (except those specified in Sections 6.01); provided, however, that if a final judgment is entered finding that cause did not exist for termination, the Company will pay all benefits to the Executive to which he would have been entitled had the termination not been for cause, plus interest on all amounts withheld from the Executive at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for cause occurs after a Change in Control, the Company shall have no right to suspend or withhold payments to the Executive under any provision of this Agreement until or unless a final judgment is entered upholding the Company's determination that the termination was for cause, in which event the Executive will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S. 6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefits to which Executive would be entitled but for this Agreement. 6.05. NOTICES. Notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, return receipt requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System, (ii) by facsimile transmission if the receiver acknowledges receipt; (iii) by Federal Express or other expedited delivery service provided that acknowledgement of receipt is received and retained by the deliverer and furnished to the sender, if to the Executive, at the last address he has filed in writing with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices. 6.06. NON-ALIENATION. The Executive shall not have any right to pledge hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject ,matter hereof. Upon the death of the Executive, his Executors, Administrators, devisees and heirs, in that order, shall have the right to enforce the provisions hereof. Page 20 of 23 6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No provision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other persons to any such amendment, waiver or discharge shall not be required. 6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein this Agreement shall be binding upon and inure to the benefit of the Executive and his legal representatives, heirs, and assigns, provided however, that in the event of the Executive's death prior to payment or distribution of all amounts, distributions, and benefits due him hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive, to the Company, to receive such payment or distribution and in the event Executive has made no applicable designation, to his Estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts. 6.09. GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Louisiana because the Company is incorporated under the laws of the State of Louisiana, the validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of Texas. 6.10. VENUE. To the extent permitted by applicable State and Federal law, venue for all proceedings hereunder will be in Harris County, Texas. 6.11. HEADINGS. The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 6.12. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 6.13. PARTIAL INVALIDITY. In the event that any part, portion or section of this Page 21 of 23 Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be binding upon the parties hereto and the Agreement will be construed to give meaning to the remaining provisions of this Agreement in according with the intent of this Agreement. 6.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first above written. Executed in multiple originals and/or counterparts as of the Effective Date. \s\PAUL A. BRAGG PAUL A. BRAGG PRIDE INTERNATIONAL, INC. CORPORATE SEAL By: RAY H. TOLSON RAY H. TOLSON CEO and Chairman of the Board ATTEST: By: FRIDA A. MARTINEZ Frida A. Martinez Assistant Secretary Page 23 of 23 EX-10.20 6 EXHIBIT 10.20 PRIDE INTERNATIONAL, INC. EMPLOYMENT/NON-COMPETITION/ CONFIDENTIALITY AGREEMENT JAMES W. ALLEN EFFECTIVE FEBRUARY 5, 1999 INDEX I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6 1.01 Effect of Prior Agreements......................................6 II. DEFINITION OF TERMS...................................................6 2.01 Company.........................................................6 2.02 Executive/Officer/Employee......................................6 2.03 Office/Position/Title...........................................6 2.04 Effective Date..................................................6 2.05 Change in Control...............................................7 2.06 Termination.....................................................7 2.07 Customer........................................................9 III. EMPLOYMENT...........................................................9 3.01 Employment.....................................................10 3.02 Best Efforts And Other Employment Of Executive.................10 3.03 Term Of Employment.............................................10 3.04 Compensation And Benefits......................................11 3.05 Termination Without Change In Control..........................12 IV.CHANGE IN CONTROL.....................................................15 4.01 Extension Of Employment Period.................................15 4.02 Change In Control Termination Payments & Benefits..............15 4.03 Voluntary Resignation Upon Change In Control...................15 V. NON-COMPETITION AND CONFIDENTIALITY...................................16 5.01 Consideration..................................................16 5.02 Non-Competition................................................16 5.03 Confidentiality................................................17 5.04 Geographical Area..............................................18 5.05 Company Remedies For Violation Of Non-Competition Or Confidentiality Agreement............................18 5.06 Termination Of Benefits For Violation Of Non- Competition And Confidentiality.....................19 VI. GENERAL.............................................................19 6.01 Enforcement Costs...............................................20 6.02 Income, Excise or Other Tax Liability...........................20 6.03 Payment Of Benefits Upon Termination For Cause..................20 6.04 Non-Exclusive Agreement.........................................21 6.05 Notices.........................................................21 6.06 Non-Alienation..................................................21 6.07 Entire Agreement: Amendment.....................................22 6.08 Successors And Assigns..........................................22 6.09 Governing Law...................................................22 6.10 Venue...........................................................22 6.11 Headings........................................................22 6.12 Severability....................................................23 6.13 Partial Invalidity..............................................23 6.14 Counterparts....................................................23 Page 3 of 23 EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT DATE: FEBRUARY 5, 1999 COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation 5847 San Felipe, Suite 3300 Houston, Texas 77057 EXECUTIVE/EMPLOYEE: James W. Allen 11842 Riverview Houston, Texas 77077 This Agreement is made as of the date first above written and to become effective as herein provided. PREAMBLE WHEREAS, the Company wishes to attract and retain well-qualified Executive and key personnel and to assure itself of the continuity of its management; WHEREAS, Executive is an officer of the Company with significant management responsibilities in the conduct of its business; WHEREAS, the Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive; WHEREAS, the Company desires to obtain assurances that Executive will devote his best efforts to his employment with the Company and will not enter into competition with the Company in its business as now conducted and to be conducted, or solicit customers or other employees of the Company to terminate their relationships with the Company; WHEREAS, Executive is a key employee of the Company and he acknowledges that his talents and services to the Company are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company; Page 4 of 23 WHEREAS, the Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise; Executive may have concerns about the continuation of his employment status and responsibilities and may be approached by others offering competing employment opportunities; the Company, therefore, desires to provide Executive with assurances as to the continuation of his employment status and responsibilities in such event; WHEREAS, the Company further desires to assure Executive that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to his financial well-being; WHEREAS, Executive is willing to continue to serve as such but desires assurances that in the event of such a change in control he will continue to have the employment status and responsibilities he could reasonably expect absent such event and, that in the event this turns out not to be the case, he will have fair and reasonable severance protection on the basis of his service to the Company to that time; WHEREAS, different factors affect the Company and Executive under circumstances of regular employment between the Company and the Executive when there is no threat of change in control and/or none has occurred, as opposed to circumstances under which a change in control is rumored, threatened, occurring or has occurred. For this reason this Employment Agreement is primarily in two parts. One part deals with the regular employment of Executive under circumstances whereby no change in control is threatened, occurring or occurred; herein called "Regular Employment". The second part deals with circumstances whereby a change in control is threatened, occurring or has occurred. Other parts of the Agreement deal with matters affecting both Regular Employment and employment following change in control, including non-competition and confidentiality; and WHEREAS, Executive is willing to enter into and carry out the Non-Competition and Confidentiality Agreement set forth herein in consideration of the Employment Agreement set forth herein. Page 5 of 23 AGREEMENT NOW THEREFORE, the parties agree as follows: I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS. 1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the Effective Date all prior employment and non-competition contracts between Company and Executive are hereby amended, modified and superseded by this Agreement insofar as future employment, compensation, non- competition, confidentiality, accrual of payments or any form of compensation or benefits from the Company are concerned. This Agreement does not release or relieve Company from its liability or obligation with respect to any compensation, payments, or benefits already accrued to Executive, nor to any vesting of benefits or other rights which are attributable to length of employment, seniority or other such matters. This agreement does not relieve Executive of any prior non-competition or confidentiality obligations and agreements and the same are hereby modified and amended as to future matters and future confidentiality even as to matters accruing prior to the Effective Date hereof. II. DEFINITION OF TERMS. 2.01. COMPANY. Company means Pride International, Inc., a Louisiana corporation, as the same presently exists, as well as any and all successors, regardless of the nature of the entity or the State or Nation of organization, whether by reorganization, merger, consolidation, absorption or dissolution. For the purpose of the Non-Competition and Confidentiality Agreement, Company includes any subsidiary or affiliate of the Company to the extent it is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company. 2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means James W. Allen. 2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which the Executive is employed is that of Senior Vice President of Operations-Worldwide of the Company and carries with it the duties, responsibilities, rights, benefits and privileges presently held by the Executive, or as may reasonably be assigned to the Executive as are customary and usual for such position. 2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of Page 6 of 23 February 5, 1999. 2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following: a. there occurs a Change in Control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; b. any "person" {as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934} is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; c. the individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; d. the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation; or e. the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person. 2.06. TERMINATION. The term "termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company {including death and disability (as described below)} for any reason other than cause (as described below) or voluntary resignation (as described below). Termination includes "Constructive Termination" as described below. Termination includes non-renewal or failure to extend this Agreement at the end of any employment term, except for cause. Page 7 of 23 a. The term "disability" means physical or mental incapacity qualifying the Executive for a long-term disability under the Company's long-term disability plan. If no such plan exists on the Effective Date of this Agreement, the term "disability" means physical or mental incapacity as determined by a doctor jointly selected by the Executive and the Board of Directors of the Company qualifying the Executive for long-term disability under reasonable employment standards. b. The term "cause" means: (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties, (ii) willful misconduct materially and demonstrably injurious to the Company or (iii) material violation of the covenant not to compete (except after termination under the Change in Control provisions hereof and confidentiality provisions hereof.) No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, or other action by or at request of the Company in respect of his position, authority, or responsibility that is contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-fourths of the entire Board of Directors of the Company at a meeting of the Board of Directors called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board of Directors the Executive has been guilty thereof and specifying the particulars thereof. c. The term "Constructive Termination" means any circumstance by which the actions of the Company either reduce or change Executive's title, position, duties, responsibilities or authority to such an extent or in such a manner as to relegate Executive to a position Page 8 of 23 not substantially similar to that which he presently holds; would degrade, embarrass or otherwise make it unreasonable for Executive to remain in the employment of the Company; and includes violation of the employment provisions and conditions of this Agreement. d. The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) The Executive's resignation or retirement is requested by the Company other than for cause; (ii) Any significant adverse change in the nature or scope of the Executive's position, authorities or duties from those described in this Agreement; (iii) Any reduction in the Executive's total compensation or benefits from that provided in the Compensation and Benefits Section hereof; (iv) The material breach by the Company of any other provision of this Agreement; (v) Any action by the Company which would constitute Constructive Termination; or (vi) Non-renewal or failure to extend any employment term, contrary to the wishes of the Executive. Termination that entitles the Executive to the payments and benefits provided in the "Termination Payments and Benefits" Section hereof shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award, or eligibility, for the purpose of any plan, practice or agreement of the Company referred to in the Compensation and Benefits Section hereof. 2.07. CUSTOMER. The term "Customer" includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase. III. EMPLOYMENT. 3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the Page 9 of 23 Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the Term of Employment ("Employment Period") herein specified. During the Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company and Executive may agree. 3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE. a. Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. Such duties shall be rendered at Houston, Texas, and such other place or places within or without the State of Texas as the Company and Executive shall agree. b. Executive shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for the Company. Such employment shall be considered "full time" employment. Executive shall have the right to make investments in businesses which engage in activities other than those engaged by the Company. Executive shall also have the right to devote such incidental and immaterial amount of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Executive shall have the right to make investments in the manner and to the extent authorized and set forth in the Non-Competition Section of this Agreement. 3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for Page 10 of 23 successive terms of one (1) year each commencing February 5, 2001, and on February 5 of each year thereafter, unless Company or Executive gives written notice to the other that employment will not be renewed or continued after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company. 3.04. COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits: a. He shall receive an annual base salary of not less than his annual base salary which is $285,000.00, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors. b. To the extent that such plans exist immediately prior to the Effective Date of this Agreement, he shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. c. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits and prerequisites which are the greater of: (i) the employee benefits and prerequisites provided by the Company to Executives with comparable duties and (ii) the employee benefits and prerequisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Agreement. d. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental Page 11 of 23 executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Date of this Agreement with respect to his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive such benefit) will be not less than it would be had all such plans and agreements were in effect immediately prior to the Effective Date of this Agreement and continued to be in effect without change until and after he begins to receive such benefits. e. Paid vacations each year and use of a Company car or a car allowance to the same extent as he is presently receiving or the benefits provided to Executives with comparable duties whichever is greater. f. Participation in all other executive incentive stock and benefit plans approved by the Compensation Committee 3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including any extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change in Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive (or his Executor, Administrator or Estate in the event of death, as soon as reasonably practical): a. An amount equal to two full years of his base salary (including the amount allocated to the covenant not to compete), which base salary is here defined as twelve (12) times the then current monthly salary in effect for the Executive and all other benefits due him based upon the salary in effect on the Date of Termination (but not less than the highest annual base salary paid to the Executive during any of the three (3) years immediately preceding his Date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions. b. The Company shall provide to Executive for a period of two (2) full years following the Date of Termination, life, health, accident and disability insurance. These benefits are not to be less than the highest benefits furnished to the Executive during the term of this Agreement. Page 12 of 23 c. An amount equal to two (2) times the target award for the Executive under the Company's annual bonus plan for the fiscal year in which termination occurs, provided that if the Executive has deferred his award for such year under a Company plan, the payment due the Executive under this subparagraph shall be paid in accordance with the terms of the deferral or as specified by the Executive. d. The Company shall pay, distribute and otherwise provide to the Executive the amount and value of his entire plan account and interest under any retirement plan, employee benefit plan, investment plan or stock ownership plan, if any exists on the Date of Termination, and all employer contributions made or payable to any such plan for his account prior to the end of the month in which Termination occurs shall be deemed vested and payable to him. Such payment or distribution shall be in accordance with the elections made by the Executive with respect to distributions in accordance with the plan as if the Executive's employment with the Company terminated at the end of the month in which Termination occurs. e. All stock options and awards to which the Executive is entitled will immediately vest and the time for exercising any option will be as specified in the plan as if the Executive were still employed by the Company; provided however if the immediate vesting of all benefits under the plan is not permitted by the plan, then the benefits will be vested only to the extent authorized or permitted by the plan. f. If Executive elects to treat the termination as retirement then on the Date of Termination, the Executive shall be deemed to have retired from the Company. At that time, or at such later time as he may elect consistent with the terms of any applicable plan or benefit, in order to receive benefits or avoid or minimize any applicable early pension reduction provisions, he shall be entitled to commence to receive total combined qualified and non-qualified retirement benefits to which he is entitled hereunder; or, his total non-qualified retirement benefit hereunder if under the terms of the Company's qualified retirement plan for salaried employees he is not entitled to a qualified benefit. Executive may treat the termination as termination other than "retirement" if Executive so elects and may defer "retirement" to a later date if permitted by any applicable plan. g. The "Compensation and Benefits" section hereof shall be applicable in determining the payments and benefits due the Executive under this section and if Termination occurs after a reduction in all or part of the Executive's total compensation or benefits, the lump sum Page 13 of 23 severance allowance and other compensation and benefits payable to him pursuant to this section shall be based upon his compensation and benefits before the reduction. h. If any provision of this Section cannot, in whole or in part, be implemented and carried out under the terms of the applicable compensation, benefit or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Company, due to insufficient or reduced credited service based upon his actual employment by the Company or because the plan or arrangement has been terminated or amended after the Effective Date of this Agreement, or for any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to the Executive, his dependents, beneficiaries and estate as if Executive's employment had not been terminated. i. All life, health, hospitalization, medical and accident benefits available to Executive's spouse and dependents shall continue for the same term as the Executive's benefits. If the Executive dies, all benefits will be provided for a term of two (2) years {or three (3) years if after a change in control} after the date of death of the Executive. j. The Company's obligation under this Section to continue to pay or provide health care, life, accident and disability insurance to the Executive, the Executive's spouse and Executive's dependents, during the remainder of the Employment Period shall be reduced when and to the extent any of such benefits are paid or provided to the Executive by another employer, provided that the Executive shall have all rights afforded to retirees to convert group insurance coverage to the individual insurance coverage as, to the extent of, and whenever his group insurance coverage under this Section is reduced or expires. Apart from this subparagraph, the Executive shall have and be subject to no obligation to mitigate. k. The Company shall deduct applicable withholding taxes in performing its obligations under this Section. Nothing in this Section is intended, nor shall be deemed or interpreted, to be an amendment to any compensation, benefit or other plan to the Company. To the extent the Company's performance under this Section includes the performance of the Company's obligations to the Executive under any other plan or under another agreement between the Company and the Executive, the rights of the Executive under such other plan or other agreements, which Page 14 of 23 are discharged under this Agreement, are discharged, surrendered, or released PRO TANTO. IV. CHANGE IN CONTROL. 4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the Employment Period shall be immediately and without further action extended for a term of three (3) years following the Effective Date of the Change in Control and will expire at 12:00 o'clock midnight on the last day of the month following three (3) years after the Change in Control. Thereafter the Employment Period will be extended for successive terms of one (1) year each, unless terminated, all in the manner specified in the Term of Employment Section pertaining to regular employment. 4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS. In the event the Executive is terminated within three (3) years following a Change in Control, the Executive will receive the payments and benefits specified in the "Termination without Change in Control" Section in the same time and manner therein specified except as amended and modified hereby: a. The salary and benefits specified in Section 3.05a will be paid based upon a multiple of three (3) years {instead of two (2) years}. b. Life, health, accident and disability insurance specified in Section 3.05b will be provided until: (i) Executive becomes reemployed and receives similar benefits from a new employer, or (ii) three (3) years after the Date of Termination, whichever is earlier. c. An amount equal to three (3) times the maximum award that the Executive could receive under the Company's Annual Bonus Plan for the fiscal year in which the termination occurs, instead of the benefits provided in Section 3.05(c) hereof. d. All other rights and benefits specified in Section 3.05. 4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive voluntarily resigns his employment within twelve (12) months after a Change in Control (whether or not Company may be alleging the right to terminate employment for cause), he will receive the same payments, compensation and benefits as if he had been terminated on the date of resignation after Change in Control. Page 15 of 23 V. NON-COMPETITION AND CONFIDENTIALITY. 5.01. CONSIDERATION. The base salary awarded to the Executive and to be paid to the Executive in the future includes consideration for the Non-Competition and Confidentiality Agreement set forth herein and the amount to be paid to Executive in the event of the termination of employment of Executive, voluntarily, involuntarily, or under a Change in Control, under Sections 3.05a and 4.02a hereof constitute payment, in part, for the Non-Competition and Confidentiality of the Executive. It is contracted, stipulated and agreed that fifteen percent (15%) of such amount paid and to be paid to the Executive shall constitute the consideration for the Non-Competition and Confidentiality Agreement set forth herein. 5.02. NON-COMPETITION. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company could cause serious harm to the Company. Accordingly, the Executive agrees that during his employment with the Company and for a period of two (2) years after he is no longer employed by the Company (unless his employment is terminated after a Change in Control, in which event there will be no covenant not to compete and the provisions of the covenant not to compete herein contained will terminate on the date of termination of the Executive) the Executive will not, directly or indirectly, either as an individual, proprietor, stockholder {other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers}, partner, officer, employee or otherwise: a. work for, become an employee of, invest in, provide consulting services or in any way engage in any business which provides, produces, leases or sells products or services of the same or similar type provided, produced, leased or sold by the Company and with regard to which Executive was engaged, or over which Executive had direct or indirect supervision or control, within three (3) years preceding the Executive's termination of employment, in any area where the Company provided, produced, leased or sold such products or services at any time during the three (3) years preceding such termination of employment, or b. provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which the Executive had direct or indirect supervision or control, within three (3) years preceding Executive's termination of employment, to or from any person, firm or entity which was a Page 16 of 23 customer for such products or services of the Company during the three (3) years preceding such termination from whom the Company had solicited business during such three (3) years; or c. solicit, aid, counsel or encourage any officer, director, employee or other individual to: (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) violate the terms of any employment, non-competition or similar agreement with the Company; or d. employ, directly or indirectly; permit the employment of; contract for services or work to be performed by; or otherwise, use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the Date of Termination of employment of Executive with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever occurs earlier. 5.03. CONFIDENTIALITY. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Executive will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation (in any manner whatsoever) any information concerning any matter affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, the Executive may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of the Executive's duties as an employee of the Company, and the Executive may not make use of any information of the Company after he is no longer an employee of the Company. The Executive agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties. All information, whether written or otherwise, regarding the Company's business, including, but not limited to, information regarding customers, customer lists, costs, prices, earnings, products, services, formulae, compositions, machinery, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply, is PRIMA FACIE presumed to be important, material and confidential information of the Company for the purposes of this Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general Page 17 of 23 public. The Executive further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, typed or printed materials, whether furnished by the Company or prepared by the Executive, which contain any information relating to the Company's business, and the Executive agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, the Executive will not be liable for any breach of these confidentiality provisions unless the same constitutes a material detriment to the Company, or due to the nature of the information divulged and the manner in which it was divulged and the person to whom it was divulged would likely cause damage to the Company or constitute a material detriment to the Company. 5.04. GEOGRAPHICAL AREA. The geographical area within which the non- competition covenants of this Agreement shall apply is that territory within two hundred (200) miles of: (i) any of the Company's present offices, (ii) any of the Company's present rig yards, and (iii) any additional location where the Company, as of the date of any action taken in violation of the non- competition covenants of this Agreement, has an office, a rig yard, or definitive plans to locate an office or a rig yard. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country. 5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY AGREEMENT. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the covenants made by the Executive herein, it is agreed that: a. the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; b. because of the nature of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Agreement are reasonable; and c. the injury suffered by the Company by a violation of any covenant in this Agreement resulting from loss of profits created by the competitive use of such skills, experience and contacts that otherwise will make it difficult to calculate in damages in an action at law and cannot fully compensate the Company for any violation of any covenant in this Agreement, accordingly, Page 18 of 23 (i) the Company shall be entitled to injunctive relief to prevent violations of such covenants or continuing violations thereof and to prevent Executive from rendering any services to any person, firm or entity in breach of such covenant and to prevent Executive from divulging any confidential information, and (ii) compliance with this Agreement is a condition precedent to the Company's obligation to make payments of any nature to the Executive. 5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY. If the Executive's termination was not after a Change in Control and if the Executive shall have materially violated the Confidentiality and/or Non-Competition Agreement or any agreement he may have signed as an employee of the Company, the Executive agrees that there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in the Termination of Rights and Benefits Section hereof, subject to the provisions of Section 6.01 hereof. There will be no withholding of benefits or payments if the termination occurred after a Change in Control and the Executive will not be bound by the non-competition provisions if terminated while the Change in Control provisions hereof are applicable. VI. GENERAL. 6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a Change in Control, or under other circumstances even when a Change in Control has not occurred, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny Executive the benefits intended under this Agreement; or actions may be taken to enforce the non-competition or confidentiality provisions of this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of his rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to Executive hereunder nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such costs. Accordingly, if at any time after the Effective Date of this Agreement, it should appear to the Executive that the Company is or has acted contrary Page 19 of 23 to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable, that Executive has violated the terms of this Agreement, or for any other reason, or that the Company has purported to terminate his employment for cause or is in the course of doing so, or is withholding payments or benefits, or is threatening to withhold payments or benefits, contrary to this Agreement, or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits provided or intended to be provided to him hereunder, and the Executive has acted in good faith to perform his obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company to represent him in connection with the protection and enforcement of his rights hereunder including, without limitation, representation in connection with termination of his employment or withholding of benefits or payments contrary to this Agreement or with the initiation or defense of any litigation or any other legal action, whether by or against the Executive or the Company or any Director, Officer, stockholder or other person affiliated with the Company, in any jurisdiction. Company is not authorized to withhold the periodic payments of attorney's fees and expenses hereunder based upon any belief or assertion by the Company that Executive has not acted in good faith or has violated this Agreement. If Company subsequently establishes that Executive was not acting in good faith and has violated this Agreement, Executive will be liable to the Company for reimbursement of amounts paid due to Executive's actions not based on good faith and in violation of this Agreement. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company, on a regular, periodic basis within thirty (30) days after presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $250,000.00. 6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and will pay all income tax liability by virtue of any payments made to the Executive under this Agreement, as if the same were earned and paid in the normal course of business and not the result of a Change in Control and not otherwise triggered by the "golden parachute" or excess payment provisions of the Internal Revenue Code of the United States, which would cause additional tax liability to be imposed. If any additional income tax, excise or other taxes are imposed on any amount or payment in the nature of compensation paid or provided to or on behalf of Executive, the Company shall "gross up" Executive for such tax liability by paying to Executive an amount sufficient so that after payment of all such taxes so imposed, Page 20 of 23 Executive's position on an after-tax basis is what it would have been had no such additional taxes been imposed. Executive will cooperate with the company to minimize the tax consequences to the Executive and to the Company so long as the actions proposed to be taken by the Company do not cause any additional tax consequences to the Executive and do not prolong or delay the time that payments are to be made, or the amount of payments to be made, unless the Executive consents, in writing, to any delay or deferment of payment. 6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of the Executive is for cause and not after a Change in Control, the Company will have the right to withhold all payments (except those specified in Sections 6.01); provided, however, that if a final judgment is entered finding that cause did not exist for termination, the Company will pay all benefits to the Executive to which he would have been entitled had the termination not been for cause, plus interest on all amounts withheld from the Executive at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for cause occurs after a Change in Control, the Company shall have no right to suspend or withhold payments to the Executive under any provision of this Agreement until or unless a final judgment is entered upholding the Company's determination that the termination was for cause, in which event the Executive will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S. 6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefits to which Executive would be entitled but for this Agreement. 6.05. NOTICES. Notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, return receipt requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System, (ii) by facsimile transmission if the receiver acknowledges receipt; (iii) by Federal Express or other expedited delivery service provided that acknowledgement of receipt is received and retained by the deliverer and furnished to the sender, if to the Executive, at the last address he has filed in writing with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices. 6.06. NON-ALIENATION. The Executive shall not have any right to pledge Page 21 of 23 hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject ,matter hereof. Upon the death of the Executive, his Executors, Administrators, devisees and heirs, in that order, shall have the right to enforce the provisions hereof. 6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No provision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other persons to any such amendment, waiver or discharge shall not be required. 6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein this Agreement shall be binding upon and inure to the benefit of the Executive and his legal representatives, heirs, and assigns, provided however, that in the event of the Executive's death prior to payment or distribution of all amounts, distributions, and benefits due him hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive, to the Company, to receive such payment or distribution and in the event Executive has made no applicable designation, to his Estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts. 6.09. GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Louisiana because the Company is incorporated under the laws of the State of Louisiana, the validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of Texas. 6.10. VENUE. To the extent permitted by applicable State and Federal law, venue for all proceedings hereunder will be in Harris County, Texas. 6.11. HEADINGS. The headings in this Agreement are inserted for convenience Page 22 of 23 of reference only and shall not affect the meaning or interpretation of this Agreement. 6.12. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 6.13. PARTIAL INVALIDITY. In the event that any part, portion or section of this Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be binding upon the parties hereto and the Agreement will be construed to give meaning to the remaining provisions of this Agreement in according with the intent of this Agreement. 6.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first above written. Executed in multiple originals and/or counterparts as of the Effective Date. \s\JAMES W. ALLEN JAMES W. ALLEN PRIDE INTERNATIONAL, INC. CORPORATE SEAL By: RAY H. TOLSON RAY H. TOLSON CEO and Chairman of the Board ATTEST: By: FRIDA A. MARTINEZ Frida A. Martinez Assistant Secretary Page 23 of 23 EX-10.21 7 EXHIBIT 10.21 PRIDE INTERNATIONAL, INC. EMPLOYMENT/NON-COMPETITION/ CONFIDENTIALITY AGREEMENT JOHN C.G. O'LEARY EFFECTIVE FEBRUARY 5, 1999 INDEX I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6 1.01 Effect of Prior Agreements......................................6 II. DEFINITION OF TERMS...................................................6 2.01 Company.........................................................6 2.02 Executive/Officer/Employee......................................6 2.03 Office/Position/Title...........................................6 2.04 Effective Date..................................................6 2.05 Change in Control...............................................7 2.06 Termination.....................................................7 2.07 Customer........................................................9 III. EMPLOYMENT..........................................................10 3.01 Employment.....................................................10 3.02 Best Efforts And Other Employment Of Executive.................10 3.03 Term Of Employment.............................................10 3.04 Compensation And Benefits......................................11 3.05 Termination Without Change In Control..........................12 IV.CHANGE IN CONTROL.....................................................14 4.01 Extension Of Employment Period.................................14 4.02 Change In Control Termination Payments & Benefits..............15 4.03 Voluntary Resignation Upon Change In Control...................15 V. NON-COMPETITION AND CONFIDENTIALITY...................................15 5.01 Consideration..................................................15 5.02 Non-Competition................................................16 5.03 Confidentiality................................................17 5.04 Geographical Area..............................................18 5.05 Company Remedies For Violation Of Non-Competition Or Confidentiality Agreement............................18 5.06 Termination Of Benefits For Violation Of Non- Competition And Confidentiality.....................19 Page 2 of 23 VI. GENERAL.............................................................19 6.01 Enforcement Costs...............................................20 6.02 Income, Excise or Other Tax Liability...........................20 6.03 Payment Of Benefits Upon Termination For Cause..................20 6.04 Non-Exclusive Agreement.........................................21 6.05 Notices.........................................................21 6.06 Non-Alienation..................................................21 6.07 Entire Agreement: Amendment.....................................21 6.08 Successors And Assigns..........................................22 6.09 Governing Law...................................................22 6.10 Venue...........................................................22 6.11 Headings........................................................22 6.12 Severability....................................................22 6.13 Partial Invalidity..............................................22 6.14 Counterparts....................................................23 Page 3 of 23 EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT DATE: FEBRUARY 5, 1999 COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation 5847 San Felipe, Suite 3300 Houston, Texas 77057 EXECUTIVE/EMPLOYEE: John C. G. O'Leary 755 Marchmont Houston, Texas 77024 This Agreement is made as of the date first above written and to become effective as herein provided. PREAMBLE WHEREAS, the Company wishes to attract and retain well-qualified Executive and key personnel and to assure itself of the continuity of its management; WHEREAS, Executive is an officer of the Company with significant management responsibilities in the conduct of its business; WHEREAS, the Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive; WHEREAS, the Company desires to obtain assurances that Executive will devote his best efforts to his employment with the Company and will not enter into competition with the Company in its business as now conducted and to be conducted, or solicit customers or other employees of the Company to terminate their relationships with the Company; WHEREAS, Executive is a key employee of the Company and he acknowledges that his talents and services to the Company are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company; Page 4 of 23 WHEREAS, the Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise; Executive may have concerns about the continuation of his employment status and responsibilities and may be approached by others offering competing employment opportunities; the Company, therefore, desires to provide Executive with assurances as to the continuation of his employment status and responsibilities in such event; WHEREAS, the Company further desires to assure Executive that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to his financial well-being; WHEREAS, Executive is willing to continue to serve as such but desires assurances that in the event of such a change in control he will continue to have the employment status and responsibilities he could reasonably expect absent such event and, that in the event this turns out not to be the case, he will have fair and reasonable severance protection on the basis of his service to the Company to that time; WHEREAS, different factors affect the Company and Executive under circumstances of regular employment between the Company and the Executive when there is no threat of change in control and/or none has occurred, as opposed to circumstances under which a change in control is rumored, threatened, occurring or has occurred. For this reason this Employment Agreement is primarily in two parts. One part deals with the regular employment of Executive under circumstances whereby no change in control is threatened, occurring or occurred; herein called "Regular Employment". The second part deals with circumstances whereby a change in control is threatened, occurring or has occurred. Other parts of the Agreement deal with matters affecting both Regular Employment and employment following change in control, including non-competition and confidentiality; WHEREAS, the Company has previously entered into a Severance Agreement with Executive dated March 11, 1997 ("Severance Agreement"); WHEREAS, the Company and Executive desire to terminate the Severance Agreement and replace it with this Agreement; and WHEREAS, Executive is willing to enter into and carry out the Non-Competition and Confidentiality Agreement set forth herein in consideration of the Employment Agreement set forth herein. Page 5 of 23 AGREEMENT NOW THEREFORE, the parties agree as follows: I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS. 1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the Effective Date all prior employment and non-competition contracts between Company and Executive are hereby amended, modified and superseded by this Agreement insofar as future employment, compensation, non- competition, confidentiality, accrual of payments or any form of compensation or benefits from the Company are concerned. This Agreement does not release or relieve Company from its liability or obligation with respect to any compensation, payments, or benefits already accrued to Executive, nor to any vesting of benefits or other rights which are attributable to length of employment, seniority or other such matters. This agreement does not relieve Executive of any prior non-competition or confidentiality obligations and agreements and the same are hereby modified and amended as to future matters and future confidentiality even as to matters accruing prior to the Effective Date hereof. The Severance Agreement is hereby terminated with no liability to the Company. II. DEFINITION OF TERMS. 2.01. COMPANY. Company means Pride International, Inc., a Louisiana corporation, as the same presently exists, as well as any and all successors, regardless of the nature of the entity or the State or Nation of organization, whether by reorganization, merger, consolidation, absorption or dissolution. For the purpose of the Non-Competition and Confidentiality Agreement, Company includes any subsidiary or affiliate of the Company to the extent it is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company. 2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means John C.G. O'Leary. 2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which the Executive is employed is that of Vice President-Worldwide Marketing of the Company and carries with it the duties, responsibilities, rights, benefits and privileges presently held by the Executive, or as may reasonably be assigned to the Executive as are customary and usual for such position. 2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of Page 6 of 23 February 5, 1999. 2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following: a. there occurs a Change in Control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; b. any "person" {as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934} is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; c. the individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; d. the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation; or e. the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person. 2.06. TERMINATION. The term "termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company {including death and disability (as described below)} for any reason other than cause (as described below) or voluntary resignation (as described below). Termination includes "Constructive Termination" as described below. Termination includes non-renewal or failure to extend this Agreement at the end of any employment term, except for cause. Page 7 of 23 a. The term "disability" means physical or mental incapacity qualifying the Executive for a long-term disability under the Company's long-term disability plan. If no such plan exists on the Effective Date of this Agreement, the term "disability" means physical or mental incapacity as determined by a doctor jointly selected by the Executive and the Board of Directors of the Company qualifying the Executive for long-term disability under reasonable employment standards. b. The term "cause" means: (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties, (ii) willful misconduct materially and demonstrably injurious to the Company or (iii) material violation of the covenant not to compete (except after termination under the Change in Control provisions hereof and confidentiality provisions hereof.) No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, or other action by or at request of the Company in respect of his position, authority, or responsibility that is contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-fourths of the entire Board of Directors of the Company at a meeting of the Board of Directors called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board of Directors the Executive has been guilty thereof and specifying the particulars thereof. c. The term "Constructive Termination" means any circumstance by which the actions of the Company either reduce or change Executive's title, position, duties, responsibilities or authority to such an extent or in such a manner as to relegate Executive to a position Page 8 of 23 not substantially similar to that which he presently holds; would degrade, embarrass or otherwise make it unreasonable for Executive to remain in the employment of the Company; and includes violation of the employment provisions and conditions of this Agreement. d. The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) The Executive's resignation or retirement is requested by the Company other than for cause; (ii) Any significant adverse change in the nature or scope of the Executive's position, authorities or duties from those described in this Agreement; (iii) Any reduction in the Executive's total compensation or benefits from that provided in the Compensation and Benefits Section hereof; (iv) The material breach by the Company of any other provision of this Agreement; (v) Any action by the Company which would constitute Constructive Termination; or (vi) Non-renewal or failure to extend any employment term, contrary to the wishes of the Executive. Termination that entitles the Executive to the payments and benefits provided in the "Termination Payments and Benefits" Section hereof shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award, or eligibility, for the purpose of any plan, practice or agreement of the Company referred to in the Compensation and Benefits Section hereof. 2.07. CUSTOMER. The term "Customer" includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase. III. EMPLOYMENT. 3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the Company hereby agrees to continue the Executive in its employ, and the Page 9 of 23 Executive hereby agrees to remain in the employ of the Company, for the Term of Employment ("Employment Period") herein specified. During the Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company and Executive may agree. 3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE. a. Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. Such duties shall be rendered at Houston, Texas, and such other place or places within or without the State of Texas as the Company and Executive shall agree. b. Executive shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for the Company. Such employment shall be considered "full time" employment. Executive shall have the right to make investments in businesses which engage in activities other than those engaged by the Company. Executive shall also have the right to devote such incidental and immaterial amount of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Executive shall have the right to make investments in the manner and to the extent authorized and set forth in the Non-Competition Section of this Agreement. 3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for successive terms of one (1) year each commencing February 5, 2001, and on Page 10 of 23 February 5 of each year thereafter, unless Company or Executive gives written notice to the other that employment will not be renewed or continued after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company. 3.04. COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits: a. He shall receive an annual base salary of not less than his annual base salary which is $217,000.00, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors. b. To the extent that such plans exist immediately prior to the Effective Date of this Agreement, he shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. c. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits and prerequisites which are the greater of: (i) the employee benefits and prerequisites provided by the Company to Executives with comparable duties and (ii) the employee benefits and prerequisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Agreement. d. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Date of this Agreement with respect to his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive such benefit) will be not less than it would be had all such plans and Page 11 of 23 agreements were in effect immediately prior to the Effective Date of this Agreement and continued to be in effect without change until and after he begins to receive such benefits. e. Paid vacations each year and use of Company cars to the same extent as he is presently receiving or the benefits provided to Executives with comparable duties whichever is greater. f. Participation in all other executive incentive stock and benefit plans approved by the Compensation Committee 3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including any extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change in Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive (or his Executor, Administrator or Estate in the event of death, as soon as reasonably practical): a. An amount equal to two full years of his base salary (including the amount allocated to the covenant not to compete), which base salary is here defined as twelve (12) times the then current monthly salary in effect for the Executive and all other benefits due him based upon the salary in effect on the Date of Termination (but not less than the highest annual base salary paid to the Executive during any of the three (3) years immediately preceding his Date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions. b. The Company shall provide to Executive for a period of two (2) full years following the Date of Termination, life, health, accident and disability insurance. These benefits are not to be less than the highest benefits furnished to the Executive during the term of this Agreement. c. An amount equal to two (2) times the target award for the Executive under the Company's annual bonus plan for the fiscal year in which termination occurs, provided that if the Executive has deferred his award for such year under a Company plan, the payment due the Executive under this subparagraph shall be paid in accordance with the terms of the deferral or as specified by the Executive. Page 12 of 23 d. The Company shall pay, distribute and otherwise provide to the Executive the amount and value of his entire plan account and interest under any retirement plan, employee benefit plan, investment plan or stock ownership plan, if any exists on the Date of Termination, and all employer contributions made or payable to any such plan for his account prior to the end of the month in which Termination occurs shall be deemed vested and payable to him. Such payment or distribution shall be in accordance with the elections made by the Executive with respect to distributions in accordance with the plan as if the Executive's employment with the Company terminated at the end of the month in which Termination occurs. e. All stock options and awards to which the Executive is entitled will immediately vest and the time for exercising any option will be as specified in the plan as if the Executive were still employed by the Company; provided however if the immediate vesting of all benefits under the plan is not permitted by the plan, then the benefits will be vested only to the extent authorized or permitted by the plan. f. If Executive elects to treat the termination as retirement then on the Date of Termination, the Executive shall be deemed to have retired from the Company. At that time, or at such later time as he may elect consistent with the terms of any applicable plan or benefit, in order to receive benefits or avoid or minimize any applicable early pension reduction provisions, he shall be entitled to commence to receive total combined qualified and non-qualified retirement benefits to which he is entitled hereunder; or, his total non-qualified retirement benefit hereunder if under the terms of the Company's qualified retirement plan for salaried employees he is not entitled to a qualified benefit. Executive may treat the termination as termination other than "retirement" if Executive so elects and may defer "retirement" to a later date if permitted by any applicable plan. g. The "Compensation and Benefits" section hereof shall be applicable in determining the payments and benefits due the Executive under this section and if Termination occurs after a reduction in all or part of the Executive's total compensation or benefits, the lump sum severance allowance and other compensation and benefits payable to him pursuant to this section shall be based upon his compensation and benefits before the reduction. h. If any provision of this Section cannot, in whole or in part, be implemented and carried out under the terms of the applicable Page 13 of 23 compensation, benefit or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Company, due to insufficient or reduced credited service based upon his actual employment by the Company or because the plan or arrangement has been terminated or amended after the Effective Date of this Agreement, or for any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to the Executive, his dependents, beneficiaries and estate as if Executive's employment had not been terminated. i. All life, health, hospitalization, medical and accident benefits available to Executive's spouse and dependents shall continue for the same term as the Executive's benefits. If the Executive dies, all benefits will be provided for a term of two (2) years {or three (3) years if after a change in control} after the date of death of the Executive. j. The Company's obligation under this Section to continue to pay or provide health care, life, accident and disability insurance to the Executive, the Executive's spouse and Executive's dependents, during the remainder of the Employment Period shall be reduced when and to the extent any of such benefits are paid or provided to the Executive by another employer, provided that the Executive shall have all rights afforded to retirees to convert group insurance coverage to the individual insurance coverage as, to the extent of, and whenever his group insurance coverage under this Section is reduced or expires. Apart from this subparagraph, the Executive shall have and be subject to no obligation to mitigate. k. The Company shall deduct applicable withholding taxes in performing its obligations under this Section. Nothing in this Section is intended, nor shall be deemed or interpreted, to be an amendment to any compensation, benefit or other plan to the Company. To the extent the Company's performance under this Section includes the performance of the Company's obligations to the Executive under any other plan or under another agreement between the Company and the Executive, the rights of the Executive under such other plan or other agreements, which are discharged under this Agreement, are discharged, surrendered, or released PRO TANTO. IV. CHANGE IN CONTROL. 4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the Page 14 of 23 Employment Period shall be immediately and without further action extended for a term of three (3) years following the Effective Date of the Change in Control and will expire at 12:00 o'clock midnight on the last day of the month following three (3) years after the Change in Control. Thereafter, the Employment Period will be extended for successive terms of one (1) year each, unless terminated, all in the manner specified in the Term of Employment Section pertaining to regular employment. 4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS. In the event the Executive is terminated within three (3) years following a Change in Control, the Executive will receive the payments and benefits specified in the "Termination without Change in Control" Section in the same time and manner therein specified except as amended and modified hereby: a. The salary and benefits specified in Section 3.05a will be paid based upon a multiple of three (3) years {instead of two (2) years}. b. Life, health, accident and disability insurance specified in Section 3.05b will be provided until: (i) Executive becomes reemployed and receives similar benefits from a new employer, or (ii) three (3) years after the Date of Termination, whichever is earlier. c. An amount equal to three (3) times the maximum award that the Executive could receive under the Company's Annual Bonus Plan for the fiscal year in which the termination occurs, instead of the benefits provided in Section 3.05(c) hereof. d. All other rights and benefits specified in Section 3.05. 4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive voluntarily resigns his employment within twelve (12) months after a Change in Control (whether or not Company may be alleging the right to terminate employment for cause), he will receive the same payments, compensation and benefits as if he had been terminated on the date of resignation after Change in Control. V. NON-COMPETITION AND CONFIDENTIALITY. 5.01. CONSIDERATION. The base salary awarded to the Executive and to be paid to the Executive in the future includes consideration for the Non-Competition and Confidentiality Agreement set forth herein and the amount to be paid to Executive in the event of the termination of employment of Executive, voluntarily, involuntarily, or under a Change in Control, under Sections 3.05a and 4.02a hereof constitute payment, in part, for the Non-Competition and Page 15 of 23 Confidentiality of the Executive. It is contracted, stipulated and agreed that fifteen percent (15%) of such amount paid and to be paid to the Executive shall constitute the consideration for the Non-Competition and Confidentiality Agreement set forth herein. 5.02. NON-COMPETITION. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company could cause serious harm to the Company. Accordingly, the Executive agrees that during his employment with the Company and for a period of two (2) years after he is no longer employed by the Company (unless his employment is terminated after a Change in Control, in which event there will be no covenant not to compete and the provisions of the covenant not to compete herein contained will terminate on the date of termination of the Executive) the Executive will not, directly or indirectly, either as an individual, proprietor, stockholder {other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers}, partner, officer, employee or otherwise: a. work for, become an employee of, invest in, provide consulting services or in any way engage in any business which provides, produces, leases or sells products or services of the same or similar type provided, produced, leased or sold by the Company and with regard to which Executive was engaged, or over which Executive had direct or indirect supervision or control, within three (3) years preceding the Executive's termination of employment, in any area where the Company provided, produced, leased or sold such products or services at any time during the three (3) years preceding such termination of employment, or b. provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which the Executive had direct or indirect supervision or control, within three (3) years preceding Executive's termination of employment, to or from any person, firm or entity which was a customer for such products or services of the Company during the three (3) years preceding such termination from whom the Company had solicited business during such three (3) years; or c. solicit, aid, counsel or encourage any officer, director, employee or other individual to: (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) violate the terms of any employment, non-competition or similar Page 16 of 23 agreement with the Company; or d. employ, directly or indirectly; permit the employment of; contract for services or work to be performed by; or otherwise, use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the Date of Termination of employment of Executive with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever occurs earlier. 5.03. CONFIDENTIALITY. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Executive will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation (in any manner whatsoever) any information concerning any matter affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, the Executive may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of the Executive's duties as an employee of the Company, and the Executive may not make use of any information of the Company after he is no longer an employee of the Company. The Executive agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties. All information, whether written or otherwise, regarding the Company's business, including, but not limited to, information regarding customers, customer lists, costs, prices, earnings, products, services, formulae, compositions, machinery, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply, is PRIMA FACIE presumed to be important, material and confidential information of the Company for the purposes of this Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general public. The Executive further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, typed or printed materials, whether furnished by the Company or prepared by the Executive, which contain any information relating to the Company's business, and the Executive agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, the Executive will not be liable for any breach of these confidentiality provisions unless the same Page 17 of 23 constitutes a material detriment to the Company, or due to the nature of the information divulged and the manner in which it was divulged and the person to whom it was divulged would likely cause damage to the Company or constitute a material detriment to the Company. 5.04. GEOGRAPHICAL AREA. The geographical area within which the non- competition covenants of this Agreement shall apply is that territory within two hundred (200) miles of: (i) any of the Company's present offices, (ii) any of the Company's present rig yards, and (iii) any additional location where the Company, as of the date of any action taken in violation of the non- competition covenants of this Agreement, has an office, a rig yard, or definitive plans to locate an office or a rig yard. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country. 5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY AGREEMENT. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the covenants made by the Executive herein, it is agreed that: a. the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; b. because of the nature of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Agreement are reasonable; and a. the injury suffered by the Company by a violation of any covenant in this Agreement resulting from loss of profits created by the competitive use of such skills, experience and contacts that otherwise will make it difficult to calculate in damages in an action at law and cannot fully compensate the Company for any violation of any covenant in this Agreement, accordingly, (i) the Company shall be entitled to injunctive relief to prevent violations of such covenants or continuing violations thereof and to prevent Executive from rendering any services to any person, firm or entity in breach of such covenant and to prevent Executive from divulging any confidential information, and (ii) compliance with this Agreement is a condition precedent to the Page 18 of 23 Company's obligation to make payments of any nature to the Executive. 5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY. If the Executive's termination was not after a Change in Control and if the Executive shall have materially violated the Confidentiality and/or Non-Competition Agreement or any agreement he may have signed as an employee of the Company, the Executive agrees that there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in the Termination of Rights and Benefits Section hereof, subject to the provisions of Section 6.01 hereof. There will be no withholding of benefits or payments if the termination occurred after a Change in Control and the Executive will not be bound by the non-competition provisions if terminated while the Change in Control provisions hereof are applicable. VI. GENERAL. 6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a Change in Control, or under other circumstances even when a Change in Control has not occurred, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny Executive the benefits intended under this Agreement; or actions may be taken to enforce the non-competition or confidentiality provisions of this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of his rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to Executive hereunder nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such costs. Accordingly, if at any time after the Effective Date of this Agreement, it should appear to the Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable, that Executive has violated the terms of this Agreement, or for any other reason, or that the Company has purported to terminate his employment for cause or is in the course of doing so, or is withholding payments or benefits, or is threatening to withhold payments or benefits, contrary to this Agreement, or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or Page 19 of 23 institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits provided or intended to be provided to him hereunder, and the Executive has acted in good faith to perform his obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company to represent him in connection with the protection and enforcement of his rights hereunder including, without limitation, representation in connection with termination of his employment or withholding of benefits or payments contrary to this Agreement or with the initiation or defense of any litigation or any other legal action, whether by or against the Executive or the Company or any Director, Officer, stockholder or other person affiliated with the Company, in any jurisdiction. Company is not authorized to withhold the periodic payments of attorney's fees and expenses hereunder based upon any belief or assertion by the Company that Executive has not acted in good faith or has violated this Agreement. If Company subsequently establishes that Executive was not acting in good faith and has violated this Agreement, Executive will be liable to the Company for reimbursement of amounts paid due to Executive's actions not based on good faith and in violation of this Agreement. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company, on a regular, periodic basis within thirty (30) days after presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $250,000.00. 6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and will pay all income tax liability by virtue of any payments made to the Executive under this Agreement, as if the same were earned and paid in the normal course of business and not the result of a Change in Control and not otherwise triggered by the "golden parachute" or excess payment provisions of the Internal Revenue Code of the United States, which would cause additional tax liability to be imposed. If any additional income tax, excise or other taxes are imposed on any amount or payment in the nature of compensation paid or provided to or on behalf of Executive, the Company shall "gross up" Executive for such tax liability by paying to Executive an amount sufficient so that after payment of all such taxes so imposed, Executive's position on an after-tax basis is what it would have been had no such additional taxes been imposed. Executive will cooperate with the company to minimize the tax consequences to the Executive and to the Company so long as the actions proposed to be taken by the Company do not cause any additional tax consequences to the Executive and do not prolong or delay the time that payments are to be made, or the amount of payments to be made, unless the Executive consents, in writing, to any delay or deferment of payment. Page 20 of 23 6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of the Executive is for cause and not after a Change in Control, the Company will have the right to withhold all payments (except those specified in Sections 6.01); provided, however, that if a final judgment is entered finding that cause did not exist for termination, the Company will pay all benefits to the Executive to which he would have been entitled had the termination not been for cause, plus interest on all amounts withheld from the Executive at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for cause occurs after a Change in Control, the Company shall have no right to suspend or withhold payments to the Executive under any provision of this Agreement until or unless a final judgment is entered upholding the Company's determination that the termination was for cause, in which event the Executive will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S. 6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefits to which Executive would be entitled but for this Agreement. 6.05. NOTICES. Notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, return receipt requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System, (ii) by facsimile transmission if the receiver acknowledges receipt; (iii) by Federal Express or other expedited delivery service provided that acknowledgement of receipt is received and retained by the deliverer and furnished to the sender, if to the Executive, at the last address he has filed in writing with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices. 6.06. NON-ALIENATION. The Executive shall not have any right to pledge hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject ,matter hereof. Upon the death of the Executive, his Executors, Administrators, devisees and heirs, in that order, shall have the right to enforce the provisions hereof. Page 21 of 23 6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No provision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other persons to any such amendment, waiver or discharge shall not be required. 6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein this Agreement shall be binding upon and inure to the benefit of the Executive and his legal representatives, heirs, and assigns, provided however, that in the event of the Executive's death prior to payment or distribution of all amounts, distributions, and benefits due him hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive, to the Company, to receive such payment or distribution and in the event Executive has made no applicable designation, to his Estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts. 6.09. GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Louisiana because the Company is incorporated under the laws of the State of Louisiana, the validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of Texas. 6.10. VENUE. To the extent permitted by applicable State and Federal law, venue for all proceedings hereunder will be in Harris County, Texas. 6.11. HEADINGS. The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 6.12. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 6.13. PARTIAL INVALIDITY. In the event that any part, portion or section of this Page 22 of 23 Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be binding upon the parties hereto and the Agreement will be construed to give meaning to the remaining provisions of this Agreement in according with the intent of this Agreement. 6.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first above written. Executed in multiple originals and/or counterparts as of the Effective Date. \s\JOHN C.G. O'LEARY JOHN C.G. O'LEARY PRIDE INTERNATIONAL, INC. CORPORATE SEAL By: RAY H. TOLSON RAY H. TOLSON CEO and Chairman of the Board ATTEST: By: FRIDA A. MARTINEZ Frida A. Martinez Assistant Secretary Page 23 of 23 EX-10.22 8 EXHIBIT 10.22 PRIDE INTERNATIONAL, INC. EMPLOYMENT/NON-COMPETITION/ CONFIDENTIALITY AGREEMENT STEVEN R. TOLSON EFFECTIVE FEBRUARY 5, 1999 INDEX I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6 1.01 Effect of Prior Agreements......................................6 II. DEFINITION OF TERMS...................................................6 2.01 Company.........................................................6 2.02 Executive/Officer/Employee......................................6 2.03 Office/Position/Title...........................................6 2.04 Effective Date..................................................6 2.05 Change in Control...............................................7 2.06 Termination.....................................................7 2.07 Customer........................................................9 III. EMPLOYMENT..........................................................10 3.01 Employment.....................................................10 3.02 Best Efforts And Other Employment Of Executive.................10 3.03 Term Of Employment.............................................10 3.04 Compensation And Benefits......................................11 3.05 Termination Without Change In Control..........................12 IV.CHANGE IN CONTROL.....................................................14 4.01 Extension Of Employment Period.................................14 4.02 Change In Control Termination Payments & Benefits..............15 4.03 Voluntary Resignation Upon Change In Control...................15 V. NON-COMPETITION AND CONFIDENTIALITY...................................15 5.01 Consideration..................................................15 5.02 Non-Competition................................................16 5.03 Confidentiality................................................17 5.04 Geographical Area..............................................18 5.05 Company Remedies For Violation Of Non-Competition Or Confidentiality Agreement............................18 5.06 Termination Of Benefits For Violation Of Non- Competition And Confidentiality.....................19 Page 2 of 23 VI. GENERAL.............................................................19 6.01 Enforcement Costs...............................................20 6.02 Income, Excise or Other Tax Liability...........................20 6.03 Payment Of Benefits Upon Termination For Cause..................20 6.04 Non-Exclusive Agreement.........................................21 6.05 Notices.........................................................21 6.06 Non-Alienation..................................................21 6.07 Entire Agreement: Amendment.....................................21 6.08 Successors And Assigns..........................................22 6.09 Governing Law...................................................22 6.10 Venue...........................................................22 6.11 Headings........................................................22 6.12 Severability....................................................22 6.13 Partial Invalidity..............................................22 6.14 Counterparts....................................................23 Page 3 of 23 EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT DATE: FEBRUARY 5, 1999 COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation 5847 San Felipe, Suite 3300 Houston, Texas 77057 EXECUTIVE/EMPLOYEE: Steven R. Tolson 301 Maple Valley Houston, Texas 77056 This Agreement is made as of the date first above written and to become effective as herein provided. PREAMBLE WHEREAS, the Company wishes to attract and retain well-qualified Executive and key personnel and to assure itself of the continuity of its management; WHEREAS, Executive is an officer of the Company with significant management responsibilities in the conduct of its business; WHEREAS, the Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive; WHEREAS, the Company desires to obtain assurances that Executive will devote his best efforts to his employment with the Company and will not enter into competition with the Company in its business as now conducted and to be conducted, or solicit customers or other employees of the Company to terminate their relationships with the Company; WHEREAS, Executive is a key employee of the Company and he acknowledges that his talents and services to the Company are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company; Page 4 of 23 WHEREAS, the Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise; Executive may have concerns about the continuation of his employment status and responsibilities and may be approached by others offering competing employment opportunities; the Company, therefore, desires to provide Executive with assurances as to the continuation of his employment status and responsibilities in such event; WHEREAS, the Company further desires to assure Executive that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to his financial well-being; WHEREAS, Executive is willing to continue to serve as such but desires assurances that in the event of such a change in control he will continue to have the employment status and responsibilities he could reasonably expect absent such event and, that in the event this turns out not to be the case, he will have fair and reasonable severance protection on the basis of his service to the Company to that time; WHEREAS, different factors affect the Company and Executive under circumstances of regular employment between the Company and the Executive when there is no threat of change in control and/or none has occurred, as opposed to circumstances under which a change in control is rumored, threatened, occurring or has occurred. For this reason this Employment Agreement is primarily in two parts. One part deals with the regular employment of Executive under circumstances whereby no change in control is threatened, occurring or occurred; herein called "Regular Employment". The second part deals with circumstances whereby a change in control is threatened, occurring or has occurred. Other parts of the Agreement deal with matters affecting both Regular Employment and employment following change in control, including non-competition and confidentiality; and WHEREAS, Executive is willing to enter into and carry out the Non-Competition and Confidentiality Agreement set forth herein in consideration of the Employment Agreement set forth herein. Page 5 of 23 AGREEMENT NOW THEREFORE, the parties agree as follows: I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS. 1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the Effective Date all prior employment and non-competition contracts between Company and Executive are hereby amended, modified and superseded by this Agreement insofar as future employment, compensation, non- competition, confidentiality, accrual of payments or any form of compensation or benefits from the Company are concerned. This Agreement does not release or relieve Company from its liability or obligation with respect to any compensation, payments, or benefits already accrued to Executive, nor to any vesting of benefits or other rights which are attributable to length of employment, seniority or other such matters. This agreement does not relieve Executive of any prior non-competition or confidentiality obligations and agreements and the same are hereby modified and amended as to future matters and future confidentiality even as to matters accruing prior to the Effective Date hereof. II. DEFINITION OF TERMS. 2.01. COMPANY. Company means Pride International, Inc., a Louisiana corporation, as the same presently exists, as well as any and all successors, regardless of the nature of the entity or the State or Nation of organization, whether by reorganization, merger, consolidation, absorption or dissolution. For the purpose of the Non-Competition and Confidentiality Agreement, Company includes any subsidiary or affiliate of the Company to the extent it is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company. 2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Steven R. Tolson. 2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which the Executive is employed is that of Vice President, Domestic Operations-Offshore of the Company and carries with it the duties, responsibilities, rights, benefits and privileges presently held by the Executive, or as may reasonably be assigned to the Executive as are customary and usual for such position. 2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of February 5, 1999. Page 6 of 23 2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following: a. there occurs a Change in Control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; b. any "person" {as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934} is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; c. the individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; d. the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation; or e. the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person. 2.06. TERMINATION. The term "termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company {including death and disability (as described below)} for any reason other than cause (as described below) or voluntary resignation (as described below). Termination includes "Constructive Termination" as described below. Termination includes non-renewal or failure to extend this Agreement at the end of any employment term, except for cause. a. The term "disability" means physical or mental incapacity qualifying the Executive for a long-term disability under the Company's long-term disability plan. If no such plan exists on the Effective Date of this Agreement, the term "disability" means physical or mental incapacity as determined by a doctor jointly selected by the Executive and the Board of Directors of the Company qualifying the Executive for long-term disability under reasonable employment standards. Page 7 of 23 b. The term "cause" means: (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties, (ii) willful misconduct materially and demonstrably injurious to the Company or (iii) material violation of the covenant not to compete (except after termination under the Change in Control provisions hereof and confidentiality provisions hereof.) No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, or other action by or at request of the Company in respect of his position, authority, or responsibility that is contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-fourths of the entire Board of Directors of the Company at a meeting of the Board of Directors called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board of Directors the Executive has been guilty thereof and specifying the particulars thereof. c. The term "Constructive Termination" means any circumstance by which the actions of the Company either reduce or change Executive's title, position, duties, responsibilities or authority to such an extent or in such a manner as to relegate Executive to a position not substantially similar to that which he presently holds; would degrade, embarrass or otherwise make it unreasonable for Executive Page 8 of 23 to remain in the employment of the Company; and includes violation of the employment provisions and conditions of this Agreement. d. The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) The Executive's resignation or retirement is requested by the Company other than for cause; (ii) Any significant adverse change in the nature or scope of the Executive's position, authorities or duties from those described in this Agreement; (iii) Any reduction in the Executive's total compensation or benefits from that provided in the Compensation and Benefits Section hereof; (iv) The material breach by the Company of any other provision of this Agreement; (v) Any action by the Company which would constitute Constructive Termination; or (vi) Non-renewal or failure to extend any employment term, contrary to the wishes of the Executive. Termination that entitles the Executive to the payments and benefits provided in the "Termination Payments and Benefits" Section hereof shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award, or eligibility, for the purpose of any plan, practice or agreement of the Company referred to in the Compensation and Benefits Section hereof. 2.07. CUSTOMER. The term "Customer" includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase. III. EMPLOYMENT. 3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the Term of Employment ("Employment Period") herein specified. During the Page 9 of 23 Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company and Executive may agree. 3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE. a. Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. Such duties shall be rendered at Houston, Texas, and such other place or places within or without the State of Texas as the Company and Executive shall agree. b. Executive shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for the Company. Such employment shall be considered "full time" employment. Executive shall have the right to make investments in businesses which engage in activities other than those engaged by the Company. Executive shall also have the right to devote such incidental and immaterial amount of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Executive shall have the right to make investments in the manner and to the extent authorized and set forth in the Non-Competition Section of this Agreement. 3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for successive terms of one (1) year each commencing February 5, 2001, and on February 5 of each year thereafter, unless Company or Executive gives written notice to the other that employment will not be renewed or continued Page 10 of 23 after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company. 3.04. COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits: a. He shall receive an annual base salary of not less than his annual base salary which is $165,000.00, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors. b. To the extent that such plans exist immediately prior to the Effective Date of this Agreement, he shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. c. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits and prerequisites which are the greater of: (i) the employee benefits and prerequisites provided by the Company to Executives with comparable duties and (ii) the employee benefits and prerequisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Agreement. d. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Date of this Agreement with respect to his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive such benefit) will be not less than it would be had all such plans and agreements were in effect immediately prior to the Effective Date of this Agreement and continued to be in effect without change until and after he Page 11 of 23 begins to receive such benefits. e. Paid vacations each year and use of Company cars to the same extent as he is presently receiving or the benefits provided to Executives with comparable duties whichever is greater. f. Participation in all other executive incentive stock and benefit plans approved by the Compensation Committee 3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including any extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change in Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive (or his Executor, Administrator or Estate in the event of death, as soon as reasonably practical): a. An amount equal to two full years of his base salary (including the amount allocated to the covenant not to compete), which base salary is here defined as twelve (12) times the then current monthly salary in effect for the Executive and all other benefits due him based upon the salary in effect on the Date of Termination (but not less than the highest annual base salary paid to the Executive during any of the three (3) years immediately preceding his Date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions. b. The Company shall provide to Executive for a period of two (2) full years following the Date of Termination, life, health, accident and disability insurance. These benefits are not to be less than the highest benefits furnished to the Executive during the term of this Agreement. c. An amount equal to two (2) times the target award for the Executive under the Company's annual bonus plan for the fiscal year in which termination occurs, provided that if the Executive has deferred his award for such year under a Company plan, the payment due the Executive under this subparagraph shall be paid in accordance with the terms of the deferral or as specified by the Executive. d. The Company shall pay, distribute and otherwise provide to the Page 12 of 23 Executive the amount and value of his entire plan account and interest under any retirement plan, employee benefit plan, investment plan or stock ownership plan, if any exists on the Date of Termination, and all employer contributions made or payable to any such plan for his account prior to the end of the month in which Termination occurs shall be deemed vested and payable to him. Such payment or distribution shall be in accordance with the elections made by the Executive with respect to distributions in accordance with the plan as if the Executive's employment with the Company terminated at the end of the month in which Termination occurs. e. All stock options and awards to which the Executive is entitled will immediately vest and the time for exercising any option will be as specified in the plan as if the Executive were still employed by the Company; provided however if the immediate vesting of all benefits under the plan is not permitted by the plan, then the benefits will be vested only to the extent authorized or permitted by the plan. f. If Executive elects to treat the termination as retirement then on the Date of Termination, the Executive shall be deemed to have retired from the Company. At that time, or at such later time as he may elect consistent with the terms of any applicable plan or benefit, in order to receive benefits or avoid or minimize any applicable early pension reduction provisions, he shall be entitled to commence to receive total combined qualified and non-qualified retirement benefits to which he is entitled hereunder; or, his total non-qualified retirement benefit hereunder if under the terms of the Company's qualified retirement plan for salaried employees he is not entitled to a qualified benefit. Executive may treat the termination as termination other than "retirement" if Executive so elects and may defer "retirement" to a later date if permitted by any applicable plan. g. The "Compensation and Benefits" section hereof shall be applicable in determining the payments and benefits due the Executive under this section and if Termination occurs after a reduction in all or part of the Executive's total compensation or benefits, the lump sum severance allowance and other compensation and benefits payable to him pursuant to this section shall be based upon his compensation and benefits before the reduction. h. If any provision of this Section cannot, in whole or in part, be implemented and carried out under the terms of the applicable compensation, benefit or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Page 13 of 23 Company, due to insufficient or reduced credited service based upon his actual employment by the Company or because the plan or arrangement has been terminated or amended after the Effective Date of this Agreement, or for any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to the Executive, his dependents, beneficiaries and estate as if Executive's employment had not been terminated. i. All life, health, hospitalization, medical and accident benefits available to Executive's spouse and dependents shall continue for the same term as the Executive's benefits. If the Executive dies, all benefits will be provided for a term of two (2) years {or three (3) years if after a change in control} after the date of death of the Executive. j. The Company's obligation under this Section to continue to pay or provide health care, life, accident and disability insurance to the Executive, the Executive's spouse and Executive's dependents, during the remainder of the Employment Period shall be reduced when and to the extent any of such benefits are paid or provided to the Executive by another employer, provided that the Executive shall have all rights afforded to retirees to convert group insurance coverage to the individual insurance coverage as, to the extent of, and whenever his group insurance coverage under this Section is reduced or expires. Apart from this subparagraph, the Executive shall have and be subject to no obligation to mitigate. k. The Company shall deduct applicable withholding taxes in performing its obligations under this Section. Nothing in this Section is intended, nor shall be deemed or interpreted, to be an amendment to any compensation, benefit or other plan to the Company. To the extent the Company's performance under this Section includes the performance of the Company's obligations to the Executive under any other plan or under another agreement between the Company and the Executive, the rights of the Executive under such other plan or other agreements, which are discharged under this Agreement, are discharged, surrendered, or released PRO TANTO. IV. CHANGE IN CONTROL. 4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the Employment Period shall be immediately and without further action extended for a term of three (3) years following the Effective Date of the Change in Page 14 of 23 Control and will expire at 12:00 o'clock midnight on the last day of the month following three (3) years after the Change in Control. Thereafter the Employment Period will be extended for successive terms of one (1) year each, unless terminated, all in the manner specified in the Term of Employment Section pertaining to regular employment. 4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS. In the event the Executive is terminated within three (3) years following a Change in Control, the Executive will receive the payments and benefits specified in the "Termination without Change in Control" Section in the same time and manner therein specified except as amended and modified hereby: a. The salary and benefits specified in Section 3.05a will be paid based upon a multiple of three (3) years {instead of two (2) years}. b. Life, health, accident and disability insurance specified in Section 3.05b will be provided until: (i) Executive becomes reemployed and receives similar benefits from a new employer, or (ii) three (3) years after the Date of Termination, whichever is earlier. c. An amount equal to three (3) times the maximum award that the Executive could receive under the Company's Annual Bonus Plan for the fiscal year in which the termination occurs, instead of the benefits provided in Section 3.05(c) hereof. d. All other rights and benefits specified in Section 3.05. 4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive voluntarily resigns his employment within twelve (12) months after a Change in Control (whether or not Company may be alleging the right to terminate employment for cause), he will receive the same payments, compensation and benefits as if he had been terminated on the date of resignation after Change in Control. V. NON-COMPETITION AND CONFIDENTIALITY. 5.01. CONSIDERATION. The base salary awarded to the Executive and to be paid to the Executive in the future includes consideration for the Non-Competition and Confidentiality Agreement set forth herein and the amount to be paid to Executive in the event of the termination of employment of Executive, voluntarily, involuntarily, or under a Change in Control, under Sections 3.05a and 4.02a hereof constitute payment, in part, for the Non-Competition and Confidentiality of the Executive. It is contracted, stipulated and agreed that fifteen percent (15%) of such amount paid and to be paid to the Executive Page 15 of 23 shall constitute the consideration for the Non-Competition and Confidentiality Agreement set forth herein. 5.02. NON-COMPETITION. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company could cause serious harm to the Company. Accordingly, the Executive agrees that during his employment with the Company and for a period of two (2) years after he is no longer employed by the Company (unless his employment is terminated after a Change in Control, in which event there will be no covenant not to compete and the provisions of the covenant not to compete herein contained will terminate on the date of termination of the Executive) the Executive will not, directly or indirectly, either as an individual, proprietor, stockholder {other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers}, partner, officer, employee or otherwise: a. work for, become an employee of, invest in, provide consulting services or in any way engage in any business which provides, produces, leases or sells products or services of the same or similar type provided, produced, leased or sold by the Company and with regard to which Executive was engaged, or over which Executive had direct or indirect supervision or control, within three (3) years preceding the Executive's termination of employment, in any area where the Company provided, produced, leased or sold such products or services at any time during the three (3) years preceding such termination of employment, or b. provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which the Executive had direct or indirect supervision or control, within three (3) years preceding Executive's termination of employment, to or from any person, firm or entity which was a customer for such products or services of the Company during the three (3) years preceding such termination from whom the Company had solicited business during such three (3) years; or c. solicit, aid, counsel or encourage any officer, director, employee or other individual to: (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) violate the terms of any employment, non-competition or similar agreement with the Company; or Page 16 of 23 d. employ, directly or indirectly; permit the employment of; contract for services or work to be performed by; or otherwise, use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the Date of Termination of employment of Executive with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever occurs earlier. 5.03. CONFIDENTIALITY. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Executive will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation (in any manner whatsoever) any information concerning any matter affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, the Executive may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of the Executive's duties as an employee of the Company, and the Executive may not make use of any information of the Company after he is no longer an employee of the Company. The Executive agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties. All information, whether written or otherwise, regarding the Company's business, including, but not limited to, information regarding customers, customer lists, costs, prices, earnings, products, services, formulae, compositions, machinery, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply, is PRIMA FACIE presumed to be important, material and confidential information of the Company for the purposes of this Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general public. The Executive further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, typed or printed materials, whether furnished by the Company or prepared by the Executive, which contain any information relating to the Company's business, and the Executive agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, the Executive will not be liable for any breach of these confidentiality provisions unless the same constitutes a material detriment to the Company, or due to the nature of the information divulged and the manner in which it was divulged and the person Page 17 of 23 to whom it was divulged would likely cause damage to the Company or constitute a material detriment to the Company. 5.04. GEOGRAPHICAL AREA. The geographical area within which the non- competition covenants of this Agreement shall apply is that territory within two hundred (200) miles of: (i) any of the Company's present offices, (ii) any of the Company's present rig yards, and (iii) any additional location where the Company, as of the date of any action taken in violation of the non- competition covenants of this Agreement, has an office, a rig yard, or definitive plans to locate an office or a rig yard. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country. 5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY AGREEMENT. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the covenants made by the Executive herein, it is agreed that: a. the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; b. because of the nature of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Agreement are reasonable; and a. the injury suffered by the Company by a violation of any covenant in this Agreement resulting from loss of profits created by the competitive use of such skills, experience and contacts that otherwise will make it difficult to calculate in damages in an action at law and cannot fully compensate the Company for any violation of any covenant in this Agreement, accordingly, (i) the Company shall be entitled to injunctive relief to prevent violations of such covenants or continuing violations thereof and to prevent Executive from rendering any services to any person, firm or entity in breach of such covenant and to prevent Executive from divulging any confidential information, and (ii) compliance with this Agreement is a condition precedent to the Company's obligation to make payments of any nature to the Executive. Page 18 of 23 5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY. If the Executive's termination was not after a Change in Control and if the Executive shall have materially violated the Confidentiality and/or Non-Competition Agreement or any agreement he may have signed as an employee of the Company, the Executive agrees that there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in the Termination of Rights and Benefits Section hereof, subject to the provisions of Section 6.01 hereof. There will be no withholding of benefits or payments if the termination occurred after a Change in Control and the Executive will not be bound by the non-competition provisions if terminated while the Change in Control provisions hereof are applicable. VI. GENERAL. 6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a Change in Control, or under other circumstances even when a Change in Control has not occurred, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny Executive the benefits intended under this Agreement; or actions may be taken to enforce the non-competition or confidentiality provisions of this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of his rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to Executive hereunder nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such costs. Accordingly, if at any time after the Effective Date of this Agreement, it should appear to the Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable, that Executive has violated the terms of this Agreement, or for any other reason, or that the Company has purported to terminate his employment for cause or is in the course of doing so, or is withholding payments or benefits, or is threatening to withhold payments or benefits, contrary to this Agreement, or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits provided or intended to be provided to him hereunder, and the Executive has acted in good faith to perform his Page 19 of 23 obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company to represent him in connection with the protection and enforcement of his rights hereunder including, without limitation, representation in connection with termination of his employment or withholding of benefits or payments contrary to this Agreement or with the initiation or defense of any litigation or any other legal action, whether by or against the Executive or the Company or any Director, Officer, stockholder or other person affiliated with the Company, in any jurisdiction. Company is not authorized to withhold the periodic payments of attorney's fees and expenses hereunder based upon any belief or assertion by the Company that Executive has not acted in good faith or has violated this Agreement. If Company subsequently establishes that Executive was not acting in good faith and has violated this Agreement, Executive will be liable to the Company for reimbursement of amounts paid due to Executive's actions not based on good faith and in violation of this Agreement. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company, on a regular, periodic basis within thirty (30) days after presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $250,000.00. 6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and will pay all income tax liability by virtue of any payments made to the Executive under this Agreement, as if the same were earned and paid in the normal course of business and not the result of a Change in Control and not otherwise triggered by the "golden parachute" or excess payment provisions of the Internal Revenue Code of the United States, which would cause additional tax liability to be imposed. If any additional income tax, excise or other taxes are imposed on any amount or payment in the nature of compensation paid or provided to or on behalf of Executive, the Company shall "gross up" Executive for such tax liability by paying to Executive an amount sufficient so that after payment of all such taxes so imposed, Executive's position on an after-tax basis is what it would have been had no such additional taxes been imposed. Executive will cooperate with the company to minimize the tax consequences to the Executive and to the Company so long as the actions proposed to be taken by the Company do not cause any additional tax consequences to the Executive and do not prolong or delay the time that payments are to be made, or the amount of payments to be made, unless the Executive consents, in writing, to any delay or deferment of payment. 6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of the Executive is for cause and not after a Change in Control, Page 20 of 23 the Company will have the right to withhold all payments (except those specified in Sections 6.01); provided, however, that if a final judgment is entered finding that cause did not exist for termination, the Company will pay all benefits to the Executive to which he would have been entitled had the termination not been for cause, plus interest on all amounts withheld from the Executive at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for cause occurs after a Change in Control, the Company shall have no right to suspend or withhold payments to the Executive under any provision of this Agreement until or unless a final judgment is entered upholding the Company's determination that the termination was for cause, in which event the Executive will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S. 6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefits to which Executive would be entitled but for this Agreement. 6.05. NOTICES. Notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, return receipt requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System, (ii) by facsimile transmission if the receiver acknowledges receipt; (iii) by Federal Express or other expedited delivery service provided that acknowledgement of receipt is received and retained by the deliverer and furnished to the sender, if to the Executive, at the last address he has filed in writing with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices. 6.06. NON-ALIENATION. The Executive shall not have any right to pledge hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject ,matter hereof. Upon the death of the Executive, his Executors, Administrators, devisees and heirs, in that order, shall have the right to enforce the provisions hereof. 6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No Page 21 of 23 provision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other persons to any such amendment, waiver or discharge shall not be required. 6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein this Agreement shall be binding upon and inure to the benefit of the Executive and his legal representatives, heirs, and assigns, provided however, that in the event of the Executive's death prior to payment or distribution of all amounts, distributions, and benefits due him hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive, to the Company, to receive such payment or distribution and in the event Executive has made no applicable designation, to his Estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts. 6.09. GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Louisiana because the Company is incorporated under the laws of the State of Louisiana, the validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of Texas. 6.10. VENUE. To the extent permitted by applicable State and Federal law, venue for all proceedings hereunder will be in Harris County, Texas. 6.11. HEADINGS. The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 6.12. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 6.13. PARTIAL INVALIDITY. In the event that any part, portion or section of this Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be binding upon the parties Page 22 of 23 hereto and the Agreement will be construed to give meaning to the remaining provisions of this Agreement in according with the intent of this Agreement. 6.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first above written. Executed in multiple originals and/or counterparts as of the Effective Date. \s\STEVEN R. TOLSON STEVEN R. TOLSON PRIDE INTERNATIONAL, INC. CORPORATE SEAL By: RAY H. TOLSON RAY H. TOLSON CEO and Chairman of the Board ATTEST: By: FRIDA A. MARTINEZ Frida A. Martinez Assistant Secretary Page 23 of 23 EX-10.23 9 EXHIBIT 10.23 PRIDE INTERNATIONAL, INC. EMPLOYMENT/NON-COMPETITION/ CONFIDENTIALITY AGREEMENT ROBERT W. RANDALL EFFECTIVE FEBRUARY 5, 1999 INDEX I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6 1.01 Effect of Prior Agreements......................................6 II. DEFINITION OF TERMS...................................................6 2.01 Company.........................................................6 2.02 Executive/Officer/Employee......................................6 2.03 Office/Position/Title...........................................6 2.04 Effective Date..................................................6 2.05 Change in Control...............................................7 2.06 Termination.....................................................7 2.07 Customer........................................................9 III. EMPLOYMENT...........................................................9 3.01 Employment......................................................9 3.02 Best Efforts And Other Employment Of Executive.................10 3.03 Term Of Employment.............................................10 3.04 Compensation And Benefits......................................11 3.05 Termination Without Change In Control..........................12 IV.CHANGE IN CONTROL.....................................................14 4.01 Extension Of Employment Period.................................14 4.02 Change In Control Termination Payments & Benefits..............15 4.03 Voluntary Resignation Upon Change In Control...................15 V. NON-COMPETITION AND CONFIDENTIALITY...................................15 5.01 Consideration..................................................15 5.02 Non-Competition................................................16 5.03 Confidentiality................................................17 5.04 Geographical Area..............................................18 5.05 Company Remedies For Violation Of Non-Competition Or Confidentiality Agreement............................18 5.06 Termination Of Benefits For Violation Of Non- Competition And Confidentiality.....................19 Page 2 of 23 VI. GENERAL.............................................................19 6.01 Enforcement Costs...............................................19 6.02 Income, Excise or Other Tax Liability...........................20 6.03 Payment Of Benefits Upon Termination For Cause..................21 6.04 Non-Exclusive Agreement.........................................21 6.05 Notices.........................................................21 6.06 Non-Alienation..................................................21 6.07 Entire Agreement: Amendment.....................................22 6.08 Successors And Assigns..........................................22 6.09 Governing Law...................................................22 6.10 Venue...........................................................22 6.11 Headings........................................................22 6.12 Severability....................................................22 6.13 Partial Invalidity..............................................23 6.14 Counterparts....................................................23 Page 3 of 23 EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT DATE: FEBRUARY 5, 1999 COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation 5847 San Felipe, Suite 3300 Houston, Texas 77057 EXECUTIVE/EMPLOYEE: Robert W. Randall 14621 Westway Lane Houston, Texas 77077 This Agreement is made as of the date first above written and to become effective as herein provided. PREAMBLE WHEREAS, the Company wishes to attract and retain well-qualified Executive and key personnel and to assure itself of the continuity of its management; WHEREAS, Executive is an officer of the Company with significant management responsibilities in the conduct of its business; WHEREAS, the Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive; WHEREAS, the Company desires to obtain assurances that Executive will devote his best efforts to his employment with the Company and will not enter into competition with the Company in its business as now conducted and to be conducted, or solicit customers or other employees of the Company to terminate their relationships with the Company; WHEREAS, Executive is a key employee of the Company and he acknowledges that his talents and services to the Company are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company; Page 4 of 23 WHEREAS, the Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise; Executive may have concerns about the continuation of his employment status and responsibilities and may be approached by others offering competing employment opportunities; the Company, therefore, desires to provide Executive with assurances as to the continuation of his employment status and responsibilities in such event; WHEREAS, the Company further desires to assure Executive that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to his financial well-being; WHEREAS, Executive is willing to continue to serve as such but desires assurances that in the event of such a change in control he will continue to have the employment status and responsibilities he could reasonably expect absent such event and, that in the event this turns out not to be the case, he will have fair and reasonable severance protection on the basis of his service to the Company to that time; WHEREAS, different factors affect the Company and Executive under circumstances of regular employment between the Company and the Executive when there is no threat of change in control and/or none has occurred, as opposed to circumstances under which a change in control is rumored, threatened, occurring or has occurred. For this reason this Employment Agreement is primarily in two parts. One part deals with the regular employment of Executive under circumstances whereby no change in control is threatened, occurring or occurred; herein called "Regular Employment". The second part deals with circumstances whereby a change in control is threatened, occurring or has occurred. Other parts of the Agreement deal with matters affecting both Regular Employment and employment following change in control, including non-competition and confidentiality; and WHEREAS, Executive is willing to enter into and carry out the Non-Competition and Confidentiality Agreement set forth herein in consideration of the Employment Agreement set forth herein. Page 5 of 23 AGREEMENT NOW THEREFORE, the parties agree as follows: I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS. 1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the Effective Date all prior employment and non-competition contracts between Company and Executive are hereby amended, modified and superseded by this Agreement insofar as future employment, compensation, non- competition, confidentiality, accrual of payments or any form of compensation or benefits from the Company are concerned. This Agreement does not release or relieve Company from its liability or obligation with respect to any compensation, payments, or benefits already accrued to Executive, nor to any vesting of benefits or other rights which are attributable to length of employment, seniority or other such matters. This agreement does not relieve Executive of any prior non-competition or confidentiality obligations and agreements and the same are hereby modified and amended as to future matters and future confidentiality even as to matters accruing prior to the Effective Date hereof. II. DEFINITION OF TERMS. 2.01. COMPANY. Company means Pride International, Inc., a Louisiana corporation, as the same presently exists, as well as any and all successors, regardless of the nature of the entity or the State or Nation of organization, whether by reorganization, merger, consolidation, absorption or dissolution. For the purpose of the Non-Competition and Confidentiality Agreement, Company includes any subsidiary or affiliate of the Company to the extent it is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company. 2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Robert W. Randall. 2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which the Executive is employed is that of Vice President, General Counsel and Secretary of the Company and carries with it the duties, responsibilities, rights, benefits and privileges presently held by the Executive, or as may reasonably be assigned to the Executive as are customary and usual for such position. 2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of Page 6 of 23 February 5, 1999. 2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following: a. there occurs a Change in Control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; b. any "person" {as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934} is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; c. the individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; d. the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation; or e. the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person. 2.06. TERMINATION. The term "termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company {including death and disability (as described below)} for any reason other than cause (as described below) or voluntary resignation (as described below). Termination includes "Constructive Termination" as described below. Termination includes non-renewal or failure to extend this Agreement at the end of any employment term, except for cause. Page 7 of 23 a. The term "disability" means physical or mental incapacity qualifying the Executive for a long-term disability under the Company's long-term disability plan. If no such plan exists on the Effective Date of this Agreement, the term "disability" means physical or mental incapacity as determined by a doctor jointly selected by the Executive and the Board of Directors of the Company qualifying the Executive for long-term disability under reasonable employment standards. b. The term "cause" means: (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties, (ii) willful misconduct materially and demonstrably injurious to the Company or (iii) material violation of the covenant not to compete (except after termination under the Change in Control provisions hereof and confidentiality provisions hereof.) No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, or other action by or at request of the Company in respect of his position, authority, or responsibility that is contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-fourths of the entire Board of Directors of the Company at a meeting of the Board of Directors called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board of Directors the Executive has been guilty thereof and specifying the particulars thereof. c. The term "Constructive Termination" means any circumstance by which the actions of the Company either reduce or change Executive's title, position, duties, responsibilities or authority to such an extent or in such a manner as to relegate Executive to a position Page 8 of 23 not substantially similar to that which he presently holds; would degrade, embarrass or otherwise make it unreasonable for Executive to remain in the employment of the Company; and includes violation of the employment provisions and conditions of this Agreement. d. The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) the Executive's resignation or retirement is requested by the Company other than for cause; (ii) any significant adverse change in the nature or scope of the Executive's position, authorities or duties from those described in this Agreement; (iii) any reduction in the Executive's total compensation or benefits from that provided in the Compensation and Benefits Section hereof; (iv) the material breach by the Company of any other provision of this Agreement; (v) any action by the Company which would constitute Constructive Termination; or (vi) non-renewal or failure to extend any employment term, contrary to the wishes of the Executive. Termination that entitles the Executive to the payments and benefits provided in the "Termination Payments and Benefits" Section hereof shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award, or eligibility, for the purpose of any plan, practice or agreement of the Company referred to in the Compensation and Benefits Section hereof. 2.07. CUSTOMER. The term "Customer" includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase. III. EMPLOYMENT. 3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the Page 9 of 23 Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the Term of Employment ("Employment Period") herein specified. During the Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company and Executive may agree. 3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE. a. Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. Such duties shall be rendered at Houston, Texas, and such other place or places within or without the State of Texas as the Company and Executive shall agree. b. Executive shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for the Company. Such employment shall be considered "full time" employment. Executive shall have the right to make investments in businesses which engage in activities other than those engaged by the Company. Executive shall also have the right to devote such incidental and immaterial amount of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Executive shall have the right to make investments in the manner and to the extent authorized and set forth in the Non-Competition Section of this Agreement. 3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for Page 10 of 23 successive terms of one (1) year each commencing February 5, 2001, and on February 5 of each year thereafter, unless Company or Executive gives written notice to the other that employment will not be renewed or continued after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company. 3.04. COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits: a. He shall receive an annual base salary of not less than his annual base salary which is $170,000.00, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors. b. To the extent that such plans exist immediately prior to the Effective Date of this Agreement, he shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. c. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits and prerequisites which are the greater of: (i) the employee benefits and prerequisites provided by the Company to Executives with comparable duties and (ii) the employee benefits and prerequisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Agreement. d. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Date of this Agreement with respect to his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive Page 11 of 23 such benefit) will be not less than it would be had all such plans and agreements were in effect immediately prior to the Effective Date of this Agreement and continued to be in effect without change until and after he begins to receive such benefits. e. Paid vacations each year and use of a Company car or a car allowance to the same extent as he is presently receiving or the benefits provided to Executives with comparable duties whichever is greater. f. Participation in all other executive incentive stock and benefit plans approved by the Compensation Committee 3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including any extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change in Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive (or his Executor, Administrator or Estate in the event of death, as soon as reasonably practical): a. An amount equal to one (1) full year of his base salary (including the amount allocated to the covenant not to compete), which base salary is here defined as twelve (12) times the then current monthly salary in effect for the Executive and all other benefits due him based upon the salary in effect on the Date of Termination (but not less than the highest annual base salary paid to the Executive during any of the three (3) years immediately preceding his Date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions. b. The Company shall provide to Executive for a period of one (1) full years following the Date of Termination, life, health, accident and disability insurance. These benefits are not to be less than the highest benefits furnished to the Executive during the term of this Agreement. c. An amount equal to the target award for the Executive under the Company's annual bonus plan for the fiscal year in which termination occurs, provided that if the Executive has deferred his award for such year under a Company plan, the payment due the Executive under this subparagraph shall be paid in accordance with the terms of the Page 12 of 23 deferral or as specified by the Executive. d. The Company shall pay, distribute and otherwise provide to the Executive the amount and value of his entire plan account and interest under any retirement plan, employee benefit plan, investment plan or stock ownership plan, if any exists on the Date of Termination, and all employer contributions made or payable to any such plan for his account prior to the end of the month in which Termination occurs shall be deemed vested and payable to him. Such payment or distribution shall be in accordance with the elections made by the Executive with respect to distributions in accordance with the plan as if the Executive's employment with the Company terminated at the end of the month in which Termination occurs. e. All stock options and awards to which the Executive is entitled will immediately vest and the time for exercising any option will be as specified in the plan as if the Executive were still employed by the Company; provided however if the immediate vesting of all benefits under the plan is not permitted by the plan, then the benefits will be vested only to the extent authorized or permitted by the plan. f. If Executive elects to treat the termination as retirement then on the Date of Termination, the Executive shall be deemed to have retired from the Company. At that time, or at such later time as he may elect consistent with the terms of any applicable plan or benefit, in order to receive benefits or avoid or minimize any applicable early pension reduction provisions, he shall be entitled to commence to receive total combined qualified and non-qualified retirement benefits to which he is entitled hereunder; or, his total non-qualified retirement benefit hereunder if under the terms of the Company's qualified retirement plan for salaried employees he is not entitled to a qualified benefit. Executive may treat the termination as termination other than "retirement" if Executive so elects and may defer "retirement" to a later date if permitted by any applicable plan. g. The "Compensation and Benefits" section hereof shall be applicable in determining the payments and benefits due the Executive under this section and if Termination occurs after a reduction in all or part of the Executive's total compensation or benefits, the lump sum severance allowance and other compensation and benefits payable to him pursuant to this section shall be based upon his compensation and benefits before the reduction. h. If any provision of this Section cannot, in whole or in part, be Page 13 of 23 implemented and carried out under the terms of the applicable compensation, benefit or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Company, due to insufficient or reduced credited service based upon his actual employment by the Company or because the plan or arrangement has been terminated or amended after the Effective Date of this Agreement, or for any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to the Executive, his dependents, beneficiaries and estate as if Executive's employment had not been terminated. i. All life, health, hospitalization, medical and accident benefits available to Executive's spouse and dependents shall continue for the same term as the Executive's benefits. If the Executive dies, all benefits will be provided for a term of one (1) year {or three (3) years if after a change in control} after the date of death of the Executive. j. The Company's obligation under this Section to continue to pay or provide health care, life, accident and disability insurance to the Executive, the Executive's spouse and Executive's dependents, during the remainder of the Employment Period shall be reduced when and to the extent any of such benefits are paid or provided to the Executive by another employer, provided that the Executive shall have all rights afforded to retirees to convert group insurance coverage to the individual insurance coverage as, to the extent of, and whenever his group insurance coverage under this Section is reduced or expires. Apart from this subparagraph, the Executive shall have and be subject to no obligation to mitigate. k. The Company shall deduct applicable withholding taxes in performing its obligations under this Section. Nothing in this Section is intended, nor shall be deemed or interpreted, to be an amendment to any compensation, benefit or other plan to the Company. To the extent the Company's performance under this Section includes the performance of the Company's obligations to the Executive under any other plan or under another agreement between the Company and the Executive, the rights of the Executive under such other plan or other agreements, which are discharged under this Agreement, are discharged, surrendered, or released PRO TANTO. IV. CHANGE IN CONTROL. Page 14 of 23 4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the Employment Period shall be immediately and without further action extended for a term of three (3) years following the Effective Date of the Change in Control and will expire at 12:00 o'clock midnight on the last day of the month following three (3) years after the Change in Control. Thereafter the Employment Period will be extended for successive terms of one (1) year each, unless terminated, all in the manner specified in the Term of Employment Section pertaining to regular employment. 4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS. In the event the Executive is terminated within three (3) years following a Change in Control, the Executive will receive the payments and benefits specified in the "Termination without Change in Control" Section in the same time and manner therein specified except as amended and modified hereby: a. The salary and benefits specified in Section 3.05a will be paid based upon a multiple of three (3) years {instead of one (1) year}. b. Life, health, accident and disability insurance specified in Section 3.05b will be provided until: (i) Executive becomes reemployed and receives similar benefits from a new employer, or (ii) three (3) years after the Date of Termination, whichever is earlier. c. An amount equal to three (3) times the maximum award that the Executive could receive under the Company's Annual Bonus Plan for the fiscal year in which the termination occurs, instead of the benefits provided in Section 3.05(c) hereof. d. All other rights and benefits specified in Section 3.05. 4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive voluntarily resigns his employment within twelve (12) months after a Change in Control (whether or not Company may be alleging the right to terminate employment for cause), he will receive the same payments, compensation and benefits as if he had been terminated on the date of resignation after Change in Control. I. NON-COMPETITION AND CONFIDENTIALITY. 5.01. CONSIDERATION. The base salary awarded to the Executive and to be paid to the Executive in the future includes consideration for the Non-Competition and Confidentiality Agreement set forth herein and the amount to be paid to Executive in the event of the termination of employment of Executive, voluntarily, involuntarily, or under a Change in Control, under Sections 3.05a Page 15 of 23 and 4.02a hereof constitute payment, in part, for the Non-Competition and Confidentiality of the Executive. It is contracted, stipulated and agreed that fifteen percent (15%) of such amount paid and to be paid to the Executive shall constitute the consideration for the Non-Competition and Confidentiality Agreement set forth herein. 5.02. NON-COMPETITION. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company could cause serious harm to the Company. Accordingly, the Executive agrees that during his employment with the Company and for a period of one (1) year after he is no longer employed by the Company (unless his employment is terminated after a Change in Control, in which event there will be no covenant not to compete and the provisions of the covenant not to compete herein contained will terminate on the date of termination of the Executive) the Executive will not, directly or indirectly, either as an individual, proprietor, stockholder {other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers}, partner, officer, employee or otherwise: a. work for, become an employee of, invest in, provide consulting services or in any way engage in any business which provides, produces, leases or sells products or services of the same or similar type provided, produced, leased or sold by the Company and with regard to which Executive was engaged, or over which Executive had direct or indirect supervision or control, within one (1) year preceding the Executive's termination of employment, in any area where the Company provided, produced, leased or sold such products or services at any time during the one (1) year preceding such termination of employment, or b. provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which the Executive had direct or indirect supervision or control, within one (1) year preceding Executive's termination of employment, to or from any person, firm or entity which was a customer for such products or services of the Company during the one (1) year preceding such termination from whom the Company had solicited business during such one (1) year; or c. solicit, aid, counsel or encourage any officer, director, employee or other individual to: (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) Page 16 of 23 violate the terms of any employment, non-competition or similar agreement with the Company; or d. employ, directly or indirectly; permit the employment of; contract for services or work to be performed by; or otherwise, use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the Date of Termination of employment of Executive with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever occurs earlier. 5.03. CONFIDENTIALITY. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Executive will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation (in any manner whatsoever) any information concerning any matter affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, the Executive may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of the Executive's duties as an employee of the Company, and the Executive may not make use of any information of the Company after he is no longer an employee of the Company. The Executive agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties. All information, whether written or otherwise, regarding the Company's business, including, but not limited to, information regarding customers, customer lists, costs, prices, earnings, products, services, formulae, compositions, machinery, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply, is PRIMA FACIE presumed to be important, material and confidential information of the Company for the purposes of this Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general public. The Executive further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, typed or printed materials, whether furnished by the Company or prepared by the Executive, which contain any information relating to the Company's business, and the Executive agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, the Executive will not be Page 17 of 23 liable for any breach of these confidentiality provisions unless the same constitutes a material detriment to the Company, or due to the nature of the information divulged and the manner in which it was divulged and the person to whom it was divulged would likely cause damage to the Company or constitute a material detriment to the Company. 5.04. GEOGRAPHICAL AREA. The geographical area within which the non- competition covenants of this Agreement shall apply is that territory within two hundred (200) miles of: (i) any of the Company's present offices, (ii) any of the Company's present rig yards, and (iii) any additional location where the Company, as of the date of any action taken in violation of the non- competition covenants of this Agreement, has an office, a rig yard, or definitive plans to locate an office or a rig yard. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country. 5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY AGREEMENT. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the covenants made by the Executive herein, it is agreed that: a. the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; b. because of the nature of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Agreement are reasonable; and c. the injury suffered by the Company by a violation of any covenant in this Agreement resulting from loss of profits created by the competitive use of such skills, experience and contacts that otherwise will make it difficult to calculate in damages in an action at law and cannot fully compensate the Company for any violation of any covenant in this Agreement, accordingly, (i) the Company shall be entitled to injunctive relief to prevent violations of such covenants or continuing violations thereof and to prevent Executive from rendering any services to any person, firm or entity in breach of such covenant and to prevent Executive from divulging any confidential information, and Page 18 of 23 (ii) compliance with this Agreement is a condition precedent to the Company's obligation to make payments of any nature to the Executive. 5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY. If the Executive's termination was not after a Change in Control and if the Executive shall have materially violated the Confidentiality and/or Non-Competition Agreement or any agreement he may have signed as an employee of the Company, the Executive agrees that there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in the Termination of Rights and Benefits Section hereof, subject to the provisions of Section 6.01 hereof. There will be no withholding of benefits or payments if the termination occurred after a Change in Control and the Executive will not be bound by the non-competition provisions if terminated while the Change in Control provisions hereof are applicable. VI. GENERAL. 6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a Change in Control, or under other circumstances even when a Change in Control has not occurred, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny Executive the benefits intended under this Agreement; or actions may be taken to enforce the non-competition or confidentiality provisions of this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of his rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to Executive hereunder nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such costs. Accordingly, if at any time after the Effective Date of this Agreement, it should appear to the Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable, that Executive has violated the terms of this Agreement, or for any other reason, or that the Company has purported to terminate his employment for cause or is in the course of doing so, or is withholding payments or benefits, or is threatening to withhold payments or benefits, contrary to this Agreement, or in the event that the Company or any other Page 19 of 23 person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits provided or intended to be provided to him hereunder, and the Executive has acted in good faith to perform his obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company to represent him in connection with the protection and enforcement of his rights hereunder including, without limitation, representation in connection with termination of his employment or withholding of benefits or payments contrary to this Agreement or with the initiation or defense of any litigation or any other legal action, whether by or against the Executive or the Company or any Director, Officer, stockholder or other person affiliated with the Company, in any jurisdiction. Company is not authorized to withhold the periodic payments of attorney's fees and expenses hereunder based upon any belief or assertion by the Company that Executive has not acted in good faith or has violated this Agreement. If Company subsequently establishes that Executive was not acting in good faith and has violated this Agreement, Executive will be liable to the Company for reimbursement of amounts paid due to Executive's actions not based on good faith and in violation of this Agreement. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company, on a regular, periodic basis within thirty (30) days after presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $250,000.00. 6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and will pay all income tax liability by virtue of any payments made to the Executive under this Agreement, as if the same were earned and paid in the normal course of business and not the result of a Change in Control and not otherwise triggered by the "golden parachute" or excess payment provisions of the Internal Revenue Code of the United States, which would cause additional tax liability to be imposed. If any additional income tax, excise or other taxes are imposed on any amount or payment in the nature of compensation paid or provided to or on behalf of Executive, the Company shall "gross up" Executive for such tax liability by paying to Executive an amount sufficient so that after payment of all such taxes so imposed, Executive's position on an after-tax basis is what it would have been had no such additional taxes been imposed. Executive will cooperate with the company to minimize the tax consequences to the Executive and to the Company so long as the actions proposed to be taken by the Company do not cause any additional tax consequences to the Executive and do not prolong or delay the time that payments are to be made, or the amount of payments to be made, unless the Executive consents, in writing, to any delay or Page 20 of 23 deferment of payment. 6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of the Executive is for cause and not after a Change in Control, the Company will have the right to withhold all payments (except those specified in Sections 6.01); provided, however, that if a final judgment is entered finding that cause did not exist for termination, the Company will pay all benefits to the Executive to which he would have been entitled had the termination not been for cause, plus interest on all amounts withheld from the Executive at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for cause occurs after a Change in Control, the Company shall have no right to suspend or withhold payments to the Executive under any provision of this Agreement until or unless a final judgment is entered upholding the Company's determination that the termination was for cause, in which event the Executive will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S. 6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefits to which Executive would be entitled but for this Agreement. 6.05. NOTICES. Notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, return receipt requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System, (ii) by facsimile transmission if the receiver acknowledges receipt; (iii) by Federal Express or other expedited delivery service provided that acknowledgement of receipt is received and retained by the deliverer and furnished to the sender, if to the Executive, at the last address he has filed in writing with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices. 6.06. NON-ALIENATION. The Executive shall not have any right to pledge hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject ,matter hereof. Upon the death of the Executive, his Executors, Administrators, devisees and heirs, in that order, Page 21 of 23 shall have the right to enforce the provisions hereof. 6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No prpvision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other persons to any such amendment, waiver or discharge shall not be required. 6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein this Agreement shall be binding upon and inure to the benefit of the Executive and his legal representatives, heirs, and assigns, provided however, that in the event of the Executive's death prior to payment or distribution of all amounts, distributions, and benefits due him hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive, to the Company, to receive such payment or distribution and in the event Executive has made no applicable designation, to his Estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts. 6.09. GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Louisiana because the Company is incorporated under the laws of the State of Louisiana, the validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of Texas. 6.10. VENUE. To the extent permitted by applicable State and Federal law, venue for all proceedings hereunder will be in Harris County, Texas. 6.11. HEADINGS. The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 6.12. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. Page 22 of 23 6.13. PARTIAL INVALIDITY. In the event that any part, portion or section of this Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be binding upon the parties hereto and the Agreement will be construed to give meaning to the remaining provisions of this Agreement in according with the intent of this Agreement. 6.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first above written. Executed in multiple originals and/or counterparts as of the Effective Date. \s\ROBERT W. RANDALL ROBERT W. RANDALL PRIDE INTERNATIONAL, INC. CORPORATE SEAL By: RAY H. TOLSON RAY H. TOLSON CEO and Chairman of the Board ATTEST: By: FRIDA A. MARTINEZ Frida A. Martinez Assistant Secretary Page 23 of 23 EX-10.24 10 EXHIBIT 10.24 PRIDE INTERNATIONAL, INC. EMPLOYMENT/NON-COMPETITION/ CONFIDENTIALITY AGREEMENT EARL W. MCNIEL EFFECTIVE FEBRUARY 5, 1999 INDEX I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS..................................6 1.01 Effect of Prior Agreements......................................6 II. DEFINITION OF TERMS...................................................6 2.01 Company.........................................................6 2.02 Executive/Officer/Employee......................................6 2.03 Office/Position/Title...........................................6 2.04 Effective Date..................................................6 2.05 Change in Control...............................................7 2.06 Termination.....................................................7 2.07 Customer........................................................9 III. EMPLOYMENT...........................................................9 3.01 Employment......................................................9 3.02 Best Efforts And Other Employment Of Executive.................10 3.03 Term Of Employment.............................................10 3.04 Compensation And Benefits......................................11 3.05 Termination Without Change In Control..........................12 IV. CHANGE IN CONTROL....................................................14 4.01 Extension Of Employment Period.................................14 4.02 Change In Control Termination Payments & Benefits..............15 4.03 Voluntary Resignation Upon Change In Control...................15 V. NON-COMPETITION AND CONFIDENTIALITY...................................15 5.01 Consideration..................................................15 5.02 Non-Competition................................................16 5.03 Confidentiality................................................17 5.04 Geographical Area..............................................18 5.05 Company Remedies For Violation Of Non-Competition Or Confidentiality Agreement................................18 5.06 Termination Of Benefits For Violation Of Non- Competition And Confidentiality.............................19 Page 2 of 23 VI. GENERAL.............................................................19 6.01 Enforcement Costs...............................................19 6.02 Income, Excise or Other Tax Liability...........................20 6.03 Payment Of Benefits Upon Termination For Cause..................21 6.04 Non-Exclusive Agreement.........................................21 6.05 Notices.........................................................21 6.06 Non-Alienation..................................................21 6.07 Entire Agreement: Amendment.....................................21 6.08 Successors And Assigns..........................................22 6.09 Governing Law...................................................22 6.10 Venue...........................................................22 6.11 Headings........................................................22 6.12 Severability....................................................22 6.13 Partial Invalidity..............................................22 6.14 Counterparts....................................................23 Page 3 of 23 EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT DATE: FEBRUARY 5, 1999 COMPANY/EMPLOYER: Pride International, Inc., A Louisiana corporation 5847 San Felipe, Suite 3300 Houston, Texas 77057 EXECUTIVE/EMPLOYEE: Earl W. McNiel 1423 Stependale Katy, Texas 77450 This Agreement is made as of the date first above written and to become effective as herein provided. PREAMBLE WHEREAS, the Company wishes to attract and retain well-qualified Executive and key personnel and to assure itself of the continuity of its management; WHEREAS, Executive is an officer of the Company with significant management responsibilities in the conduct of its business; WHEREAS, the Company recognizes that Executive is a valuable resource of the Company and the Company desires to be assured of the continued services of Executive; WHEREAS, the Company desires to obtain assurances that Executive will devote his best efforts to his employment with the Company and will not enter into competition with the Company in its business as now conducted and to be conducted, or solicit customers or other employees of the Company to terminate their relationships with the Company; WHEREAS, Executive is a key employee of the Company and he acknowledges that his talents and services to the Company are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to the Company; Page 4 of 23 WHEREAS, the Company is concerned that in the event of a possible or threatened change in control of the Company, uncertainties necessarily arise; Executive may have concerns about the continuation of his employment status and responsibilities and may be approached by others offering competing employment opportunities; the Company, therefore, desires to provide Executive with assurances as to the continuation of his employment status and responsibilities in such event; WHEREAS, the Company further desires to assure Executive that, if a possible or threatened change in control should arise and Executive should be involved in deliberations or negotiations in connection therewith, Executive would be in a secure position to consider and participate in such transaction as objectively as possible in the best interests of the Company and to this end desires to protect Executive from any direct or implied threat to his financial well-being; WHEREAS, Executive is willing to continue to serve as such but desires assurances that in the event of such a change in control he will continue to have the employment status and responsibilities he could reasonably expect absent such event and, that in the event this turns out not to be the case, he will have fair and reasonable severance protection on the basis of his service to the Company to that time; WHEREAS, different factors affect the Company and Executive under circumstances of regular employment between the Company and the Executive when there is no threat of change in control and/or none has occurred, as opposed to circumstances under which a change in control is rumored, threatened, occurring or has occurred. For this reason this Employment Agreement is primarily in two parts. One part deals with the regular employment of Executive under circumstances whereby no change in control is threatened, occurring or occurred; herein called "Regular Employment". The second part deals with circumstances whereby a change in control is threatened, occurring or has occurred. Other parts of the Agreement deal with matters affecting both Regular Employment and employment following change in control, including non-competition and confidentiality; and WHEREAS, Executive is willing to enter into and carry out the Non-Competition and Confidentiality Agreement set forth herein in consideration of the Employment Agreement set forth herein. Page 5 of 23 AGREEMENT NOW THEREFORE, the parties agree as follows: I. PRIOR AGREEMENTS/EMPLOYMENT CONTRACTS. 1.01. EFFECT OF PRIOR AGREEMENTS. On and as of 12:00 o'clock noon of the Effective Date all prior employment and non-competition contracts between Company and Executive are hereby amended, modified and superseded by this Agreement insofar as future employment, compensation, non- competition, confidentiality, accrual of payments or any form of compensation or benefits from the Company are concerned. This Agreement does not release or relieve Company from its liability or obligation with respect to any compensation, payments, or benefits already accrued to Executive, nor to any vesting of benefits or other rights which are attributable to length of employment, seniority or other such matters. This agreement does not relieve Executive of any prior non-competition or confidentiality obligations and agreements and the same are hereby modified and amended as to future matters and future confidentiality even as to matters accruing prior to the Effective Date hereof. II. DEFINITION OF TERMS. 2.01. COMPANY. Company means Pride International, Inc., a Louisiana corporation, as the same presently exists, as well as any and all successors, regardless of the nature of the entity or the State or Nation of organization, whether by reorganization, merger, consolidation, absorption or dissolution. For the purpose of the Non-Competition and Confidentiality Agreement, Company includes any subsidiary or affiliate of the Company to the extent it is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company. 2.02. EXECUTIVE/OFFICER/EMPLOYEE. Executive/Officer/Employee means Earl W. McNiel. 2.03. OFFICE/POSITION/TITLE. The Office, Position and Title for which the Executive is employed is that of Vice President and Chief Financial Officer of the Company and carries with it the duties, responsibilities, rights, benefits and privileges presently held by the Executive, or as may reasonably be assigned to the Executive as are customary and usual for such position. 2.04. EFFECTIVE DATE. This Agreement becomes effective and binding as of Page 6 of 23 February 5, 1999. 2.05. CHANGE IN CONTROL. The term "Change in Control" of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following: a. there occurs a Change in Control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 1 of Form 8(k) promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes; b. any "person" {as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934} is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; c. the individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; d. the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation; or e. the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person. 2.06. TERMINATION. The term "termination" shall mean termination, prior to the expiration of the Employment Period, of the employment of the Executive with the Company {including death and disability (as described below)} for any reason other than cause (as described below) or voluntary resignation (as described below). Termination includes "Constructive Termination" as described below. Termination includes non-renewal or failure to extend this Agreement at the end of any employment term, except for cause. Page 7 of 23 a. The term "disability" means physical or mental incapacity qualifying the Executive for a long-term disability under the Company's long-term disability plan. If no such plan exists on the Effective Date of this Agreement, the term "disability" means physical or mental incapacity as determined by a doctor jointly selected by the Executive and the Board of Directors of the Company qualifying the Executive for long-term disability under reasonable employment standards. b. The term "cause" means: (i) the willful and continued failure of the Executive substantially to perform his duties with the Company (other than any failure due to physical or mental incapacity) after a demand for substantial performance is delivered to him by the Board of Directors which specifically identifies the manner in which the Board believes he has not substantially performed his duties, (ii) willful misconduct materially and demonstrably injurious to the Company or (iii) material violation of the covenant not to compete (except after termination under the Change in Control provisions hereof and confidentiality provisions hereof.) No act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. The unwillingness of the Executive to accept any or all of a change in the nature or scope of his position, authorities or duties, a reduction in his total compensation or benefits, or other action by or at request of the Company in respect of his position, authority, or responsibility that is contrary to this Agreement, may not be considered by the Board of Directors to be a failure to perform or misconduct by the Executive. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause for purposes of this Agreement unless and until there shall have been delivered to him a copy of a resolution, duly adopted by a vote of three-fourths of the entire Board of Directors of the Company at a meeting of the Board of Directors called and held (after reasonable notice to the Executive and an opportunity for the Executive and his counsel to be heard before the Board) for the purpose of considering whether the Executive has been guilty of such a willful failure to perform or such willful misconduct as justifies termination for cause hereunder, finding that in the good faith opinion of the Board of Directors the Executive has been guilty thereof and specifying the particulars thereof. c. The term "Constructive Termination" means any circumstance by which the actions of the Company either reduce or change Executive's title, position, duties, responsibilities or authority to such Page 8 of 23 an extent or in such a manner as to relegate Executive to a position not substantially similar to that which he presently holds; would degrade, embarrass or otherwise make it unreasonable for Executive to remain in the employment of the Company; and includes violation of the employment provisions and conditions of this Agreement. d. The resignation of the Executive shall be deemed "voluntary" if it is for any reason other than one or more of the following: (i) the Executive's resignation or retirement is requested by the Company other than for cause; (ii) any significant adverse change in the nature or scope of the Executive's position, authorities or duties from those described in this Agreement; (iii) any reduction in the Executive's total compensation or benefits from that provided in the Compensation and Benefits Section hereof; (iv) the material breach by the Company of any other provision of this Agreement; (v) any action by the Company which would constitute Constructive Termination; or (vi) non-renewal or failure to extend any employment term, contrary to the wishes of the Executive. Termination that entitles the Executive to the payments and benefits provided in the "Termination Payments and Benefits" Section hereof shall not be deemed or treated by the Company as the termination of the Executive's employment or the forfeiture of his participation, award, or eligibility, for the purpose of any plan, practice or agreement of the Company referred to in the Compensation and Benefits Section hereof. 2.07. CUSTOMER. The term "Customer" includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase. III. EMPLOYMENT. Page 9 of 23 3.0.1. EMPLOYMENT. Except as otherwise provided in this Agreement, the Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the Term of Employment ("Employment Period") herein specified. During the Employment Period, Executive shall exercise such position and authority and perform such responsibilities as are commensurate with the position and authority being exercised and duties being performed by the Executive immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement or at such other location as the Company and Executive may agree. 3.02. BEST EFFORTS AND OTHER EMPLOYMENT OF EXECUTIVE. a. Executive agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of the Company. Such duties shall be rendered at Houston, Texas, and such other place or places within or without the State of Texas as the Company and Executive shall agree. b. Executive shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Executive performed for the Company. Such employment shall be considered "full time" employment. Executive shall have the right to make investments in businesses which engage in activities other than those engaged by the Company. Executive shall also have the right to devote such incidental and immaterial amount of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Executive shall have the right to make investments in the manner and to the extent authorized and set forth in the Non-Competition Section of this Agreement. 3.03. TERM OF EMPLOYMENT ("EMPLOYMENT PERIOD"). Executive's regular employment (no Change in Control being presently contemplated) will commence on the Effective Date of this Agreement and will be for a term of Page 10 of 23 two (2) years ending at 12:00 o'clock midnight February 4, 2001; thereafter, the Term of Employment of Executive will be automatically extended for successive terms of one (1) year each commencing February 5, 2001, and on February 5 of each year thereafter, unless Company or Executive gives written notice to the other that employment will not be renewed or continued after the next scheduled expiration date which is not less than one year after the date that the notice of non-renewal was given. All extended employment terms will be considered to be within the Employment Period while Executive is employed with the Company. 3.04. COMPENSATION AND BENEFITS. During the Employment Period the Executive shall receive the following compensation and benefits: a. He shall receive an annual base salary of not less than his annual base salary which is $170,000.00, with the opportunity for increases, from time to time thereafter, which are in accordance with the Company's regular executive compensation practices. Executive's salary will be reviewed at least annually by the Compensation Committee of the Board of Directors. b. To the extent that such plans exist immediately prior to the Effective Date of this Agreement, he shall be eligible to participate on a reasonable basis, and to continue his existing participation, in annual bonus, stock option and other incentive compensation plans which provide opportunities to receive compensation in addition to his annual base salary which are the greater of: (i) the opportunities provided by the Company for Executives with comparable duties, or (ii) the opportunities under any such plans in which he was participating immediately prior to the Effective Date of this Agreement. c. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to receive and participate in salaried employee benefits including, but not limited to: medical, life, health, accident and disability insurance and disability benefits and prerequisites which are the greater of: (i) the employee benefits and prerequisites provided by the Company to Executives with comparable duties and (ii) the employee benefits and prerequisites to which he was entitled or in which he participated immediately prior to the Effective Date of this Agreement. d. To the extent such plans exist immediately prior to the Effective Date of this Agreement, he shall be entitled to continue to accrue credited service for retirement benefits and to be entitled to receive retirement benefits under and pursuant to the terms of the Company's qualified retirement plan for salaried employees, the Company's supplemental executive retirement plan, and any successor or other retirement plan or agreement in effect on the Effective Page 11 of 23 Date of this Agreement with respect to his retirement, whether or not a qualified plan or agreement, so that his aggregate monthly retirement benefit from all such plans and agreements (regardless when he begins to receive such benefit) will be not less than it would be had all such plans and agreements were in effect immediately prior to the Effective Date of this Agreement and continued to be in effect without change until and after he begins to receive such benefits. e. Paid vacations each year and use of a Company car or a car allowance to the same extent as he is presently receiving or the benefits provided to Executives with comparable duties whichever is greater. f. Participation in all other executive incentive stock and benefit plans approved by the Compensation Committee 3.05. TERMINATION WITHOUT CHANGE IN CONTROL. The Company shall have the right to terminate Executive at any time during the Employment Period (including any extended term). Should the Company choose not to renew or extend the Employment period of this Employment Agreement or choose to terminate the Executive during, or at the end of, the Employment Period, or in the event of death or disability of the Executive, if the termination is not after a Change in Control and is not for cause, the Company shall, within thirty (30) days following such termination, pay and provide to the Executive (or his Executor, Administrator or Estate in the event of death, as soon as reasonably practical): a. An amount equal to one (1) full year of his base salary (including the amount allocated to the covenant not to compete), which base salary is here defined as twelve (12) times the then current monthly salary in effect for the Executive and all other benefits due him based upon the salary in effect on the Date of Termination (but not less than the highest annual base salary paid to the Executive during any of the three (3) years immediately preceding his Date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions. b. The Company shall provide to Executive for a period of one (1) full years following the Date of Termination, life, health, accident and disability insurance. These benefits are not to be less than the highest benefits furnished to the Executive during the term of this Agreement. c. An amount equal to the target award for the Executive under the Page 12 of 23 Company's annual bonus plan for the fiscal year in which termination occurs, provided that if the Executive has deferred his award for such year under a Company plan, the payment due the Executive under this subparagraph shall be paid in accordance with the terms of the deferral or as specified by the Executive. d. The Company shall pay, distribute and otherwise provide to the Executive the amount and value of his entire plan account and interest under any retirement plan, employee benefit plan, investment plan or stock ownership plan, if any exists on the Date of Termination, and all employer contributions made or payable to any such plan for his account prior to the end of the month in which Termination occurs shall be deemed vested and payable to him. Such payment or distribution shall be in accordance with the elections made by the Executive with respect to distributions in accordance with the plan as if the Executive's employment with the Company terminated at the end of the month in which Termination occurs. e. All stock options and awards to which the Executive is entitled will immediately vest and the time for exercising any option will be as specified in the plan as if the Executive were still employed by the Company; provided however if the immediate vesting of all benefits under the plan is not permitted by the plan, then the benefits will be vested only to the extent authorized or permitted by the plan. f. If Executive elects to treat the termination as retirement then on the Date of Termination, the Executive shall be deemed to have retired from the Company. At that time, or at such later time as he may elect consistent with the terms of any applicable plan or benefit, in order to receive benefits or avoid or minimize any applicable early pension reduction provisions, he shall be entitled to commence to receive total combined qualified and non-qualified retirement benefits to which he is entitled hereunder; or, his total non-qualified retirement benefit hereunder if under the terms of the Company's qualified retirement plan for salaried employees he is not entitled to a qualified benefit. Executive may treat the termination as termination other than "retirement" if Executive so elects and may defer "retirement" to a later date if permitted by any applicable plan. g. The "Compensation and Benefits" section hereof shall be applicable in determining the payments and benefits due the Executive under this section and if Termination occurs after a reduction in all or part of the Executive's total compensation or benefits, the lump sum Page 13 of 23 severance allowance and other compensation and benefits payable to him pursuant to this section shall be based upon his compensation and benefits before the reduction. h. If any provision of this Section cannot, in whole or in part, be implemented and carried out under the terms of the applicable compensation, benefit or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Company, due to insufficient or reduced credited service based upon his actual employment by the Company or because the plan or arrangement has been terminated or amended after the Effective Date of this Agreement, or for any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to the Executive, his dependents, beneficiaries and estate as if Executive's employment had not been terminated. i. All life, health, hospitalization, medical and accident benefits available to Executive's spouse and dependents shall continue for the same term as the Executive's benefits. If the Executive dies, all benefits will be provided for a term of one (1) year {or three (3) years if after a change in control} after the date of death of the Executive. j. The Company's obligation under this Section to continue to pay or provide health care, life, accident and disability insurance to the Executive, the Executive's spouse and Executive's dependents, during the remainder of the Employment Period shall be reduced when and to the extent any of such benefits are paid or provided to the Executive by another employer, provided that the Executive shall have all rights afforded to retirees to convert group insurance coverage to the individual insurance coverage as, to the extent of, and whenever his group insurance coverage under this Section is reduced or expires. Apart from this subparagraph, the Executive shall have and be subject to no obligation to mitigate. k. The Company shall deduct applicable withholding taxes in performing its obligations under this Section. Nothing in this Section is intended, nor shall be deemed or interpreted, to be an amendment to any compensation, benefit or other plan to the Company. To the extent the Company's performance under this Section includes the performance of the Company's obligations to the Executive under any other plan or under another agreement between the Company and the Executive, Page 14 of 23 the rights of the Executive under such other plan or other agreements, which are discharged under this Agreement, are discharged, surrendered, or released PRO TANTO. IV. CHANGE IN CONTROL. 4.01. EXTENSION OF EMPLOYMENT PERIOD. Upon any Change in Control the Employment Period shall be immediately and without further action extended for a term of three (3) years following the Effective Date of the Change in Control and will expire at 12:00 o'clock midnight on the last day of the month following three (3) years after the Change in Control. Thereafter the Employment Period will be extended for successive terms of one (1) year each, unless terminated, all in the manner specified in the Term of Employment Section pertaining to regular employment. 4.02. CHANGE IN CONTROL, TERMINATION PAYMENTS AND BENEFITS. In the event the Executive is terminated within three (3) years following a Change in Control, the Executive will receive the payments and benefits specified in the "Termination without Change in Control" Section in the same time and manner therein specified except as amended and modified hereby: a. The salary and benefits specified in Section 3.05a will be paid based upon a multiple of three (3) years {instead of one (1) year}. b. Life, health, accident and disability insurance specified in Section 3.05b will be provided until: (i) Executive becomes reemployed and receives similar benefits from a new employer, or (ii) three (3) years after the Date of Termination, whichever is earlier. c. An amount equal to three (3) times the maximum award that the Executive could receive under the Company's Annual Bonus Plan for the fiscal year in which the termination occurs, instead of the benefits provided in Section 3.05(c) hereof. d. All other rights and benefits specified in Section 3.05. 4.03. VOLUNTARY RESIGNATION UPON CHANGE IN CONTROL. If the Executive voluntarily resigns his employment within twelve (12) months after a Change in Control (whether or not Company may be alleging the right to terminate employment for cause), he will receive the same payments, compensation and benefits as if he had been terminated on the date of resignation after Change in Control. Page 15 of 23 I. NON-COMPETITION AND CONFIDENTIALITY. 5.01. CONSIDERATION. The base salary awarded to the Executive and to be paid to the Executive in the future includes consideration for the Non-Competition and Confidentiality Agreement set forth herein and the amount to be paid to Executive in the event of the termination of employment of Executive, voluntarily, involuntarily, or under a Change in Control, under Sections 3.05a and 4.02a hereof constitute payment, in part, for the Non-Competition and Confidentiality of the Executive. It is contracted, stipulated and agreed that fifteen percent (15%) of such amount paid and to be paid to the Executive shall constitute the consideration for the Non-Competition and Confidentiality Agreement set forth herein. 5.02. NON-COMPETITION. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company could cause serious harm to the Company. Accordingly, the Executive agrees that during his employment with the Company and for a period of one (1) year after he is no longer employed by the Company (unless his employment is terminated after a Change in Control, in which event there will be no covenant not to compete and the provisions of the covenant not to compete herein contained will terminate on the date of termination of the Executive) the Executive will not, directly or indirectly, either as an individual, proprietor, stockholder {other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers}, partner, officer, employee or otherwise: a. work for, become an employee of, invest in, provide consulting services or in any way engage in any business which provides, produces, leases or sells products or services of the same or similar type provided, produced, leased or sold by the Company and with regard to which Executive was engaged, or over which Executive had direct or indirect supervision or control, within one (1) year preceding the Executive's termination of employment, in any area where the Company provided, produced, leased or sold such products or services at any time during the one (1) year preceding such termination of employment, or b. provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which the Executive had direct or indirect supervision or control, within one (1) year preceding Executive's termination of Page 16 of 23 employment, to or from any person, firm or entity which was a customer for such products or services of the Company during the one (1) year preceding such termination from whom the Company had solicited business during such one (1) year; or c. solicit, aid, counsel or encourage any officer, director, employee or other individual to: (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) violate the terms of any employment, non-competition or similar agreement with the Company; or d. employ, directly or indirectly; permit the employment of; contract for services or work to be performed by; or otherwise, use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the Date of Termination of employment of Executive with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever occurs earlier. 5.03. CONFIDENTIALITY. Executive acknowledges that his employment with the Company has in the past and will, of necessity, provide him with specialized knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Executive will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation (in any manner whatsoever) any information concerning any matter affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, the Executive may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of the Executive's duties as an employee of the Company, and the Executive may not make use of any information of the Company after he is no longer an employee of the Company. The Executive agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties. All information, whether written or otherwise, regarding the Company's business, including, but not limited to, information regarding customers, customer lists, costs, prices, earnings, products, services, formulae, compositions, machinery, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply, is PRIMA FACIE presumed to be important, material and confidential information of the Page 17 of 23 Company for the purposes of this Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general public. The Executive further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, typed or printed materials, whether furnished by the Company or prepared by the Executive, which contain any information relating to the Company's business, and the Executive agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, the Executive will not be liable for any breach of these confidentiality provisions unless the same constitutes a material detriment to the Company, or due to the nature of the information divulged and the manner in which it was divulged and the person to whom it was divulged would likely cause damage to the Company or constitute a material detriment to the Company. 5.04. GEOGRAPHICAL AREA. The geographical area within which the non- competition covenants of this Agreement shall apply is that territory within two hundred (200) miles of: (i) any of the Company's present offices, (ii) any of the Company's present rig yards, and (iii) any additional location where the Company, as of the date of any action taken in violation of the non- competition covenants of this Agreement, has an office, a rig yard, or definitive plans to locate an office or a rig yard. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country. 5.05. COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY AGREEMENT. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the covenants made by the Executive herein, it is agreed that: a. the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; b. because of the nature of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Agreement are reasonable; and c. the injury suffered by the Company by a violation of any covenant in this Agreement resulting from loss of profits created by the competitive use of such skills, experience and contacts that otherwise will make it difficult to calculate in damages in an action at law and Page 18 of 23 cannot fully compensate the Company for any violation of any covenant in this Agreement, accordingly, (i) the Company shall be entitled to injunctive relief to prevent violations of such covenants or continuing violations thereof and to prevent Executive from rendering any services to any person, firm or entity in breach of such covenant and to prevent Executive from divulging any confidential information, and (ii) compliance with this Agreement is a condition precedent to the Company's obligation to make payments of any nature to the Executive. 5.06. TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY. If the Executive's termination was not after a Change in Control and if the Executive shall have materially violated the Confidentiality and/or Non-Competition Agreement or any agreement he may have signed as an employee of the Company, the Executive agrees that there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in the Termination of Rights and Benefits Section hereof, subject to the provisions of Section 6.01 hereof. There will be no withholding of benefits or payments if the termination occurred after a Change in Control and the Executive will not be bound by the non-competition provisions if terminated while the Change in Control provisions hereof are applicable. VI. GENERAL. 6.01. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a Change in Control, or under other circumstances even when a Change in Control has not occurred, the Board of Directors or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny Executive the benefits intended under this Agreement; or actions may be taken to enforce the non-competition or confidentiality provisions of this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of his rights under this Agreement by litigation or other legal action because such costs would substantially detract from the Page 19 of 23 benefits intended to be extended to Executive hereunder nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such costs. Accordingly, if at any time after the Effective Date of this Agreement, it should appear to the Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable, that Executive has violated the terms of this Agreement, or for any other reason, or that the Company has purported to terminate his employment for cause or is in the course of doing so, or is withholding payments or benefits, or is threatening to withhold payments or benefits, contrary to this Agreement, or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits provided or intended to be provided to him hereunder, and the Executive has acted in good faith to perform his obligations under this Agreement, the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company to represent him in connection with the protection and enforcement of his rights hereunder including, without limitation, representation in connection with termination of his employment or withholding of benefits or payments contrary to this Agreement or with the initiation or defense of any litigation or any other legal action, whether by or against the Executive or the Company or any Director, Officer, stockholder or other person affiliated with the Company, in any jurisdiction. Company is not authorized to withhold the periodic payments of attorney's fees and expenses hereunder based upon any belief or assertion by the Company that Executive has not acted in good faith or has violated this Agreement. If Company subsequently establishes that Executive was not acting in good faith and has violated this Agreement, Executive will be liable to the Company for reimbursement of amounts paid due to Executive's actions not based on good faith and in violation of this Agreement. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company, on a regular, periodic basis within thirty (30) days after presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $250,000.00. 6.02 INCOME, EXCISE OR OTHER TAX LIABILITY. Executive will be liable for and will pay all income tax liability by virtue of any payments made to the Executive under this Agreement, as if the same were earned and paid in the normal course of business and not the result of a Change in Control and not otherwise triggered by the "golden parachute" or excess payment provisions of the Internal Revenue Code of the United States, which would cause additional tax liability to be imposed. If any additional income tax, excise or other taxes are imposed on any amount or payment in the nature of compensation paid or provided to or on behalf of Executive, the Company shall "gross up" Executive for such tax liability by paying to Executive an amount sufficient so that after payment of all such taxes so imposed, Executive's position on an after-tax basis is what it would have been had no such additional taxes been imposed. Executive will cooperate with the company to minimize the tax consequences to the Executive and to the Company so long as the actions proposed to be taken by the Company do not cause any additional tax consequences to the Executive and do not prolong or delay the time that payments are to be made, or the amount of payments to be made, unless the Executive consents, in writing, to any delay or deferment of payment. 6.03. PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of the Executive is for cause and not after a Change in Control, Page 20 of 23 the Company will have the right to withhold all payments (except those specified in Sections 6.01); provided, however, that if a final judgment is entered finding that cause did not exist for termination, the Company will pay all benefits to the Executive to which he would have been entitled had the termination not been for cause, plus interest on all amounts withheld from the Executive at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for cause occurs after a Change in Control, the Company shall have no right to suspend or withhold payments to the Executive under any provision of this Agreement until or unless a final judgment is entered upholding the Company's determination that the termination was for cause, in which event the Executive will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S. 6.04. NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Executive's participation in other benefits available to executive personnel generally, or to preclude or limit other compensation or benefits as may be authorized by the Board of Directors of the Company at any time, or to limit or reduce any compensation or benefits to which Executive would be entitled but for this Agreement. 6.05. NOTICES. Notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, return receipt requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System, (ii) by facsimile transmission if the receiver acknowledges receipt; (iii) by Federal Express or other expedited delivery service provided that acknowledgement of receipt is received and retained by the deliverer and furnished to the sender, if to the Executive, at the last address he has filed in writing with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices. 6.06. NON-ALIENATION. The Executive shall not have any right to pledge hypothecate, anticipate, or in any way create a lien upon any amounts provided under this Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject ,matter hereof. Upon the death of the Executive, his Executors, Administrators, devisees and heirs, in that order, shall have the right to enforce the provisions hereof. 6.07. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof. No Page 21 of 23 provision of this Agreement may be amended, waived, or discharged except by the mutual written agreement of the parties. The consent of any other persons to any such amendment, waiver or discharge shall not be required. 6.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, its successors or assigns, by operation of law or otherwise including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement. Except as otherwise provided herein this Agreement shall be binding upon and inure to the benefit of the Executive and his legal representatives, heirs, and assigns, provided however, that in the event of the Executive's death prior to payment or distribution of all amounts, distributions, and benefits due him hereunder, each such unpaid amount and distribution shall be paid in accordance with this Agreement to the person or persons designated by Executive, to the Company, to receive such payment or distribution and in the event Executive has made no applicable designation, to his Estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts. 6.09. GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Louisiana because the Company is incorporated under the laws of the State of Louisiana, the validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of Texas. 6.10. VENUE. To the extent permitted by applicable State and Federal law, venue for all proceedings hereunder will be in Harris County, Texas. 6.11. HEADINGS. The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 6.12. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 6.13. PARTIAL INVALIDITY. In the event that any part, portion or section of this Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be binding upon the parties Page 22 of 23 hereto and the Agreement will be construed to give meaning to the remaining provisions of this Agreement in according with the intent of this Agreement. 6.14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary or Assistant Secretary, all as of the day and year first above written. Executed in multiple originals and/or counterparts as of the Effective Date. \s\EARL W. MCNIEL EARL W. MCNIEL PRIDE INTERNATIONAL, INC. CORPORATE SEAL By: RAY H. TOLSON RAY H. TOLSON CEO and Chairman of the Board ATTEST: By: FRIDA A. MARTINEZ Frida A. Martinez Assistant Secretary Page 23 of 23 EX-21 11 EXHIBIT 21 PRIDE INTERNATIONAL, INC. SUBSIDIARIES - - ------------------------------------------------------------------------------ JURISDICTION OF COMPANY INCORPORATION OR ORGANIZATION - - ------------------------------------------------------------------------------ PRIDE INTERNATIONAL, INC. Louisiana Petroleum Supply Company Texas Pride Offshore, Inc. Delaware Mexico Drilling Limited, LLC Delaware Ranger Well Service Texas Ranger Corporation Delaware Pride International Holdings, Inc. Delaware Pride International Services, Inc. Delaware Pride International Management Company Delaware Pride International Ltd. British Virgin Islands Pride South America Ltd. British Virgin Islands Pride International, C.A. Venezuela Pride Cyprus Ltd. Cyprus Pride Limassol Ltd. Cyprus Pride International JSC Russia Pride International, S.A. Argentina Larcom Insurance Ltd. Bermuda Pride Drilling, C.A. Venezuela Pride Peru S.A. Peru Ingeser de Colombia, S.A. British Virgin Islands Marlin Columbia Drilling Co., Inc. British Virgin Islands *1* - - ------------------------------------------------------------------------------ JURISDICTION OF COMPANY INCORPORATION OR ORGANIZATION - - ------------------------------------------------------------------------------ Pride Global Ltd. British Virgin Islands SE Pacific Drilling Ltd. British Virgin Islands Westville Management Corporation British Virgin Islands Utah Drilling Limited British Virgin Islands Pride International Personnel, Ltd. British Virgin Islands Pride U.S. Personnel, Ltd. British Virgin Islands Pride-Forasol-Foramer Ltd. British Virgin Islands Dupont Maritime Ltd. British Virgin Islands Durand Maritime Ltd. British Virgin Islands Pride de Venezuela, C.A. Venezuela Martin Maritime Limited Bahamas Andre Maritime Ltd. Bahamas Sonamer Limited Bahamas Pride-Forasol, S.A. France Forinter Ltd. Jersey Pride-Foramer S.A. France Al Jazirah Sharikat Corporation Liberia Basafojagu (HS) Inc. Liberia Caland Boren B.V. The Netherlands Compagnie Monegasque De Services Comoser s.a.m. Monaco Dayana Finance S.A. Panama Drilling Labor Services PTE Ltd. Singapore *2* - - ------------------------------------------------------------------------------ JURISDICTION OF COMPANY INCORPORATION OR ORGANIZATION - - ------------------------------------------------------------------------------ Dundee Corp. Panama Foracasp CEI Foradel SDN B.H.D. Malaysia Forasub, B.V. The Netherlands Forafels Inc. Panama Forarom SRI Romania Forasol Drilling (West Africa) Ltd. Abuja Forasol Arabia Limited Saudi Arabia C.A. Foravep Venezuela Hispano Americana de Petroleos S.A. HAPSA Argentina Horwell S.A. France Internationale de Travaux et de Materiel (I.T.M.) France National Drilling & Services Co., L.L.C. Oman S.B.M. France France Societe Maritime De Services SOMASER France Dupont Martime Ltd. Liberia Inter-Drill Limited Bahamas Bahamas Gisor Limited U.K. Foramac Drilling Limited U.K. Pride International Bolivia Ltda. Argentina Amethyst Financial Company Ltd. British Virgin Islands Petrodrill Two Limited British Virgin Islands *3* - - ------------------------------------------------------------------------------ JURISDICTION OF COMPANY INCORPORATION OR ORGANIZATION - - ------------------------------------------------------------------------------ Petrodrill Three Limited British Virgin Islands Petrodrill Four Limited British Virgin Islands Petrodrill Five Limited British Virgin Islands Petrodrill Six Limited British Virgin Islands Petrodrill Seven Limited British Virgin Islands Pride Amethyst Ltd. British Virgin Islands Petrodrill Two, Inc. Bahamas Petrodrill Three, Inc. Bahamas Techdrill Inc. Bahamas Drillpetro Inc. Bahamas Formaritima Ltd. British Virgin Islands Petrodrill Offshore Inc. Bahamas Petrodrill Engineering N.V. The Netherlands BiGem Holdings N.V. The Netherlands Compania Boliviana de Perforacion S.A.M. Bolivia *4* EX-23 12 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Pride International, Inc. on Form S-8 (Registration Nos. 33-26854, 33-44823, 333-06823, 333-06825, 333-27661, 333-35089 and 333-35093) and on Form S-3 (Registration Nos. 33-62425 and 333-44925) of our report dated March 30, 1999 on our audits of the consolidated financial statements of Pride International, Inc. as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, which report is included in this Annual Report on Form 10-K. PRICEWATERHOUSECOOPERS LLP Houston, Texas March 31, 1999 EX-27 13
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 DEC-31-1998 86,540 0 187,351 1,354 29,161 369,782 1,725,787 165,503 2,192,167 285,179 289,807 0 0 1 763,401 2,192,167 835,563 835,563 529,844 694,600 (7,056) 0 45,776 102,243 24,726 24,726 0 0 0 77,517 1.55 1.39
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