-----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, NWIu9ePV9RASzuHLFSRUMAUi9O5vUdrUqwBB6TcASJ2ZR4n9cUeF+uFUBzOZuANg /pspv+dqaYhEv97MfTbj2w== 0000950129-03-004284.txt : 20030814 0000950129-03-004284.hdr.sgml : 20030814 20030814173225 ACCESSION NUMBER: 0000950129-03-004284 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIDE INTERNATIONAL INC CENTRAL INDEX KEY: 0000833081 STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389] IRS NUMBER: 760069030 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-107996 FILM NUMBER: 03849003 BUSINESS ADDRESS: STREET 1: 5847 SAN FELIPE STREET 2: SUITE 3300 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137891400 MAIL ADDRESS: STREET 1: 5847 SAN FELIPE STREET 2: SUITE 3300 CITY: HOUSTON STATE: TX ZIP: 77057 FORMER COMPANY: FORMER CONFORMED NAME: PRIDE PETROLEUM SERVICES INC DATE OF NAME CHANGE: 19920703 S-3 1 h07587sv3.txt PRIDE INTERNATIONAL, INC. As filed with the Securities and Exchange Commission on August 14, 2003 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ---------- PRIDE INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 5847 SAN FELIPE, SUITE 3300 76-0069030 (State or other jurisdiction of HOUSTON, TEXAS 77057 (I.R.S. Employer incorporation or organization) (713) 789-1400 Identification No.) (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
---------- ROBERT W. RANDALL VICE PRESIDENT AND GENERAL COUNSEL PRIDE INTERNATIONAL, INC. 5847 SAN FELIPE, SUITE 3300 HOUSTON, TEXAS 77057 (713) 789-1400 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPY TO: TULL R. FLOREY BAKER BOTTS L.L.P. 2900 ONE SHELL PLAZA HOUSTON, TEXAS 77002-4995 (713) 229-1234 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
=================================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION TITLE OF SHARES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE - --------------------------------------------- ------------------- ------------------- ------------------- ------------------- 3 1/4% Convertible Senior Notes Due 2033..... $ 300,000,000(1) 100% $ 300,000,000(1) $ 24,270 - --------------------------------------------- ------------------- ------------------- ------------------- ------------------- Common Stock, par value $.01 per share (2)... 11,671,350 shares --(3) --(3) --(4) ===================================================================================================================================
(1) Estimated solely to compute the amount of the registration fee under Rule 457(o) under the Securities Act and exclusive of accrued interest. (2) Includes the associated rights to purchase preferred stock, which initially are attached to and trade with the shares of common stock being registered hereby. (3) Represents the number of shares of common stock that are currently issuable upon conversion of the 3 1/4% Convertible Senior Notes Due 2033, calculated based on a conversion rate of 38.9045 shares per $1,000 principal amount of the notes. Pursuant to Rule 416 under the Securities Act of 1933, we are also registering an indeterminable number of shares of common stock as may be issued in connection with a stock split, stock dividend, recapitalization or similar event. (4) Under Rule 457(i) under the Securities Act of 1933, no separate registration fee is required for the shares of common stock currently issuable upon conversion of the notes because no additional consideration will be received upon such conversion. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION DATED AUGUST 14, 2003 PROSPECTUS (PRIDE INTERNATIONAL LOGO) $300,000,000 3 1/4% CONVERTIBLE SENIOR NOTES DUE 2033 AND COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES This prospectus relates to $300,000,000 aggregate principal amount of our 3 1/4% Convertible Senior Notes Due 2033. We originally issued and sold the notes to Morgan Stanley & Co. Incorporated in a private placement in April and May 2003. This prospectus will be used by selling securityholders to resell their notes and the common stock issuable upon conversion of the notes. We will pay interest on the notes on May 1 and November 1 of each year. In addition, we will pay contingent interest during any six-month interest period commencing on or after May 1, 2008 for which the trading price of the notes for each of the five trading days immediately preceding such period equals or exceeds 120% of the principal amount of the notes. Holders may convert the notes into shares of our common stock at a conversion rate of 38.9045 shares per $1,000 principal amount of notes (which is equal to a conversion price of $25.704), subject to adjustment, but only before close of business on May 1, 2033 and only under any of the following circumstances: (1) during any fiscal quarter commencing after June 30, 2003 for which the closing sale price of our common stock exceeded 120% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; (2) during the five business day period immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each day of that period was less than 98% of the product of the closing sale price of our common stock and the conversion rate; (3) if the notes have been called for redemption; or (4) upon the occurrence of certain corporate events. Upon conversion, we will have the right to deliver, in lieu of shares of our common stock, cash or a combination of cash and common stock. Beginning May 5, 2008, we may redeem any of the notes at a redemption price of 100% of their principal amount, plus accrued and unpaid interest. Holders may require us to repurchase their notes at a repurchase price of 100% of their principal amount plus accrued and unpaid interest on May 1 of 2008, 2010, 2013, 2018, 2023 and 2028. If a change of control occurs prior to maturity, holders may require us to purchase all or part of the notes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. The notes are our senior unsecured debt and rank equally in right of payment with all of our other existing and future senior debt and senior in right of payment to all of our existing and future subordinated debt. The notes are effectively subordinated to all our existing and future secured debt, to the existing and future debt of our subsidiaries that do not guarantee the notes and to the existing and future secured debt of any subsidiaries that guarantee the notes. We currently expect that there will be no subsidiary guarantors. For U.S. federal income tax purposes, the notes will be subject to U.S. federal income tax rules applicable to contingent payment debt instruments. For a more detailed description of the notes, see "Description of Notes" beginning on page 14. Our common stock is traded on the New York Stock Exchange under the symbol "PDE." On August 13, 2003, the last reported sales price of our common stock on the NYSE was $17.10 per share. INVESTING IN THE NOTES AND THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2003. You should rely only on the information we have provided or incorporated by reference in this prospectus or any prospectus supplement. We have not authorized any person (including any salesman or broker) to provide you with additional or different information. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should assume that the information in this prospectus or any prospectus supplement is accurate only as of the date on the front of that document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference. TABLE OF CONTENTS
Page ---- Summary .......................................................... 2 Risk Factors ..................................................... 5 Forward-Looking Information ...................................... 12 Use of Proceeds .................................................. 13 Ratio of Earnings to Fixed Charges ............................... 13 Price Range of Common Stock ...................................... 13 Dividend Policy .................................................. 13 Description of Notes ............................................. 14 Description of Capital Stock ..................................... 44 Selling Security Holders ......................................... 48 Certain United States Federal Income Tax Consequences ............ 50 Plan of Distribution ............................................. 56 Legal Matters .................................................... 57 Experts .......................................................... 58 Independent Accountants .......................................... 58 Where You Can Find More Information .............................. 58
SUMMARY The following summary should be read together with the information contained in other parts of this prospectus and the documents we incorporate by reference. You should carefully read this prospectus and the documents we incorporate by reference to fully understand the terms of the notes as well as the tax and other considerations that are important to you in making a decision about whether to invest in the notes and the common stock issuable upon their conversion. In this prospectus, we refer to Pride International, Inc. and its subsidiaries as "we," "us" or "Pride," unless we specifically indicate otherwise or the context clearly indicates otherwise. ABOUT PRIDE Pride is a leading international provider of contract drilling and related services, operating both offshore and on land. As of August 8, 2003, we operated a global fleet of 331 rigs, including two ultra-deepwater drillships, 11 semisubmersible rigs, 35 jackup rigs, 29 tender-assisted, barge and platform rigs and 254 land-based drilling and workover rigs. We operate in more than 30 countries and marine provinces. We are a Delaware corporation with our principal executive offices located at 5847 San Felipe, Suite 3300, Houston, Texas 77057. Our telephone number at such address is (713) 789-1400. THE OFFERING Securities Offered................... $300,000,000 principal amount of 3 1/4% Convertible Senior Notes Due 2033. Maturity Date........................ May 1, 2033. Interest............................. 3 1/4% per annum on the principal amount, payable semi-annually in arrears in cash on May 1 and November 1 of each year, beginning November 1, 2003. We also will pay contingent interest during any six-month period from May 1 to October 31 or from November 1 to April 30 commencing on or after May 1, 2008 for which the trading price of the notes for each of the five trading days immediately preceding the first day of such six-month period equals 120% or more of the principal amount of the notes. During any interest period when contingent interest is payable, the contingent interest payable per note will equal 0.25% of the average trading price of the notes during the five trading days immediately preceding the first day of the applicable six-month interest period. Conversion........................... You may convert the notes into shares of our common stock at a conversion rate of 38.9045 shares per $1,000 principal amount of notes (which is equal to a conversion price of $25.704), subject to adjustment, but only prior to the close of business on the final maturity date and only under any of the following circumstances: o during any fiscal quarter commencing after June 30, 2003 for which the closing sale price of our common stock exceeded 120% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; or o during the five business day period immediately after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each day of that period was less than 98% of the product of the closing sale price of our common stock and the conversion rate; or
2 o if the notes have been called for redemption; or o upon the occurrence of specified corporate events described under "Description of Notes." Upon conversion, we will have a right to deliver, in lieu of shares of our common stock, cash or a combination of cash and common stock. Redemption........................... We may redeem any of the notes beginning May 5, 2008 by giving you at least 30 days' notice. We may redeem the notes either in whole or in part at a redemption price of 100% of their principal amount, plus accrued and unpaid interest. Change in Control.................... If a change in control (as described under "Description of Notes--Repurchase at Option of the Holder Upon a Change in Control") occurs prior to maturity, you may require us to purchase all or part of your notes at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest. Repurchase at the Option of the Holder........................... You may require us to repurchase the notes on May 1 of 2008, 2010, 2013, 2018, 2023 and 2028 at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest. We may elect to pay all or a portion of the repurchase price in common stock instead of cash, subject to certain conditions. See "Description of Notes--Repurchase at Option of the Holder." Ranking.............................. The notes rank senior in right of payment to all of our existing and future subordinated debt and rank equally in right of payment with all of our existing and future senior debt. The notes are effectively subordinated to all our existing and future secured debt, to the existing and future debt of our subsidiaries that do not guarantee the notes and to the existing and future secured debt of any subsidiaries that guarantee the notes. We are not restricted by the notes from incurring additional debt, and we and our subsidiaries have significant ability to incur liens. In the circumstances described under "Description of Notes-- Limitation on Non-Guarantor Subsidiaries," some of our subsidiaries, upon the incurrence of significant debt, may be required to guarantee the notes; however, our subsidiaries may incur substantial debt without guaranteeing the notes. We currently expect that there will be no subsidiary guarantors. Covenants and Cross Default to Other Debt........................... The notes are issued under an indenture supplement that limits our ability and the ability of our subsidiaries to incur liens and engage in sale/leaseback transactions and limits the ability of our subsidiaries to incur debt without guaranteeing the notes. In addition, an event of default with respect to the notes will occur upon the failure to pay, or the acceleration of, more than $10 million of certain of our or our subsidiaries' outstanding debt.
3 The restriction on the ability of our subsidiaries to incur debt without guaranteeing the notes will be suspended (and any then- existing subsidiary guarantees will be released) during periods when the notes are rated investment grade by both Standard & Poor's Ratings Services and Moody's Investors Service, Inc. Form and Denomination of Notes....... The notes are represented by one or more global notes in fully registered form, without coupons, deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company. Beneficial interests in the global note are shown on, and transfers of the global note will be effected only through, records maintained by DTC and its participants. See "Description of Notes--Global Note, Book-Entry Form." Use of Proceeds...................... We will not receive any proceeds from the sale by the selling security holders of the notes or the common stock issuable upon conversion of the notes. See "Use of Proceeds." Listing.............................. The notes sold to qualified institutional buyers are eligible for trading in The Portal(SM) Market, a subsidiary of The Nasdaq Stock Market, Inc.; however, the notes resold pursuant to this prospectus will no longer trade on Portal. We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Our common stock is traded on the New York Stock Exchange under the symbol "PDE."
RISK FACTORS You should read the "Risk Factors" section beginning on page 5 of this prospectus so that you understand the risks associated with an investment in the notes and the common stock issuable upon their conversion. 4 RISK FACTORS You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of the notes and our common stock could decline due to any of these risks, and you may lose all or part of your investment. This prospectus and the documents we incorporate by reference also contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus and in the documents we incorporate by reference. RISKS RELATED TO OUR BUSINESS OUR BUSINESS DEPENDS ON THE LEVEL OF ACTIVITY IN THE OIL AND GAS INDUSTRY, WHICH IS SIGNIFICANTLY AFFECTED BY VOLATILE OIL AND GAS PRICES. The profitability of our operations depends upon conditions in the oil and gas industry and, specifically, the level of exploration and production expenditures of oil and gas company customers. The oil and gas industry is cyclical. The demand for contract drilling and related services is directly influenced by many factors beyond our control, including: o oil and gas prices and expectations about future prices; o the demand for oil and gas; o the cost of producing and delivering oil and gas; o advances in exploration, development and production technology; o government regulations; o local and international political and economic conditions; o the ability of the Organization of Petroleum Exporting Countries (OPEC) to set and maintain production levels and prices; o the level of production by non-OPEC countries; and o the policies of various governments regarding exploration and development of their oil and gas reserves. Depending on the market prices of oil and gas, companies exploring for oil and gas may cancel or curtail their drilling programs, thereby reducing demand for drilling services. Such a reduction in demand may erode daily rates and utilization of our rigs, negatively impacting our financial results. Utilization rates and dayrates are also affected by the total supply of comparable rigs available for service in the geographic markets in which we compete. Short-term improvements in demand in a geographic market may cause our competitors to respond by moving competing rigs into the market, thus intensifying price competition. Significant new rig construction could also intensify price competition. In the past, there have been prolonged periods of rig oversupply with correspondingly depressed utilization rates and dayrates largely due to earlier, speculative construction of new rigs. Improvements in dayrates and expectations of longer-term, sustained 5 improvements in utilization rates and dayrates for offshore drilling rigs may cause our competitors to construct new rigs, which could adversely affect our business. INTERNATIONAL EVENTS MAY HURT OUR OPERATIONS. We derive a significant portion of our revenues from international operations. In 2002, we derived approximately 41% of our revenues from operations in countries within South America and approximately 40% of our revenues from operations in other countries outside the United States. Our operations in these areas are subject to the following risks, among others: o foreign currency fluctuations and devaluation; o new economic policies; o restrictions on currency repatriation; and o political instability, war and civil disturbances, including uncertainty or instability resulting from armed hostilities or other crises in the Middle East or other geographic areas in which we operate or acts of terrorism. Continued hostilities in the Middle East and the occurrence or threat of future terrorist attacks such as those against the U.S. on September 11, 2001 could adversely affect the economies of the U.S. and other developed countries. A lower level of economic activity could result in a decline in energy consumption, which could adversely affect our revenues and margins and limit our future growth prospects. More specifically, these risks could lead to increased volatility in prices for crude oil and natural gas and could affect the markets for our drilling services. In addition, these risks could increase instability in the financial and insurance markets and adversely affect our ability to access capital and to obtain insurance coverages that we consider adequate or are otherwise required by our contracts. We attempt to limit the risks of currency fluctuation and restrictions on currency repatriation by obtaining contracts providing for payment in U.S. dollars or freely convertible foreign currency. To the extent possible, we limit our exposure to potentially devaluating currencies by matching the acceptance of local currencies to our expense requirements in those currencies. Although we have done this in the past, we may not be able to take these 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. During 2002, approximately 24% of our consolidated revenues were derived from our land-based drilling, workover and E&P services operations in Argentina and Venezuela, which are currently experiencing political and economic instability that has resulted in significant changes in their general economic policies and regulations. During 2002, the Argentine peso declined in value against the U.S. dollar following the Argentine government's decisions to abandon the country's fixed dollar-to-peso exchange rate, requiring private sector, dollar-denominated loans and contracts to be paid in pesos and placing restrictions on the convertibility of the Argentine peso. The devaluation, coupled with the government's mandated conversion of all dollar-based contracts to pesos, severely pressured our margins. During 2002, we engaged in discussion with all of our Argentine customers regarding the recovery of losses sustained from the devaluation of accounts receivable and the basis on which new business would be contracted. We have restructured most of our contracts on a basis that we believe limits our exposure to further devaluations. However, we can give no assurances that further devaluations will not adversely affect our results. Since the second quarter of 2002, Venezuela has experienced political and economic turmoil, including prolonged labor strikes, demonstrations and an attempt to overthrow the government. Much of the turmoil has negatively impacted PDVSA, which is our principal customer in Venezuela, and led to the dismissal of more than 18,000 PDVSA employees by the government. The implication and results of the political, economic and social instability in Venezuela are uncertain at this time, but the instability has had and is continuing to have an adverse effect on our business. As of June 30, 2003, 10 of our 35 rigs in the country were idle. 6 Recently implemented exchange controls, together with employee dismissals and reorganization within PDVSA, led to a slower rate of collection of our trade receivables in early 2003 and could limit our ability to convert local currency into U.S. dollars and transfer funds out of Venezuela. The exchange controls could result in an artificially high value being placed on the local currency. Although foreign exchange in the other countries where we operate is currently carried out on a free-market basis, there is no assurance that local monetary authorities in these countries will not, in the future, implement exchange controls or other economic measures that would adversely affect our rights to receive payments or to otherwise conduct business in these countries. From time to time, certain of our foreign subsidiaries operate in countries that are subject to sanctions and embargoes imposed by the U.S. government and the United Nations. Although these sanctions and embargoes do not prohibit those subsidiaries from completing existing contracts or from entering into new contracts to provide drilling services in such countries, they do prohibit us and our domestic subsidiaries, as well as employees of our foreign subsidiaries who are U.S. citizens, from participating in or approving any aspect of the business activities in those countries. These constraints on our ability to have U.S. persons, including our senior management, provide managerial oversight and supervision may adversely affect the financial or operating performance of such business activities. Our international operations are also subject to other risks, including foreign monetary and tax policies, expropriation, nationalization and nullification or modification of contracts. Additionally, our ability to compete in international contract drilling markets may be 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. OUR CUSTOMERS MAY SEEK TO CANCEL OR RENEGOTIATE SOME OF OUR DRILLING CONTRACTS DURING PERIODS OF DEPRESSED MARKET CONDITIONS OR IF WE EXPERIENCE OPERATIONAL DIFFICULTIES. During depressed market conditions, a customer may no longer need a rig that is currently under contract or may be able to obtain a comparable rig at a lower daily rate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under those contracts. In addition, our customers may seek to terminate existing contracts if we experience operational problems. The deepwater markets in which we operate require the use of floating rigs with sophisticated positioning, subsea and related systems designed for drilling in deep water. If this equipment fails to function properly, the rig cannot engage in drilling operations, and customers may have the right to terminate the drilling contracts. The likelihood that a customer may seek to terminate a contract for operational difficulties is increased during periods of market weakness. The cancellation of a number of our drilling contracts could adversely affect our results of operations. WE MAY BE CONSIDERED HIGHLY LEVERAGED. OUR SIGNIFICANT DEBT LEVELS AND DEBT AGREEMENT RESTRICTIONS MAY LIMIT OUR FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN PURSUING OTHER BUSINESS OPPORTUNITIES. As of June 30, 2003, we had approximately $1.9 billion in long-term debt and capital lease obligations. 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 certain financial tests, which may affect our flexibility in planning for, and reacting to, changes in our business and may limit our ability to dispose of assets, withstand current or future economic or industry downturns and compete with others in our industry for strategic opportunities; and o our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited. 7 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. COSTS OVERRUNS ON OUR FIXED-PRICE CONSTRUCTION CONTRACTS HAVE ADVERSELY IMPACTED OUR FINANCIAL RESULTS AND MAY CONTINUE TO DO SO IN THE FUTURE. Our technical services segment is performing a number of deepwater platform rig construction projects under fixed-price contracts with our customers. The revenue, cost and gross profit we realize on a fixed-price contract may vary from the estimated amounts because of risks generally inherent in the marine construction industry, including variations in labor and equipment productivity over the term of the contract, unanticipated cost increases, engineering, shipyard or systems problems, shortages of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment, work stoppages, shipyard unavailability or delays. We have experienced cost overruns on these contracts that have adversely impacted our financial results, and there may be further losses resulting from completing these projects. WE RECOGNIZE REVENUES UNDER OUR CONTRACTS IN THE TECHNICAL SERVICES SEGMENT ON A PERCENTAGE-OF-COMPLETION BASIS. ADJUSTMENTS IN ESTIMATES COULD RESULT IN A CHARGE AGAINST EARNINGS, WHICH COULD BE MATERIAL. In addition, we recognize revenues under our contracts in the technical services segment on a percentage-of-completion basis. Accordingly, we review contract price and cost estimates periodically as the work progresses and reflect adjustments in income (1) to recognize a gain proportionate to the percentage of completion in the case of projects showing an estimated profit at completion and (2) to recognize the entire amount of the loss in the case of projects showing an estimated loss at completion. To the extent these adjustments result in an increase in previously reported losses or a reduction in or an elimination of previously reported profits with respect to a project, we would recognize a charge against current earnings, which could be material. Our current estimates may be revised in future periods, and those revisions may be material. WE ARE SUBJECT TO HAZARDS CUSTOMARY IN THE OILFIELD SERVICES 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, we are required by contract to indemnify customers or others. We maintain insurance for injuries to our employees and other insurance coverage for normal business risks, including general liability insurance. Although we believe our current 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, the September 11, 2001 terrorist attacks in the United States have significantly increased premiums for some types of coverage. We may not be able to maintain adequate insurance at rates or on terms that we consider reasonable or acceptable. FAILURE TO RETAIN KEY PERSONNEL COULD HURT OUR OPERATIONS. We require highly skilled personnel to operate and provide technical services and support for our drilling units. To the extent demand for drilling services and the size of the worldwide industry fleet increase, shortages of qualified personnel could arise, creating upward pressure on wages and difficulty in staffing rigs and managerial positions. 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. We have spent and will continue to spend material amounts to comply with these regulations. Laws and regulations protecting the environment have become more stringent in recent years and may in certain circumstances impose strict liability, rendering us liable for environmental damage without regard to negligence or fault on our part. These laws and regulations may expose us to liability for the conduct of, or conditions caused by, others or for acts that were in compliance with all applicable laws at the time the acts were performed. The application of these requirements 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. RISKS RELATED TO THE OFFERING THE NOTES ARE OUR SENIOR UNSECURED OBLIGATIONS. AS SUCH, THE NOTES ARE EFFECTIVELY SUBORDINATED TO ALL OUR EXISTING AND FUTURE SECURED DEBT, TO THE EXISTING AND FUTURE DEBT OF OUR SUBSIDIARIES THAT DO NOT GUARANTEE THE NOTES AND TO THE EXISTING AND FUTURE SECURED DEBT OF ANY SUBSIDIARIES THAT GUARANTEE THE NOTES. The notes constitute our senior unsecured debt and rank equally in right of payment with all of our other existing and future senior debt and senior in right of payment to all of our existing and future subordinated debt. The notes are effectively subordinated to all our existing and future secured debt, to the existing and future debt of 8 our subsidiaries that do not guarantee the notes and to the existing and future secured debt of any subsidiaries that guarantee the notes. We currently expect that there will be no subsidiary guarantors. If we are involved in any dissolution, liquidation or reorganization, our secured debt holders would be paid before you receive any amounts due under the notes to the extent of the value of the assets securing their debt. In that event, you may not be able to recover any principal or interest you are due under the notes. We currently conduct our operations through both U.S. and foreign subsidiaries, and our operating income and cash flow are generated by our subsidiaries. As a result, distributions or advances from our subsidiaries are the principal source of funds necessary to meet our debt service obligations. Contractual provisions or laws, as well as our subsidiaries' financial condition and operating requirements, may limit our ability to obtain cash from our subsidiaries that we require to pay our debt service obligations, including payments on the notes. In addition, holders of the notes will have a junior position to the claims of creditors, including trade creditors and tort claimants, of our subsidiaries that do not guarantee the notes and to all secured creditors of our subsidiaries, whether or not they guarantee the notes, with respect to the assets securing the claims of those secured creditors. We are not restricted by the notes from incurring indebtedness, and our subsidiaries may incur significant indebtedness without guaranteeing the notes. In addition, we and our subsidiaries have significant ability to incur liens. Based on our June 30, 2003 balance sheet, our subsidiaries would have been able to incur in excess of $630 million of additional indebtedness, and we and our subsidiaries would have been able to incur new liens to secure indebtedness in excess of $860 million. As of June 30, 2003, Pride had outstanding $1,211.9 million of unsecured and unsubordinated indebtedness, and no secured or subordinated indebtedness (in each case excluding guarantees of indebtedness of our subsidiaries), and Pride's subsidiaries had outstanding $44.1 million of unsecured and unsubordinated indebtedness, $717.3 million of secured indebtedness and no subordinated indebtedness. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID SUBSIDIARY GUARANTEES. The indenture governing the notes does not require any subsidiary to guarantee the notes unless that subsidiary incurs significant indebtedness as described under "Description of Notes--Limitation on Non-Guarantor Subsidiaries." We currently expect that there will be no subsidiary guarantors. Various fraudulent conveyance laws have been enacted for the protection of creditors, and a court may use these laws to subordinate or avoid any subsidiary guarantee that may be delivered in the future. A court could avoid or subordinate a subsidiary guarantee in favor of that subsidiary guarantor's other creditors if the court found that either: o the guarantee was incurred with the intent to hinder, delay or defraud any present or future creditor or the subsidiary guarantor contemplated insolvency with a design to favor one or more creditors to the exclusion in whole or in part of others; or o the subsidiary guarantor did not receive fair consideration or reasonably equivalent value for issuing its subsidiary guarantee; and, in either case, the subsidiary guarantor, at the time it issued the subsidiary guarantee: o was insolvent or rendered insolvent by reason of the issuance of the subsidiary guarantee; o was engaged or about to engage in a business or transaction for which its remaining assets constituted unreasonably small capital; or o intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured. Among other things, a legal challenge of the subsidiary guarantee on fraudulent conveyance grounds may focus on the benefits, if any, realized by the subsidiary guarantor as a result of our issuance of the notes or the delivery of the subsidiary guarantee. To the extent the subsidiary guarantee was avoided as a fraudulent conveyance or held unenforceable for any other reason, the holders of the notes would cease to have any claim against that subsidiary guarantor and would be solely creditors of the parent company and of any subsidiary guarantors whose subsidiary 9 guarantees were not avoided or held unenforceable. In that event, the claims of the holders of the notes against the issuer of an invalid subsidiary guarantee would be subject to the prior payment of all liabilities of that subsidiary guarantor. WE MAY NOT BE ABLE TO PURCHASE THE NOTES OR OUR OTHER OUTSTANDING DEBT SECURITIES WHEN WE ARE REQUIRED TO DO SO. On May 1, 2008, 2010, 2013, 2018, 2023 and 2028, each holder of the notes has the right to require us, subject to certain conditions, to purchase all or part of that holder's notes at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest through the date of repurchase. We may elect to pay a portion of the purchase price of the notes in common stock instead of cash, subject to certain conditions. In connection with specified change in control events, we may be required to purchase for cash approximately $1.0 billion of our currently outstanding debt securities, including the notes offered by this prospectus. Prior to purchasing these debt securities as specified above, we may be required to obtain consents from the lenders under our other debt arrangements to permit the repurchase. If we cannot purchase that debt or obtain the consents necessary under those debt arrangements, we may not be able to purchase the notes. Also, we may not have sufficient funds available or be able to obtain the financing necessary to make any of the debt payments, including purchases of the notes, described above. If we were required to purchase the notes and we did not have the funds or financing available to make the debt payments, including purchases of the notes, an event of default would be triggered under the indenture governing the notes and certain other debt instruments. Each of these defaults could have a material adverse effect on us and the holders of the notes. YOU SHOULD CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING THE NOTES. We intend to treat the notes as indebtedness for United States federal income tax purposes and intend to take the position that the notes will be subject to the special regulations governing contingent payment debt instruments (which we refer to as the CPDI regulations). The notes will be subject to the CPDI regulations if the contingency represented by the provision of contingent interest on the notes is neither remote nor incidental, as defined in section 1.1275-4(a)(5) of the CPDI regulations. Notwithstanding the issuance of a recent revenue ruling, the application of the CPDI regulations to instruments such as the notes is uncertain in several respects, and, as a result, no assurance can be given that the Internal Revenue Service or a court will agree with the treatment described herein. Any differing treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in the notes. In particular, a holder might be required to accrue interest income at a higher or lower rate, might not recognize income, gain or loss upon conversion of the notes into shares of our common stock, and might recognize capital gain or loss upon a taxable disposition of the notes. Under the indenture, we have agreed, and by acceptance of a beneficial interest in the notes each beneficial owner of the notes will be deemed to have agreed, among other things, for United States federal income tax purposes, to treat the notes as indebtedness that is subject to the CPDI regulations, and the discussion below assumes that the notes will be so treated. In general, beneficial owners of the notes will be required to accrue ordinary interest income, which we refer to as original issue discount, on the notes, in advance of the receipt of the cash or other property attributable to the notes, regardless of whether such owner uses the cash or accrual method of tax accounting. Beneficial owners will be required, in general, to accrue original issue discount based on the rate at which we would issue a noncontingent, nonconvertible, fixed-rate debt instrument with terms and conditions otherwise similar to those of the notes, rather than at a lower rate based on the stated semi-annual cash interest payable on the notes. Accordingly, owners of the notes will be required to include interest in taxable income in each year in excess of the stated semi-annual cash interest payable on the notes. Furthermore, upon a sale, exchange, purchase by us at the holder's option, conversion, redemption or retirement of a note, owners of the notes will recognize gain or loss equal to the difference between the amount realized and their adjusted tax basis in the notes. In general, the amount realized will include the fair market value of shares of our common stock received. Any gain on a sale, exchange, purchase by us at the holder's option, conversion, redemption or retirement of a note will be treated as ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and thereafter, capital loss. Owners of the notes should consult their tax advisors as to the United States federal, state, local or other tax consequences of acquiring, owning and disposing of the notes. A summary of the 10 United States, federal income tax consequences of ownership of the notes is described in this prospectus under the heading "Certain United States Federal Income Tax Consequences." AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP. There is currently no public market for the notes. Although the notes sold to qualified institutional buyers under Rule 144A are eligible for trading in the PORTAL market, the notes resold pursuant to this prospectus will no longer trade on the PORTAL market. As a result, there may be a limited market for the notes. We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Accordingly, we cannot predict whether an active trading market for the notes will develop or be sustained. If an active market for the notes fails to develop or be sustained, the trading price of the notes could fall. If an active trading market were to develop, the notes could trade at prices that may be lower than the initial offering price of the notes. In addition, the market price for the notes may be adversely affected by changes in our financial performance, changes in the overall market for similar securities and performance or prospects for companies in our industry. 11 FORWARD-LOOKING INFORMATION This prospectus, including the information we incorporate by reference, includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this prospectus or the documents we incorporate by reference that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These include such matters as: o market conditions, expansion and other development trends in the contract drilling industry; o utilization rates and contract rates for rigs; o 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); o estimates of profit or loss from performance of rig construction projects; o future asset sales; o completion and employment of rigs under construction; o repayment of debt; o business strategies; o expansion and growth of operations; o future exposure to currency devaluations; o expected outcomes of legal and administrative proceedings and their expected effects on our financial position, results of operations and cash flows; o future operating results and financial condition; and o the effectiveness of our disclosure controls and procedures. We have based these statements on assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe were appropriate in the circumstances when the statements were made. These statements are subject to a number of assumptions, risks and uncertainties, including those described above under "Risk Factors" and in our SEC filings and the following: o general economic and business conditions; o prices of oil and gas and industry expectations about future prices; o cost overruns in our fixed-price construction and other turnkey contracts; o adjustments in estimates affecting our revenue recognition under percentage-of-completion accounting; o foreign exchange controls and currency fluctuations; o political stability in the countries in which we operate; o the business opportunities (or lack thereof) that may be presented to and pursued by us; o changes in laws or regulations; and o the validity of the assumptions used in the design of our disclosure controls and procedures. Most of these factors are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in these statements. We will not update these statements unless the securities laws require us to do so. 12 USE OF PROCEEDS We will not receive any proceeds from the sale by the selling securityholders of the notes or the common stock issuable upon their conversion. RATIO OF EARNINGS TO FIXED CHARGES We have presented in the table below our historical consolidated ratio of earnings to fixed charges for the periods shown.
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED --------------------------------------------- JUNE 30, 2003 2002 2001 2000 1999 1998 - ------------------ ----- ----- ----- ----- ----- -- 1.1x 2.0x 1.7x -- 3.7x
We have computed the ratios of earnings to fixed charges by dividing earnings by fixed charges. For this purpose, "earnings" consist of earnings before income taxes plus fixed charges less capitalized interest. "Fixed charges" consist of interest expense, capitalized interest and that portion of operating lease rental expense we have deemed to represent the interest factor. For the six months ended June 30, 2003 and the year ended December 31, 1999, earnings were inadequate to cover fixed charges by $3.9 million and $118.9 million, respectively. PRICE RANGE OF COMMON STOCK Our common stock is listed on the New York Stock Exchange under the symbol "PDE." On August 13, 2003, the last reported sales price of our common stock on the New York Stock Exchange was $17.10. The following table presents the range of high and low quarterly closing sales prices of our common stock since January 1, 2002.
PRICE ------------------------- HIGH LOW ---------- ---------- 2002 First Quarter ................................... $ 16.25 $ 11.70 Second Quarter .................................. 19.70 15.00 Third Quarter ................................... 15.66 10.80 Fourth Quarter .................................. 16.15 12.25 2003 First Quarter ................................... 15.48 12.75 Second Quarter .................................. 20.09 13.15 Third Quarter (through August 13) ............... 19.08 15.75
DIVIDEND POLICY 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 our existing financing arrangements. The desirability of paying such dividends could also be materially affected by U.S. and foreign tax considerations. 13 DESCRIPTION OF NOTES We issued the notes under an indenture dated as of May 1, 1997, between Pride, as issuer, and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as trustee, as supplemented. The following description is a summary of the material provisions of the notes, the indenture and the registration rights agreement. It does not purport to be complete. We urge you to read the notes, the indenture and the registration rights agreement in their entirety because those documents, and not this description, define your rights as holders of the notes. You may request a copy of the indenture and the registration rights agreement by writing or telephoning us at our address shown under the caption "Where You Can Find More Information." The terms of the indenture include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939. In addition to the notes, our 2 1/2% Convertible Senior Notes Due 2007, 9 3/8% Senior Notes due 2007 and 10% Senior Notes due 2009 have been issued and are outstanding under the indenture. As used in this "Description of Notes" section, references to "Pride," "we," "our" or "us" refer solely to Pride International, Inc. and not to its subsidiaries. In addition, we have used in this description capitalized and other terms that we have defined below under "--Glossary" and in other parts of this description. GENERAL The notes are limited to $300,000,000 aggregate principal amount and are senior unsecured Indebtedness of Pride. The notes bear interest at 3 1/4% per year, plus contingent interest (if applicable) as described under "--Contingent Interest," and mature on May 1, 2033 unless earlier converted, redeemed or repurchased. The notes are convertible into common stock as described under "--Conversion of Notes" and are issued only in denominations of $1,000 principal amount and integral multiples of $1,000 principal amount. You are not afforded protection under the indenture in the event of a highly leveraged transaction or, except to the extent described below under "--Repurchase at Option of the Holder Upon a Change in Control," a change in control of Pride. Under the indenture, we have agreed, and, by acceptance of a beneficial interest in the notes, each beneficial owner of the notes will be deemed to have agreed, for United States federal income tax purposes, to treat the notes as indebtedness that is subject to the regulations governing contingent payment debt instruments and, for purposes of those regulations, to treat the fair market value of any stock received upon any conversion of the notes as a contingent payment. Some implications and uncertainties relating to this treatment are described under "Certain United States Federal Income Tax Consequences." We will pay interest, including contingent interest, if any, on May 1 and November 1 of each year, beginning November 1, 2003, to record holders at the close of business on the April 15 or October 15, as the case may be, immediately preceding the interest payment date, except that interest payable upon redemption or repurchase will be paid to the person to whom principal is payable unless the redemption date or repurchase date is an interest payment date. Interest will be computed on the basis of a 360-day year composed of twelve 30-day months. We will maintain an office in the Borough of Manhattan, The City of New York, for the payment of interest, which shall initially be an office or agency of the trustee. We may pay interest either: o by check mailed to your address as it appears in the note register, provided that, if you are a holder with an aggregate principal amount in excess of $2.0 million, you will be paid, if you so elect in writing, according to the immediately following bullet point; or o by wire transfer of immediately available funds to an account maintained by you in the United States. Payments on notes registered in the name of The Depository Trust Company, New York, New York, which we refer to as DTC, will be made according to the second bullet point above to the account of DTC or its nominee in the United States. 14 RANKING The notes constitute our senior unsecured indebtedness and rank equally in right of payment with all of our other unsubordinated indebtedness and senior in right of payment to all of our subordinated indebtedness. The notes are effectively subordinated to our secured indebtedness with respect to the assets securing that indebtedness. We currently conduct our operations through both U.S. and foreign subsidiaries, and our operating income and cash flow are generated by our subsidiaries. As a result, distributions or advances from our subsidiaries are the principal source of funds necessary to meet our debt service obligations. Contractual provisions or laws, as well as our subsidiaries' financial condition and operating requirements, may limit our ability to obtain cash from our subsidiaries that we require to pay our debt service obligations, including payments on the notes. In addition, holders of the notes will have a junior position to the claims of creditors, including trade creditors and tort claimants, of our subsidiaries that do not guarantee the notes and to all secured creditors of our subsidiaries that guarantee the notes with respect to the assets securing the claims of those secured creditors. We are not restricted by the notes from incurring indebtedness, and our subsidiaries may incur significant indebtedness without guaranteeing the notes. In addition, we and our subsidiaries have significant ability to incur Liens. Based on our June 30, 2003 balance sheet, our subsidiaries would have been able to incur in excess of $630 million of additional indebtedness, and we and our subsidiaries would have been able to incur new liens to secure indebtedness in excess of $860 million. As of June 30, 2003, Pride had outstanding $1,211.9 million of unsecured and unsubordinated indebtedness, and no secured or subordinated indebtedness (in each case excluding guarantees of indebtedness of our subsidiaries), and Pride's subsidiaries had outstanding $44.1 million of unsecured and unsubordinated indebtedness, $717.3 million of secured indebtedness and no subordinated indebtedness. SUBSIDIARY GUARANTEES OF NOTES Under the circumstances described below, our payment obligations under the notes may in the future be jointly and severally guaranteed by our existing or future Subsidiaries as subsidiary guarantors. We currently expect that there will be no subsidiary guarantors. Although the indenture does not contain any requirement that any Subsidiary initially execute and deliver a subsidiary guarantee, covenants described below may require a Subsidiary in the future to execute and deliver a subsidiary guarantee prior to its incurrence of certain Indebtedness, including any guarantee of our other Indebtedness. See "--Limitation on Non-Guarantor Subsidiaries." Under its subsidiary guarantee, each subsidiary guarantor will guarantee, jointly and severally, to each holder and the trustee, the full and prompt performance of our obligations under the indenture and the notes, including the payment of principal of (or premium, if any, on) and interest, if any, on the notes. The subsidiary guarantees will be senior unsecured indebtedness of each subsidiary guarantor and will rank equally in right of payment with all other unsubordinated indebtedness of that subsidiary guarantor and senior in right of payment to all subordinated indebtedness of that subsidiary guarantor. The subsidiary guarantees will be effectively subordinated to the secured indebtedness of the subsidiary guarantor with respect to the assets securing that indebtedness. The obligations of each subsidiary guarantor will be limited to the maximum amount that will not render that subsidiary guarantor insolvent or leave it with unreasonably small capital under federal or state law, after giving effect to the following: all other Indebtedness of that subsidiary guarantor, the right of the subsidiary guarantor to contribution from other subsidiary guarantors and any other rights the subsidiary guarantor may have. Each subsidiary guarantor that makes a payment or distribution under a subsidiary guarantee will be entitled to a contribution from each other subsidiary guarantor in a pro rata amount based on the Adjusted Net Assets of each subsidiary guarantor. Each subsidiary guarantor may consolidate with or merge into or sell or otherwise dispose of all or substantially all of its assets to us or another subsidiary guarantor without limitation, except to the extent any transaction is 15 restricted by the covenant described below under "--Merger and Sale of Assets by Pride." Each subsidiary guarantor may consolidate with or merge with or into another entity (whether or not affiliated with the subsidiary guarantor) only if: o the surviving entity, if not the subsidiary guarantor, agrees to assume the subsidiary guarantor's subsidiary guarantee and all its obligations under the indenture, except to the extent the subsidiary guarantee and obligations are released as described below; and o the transaction does not result in a Default or Event of Default that is continuing. A subsidiary guarantor will be released from its subsidiary guarantee and all of its obligations under the indenture upon: o the sale or other disposition, by merger or otherwise, of the subsidiary guarantor or all or substantially all of its assets to a person other than us or another Subsidiary and in a transaction that is otherwise in compliance with the indenture; o the commencement of an Investment Grade Status Period; o the release of all guarantees by the subsidiary guarantor of our Indebtedness and the repayment of all Indebtedness of the subsidiary guarantor other than Permitted Subsidiary Indebtedness; or o the designation of the subsidiary guarantor as a Non-Recourse Subsidiary. Any release pursuant to the first bullet point above will occur, however, only to the extent that all obligations of the subsidiary guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests that secure, our other Indebtedness or other Indebtedness of any other Subsidiary also terminate or are released upon the sale or other disposition. CONVERSION OF NOTES You may convert any of your notes, in whole or in part, into common stock, but only prior to the close of business on the final maturity date of the notes (unless earlier redeemed or repurchased) and only under any of the following circumstances: o upon satisfaction of a market price condition; o upon satisfaction of a trading price condition; o upon notice of redemption; or o upon specified corporate transactions, all as described below, provided that you may convert your notes in part only if such part is $1,000 principal amount or an integral multiple of $1,000 principal amount. CONVERSION PROCEDURES The initial conversion rate for the notes is 38.9045 shares of common stock per $1,000 principal amount of notes. We will not issue fractional shares of common stock upon conversion of notes. Instead, we will pay cash equal to the closing sale price of the common stock on the trading day prior to the conversion date. The conversion rate will be adjusted as described under "--Adjustments to Conversion Rate" below. The "closing sale price" of our common stock on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of 16 the average bid and the average ask prices) on such date as reported in composite transactions for the principal United States securities exchange on which our common stock is traded or, if our common stock is not listed on a United States national or regional securities exchange, as reported by the Nasdaq System or by the National Quotation Bureau Incorporated. The "conversion price" as of any day will equal $1,000 divided by the conversion rate. The initial conversion rate is equal to a conversion price of $25.704. To convert your note into common stock you must: o complete and manually sign the conversion notice on the back of the note (or a facsimile of such conversion notice) and deliver it to the conversion agent; o surrender the note to the conversion agent; o if required, furnish appropriate endorsements and transfer documents; o pay any transfer or similar taxes; and o if required, pay funds equal to interest payable on the next interest payment date. The date you comply with these requirements is the conversion date under the indenture. Upon conversion of notes, a holder will not receive any cash payment of interest (except as described in the immediately following paragraph) or any accrued dividends. Our delivery to the holder of the full number of shares of our common stock into which the note is convertible and any cash payment for fractional shares (or cash or a combination of cash and shares of our common stock in lieu thereof as described below) will be deemed to satisfy our obligation to pay: o the principal amount of the note; and o accrued but unpaid interest, including contingent interest, if any, attributable to the period from the most recent interest payment date to the conversion date. As a result, accrued but unpaid interest, including contingent interest, if any, attributable to the period from the most recent interest payment date to the conversion date will be deemed to be paid in full rather than cancelled, extinguished or forfeited. Notwithstanding the preceding paragraph, if the conversion date occurs after a record date but prior to the next succeeding interest payment date, holders of such notes at the close of business on the record date will receive the interest payable on such notes on the corresponding interest payment date notwithstanding the conversion. Such notes, upon surrender for conversion, must be accompanied by funds equal to the amount of interest payable on the notes so converted; provided that no such payment need be made if (1) we have specified a redemption date that is after a record date and prior to the next interest payment date, (2) we have specified a purchase date following a Change in Control that is during such period or (3) only to the extent of overdue interest (including overdue contingent interest if any), any overdue interest (including overdue contingent interest, if any) exists at the time of conversion with respect to such note. In lieu of delivery of shares of our common stock upon conversion of any notes, for all or any portion of the notes, we may elect to pay holders surrendering notes an amount in cash per note (or a portion of a note) equal to the applicable stock price multiplied by the conversion rate in effect on the conversion date. We will inform the holders through the trustee no later than two business days following the conversion date of our election to deliver shares of our common stock or to pay cash in lieu of delivery of the shares or to do a combination thereof. Shares of our common stock and cash deliverable upon conversion will be delivered through the conversion agent no later than the third business day following the determination of the applicable stock price. If an Event of Default as described below (other than a Default in a cash payment upon conversion of the notes) has occurred and is continuing, we may not pay cash upon conversion of any notes or portion of the notes (other than cash for fractional shares). 17 In addition, this paragraph will not apply if a Principal Value Conversion applies. The "applicable stock price" shall mean the average of the closing sale prices of our common stock over the five trading day period starting the third trading day following the conversion date of the notes. Conversion Upon Satisfaction of Market Price Condition You may surrender your note for conversion into our common stock prior to the close of business on the maturity date (unless earlier redeemed or repurchased) during any fiscal quarter commencing after June 30, 2003 for which the closing sale price of our common stock exceeded 120% of the conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter. Conversion Upon Satisfaction of a Trading Price Condition You may surrender your notes for conversion into our common stock prior to the close of business on the maturity date (unless earlier redeemed or repurchased) during the five business day period immediately after any five consecutive trading day period in which the "trading price" per $1,000 principal amount of notes, as determined following a request by a holder of notes according to the procedures described below, for each day of that period was less than 98% of the product of the closing sale price of our common stock and the conversion rate (the "98% Trading Exception"); provided that if on any conversion date pursuant to the 98% Trading Exception that is on or after May 1, 2028, the closing sale price of our common stock is greater than the conversion price, then you will receive, in lieu of common stock based on the conversion rate, cash or common stock or a combination of cash and common stock, at our option, with a value equal to the principal amount of your notes plus accrued and unpaid interest, including contingent interest, if any, as of the conversion date ("Principal Value Conversion"). If you surrender your notes for conversion and it is a Principal Value Conversion, we will notify you by the second trading day following the conversion date whether we will pay you all or a portion of the principal amount plus accrued and unpaid interest, including contingent interest, if any, in cash, common stock or a combination of cash and common stock, and in what percentage. Any common stock delivered upon a Principal Value Conversion will be valued at the greater of the conversion price on the conversion date and the applicable stock price. We will pay you any portion of the principal amount plus accrued and unpaid interest to be paid in cash, and deliver common stock with respect to any portion of the principal amount plus accrued and unpaid interest to be paid in common stock, no later than the third business day following the determination of the applicable stock price. The "trading price" of the notes on any date of determination means the average of the secondary market bid quotations obtained by the trustee for $10,000,000 principal amount of the notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select; provided that if three such bids cannot reasonably be obtained by the trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the trustee, that one bid shall be used. If the trustee cannot reasonably obtain at least one bid for $10,000,000 principal amount of the notes from a nationally recognized securities dealer or in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the notes, then, for such trading day, the trading price per $1,000 principal amount of notes will be deemed to be less than 98% of the product of the closing sale price of our common stock and the conversion rate. In connection with any conversion upon satisfaction of the above trading pricing condition, the trustee shall have no obligation to determine the trading price of the notes unless we have requested such determination; and we shall have no obligation to make such request unless you provide us with reasonable evidence that the 98% Trading Exception will apply. At such time, we shall instruct the trustee to determine the trading price of the notes beginning on the next trading day and on each successive trading day until the trading price per $1,000 principal amount of notes is greater than or equal to 98% of the product of the closing sale price of our common stock and the conversion rate. Conversion Upon Notice of Redemption If we call notes for redemption, you may convert the notes only until the close of business on the business day immediately preceding the redemption date unless we fail to pay the redemption price. If you have submitted your notes for repurchase upon a Change in Control, you may convert your notes only if you withdraw your repurchase 18 election according to the indenture. Similarly, if you exercise your option to require us to repurchase your notes other than upon a Change in Control, those notes may be converted only if you withdraw your election to exercise your option according to the indenture. Conversion Upon Specified Corporate Transactions If we elect to: o distribute to all holders of our common stock certain rights entitling them to purchase, for a period expiring within 45 days, our common stock at less than the current market price (measured by averaging the closing prices for the 10 preceding trading days); or o distribute to all holders of our common stock, assets, debt securities or certain rights to purchase our securities, which distribution has a per share value exceeding 10% of the closing sale price of our common stock on the day preceding the declaration date for such distribution; we must notify you at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, you may surrender your notes for conversion at any time until the earliest of close of business on the business day prior to the ex-dividend date or any announcement by us that such distribution will not take place or close of business on the maturity date (unless earlier redeemed or repurchased). No adjustment to your ability to convert will be made if you will otherwise participate in the distribution without conversion. In addition, if we are a party to a consolidation, merger, binding share exchange or sale of all or substantially all of our assets, in each case pursuant to which our common stock would be converted into cash, securities or other property, you may surrender your notes for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until and including the date which is 15 days after the actual date of such transaction. If we are a party to a consolidation, merger, binding share exchange or sale of all or substantially all of our assets, in each case pursuant to which our common stock is converted into cash, securities, or other property, then at the effective time of the transaction, your right to convert a note into our common stock will be changed into a right to convert it into the kind and amount of cash, securities and other property which you would have received if you had converted your notes immediately prior to the transaction. If the transaction also constitutes a change in control, you can require us to purchase all or a portion of your notes as described under "--Repurchase at Option of the Holder Upon a Change in Control." Adjustments to Conversion Rate The conversion rate will be adjusted for: o dividends or distributions on common stock payable in common stock or other capital stock of Pride; o subdivisions, combinations or certain reclassifications of common stock; o distributions to all holders of common stock of certain rights, warrants or options to purchase common stock or securities convertible into common stock for a period expiring within 60 days after the applicable record date for such distribution at a price per share less than the closing sale price of our common stock at the time of determination; o distributions to all holders of common stock of assets or debt securities of Pride or rights, warrants or options to purchase securities of Pride (excluding distributions to which any of the preceding three bullet points apply and cash dividends or other cash distributions from consolidated current net income or retained earnings), except that, in cases where the fair market value (per share of common stock) of the assets, debt securities or rights, warrants or options distributed exceeds the Average Sale Price (as defined in the indenture) less $1.00, there will be no adjustment of the conversion rate but, upon conversion of a note, you will be entitled to receive, in addition to the shares of common stock into which the note is convertible, the kind and amount of assets, debt securities or rights, options or warrants that you would 19 have received as a result of the distribution if you had converted that note immediately prior to the record date for determining the shareholders entitled to receive the distribution; o cash distributions to substantially all holders of our common stock that, together with all other all-cash distributions and consideration payable in respect of any tender or exchange offer by us or one of our subsidiaries for our common stock made within the preceding twelve months, exceeds 5.0% of our aggregate market capitalization on the date of the distribution; and o repurchases (including by way of a tender offer) of our common stock which involve an aggregate consideration that, together with: o any cash and other consideration payable in respect of repurchases by us or one of our subsidiaries for our common stock concluded within the preceding twelve months; and o the amount of any all-cash distributions to all holders of our common stock made within the preceding twelve months; exceed 5.0% of our aggregate market capitalization on the date of the repurchase. No adjustment need be made, however: o if you may participate in the transactions otherwise giving rise to an adjustment on a basis and with notice that our Board of Directors determines to be fair and appropriate; o for rights to purchase common stock pursuant to a dividend or interest reinvestment plan sponsored by us; o for changes in the par value of the common stock; or o unless the adjustment, together with any other adjustments carried forward according to the proviso to this bullet point, equals at least 1% of the then-current conversion rate, provided that each adjustment not made as a result of this bullet point will be carried forward and made wherever the test in this bullet point is met. In addition, if, as a result of an adjustment, the notes become convertible solely into cash, no subsequent adjustment will be made. The indenture permits us to increase the conversion rate from time to time at our discretion. Upon conversion of the notes into common stock, you will receive, in addition to the common stock, the rights under our rights agreement dated as of September 13, 2001 or under any future rights plan we may adopt, whether or not the rights have separated from the common stock at the time of conversion, so no adjustment to the conversion rate shall be made if the rights have separated from our common stock. You may in certain situations be deemed to have received a distribution subject to United States federal income tax as a dividend in the event of any taxable distribution to holders of common stock or in certain other situations requiring a conversion rate adjustment. See "Certain United States Federal Income Tax Consequences." CONTINGENT INTEREST Subject to the accrual and record date provisions described in this "Description of Notes" section, we will pay contingent interest to the holders of notes during any six-month period from May 1 to October 31 or from November 1 to April 30 commencing on or after May 1, 2008 for which the trading price of the notes for each of the five trading days immediately preceding the first day of such six-month period equals 120% or more of the principal amount of the notes. During any period when contingent interest is payable, the contingent interest payable per note will equal 0.25% of the average trading price of the notes during the five trading days immediately preceding the first day of the applicable six-month interest period. 20 We will notify the noteholders upon determination that they will be entitled to receive contingent interest during a six-month interest period. OPTIONAL REDEMPTION BY PRIDE Beginning May 5, 2008, we may redeem the notes in whole or in part at a redemption price of 100% of the principal amount. We will also pay interest to, but excluding, the redemption date. If the redemption date is an interest payment date, interest shall be paid to the record holder on the relevant record date. We are required to give notice of redemption by mail to holders not more than 60 but not less than 30 days prior to the redemption date. If we specify that less than all of the outstanding notes are to be redeemed, the trustee will select the notes to be redeemed in principal amounts of $1,000 or integral multiples of $1,000 by the method the trustee considers fair and appropriate. If a portion of your notes is selected for partial redemption and you convert a portion of your notes, the converted portion will be deemed to be of the portion selected for redemption. REPURCHASE AT OPTION OF THE HOLDER You have the right to require us to repurchase the notes on May 1 of 2008, 2010, 2013, 2018, 2023 and 2028. We will be required to repurchase any outstanding note for which you deliver a written repurchase notice as described below to the paying agent. The paying agent initially will be the trustee. This notice must be delivered during the period beginning at any time from the opening of business on the date that is 20 business days prior to the repurchase date until the close of business on the repurchase date. If a repurchase notice is given and withdrawn during that period, we will not be obligated to repurchase the notes listed in the notice. Our repurchase obligation will be subject to certain additional conditions. The repurchase price payable for a note will be equal to 100% of the principal amount plus accrued and unpaid interest to the repurchase date. We may, at our option, elect to pay the repurchase price in cash, in shares of our common stock or in any combination of the two. For a discussion of the tax treatment of note holders receiving cash, shares of our common stock or both, see "Certain United States Federal Income Tax Consequences." If we elect to pay the repurchase price, in whole or in part, in shares of our common stock, the number of shares to be delivered in exchange for the portion of the repurchase price to be paid in our common stock will be equal to that portion of the repurchase price divided by the market price (as defined below) of our common stock. We will not, however, deliver fractional shares in repurchases using shares of our common stock as consideration. Noteholders who would otherwise be entitled to receive fractional shares will instead receive cash in an amount equal to the market price of a share of our common stock multiplied by such fraction. The repurchase notice must state: (1) if certificated notes have been issued, the note certificate numbers (or, if your notes are not certificated, your repurchase notice must comply with appropriate DTC procedures); (2) the portion of the principal of notes to be repurchased, which must be in integral multiples of $1,000; (3) that the notes are to be repurchased by us pursuant to the applicable provisions of the notes and the indenture; and (4) your election, in the event that we decide to pay all or a portion of the repurchase price in shares of our common stock but prove unable to satisfy the conditions for common stock payment and ultimately have to pay cash, to: o withdraw your repurchase notice with respect to all or a portion of the notes listed therein; or o receive cash for the entire repurchase price for all the notes listed in your repurchase notice. 21 If you fail to indicate your election under item (4) above, you will be deemed to have elected to receive cash for the entire repurchase price for all the notes listed in your repurchase notice. You may withdraw any written repurchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the repurchase date. The withdrawal notice must state: o the principal amount of the withdrawn notes; o if certificated notes have been issued, the certificate numbers of the withdrawn notes (or, if your notes are not certificated, your withdrawal notice must comply with appropriate DTC procedures); and o the principal amount, if any, which remains subject to the repurchase notice. We must give notice of an upcoming repurchase date to all noteholders not less than 20 business days prior to the repurchase date at their addresses shown in the register of the registrar. We will also give notice to beneficial owners as required by applicable law. This notice will state, among other things: o whether we will pay the repurchase price of the notes in cash, shares of our common stock, or both (in which case the relative percentages will be specified); o if we elect to pay all or a portion of the repurchase price in shares of our common stock, the method by which we are required to calculate "market price" of the common stock; and o the procedures that holders must follow to require us to repurchase their notes. The "market price" means the average closing sale price of our common stock for the five trading days ending on the third business day prior to the applicable repurchase date (assuming the third business day prior to the applicable repurchase date is a trading day, or if not, the five trading days ending on the last trading day prior to the third business day), appropriately adjusted to take into account the occurrence of certain events that would result in an adjustment of the conversion rate with respect to our common stock. Because the market price of our common stock will be determined prior to the applicable repurchase date, noteholders bear the market risk that our common stock will decline in value between the date the market price is calculated and the repurchase date. We may pay the repurchase price or any portion of the repurchase price in shares of our common stock only if our common stock is listed on a United States national securities exchange or quoted in an inter-dealer quotation system of any registered United States national securities association. Upon determination of the actual number of shares of our common stock to be issued in accordance with the foregoing provisions, if required, we will notify the securities exchanges or quotation systems on which our common stock is then listed or quoted and disseminate the number of shares to be issued on our website or through another public medium. Our right to repurchase your notes, in whole or in part, with shares of our common stock is subject to various conditions, including: o registration of the shares of our common stock to be issued upon repurchase under the Securities Act and the Exchange Act, if required; and o qualification or registration of the shares of our common stock to be issued upon repurchase under applicable state securities laws, if necessary, or the availability of an exemption therefrom. If these conditions are not satisfied by a repurchase date, we will pay the repurchase price of the notes to be repurchased entirely in cash. We may not change the form or components or percentages of components of consideration to be paid for the notes once we have given the note holders the required notice, except as described in the preceding sentence. 22 Payment of the repurchase price for a note for which a repurchase notice has been delivered and not withdrawn is conditioned upon book-entry transfer or delivery of the note, together with necessary endorsements, to the paying agent at its office in the Borough of Manhattan, The City of New York, or any other office of the paying agent, at any time after delivery of the repurchase notice. Payment of the repurchase price for the note will be made on the later of the business day following the repurchase date or promptly following the time of book-entry transfer or delivery of the note. If the paying agent holds money or securities sufficient to pay the repurchase price of the note on the business day following the repurchase date, then, on and after that date: o the note will cease to be outstanding; o interest will cease to accrue; and o all other rights of the holder will terminate (other than the right to receive the repurchase price upon delivery of the note). This will be the case whether or not book-entry transfer of the note has been made or the note has been delivered to the paying agent. Our ability to repurchase notes with cash may be limited by the terms of our then-existing borrowing agreements. Even though we become obligated to repurchase any outstanding note on a repurchase date, we may not have sufficient funds to pay the repurchase price on that repurchase date. If this were to occur, we could be required to issue shares of our common stock to pay the repurchase price at valuations based on then-prevailing market prices for all notes tendered by their holders. We will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Securities Exchange Act of 1934 that may be applicable at the time of the tender offer. If required, we will file a Schedule TO or any other schedule required in connection with any offer by us to repurchase the notes. REPURCHASE AT OPTION OF THE HOLDER UPON A CHANGE IN CONTROL In the event of any Change in Control of Pride, each holder of notes will have the right, at the holder's option, subject to the terms and conditions of the indenture, to require us to purchase all or any portion (provided that the principal amount must be $1,000 or an integral multiple thereof) of the holder's notes as of the date that is 35 business days after the occurrence of such Change in Control, which we refer to as the "Change in Control Purchase Date," at a cash price equal to 100% of the outstanding principal amount of those notes plus accrued and unpaid interest, if any, through and including the Change in Control Purchase Date, which we refer to as the "Change in Control Purchase Price." Within 15 business days after the Change in Control, Pride will mail to the trustee and to each holder (and to beneficial owners as required by applicable law) a notice regarding the Change in Control, which notice will state, among other things: o the date of such Change in Control and, briefly, the events causing such Change in Control, o the date by which the Change in Control Purchase Notice must be given, o the Change in Control Purchase Date, o the Change in Control Purchase Price, o the name and address of the paying agent and the conversion agent, o the conversion rate and any adjustments thereto, 23 o that notes with respect to which a Change in Control Purchase Notice is given by the holder may be converted into shares of common stock only if the Change in Control Purchase Notice has been withdrawn by the holder in accordance with the terms of the indenture, o the procedures that holders must follow to exercise these rights, o the procedures for withdrawing a Change in Control Purchase Notice, and o that holders who want to convert notes must satisfy the requirements set forth in the notes. We will cause a copy of such notice to be published in a daily newspaper of national circulation. To exercise the purchase right, the holder must deliver written notice of the exercise of such right, which we refer to as a "Change in Control Purchase Notice," to the paying agent prior to the close of business on the Change in Control Purchase Date. The Change in Control Purchase Notice must state: o the certificate numbers of the notes to be delivered by the holder thereof for purchase by Pride, o the portion of the principal amount of notes to be purchased, which portion must be $1,000 or an integral multiple thereof, and o that such notes are to be purchased by Pride pursuant to the applicable provisions of the notes. Any Change in Control Purchase Notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the Change in Control Purchase Date. The notice of withdrawal must state the principal amount and the certificate numbers of the notes as to which the withdrawal notice relates and the principal amount, if any, which remains subject to a Change in Control Purchase Notice. Payment of the Change in Control Purchase Price for a note for which a Change in Control Purchase Notice has been delivered and not validly withdrawn is conditioned upon delivery of such note (together with necessary endorsements) to the paying agent at any time (whether prior to, on or after the Change in Control Purchase Date) after the delivery of such Change in Control Purchase Notice. Payment of the Change in Control Purchase Price for such note will be made on the later of the business day following the Change in Control Purchase Date or promptly following the time of delivery of such note. If the paying agent holds, in accordance with the terms of the indenture, money sufficient to pay the Change in Control Purchase Price of such note on the business day following the Change in Control Purchase Date, then, on and after the Change in Control Purchase Date, such note will cease to be outstanding and interest on such note will cease to accrue and will be deemed paid, whether or not such note is delivered to the paying agent, and all other rights of the holder shall terminate (other than the right to receive the Change in Control Purchase Price upon delivery of such note). One of the events that constitutes a Change in Control under the indenture is a sale, conveyance, transfer or lease of all or substantially all of the assets of Pride and its Subsidiaries, taken as a whole. New York law will govern the indenture and the notes, and there is no established quantitative definition under New York law of "substantially all" of the assets of a corporation. Accordingly, if we engaged in a transaction in which we disposed of less than all of our assets, a question of interpretation could arise as to whether that disposition was of "substantially all" of our assets and whether we were required to purchase notes at the option of the holders. We will comply with the provisions of Rule 13e-4 and any other rules under the Securities Exchange Act of 1934 that may then be applicable to our offer to purchase notes at the option of the holders thereof upon a Change in Control of Pride and, if required, will file a Schedule TO or any other required schedule. The Change in Control purchase feature of the notes may, in certain circumstances, make more difficult or discourage a takeover of Pride and, thus, the removal of incumbent management. The Change in Control purchase feature, however, is not the result of management's knowledge of any specific effort to accumulate shares of common stock or to obtain control of Pride by means of a merger, tender offer, solicitation or otherwise, or part of a 24 plan by management to adopt a series of anti takeover provisions. The terms of such feature result from negotiations between Pride and the initial purchaser. The provisions of the indenture relating to a Change in Control may not afford the holders protection in the event of a highly leveraged transaction, reorganization, restructuring, merger, spin-off or similar transaction that may adversely affect holders, if such transaction does not constitute a Change in Control. If a Change in Control were to occur, there can be no assurance that we would have funds sufficient to pay the Change in Control Purchase Price for all of the notes that might be delivered by holders seeking to exercise the purchase right, because we might also be required to prepay certain other Indebtedness having change of control provisions in favor of the holders thereof. In addition, our ability to purchase notes with cash may be limited by the terms of our then-existing borrowing agreements. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS We will, and will permit any Subsidiary to, enter into, assume, guarantee or otherwise become liable with respect to any Sale and Lease-Back Transaction only if: o the proceeds from the Sale and Lease-Back Transaction are at least equal to the Fair Market Value of the Property being transferred, and o we or the Subsidiary would have been permitted to enter into the transaction under the covenant described under the caption "--Limitation on Liens." LIMITATION ON LIENS We will not, and will not permit any Subsidiary to, create, affirm, incur, assume or suffer to exist any Liens on or with respect to any Property of Pride or that Subsidiary or any interest in that Property or any income or profits from that Property, without effectively securing the notes equally and ratably with (or prior to) any Indebtedness so secured. This restriction will not apply to Permitted Liens. LIMITATION ON NON-GUARANTOR SUBSIDIARIES Subject to the immediately following paragraph, we will not permit any Subsidiary that is not a subsidiary guarantor to incur any Indebtedness, other than Indebtedness of Non-Recourse Subsidiaries and Permitted Subsidiary Indebtedness, unless: (1) both: o such Subsidiary simultaneously executes and delivers a supplemental indenture providing for a subsidiary guarantee of the notes by such Subsidiary and o with respect to any guarantee of our Subordinated Indebtedness by a Subsidiary, any such guarantee will be subordinated to that Subsidiary's guarantee of the notes at least to the same extent as such Subordinated Indebtedness is subordinated to the notes, (2) such Subsidiary waives, and agrees not in any manner whatsoever to exercise any right or claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against us or any other Subsidiary as a result of any payment by such Subsidiary under its subsidiary guarantee of the notes until such time as the obligations guaranteed thereby are paid in full and (3) such Subsidiary delivers to the trustee an opinion of independent legal counsel to the effect that such supplemental indenture has been duly executed and authorized and such subsidiary guarantee constitutes a valid, binding and enforceable obligation of the Subsidiary, except insofar as enforcement may be: 25 o limited by bankruptcy, insolvency or similar laws (including all laws relating to fraudulent transfers), and o subject to general principles of equity. If, during any period, the notes achieve and continue to maintain a rating of Baa3 (or the equivalent) or higher by Moody's Investors Service, Inc. and BBB- (or the equivalent) or higher by Standard & Poor's Ratings Services and no Event of Default has occurred and is continuing, which period we call an "Investment Grade Status Period," this covenant will be suspended and will not apply to us and our Subsidiaries during the Investment Grade Status Period. No failure to comply with this covenant by us or any of our Subsidiaries during an Investment Grade Status Period will constitute a Default or Event of Default should this covenant be subsequently reinstated. GLOSSARY "Adjusted Net Assets" of a subsidiary guarantor at any date means the amount by which the Fair Value of the properties and assets of such subsidiary guarantor exceeds the total amount of liabilities, including contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its subsidiary guarantee, of such subsidiary guarantor at such date. "Average Life" means, as of any date, the quotient obtained by dividing: (1) the sum of the products of o the number of years from such date to the date of each scheduled principal payment (including any sinking fund or mandatory redemption payment requirements) of the applicable debt security or preferred stock, multiplied in each case by o the amount of such principal payment; by (2) the sum of all such principal payments. "Capital Lease Obligation" means, at any time as to any person with respect to any Property leased by that person as lessee, the amount of the liability with respect to such lease that would be required at such time to be capitalized and accounted for as a capital lease on the balance sheet of such person prepared in accordance with GAAP. For purposes of "--Limitation on Liens," a Capital Lease Obligation shall be deemed secured by a Lien on the Property being leased. "Capital Stock" in any entity means any and all shares, interests, partnership interests, participations or other equivalents in the equity interest (however designated) in such entity and any rights (other than debt securities convertible into an equity interest), warrants or options to acquire an equity interest in such entity. "Change in Control" means: (1) a determination by us that any person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) other than a Parent Holding Company has become the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of our Voting Stock; (2) we are merged with or into or consolidated with another entity and, immediately after giving effect to the merger or consolidation, less than 50% of the outstanding voting securities entitled to vote generally in the election of directors or persons who serve similar functions of the surviving or resulting entity are then beneficially owned (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) in the aggregate by: o our stockholders immediately prior to such merger or consolidation; 26 o if the record date has been set to determine our stockholders entitled to vote on such merger or consolidation, our stockholders as of such record date; or o a Parent Holding Company; (3) we, either individually or in conjunction with one or more Subsidiaries, sell, convey, transfer or lease, or the Subsidiaries sell, convey, transfer or lease, all or substantially all of our and our Subsidiaries' assets, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the Subsidiaries, to any person or entity (other than a Parent Holding Company or a Wholly Owned Subsidiary of Pride); (4) the liquidation or dissolution of our company; or (5) the first day on which a majority of the individuals who constitute the Board of Directors are not Continuing Directors. The term "common stock" means common stock, par value $.01 per share, of Pride as it exists on the original date of issuance of the notes or any other Capital Stock of Pride into which such common stock shall be reclassified or changed. "Consolidated Current Liabilities" of any entity means, as of any date, the total liabilities (including tax and other proper accruals) of such entity and its subsidiaries (other than Non-Recourse Subsidiaries) on a consolidated basis at such date which may properly be classified as current liabilities in accordance with GAAP, after eliminating (1) all intercompany items between such entity and its subsidiaries (other than Non-Recourse Subsidiaries) or between subsidiaries (other than between a subsidiary that is not a Non-Recourse Subsidiary and Non-Recourse Subsidiaries) and (2) all current maturities of long-term Indebtedness. "Consolidated Net Tangible Assets" of any person means, as of any date, Consolidated Tangible Assets of such person at such date, after deducting (without duplication of deductions) all Consolidated Current Liabilities of such person at such date. "Consolidated Tangible Assets" of any person means, as of any date, the consolidated assets of such person and its subsidiaries (other than Non-Recourse Subsidiaries) at such date, after eliminating intercompany items between such entity and its subsidiaries (other than Non-Recourse Subsidiaries) or between subsidiaries (other than between a subsidiary that is not a Non-Recourse Subsidiary and Non-Recourse Subsidiaries) and after deducting: (1) the net book value of all assets that would be classified as intangibles under GAAP (including, without limitation, goodwill, organizational expenses, trademarks, trade names, copyrights, patents, licenses and any rights in any thereof); and (2) any prepaid expenses, deferred charges and unamortized debt discount and expense, each such item determined in accordance with GAAP. "Continuing Director" means an individual who is a member of the full Board of Directors of Pride and either: (1) who was a member of the Board of Directors on the original date of issuance of the notes; or (2) whose nomination for election or election to the Board of Directors was approved by vote of at least 66 2/3% of the directors then still in office who were either directors on the original date of issuance of the notes or whose election or nomination for election was previously so approved. "Currency Hedge Obligations" means, at any time as to any person, the obligations of such person at such time which were incurred in the ordinary course of business pursuant to any foreign currency exchange agreement, option or future contract or other similar agreement or arrangement designed to protect against or manage such person's or any of its subsidiaries' exposure to fluctuations in foreign currency exchange rates. 27 "Fair Market Value" means the fair market value as determined in good faith by the Board of Directors of Pride. "Fair Value" means the price that could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "GAAP" means, at any date, United States generally accepted accounting principles, consistently applied, as set forth in the opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be designated by the AICPA, that are applicable to the circumstances as of the date of determination. All calculations made for purposes of determining compliance with the terms of the covenants set forth under "--Limitation on Sale and Lease-Back Transactions," "--Limitation on Liens" and "-- Limitation on Non-Guarantor Subsidiaries" will, however, use GAAP in effect at the date of original issuance of the notes. "Indebtedness" as applied to any person means, at any time, without duplication: (1) any obligation of such person, contingent or otherwise, for borrowed money; (2) any obligation of such person evidenced by bonds, debentures, notes or other similar instruments; (3) any obligation of such person for all or any part of the purchase price of Property or for the cost of Property constructed or of improvements thereto (including any obligation under or in connection with any letter of credit related thereto), other than accounts payable included in current liabilities incurred in respect of Property and services purchased in the ordinary course of business; (4) any obligation of such person upon which interest charges are customarily paid (other than accounts payable incurred in the ordinary course of business); (5) any obligation of such person under conditional sale or other title retention agreements relating to purchased Property (other than accounts payable incurred in the ordinary course of business); (6) any obligation of such person issued or assumed as the deferred purchase price of Property (other than accounts payable incurred in the ordinary course of business); (7) any Capital Lease Obligation; (8) any obligation of any other person secured by (or for which the obligee thereof has an existing right, contingent or otherwise, to be secured by) any Lien on Property owned or acquired, whether or not any obligation secured thereby has been assumed, by such person, the amount of such obligation being deemed to be the lesser of the value of such Property or the amount of the obligation so secured; (9) any obligation of such person in respect of any letter of credit supporting any obligation of any other person; (10) the maximum fixed repurchase price of any Redeemable Stock of such person (or if such person is a subsidiary, any preferred stock of such person); (11) any Interest Swap Obligation or Currency Hedge Obligation of such person; and (12) any obligation that is in economic effect a guarantee, regardless of its characterization (other than an endorsement in the ordinary course of business or any performance guarantee), with respect to any Indebtedness of another person, to the extent guaranteed. For purposes of this definition, the maximum fixed repurchase price of any Redeemable Stock or subsidiary preferred stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such 28 Redeemable Stock or subsidiary preferred stock as if such Redeemable Stock or subsidiary preferred stock were repurchased on any date on which Indebtedness will be required to be determined pursuant to the indenture; provided, however, that if such Redeemable Stock or subsidiary preferred stock is not then permitted to be repurchased, the repurchase price will be the book value of such Redeemable Stock or subsidiary preferred stock. The amount of Indebtedness of any person at any date will be: (1) the outstanding book value at such date of all unconditional obligations as described above and (2) the maximum liability at such date of any contingent obligations as described above. "Interest Swap Obligation" means, with respect to any person, the obligation of such person pursuant to any interest rate swap agreement, interest rate cap, collar or floor agreement or other similar agreement or arrangement designed to protect against or manage such person's or any of its subsidiaries' exposure to fluctuations in interest rates. "Investment" means, with respect to any person, any investment in another person, whether by means of: o a share purchase; o a capital contribution; o a loan; o an advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures or prepayments or deposits in the ordinary course of business) or similar credit extension constituting Indebtedness of such other person; or o any guarantee of Indebtedness of any other person. The term "Investment" will not, however, include any transaction involving the purchase or other acquisition (including by way of merger) of Property (including Capital Stock) by Pride or any Subsidiary in exchange for Capital Stock (other than Redeemable Stock) of Pride. The amount of any person's Investment will be the original cost of such Investment to such person, plus the cost of all additions thereto paid by such person, minus the amount of any portion of such Investment repaid to such person in cash as a repayment of principal or a return of capital, as the case may be, but without any other adjustments for increases or decreases in value, or writeups, writedowns or writeoffs with respect to such Investment. In determining the amount of any investment involving a transfer of any Property other than cash, such Property to be valued at its Fair Value at the time of such transfer as determined in good faith by the board of directors (or comparable body) of the person making such transfer. "Lien" means: o any mortgage; o pledge; o hypothecation; o charge; o assignment; o deposit arrangement; o encumbrance; 29 o security interest; o lien (statutory or other); or o preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever. The definition of "Lien" includes any agreement to give or grant a Lien or any lease, conditional sale or other title retention agreement having substantially the same economic effect as any of the above. "Limited Recourse Indebtedness" means: (1) Indebtedness with respect to the two drilling/workover barge rigs owned by Pride's Venezuelan Subsidiary as in effect on the date of original issuance of the notes (the "Venezuelan Barge Financing"); (2) Indebtedness with respect to the two drillships owned by Andre Maritime Ltd. and Martin Maritime Ltd. as in effect on the date of original issuance of the notes (the "Angola/Africa Drillship Financing"); and (3) Indebtedness incurred to finance the purchase, acquisition, renovation or construction of capital assets and related items (including interest added to principal), or refinancing thereof, o for which the recourse of the holder of such Indebtedness is effectively limited to such capital assets and related items; or o in which the recourse and security are similar to (or more favorable to Pride and its Subsidiaries than) the Venezuelan Barge Financing or the Angola/Africa Drillship Financing. "Non-Recourse Indebtedness" means Indebtedness or that portion of Indebtedness of a Non-Recourse Subsidiary as to which: (1) neither Pride nor any Subsidiary provides credit support constituting Indebtedness of Pride or any Subsidiary or is otherwise directly or indirectly liable (other than as permitted to be incurred under the definition of Non-Recourse Subsidiary); and (2) no default with respect to such Indebtedness (including any rights which the holders thereof may have to take enforcement action against a Non-Recourse Subsidiary) would permit (upon notice or lapse of time or both) any holder of any other Indebtedness of Pride or its Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. "Non-Recourse Subsidiary" means: o any subsidiary of Pride that at the time of determination will be designated a Non-Recourse Subsidiary by the Board of Directors of Pride as provided below; and o any subsidiary of a Non-Recourse Subsidiary. The Board of Directors of Pride may designate any subsidiary of Pride as a Non-Recourse Subsidiary so long as: (1) neither Pride nor any Subsidiary is directly or indirectly liable pursuant to the terms of any Indebtedness of such subsidiary or has made an Investment in such subsidiary, subject to the proviso described below; 30 (2) no default with respect to any Indebtedness of such subsidiary would permit (upon notice or lapse of time or otherwise) any holder of any other Indebtedness of Pride or any Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (3) designation does not result in the creation or imposition of any Lien on any Property of Pride or any Subsidiary (other than any Permitted Lien or any Lien the creation or imposition of which is in compliance with the "Limitation on Liens" covenant). With respect to clause (1), however, Pride or a Subsidiary may be liable for Indebtedness of, and may have an Investment in, a Non-Recourse Subsidiary if: o at the time of incurrence, such liability or Investment, together with all other liabilities and Investments within clause (1) outstanding at such time, does not exceed 5% of our Consolidated Net Tangible Assets; or o at the time of designation of such subsidiary as a Non-Recourse Subsidiary, such liability or Investment, together with all other liabilities and Investments within clause (1) outstanding at such time, does not exceed 5% of our Consolidated Net Tangible Assets (calculated as if such subsidiary were a Non-Recourse Subsidiary). The Board of Directors of Pride may designate any Non-Recourse Subsidiary as a Subsidiary if, immediately after giving effect to such designation, no Event of Default or event that, after notice or the passage of time or both, would be an Event of Default has occurred and is continuing and, if any Property of Pride or any of its Subsidiaries would upon such designation become subject to any Lien (other than a Permitted Lien), the creation or imposition of such Lien is in compliance with the "Limitation on Liens" covenant. "Parent Holding Company" means (a) from and after the time the common stock is not listed on a United States or foreign national or regional securities exchange or traded through the National Association of Securities Dealers Automated Quotation System or similar system or another entity succeeds to and is substituted for Pride under the indenture, an entity which, immediately after such time, had substantially the same stockholders, directly or indirectly, as Pride immediately prior to such time with holdings in substantially the same proportion as such stockholders' holdings in Pride immediately prior to such time, (b) from and after the sale, conveyance, assignment, transfer, lease or other disposition of all or substantially all of our and our Subsidiaries' assets, Pride and (c) each Wholly Owned Subsidiary of another Parent Holding Company. "Permitted Liens" means: (1) Liens in existence on the original date of issuance of the notes; (2) Liens created for the benefit of the notes; (3) Liens on Property of a person existing at the time such person is merged or consolidated with or into, or otherwise acquired by, Pride or a Subsidiary (and not incurred as a result of, or in anticipation of, such transaction), if such Liens relate solely to such Property and the proceeds thereof and accessories and upgrades thereto; (4) Liens on Property existing at the time of the acquisition thereof (and not incurred as a result of, or in anticipation of, such transaction), if such Liens relate solely to such Property and the proceeds thereof and accessories and upgrades thereto; (5) Liens incurred or pledges and deposits made in connection with worker's compensation, unemployment insurance and other social security benefits, statutory obligations, bid, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens imposed by law or arising by operation of law and incurred in the ordinary course of business; 31 (7) zoning restrictions, easements, licenses, covenants, reservations, restrictions on the use of property and defects, irregularities and deficiencies in title to property that do not, individually or in the aggregate, materially affect the ability of Pride and its Subsidiaries, taken as a whole, to conduct the business presently conducted; (8) Liens for taxes or assessments or other governmental charges or levies not yet due and payable, or the validity of which is being contested by Pride or a Subsidiary in good faith appropriate proceedings upon stay of execution or the enforcement thereof and for which adequate reserves in accordance with GAAP or other appropriate provision has been made; (9) Liens to secure Indebtedness incurred for the purpose of financing all or a part of the purchase price or construction cost of Property (including the cost of upgrading or refurbishing rigs or drillships) acquired or constructed after the original date of issuance of the notes, if: o the principal amount of Indebtedness secured by such Liens does not exceed 100% of the lesser of cost or Fair Market Value of the Property so acquired, upgraded or constructed plus transaction costs related thereto; o such Liens do not encumber any other Property of Pride or any Subsidiary (other than the proceeds thereof and improvements, accessions and upgrades thereto); and o such Liens attach to such Property within 180 days of the later of commencement of commercial operations of such Property and completion of the construction, acquisition, upgrade or improvement of such Property; (10) Liens securing Capital Lease Obligations and other obligations, if such Liens secure Capital Lease Obligations and other obligations that do not exceed 10% of Pride's Consolidated Net Tangible Assets when combined with: o the outstanding secured Indebtedness of Pride and its Subsidiaries (other than Indebtedness secured by Liens described under clauses (2) and (9) of this definition); and o the aggregate amount of all other Capital Lease Obligations and other obligations of Pride and Subsidiaries; (11) Liens to secure any extension, renewal, refinancing or refunding (or successive extensions, renewals, refinancings or refundings), in whole or in part, of any Indebtedness secured by Liens referred to in the foregoing clauses (1), (2), (3), (4) and (9) if such Liens do not extend to any other Property of Pride or any Subsidiary (other than the proceeds thereof and accessions and upgrades thereto) and the principal amount of the Indebtedness secured by such Liens is not increased; (12) any charter or lease of drilling rigs in the ordinary course of business; (13) leases or subleases of property to other persons in the ordinary course of business; (14) Liens securing Non-Recourse Indebtedness; (15) Liens securing Indebtedness (and any guarantee or pledge) under one or more credit facilities, in an aggregate principal amount at any one time outstanding not to exceed the greater of: o $100 million; and o an amount equal to 10% of our Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness (plus interest and fees under such facilities); 32 (16) judgment liens not giving rise to an Event of Default so long as any appropriate legal proceedings which may have been only initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (17) rights of set-off of banks and other persons; (18) other deposits made in the ordinary course of business to secure liability to insurance carriers under insurance or self-insurance arrangements; (19) Liens securing reimbursement obligations under letters of credit, entered into in the ordinary course of business if in each case such Liens cover only the title documents and related goods (and any proceeds thereof) covered by the related letter of credit; (20) Liens or equitable encumbrances deemed to exist by reason of fraudulent conveyance or transfer laws or negative pledge or similar agreements to refrain from permitting Liens; and (21) Liens securing up to $500 million of other Indebtedness. "Permitted Subsidiary Indebtedness" means any of the following Indebtedness of a Subsidiary, other than guarantees of our Indebtedness (provided that a pledge of assets to secure Indebtedness for which the pledgor is not otherwise liable will not be considered a guarantee): (1) Indebtedness or preferred stock issued to and held by us or any of our Wholly Owned Subsidiaries, so long as any transfer of such Indebtedness or preferred stock to a person other than us or any of our Wholly Owned Subsidiaries will be deemed to constitute the issuance of such Indebtedness or preferred stock by the issuer; (2) Indebtedness or preferred stock of a Subsidiary that existed at the time such person became our Subsidiary (other than Indebtedness or preferred stock issued in connection with or in anticipation of that person becoming our Subsidiary); (3) Indebtedness or preferred stock outstanding on the original date of issuance of the notes; (4) Indebtedness (and any guarantee or pledge) under one or more credit facilities, in an aggregate principal amount at any one time outstanding not to exceed $250 million plus the greater of: o $100 million; and o an amount equal to 10% of our Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness (plus interest and fees under such facilities); (5) Indebtedness under Interest Swap Obligations if: o such Interest Swap Obligations are related to payment obligations on Indebtedness; and o the notional principal amount of such Interest Swap Obligations does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligations relate; (6) Indebtedness under Currency Hedge Obligations if: o such Currency Hedge Obligations are related to payment obligations on Indebtedness or to the foreign currency cash flows reasonably expected to be generated by Pride and the Subsidiaries; and 33 o the notional principal amount of such Currency Hedge Obligations does not exceed the principal amount of the Indebtedness and the amount of the foreign currency cash flows to which such Currency Hedge Obligations relate; (7) Indebtedness for bid performance bonds, surety bonds, appeal bonds and letters of credit or similar arrangements issued for the account of Pride or any Subsidiary, in each case in the ordinary course of business; (8) Permitted Subsidiary Refinancing Indebtedness; (9) preferred stock issued in exchange for, or the proceeds of which are used to refinance, repurchase or redeem, Indebtedness or preferred stock described in clauses (2) and (3) of this definition (the "Retired Indebtedness or Stock"), if the preferred stock so issued has: o a liquidation value not in excess of the principal amount or liquidation value of the Retired Indebtedness or Stock plus related expenses for redemption and issuance; and o a redemption date later than the stated maturity or redemption date (if any) of the Retired Indebtedness or Stock; (10) Indebtedness of a Subsidiary that represents the assumption by that Subsidiary of Indebtedness of another Subsidiary (other than Non-Recourse Indebtedness) in connection with a merger of those Subsidiaries, if no Subsidiary or any successor existing on the original date of issuance of the notes assumes or otherwise becomes responsible for any Indebtedness of an entity that is not a Subsidiary on the original date of issuance of the notes, except to the extent that a Subsidiary would be permitted to incur such Indebtedness under this definition; (11) Indebtedness to finance the construction and operation of the drillships Pride Africa and Pride Angola pursuant to the credit agreements among Pride, certain of its Subsidiaries, and lenders thereunder, as in effect on the original date of issuance of the notes, and any refinancings or replacements thereof; and (12) Indebtedness or preferred stock of any Subsidiary, which when taken together with all other Indebtedness and preferred stock of the Subsidiaries (except Indebtedness or preferred stock incurred pursuant to clauses (1), (2), (4), (5), (6), (7) and (11) of this definition and clauses (8) and (9) of this definition to the extent relating to Indebtedness incurred pursuant to clauses (1), (2), (4), (5), (6) and (7) of this definition), does not exceed at any one time outstanding the greater of: o $100 million; and o 15% of our Consolidated Net Tangible Assets determined as of the date of incurrence of such Indebtedness. "Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any Subsidiary incurred in exchange for, or the net proceeds of which are used to renew, extend, refinance, refund or repurchase, outstanding Indebtedness of such Subsidiary or any other Subsidiary (provided that, if any Subsidiary that is an obligor on the Indebtedness being renewed, extended, refinanced, refunded or repurchased (the "Existing Indebtedness") is a subsidiary guarantor, each Subsidiary that is an obligor on such Permitted Refinancing Subsidiary Indebtedness, if not an obligor on the Existing Indebtedness, must become a subsidiary guarantor), which outstanding Indebtedness was incurred in accordance with or is otherwise permitted by the terms of the Indenture, if: (1) if the Indebtedness being renewed, extended, refinanced, refunded or repurchased is equal or subordinated in right of payment to the subsidiary guarantees of the notes, then such new Indebtedness is equal or subordinated, as the case may be, in right of payment (without regard to its being secured) to the subsidiary guarantees of the notes at least to the same extent as the Indebtedness being renewed, extended, refinanced, refunded or repurchased; 34 (2) such new Indebtedness is scheduled to mature later than the Indebtedness being renewed, extended, refinanced, refunded or repurchased; (3) such new Indebtedness has an Average Life at the time such Indebtedness is incurred that is greater than the Average Life of the Indebtedness being renewed, extended, refinanced, refunded or repurchased; and (4) such new Indebtedness is in an aggregate principal amount (or, if such Indebtedness is issued at a price less than the principal amount thereof, the aggregate amount of gross proceeds therefrom is) not in excess of the aggregate principal amount then outstanding of the Indebtedness being renewed, extended, refinanced, refunded or repurchased (or if the Indebtedness being renewed, extended, refinanced, refunded or repurchased was issued at a price less than the principal amount thereof, then not in excess of the amount of liability in respect thereof determined in accordance with GAAP) plus the amount of reasonable fees, expenses and any premium incurred by Pride or such Subsidiary in connection therewith. "Property" means, with respect to any person, any interest of such person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Redeemable Stock" means, with respect to any person, any equity security that by its terms or otherwise is required to be redeemed, or is redeemable at the option of the holder thereof, at any time prior to one year following the stated maturity of the notes or is exchangeable into Indebtedness of such person or any of its subsidiaries. "Sale and Lease-Back Transaction" means, with respect to any person, any direct or indirect arrangement pursuant to which Property is sold or transferred by such person or a subsidiary of such person and is thereafter leased back from the purchaser or transferee thereof by such person or one of its subsidiaries. "Subordinated Indebtedness" means any Indebtedness of Pride or any subsidiary guarantor that is subordinated in right of payment to the notes or the subsidiary guarantees of the notes, as the case may be, pursuant to a written agreement to that effect and does not mature prior to one year following the stated maturity of the notes. The term "subsidiary" means, with respect to any person: (1) any corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such person, or by one or more other subsidiaries of such person, or by such person and one or more other subsidiaries of such person; (2) any general partnership, joint venture or similar entity more than 50% of the outstanding partnership or similar interests of which is owned, directly or indirectly, by such person, or by one or more other subsidiaries of such person, or by such person and one or more other subsidiaries of such person; and (3) any limited partnership of which such person or any subsidiary of such person is a general partner. The term "Subsidiary" means a subsidiary of Pride other than a Non-Recourse Subsidiary. "Voting Stock" means, with respect to any person, securities of any class or classes of Capital Stock or other interests (including partnership interests) in such person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable body of such person. "Wholly Owned Subsidiary" means, with respect to a person, any subsidiary of that person to the extent: (1) all of the Voting Stock or other ownership interests in such subsidiary, other than any director's qualifying shares mandated by applicable law, is owned directly or indirectly by such person; or (2) such subsidiary is organized in a foreign jurisdiction and is required by the applicable laws and regulations of such foreign jurisdiction to be partially owned by the government of such foreign jurisdiction or 35 individual or corporate citizens of such foreign jurisdiction in order for such subsidiary to transact business in such foreign jurisdiction, if such person: o directly or indirectly owns the remaining Capital Stock or ownership interest in such subsidiary; and o by contract or otherwise, controls the management and business of such subsidiary and derives the economic benefits of ownership of such subsidiary to substantially the same extent as if such subsidiary were a wholly owned subsidiary. MERGER AND SALE OF ASSETS BY PRIDE We may consolidate with or merge into any other entity (other than a merger of a Subsidiary into us in which we are the continuing corporation), or sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of our and our Subsidiaries' assets, taken as a whole, to any person, only if: (1) either o we are the continuing entity; or o the resulting entity is organized under the laws of the United States of America or any State thereof or the District of Columbia, the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, any of the Channel Islands, France, the Netherlands, or the Netherlands Antilles, and assumes by a supplemental indenture the due and punctual payments on the notes and the performance of our covenants and obligations under the indenture; (2) immediately after giving effect to the transaction on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), no Event of Default or event that, after notice or the passage of time or both, would be an Event of Default under the indenture (a "Default") has occurred and is continuing or would result from the transaction; and (3) in the event that we or the resulting entity is organized in a jurisdiction other than the United States that is different from the jurisdiction in which the obligor on the notes was organized immediately before giving effect to the transaction: o such continuing entity delivers to the trustee an opinion of counsel stating that (a) the obligations of the continuing entity under the indenture are enforceable under the laws of the new jurisdiction of its formation subject to customary exceptions and (b) the holders will not recognize any income, gain or loss for U.S. federal income tax purposes as a result of the transaction and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such transaction had not occurred; o the continuing entity agrees in writing to submit to jurisdiction and appoints an agent for the service of process, each under terms satisfactory to the trustee; and o the board of directors of the continuing entity determines in good faith that such transaction will have no material adverse effect on any holder and a board resolution to that effect is delivered to the trustee. This covenant will not apply to any merger of another entity into Pride. In connection with any consolidation, merger, asset transfer or other transaction contemplated by this restriction, we will deliver or cause to be delivered to the trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, asset transfer or transaction and the supplemental indenture in respect 36 thereto comply with the provisions of the indenture and that all conditions precedent in the indenture relating to such transactions have been complied with. Upon any transaction of the type described in and effected in accordance with this section, the resulting entity will succeed to and be substituted for and may exercise every right and power of Pride under the indenture and the notes with the same effect as if the resulting entity had been named as Pride in the indenture. When the resulting entity assumes all the obligations and covenants of Pride under the indenture and the notes, except in the case of a lease, we will be relieved of all such obligations. EVENTS OF DEFAULT If an Event of Default occurs and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes may declare the principal amount of the notes to be due and payable immediately, except that, in the case of an Event of Default specified in item (e) below, if the Event of Default affects more than one series of debt securities issued under the indenture, the trustee or the holders of at least 25% in aggregate outstanding principal amount of all series are required to make such declaration. In the case of certain events of bankruptcy or insolvency, the principal amount will automatically become immediately due and payable without any declaration or other act on the part of either the trustee or any holder. At any time after a declaration of acceleration has been made, but before a judgment has been obtained, the holders of a majority in aggregate principal amount of the outstanding notes or of all the outstanding debt securities issued under the indenture, as applicable, may, under certain circumstances, rescind or annul any such acceleration. Interest shall, to the extent permitted by law, accrue at the annual rate of 1% above the coupon rate and be payable on demand upon a default in the payment of principal amount, accrued and unpaid interest or any redemption price, Change in Control Purchase Price or shares of common stock to be delivered upon conversion of the notes, and such interest shall be compounded semiannually. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of interest. An Event of Default with respect to the notes includes any of the following: (a) our failure to pay interest on any note for 30 days; (b) our failure to pay principal of or any premium on any note when due; (c) our failure to deliver shares of common stock within 10 days when such common stock is required to be delivered upon conversion or repurchase of a note as provided in the indenture; (d) our failure to comply with any of our covenants or agreements contained in "--Merger and Sale of Assets by Pride" and "--Repurchase at Option of the Holder Upon a Change in Control;" (e) the failure in the performance or breach of any covenant or agreement by Pride or any subsidiary guarantor contained in the notes, any subsidiary guarantee of the notes or the indenture (other than a covenant or agreement a default in performance or breach of which is specifically dealt with) for 30 days after written notice has been mailed to Pride or such subsidiary guarantor by the trustee or to Pride or such subsidiary guarantor and the trustee by the holders of at least 25% of the aggregate principal amount of the outstanding notes; (f) the failure by Pride or any Subsidiary to pay its Indebtedness (other than Non-Recourse Indebtedness or Limited Recourse Indebtedness) when due within the applicable grace period or the acceleration of any such Indebtedness by the holders thereof and, in either case, the aggregate principal amount of the due and unpaid or accelerated Indebtedness exceeds $10 million; (g) any subsidiary guarantee for any reason ceases to be, or is asserted by Pride or any subsidiary guarantor, as applicable, not to be, in full force and effect (except pursuant to the release of any such subsidiary guarantee in accordance with the indenture); and 37 (h) events of bankruptcy, insolvency or reorganization involving Pride or any significant subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the SEC as in effect on the original date of issuance of the notes) of Pride. If a Default or Event of Default occurs, is continuing and is known to the trustee, the trustee will notify the holders of the notes within 90 days after it occurs. The trustee may withhold notice to the holders of the notes of any Default or Event of Default, except in any payment on the notes, if the trustee in good faith determines that withholding notice is in the interest of the holders of the notes. A holder of a note may pursue any remedy under the indenture only if: o the holder has previously given written notice to the trustee of a continuing Event of Default with respect to the notes; o the holders of at least 25% in principal amount of the outstanding notes have made written request to the trustee to institute proceedings in the trustee's own name; o the holder has offered the trustee reasonable indemnity; o the trustee has failed to act within 60 days after receipt of the notice and indemnity; and o during that 60-day period, the holders of a majority in principal amount of the outstanding notes have given no direction inconsistent with the request. This provision does not, however, affect the right of a holder of any notes to sue for the enforcement of any overdue payment. In most cases, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any of the holders unless those holders have offered to the trustee reasonable indemnity. Subject to this provision for indemnification, the holders of a majority in principal amount of the outstanding notes generally may direct the time, method and place of: o conducting any proceeding for any remedy available to the trustee; or o exercising any trust or power conferred on the trustee with respect to the notes; except that, in some cases, a majority in principal amount of all outstanding debt securities issued under the indenture is required. If an Event of Default occurs and is continuing, the trustee will be required to use the degree of care and skill of a prudent person in the conduct of his own affairs. The indenture requires us to furnish to the trustee annually a statement as to our performance of certain of our obligations under the indenture and as to any default in performance. MODIFICATION AND WAIVER We may modify or amend the indenture for purposes of the notes with the consent of the holders of at least a majority in principal amount of the notes then outstanding. Without the consent of each holder of an outstanding note, however, no modification may: o change the stated maturity of the principal of, or any installment of interest on, any note; o reduce the principal amount of, or the rate of interest or any premium on, any note; o change the place of payment where, or the currency in which, the principal of, or any premium or interest on, any note is payable; 38 o impair the right to institute suit for the enforcement of any payment on any note; o materially and adversely affect the right provided in the indenture to convert any note; o subordinate in right of payment, or otherwise subordinate, the notes or any subsidiary guarantee to any other Indebtedness; o materially and adversely affect the right provided in the indenture to require us to repurchase notes upon a Change in Control; or o reduce the percentage in principal amount of outstanding notes necessary to modify the indenture, to waive compliance with certain provisions or to waive certain defaults. We may modify or amend the indenture without the consent of any holders of notes in certain circumstances, including: o to add covenants and Events of Default or to surrender any rights we have under the indenture; o to provide any security for the notes; o to provide for the assumption of our obligations under the indenture and the notes by a successor upon any merger, consolidation or asset transfer; o to make any change that does not adversely affect the rights of any holder of the notes in any material respect; o to facilitate the defeasance or discharge of the notes if that change does not adversely affect the holders of or any other series of debt securities under the indenture in any material respect; o to provide for the acceptance of a successor or another trustee; o to cure any ambiguity, omission, defect or inconsistency in the indenture; o to add or release any subsidiary guarantor as contemplated under "--Subsidiary Guarantees of Notes"; o to release any subsidiary guarantor pursuant to the terms of the indenture other than as contemplated under "--Subsidiary Guarantees of the Notes", provided that it does not adversely affect the interests of the holders in any material respect; or o to complete or make provision for certain other matters contemplated by the indenture. DEFEASANCE The notes will be subject to both legal defeasance and discharge and covenant defeasance at our option. However, our obligations with respect to the convertibility of the notes will survive any such action by us. When we use the term defeasance, we mean discharge from some or all of our obligations under the indenture. If we deposit with the trustee funds or U.S. government securities sufficient to make payments on the notes on the dates those payments are due and payable, then, at our option, either of the following will occur: o we will be discharged from our obligations with respect to the notes ("legal defeasance and discharge"); or o we will no longer have any obligations under the indenture and the notes ("covenant defeasance"); 39 except for our obligations relating to, among other things: o making payments on the notes; o registration of transfer or exchange of notes; o replacement of stolen, lost or mutilated notes; o maintenance of paying agencies; and o holding of funds or U.S. government securities for payment in trust. We will be required to deliver to the trustee an opinion of counsel that the deposit and related defeasance would not cause the holders of the notes to recognize income, gain or loss for federal income tax purposes and that the holders would be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the deposit and related defeasance had not occurred. If we elect legal defeasance and discharge, that opinion of counsel must be based upon a ruling from the United States Internal Revenue Service or a change in law to that effect. Under current United States federal income tax law, legal defeasance and discharge would likely be treated as a taxable exchange of notes to be defeased for interests in the defeasance trust. As a consequence, a United States holder would recognize gain or loss equal to the difference between the holder's cost or other tax basis for the notes and the value of the holder's interest in the defeasance trust, and thereafter would be required to include in income a share of the income, gain or loss of the defeasance trust. Under current United States federal income tax law, covenant defeasance would not be treated as a taxable exchange of such debt securities. FORM, DENOMINATION AND REGISTRATION The notes will be issued: o in fully registered form; o without interest coupons; and o in denominations of $1,000 principal amount and integral multiples of $1,000. GLOBAL NOTE, BOOK-ENTRY FORM We originally issued the notes in the form of global notes. We deposited the global notes with or on behalf of DTC and registered the global notes in the name of Cede & Co. as DTC's nominee. The notes sold under this prospectus will be represented by a new unrestricted global note. Except as set forth below, a global note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee. Investors may hold their interests in a global note directly through DTC if such holder is a participant in DTC, or indirectly through organizations that are participants in DTC (called "participants"). Transfers between participants will be effected in the ordinary way in accordance with DTC rules and will be settled in clearing house funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. As a result, the ability to transfer beneficial interests in the global note to such persons may be limited. Investors who are not participants may beneficially own interests in a global note held by DTC only through participants, or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a participant, either directly or indirectly (called "indirect participants"). So long as Cede & Co., as the nominee of DTC, is the registered owner of a global note, Cede & Co. for all purposes will be considered the sole holder of such global note. Except as provided below, owners of beneficial interests in a global note will: 40 o not be entitled to have certificates registered in their names; o not receive physical delivery of certificates in definitive registered form; and o not be considered holders of the global note. We will pay interest on and the redemption or repurchase price of a global note to Cede & Co., as the registered owner of the global note, by wire transfer of immediately available funds on each interest payment date or the redemption or repurchase date, as the case may be. Neither we, the trustee nor any paying agent will be responsible or liable: o for the records relating to, or payments made on account of, beneficial ownership interests in a global note; or o for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. We have been informed that DTC's practice is to credit participants' accounts on that payment date with payments in amounts proportionate to their respective beneficial interests in the principal amount represented by a global note as shown in the records of DTC, unless DTC has reason to believe that it will not receive payment on that payment date. Payments by participants to owners of beneficial interests in the principal amount represented by a global note held through participants will be the responsibility of the participants, as is now the case with securities held for the accounts of customers registered in "street name." Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having a beneficial interest in the principal amount represented by the global note to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate evidencing its interest. Neither we, the trustee, security registrar, paying agent nor conversion agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. DTC has advised us that it will take any action permitted to be taken by a holder of notes, including the presentation of notes for exchange, only at the direction of one or more participants to whose account with DTC interests in a global note are credited, and only in respect of the principal amount of the notes represented by the global note as to which the participant or participants has or have given such direction. DTC has advised us that it is: o a limited purpose trust company organized under the laws of the State of New York, and a member of the Federal Reserve System; o a "clearing corporation" within the meaning of the Uniform Commercial Code; and o a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants. Participants include securities brokers, dealers, banks, trust companies and clearing corporations and other organizations. Some of the participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. DTC has agreed to the foregoing procedures to facilitate transfers of interests in a global note among participants. However, DTC is under no obligation to perform or continue to perform these procedures, and may discontinue these procedures at any time. If DTC is at any time unwilling or unable to continue as depositary and a 41 successor depositary is not appointed by us within 90 days, we will issue notes in certificated form in exchange for global notes. CERTIFICATED NOTES Notes represented by certificates in definitive form registered in the names of their beneficial owners or their nominees will be transferred to all beneficial owners in exchange for their beneficial interests in a global note if either: o DTC or any successor depositary notifies us that it is unwilling or unable to continue as depositary for such global note and a successor depositary is not appointed by us within 90 days of such notice; o an Event of Default has occurred and is continuing with respect to the notes and the security registrar has received a request from the depositary to issue certificated notes in lieu of all or a portion of the global note (in which case we will deliver certificated notes within 30 days of such request); or o we determine not to have the notes represented by a global note. Neither we nor the trustee will be liable for any delay by the related depositary or its nominee in identifying the beneficial owners of the related notes, and each such person may conclusively rely on, and will be protected in relying on, instructions from such depositary or nominee for all purposes (including with respect to the registration and delivery, and the respective principal amounts at maturity, of the notes to be issued). REGISTRATION RIGHTS OF THE NOTEHOLDERS We have entered into a registration rights agreement with the initial purchaser of the notes for the benefit of the holders of the notes and the common stock issuable on conversion of the notes. Under this agreement, we agreed, at our cost, to use reasonable best efforts to: o on or prior to the 90th day after the first date of original issuance of the notes, file a shelf registration statement with the SEC covering resales of the notes and the common stock issuable on conversion of the notes; o cause the shelf registration statement to be declared effective under the Securities Act no later than 180 days after the first date of original issuance of the notes; and o keep the shelf registration statement effective after its effective date until either of the following has occurred: o all securities covered by the registration statement have been sold; or o the applicable holding period with respect to the notes and the underlying common stock under Rule 144(k) under the Securities Act or any successor provision has expired. We have filed the registration statement of which this prospectus is a part to satisfy our obligations under the registration rights agreement. We have the right to suspend use of the shelf registration statement for any reason for up to 30 consecutive days in any 90-day period, for a total of not more than 60 days in any calendar year. If we fail to file the shelf registration statement on or prior to the 90th day after original issuance of the notes, if we fail to use reasonable best efforts and the shelf registration statement is not declared effective on or prior to the 180th day after original issuance of the notes, or after the shelf registration statement has been declared effective, we fail to keep the shelf registration statement effective or usable in accordance with and during the periods specified in the registration rights agreement, then, in each case, we will pay liquidated damages, until such failure is cured, to all holders of notes and all holders of common stock issued on conversion of the notes equal to 0.5% of the aggregate principal amount of notes per annum for the first 90 days following such failure, increasing by 0.5% per annum at the 42 beginning of each subsequent 90-day period. Liquidated damages will not, however, exceed 1.0% per annum at any time. If a holder has converted notes into shares of common stock, the holder will be entitled to receive equivalent amounts based on the shares held. A holder who elects to sell any securities pursuant to the shelf registration statement: o will be required to be named as a selling securityholder; o will be required to deliver a prospectus to purchasers; o will be subject to the civil liability provisions under the Securities Act in connection with any sales; and o will be bound by the applicable provisions of the registration rights agreement, including indemnification obligations. We refer to the notes and the common stock issuable on conversion of the notes as registrable securities. To be named as a selling security holder in the shelf registration statement when it first becomes effective, holders must complete and deliver a questionnaire, the form of which can be obtained from Pride upon request, before the effectiveness of the shelf registration statement. If we receive from a holder of registrable securities a completed questionnaire, together with such other information as may be reasonably requested by us, after the effectiveness of the shelf registration statement, we will file an amendment to the shelf registration statement or supplement to the related prospectus to permit the holder to deliver a prospectus to purchasers of registrable securities. Any holder that does not complete and deliver a questionnaire or provide such other information will not be named as a selling security holder in this prospectus and therefore will not be permitted to sell any registrable securities under the shelf registration statement. GOVERNING LAW The indenture and the notes are governed by and construed in accordance with the laws of the State of New York. INFORMATION CONCERNING THE TRUSTEE We have appointed JPMorgan Chase Bank, the trustee under the indenture, as paying agent, conversion agent, security registrar and custodian for the notes. The trustee or its affiliates may provide banking and other services to us in the ordinary course of their business. The indenture contains certain limitations on the rights of the trustee, if it or any of its affiliates is then our creditor, to obtain payment of claims in certain cases or to realize on certain property received on any claim as security or otherwise. The trustee and its affiliates will be permitted to engage in other transactions with us. However, if the trustee acquires any conflicting interest and a Default occurs with respect to the notes, the trustee must eliminate such conflict or resign within 90 days after ascertaining that it has a conflicting interest. 43 DESCRIPTION OF CAPITAL STOCK The following description of our common stock, preferred stock, certificate of incorporation and bylaws is a summary only and is subject to the complete text of our certificate of incorporation and bylaws and the rights agreement we have entered into with American Stock Transfer & Trust Company, as rights agent, which we have filed as exhibits to the registration statement of which this prospectus is a part. Our authorized capital stock consists of 400,000,000 shares of common stock, par value $.01 per share, and 50,000,000 shares of preferred stock, par value $.01 per share. COMMON STOCK The holders of our common stock are entitled to one vote per share on all matters to be voted on by stockholders generally, including the election of directors. There are no cumulative voting rights, meaning that the holders of a majority of the shares voting for the election of directors can elect all of the directors standing for election. Our common stock carries no preemptive or other subscription rights to purchase shares of our stock and is not convertible, redeemable or assessable or entitled to the benefits of any sinking fund. Holders of our common stock will be entitled to dividends in the amounts and at the times declared by our board of directors out of funds legally available for the payment of dividends. If we are liquidated, dissolved or wound up, the holders of our common stock will share pro rata in our assets after satisfaction of all of our liabilities and the prior rights of any outstanding class of our preferred stock. PREFERRED STOCK Our board of directors has the authority, without stockholder approval, to issue shares of preferred stock in one or more series and to fix the number of shares and terms of each series. The board may determine the designation and other terms of each series, including, among others: o dividend rights; o voting powers; o preemptive rights; o conversion rights; o redemption rights; and o liquidation preferences. The issuance of preferred stock, while providing desired flexibility in connection with possible acquisitions and other corporate purposes, could adversely affect the voting power of holders of our common stock. It also could affect the likelihood that holders of our common stock will receive dividend payments and payments upon liquidation. For purposes of the rights plan described below, our board of directors has designated 4,000,000 shares of preferred stock to constitute the Series A Junior Participating Preferred Stock. For a description of the rights plan, please read "--Stockholder Rights Plan." 44 ANTI-TAKEOVER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS Our certificate of incorporation and bylaws contain provisions that could delay or make more difficult the acquisition of control of us through a hostile tender offer, open market purchases, proxy contest, merger or other takeover attempt that a stockholder might consider in his or her best interest, including those attempts that might result in a premium over the market price of our common stock. AUTHORIZED BUT UNISSUED STOCK We have 400,000,000 authorized shares of common stock and 50,000,000 authorized shares of preferred stock. One of the consequences of our authorized but unissued common stock and undesignated preferred stock may be to enable our board of directors to make more difficult or to discourage an attempt to obtain control of us. If, in the exercise of its fiduciary obligations, our board of directors determined that a takeover proposal was not in our best interest, the board could authorize the issuance of those shares without stockholder approval. The shares could be issued in one or more transactions that might prevent or make the completion of the change of control transaction more difficult or costly by: o diluting the voting or other rights of the proposed acquiror or insurgent stockholder group; o creating a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board; or o effecting an acquisition that might complicate or preclude the takeover. In this regard, our certificate of incorporation grants our board of directors broad power to establish the rights and preferences of the authorized and unissued preferred stock. Our board could establish one or more series of preferred stock that entitle holders to: o vote separately as a class on any proposed merger or consolidation; o cast a proportionately larger vote together with our common stock on any transaction or for all purposes; o elect directors having terms of office or voting rights greater than those of other directors; o convert preferred stock into a greater number of shares of our common stock or other securities; o demand redemption at a specified price under prescribed circumstances related to a change of control of our company; or o exercise other rights designed to impede a takeover. STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS OF STOCKHOLDERS Our certificate of incorporation provides that no action that is required or permitted to be taken by our stockholders at any annual or special meeting may be taken by written consent of stockholders in lieu of a meeting, and that special meetings of stockholders may be called only by the board of directors, the chairman of the board or the president. These provisions of the certificate of incorporation may only be amended or repealed by a vote of 80% of the voting power of our outstanding common stock. AMENDMENT OF THE BYLAWS Under Delaware law, the power to adopt, amend or repeal bylaws is conferred upon the stockholders. A corporation may, however, in its certificate of incorporation also confer upon the board of directors the power to adopt, amend or repeal its bylaws. Our certificate of incorporation and bylaws grant our board of directors the power to adopt, amend and repeal our bylaws at any regular or special meeting of the board on the affirmative vote 45 of a majority of the directors then in office. Our stockholders may also adopt, amend or repeal our bylaws by a vote of a majority of the voting power of our outstanding voting stock. REMOVAL OF DIRECTORS Directors may be removed with or without cause by a vote of a majority of the voting power of our outstanding voting stock. A vacancy on our board of directors may be filled by a vote of a majority of the directors in office or by the stockholders, and a director elected to fill a vacancy serves until the next annual meeting of stockholders. ADVANCE NOTICE PROCEDURE FOR DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS Our bylaws provide the manner in which stockholders may give notice of business to be brought before an annual meeting. In order for an item to be properly brought before the meeting by a stockholder, the stockholder must be a holder of record at the time of the giving of notice and must be entitled to vote at the annual meeting. The item to be brought before the meeting must be a proper subject for stockholder action, and the stockholder must have given timely advance written notice of the item. For notice to be timely, it must be delivered to, or mailed and received at, our principal office not less than 120 days prior to the scheduled annual meeting date (regardless of any postponements of the annual meeting to a later date). If the month and day of the scheduled annual meeting date differs by more than 30 days from the month and day of the previous year's annual meeting, and if we give less than 100 days' prior notice or public disclosure of the scheduled annual meeting date, then notice of an item to be brought before the annual meeting may be timely if it is delivered or received not later than the close of business on the 10th day following the earlier of notice to the stockholders or public disclosure of the scheduled annual meeting date. The notice must set forth, as to each item to be brought before the annual meeting, a description of the proposal and the reasons for conducting such business at the annual meeting, the name and address, as they appear on our books, of the stockholder proposing the item and any other stockholders known by the stockholder to be in favor of the proposal, the number of shares of each class or series of capital stock beneficially owned by the stockholder as of the date of the notice, and any material interest of the stockholder in the proposal. These procedures may limit the ability of stockholders to bring business before a stockholders meeting, including the nomination of directors and the consideration of any transaction that could result in a change in control and that may result in a premium to our stockholders. STOCKHOLDER RIGHTS PLAN We have adopted a preferred share purchase rights plan. Under the plan, each share of our common stock will include one right to purchase preferred stock. The rights will separate from the common stock and become exercisable (1) ten days after public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 15% of our outstanding common stock or (2) ten business days following the start of a tender offer or exchange offer that would result in a person's acquiring beneficial ownership of 15% of our outstanding common stock. A 15% beneficial owner is referred to as an "acquiring person" under the plan. The board of directors has taken action under the plan to increase the applicable percentage of beneficial stock ownership that triggers the plan, only as it applies to funds affiliated with First Reserve Corporation and First Reserve GP IX, Inc. and their affiliates, from 15% to 19%. Our board of directors can elect to delay the separation of the rights from the common stock beyond the ten-day periods referred to above. The plan also confers on our board the discretion to increase or decrease the level of ownership that causes a person to become an acquiring person. Until the rights are separately distributed, the rights will be evidenced by the common stock certificates and will be transferred with and only with the common stock certificates. After the rights are separately distributed, each right will entitle the holder to purchase from us one one-hundredth of a share of Series A Junior Participating Preferred Stock for a purchase price of $50. The rights will 46 expire at the close of business on September 30, 2011, unless we redeem or exchange them earlier as described below. If a person becomes an acquiring person, the rights will become rights to purchase shares of our common stock for one-half the current market price, as defined in the rights agreement, of the common stock. This occurrence is referred to as a "flip-in event" under the plan. After any flip-in event, all rights that are beneficially owned by an acquiring person, or by certain related parties, will be null and void. Our board of directors has the power to decide that a particular tender or exchange offer for all outstanding shares of our common stock is fair to and otherwise in the best interests of our stockholders. If the board makes this determination, the purchase of shares under the offer will not be a flip-in event. If, after there is an acquiring person, we are acquired in a merger or other business combination transaction or 50% or more of our assets, earning power or cash flow are sold or transferred, each holder of a right will have the right to purchase shares of the common stock of the acquiring company at a price of one-half the current market price of that stock. This occurrence is referred to as a "flip-over event" under the plan. An acquiring person will not be entitled to exercise its rights, which will have become void. Until ten days after the announcement that a person has become an acquiring person, our board of directors may decide to redeem the rights at a price of $.01 per right, payable in cash, shares of our common stock or other consideration. The rights will not be exercisable after a flip-in event until the rights are no longer redeemable. At any time after a flip-in event and prior to either a person's becoming the beneficial owner of 50% or more of the shares of our common stock or a flip-over event, our board of directors may decide to exchange the rights for shares of our common stock on a one-for-one basis. Rights owned by an acquiring person, which will have become void, will not be exchanged. Other than provisions relating to the redemption price of the rights, the rights agreement may be amended by our board of directors at any time that the rights are redeemable. Thereafter, the provisions of the rights agreement other than the redemption price may be amended by the board of directors to cure any ambiguity, defect or inconsistency, to make changes that do not materially adversely affect the interests of holders of rights (excluding the interests of any acquiring person), or to shorten or lengthen any time period under the rights agreement. No amendment to lengthen the time period for redemption may be made if the rights are not redeemable at that time. The rights have certain anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of directors. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire us even if the acquisition may be favorable to the interests of our stockholders. Because the board of directors can redeem the rights or approve a tender or exchange offer, the rights should not interfere with a merger or other business combination approved by the board. LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS Our directors will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except, if required by Delaware law, for liability: o for any breach of the duty of loyalty to us or our stockholders; o for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; o for unlawful payment of a dividend or unlawful stock purchases or redemptions; and o for any transaction from which the director derived an improper personal benefit. As a result, neither we nor our stockholders have the right, through stockholders' derivative suits on our behalf, to recover monetary damages against a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior, except in the situations described above. 47 DELAWARE ANTI-TAKEOVER LAW We are a Delaware corporation and are subject to Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions. Section 203 prevents an "interested stockholder," which is defined generally as a person owning 15% or more of a corporation's voting stock, or any affiliate or associate of that person, from engaging in a broad range of "business combinations" with the corporation for three years after becoming an interested stockholder unless: o the board of directors of the corporation had previously approved either the business combination or the transaction that resulted in the stockholder's becoming an interested stockholder; o upon completion of the transaction that resulted in the stockholder's becoming an interested stockholder, that person owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers and shares owned in employee stock plans in which participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered; or o following the transaction in which that person became an interested stockholder, the business combination is approved by the board of directors of the corporation and holders of at least two-thirds of the outstanding voting stock not owned by the interested stockholder. Under Section 203, the restrictions described above also do not apply to specific business combinations proposed by an interested stockholder following the announcement or notification of designated extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation's directors, if such extraordinary transaction is approved or not opposed by a majority of the directors who were directors prior to any person becoming an interested stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. Section 203 may make it more difficult for a person who would be an interested stockholder to effect various business combinations with a corporation for a three-year period. SELLING SECURITY HOLDERS We originally issued the notes in transactions exempt from or not subject to registration under the Securities Act. The notes and the common stock issuable upon conversion of the notes that may be offered under this prospectus will be offered by the selling securityholders, which includes their transferees, pledgees, donees and successors. Only those notes and shares of common stock issuable upon conversion of the notes listed below may be offered for resale by the selling holders pursuant to this prospectus. The following table sets forth recent information about the principal amount of notes beneficially owned by each selling securityholder and the number of shares of common stock issuable upon conversion of those notes that may be offered from time to time pursuant to this prospectus. The number of shares of common stock shown in the table below assumes conversion of the full amount of notes held by such holder at the initial conversion rate of 38.9045 shares per $1,000 principal amount of notes. This conversion rate is subject to adjustment as described under "Description of Notes--Conversion of Notes." Accordingly, the number of shares of common stock issuable upon conversion of the notes may increase or decrease from time to time. Under the terms of the indenture, fractional shares will not be issued upon conversion of the notes. Cash will be paid instead of fractional shares, if any. 48
PRINCIPAL AMOUNT OF NUMBER OF NOTES SHARES OF BENEFICIALLY PERCENTAGE OF COMMON STOCK PERCENTAGE OF OWNED THAT MAY NOTES THAT COMMON STOCK NAME BE SOLD OUTSTANDING MAY BE SOLD OUTSTANDING(1) - ---- -------------- ------------- ------------ -------------- American Investors Life Insurance Co. ............. 400,000 * 15,561 * AmerUs Life Insurance Co. ......................... 4,300,000 1.4% 167,289 * Bank Austria Cayman Islands, Ltd. ................. 2,500,000 * 97,261 * Bear, Stearns & Co. Inc.(2) ....................... 1,000,000 * 38,904 * BNP Paribas Equity Strategies, SNC ................ 992,000 * 38,593 * Clinton Mulistrategy Master Fund, Ltd. ............ 6,030,000 2.0 234,594 * Clinton Riverside Convertible Portfolio Limited ... 6,070,000 2.0 236,150 * CooperNeff Convertible Strategies (Cayman) Master Fund, L.P. ............................. 774,000 * 30,112 * Deutsche Bank Securities Inc. ..................... 2,155,000 * 83,839 * Dodeca Fund, L.P. ................................. 800,000 * 31,123 * Gasner Investors Holdings Ltd. .................... 1,500,000 * 58,356 * Guggenheim Portfolio Co. XV, LLC .................. 800,000 * 31,123 * IL Annuity and Insurance Co. ...................... 3,500,000 1.2 136,165 * Man Convertible Bond Master Fund, Ltd. ............ 5,284,000 1.8 205,571 * Meadow IAM Limited ................................ 700,000 * 27,233 * Nomura Securities International, Inc.(3) .......... 27,800,000 9.3 1,081,545 * Pioneer High Yield Fund ........................... 57,450,000 19.2 2,235,063 1.6 Pioneer High Yield VCT Portfolio .................. 300,000 * 11,671 * Pioneer U.S. High Yield Corp. Bond ................ 4,000,000 1.3 155,618 * Ramius Master Fund, Ltd. .......................... 5,050,000 1.7 196,467 * Ramius Partners II, LP. ........................... 200,000 * 7,780 * RCG Halifax Master Fund, Ltd. ..................... 500,000 * 19,452 * RCG Latitude Master Fund, Ltd. .................... 5,050,000 1.7 196,467 * RCG Multi Strategy Master Fund, Ltd. .............. 400,000 * 15,561 * Singlehedge U.S. Convertible Arbitrage Fund ................................ 94,000 * 3,657 * St. Thomas Trading, Ltd. .......................... 9,716,000 3.2 377,996 * Sturgeon Limited .................................. 140,000 * 5,446 * Sunrise Partners Limited Partnership .............. 3,000,000 1.0 116,713 * Thomas Weisel Partners ............................ 2,000,000 * 77,809 * Wachovia Securities Inc. .......................... 25,000,000 8.3 972,612 * White River Securities L.L.C. ..................... 1,000,000 * 38,904 * Xavex Convertible Arbitrage #5 .................... 500,000 * 19,452 * All other holders of notes or future transferees, pledgees, donees or successors of any such holder(4) ......................... 120,995,000 40.3 4,707,249 3.4
* Less than 1% (1) Calculated using 135,119,806 shares of common stock outstanding as of August 12, 2003. In calculating this amount, we treated as outstanding the number of shares of common stock issuable upon conversion of all of the applicable holder's notes, but we did not assume conversion of any other holder's notes. (2) Bear, Stearns & Co. Inc. is associated with the specialist that makes a market in our common stock, and that specialist from time to time may have a position (long or short), and may be on the opposite side of public orders, in our common stock. (3) Nomura Securities International, Inc. also beneficially owns 4,700 shares of common stock. (4) Information concerning other selling securityholders of notes or common stock issuable upon conversion of the notes will be set forth in prospectus supplements from time to time, if required. 49 The preceding table has been prepared based upon the information furnished to us by the selling securityholders. The selling securityholders identified above may have sold, transferred or otherwise disposed of some or all of their notes since the date on which the information in the preceding table is presented in transactions exempt from or not subject to the registration requirements of the Securities Act. Information concerning the selling securityholders may change from time to time and, if necessary, we will supplement this prospectus accordingly. We cannot give an estimate as to the amount of the notes or common stock issuable upon conversion of the notes that will be held by the selling securityholders upon the termination of this offering because the selling securityholders may offer some or all of their notes or common stock pursuant to the offering contemplated by this prospectus. See "Plan of Distribution." To our knowledge, other than their ownership of the securities described above, none of the selling holders has, or has had within the past three years, any position, office or other material relationship with us or any of our predecessors or affiliates, except that an affiliate of Deutsche Bank Securities Inc. acted as the initial purchaser in connection with our issuance in March 2002 of $300 million aggregate principal amount of 2 1/2% Convertible Senior Notes Due 2007 and acts as an adviser to us from time to time with respect to other matters. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES GENERAL This is a summary of certain United States federal income tax consequences relevant to holders of the notes. This summary is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (including retroactive changes) or possible differing interpretations. The discussion below deals only with notes held as capital assets and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, tax-exempt entities, persons holding the notes in a tax-deferred or tax-advantaged account, or persons holding the notes as a hedge against currency risks, as a position in a "straddle" or as part of a "hedging" or "conversion" transaction for tax purposes. We do not address all of the tax consequences that may be relevant to an investor in the notes. In particular, we do not address: o the United States federal income tax consequences to shareholders in, or partners or beneficiaries of, an entity that is a holder of the notes; o the United States federal estate, gift or alternative minimum tax consequences of the purchase, ownership or disposition of the notes; o the United States federal income tax consequences to holders whose functional currency is not the United States dollar; o any state, local or foreign tax consequences of the purchase, ownership or disposition of the notes; or o any United States federal, state, local or foreign tax consequences of owning or disposing of our common stock. Persons considering the purchase of the notes should consult their own tax advisors concerning the application of the United States federal income tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of the notes arising under other United States federal tax laws and the laws of any other taxing jurisdiction. For purposes of the discussion that follows, a U.S. holder is a beneficial owner of the notes that for U.S. federal income tax purposes is: o an individual citizen or resident of the United States; 50 o a corporation, including any entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, or any political subdivision thereof; o an estate if its income is subject to United States federal income taxation regardless of its source; or o a trust (1) that is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. Except in the case of a partnership, a Non-U.S. holder is a beneficial owner of the notes other than a U.S. holder. If a partnership (including for this purpose any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of the notes, the United States federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. A holder of the notes that is a partnership and partners in such partnership should consult their individual tax advisors about the United States federal income tax consequences of holding and disposing of the notes. No statutory or judicial authority directly addresses the treatment of the notes or instruments similar to the notes for United States federal income tax purposes. The Internal Revenue Service (the "IRS") has recently issued a revenue ruling with respect to instruments similar to the notes. To the extent it addresses the issues, this ruling supports certain aspects of the treatment described below. No ruling has been or is expected to be sought from the IRS with respect to the United States federal income tax consequences to the holders of the notes. The IRS would not be precluded from taking contrary positions. As a result, no assurance can be given that the IRS will agree with all of the tax characterizations and the tax consequences described below. WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND OUR COMMON STOCK IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. CLASSIFICATION OF THE NOTES We intend to treat the notes as indebtedness for United States federal income tax purposes and intend to take the position that the notes will be subject to the special regulations governing contingent payment debt instruments (which we refer to as the CPDI regulations). The notes will be subject to the CPDI regulations if the contingency represented by the provision for contingent interest on the notes is neither remote nor incidental, as defined in section 1.1275-4(a)(5) of the CPDI regulations. Pursuant to the terms of the indenture, we and each holder of the notes agree, for United States federal income tax purposes, to treat the notes as debt instruments that are subject to the CPDI regulations, and the remainder of this discussion assumes that the notes will be so treated. In addition, under the indenture, each holder will be deemed to have agreed to treat the fair market value of our common stock received by such holder upon conversion as a contingent payment and to accrue interest with respect to the notes as original issue discount for United States federal income tax purposes according to the "noncontingent bond method," set forth in section 1.1275-4(b) of the CPDI regulations, using the comparable yield (as defined below) compounded semiannually and the projected payment schedule (as defined below) determined by us. Notwithstanding the issuance of the recent revenue ruling, the application of the CPDI regulations to instruments such as the notes is uncertain in several respects, and, as a result, no assurance can be given that the IRS or a court will agree with the treatment described herein. Any differing treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in the notes. In particular, a holder might be required to accrue interest income at a higher or lower rate, might not recognize income, gain or loss upon conversion of the notes into shares of our common stock, and might recognize capital gain or loss upon a taxable disposition of the notes. Holders should consult their tax advisors concerning the tax treatment of holding and disposing of the notes. 51 ACCRUAL OF INTEREST ON THE NOTES Pursuant to the CPDI regulations, a U.S. holder will be required to accrue interest income on the notes, which we sometimes refer to as original issue discount, in the amounts described below, regardless of whether the U.S. holder uses the cash or accrual method of tax accounting. Accordingly, U.S. holders will likely be required to include interest in taxable income in each year in excess of the accruals on the notes for non-tax purposes (i.e., in excess of the stated semi-annual cash interest payable on the notes and any contingent interest payments actually received in that year). The CPDI regulations provide that a U.S. holder must accrue an amount of ordinary interest income, as original issue discount for United States federal income tax purposes, for each accrual period prior to and including the maturity date of the notes that equals: (1) the product of (i) the adjusted issue price (as defined below) of the notes as of the beginning of the accrual period and (ii) the comparable yield (as defined below) of the notes, adjusted for the length of the accrual period; (2) divided by the number of days in the accrual period; and (3) multiplied by the number of days during the accrual period that the U.S. holder held the notes. The notes' issue price is the first price at which a substantial amount of the notes is sold, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The adjusted issue price of a note is its issue price increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below, and decreased by the projected amount of any projected payments (as defined below) previously made (including payments of stated cash interest) with respect to the notes. Unless certain conditions are met, the term "comparable yield" means the annual yield we would pay, as of the initial issue date, on a noncontingent, nonconvertible, fixed-rate debt instrument with terms and conditions otherwise comparable to those of the notes. We intend to take the position that the comparable yield for the notes is 8.25%, compounded semiannually. The precise manner of calculating the comparable yield, however, is not entirely clear. If the comparable yield were successfully challenged by the IRS, the redetermined yield could differ materially from the comparable yield provided by us. Moreover, the projected payment schedule could differ materially from the projected payment schedule provided by us. The CPDI regulations require that we provide to U.S. holders, solely for United States federal income tax purposes, a schedule of the projected amounts of payments, which we refer to as projected payments, on the notes. This schedule must produce the comparable yield. The projected payment schedule includes the semi-annual stated cash interest payable on the notes at the rate of 3.25% per annum, estimates for certain contingent interest payments and an estimate for a payment at maturity taking into account the conversion feature. In this connection, the fair market value of any common stock (and cash, if any) received by a holder upon conversion will be treated as a contingent payment. The comparable yield and the schedule of projected payments will be set forth in the indenture. U.S. holders may also obtain the projected payment schedule by submitting a written request for such information to: Pride International, Inc., 5847 San Felipe, Suite 3300, Houston, Texas 77057, Attention: Chief Financial Officer. THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE NOTES FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE NOTES. Amounts treated as interest under the CPDI regulations are treated as original issue discount for all purposes of the of the Internal Revenue Code of 1986, as amended (which we refer to as the Code). 52 ADJUSTMENTS TO INTEREST ACCRUALS ON THE NOTES As noted above, the projected payment schedule includes amounts attributable to the stated semi-annual cash interest payable on the notes. Accordingly, the receipt of the stated semi-annual cash interest payments will not be separately taxable to U.S. holders. If, during any taxable year, a U.S. holder receives actual payments with respect to the notes for that taxable year that in the aggregate exceed the total amount of projected payments for that taxable year, the U.S. holder will incur a "net positive adjustment" under the CPDI regulations equal to the amount of such excess. The U.S. holder will treat a "net positive adjustment" as additional interest income. For this purpose, the payments in a taxable year include the fair market value of property received in that year, including the fair market value of our common stock received upon conversion. If a U.S. holder receives in a taxable year actual payments with respect to the notes for that taxable year that in the aggregate were less than the amount of projected payments for that taxable year, the U.S. holder will incur a "net negative adjustment" under the CPDI regulations equal to the amount of such deficit. This adjustment will (a) first reduce the U.S. holder's interest income on the notes for that taxable year and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the U.S. holder's interest income on the notes during prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. A negative adjustment is not subject to the two percent floor limitation imposed on miscellaneous itemized deductions under Section 67 of the Code. Any negative adjustment in excess of the amounts described in (a) and (b) will be carried forward and treated as a negative adjustment in the succeeding taxable year and will offset future interest income accruals in respect of the notes or will reduce the amount realized on the sale, exchange, purchase by us at the holder's option, conversion, redemption or retirement of the notes. If a U.S. holder purchases notes at a discount or premium to the adjusted issue price, the discount will be treated as a positive adjustment and the premium will be treated as a negative adjustment. The U.S. holder must reasonably allocate the adjustment over the remaining term of the notes by reference to the accruals of original issue discount at the comparable yield or to the projected payments. It may be reasonable to allocate the adjustment over the remaining term of the notes pro rata with the accruals of original issue discount at the comparable yield. You should consult your tax advisors regarding these allocations. SALE, EXCHANGE, CONVERSION OR REDEMPTION Generally, the sale or exchange of a note, the purchase of a note by us at the holder's option, or the redemption or retirement of a note for cash, will result in taxable gain or loss to a U.S. holder. As described above, our calculation of the comparable yield and the schedule of projected payments for the notes includes the receipt of common stock upon conversion as a contingent payment with respect to the notes. Accordingly, we intend to treat the receipt of our common stock by a U.S. holder upon the conversion of a note as a contingent payment under the CPDI Regulations. Under this treatment, conversion also would result in taxable gain or loss to the U.S. holder. As described above, holders will be deemed to have agreed to be bound by our determination of the comparable yield and the schedule of projected payments. The amount of gain or loss on a taxable sale, exchange, purchase by us at the holder's option, conversion, redemption or retirement would be equal to the difference between (a) the amount of cash plus the fair market value of any other property received by the U.S. holder, including the fair market value of any of our common stock received, and (b) the U.S. holder's adjusted tax basis in the note. A U.S. holder's adjusted tax basis in a note will generally be equal to the U.S. holder's original purchase price for the note, increased by any interest income previously accrued by the U.S. holder (determined without regard to any adjustments to interest accruals described above, other than adjustments to reflect a discount or premium to the adjusted issue price, if any), and decreased by the amount of any projected payments that have been previously made in respect of the notes to the U.S. holder (without regard to the actual amount paid). Gain recognized upon a sale, exchange, purchase by us at the holder's option, conversion, redemption or retirement of a note will generally be treated as ordinary interest income; any loss will be ordinary loss to the extent of interest previously included in income, and thereafter, capital loss (which will be long-term if the note is held for more than one year). The deductibility of net capital losses by individuals and corporations is subject to limitations. 53 A U.S. holder's tax basis in our common stock received upon a conversion of a note will equal the then current fair market value of such common stock. The U.S. holder's holding period for the common stock received will commence on the day immediately following the date of conversion. CONSTRUCTIVE DIVIDENDS If at any time we were to make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for United States federal income tax purposes and, in accordance with the antidilution provisions of the notes, the conversion rate of the notes were increased, such increase might be deemed to be the payment of a taxable dividend to holders of the notes. For example, an increase in the conversion rate in the event of distributions of our evidences of indebtedness, or assets, or an increase in the event of an extraordinary cash dividend may result in deemed dividend treatment to holders of the notes, but generally an increase in the event of stock dividends or the distribution of rights to subscribe for common stock would not be so treated. LIQUIDATED DAMAGES We may be required to make payments of liquidated damages if the shelf registration statement is not timely filed or made effective or if the prospectus is unavailable for periods in excess of those permitted by the registration rights agreement, as described under "Description of Notes--Registration Rights of the Noteholders." We intend to take the position for United States federal income tax purposes that any payments of liquidated damages should be taxable to U.S. holders as additional ordinary income when received or accrued, in accordance with their method of tax accounting. Our determination is binding on holders of the notes, unless they explicitly disclose that they are taking a different position to the IRS on their tax returns for the year during which they acquire the note. The IRS could take a contrary position from that described above, which could affect the timing and character of U.S. holders' income from the notes with respect to the payments of liquidated damages. U.S. holders should consult their tax advisers concerning the appropriate tax treatment of the payment of liquidated damages, if any, with respect to the notes. TREATMENT OF NON-U.S. HOLDERS All payments on the notes made to a Non-U.S. holder will be exempt from United States income or withholding tax provided that: (i) such Non-U.S. holder does not own, actually, indirectly or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote, and is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership; (ii) the statement requirement described below has been fulfilled with respect to the beneficial owner, as discussed below; (iii) such payments and gain are not effectively connected with the conduct by such Non-U.S. holder of a trade or business in the United States; (iv) our common stock continues to be actively traded within the meaning of section 871(h)(4)(C)(v)(I) of the Code (which, for these purposes and subject to certain exceptions, includes trading on the New York Stock Exchange); and (v) we are not a "United States real property holding corporation." We believe that we are not and do not anticipate becoming a "United States real property holding corporation." However, if a Non-U.S. holder were deemed to have received a constructive dividend (see "--Constructive Dividends" above), the Non-U.S. holder will generally be subject to United States federal withholding tax at a 30% rate, subject to a reduction by an applicable treaty, on the taxable amount of such dividend. The statement requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a note certifies on IRS Form W-8BEN, under penalties of perjury, that it is not a United States person and provides its name and address or otherwise satisfies applicable documentation requirements. If a Non-U.S. holder of the notes is engaged in a trade or business in the United States, and if interest on the notes is effectively connected with the conduct of such trade or business, the Non-U.S. holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be subject to regular United States federal income tax on interest and on any gain realized on the sale, exchange, purchase by us at the holder's option, conversion, redemption or retirement of the notes in the same manner as if it were a U.S. holder. In lieu of the certificate described above, such a Non-U.S. holder would be required to provide to the withholding agent a properly executed IRS Form W-8ECI (or successor 54 form) in order to claim an exemption from withholding tax. In addition, if such a Non-U.S. holder is a foreign corporation, such holder may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. BACKUP WITHHOLDING TAX AND INFORMATION REPORTING Payments of principal, premium, if any, and interest (including original issue discount and a payment in common stock pursuant to a conversion of the notes) on, and the proceeds of dispositions of, the notes may be subject to information reporting and United States federal backup withholding tax at the applicable statutory rate if the U.S. holder thereof fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable United States information reporting or certification requirements. A Non-U.S. holder may be subject to United States backup withholding tax on payments on the notes and the proceeds from a sale or other disposition of the notes unless the Non-U.S. holder complies with certification procedures to establish that it is not a United States person. Any amounts so withheld will be allowed as a credit against a holder's United States federal income tax liability and may entitle a holder to a refund, provided the required information is timely furnished to the IRS. 55 PLAN OF DISTRIBUTION We will not receive any of the proceeds of the sale of the notes and the common stock issuable upon conversion of the notes offered by this prospectus. The aggregate proceeds to the selling securityholders from the sale of the notes or common stock will be the purchase price of the notes or common stock less any discounts and commissions. A selling securityholder reserves the right to accept and, together with their agents, to reject, any proposed purchases of notes or common stock to be made directly or through agents. The notes and the common stock offered by this prospectus may be sold from time to time to purchasers: o directly by the selling securityholders and their successors, which includes their transferees, pledgees or donees or their successors-in-interest; or o through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers of the notes and the common stock. These discounts, concessions or commissions may be in excess of those customary in the types of transactions involved. The selling securityholders and any underwriters, broker-dealers or agents who participate in the distribution of the notes and the common stock may be deemed to be "underwriters" within the meaning of the Securities Act of 1933. As a result, any profits on the sale of the notes and the common stock by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Selling securityholders who are "underwriters" within the meaning of the Securities Act will be subject to prospectus delivery requirements of the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders may be subject to certain statutory liabilities of the Securities Act and the Securities Exchange Act of 1934. If the notes and the common stock are sold through underwriters, broker-dealers or agents, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions. The notes and the common stock issuable upon conversion of the notes may be sold in one or more transactions at: o fixed prices; o prevailing market prices at the time of sale; o prices related to such prevailing market prices; o varying prices determined at the time of sale; or o negotiated prices. These sales may be effected in transactions: o on any national securities exchange or quotation service on which the notes and common stock may be listed or quoted at the time of the sale; o in the over-the-counter market; o in transactions otherwise than on such exchanges or services or in the over-the-counter market; o through the writing and exercise of options (including the issuance by the selling securityholder of derivative securities), whether such options or other derivative securities are listed on an options exchange or otherwise; or 56 o through the settlement of short sales. These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with the sales of the notes and the common stock issuable upon conversion of the notes or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions that in turn may engage in short sales of the notes or the common stock in the course of hedging their positions, sell the notes and common stock short and deliver the notes and common stock to close out short positions, loan or pledge notes or the common stock to broker-dealers or other financial institutions that in turn may sell the notes and the common stock, enter into option or other transactions with broker-dealers or other financial institutions that require the delivery to the broker-dealer or other financial institution of the notes or the common stock, which the broker-dealer or other financial institution may resell pursuant to the prospectus, or enter into transactions in which a broker-dealer makes purchases as a principal for resale for its own account or through other types of transactions. To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the notes and the common stock by the selling securityholders. Our common stock trades on the New York Stock Exchange under the symbol "PDE." We do not intend to apply for listing of the notes on any securities exchange or for inclusion of the notes in any automated quotation system. Accordingly, no assurances can be given as to the development of liquidity or any trading market for the notes. See "Risk Factors - An active trading market for the notes may not develop." There can be no assurance that any selling securityholder will sell any or all of the notes or the common stock pursuant to this prospectus. Further, we cannot assure you that any such selling securityholder will not transfer, devise or gift the notes and the common stock by other means not described in this prospectus. In addition, any notes or common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than under this prospectus. The notes and the common stock may be sold in some states only through registered or licensed brokers or dealers. In addition, in some states the notes and common stock may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification is available and complied with. The selling securityholders and any other person participating in the sale of notes or the common stock will be subject to the Securities Exchange Act of 1934. Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the common stock by the selling securityholders and any other such person. In addition, Regulation M may restrict the ability of any person engaged in the distribution of the notes and the common stock to engage in market-making activities with respect to the particular notes and the common stock being distributed. This may affect the marketability of the notes and the common stock and the ability of any person or entity to engage in market-making activities with respect to the notes and the common stock. We have agreed to indemnify the selling securityholders against certain liabilities, including liabilities under the Securities Act. We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the notes and common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents. LEGAL MATTERS Certain legal matters in connection with the notes and the common stock issuable upon conversion of the notes will be passed upon for us by Baker Botts L.L.P., Houston, Texas. 57 EXPERTS The consolidated financial statements incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2002, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of such firm as experts in auditing and accounting. INDEPENDENT ACCOUNTANTS With respect to the unaudited interim consolidated financial information of Pride for the three-month and six-month periods ended June 30, 2003 and 2002 incorporated by reference in this prospectus, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated August 14, 2003 incorporated by reference in this prospectus states that they did not audit and they do not express an opinion on that unaudited consolidated financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited interim consolidated financial information because that report is not a "report" or a "part" of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Securities Act of 1933. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You can read and copy any materials we file with the SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain information about the operation of the SEC's public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a Web site that contains information we file electronically with the SEC, which you can access over the Internet at http://www.sec.gov. You can obtain information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. This prospectus is part of a registration statement we have filed with the SEC relating to the notes and the common stock issuable upon conversion of the notes. As permitted by SEC rules, this prospectus does not contain all of the information we have included in the registration statement and the accompanying exhibits and schedules we file with the SEC. You may refer to the registration statement, the exhibits and the schedules for more information about us and our securities. The registration statement, exhibits and schedules are available at the SEC's public reference room or through its Web site. We are incorporating by reference information we file with the SEC, which means that we are disclosing important information to you by referring you to those documents. The information we incorporate by reference is an important part of this prospectus, and later information that we file with the SEC automatically will update and supersede this information. We incorporate by reference the documents listed below and any future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell all the securities: o our annual report on Form 10-K for the fiscal year ended December 31, 2002; o our quarterly reports on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003; o our current reports on Form 8-K dated April 21, 2003, April 22, 2003 and July 25, 2003, in each case other than the information furnished pursuant to Item 9 or 12 of Form 8-K; and o the description of our common stock (including the related preferred share purchase rights) contained in our current report on Form 8-K filed with the SEC on September 28, 2001, as we may update that description from time to time. 58 You may request a copy of these filings (other than an exhibit to those filings unless we have specifically incorporated that exhibit by reference into the filing), at no cost, by writing or telephoning us at the following address: Pride International, Inc. 5847 San Felipe, Suite 3300 Houston, Texas 77057 Attention: Robert W. Randall Vice President - General Counsel and Secretary Telephone: (713) 789-1400 59 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the estimated expenses payable by Pride International, Inc., a Delaware corporation ("Pride"), in connection with the offering described in this Registration Statement. SEC registration fee ........................ $ 24,270 Printing expenses ........................... 10,000 Accounting fees and expenses ................ 20,000 Legal fees and expenses ..................... 30,000 Miscellaneous ............................... 5,730 ------------ Total .................................. $ 90,000 ============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law, inter alia, empowers a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Similar indemnity is authorized for such persons against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of any such threatened, pending or completed action or suit if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and provided further that (unless a court of competent jurisdiction otherwise provides) such person shall not have been adjudged liable to the corporation. Any such indemnification may be made only as authorized in each specific case upon a determination by the shareholders or disinterested directors or by independent legal counsel in a written opinion that indemnification is proper because the indemnitee has met the applicable standard of conduct. Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145. Pride expects to maintain policies insuring its and its subsidiaries' officers and directors against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933, as amended. Article Seventh of the Certificate of Incorporation of Pride eliminates the personal liability of each director of Pride to Pride and its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that such provision does not eliminate or limit the liability of a director (i) for any breach of such director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Title 8, Section 174 of the Delaware General Corporation Law, as the same exists or as such provision may hereafter be amended, supplemented or replaced, or (iv) for any transactions from which such director derived an improper personal benefit. The Bylaws of Pride provide that Pride will indemnify and hold harmless, to the fullest extent permitted by applicable law in effect as of the date of the adoption of the Bylaws and to such greater extent as applicable law may thereafter permit, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee, agent or fiduciary of (i) II-1 Pride, (ii) any predecessor of Pride, (iii) Pride Oil Well Service Company, a Texas corporation ("Pride Oil Well"), (iv) Pride International, Inc., a Louisiana corporation ("Old Pride"), (v) Marine Drilling Companies, Inc., a Texas corporation ("Marine"), (vi) any subsidiary of Pride, Pride Oil Well, Old Pride or Marine or (vii) any other corporation, partnership, limited liability company, association, joint venture, trust, employee benefit plan or other enterprise which the person is or was serving at the request of Pride ("corporate status") against any and all losses, liabilities, costs, claims, damages and expenses actually and reasonably incurred by him or on his behalf by reason of his corporate status. The Bylaws further provide that Pride will pay the expenses reasonably incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses will be made only upon receipt of (i) a written undertaking executed by or on behalf of the person to be indemnified to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified by Pride and (ii) satisfactory evidence as to the amount of such expenses. ITEM 16. EXHIBITS. Exhibit No. Description of Exhibit *3.1 Certificate of Incorporation of Pride (incorporated by reference to Annex D to the Joint Proxy Statement/Prospectus included in the Registration Statement of Old Pride and Pride on Form S-4, Registration Nos. 333-66644 and 333-66644-01 (the "Registration Statement")). *3.2 Bylaws of Pride (incorporated by reference to Annex E to the Joint Proxy Statement/Prospectus included in the Registration Statement). *4.1 Indenture, dated as of May 1, 1997, between Pride and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as trustee (the "Senior Trustee") (incorporated by reference to Exhibit 4.1 to the Quarterly Report of Pride on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289 (the "Form 10-Q")). *4.2 Fourth Supplemental Indenture, dated as of September 10, 2001, between Pride and the Senior Trustee (incorporated by reference to Exhibit 4.4 to the Current Report of Pride on Form 8-K filed with the SEC on September 28, 2001, File No. 1-13289 (the "Form 8-K")). 4.3 Sixth Supplemental Indenture, dated as of April 28, 2003, between Pride and the Senior Trustee, with respect to $300,000,000 aggregate principal amount of 3 1/4% Convertible Senior Notes Due 2033. 4.4 Form of Seventh Supplemental Indenture between Pride and the Senior Trustee. *4.5 Form of Pride Common Stock Certificate (incorporated by reference to Exhibit 4.13 to the Registration Statement). *4.6 Rights Agreement dated as of September 13, 2001 between Pride and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.2 to the Form 8-K). *4.7 Certificate of Designations of Series A Junior Participating Preferred Stock of Pride (incorporated by reference to Exhibit 4.3 to the Form 8-K). 4.8 Registration Rights Agreement dated as of April 28, 2003 between Pride and Morgan Stanley & Co. Incorporated. **5.1 Opinion of Baker Botts L.L.P. as to the legality of the securities. 12.1 Statement of computation of ratio of earnings to fixed charges. 15.1 Letter on unaudited interim financial information of PricewaterhouseCoopers LLP. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of KPMG LLP. **23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.1). 24.1 Powers of Attorney (included on the signature page herein). 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee on Form T-1. - ---------- * Incorporated by reference as indicated. ** To be filed by amendment. II-2 ITEM 17. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii)To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) of the Securities Act of 1933 if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on August 14, 2003. PRIDE INTERNATIONAL, INC. By: /s/ Earl W. McNiel ------------------------------------------ Earl W. McNiel Vice President and Chief Financial Officer POWER OF ATTORNEY Each person whose signature appears below appoints Paul A. Bragg, Earl W. McNiel and Robert W. Randall, and each of them severally, each of whom may act without the joinder of the others, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated and on August 14, 2003. /s/ Paul A. Bragg President, Chief Executive Officer and Director - ------------------------------ (Principal Executive Officer) Paul A. Bragg /s/ Earl W. McNiel Vice President and Chief Financial Officer - ------------------------------ (Principal Financial Officer) Earl W. McNiel /s/ Edward G. Brantley Vice President and Chief Accounting Officer - ------------------------------ (Principal Accounting Officer) Edward G. Brantley /s/ William E. Macaulay Chairman of the Board - ------------------------------ William E. Macaulay /s/ Robert L. Barbanell Director - ------------------------------ Robert L. Barbanell /s/ David A.B. Brown Director - ------------------------------ David A.B. Brown /s/ J.C. Burton Director - ------------------------------ J.C. Burton /s/ Jorge E. Estrada M. Director - ------------------------------ Jorge E. Estrada M. /s/ Ralph D. McBride - ------------------------------ Ralph D. McBride Director /s/ David B. Robson - ------------------------------ David B. Robson Director
II-4 INDEX TO EXHIBITS
Exhibit No. Description of Exhibit - ----------- ---------------------- *3.1 Certificate of Incorporation of Pride (incorporated by reference to Annex D to the Joint Proxy Statement/Prospectus included in the Registration Statement of Old Pride and Pride on Form S-4, Registration Nos. 333-66644 and 333-66644-01 (the "Registration Statement")). *3.2 Bylaws of Pride (incorporated by reference to Annex E to the Joint Proxy Statement/Prospectus included in the Registration Statement). *4.1 Indenture, dated as of May 1, 1997, between Pride and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as trustee (the "Senior Trustee") (incorporated by reference to Exhibit 4.1 to the Quarterly Report of Pride on Form 10-Q for the quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289 (the "Form 10-Q")). *4.2 Fourth Supplemental Indenture, dated as of September 10, 2001, between Pride and the Senior Trustee (incorporated by reference to Exhibit 4.4 to the Current Report of Pride on Form 8-K filed with the SEC on September 28, 2001, File No. 1-13289 (the "Form 8-K")). 4.3 Sixth Supplemental Indenture, dated as of April 28, 2003, between Pride and the Senior Trustee, with respect to $300,000,000 aggregate principal amount of 3 1/4% Convertible Senior Notes Due 2033. 4.4 Form of Seventh Supplemental Indenture between Pride and the Senior Trustee. *4.5 Form of Pride Common Stock Certificate (incorporated by reference to Exhibit 4.13 to the Registration Statement). *4.6 Rights Agreement dated as of September 13, 2001 between Pride and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.2 to the Form 8-K). *4.7 Certificate of Designations of Series A Junior Participating Preferred Stock of Pride (incorporated by reference to Exhibit 4.3 to the Form 8-K). 4.8 Registration Rights Agreement dated as of April 28, 2003 between Pride and Morgan Stanley & Co. Incorporated. **5.1 Opinion of Baker Botts L.L.P. as to the legality of the securities. 12.1 Statement of computation of ratio of earnings to fixed charges. 15.1 Letter on unaudited interim financial information of PricewaterhouseCoopers LLP. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of KPMG LLP. **23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5.1). 24.1 Powers of Attorney (included on the signature page herein). 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee on Form T-1.
- ---------- * Incorporated by reference as indicated. ** To be filed by amendment. EX-4.3 3 h07587exv4w3.txt 6TH SUPPLEMENTAL INDENTURE EXHIBIT 4.3 PRIDE INTERNATIONAL, INC. and JPMORGAN CHASE BANK Trustee. ------------------------- SIXTH SUPPLEMENTAL INDENTURE Dated as of April 28, 2003 ------------------------- Supplementing the Indenture dated as of May 1, 1997 3 1/4% CONVERTIBLE SENIOR NOTES DUE 2033 TABLE OF CONTENTS ARTICLE 1 SUPPLEMENT OF THE ORIGINAL INDENTURE................................................... 2 Section 1.01. Supplement to Article One of the Original Indenture...................... 2 Section 1.02. Supplement to Article Two of the Original Indenture...................... 18 Section 1.03. Supplement to Article Three of the Original Indenture.................... 18 Section 1.04. Supplement to Article Four of the Original Indenture..................... 24 Section 1.05. Supplement to Article Five of the Original Indenture..................... 25 Section 1.06. Supplement to Article Eight of the Original Indenture.................... 27 Section 1.07. Supplement to Article Nine of the Original Indenture..................... 29 Section 1.08. Supplement to Article Ten of the Original Indenture...................... 30 Section 1.09. Supplement to Article Eleven of the Original Indenture................... 36 Section 1.10. New Article Fourteen..................................................... 51 Section 1.11. New Article Fifteen...................................................... 57 Section 1.12. Effect of Article One.................................................... 74 ARTICLE 2 THE NOTES.............................................................................. 75 Section 2.01. Form and Terms........................................................... 75 Section 2.02. Designation and Amount................................................... 75 Section 2.03. Registered Securities.................................................... 75 ARTICLE 3 REPRESENTATIONS OF THE COMPANY......................................................... 75 Section 3.01. Authority of the Company................................................. 75 Section 3.02. Truth of Recitals and Statements......................................... 75 ARTICLE 4 CONCERNING THE TRUSTEE................................................................. 76 Section 4.01. Acceptance of Trusts..................................................... 76 Section 4.02. No Responsibility of Trustee for Recitals, Etc........................... 76 ARTICLE 5 MISCELLANEOUS PROVISIONS............................................................... 76 Section 5.01. Relation to the Original Indenture....................................... 76 Section 5.02. Meaning of Terms......................................................... 76 Section 5.03. Counterparts of Supplemental Indenture................................... 77 Section 5.04. Governing Law............................................................ 77
THIS SIXTH SUPPLEMENTAL INDENTURE, dated as of April 28, 2003 between Pride International, Inc., a Delaware corporation (successor by merger to Pride International, Inc., a Louisiana corporation formerly known as Pride Petroleum Services, Inc.) (the "Company"), and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), a New York banking corporation, as Trustee (the "Trustee") under the Indenture (as defined below), W I T N E S S E T H: WHEREAS, the Company has duly authorized the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), which are to be issued in one or more series, and the Company has heretofore made, executed and delivered to the Trustee its Indenture dated as of May 1, 1997 (the "Original Indenture") pursuant to which the Securities are issuable; WHEREAS, the Original Indenture has been previously supplemented in connection with (a) the issuance of the Company's first series of Securities designated as its 9 3/8% Senior Notes due 2007, its second series of Securities designated as its 10% Senior Notes due 2009, its third series of Securities designated as its Zero Coupon Convertible Senior Debentures Due 2021, and its fourth series of Securities designated as its 2 1/2% Convertible Senior Notes Due 2007, pursuant to the First Supplemental Indenture dated as of May 1, 1997, the Second Supplemental Indenture dated as of May 26, 1999, the Third Supplemental Indenture dated as of January 16, 2001 and the Fifth Supplemental Indenture dated as of March 4, 2002, respectively, each between the Company and the Trustee and (b) the merger of Pride International, Inc., a Louisiana corporation ("Pride Louisiana"), into the Company and the succession, pursuant to the Fourth Supplemental Indenture dated as of September 10, 2001, between the Company and the Trustee, by the Company to the position of Pride Louisiana under the Indenture; WHEREAS, Sections 201, 301 and 901 of the Original Indenture provide that the form or terms of any series of Securities may be established in an Indenture supplemental thereto, and the Company desires to establish in this Sixth Supplemental Indenture both the form and terms of a series of Securities designated as its 3 1/4% Convertible Senior Notes Due 2033 (the "Notes"); WHEREAS, Section 901 of the Original Indenture further provides that under certain conditions the Company and Trustee, may, without the consent of any Holders, from time to time and at any time, enter into an indenture or indentures supplemental thereto, for the purposes, inter alia, of adding to the covenants of the Company for the benefit of the Holders of all or any series of Securities, and adding any additional Events of Default, and the Company desires by means of this Sixth Supplemental Indenture to add to its covenants for the sole benefit of the Holders of the Notes and to add certain additional Events of Default, also solely for the benefit of such Holders; and 1 WHEREAS, all things necessary to authorize the execution and delivery of this Sixth Supplemental Indenture, to establish the Notes as provided for in this Sixth Supplemental Indenture, and to make the Original Indenture, as supplemented by this Sixth Supplemental Indenture and as otherwise supplemented with applicability with respect to the Notes (the Original Indenture, as so supplemented, being sometimes referred to herein as the "Indenture"), a valid agreement of the Company, in accordance with its terms, have been done; NOW, THEREFORE, THIS SIXTH SUPPLEMENTAL INDENTURE WITNESSETH that for and in consideration of the premises and the purchase of the Notes by the Holders, the Company and the Trustee mutually covenant and agree, solely for the equal and proportionate benefit of the respective Holders from time to time of Notes, as follows: ARTICLE 1 SUPPLEMENT OF THE ORIGINAL INDENTURE Section 1.01. Supplement to Article One of the Original Indenture. Section 101 of the Original Indenture is supplemented or superseded with respect to the Notes, in the case of definitional paragraphs that may be inconsistent, by inserting therein, in alphabetical order, the following definitional paragraphs: "Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the amount by which the Fair Value of the properties and assets of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such date. "Affiliate" of any specified Person means another Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Applicable Stock Price" means, in respect of a Conversion Date, the average of the Sale Prices of a share of Common Stock over the five Trading Day period starting the third Trading Day following such Conversion Date. 2 "Average Life" means, as of any date, with respect to any debt security or preferred stock, the quotient obtained by dividing (i) the sum of the products of (x) the number of years from such date to the date of each scheduled principal payment (including any sinking fund or mandatory redemption payment requirements) of such debt security or preferred stock multiplied in each case by (y) the amount of such principal payment by (ii) the sum of all such principal payments. "Average Sale Price" has the meaning specified in Section 1501. "Capital Lease Obligation" means, at any time as to any Person with respect to any Property leased by such Person as lessee, the amount of the liability with respect to such lease that would be required at such time to be capitalized and accounted for as a capital lease on the balance sheet of such Person prepared in accordance with GAAP. For purposes of Section 1009, a Capital Lease Obligation shall be deemed secured by a Lien on the Property being leased. "Capital Stock" in any Person means any and all shares, interests, partnership interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to acquire an equity interest in such Person. The term "certificated," when referring to the form of Notes, shall mean Notes in the form of Registered Securities under the Indenture other than Notes in global form, including as Book-Entry Securities or otherwise. "Change in Control" means (i) a determination by the Company that any Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than a Parent Holding Company has become the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the Voting Stock of the Company; (ii) the Company is merged with or into or consolidated with another Person and, immediately after giving effect to the merger or consolidation, less than 50% of the outstanding voting securities entitled to vote generally in the election of directors or persons who serve similar functions of the surviving or resulting Person are then beneficially owned (within the meaning of Rule 13d-3 of the Exchange Act) in the aggregate by (x) the stockholders of the Company immediately prior to such merger or consolidation, or (y) if the record date has been set to determine the stockholders of the Company entitled to vote on such merger or consolidation, the stockholders of the Company as of such record date, or (z) a Parent Holding Company; (iii) the Company, either individually or in conjunction with one or more Subsidiaries, sells, conveys, transfers or leases, or the Subsidiaries sell, convey, transfer or lease, all or 3 substantially all of the assets of the Company and the Subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the Subsidiaries, to any Person (other than a Parent Holding Company or a Wholly Owned Subsidiary of the Company); (iv) the liquidation or dissolution of the Company; or (v) the first day on which a majority of the individuals who constitute the Board of Directors are not Continuing Directors. "Change in Control Purchase Date" has the meaning specified in Section 1110(a). "Change in Control Purchase Price" has the meaning specified in Section 1110(a). "Common Stock" means Common Stock, par value $.01 per share, of the Company as it exists on the Issue Date or any other Capital Stock of the Company into which such Common Stock shall be reclassified or changed. "Company Notice" has the meaning specified in Section 1117(d). "Company Notice Date" has the meaning specified in Section 1117(d). "Consolidated Current Liabilities" of any Person means, as of any date, the total liabilities (including tax and other proper accruals) of such Person and its subsidiaries (other than Non-Recourse Subsidiaries) on a consolidated basis at such date which may properly be classified as current liabilities in accordance with GAAP, after eliminating (1) all intercompany items between such Person and its subsidiaries (other than Non-Recourse Subsidiaries) or between subsidiaries (other than between a subsidiary that is not a Non-Recourse Subsidiary and Non-Recourse Subsidiaries) and (2) all current maturities of long-term Indebtedness. "Consolidated Net Tangible Assets" of any Person means, as of any date, Consolidated Tangible Assets of such Person at such date, after deducting therefrom (without duplication of deductions) all Consolidated Current Liabilities of such Person at such date. "Consolidated Tangible Assets" of any Person means, as of any date, the consolidated assets of such Person and its subsidiaries (other than Non-Recourse Subsidiaries) at such date, after eliminating intercompany items between such Person and its subsidiaries (other than Non-Recourse Subsidiaries) or between subsidiaries (other than between a subsidiary that is not a Non-Recourse Subsidiary and Non-Recourse Subsidiaries) and after deducting from such total (i) the net book value of all assets that would be 4 classified as intangibles under GAAP (including, without limitation, goodwill, organizational expenses, trademarks, trade names, copyrights, patents, licenses and any rights in any thereof) and (ii) any prepaid expenses, deferred charges and unamortized debt discount and expense, each such item determined in accordance with GAAP. "Continuing Director" means an individual (i) who is a member of the full Board of Directors and (ii) either (A) who was a member of the Board of Directors on the Issue Date or (B) whose nomination for election or election to the Board of Directors was approved by vote of at least two-thirds of the directors then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved. "Conversion Agent" means an office or agency where Notes may be presented for conversion pursuant to the terms and conditions of the Sixth Supplemental Indenture. "Conversion Date" has the meaning specified in Section 1502. "Conversion Price" has the meaning specified in Section 1501. "Conversion Rate" has the meaning specified in Section 1501. "Currency Hedge Obligations" means, at any time as to any Person, the obligations of such Person at such time which were incurred in the ordinary course of business pursuant to any foreign currency exchange agreement, option or future contract or other similar agreement or arrangement designed to protect against or manage such Person's or any of its subsidiaries' exposure to fluctuations in foreign currency exchange rates. "Exchange Act" has the meaning specified within the definition of "Change in Control" and also includes any successor statute. "Ex-Dividend Time" has the meaning specified in Section 1501. "Fair Market Value" means the fair market value as determined in good faith by the Board of Directors. "Fair Value" means the price that could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "GAAP" means, at any date, United States generally accepted accounting principles, consistently applied, as set forth in the opinions of the Accounting Principles Board of the American Institute of Certified Public 5 Accountants ("AICPA") and statements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be designated by the AICPA, that are applicable to the circumstances as of the date of determination; provided, however, that all calculations made for purposes of determining compliance with the provisions set forth in Sections 1008, 1009 and 1010 shall utilize GAAP in effect at the Issue Date. "Global Note" has the meaning specified in Section 305(b). "Indebtedness" as applied to any Person means, at any time, without duplication, (i) any obligation of such Person, contingent or otherwise, for borrowed money; (ii) any obligation of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) any obligation of such Person for all or any part of the purchase price of Property or for the cost of Property constructed or of improvements thereto (including any obligation under or in connection with any letter of credit related thereto), other than accounts payable included in current liabilities incurred in respect of Property and services purchased in the ordinary course of business; (iv) any obligation of such Person upon which interest charges are customarily paid (other than accounts payable incurred in the ordinary course of business); (v) any obligation of such Person under conditional sale or other title retention agreements relating to purchased Property (other than accounts payable incurred in the ordinary course of business); (vi) any obligation of such Person issued or assumed as the deferred purchase price of Property (other than accounts payable incurred in the ordinary course of business); (vii) any Capital Lease Obligation; (viii) any obligation of any other Person secured by (or for which the obligee thereof has an existing right, contingent or otherwise, to be secured by) any Lien on Property owned or acquired, whether or not any obligation secured thereby has been assumed, by such Person, the amount of such obligation being deemed to be the lesser of the value of such Property or the amount of the obligation so secured; (ix) any obligation of such Person in respect of any letter of credit supporting any obligation of any other Person; (x) the maximum fixed repurchase price of any Redeemable Stock of such Person (or if such Person is a subsidiary, any preferred stock of such Person); (xi) any Interest Swap Obligation or Currency Hedge Obligation of such Person; and (xii) any obligation that is in economic effect a guarantee, regardless of its characterization (other than an endorsement in the ordinary course of business or any performance guarantee), with respect to any Indebtedness of another Person, to the extent guaranteed. For purposes of the preceding sentence, the maximum fixed repurchase price of any Redeemable Stock or subsidiary preferred stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock or subsidiary preferred stock as if such Redeemable Stock or subsidiary preferred stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; provided, however, that if such Redeemable Stock or 6 subsidiary preferred stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock or subsidiary preferred stock. The amount of Indebtedness of any Person at any date shall be (x) the outstanding book value at such date of all unconditional obligations as described above and (y) the maximum liability of any such contingent obligation at such date. "Indenture" has the meaning specified in the recitals to the Sixth Supplemental Indenture. "Initial Purchaser" means Morgan Stanley & Co. Incorporated, as initial purchaser under the Purchase Agreement. "Interest Swap Obligation" means, with respect to any Person, the obligation of such Person pursuant to any interest rate swap agreement, interest rate cap, collar or floor agreement or other similar agreement or arrangement designed to protect against or manage such Person's or any of its subsidiaries' exposure to fluctuations in interest rates. "Investment" means, with respect to any Person, any investment in another Person, whether by means of a share purchase, capital contribution, loan, advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures or prepayments or deposits in the ordinary course of business) or similar credit extension constituting Indebtedness of such other Person or any guarantee of Indebtedness of any other Person; provided, however, that the term "Investment" shall not include any transaction involving the purchase or other acquisition (including by way of merger) of Property (including Capital Stock) by the Company or any Subsidiary in exchange for Capital Stock (other than Redeemable Stock) of the Company. The amount of any Person's Investment shall be the original cost of such Investment to such Person, plus the cost of all additions thereto paid by such Person, and minus the amount of any portion of such Investment repaid to such Person in cash as a repayment of principal or a return of capital, as the case may be, but without any other adjustments for increases or decreases in value, or writeups, writedowns or writeoffs with respect to such Investment. In determining the amount of any investment involving a transfer of any Property other than cash, such Property shall be valued at its Fair Value at the time of such transfer as determined in good faith by the board of directors (or comparable body) of the Person making such transfer. "Investment Grade Status" exists as of any time if at such time (i) the rating assigned to the Notes by Moody's is Baa3 (or the equivalent) or higher and (ii) the rating assigned to the Notes by S&P is BBB- (or the equivalent) or higher. 7 "Issue Date" means the date on which the Notes are first authenticated and delivered under this Indenture. "Legal Holiday" means a day that is not a Business Day in the Place of Payment for the Note. "Lien" means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement, encumbrance, security interest, lien (statutory or other), or preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any agreement to give or grant a Lien or any lease, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Limited Recourse Indebtedness" means (i) Indebtedness with respect to the two drilling/workover barge rigs owned by the Company's Venezuelan Subsidiary as in effect on the Issue Date (the "Venezuelan Barge Financing"), (ii) Indebtedness with respect to two drillships owned by Andre Maritime Ltd. and Martin Maritime Ltd. as in effect on the Issue Date (the "Angola/Africa Drillship Financing") and (iii) Indebtedness incurred to finance the purchase, acquisition, renovation or construction of capital assets and related items (including interest added to principal), or refinancings thereof, (a) for which the recourse of the holder of such Indebtedness is effectively limited to such capital assets and related items or (b) in which the recourse and security are similar to (or more favorable to the Company and its Subsidiaries than) the Venezuelan Barge Financing or the Angola/Africa Drillship Financing. "Liquidated Damages" means Liquidated Damages (as defined in the Registration Rights Agreement) owing with respect to the Notes under the Registration Rights Agreement. "Market Capitalization" means an amount determined by multiplying the number of shares of Common Stock outstanding on the applicable date by the Average Sale Price as of such date. "Market Price" means, as of any Repurchase Date, the average of the Sale Prices of a share of Common Stock over the five Trading Day period ending on the third Business Day prior to the applicable Repurchase Date (if the third Business Day prior to the applicable Repurchase Date is a Trading Day or, if it is not a Trading Day, then the five Trading Day period ending on the last Trading Day prior to such third Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first Trading Day of such five Trading Day period and ending on such Repurchase Date, of any event described in Article Fourteen hereof that would result in an adjustment of the Conversion Rate. 8 "Maturity" means the date on which the principal of a Note becomes due and payable as provided therein or in this Indenture, whether at the Stated Maturity or by declaration of acceleration or otherwise. "Moody's" means Moody's Investors Service, Inc., and includes any successor to its credit ratings business. "98% Trading Exception" has the meaning specified in Section 1501. "Non-Recourse Indebtedness" means Indebtedness or that portion of Indebtedness of a Non-Recourse Subsidiary as to which (a) neither the Company nor any Subsidiary provides credit support constituting Indebtedness of the Company or any Subsidiary or is otherwise directly or indirectly liable (other than such Indebtedness permitted to be incurred under the definition of Non-Recourse Subsidiary) and (b) no default with respect to such Indebtedness (including any rights which the holders thereof may have to take enforcement action against a Non-Recourse Subsidiary) would permit (upon notice or lapse of time or both) any holder of any other Indebtedness of the Company or its Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. "Non-Recourse Subsidiary" means (i) any subsidiary of the Company that at the time of determination will be designated a Non-Recourse Subsidiary by the Board of Directors as provided below and (ii) any subsidiary of a Non-Recourse Subsidiary. The Board of Directors may designate any subsidiary of the Company as a Non-Recourse Subsidiary so long as (a) neither the Company nor any Subsidiary is directly or indirectly liable pursuant to the terms of any Indebtedness of such subsidiary or has made an Investment in such subsidiary, subject to the proviso described below; (b) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice or lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (c) such designation does not result in the creation or imposition of any Lien on any Property of the Company or any Subsidiary (other than any Permitted Lien or any Lien the creation or imposition of which shall have been in compliance with Section 1009 hereof); provided, however, that with respect to clause (a), the Company or a Subsidiary may be liable for Indebtedness of, or may have an Investment in, a Non-Recourse Subsidiary if (x) at the time of incurrence, such liability or Investment, 9 together with all other liabilities and Investments within clause (a) outstanding at such time, does not exceed 5% of the Company's Consolidated Net Tangible Assets, or (y) at the time of designation of such subsidiary as a Non-Recourse Subsidiary, such liability or Investment, together with all other liabilities and Investments within clause (a) outstanding at such time, does not exceed 5% of the Company's Consolidated Net Tangible Assets (calculated as if such subsidiary were a Non-Recourse Subsidiary). Any such designation by the Board of Directors shall be evidenced to the Trustee by filing a Board Resolution with the Trustee giving effect to such designation. The Board of Directors may designate any Non-Recourse Subsidiary as a Subsidiary if, immediately after giving effect to such designation, (i) no Default or Event of Default shall have occurred and be continuing, and (ii) if any Property of the Company or any of its Subsidiaries would upon such designation become subject to any Lien (other than a Permitted Lien), the creation or imposition of such Lien shall have been in compliance with Section 1009 hereof. "Notes" has the meaning specified in the recitals to the Sixth Supplemental Indenture to this Indenture. "Original Indenture" means the Indenture, dated as of May 1, 1997, between the Company and the Trustee, as originally executed. "Parent Holding Company" means (a) from and after the time the Common Stock is not listed on a United States or foreign national or regional securities exchange or traded through the National Association of Securities Dealers Automated Quotation System or similar system or another Person succeeds to and is substituted for the Company under this Indenture, a Person which, immediately after such time, had substantially the same stockholders, directly or indirectly, as the Company immediately prior to such time with holdings in substantially the same proportion as such stockholders' holdings in the Company immediately prior to such time, (b) from and after the sale, conveyance, assignment, transfer, lease or other disposition of all or substantially all of the Company's and the Subsidiaries' assets, the Company (as determined prior to the transaction) and (c) each Wholly Owned Subsidiary of another Parent Holding Company. "Permitted Liens" means (a) Liens in existence on the Issue Date; (b) Liens created for the benefit of the Notes; (c) Liens on Property of a Person existing at the time such Person is merged or consolidated with or into, or otherwise acquired by, the Company or a Subsidiary (and not incurred as a result of, or in anticipation of, such transaction), provided that such Liens relate solely to such Property and the proceeds thereof and accessories and upgrades thereto; (d) Liens on Property existing at the time of the acquisition thereof (and not incurred as a result of, or in anticipation of, such transaction), provided that such Liens relate solely to such Property and the proceeds thereof and accessories and upgrades thereto; (e) Liens incurred or pledges and deposits made in connection with worker's compensation, unemployment insurance and other social security benefits, statutory obligations, bid, surety or appeal bonds, performance bonds or 10 other obligations of a like nature incurred in the ordinary course of business; (f) Liens imposed by law or arising by operation of law, including, without limitation, landlords', mechanics', carriers', warehousemen's, materialmen's, suppliers' and vendors' Liens and Liens for master's and crew's wages and other similar maritime Liens, and incurred in the ordinary course of business; (g) zoning restrictions, easements, licenses, covenants, reservations, restrictions on the use of property and defects, irregularities and deficiencies in title to property that do not, individually or in the aggregate, materially affect the ability of the Company and its Subsidiaries, taken as a whole, to conduct the business presently conducted; (h) Liens for taxes or assessments or other governmental charges or levies not yet due and payable, or the validity of which is being contested by the Company or a Subsidiary in good faith appropriate proceedings upon stay of execution or the enforcement thereof and for which adequate reserves in accordance with GAAP or other appropriate provision has been made; (i) Liens to secure Indebtedness incurred for the purpose of financing all or a part of the purchase price or construction cost of Property (including the cost of upgrading or refurbishing rigs or drillships) acquired or constructed after the Issue Date, provided that (1) the principal amount of Indebtedness secured by such Liens shall not exceed 100% of the lesser of cost or Fair Market Value of the Property so acquired, upgraded or constructed plus transaction costs related thereto, (2) such Liens shall not encumber any other Property of the Company or any Subsidiary (other than the proceeds thereof and improvements, accessions and upgrades thereto) and (3) such Liens shall attach to such Property within 180 days of the date of the later of commencement of commercial operations of such Property and completion of the construction, acquisition, upgrade or improvement of such Property; (j) Liens securing Capital Lease Obligations and other obligations, provided that such Liens secure Capital Lease Obligations and other obligations which, when combined with (1) the outstanding secured Indebtedness of the Company and its Subsidiaries (other than Indebtedness secured by Liens described under clauses (b) and (i) hereof) and (2) the aggregate amount of all other Capital Lease Obligations and other obligations of the Company and its Subsidiaries, do not exceed 10% of the Company's Consolidated Net Tangible Assets; (k) Liens to secure any extension, renewal, refinancing or refunding (or successive extensions, renewals, refinancings or refundings), in whole or in part, of any Indebtedness secured by Liens referred to in the foregoing clauses (a), (b), (c), (d) and (i), provided that such Liens do not extend to any other Property of the Company or any Subsidiary (other than the proceeds thereof and accessions and upgrades thereto) and the principal amount of the Indebtedness secured by such Liens is not increased; (1) any charter or lease of drilling rigs in the ordinary of course of business; (m) leases or subleases of property to other Persons in the ordinary course of business; (n) Liens securing Non-Recourse Indebtedness; (o) Liens securing Indebtedness (and any guarantee or pledge) under one or more credit 11 facilities, in an aggregate principal amount at any one time outstanding not to exceed the greater of (A) $100 million and (B) an amount equal to 10% of the Company's Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness (plus interest and fees under such facilities); (p) judgment liens not giving rise to an Event of Default so long as any appropriate legal proceedings which may have been only initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (q) rights of set-off of banks and other Persons; (r) other deposits made in the ordinary course of business to secure liability to insurance carriers under insurance or self-insurance arrangements; (s) Liens securing reimbursement obligations under letters of credit, entered into in the ordinary course of business if in each case such Liens cover only the title documents and related goods (and any proceeds thereof) covered by the related letter of credit; (t) Liens or equitable encumbrances deemed to exist by reason of fraudulent conveyance or transfer laws or negative pledge or similar agreements to refrain from permitting Liens; and (u) Liens securing up to $500 million of other Indebtedness. "Permitted Subsidiary Indebtedness" means any of the following Indebtedness of a Subsidiary, other than guarantees of the Company's Indebtedness (provided that a pledge of assets to secure Indebtedness for which the pledgor is not otherwise liable shall not be considered a guarantee): (i) Indebtedness or preferred stock issued to and held by the Company or a Wholly Owned Subsidiary, so long as any transfer of such Indebtedness or preferred stock to a Person other then the Company or a Wholly Owned Subsidiary of the Company shall be deemed to constitute the issuance of such Indebtedness or preferred stock by the issuer; (ii) Indebtedness or preferred stock of a Subsidiary that existed at the time such Person became a Subsidiary (other than Indebtedness or preferred stock issued in connection with or in anticipation of that Person becoming a Subsidiary); (iii) Indebtedness or preferred stock outstanding on the Issue Date; (iv) Indebtedness (and any guarantee or pledge) under one or more credit facilities, in an aggregate principal amount at any one time outstanding not to exceed $250 million plus the greater of (x) $100 million and (y) an amount equal to 10% of the Company's Consolidated Net Tangible Assets determined as of the date of the incurrence of such Indebtedness (plus interest and fees under such facilities); (v) Indebtedness under Interest Swap Obligations if (a) such Interest Swap Obligations are related to payment obligations on Indebtedness, and (b) the notional principal amount of such Interest Swap Obligations does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligations relate; (vi) Indebtedness under Currency Hedge Obligations if (x) such Currency Hedge Obligations are related to payment obligations on Indebtedness or to the foreign currency cash flows reasonably expected to be generated by the Company and the Subsidiaries, and (y) the notional 12 principal amount of such Currency Hedge Obligations does not exceed the principal amount of the Indebtedness and the amount of the foreign currency cash flows to which such Currency Hedge Obligations relate; (vii) Indebtedness for bid performance bonds, surety bonds, appeal bonds and letters of credit or similar arrangements issued for the account of the Company or any Subsidiary, in each case in the ordinary course of business; (viii) Permitted Subsidiary Refinancing Indebtedness; (ix) preferred stock issued in exchange for, or the proceeds of which are used to refinance, repurchase or redeem, Indebtedness or preferred stock described in clauses (ii) and (iii) above (the "Retired Indebtedness or Stock"), if the preferred stock so issued has (a) a liquidation value not in excess of the principal amount or liquidation value of the Retired Indebtedness or Stock plus related expenses for redemption and issuance, and (b) a redemption date later than the stated maturity or redemption date (if any) of the Retired Indebtedness or Stock; (x) Indebtedness of a Subsidiary that represents the assumption by that Subsidiary of Indebtedness of another Subsidiary (other than Non-Recourse Indebtedness) in connection with a merger of those Subsidiaries, if no Subsidiary existing on the Issue Date or any successor assumes or otherwise becomes responsible for any Indebtedness of an entity that is not a Subsidiary on the Issue Date except to the extent that a Subsidiary would be permitted to incur such Indebtedness under this definition; (xi) Indebtedness to finance the construction and operation of the drillships Pride Africa and Pride Angola pursuant to the credit agreements among the Company, certain of its Subsidiaries, and lenders thereunder, as in effect on the Issue Date, and any refinancings or replacements thereof; and (xii) Indebtedness or preferred stock of any Subsidiary, which when taken together with all other Indebtedness and preferred stock of the Subsidiaries (except Indebtedness or preferred stock incurred pursuant to clauses (i), (ii), (iv), (v), (vi), (vii) and (xi) of this definition and clauses (viii) and (ix) of this definition to the extent relating to Indebtedness incurred pursuant to clauses (i), (ii), (iv), (v), (vi) and (vii) of this definition), does not exceed at any one time outstanding the greater of (x) $100 million and (y) 15% of the Company's Consolidated Net Tangible Assets determined as of the date of incurrence of such Indebtedness. "Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any Subsidiary incurred in exchange for, or the net proceeds of which are used to renew, extend, refinance, refund or repurchase, outstanding Indebtedness of such Subsidiary or any other Subsidiary (provided that, if any Subsidiary that is an obligor on the Indebtedness being exchanged, renewed, extended, refinanced, refunded or repurchased (the "Existing Indebtedness") is a Subsidiary Guarantor, each Subsidiary that is an obligor on such Permitted Refinancing Subsidiary Indebtedness, if not an obligor on the Existing Indebtedness, must become a Subsidiary Guarantor), which outstanding Indebtedness was incurred in accordance with or is otherwise permitted by the terms of this Indenture, provided that (a) if the 13 Indebtedness being renewed, extended, refinanced, refunded or repurchased is equal or subordinated in right of payment to the Subsidiary Guarantees, then such new Indebtedness is equal or subordinated, as the case may be, in right of payment (without regard to its being secured) to the Subsidiary Guarantees at least to the same extent as the Indebtedness being renewed, extended, refinanced, refunded or repurchased; (b) such new Indebtedness is scheduled to mature later than the Indebtedness being renewed, extended, refinanced, refunded or repurchased; (c) such new Indebtedness has an Average Life at the time such Indebtedness is incurred that is greater than the Average Life of the Indebtedness being renewed, extended, refinanced, refunded or repurchased; and (d) such new Indebtedness is in an aggregate principal amount (or, if such Indebtedness is issued at a price less than the principal amount thereof, the aggregate amount of gross proceeds therefrom is) not in excess of the aggregate principal amount then outstanding of the Indebtedness being renewed, extended, refinanced, refunded or repurchased (or if the Indebtedness being renewed, extended, refinanced, refunded or repurchased was issued at a price less than the principal amount thereof, then not in excess of the amount of liability in respect thereof determined in accordance with GAAP) plus the amount of reasonable fees, expenses and any premium incurred by the Company or such Subsidiary in connection therewith. "Principal Amount" means, with respect to any Note, the principal amount due at the Stated Maturity thereof as set forth on the face of the Note. "Principal Value Conversion" has the meaning specified in Section 1501. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Purchase Agreement" means the Purchase Agreement dated April 22, 2003 between the Company and the Initial Purchaser. "Purchase Price" has the meaning specified in Section 1117(a). "Redeemable Stock" means, with respect to any Person, any equity security that by its terms or otherwise is required to be redeemed, or is redeemable at the option of the holder thereof, at any time prior to one year following the Stated Maturity of the Notes or is exchangeable into Indebtedness of such Person or any of its subsidiaries. 14 "Registration Rights Agreement" means the Registration Rights Agreement dated April 28, 2003 between the Company and the Initial Purchaser and certain permitted assigns. "Repurchase Date" has the meaning specified in Section 1117(a). "Repurchase Notice" has the meaning specified in Section 1117(a)(1). "Rule 144A" means Rule 144A promulgated under the Securities Act. "S&P" means Standard & Poor's Ratings Services, and includes any successor to its credit ratings business. "Sale and Lease-Back Transaction" means, with respect to any Person, any direct or indirect arrangement pursuant to which Property is sold or transferred by such Person or a subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its subsidiaries. "Sale Price of a share of Common Stock" or "Sale Price" means, on any date, the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and average ask prices) for the Common Stock on such date (or, if such date is not a Trading Day, on the last Trading Day prior to such date) as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by the Nasdaq System or by the National Quotation Bureau Incorporated. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Sixth Supplemental Indenture" means the Sixth Supplemental Indenture, dated as of the Issue Date, between the Company and the Trustee, supplementing and amending the Original Indenture as set forth therein. "Subordinated Indebtedness" means any Indebtedness of the Company or any Subsidiary Guarantor that is subordinated in right of payment to the Notes or the Subsidiary Guarantees, as the case may be, 15 pursuant to a written agreement to that effect and does not mature prior to one year following the Stated Maturity of the Notes. The term "subsidiary" means, with respect to any Person, (i) any corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person, or by one or more other subsidiaries of such Person, or by such Person and one or more other subsidiaries of such Person, (ii) any general partnership, joint venture or similar entity more than 50% of the outstanding partnership or similar interests of which is owned, directly or indirectly, by such Person, or by one or more other subsidiaries of such Person, or by such Person and one or more other subsidiaries of such Person and (iii) any limited partnership of which such Person or any subsidiary of such Person is a general partner. "Subsidiary" means a subsidiary of the Company other than a Non-Recourse Subsidiary. "Subsidiary Guarantee" means any guarantee of the Notes by any Subsidiary Guarantor in accordance with the provisions described under Article Fourteen hereof. "Subsidiary Guarantor" means (i) each of the Company's Subsidiaries, if any, executing this Indenture and (ii) any Person that becomes a successor guarantor of the Notes in compliance with the provisions described under Article Fourteen hereof. "Tax Original Issue Discount" means the amount of ordinary interest income on a Note that must be accrued as original issue discount for United States Federal income tax purposes pursuant to U.S. Treasury Regulation Section 1.1275-4. "Time of Determination" has the meaning specified in Section 1501. "Trading Day" means each day on which the securities exchange or quotation system which is used to determine the Sale Price or the independent nationally recognized securities dealers used to determine the Trading Price, as applicable, is open for trading or quotation; provided, however, that, in a context where both the Sale Price and Trading Price are required, "Trading Day" means each day on which both the securities exchange or quotation system which is used to determine the Sale Price and the independent nationally recognized securities dealers used to determine the Trading Price are open for trading or quotation. "Trading Price per $1,000 Principal Amount of Notes" or "Trading Price" means, on any Trading Day, the average of the secondary market bid quotations (expressed as Dollars per $1,000 Principal Amount of Notes) 16 obtained by the Trustee for $10,000,000 principal amount of Notes at approximately 3:30 p.m., New York City time, on such Trading Day from three independent nationally recognized securities dealers selected by the Company; provided that if at least three such bids cannot reasonably be obtained by the Trustee, but two bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, one bid shall be used; and provided further that if the Trustee cannot reasonably obtain at least one such bid or, in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Notes, then (a) for purposes of evaluating the 98% Trading Exception, the Trading Price per $1,000 Principal Amount of Notes for such Trading Day shall be deemed to be less than 98% of the product of (i) the Conversion Rate in effect as of such Trading Day and (ii) the Sale Price of a share of Common Stock on such Trading Day and (b) for purposes of determining whether contingent interest is payable in respect of any six-month interest period, the Trading Price per $1,000 Principal Amount of Notes for such Trading Day shall be deemed to be equal to the Trading Price per $1,000 Principal Amount of Notes on the Trading Day nearest thereto for which the Trading Price was determined for purposes of this Indenture and to which this proviso did not apply (provided that, if there are two such Trading Days equally near to the applicable Trading Day, the earlier of the two shall be used). "Transfer Restricted Notes" has the meaning specified in Section 305(d). "Voting Stock" means, with respect to any Person, securities of any class or classes of Capital Stock or other interests (including partnership interests) in such Person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable body of such Person. "Wholly Owned Subsidiary" means, with respect to any Person, any subsidiary of such Person to the extent (i) all of the Voting Stock or other ownership interests in such subsidiary, other than any director's qualifying shares mandated by applicable law, is owned directly or indirectly by such Person or (ii) such subsidiary is organized in a foreign jurisdiction and is required by the applicable laws and regulations of such foreign jurisdiction to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such subsidiary to transact business in such foreign jurisdiction, provided, in the case of clause (ii), that such Person, directly or indirectly, owns the remaining Capital Stock or ownership interest in such subsidiary and, by contract or otherwise, controls the management and business of such subsidiary and derives the economic benefits of ownership of such 17 subsidiary to substantially the same extent as if such subsidiary were a wholly owned subsidiary. Section 1.02. Supplement to Article Two of the Original Indenture. The Original Indenture is supplemented with respect to the Notes by revising the second sentence within the second full paragraph of Section 204(c) to read as follows: Upon receipt of such notice, or if either (1) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for any Book-Entry Securities representing the Notes and a successor Depositary is not appointed by the Company within 90 days of such notice or (2) an Event of Default has occurred with respect to the Notes and is continuing and the Security Registrar has received a request from the Depositary or the Trustee to issue Registered Securities not in global form, then in any such case the Depositary shall promptly surrender or cause the surrender of its Book-Entry Security or Securities to the Trustee. Concurrently therewith (or within 30 days of any request referred to in the preceding clause (2) of this paragraph), Registered Securities not issued in global form will be issued in an aggregate principal amount equal to the principal amount of the Book-Entry Security or Securities theretofore held by or on behalf of the Depositary. Section 1.03. Supplement to Article Three of the Original Indenture. Section 305 of the Original Indenture is supplemented with respect to the Notes by adding (i) the reference "(a)" prior to the current text of Section 305 and (ii) the following provisions thereafter (provided that, in the event of inconsistency between the following provisions and the provisions of Section 305 of the Original Indenture (now Section 305(a)), the following provisions shall control): (b) So long as the Notes are eligible for book-entry settlement with the Depositary, or unless otherwise required by law, all Notes will be represented by one or more Notes in global form registered in the name of the Depositary or the nominee of the Depositary (collectively, the "Global Note"). Transfers, exchanges and redemptions of beneficial interests in the Global Note shall be effected through the Depositary in accordance with this Indenture and the procedures of the Depositary therefor. The Trustee shall make appropriate endorsements to reflect increases or decreases in the principal amounts of the Global Note as set forth on the face of the Note to reflect any such transfers, exchanges and redemptions. Except as provided below, beneficial owners of the Global Note shall not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered Holders of the Global Note for any purposes under this Indenture. 18 (c) Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Depositary or by the National Association of Securities Dealers, Inc. in order for the Notes to be tradable on The PORTAL Market or as may be required for the Notes to be tradable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject. (d) Every Note that bears or is required under this Section 305(d) to bear the legend set forth in this Section 305(d) (together with any Common Stock issued upon conversion of the Notes and required to bear the legend set forth in Section 305(e), collectively, the "Transfer Restricted Notes") shall be subject to the restrictions on transfer set forth in this Section 305(d) (including those set forth in the legend set forth below), and the Holder of each such Transfer Restricted Note, by such Holder's acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in Sections 305(d) and 305(e), the term "transfer" encompasses any sale, pledge, transfer or other disposition whatsoever of any Transfer Restricted Note. The Company shall not register any transfer of a Transfer Restricted Note not made in accordance with the restrictions on transfer set forth in this Section 305. Until the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), any certificate evidencing such Note (and all securities issued in exchange therefor or substitution thereof, other than Common Stock, if any, issued upon conversion thereof, which shall bear the legend set forth in Section 305(e), if applicable) shall bear a legend in substantially the following form, unless such Note has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer): THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF PRIDE INTERNATIONAL, INC. (THE 19 "COMPANY") THAT THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD UNDER RULE 144(k) (OR ANY SUCCESSOR THERETO) UNDER THE SECURITIES ACT WHICH IS APPLICABLE TO THIS SECURITY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY OR (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. [INCLUDE FOLLOWING IF THE SECURITY IS IN CERTIFICATED FORM: PRIOR TO A TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (4) ABOVE), THE HOLDER OF THIS SECURITY MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AND, IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (3) ABOVE, A LEGAL OPINION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS.] THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS A QUALIFIED INSTITUTIONAL BUYER. Any Note (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired 20 in accordance with their terms or that has been transferred pursuant to a registration statement that has been declared effective under the Securities Act may, upon surrender of such Note for exchange to the Security Registrar in accordance with the provisions of this Section 305, be exchanged for a new Note or Notes, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 305(d). Notwithstanding any other provisions of this Indenture (other than the provisions set forth in Section 305(c) and in this Section 305(d)), the Global Note may not be transferred as a whole or in part except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Global Note. Initially, the Global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Custodian for Cede & Co. Any transfer of any beneficial interest in the Global Note shall only be permitted if such transfer is in compliance with the provisions of Section 305(d) applicable to transfers of the Notes and the rules and procedures of the Depositary therefor, which shall include restrictions on transfer comparable to those set forth therein and herein to the extent required by the Securities Act. If a Note in certificated form is issued in exchange for any portion of the Global Note after the close of business at the office or agency where such exchange occurs on any record date and before the opening of business at such office or agency on the next succeeding Interest Payment Date, interest will not be payable on such Interest Payment Date in respect of such Note, but will be payable on such Interest Payment Date, subject to the provisions of the Note, only to the person to whom interest in respect of such portion of the Global Note is payable in accordance with the provisions of this Indenture and the Notes. Notes in certificated form issued in exchange for all or a part of the Global Note pursuant to Section 204 and this Section 305 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Notes in 21 certificated form to the persons in whose names such Notes in certificated form are so registered. At such time as all interests in the Global Note have been redeemed, converted, canceled, exchanged for Notes in certificated form, or transferred to a transferee who receives Notes in certificated form, such Global Note shall, upon receipt thereof, be canceled by the Trustee in accordance with standing procedures and instructions existing between the Depositary and the Custodian for Cede & Co. At any time prior to such cancellation, if any interest in the Global Note is redeemed, converted, repurchased or canceled, the Principal Amount of the Global Note shall, in accordance with the standing procedures and instructions existing between the Depositary and the Custodian for Cede & Co., be appropriately reduced and an endorsement shall be made on such Global Note, by the Trustee or the Custodian for Cede & Co., at the direction of the Trustee, to reflect such reduction. (e) Every stock certificate representing Common Stock issued upon conversion of a Transfer Restricted Note that bears or is required under this Section 305(e) to bear the legend set forth in this Section 305(e) shall be subject to the restrictions on transfer set forth in this Section 305(e) (including those set forth in the legend set forth below), and the holder of such Common Stock issued upon conversion of a Transfer Restricted Note, by such holder's acceptance thereof, agrees to be bound by all such restrictions on transfer. The Company shall not register any transfer of Common Stock issued upon conversion of such a Transfer Restricted Note not made in accordance with the restrictions on transfer set forth in this Section 305. Until the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), any stock certificate representing Common Stock issued upon conversion of a Transfer Restricted Note shall bear a legend in substantially the following form, unless such Common Stock has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer) or such Common Stock has been issued upon conversion of Notes that have been transferred pursuant to a registration statement that has been declared effective under the Securities Act: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY 22 PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF PRIDE INTERNATIONAL, INC. (THE "COMPANY") THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD UNDER RULE 144(k) (OR ANY SUCCESSOR THERETO) UNDER THE SECURITIES ACT WHICH IS APPLICABLE TO THIS SECURITY OR (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER APPLICABLE TO THIS SECURITY, THE FORM OF WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRANSFER AGENT) OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. PRIOR TO A TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (3) ABOVE), THE HOLDER OF THIS SECURITY MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AND, IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (2) ABOVE, A LEGAL OPINION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms or that has been transferred pursuant to a registration statement that has been declared effective under the Securities Act may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like number of shares of Common Stock, which shall not bear the restrictive legend required by this Section 305(e). 23 (f) Any Note or Common Stock issued upon the conversion or exchange of a Note that, prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Notes or Common Stock, as the case may be, no longer being "restricted securities" (as defined under Rule 144). (g) Each Holder of a Note agrees to indemnify the Company and the Trustee against any liability that may result from the registration of transfer, exchange or assignment of such Holder's Note in violation of any provision of this Indenture and/or applicable United States Federal or state securities law. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary Participants or beneficial owners of interests in the Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Section 1.04. Supplement to Article Four of the Original Indenture. The Original Indenture is supplemented with respect to the Notes by (a) adding the words "Article Fifteen and" immediately before the words "Sections 305" in the last paragraph of Section 401 and (b) inserting the following provision in Article Four: SECTION 405. Discharge of Subsidiary Guarantees. The obligations of each Subsidiary Guarantor with respect to its Subsidiary Guarantee and under this Indenture shall be discharged automatically to the same extent as the obligations of the Company with respect to the Notes are discharged pursuant to this Article Four (in addition to any release or discharge pursuant to Section 1404), and such obligations of each Subsidiary Guarantor so discharged shall be subject to reinstatement pursuant to Section 404 in the event that such obligations of the Company shall be reinstated (unless released or discharged pursuant to Section 1404). 24 Section 1.05. Supplement to Article Five of the Original Indenture. (a) Section 501 of the Original Indenture is supplemented with respect to the Notes by deleting provisions (3) and (4) thereto (without renumbering) and adding the following provisions (8)-(14) thereto: (8) the Company (i) defaults in the payment (other than payment in shares of Common Stock or cash in lieu of fractional interests in shares of Common Stock, which is covered by clause (ii) of this Section 501(8)) of the Principal Amount, Redemption Price, Purchase Price or Change in Control Purchase Price with respect to any Note when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise, or (ii) defaults in the delivery of shares of Common Stock (or cash in lieu of fractional interests in shares of Common Stock) in accordance with the terms hereof when such Common Stock or cash is required to be delivered upon conversion or purchase of a Note and such default in this clause (ii) is not remedied for a period of 10 days; (9) the Company fails to comply with any of its covenants or agreements contained in Section 801 or Section 1110 hereof; (10) default in the performance or breach of any covenant or agreement of the Company or any Subsidiary Guarantor contained in the Notes, any Subsidiary Guarantee or this Indenture (other than a covenant or agreement a default in performance or breach of which is specifically dealt with) and continuance of such default or breach for a period of 30 days after written notice thereof has been mailed, by registered or certified mail, to the Company or such Subsidiary Guarantor by the Trustee or to the Company or such Subsidiary Guarantor and the Trustee by the Holders of at least 25% of the aggregate principal amount of the outstanding Notes; (11) Indebtedness (other than Non-Recourse Indebtedness or Limited Recourse Indebtedness) of the Company or any Subsidiary is not paid when due within the applicable grace period or is accelerated by the holders thereof and, in either case, the aggregate principal amount of such due and unpaid or accelerated Indebtedness exceeds $10 million; (12) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of any Subsidiary that constitutes a Significant Subsidiary or any group of 25 Subsidiaries that, taken together, would constitute a Significant Subsidiary, in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging such Subsidiary or Subsidiaries a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Subsidiary or Subsidiaries under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Subsidiary or Subsidiaries or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; (13) the commencement by any Subsidiary that constitutes a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case of proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of such Subsidiary or Subsidiaries in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against such Subsidiary or Subsidiaries, or the filing by such Subsidiary or Subsidiaries, of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by such Subsidiary or Subsidiaries to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of such Subsidiary or Subsidiaries or of any substantial part of the property of such Subsidiary or Subsidiaries, or the making by such Subsidiary or Subsidiaries of an assignment for the benefit of creditors, or the admission by such Subsidiary or Subsidiaries in writing of the inability of such Subsidiary or Subsidiaries to pay the debts of such Subsidiary or Subsidiaries generally as they become due, or the taking of corporate action by such Subsidiary or Subsidiaries in furtherance of any such action; or (14) any Subsidiary Guarantee shall for any reason cease to be, or be asserted by the Company or any Subsidiary Guarantor, as applicable, not to be, in full force and effect (except pursuant to the release of any such Subsidiary Guarantee in accordance with this Indenture). 26 (b) The first paragraph of Section 502 of the Original Indenture is superseded with respect to the Notes by the following provision: If an Event of Default with respect to any Notes at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Notes may declare the Principal Amount on the Notes to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), except that, in the case of an Event of Default specified in clause (10) of Section 501, if the Event of Default affects more than one series of Securities, the Trustee, or the Holders of not less than 25% in principal amount of the Outstanding Securities, of all series of Securities shall be required to make such declaration. Upon any such declaration, such amount shall become immediately due and payable. If an Event of Default described in clause (5), (6), (12) or (13) of Section 501 shall occur, the Principal Amount on the Notes to and including the date of occurrence of such event ipso facto shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Section 1.06. Supplement to Article Eight of the Original Indenture. Section 801 of the Original Indenture is superseded with respect to the Notes by the following provisions: The Company will not, in any transaction or series of transactions, consolidate with or merge into any other Person (other than a merger of a Subsidiary or any other Person into the Company in which the Company is the continuing corporation), or sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person, unless: (i) either (a) the Company shall be the continuing Person or (b) the Person (if other than the Company) formed by such consolidation or which acquires, by sale, assignment, conveyance, transfer, lease or other disposition, all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole (such Person, the "Surviving Entity"), shall be a Person organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia, the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, any of the Channel Islands, France, the Netherlands or the Netherlands Antilles and shall expressly assume, by a supplement to this Indenture, the due and punctual payment of all amounts owing on all the Notes and 27 the performance of the Company's covenants and obligations under this Indenture; (ii) immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Event of Default or Default shall have occurred and be continuing or would result therefrom; (iii) in the event that the Company or the Surviving Entity is organized in a jurisdiction other than the United States which is different from the jurisdiction in which the obligor on the Notes was organized immediately before giving effect to the transaction or series of transactions, (a) the Company or such Surviving Entity, as applicable, delivers to the Trustee an Opinion of Counsel stating that (1) the obligations of the Company or the Surviving Entity, as applicable, are enforceable under the laws of the new jurisdiction of its formation subject to customary exceptions and (2) the Holders of Notes will not recognize any income, gain or loss for U.S. federal income tax purposes as a result of the transaction or series of transactions and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such transaction or series of transactions had not occurred, (b) the Company or such Surviving Entity, as applicable, agrees in writing to submit to jurisdiction to the competent courts of the State of New York or the federal district court sitting in The City of New York and appoints an agent in the State of New York for the service of process, each under terms satisfactory to the Trustee and (c) the Board of Directors of the Company or the comparable governing body of such Surviving Entity, as applicable, determines in good faith that such transaction will have no material adverse effect on any Holder of Notes and a Board Resolution (or its equivalent if the Surviving Entity is not a corporation) to that effect is delivered to the Trustee; and (iv) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, assignment, transfer, lease or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction or series of transactions have been complied with. 28 Section 1.07. Supplement to Article Nine of the Original Indenture. (a) Section 901 of the Original Indenture is supplemented with respect to the Notes by inserting the following provisions at the end of Section 901: (9) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code of 1986); (10) to add any Subsidiary Guarantor or release any Subsidiary Guarantor as provided in Article Four or Section 1404; (11) to release any Subsidiary Guarantor pursuant to the terms of this Indenture other than as provided in Article Four or Section 1404, provided that such action will not adversely affect the interests of the Holders in any material respect; or (12) to provide for the assumption of the obligations of the Company in any case contemplated by Section 1514 hereof. (b) Article Nine of the Original Indenture is supplemented with respect to the Notes by inserting the following provisions at the end of Article Nine: SECTION 908. Supplemental Indentures with Consent of Holders of Notes. Notwithstanding Section 902, without the consent of each Holder affected, an amendment or supplement to this Indenture or the Notes may not: (1) make any change to the principal amount of the Notes whose Holders must consent to an amendment or supplement to this Section 907; (2) reduce the Conversion Rate applicable to the Notes; (3) reduce the Redemption Price or Change in Control Purchase Price of any Note or extend the date on which the Change in Control Purchase Price of any Note is payable; (4) subordinate in right of payment, or otherwise subordinate, the Notes or any Subsidiary Guarantee to any other Indebtedness; 29 (5) make any change that materially and adversely affects the right to convert any Note; or (6) make any change that materially and adversely affects the right to require the Company to purchase the Notes upon a Change in Control in accordance with the terms thereof and this Indenture. Section 1.08. Supplement to Article Ten of the Original Indenture. (a) Section 1001 of the Original Indenture is supplemented with respect to the Notes by inserting the following three paragraphs at the end thereof: The Company will pay contingent interest in respect of any six-month interest period from May 1 to October 31 or November 1 to April 30 commencing on or after May 1, 2008 for which the Trading Price for each of the five Trading Days immediately preceding the first day of such six-month interest period equals 120% or more of $1,000 per $1,000 Principal Amount of Notes. For any six-month interest period in respect of which contingent interest is payable, the contingent interest payable on each $1,000 Principal Amount of Notes shall equal 0.25% of the average Trading Price per $1,000 Principal Amount of Notes during the five Trading Day measuring period immediately preceding the first day of such six-month interest period. Contingent interest due under this Article Ten shall be treated for all purposes of this Indenture like any other interest accruing on the Notes. By the first Business Day of a six-month interest period in respect of which contingent interest will be paid, the Company shall disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News stating that contingent interest will be paid on the Notes and identifying the six-month interest period. (b) The first sentence of Section 1002 of the Original Indenture is superseded with respect to the Notes by the following sentence: The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency of the Trustee, Security Registrar, Paying Agent and Conversion Agent where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon 30 the Company in respect of the Notes and this Indenture may be served. (c) Article Ten of the Original Indenture is supplemented with respect to the Notes by inserting the following Sections at the end thereof: SECTION 1008. Limitation on Sale and Lease-Back Transactions. The Company will not, and will not permit any Subsidiary to, directly or indirectly, enter into, assume, guarantee or otherwise become liable with respect to any Sale and Lease-Back Transaction unless (i) the proceeds from such Sale and Lease-Back Transaction are at least equal to the Fair Market Value of the Property being transferred and (ii) the Company or such Subsidiary would have been permitted to enter into such transaction under the tests described under Section 1009 hereof. SECTION 1009. Limitation on Liens. The Company will not, and will not permit any Subsidiary to, directly or indirectly, create, affirm, incur, assume or suffer to exist any Liens, other than Permitted Liens, on or with respect to any Property of the Company or such Subsidiary or any interest in such Property or any income or profits from such Property, whether owned at the Issue Date or thereafter acquired, without effectively providing that the Notes shall be secured equally and ratably with (or prior to) any Indebtedness so secured. SECTION 1010. Limitation on Non-Guarantor Subsidiaries. The Company will not permit any Subsidiary that is not a Subsidiary Guarantor to incur any Indebtedness, other than Indebtedness of Non-Recourse Subsidiaries and Permitted Subsidiary Indebtedness, unless: (i)(A) such Subsidiary simultaneously executes and delivers a supplement to this Indenture providing for a Subsidiary Guarantee of the Notes by such Subsidiary and (B) with respect to Indebtedness in the form of a guarantee of Subordinated Indebtedness of the Company by such Subsidiary, any such guarantee shall be subordinated to such Subsidiary's Subsidiary Guarantee at least to the same extent as such Subordinated Indebtedness is subordinated to the Notes; (ii) such Subsidiary waives, and agrees not in any manner whatsoever to exercise any right or claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other 31 rights against the Company or any other Subsidiary as a result of any payment by such Subsidiary under its Subsidiary Guarantee until such time as the obligations guaranteed thereby are paid in full; and (iii) such Subsidiary shall deliver to the Trustee an Opinion of Counsel of independent legal counsel to the effect that such supplement has been duly executed and authorized and such Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of such Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity. SECTION 1011. Reports. The Company and any Subsidiary Guarantors shall file with the Commission, to the extent such filings are accepted by the Commission and whether or not the Company has a class of securities registered under the Exchange Act, the annual reports, quarterly reports and other documents that the Company would be required to file if the Company were subject to Section 13 or 15 of the Exchange Act, in each case on or before the dates on which such reports and other documents would have been required to have been filed with the Commission if the Company had been subject to Section 13 or 15 of the Exchange Act, beginning with the Company's fiscal quarter ended March 31, 2003. The Company shall also (i) file with the Trustee (with exhibits), and provide to each Holder of Notes (without exhibits), without cost to such Holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required and (ii) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, supply at the Company's cost copies of such reports and documents (including any exhibits thereto) to any Holder of Notes promptly upon written request. The Company shall at all times comply with Trust Indenture Act Section 314(a). SECTION 1012. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to 32 effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 1013. Liquidated Damages. (a) Whenever in this Indenture there is mentioned, in any context, the payment of interest on, or in respect of, any Note, such mention shall be deemed to include mention of the payment of Liquidated Damages to the extent that, in such context, Liquidated Damages are, were or would be payable in respect thereof pursuant to the provisions of the Registration Rights Agreement and express mention of the payment of Liquidated Damages (if applicable) in any provisions hereof shall not be construed as excluding Liquidated Damages in those provisions hereof where such express mention is not made; provided, however, that, if a conflict or inconsistency with respect to Liquidated Damages exists between the Registration Rights Agreement and this Indenture, this Indenture shall control with respect to timing and mechanics of payment, and the Registration Rights Agreement shall control otherwise (including with respect to whether and the amount of Liquidated Damages payable). For the avoidance of doubt, this Section 1013 shall not give rise to an independent obligation of the Company to pay Liquidated Damages and is included in this Indenture only to establish the timing and mechanics of payment of Liquidated Damages but only to the extent payable pursuant to the Registration Rights Agreement. (b) If Liquidated Damages are payable pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Liquidated Damages that are payable and (ii) the date on which such Liquidated Damages are payable. Unless and until a Responsible Officer receives at the Corporate Trust Office such a certificate, the Trustee may assume without inquiry that no such Liquidated Damages are payable. SECTION 1014. Stay, Extension and Usury Laws. Each of the Company and the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture, and each of the Company and the Subsidiary Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage 33 of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 1015. Suspension of Certain Covenants During Investment Grade Status Period. If, during any period, the Notes shall achieve and continue to maintain Investment Grade Status and no Event of Default shall have occurred and then be continuing (such period being referred to as an "Investment Grade Status Period"), then, immediately upon the Company's delivery to the Trustee of an Officers' Certificate certifying the existence of an Investment Grade Status Period, the covenants set forth in Sections 1010 and 1011 shall be suspended and shall not during such Investment Grade Status Period be applicable to the Company and its Subsidiaries. Further, no failure to comply with Section 1010 or 1011 during an Investment Grade Status Period by the Company or any Subsidiary shall constitute a Default or Event of Default in the event that the suspended covenants shall be subsequently reinstated. As soon as practicable following the termination of any Investment Grade Status Period, the Company shall notify the Trustee thereof in writing; provided, however, that the failure of the Company to give such notice shall not avoid the reinstatement of the suspended covenants, which reinstatement shall occur concurrently with the termination of such Investment Grade Status Period. SECTION 1016. Contingent Debt Tax Treatment. The Company agrees, and by acceptance of a Note or beneficial interest in a Note, each Holder and beneficial holder of the Note is deemed to have agreed, with respect to each of the matters set forth in (a) and (b) below, as follows: (a) Tax Treatment: (i) to treat the Notes as indebtedness of the Company for all tax purposes; (ii) to treat the Notes as indebtedness that is subject to the special regulations governing contingent payment debt instruments that are contained in U.S. Treasury Regulation section 1.1275-4; and (iii) to treat any payment to and receipt by a holder of Common Stock upon conversion of a Note as a contingent payment 34 that may result in an adjustment under U.S. Treasury Regulation section 1.1275-4(b). (b) Comparable Yield and Projected Payment Schedule. Solely for purposes of applying U.S. Treasury Regulation section 1.1275-4 to the Notes: (i) for United States Federal Income tax purposes, the Company shall accrue interest with respect to outstanding Notes as Tax Original Issue Discount according to the "noncontingent bond method," as set forth in U.S. Treasury Regulation section 1.1275-4(b); (ii) the Company has determined that the comparable yield, as defined in U.S. Treasury Regulation section 1.1275-4(b) (4) (i), for the Notes is 8.25%, compounded semiannually; (iii) the Company has determined that the projected payment schedule, as defined in U.S. Treasury Regulation section 1.1275-4(b) (ii), for the Notes consists of the projected payment schedule referred to in (v) below; (iv) the Company acknowledges and agrees, and each Holder and any beneficial holder of the Note, by its acceptance of a Note or beneficial interest in a Note, shall be deemed to acknowledge and agree that (A) the projected payment schedule is determined on a basis of an assumption of linear growth of stock price, (B) the comparable yield and the projected payment schedule are not determined for any purpose other than for the purpose of applying U.S. Treasury Regulation section 1.1275-4(b) to the Notes and (C) the comparable yield and the projected payment schedule do not constitute a projection or representation regarding the actual amounts payable on the Notes; and (v) the projected payment schedule, as defined in U.S. Treasury Regulation section 1.1275-4(b) (4) (ii) for the Notes is set forth in Annex 1 hereto. SECTION 1017. Calculation of Tax Original Issue Discount. The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Tax Original Issue Discount (including daily rates and accrual periods) accrued on outstanding Notes as of the end of such year and (ii) such other specific information relating to such Tax Original Issue Discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time. 35 SECTION 1018. Rule 144A Information Requirement. Within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, make available to any holder or beneficial holder of Notes or any Common Stock issued upon conversion thereof which continue to be Transfer Restricted Notes in connection with any sale thereof, and to any prospective purchaser of such Notes or such Common Stock designated by such holder or beneficial holder in such connection, the information required pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any holder or beneficial holder of such Notes or such Common Stock. In addition, upon the request of any holder or beneficial holder of such Notes or such Common Stock in connection with any sale thereof, the Company shall deliver to such holder or beneficial holder a written statement as to whether any information made available by the Company to such holder or beneficial holder complies with the requirements of Rule 144A(d)(4) under the Securities Act. Section 1.09. Supplement to Article Eleven of the Original Indenture. (a) Article Eleven of the Original Indenture is supplemented with respect to the Notes by inserting the following paragraph at the end of Section 1103 thereof: If any Note selected for partial redemption is thereafter surrendered for conversion in part before termination of the conversion right with respect to the portion of the Note so selected, the converted portion of such Note shall be deemed (so far as may be), solely for purposes of determining the aggregate Principal Amount of Notes to be redeemed by the Company, to be the portion selected for redemption. Notes that have been converted during a selection of Notes to be redeemed may be treated by the Trustee as Outstanding for the purpose of such selection. Nothing in this Section 1103 shall affect the right of any Holder to convert any Notes pursuant to Article Fifteen before the termination of the conversion right with respect thereto. (b) The notice of redemption provided for in Section 1104 of the Original Indenture shall also state with respect to the Notes: (1) the Conversion Rate; (2) the name and address of the Conversion Agent; (3) that Notes called for redemption may be converted at any time before the close of business on the Business Day prior to the Redemption Date; (4) that Holders who want to 36 convert Notes must satisfy the requirements set forth in paragraph 8 of the Notes and (5) that, unless the Company defaults in making payment of such Redemption Price, interest, if any, will cease to accrue on and after the Redemption Date. (c) The reference in Section 1105 of the Original Indenture relating to the deposit of money before 10:00 a.m. is hereby amended to read 11:00 a.m. with respect to the Notes. (d) New Sections 1109 through 1116 are hereby added to Article Eleven of the Original Indenture, but only with respect to the Notes, as follows: SECTION 1109. Conversion Arrangement on Call for Redemption. In connection with any redemption of Notes, the Company may arrange, in lieu of redemption, for the purchase and conversion of any Notes called for redemption by an agreement with one or more investment banks or other purchasers to purchase all or a portion of such Notes by paying to the Trustee in trust for the Holders whose Notes are to be so purchased, on or before the close of business on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Company for the redemption of such Notes, is not less than the Redemption Price, plus (unless the Redemption Date is an Interest Payment Date) accrued and unpaid interest to but excluding the Redemption Date. Notwithstanding anything to the contrary contained in this Article Eleven, the obligation of the Company to pay the Redemption Price of such Notes, plus all accrued interest, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers, but no such agreement shall relieve the Company of its obligation to pay such Redemption Price, plus all accrued interest, until such amount is so paid by such purchasers. If such an agreement is entered into, any Notes not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article Fifteen) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date, subject to payment of the above amount as aforesaid. The Trustee shall hold and pay to the Holders whose Notes are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Notes. Without the Trustee's prior written consent, no 37 arrangement between the Company and such purchasers for the purchase and conversion of any Notes shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Notes between the Company and such purchasers, including the costs and expenses incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. SECTION 1110. Purchase of Notes at Option of the Holder upon Change in Control. (a) If there shall have occurred a Change in Control, the Company shall, at the option of the Holder, become obligated to repurchase the Notes held by such Holder for cash at the purchase price specified in paragraph 6 of the Notes (the "Change in Control Purchase Price") on the date that is 35 Business Days after the occurrence of the Change in Control (the "Change in Control Purchase Date"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 1110(c). (b) Within 15 Business Days after the Change in Control, the Company shall mail a written notice of such Change in Control by first-class mail to the Trustee and to each Holder (and to beneficial owners if required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: (1) briefly, the events causing a Change in Control and the date such Change in Control is deemed to have occurred for purposes of this Section 1110; (2) the date by which the Change in Control Purchase Notice pursuant to this Section 1110 must be given; (3) the Change in Control Purchase Date; (4) the Change in Control Purchase Price; (5) the name and address of the Paying Agent and the Conversion Agent and the office or agency referred to in Section 1002; 38 (6) the Conversion Rate and any adjustments thereto; (7) that Notes with respect to which a Change in Control Purchase Notice has been given by the Holder may be converted into Common Stock at any time prior to the close of business on the Change in Control Purchase Date only if the Change in Control Purchase Notice has been withdrawn by the Holder in accordance with the terms of this Indenture; (8) that Notes must be surrendered to the Paying Agent or the office or agency referred to in Section 1002 to collect payment; (9) that the Change in Control Purchase Price for any Note as to which a Change in Control Purchase Notice has been duly given and not withdrawn will be paid on the later of (A) the Business Day following the Change in Control Purchase Date and (B) promptly following the time of surrender of such Note as described in clause (8) above; (10) the procedures the Holder must follow to exercise rights under this Section 1110 and a brief description of those rights; (11) briefly, the conversion rights of the Notes; and (12) the procedures for withdrawing a Change in Control Purchase Notice. (c) A Holder may exercise its rights specified in Section 1110(a) upon delivery of a written notice of purchase (a "Change in Control Purchase Notice") to the Paying Agent or to the office or agency referred to in Section 1002 at any time prior to the close of business on the Change in Control Purchase Date, stating: (1) the certificate number of any Note in certificated form which the Holder will deliver to be purchased; (2) the portion of the Principal Amount of each Note which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and (3) that such Note shall be purchased as of the Change in Control Purchase Date pursuant to the terms and conditions specified in paragraph 6 of the Note and in this Indenture. Receipt of the Note, prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements), 39 by the Paying Agent at the offices of the Paying Agent or by the office or agency referred to in Section 1002 shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor, together with accrued and unpaid interest through and including the Change in Control Purchase Date (subject to the right of Holders as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Change in Control Purchase Date is an Interest Payment Date); provided, however, that such Change in Control Purchase Price and accrued and unpaid interest shall be so paid pursuant to this Section 1110 only if each Note so delivered to the Paying Agent or such office or agency shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 1110, a portion of a Note if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Note also apply to the purchase of such portion of such Note. Any purchase by the Company contemplated pursuant to the provisions of this Section 1110 shall be consummated by the payment of cash to the Holder according to the second sentence of the first paragraph of Section 1111. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent or to the office or agency referred to in Section 1002 the Change in Control Purchase Notice contemplated by this Section 1110(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent or to such office or agency in accordance with Section 1111. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. SECTION 1111. Effect of Change in Control Purchase Notice. Upon receipt by the Paying Agent or by the office or agency referred to in Section 1002 of the Change in Control Purchase Notice according to Section 1110(c), the Holder of the Note in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn as 40 specified in the following paragraph) thereafter be entitled to receive solely the Change in Control Purchase Price with respect to such Note, plus accrued and unpaid interest through and including the Change in Control Purchase Date (subject to the right of the Holder as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Change in Control Purchase Date is an Interest Payment Date). Such Change in Control Purchase Price and accrued interest shall be paid to such Holder (subject to the right of the Holder as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Change in Control Purchase Date is an Interest Payment Date) on the later of (x) the Business Day following the Change in Control Purchase Date with respect to such Note and (y) promptly following the time of delivery of such Note to the Paying Agent or to the office or agency referred to in Section 1002 by the Holder thereof in the manner required by Section 1110(c). Notes in respect of which a Change in Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such Change in Control Purchase Notice unless such Change in Control Purchase Notice has first been validly withdrawn as specified in the following paragraph. A Change in Control Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent or to the office or agency referred to in Section 1002 at any time prior to the close of business on the Change in Control Purchase Date, specifying: (1) the certificate number of the Note in certificated form in respect of which such notice of withdrawal is being submitted; (2) the Principal Amount of the Note with respect to which such notice of withdrawal is being submitted; and (3) the Principal Amount, if any, of such Note (which must be $1,000 or an integral multiple thereof) which remains subject to the original Change in Control Purchase Notice and which has been or will be delivered for purchase by the Company. There shall be no purchase of any Notes pursuant to Section 1110 if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Notes, of the required Change in Control Purchase Notice) and is continuing an Event of Default (other than a default in the payment of the Change in Control Purchase Price, or accrued and unpaid interest through and including the Change in Control Purchase Date (other than overdue interest), 41 with respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof any Notes (x) with respect to which a Change in Control Purchase Notice has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Change in Control Purchase Price, or accrued and unpaid interest through and including the Change in Control Purchase Date (other than overdue interest), with respect to such Notes) in which case, upon such return, the Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. SECTION 1112. Deposit of Change in Control Purchase Price. Prior to 11:00 a.m. (local time in The City of New York) on the Business Day following the Change in Control Purchase Date the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company is acting as Paying Agent, shall segregate and hold in trust as provided in Section 1103) an amount of cash in immediately available funds sufficient to pay the aggregate Change in Control Purchase Price of all the Notes or portions thereof which are to be purchased as of the Change in Control Purchase Date, plus (unless the Change of Control Purchase Date is an Interest Payment Date) accrued and unpaid interest thereon through and including the Change in Control Purchase Date. SECTION 1113. Notes Purchased in Part. Any Note which is to be purchased under Section 1110 or 1117 only in part shall be surrendered at the office of the Paying Agent or the office or agency referred to in Section 1002 (with, if the Company or the Trustee so requires, due endorsement, or a written instrument of transfer in form satisfactory to the Company and the Trustee executed by the Holder or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate Principal Amount equal to, and in exchange for, the portion of the Principal Amount of the Note so surrendered which is not purchased. 42 SECTION 1114. Covenant to Comply with Securities Laws upon Purchase of Notes. In connection with any offer to purchase or purchase of Notes under Section 1110 or 1117, the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act, if applicable, and (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, if applicable. SECTION 1115. Repayment to the Company. The Trustee and the Paying Agent shall return to the Company, upon written request, any cash, together with interest on such cash as hereinafter provided (subject to the provisions of Section 601(a)), and other consideration held by them for the payment of a Change in Control Purchase, Redemption Price or Purchase Price or accrued and unpaid interest that remain unclaimed as provided in paragraph 12 of the Notes, provided, however, that to the extent that the aggregate amount of consideration deposited by the Company pursuant to Section 1112 or 1117(f) exceeds the aggregate Change in Control Purchase Price or Repurchase Price, respectively, of the Notes or portions thereof to be purchased, plus (unless such date is an Interest Payment Date) accrued and unpaid interest thereon through and including such date, then promptly after the Business Day following the Change in Control Purchase Date or Repurchase Price, as the case may be, the Trustee shall return any such excess to the Company together with interest on any cash as hereinafter provided thereon (subject to the provisions of Section 601(a)). Any cash deposited with the Trustee or with the Paying Agent pursuant to Section 1112 or Section 1117(f) or Section 1105 shall be invested by the Trustee or Paying Agent, as applicable, in short-term obligations of, or fully guaranteed by, the United States of America, or commercial paper rated A-1 or better by S&P or P-1 or better by Moody's as specifically directed in writing by the Company. Interest earned on such investments shall be repaid to the Company pursuant to this Section 1115. Except as provided for in this Section 1115, the Trustee shall be under no liability for interest on any money received by it pursuant to this Indenture. SECTION 1116. Outstanding Notes. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following a Change in Control Purchase Date or Repurchase Date, or at Stated Maturity, money and/or other consideration sufficient to pay the Notes payable on that date, then on and after such Redemption Date, Change in 43 Control Purchase Date, Repurchase Date or Stated Maturity, as applicable, such Notes shall cease to be Outstanding, interest on such Notes shall cease to accrue and all other rights of the Holder shall terminate (other than the right to receive the applicable Redemption Price, Change in Control Purchase Price, Purchase Price or Principal Amount, as the case may be, upon delivery of the Note in accordance with the terms of this Indenture, plus accrued and unpaid interest to but excluding the Redemption Date or through and including the Change in Control Purchase Date or the Repurchase Date or the Stated Maturity, as the case may be, subject always to the right of Holders as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the applicable date is an Interest Payment Date); provided that if the Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. If a Note is converted in accordance with Article Fifteen, then from and after the Conversion Date such Note shall cease to be Outstanding and interest shall cease to accrue on such Note and all other rights of the Holder shall terminate. SECTION 1117. Repurchase of Notes at Option of the Holder. (a) General. The Company shall, at the option of the Holder, become obligated to repurchase the Notes held by such Holder on May 1 of 2008, 2010, 2013, 2018, 2023 or 2028 (each, a "Repurchase Date") at the purchase price specified in paragraph 6 of the Notes (the "Purchase Price") upon: (1) delivery by the Holder of a written notice of purchase (a "Repurchase Notice") to the Paying Agent or to the office or agency referred to in Section 1002 at any time from the opening of business on the date that is 20 Business Days prior to the Repurchase Date until the close of business on such Repurchase Date, stating: (A) the certificate number of any Note in certificated form which the Holder will deliver to be repurchased; (B) the portion of the Principal Amount of the Note which the Holder will deliver to be repurchased, which portion must be $1,000 in Principal Amount or an integral multiple thereof; 44 (C) that such Note shall be repurchased as of the Repurchase Date pursuant to the terms and conditions specified in paragraph 6 of the Note and in this Indenture; and (D) if the Company elects, pursuant to a Company Notice, to pay the Purchase Price to be paid as of such Repurchase Date, in whole or in part, in Common Stock, whether, in the event such portion of the Purchase Price shall ultimately be payable to such Holder in cash because any of the conditions to the payment of the Purchase Price in Common Stock are not satisfied prior to or on the Repurchase Date, as set forth in Section 1117(c), such Holder elects (x) to withdraw such Repurchase Notice as to some or all of the Notes to which such Repurchase Notice relates (stating the Principal Amount and certificate numbers of any certificated Notes as to which such withdrawal shall relate) or (y) to receive cash in respect of the entire Purchase Price for all Notes to which such Repurchase Notice relates; and (2) receipt of such Notes, prior to, on or after the Repurchase Date (together with all necessary endorsements), by the Paying Agent at the offices of the Paying Agent or by the office or agency referred to in Section 1002, such delivery being a condition to receipt by the Holder of the Purchase Price therefor, together with accrued and unpaid interest through and including the Repurchase Date (subject to the right of Holders as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Repurchase Date is an Interest Payment Date); provided, however, that such Purchase Price and accrued and unpaid interest shall be so paid pursuant to this Section 1117 only if the Note so delivered to the Paying Agent or to the office or agency referred to in Section 1002 shall conform in all respects to the description thereof in the related Repurchase Notice. If a Holder, in such Holder's Repurchase Notice, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 1117(a)(1), such Holder shall be deemed to have elected to receive cash in respect of the entire Purchase Price for all Notes subject to such Repurchase Notice in the circumstances set forth in such clause (D). The Company shall purchase from the Holder thereof, pursuant to this Section 1117, a portion of a Note if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. 45 Provisions of this Indenture that apply to the purchase of all of a Note also apply to the repurchase of such portion of such Note. Any purchase by the Company contemplated pursuant to the provisions of this Section 1117 shall be consummated by the delivery of the consideration to be received by the Holder according to the immediately following paragraph. Upon receipt by the Paying Agent or by the office or agency referred to in Section 1002 of a Repurchase Notice according to this Section 1117(a), the Holder of the Note in respect of which such Repurchase Notice was given shall (unless such Repurchase Notice is withdrawn as specified in the following paragraph) thereafter be entitled to receive solely the Repurchase Price with respect to such Note, plus accrued and unpaid interest through and including the Repurchase Date (subject to the right of the Holder as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Repurchase Date is an Interest Payment Date). Such Repurchase Price and accrued and unpaid interest shall be paid to such Holder (subject to the right of the Holder as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Repurchase Date is an Interest Payment Date) on the later of (x) the Business Day following the Repurchase Date with respect to such Note and (y) promptly following the time of delivery of such Note to the Paying Agent or to the office or agency referred to in Section 1002 by the Holder thereof in the manner required by this Section 1117. Notes in respect of which a Repurchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such Repurchase Notice unless such Repurchase Notice has first been validly withdrawn as specified in the following paragraph. A Repurchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent or to the office or agency referred to in Section 1002 at any time prior to the close of business on the Repurchase Date, specifying: (1) the certificate number of any Note in certificated form in respect of which such notice of withdrawal is being submitted; (2) the Principal Amount of the Note with respect to which such notice of withdrawal is being submitted; and 46 (3) the Principal Amount, if any, of such Note (which must be $1,000 or an integral multiple thereof) which remains subject to the original Repurchase Notice and which has been or will be delivered for purchase by the Company. The Paying Agent or the office or agency referred to in Section 1002 shall promptly notify the Company of the receipt by it of any Repurchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price. The Company may elect with respect to any Repurchase Date to pay the Purchase Price in respect of the Notes to be purchased pursuant to Section 1117(a) as of such Repurchase Date, in U.S. legal tender ("cash") or Common Stock, or in any combination of cash and Common Stock, subject to the conditions set forth in Section 1117(c). The Company shall designate, in the Company Notice delivered pursuant to Section 1117(d), (i) whether the Company will repurchase the Notes for cash or Common Stock or a combination thereof and (ii) if a combination thereof, the relative percentages of the Purchase Price of Notes which it will pay in cash and Common Stock; provided that the Company will pay cash for fractional interests in shares of Common Stock. Each Holder whose Notes are repurchased pursuant to this Section 1117 shall receive the same percentage of cash and/or Common Stock in payment of the Purchase Price for such Notes, except (i) as provided in Section 1117(c) with regard to the payment of cash in lieu of fractional interests in shares of Common Stock and (ii) that, in the event that the Company is unable to repurchase the Notes of a Holder or Holders for Common Stock because any necessary qualifications or registrations of the Common Stock under applicable federal or state securities laws cannot be obtained, the Company may repurchase the Notes of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Holders, except pursuant to this Section 1117(b) or Section 1117(c). If the Company elects to pay the Purchase Price, or a specified percentage thereof, in Common Stock, the Company shall, at least one Business Day before the Company Notice Date, deliver an Officers' Certificate to the Trustee specifying that the conditions to such manner of payment set forth in Section 1117(c) have been complied with and/or that the Company will use commercially reasonable efforts to cause them to be complied with. In addition, if the Company desires the Trustee to give the Company Notice 47 required by Section 1117(d), the Company shall so inform the Trustee at such time. (c) Payment By Issuance of Common Stock. If, pursuant to Section 1117(b), the Company elects to pay the Purchase Price of Notes in respect of which a Repurchase Notice pursuant to Section 1117(a) has been given, or a specified percentage thereof, by the issuance of a number of shares of Common Stock, such number of shares of Common Stock shall be equal to the quotient obtained by dividing (i) the amount of cash to which the Holders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Notes in cash by (ii) the Market Price of a share of Common Stock as of the applicable Repurchase Date, subject to the next succeeding paragraph. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay cash for the current market value of the fractional share. The current market value of a fraction of a share shall be determined by multiplying the Market Price as of the applicable Repurchase Date by such fraction and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Note repurchased, the number of shares of Common Stock shall be based on the aggregate amount of Notes to be repurchased. The Company's right to exercise its election to repurchase the Notes pursuant to Section 1117 through the issuance of shares of Common Stock shall be conditioned upon: (i) the Company having given timely Company Notice of election to purchase all or a specified percentage of the Securities with Common Stock as provided herein; (ii) the registration of the shares of Common Stock to be issued in respect of the payment of the specified percentage of the Purchase Price under the Exchange Act and the Securities Act, in each case, if required for the initial issuance thereof; (iii) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (iv) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture 48 and (B) the shares of Common Stock to be issued by the Company in payment of the specified percentage of the Purchase Price in respect of the Notes have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the specified percentage of the Purchase Price in respect of the Notes, will be validly issued, fully paid and nonassessable, and, in the case of such Officers' Certificate, stating that conditions (i), (ii) and (iii) above have been satisfied and, in the case of such Opinion of Counsel, stating that conditions (ii) and (iii) above have been satisfied. The Company may elect to pay the Purchase Price (or any portion thereof) in Common Stock only if the Common Stock is listed on a United States national securities exchange or quoted in an inter-dealer quotation system of any registered United States national securities association. If such conditions are not satisfied with respect to a Holder or Holders prior to or on the Repurchase Date and the Company elected to repurchase the Notes to be repurchased as of such Repurchase Date pursuant to this Section 1117 through the issuance of shares of Common Stock, the Company shall pay the entire Purchase Price in respect of such Notes of such Holder or Holders in cash. If required, the Company shall (i) disseminate the number of shares of Common Stock to be issued for each $1,000 Principal Amount of Notes as soon as practicable after determination thereof by news release or via the Company's website in accordance with the Company's customary practices and (ii) concurrently notify each securities exchange on which the Common Stock is then listed of such information. (d) Notice of Election. The Company's notices of election to repurchase with cash or Common Stock or any combination thereof (each, a "Company Notice") shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 107 hereof not less than 20 Business Days prior to the Repurchase Date (the "Company Notice Date"). In the event the Company has elected to pay a Purchase Price (or a specified percentage thereof) with Common Stock, the Company Notice shall: (1) state that each Holder will receive Common Stock with a Market Price determined as of a specified date prior to the Repurchase Date equal to such specified percentage of the Purchase Price of the Notes held by such Holder (except any cash amount to be paid in lieu of a fractional share); and 49 (2) set forth the method of calculating the Market Price and state that because the Market Price of Common Stock will be determined prior to the Repurchase Date, the Holders will bear the market risk with respect to the value of the Common Stock to be received from the date such Market Price is determined to the Repurchase Date. In any case, each Company Notice shall include a form of Repurchase Notice to be completed by a Holder and shall state: (i) the Purchase Price and Conversion Rate; (ii) the name and address of the Paying Agent and the Conversion Agent and the office or agency referred to in Section 1002; (iii) that Notes as to which a Repurchase Notice has been given may be converted only if the applicable Repurchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Notes must be surrendered to the Paying Agent or the office or agency referred to in Section 1002 to collect payment; (v) that the Purchase Price for any Note as to which a Repurchase Notice has been given and not withdrawn will be paid on the later of (A) the Business Day following the Repurchase Date or (B) promptly following the time of delivery of such Note as described in clause (iv) above; (vi) the procedures the Holder must follow under this Section 1117; (vii) briefly, the conversion rights of the Notes; and (viii) the procedures for withdrawing a Repurchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 1117(a)(1)(D) or Section 1119 hereof). At the Company's request, the Trustee shall give the Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of the Company Notice shall be prepared by the Company. (e) Covenants of the Company. All shares of Common Stock delivered upon repurchase of the Notes shall be newly issued shares or treasury shares, shall be fully paid and nonassessable and 50 shall be free from preemptive rights and free of any lien or adverse claim. (f) Procedure Upon Purchase. On the Business Day following the Repurchase Date, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company is acting as Paying Agent, shall segregate and hold in trust as provided in Section 1103) cash (in respect of a cash purchase or for fractional interests, as applicable), or shares of Common Stock, or a combination thereof, as applicable, sufficient to pay the aggregate Purchase Price in respect of the Notes or portions thereof to be repurchased pursuant to this Section 1117, plus (unless the Repurchase Date is an Interest Payment Date) accrued and unpaid interest thereon through and including the Repurchase Date. As soon as practicable after the Repurchase Date, the Company shall deliver to each Holder entitled to receive Common Stock, through the Paying Agent, a certificate for the number of full shares of Common Stock, as applicable, issuable in payment of such Purchase Price. The Person in whose name the certificate for Common Stock is registered shall be treated as a holder of record on the Business Day following the Repurchase Date. No payment or adjustment will be made for dividends on the Common Stock the record date for which occurred on or prior to the Repurchase Date. (g) Taxes. If a Holder of a Note is paid in Common Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of shares of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the shares of Common Stock to be issued in a name other than the Holder's name. The Paying Agent may, and, if so instructed by the Company, shall, refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. Section 1.10. New Article Fourteen. The Original Indenture is supplemented with respect to the Notes by inserting the following Article Fourteen: 51 ARTICLE FOURTEEN SUBSIDIARY GUARANTEES SECTION 1401. Subsidiary Guarantees. Each Subsidiary Guarantor, jointly and severally, hereby unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and their respective successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and any premium and interest on the Notes shall be promptly paid in full when due, whether at Stated Maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on premium and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly and severally obligated to pay the same immediately. The Subsidiary Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee shall not be discharged (other than in accordance with Article Four or Section 1404 of this Indenture) except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company or Subsidiary Guarantors, or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or Subsidiary Guarantors, any amount 52 paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby and (y) in the event of any declaration of acceleration of such obligations as provided in Article Five, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. In order to provide for just and equitable contribution among the Subsidiary Guarantors, in the event any payment or distribution is made by any Subsidiary Guarantor (a "Funding Subsidiary Guarantor") under its Subsidiary Guarantee, such Funding Subsidiary Guarantor shall be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including the Funding Subsidiary Guarantor) for all payments, damages and expenses incurred by the Funding Subsidiary Guarantor in discharging the Company's obligations with respect to the Notes or any other Subsidiary Guarantor's obligations with respect to any Subsidiary Guarantee. Each Subsidiary Guarantor agrees that it will not be entitled to exercise any right of subrogation or contribution in relation to the Holders of Notes in respect of any obligations guaranteed hereby until payment in full of all amounts guaranteed under this Section 1401. SECTION 1402. Execution and Delivery of Subsidiary Guarantees. To evidence its Subsidiary Guarantee set forth in Section 1401, each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit B to the Sixth Supplemental Indenture shall be endorsed by an officer of such Subsidiary Guarantor on each Note thereafter authenticated and delivered by the Trustee, that a supplement to this Indenture shall be executed on behalf of such Subsidiary Guarantor by its duly authorized officer in accordance with Section 1010 hereof and that such Subsidiary Guarantor shall deliver to the Trustee the Opinion of Counsel required by Section 1010 hereof. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 1401 shall remain in full force and 53 effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an officer whose signature is on a supplement to this Indenture or on the notation of Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a notation of Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder and whether upon original issue, registration of transfer, exchange or otherwise, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of each Person that is then a Subsidiary Guarantor. SECTION 1403. Subsidiary Guarantors May Consolidate, etc., on Certain Terms. No Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person), another Person whether or not affiliated with such Subsidiary Guarantor unless: (a) subject to the provisions of Section 1404 hereof, the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee in respect of the Notes, this Indenture and such Subsidiary Guarantor's Subsidiary Guarantee; (b) immediately after giving effect to such transaction, no Default or Event of Default exists; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation or merger and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Notwithstanding the foregoing, no Subsidiary Guarantor shall be permitted to consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person pursuant to the preceding sentence if such consolidation or merger is not permitted by Article Eight hereof. 54 In case of any such consolidation or merger and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the obligations of the Subsidiary Guarantor in respect of the Notes, this Indenture and such Subsidiary Guarantor's Subsidiary Guarantee, such successor Person shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles Eight and Ten hereof, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent any sale or other disposition of all or substantially all of the assets of a Subsidiary Guarantor to the Company. SECTION 1404. Releases of Subsidiary Guarantees. In the event of a sale or other disposition of all or substantially all of the assets of any Subsidiary Guarantor to a Person other than a Subsidiary or the Company in a transaction that does not violate any provisions of this Indenture, by way of merger, consolidation or otherwise, or a sale or other disposition (including, without limitation, by foreclosure) of all of the Capital Stock of any Subsidiary Guarantor to a Person other than a Subsidiary or the Company, then such Subsidiary Guarantor shall be released and relieved of any obligations under this Indenture and its Subsidiary Guarantee; provided that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all pledges of assets or other security interests that secure, any other Indebtedness of the Company or any other Subsidiary shall also terminate or be released upon such sale or other disposition. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the 55 release of any Subsidiary Guarantor from its obligations under this Indenture and its Subsidiary Guarantee. In the event of a release or discharge in full of all obligations of any Subsidiary Guarantor in respect of all of its guarantees of Indebtedness of the Company (other than the Notes) and the repayment of all Indebtedness, other than Permitted Subsidiary Indebtedness, of such Subsidiary Guarantor, such Subsidiary Guarantor shall, upon the written request of the Company to the Trustee, be released and relieved of any obligation under this Indenture and its Subsidiary Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that such Subsidiary Guarantor has been released or discharged in full from all of its obligations under all of its guarantees of Indebtedness of the Company (other than the Notes) and that all Indebtedness, other than Permitted Subsidiary Indebtedness, of such Subsidiary Guarantor has been repaid, the Trustee shall execute any documents reasonably required in order to evidence the release of such Subsidiary Guarantor from its obligations under this Indenture and its Subsidiary Guarantee. Any Subsidiary Guarantor that is designated a Non-Recourse Subsidiary in accordance with the terms of this Indenture shall be released from and relieved of its obligations under this Indenture and its Subsidiary Guarantee. Upon effectiveness of such designation, the Trustee shall execute any documents reasonably required in order to evidence the release of such Subsidiary Guarantor from its obligations under this Indenture and its Subsidiary Guarantee. Upon the commencement of an Investment Grade Status Period and delivery of the Officer's Certificate provided for in the first sentence of Section 1015, each Subsidiary Guarantor shall be released from and relieved of its obligations under this Indenture and its Subsidiary Guarantee. Upon delivery by the Company to the Trustee of an Officer's Certificate certifying the existence of an Investment Grade Status Period (which can be the same Officer's Certificate delivered pursuant to Section 1015), the Trustee shall execute any documents reasonably required in order to evidence the release of each Subsidiary Guarantor from its obligations under this Indenture and its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and any premium and interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture. 56 SECTION 1405. Limitation on Subsidiary Guarantor Liability. For purposes hereof, each Subsidiary Guarantor's liability shall be that amount from time to time equal to the aggregate liability of such Subsidiary Guarantor thereunder, but shall be limited to the lesser of (i) the aggregate amount of the obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term is defined in the Bankruptcy Act and in the Debtor and Creditor Law of the State of New York) or (B) left it with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into, after giving effect to the incurrence of existing Indebtedness immediately prior to such time; provided that, it shall be a presumption in any lawsuit or other proceeding in which such Subsidiary Guarantor is a party that the amount guaranteed pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of such Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate liability of such Subsidiary Guarantor is limited to the amount set forth in clause (ii). In making any determination as to the solvency or sufficiency of capital of a Subsidiary Guarantor in accordance with the previous sentence, the right of such Subsidiary Guarantor to contribution from other Subsidiary Guarantors and any other rights such Subsidiary Guarantor may have, contractual or otherwise, shall be taken into account. Section 1.11. New Article Fifteen The Original Indenture is supplemented with respect to the Notes by inserting the following Article Fifteen: ARTICLE FIFTEEN CONVERSION SECTION 1501. Conversion Privilege. A Holder of a Note may convert such Note into shares of Common Stock, but only during the period stated in paragraph 8 of the Notes and only upon the occurrence of one of the events set forth in this Section 1501. The number of shares of Common Stock issuable upon conversion of a Note per $1,000 of Principal Amount thereof (the "Conversion Rate") shall be that set forth in paragraph 8 in the Notes, subject to adjustment as herein set forth. The 57 "Conversion Price" in effect at any time shall be equal to $1,000 divided by the Conversion Rate. A Holder may convert a portion of the Principal Amount of a Note if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Note also apply to conversion of a portion of a Note. "Average Sale Price" means the average of the Sale Prices of a share of Common Stock for the shorter of: (i) 30 consecutive Trading Days ending on the last full Trading Day prior to the Time of Determination with respect to the rights, options, warrants, distribution or repurchase in respect of which the Average Sale Price is being calculated, or (ii) the period (x) commencing on the date next succeeding the first public announcement of (a) the issuance of rights, options or warrants, (b) the distribution or (c) the repurchase, in each case, in respect of which the Average Sale Price is being calculated and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants, distribution or repurchase in respect of which the Average Sale Price is being calculated, or (iii) the period, if any, (x) commencing on the date next succeeding (i) the Ex-Dividend Time with respect to the next preceding (a) issuance of rights, warrants or options or (b) distribution, or (ii) the trade date with respect to the next preceding repurchase, in each case, for which an adjustment is required by the provisions of Section 1506(4), 1507, 1508 or 1509 and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants, options, distribution or repurchase in respect of which the Average Sale Price is being calculated. If the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 1506(1), (2), (3) or (5) applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a manner determined in good faith by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of a share of Common Stock during such period. 58 "Time of Determination" means the time and date of (x) the earlier of (i) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case to which Sections 1507 and 1508 apply and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend" trading for such rights, options, warrants or distribution on the New York Stock Exchange or such other national or regional exchange or market on which the shares of the Common Stock are then listed or quoted or (y) the trade date with respect to the repurchase, in the case of an adjustment pursuant to Section 1509. The Notes shall be convertible only during the period specified in paragraph 8 of the Notes and only: (i) during any fiscal quarter of the Company commencing after June 30, 2003 for which the Sale Price exceeded 120% of the Conversion Price for at least 20 Trading Days in the 30 consecutive Trading Day period ending on the last Trading Day of the preceding fiscal quarter (it being understood for purposes of this Section 15.01 that the Conversion Price in effect at the close of business on each of the 30 consecutive Trading Days shall be used); (ii) as described below after the occurrence of the 98% Trading Exception; (iii) if such Note has been called for redemption, at any time on or after the date the notice of redemption has been given until the close of business on the Business Day immediately preceding the Redemption Date; or (iv) as described below after the occurrence of any of the specified corporate transactions described below. The Company shall, within the first five Business Days of each fiscal quarter, determine whether the Notes shall be convertible during such fiscal quarter as a result of the occurrence of an event specified in clause (i) above, and, if the Notes shall be so convertible, the Company shall promptly deliver to the Trustee written notice thereof. Whenever the Notes shall become convertible pursuant to this Section 1501, the Company or, at the Company's request, the Trustee in the name and at the expense of the Company, shall notify the Holders of the event triggering such convertibility in the manner provided in Section 107. 59 Conversion after the Occurrence of the 98% Trading Exception Notes may be surrendered for conversion during the five Business Day period (but only to the extent such five Business Day period occurs during the period specified in paragraph 8 of the Notes) immediately after any five consecutive Trading Day period in which the Trading Price per $1,000 Principal Amount of Notes, as determined following a request by a Holder according to the procedures described below, for each day of such five Trading Day period was less than 98% of the product of the Sale Price and the Conversion Rate as of such Trading Day (the "98% Trading Exception"). Notwithstanding the foregoing, if, on any Conversion Date that is on or after May 1, 2028, the Sale Price of a share of Common Stock is greater than the Conversion Price, the Holders of Notes surrendered for conversion shall receive, in lieu of Common Stock based on the Conversion Rate, cash or Common Stock or a combination of cash and Common Stock, at the Company's option, with a value equal to the Principal Amount of such Notes, plus accrued and unpaid interest as of the Conversion Date ("Principal Value Conversion"). If a Holder surrenders its Notes for a Principal Value Conversion, the Company shall notify such Holder by the second Trading Day following the Conversion Date whether the Company will pay such Holder all or a portion of the Principal Amount plus accrued and unpaid interest in cash, Common Stock or a combination of cash and Common Stock, and in what relative percentages. Any Common Stock delivered upon a Principal Value Conversion will be valued at the greater of the Conversion Price on the Conversion Date and the Applicable Stock Price as of the Conversion Date. The Company will pay such Holder any portion of the Principal Amount plus accrued and unpaid interest to be paid in cash, and deliver Common Stock with respect to any portion of the Principal Amount plus accrued and unpaid interest to be paid in Common Stock, no later than the third Business Day following the determination of the Applicable Stock Price. In connection with any conversion pursuant to the immediately preceding two paragraphs of this Section 1501, the Trustee shall not have any obligation to determine the Trading Price unless the Company has requested such determination, and the Company shall have no obligation to make such request unless a Holder provides the Company with reasonable evidence that the 98% Trading Exception will apply. At such time, the Company shall instruct the Trustee to determine the Trading Price beginning on the next Trading Day and on each successive Trading Day until the 60 Trading Price per $1,000 Principal Amount of Notes is greater than or equal to 98% of the product of the Sale Price of a share of Common Stock and the Conversion Rate as of such Trading Day. Conversion after the Occurrence of Specified Corporate Transactions If: (i) (A) the Company distributes to all holders of its Common Stock rights or warrants entitling them (for a period expiring within 45 days after the record date for the determination of the stockholders entitled to receive such distribution) to subscribe for or purchase shares of Common Stock at a price per share less than the average of the Sale Prices of a share of Common Stock over the ten Trading Day period immediately preceding, but not including, the date such distribution is first publicly announced by the Company, or (B) the Company distributes to all holders of its Common Stock, cash or other assets, debt securities or rights to purchase its securities, where the Fair Market Value of such distribution per share of Common Stock exceeds 10% of the Sale Price on the Trading Day immediately preceding the date such distribution is first publicly announced by the Company, then, in either case, the Notes may be surrendered for conversion at any time on and after the date that the Company gives notice of such distribution to the Holders, which shall be not less than 20 days prior to the Ex-Dividend Time for such distribution, until the earlier of the close of business on the Business Day immediately preceding, but not including, the Ex-Dividend Time or the date the Company publicly announces that such distribution will not take place (but only to the extent such period occurs during the period specified in paragraph 8 of the Notes); provided that no adjustment to the Conversion Rate or the ability of the Holder of a Note to convert will be made if the Holder will otherwise participate in such distribution without conversion; or (ii) the Company consolidates with or merges with or into another Person or is a party to a binding share exchange or conveys, transfers, sells, leases or otherwise disposes of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, then the Notes may be surrendered for conversion, if during the period specified in paragraph 8 of the Notes, at any time from and after the date 15 days prior to the anticipated effective date of the transaction and ending on and including the date 15 days after the consummation of the transaction. The Board of Directors shall determine the anticipated effective date of the transaction, and such 61 determination shall be conclusive and binding on the Holders and shall be publicly announced by the Company and posted on its web site or notified to the Holders by the Company or, at the Company's request, the Trustee in the name and at the expense of the Company, in either case, not later than two Business Days prior to such 15th day. For the avoidance of doubt, if such transaction constitutes a Change in Control, the Holders may exercise their rights under Section 1110. SECTION 1502. Conversion Procedure. To convert a Note, a Holder must satisfy the requirements in paragraph 8 of the Notes. The date on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). In the case of any conversion other than a Principal Value Conversion (which is covered by Section 1501): (i) Each Holder's rights to convert Notes into Common Stock are subject to the Company's right to elect instead to pay each such Holder the amount of cash determined pursuant to item (iii) below (or a combination of cash and shares of Common Stock) in lieu of delivering such Common Stock; provided, however, that if an Event of Default (other than a Default in a cash payment upon conversion of the Notes) shall have occurred and be continuing, the Company shall deliver Common Stock in accordance with this Article Fifteen, whether or not the Company has delivered a notice pursuant to item (ii) below to the effect that the Notes would be paid in cash or a combination of cash and Common Stock. (ii) Within two Business Days following the Conversion Date, the Company shall deliver to the Holder, through the Conversion Agent, written notice of whether such Notes shall be converted into Common Stock or paid in cash or a combination of cash and Common Stock (unless the Company shall have already done so pursuant to a notice of redemption pursuant to paragraph 7 of the Notes in respect of a Conversion Date occurring before the Redemption Date set forth in such notice). The Company shall deliver to the Holder through the Conversion Agent, no later than the third Business Day following the date on which the Applicable Stock Price is determined, the whole shares of Common Stock issuable upon the conversion, cash in lieu of such Common Stock and/or cash in lieu of any fractional shares pursuant to Section 1503, in each case, as applicable according to the foregoing notice and this Section 1502. As soon as practicable on or after such third Business Day, the Company shall deliver to each Holder entitled to receive whole 62 shares of Common Stock upon conversion, through the Paying Agent, a certificate for such whole shares of Common Stock. (iii) If the Company shall have notified the Holder that all or a portion of such Note shall be converted solely into cash, the Company shall deliver to the Holder surrendering such Note the amount of cash equal to (A) the Applicable Stock Price multiplied by (B) the Conversion Rate in effect with respect to such Conversion Date multiplied by (C) the multiple of $1,000 that equals the Principal Amount of such Note (or a portion of a Note). Except as required by item (i) above, the Company may not change its election with respect to the consideration to be delivered upon conversion of a Note once the Company has notified the Holder in accordance with item (ii) above. Anything herein to the contrary notwithstanding, in the case of Global Notes, conversion notices may be delivered and such Notes may be surrendered for conversion in accordance with the applicable procedures of the Depositary as in effect from time to time. The Person in whose name a certificate is registered representing Common Stock issued upon conversion of a Note shall be treated as a shareholder of record as of the Conversion Date; provided, however, that no surrender of a Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender (assuming all other requirements in paragraph 8 of the Notes have been satisfied) shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided further, that such conversion shall be at the Conversion Rate in effect on the date that such Note shall have been surrendered for conversion (assuming all other requirements in paragraph 8 of the Notes have been satisfied), as if the stock transfer books of the Company had not been closed. Upon conversion of a Note, such Person shall no longer be a Holder of such Note. If the Holder converts more than one Note at the same time, the number of shares of Common Stock issuable upon the conversion shall be computed based on the total Principal Amount of the Notes converted. 63 Upon surrender of a Note that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Note in an authorized denomination equal in Principal Amount to the unconverted portion of the Note surrendered. If the last day on which a Note may be converted is a Legal Holiday in a place where the Conversion Agent is located, the Note may be surrendered to such Conversion Agent on the next succeeding day that is not a Legal Holiday. SECTION 1503. Fractional Shares. The Company will not issue a fractional share of Common Stock upon conversion of a Note. Instead, the Company will pay cash for the current market value of the fractional share. The current market value of a fractional share shall be determined to the nearest 1/1,000th of a share by multiplying the Sale Price, on the last Trading Day prior to the Conversion Date, of a full share by the fractional amount and rounding the product to the nearest whole cent. SECTION 1504. Taxes on Conversion If a Holder converts a Note, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. The Holder, however, shall pay any such tax that is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may, and, if so instructed by the Company, shall, refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. SECTION 1505. Company to Provide Stock. The Company shall, prior to issuance of any Notes hereunder, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Notes into shares of Common Stock. 64 All shares of Common Stock delivered upon conversion of the Notes shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company will endeavor promptly to comply with all Federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Notes, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. SECTION 1506. Adjustment for Change in Capital Stock. If, after the Issue Date, the Company: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; (3) combines its outstanding shares of Common Stock into a smaller number of shares; (4) pays a dividend or makes a distribution on its Common Stock in shares of its Capital Stock (other than Common Stock or rights, warrants or options for its Capital Stock); or (5) issues by reclassification of its Common Stock any shares of its Capital Stock (other than rights, warrants or options for its Capital Stock), then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Note thereafter converted may receive the number of shares or other units of Capital Stock of the Company that such Holder would have owned immediately following such action if such Holder had converted the Note immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. 65 If after an adjustment a Holder of a Note upon conversion of such Note may receive shares or other units of two or more classes or series of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class or series of Capital Stock as is contemplated by this Article Fifteen with respect to the Common Stock, on terms comparable to those applicable to Common Stock in this Article Fifteen. SECTION 1507. Adjustment for Rights Issue. If, after the Issue Date, the Company distributes any rights, warrants or options to all holders of its Common Stock entitling them, for a period expiring within 60 days after the record date for such distribution, to purchase shares of Common Stock or securities convertible into Common Stock at a price per share less than the Sale Price as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula: R1 = R x (O+N) (O+(N x P)/M) where: R1 = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 1507 is being applied. N = the number of additional shares of Common Stock offered pursuant to the distribution. P = the offering price per share of such additional shares. M = the Average Sale Price, minus, for any (i) distribution to which Section 1506(4) applies or (ii) distribution to which Section 1508 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 1507 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 1507 applies, the Fair Market Value (on the 66 record date for the distribution to which this Section 1507 applies) of the (1) Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 1506(4) distribution, and (2) assets of the Company or debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 1508 distribution. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 1507 applies. No adjustment shall be made under this Section 1507 if the application of the formula stated above in this Section 1507 would result in a value of R1 that is equal to or less than the value of R. SECTION 1508. Adjustment for Other Distributions. If, after the Issue Date, the Company distributes to all holders of its Common Stock any of its assets or debt securities or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 1506 and distributions of rights, warrants or options referred to in Section 1507 and (y) cash dividends or other cash distributions that are paid out of consolidated current net income or earnings retained in the business as shown on the books of the Company), the Conversion Rate shall be adjusted, subject to the provisions of the last paragraph of this Section 1508, in accordance with the formula: R1 = R x M M-F where: R1 = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Average Sale Price, minus, for any distribution to which Section 1506(4) applies for which (i) the record date shall occur on or before the record date for the distribution to which this Section 67 1508 applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 1508 applies, the Fair Market Value (on the record date for the distribution to which this Section 1508 applies) of any Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 1506(4) distribution. F = the Fair Market Value (on the record date for the distribution to which this Section 1508 applies) of the assets, securities, rights, warrants or options to be distributed in respect of each share of Common Stock in the distribution to which this Section 1508 is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 1508 applies. For purposes of this Section 1508, the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the Common Stock the amount of which, together with (i) the amounts of all cash dividends on the Common Stock with Ex-Dividend Times occurring in the twelve-month period ending on the date prior to the Ex-Dividend Time with respect to the cash dividend to which this provision is being applied and (ii) the amounts of all repurchases of the type described in Section 1509 occurring in the twelve-month period ending on the date prior to the Ex-Dividend Time with respect to the cash dividend to which this provision is being applied for which no adjustment pursuant to this Article Fifteen has been made, equals or exceeds 5.0% of the Company's Market Capitalization on the date of the cash dividend to which this provision is being applied, such cash dividend together with each other cash dividend with an Ex-Dividend Time occurring in such twelve-month period shall be deemed to be an Extraordinary Cash Dividend and for purposes of applying the formula set forth above in this Section 1508, the value of "F" shall be equal to (w) the aggregate amount of such cash dividend together with the amounts of the other cash dividends with Ex-Dividend Times occurring in such period minus (x) the aggregate amount of such other cash dividends with Ex-Dividend Times occurring in such period for which a prior adjustment in the Conversion Rate was previously made under this Section 1508. In making the determinations required by the immediately preceding paragraph, the amount of cash dividends paid on a per 68 share basis and the average of the Sale Prices, in each case during the period specified in the immediately preceding paragraph, shall be appropriately adjusted to reflect the occurrence during such period of any event described in Section 1506. In the event that, with respect to any distribution to which this Section 1508 would otherwise apply, the difference "M-F" as defined in the above formula is less than $1.00 or "F" is equal to or greater than "M," then the adjustment provided by this Section 1508 shall not be made and in lieu thereof the provisions of Section 1515 shall apply to such distribution. SECTION 1509. Adjustment for Repurchases. In case the Company or any of its Subsidiaries shall repurchase (including by way of tender offer) shares of Common Stock, and the Fair Market Value of the sum of (i) the aggregate consideration paid for such Common Stock, (ii) the aggregate cash dividends and distributions of the type described in clause (y) of Section 1508 paid within the twelve months preceding the date of purchase of such shares of Common Stock in respect of which no adjustment pursuant to any section of this Article Fifteen previously has been made, and (iii) the aggregate of any amounts previously paid for the repurchase of Common Stock of a type described in this Section 1509 within the twelve months preceding the date of purchase of such shares of Common Stock in respect of which no adjustment pursuant to any section of this Article Fifteen previously has been made, exceeds 5.0% of Market Capitalization on the date of, and after giving effect to, such repurchase, then the Conversion Rate shall be adjusted in accordance with the formula: R1 = R x M M - P O-S where: R1 = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Average Sale Price. P = the excess, if any, of the aggregate repurchase price paid for all shares of Common Stock that are the subject of such repurchase over the aggregate value of such shares calculated at the Average Sale Price. 69 O = the number of shares of Common Stock outstanding prior to such repurchase. S = the number of shares of Common Stock that are the subject of such repurchase The adjustment shall become effective immediately after the trade date for the repurchase. SECTION 1510. When Adjustment May Be Deferred. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% (e.g., if the Conversion Rate is 4, an increase or decrease of .04 (1% of 4)) in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article Fifteen shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be, with one-half of a cent and 5/10,000ths of a share being rounded upwards. SECTION 1511. When No Adjustment Required. No adjustment need be made for a transaction referred to in Section 1506, 1507, 1508, 1509 or 1515 if Holders are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Notes become convertible into cash pursuant to the terms of Section 1508 or 1515, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. Notwithstanding any provision to the contrary in this Indenture, no adjustment shall be made in the Conversion Rate to the extent, but only to the extent, such adjustment results in the 70 following quotient being less than the par value of the Common Stock: (i) the Principal Amount divided by (ii) the Conversion Rate as so adjusted. SECTION 1512. Notice of Adjustment. Whenever the Conversion Rate is adjusted, the Company shall file with the Trustee and the Conversion Agent a notice of such adjustment and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The Conversion Agent will promptly mail such notice to Holders at the Company's expense. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. SECTION 1513. Voluntary Increase. The Company from time to time may increase the Conversion Rate by any amount and for any period of time; provided that such period is not less than 20 Business Days. Whenever the Conversion Rate is increased, the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 1506, 1507, 1508 or 1509. SECTION 1514. Notice of Certain Transactions. If: (1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 1506, 1507, 1508 or 1509 (unless no adjustment is to occur pursuant to Section 1511); or (2) the Company takes any action that would require a supplemental indenture pursuant to Section 1515; or (3) there is a liquidation or dissolution of the Company, 71 then the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution of the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 1515. Reorganization of Company; Special Distributions. If the Company is a party to a transaction subject to Section 801 (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of Common Stock immediately prior to such transaction do not receive securities, cash or other assets of the Company or any other Person) or a merger or binding share exchange that reclassifies or changes its outstanding Common Stock (including by resulting in the Company's becoming a subsidiary of a Parent Holding Company), the Person obligated to deliver securities, cash or other assets upon conversion of Notes shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Notes is an Affiliate of the successor Company, that issuer shall join in the supplemental indenture. The supplemental indenture shall provide that the Holder of a Note may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Note immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent Person or an Affiliate of a constituent Person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non-electing Holders. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article Fifteen. The successor Company shall mail to Holders a notice briefly describing the supplemental indenture. If this Section 1515 applies, none of Sections 1506, 1507, 1508 or 1509 shall apply. If the Company makes a distribution to all holders of its Common Stock of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that, but 72 for the provisions of the last paragraph of Section 1508, would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 1508, then, from and after the record date for determining the holders of Common Stock entitled to receive the distribution, a Holder of a Note that converts such Note in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Common Stock into which the Note is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Note immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution. SECTION 1516. Rights Issued Under the Outstanding Rights Agreement; Future Stockholder Rights Plans. The Company has entered into a Rights Agreement dated as of September 13, 2001 (the "Rights Agreement") with American Stock Transfer & Trust Company. Under the Rights Agreement, preferred share purchase rights (the "Rights") have been, and may in the future be, issued in respect of shares of Common Stock. The Rights Agreement provides that, upon conversion, Holders of Notes will receive, in addition to the shares of Common Stock issuable upon such conversion, the Rights attached to such shares or, if the Rights have separated from the Common Stock, the Rights that would have attached to such shares had the Rights not become separated. There shall be no adjustment pursuant to this Article Fifteen in connection with the distribution, separation, exercise or other action relating to the Rights; provided, however, that, if the Rights Agreement is amended, or the Company adopts another stockholder rights agreement of the nature of the Rights Agreement, such that, upon separation of the Rights (or rights under the future stockholder rights agreement) from the Common Stock in accordance with the Rights Agreement (or future stockholder rights agreement), Holders of Notes would not thereafter be entitled to receive Rights (or rights under the future stockholder rights agreement) in respect of the Common Stock issuable upon conversion, the Conversion Rate will be adjusted as provided in Section 1507 on the separation or rights distribution date, subject to readjustment in the event of expiration, termination or redemption of the Rights or rights under the future stockholder rights agreement (but, unless the condition to this sentence does not hold, no adjustment pursuant to this Article Fifteen in connection with the distribution, separation, exercise or other action relating to the Rights or rights under the future stockholder rights agreement shall be made). 73 SECTION 1517. Company Determination Final. Any determination that the Company or the Board of Directors must make pursuant to this Article Fifteen is conclusive in the absence of manifest error. SECTION 1518. Trustee's Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article Fifteen should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 1515 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Notes. The Trustee shall not be responsible for the Company's failure to comply with this Article Fifteen. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 1518 as the Trustee. SECTION 1519. Simultaneous Adjustments. If this Article Fifteen requires adjustments to the Conversion Rate under more than one of Sections 1506(4), 1507 or 1508, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 1506, second, the provisions of Section 1508 and, third, the provisions of Section 1507. SECTION 1520. Successive Adjustments. After an adjustment to the Conversion Rate under this Article Fifteen, any subsequent event requiring an adjustment under this Article Fifteen shall cause an adjustment to the Conversion Rate as so adjusted. Section 1.12. Effect of Article One. The supplements to the Original Indenture set forth in Article One of this Sixth Supplemental Indenture affect only the provisions of the Original Indenture as such provisions relate to the Notes, the series of Securities comprised of the Notes and the rights, remedies and obligations of the Company, the Subsidiary Guarantors, the Holders of Notes, the Trustee and other Persons set forth in the Original Indenture as such rights, remedies and obligations relate to the Notes. 74 ARTICLE 2 THE NOTES Section 2.01. Form and Terms. The Notes shall be issued in the form of one or more permanent global Notes substantially in the form set forth on Exhibit A hereto, duly executed by the Company and authenticated by the Trustee as provided in the Indenture. The terms of the Notes set forth on Exhibit A hereto are incorporated by reference herein as if set forth herein in their entirety. Section 2.02. Designation and Amount. (a) The Notes shall be entitled the "3 1/4% Senior Convertible Notes Due 2033" of the Company. (b) The Trustee shall authenticate and deliver Notes for original issue on the Issue Date in an aggregate Principal Amount of $250,000,000 upon Company Order for the authentication and delivery of Notes, without any further action by the Company; provided, however, that in the event the Company sells any Notes pursuant to the option granted pursuant to the Purchase Agreement, then the Trustee shall authenticate and deliver additional Notes for original issue on or after the Issue Date in an aggregate Principal Amount of up to $50,000,000 aggregate Principal Amount of Notes, upon Company Order for the authentication and delivery of Notes, without any further action by the Company. The aggregate Principal Amount of Notes that may be authenticated and delivered under the Indenture for original issue may not exceed the amount set forth in the foregoing sentence, subject to the proviso thereto. (c) The Company may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article Fifteen. Section 2.03. Registered Securities. The Notes shall be Registered Securities. ARTICLE 3 REPRESENTATIONS OF THE COMPANY Section 3.01. Authority of the Company. The Company is duly authorized to execute and deliver this Sixth Supplemental Indenture, and all corporate action on its part required for the execution and delivery of this Sixth Supplemental Indenture has been duly and effectively taken. Section 3.02. Truth of Recitals and Statements. The Company warrants that the recitals of fact and statements contained in this Sixth Supplemental 75 Indenture are true and correct, and that the recitals of fact and statements contained in all certificates and other documents furnished thereunder will be true and correct. ARTICLE 4 CONCERNING THE TRUSTEE Section 4.01. Acceptance of Trusts. The Trustee accepts the trusts hereunder and agrees to perform the same, but only upon the terms and conditions set forth in the Original Indenture and in this Sixth Supplemental Indenture, to all of which the Company and the respective Holders of the Notes at any time hereafter Outstanding agree by their acceptance thereof. Section 4.02. No Responsibility of Trustee for Recitals, Etc. The recitals and statements contained in this Sixth Supplemental Indenture shall be taken as the recitals and statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Sixth Supplemental Indenture, except that the Trustee is duly authorized by all necessary corporate actions to execute and deliver this Sixth Supplemental Indenture. ARTICLE 5 MISCELLANEOUS PROVISIONS Section 5.01. Relation to the Original Indenture. The provisions of this Sixth Supplemental Indenture shall become effective immediately upon the execution and delivery hereof. This Sixth Supplemental Indenture and all the terms and provisions herein contained shall form a part of the Original Indenture as fully and with the same effect as if all such terms and provisions had been set forth in the Original Indenture; provided, however, such terms and provisions shall be so included in this Sixth Supplemental Indenture solely for the benefit of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes. The Original Indenture is hereby ratified and confirmed and shall remain and continue in full force and effect in accordance with the terms and provisions thereof, as supplemented by this Sixth Supplemental Indenture and as otherwise supplemented with applicability with respect to the Notes, and the Original Indenture (as otherwise supplemented with applicability with respect to the Notes) and this Sixth Supplemental Indenture shall be read, taken and construed together as one instrument. Section 5.02. Meaning of Terms. Any term used in this Sixth Supplemental Indenture which is defined in the Original Indenture shall have the meaning specified in the Original Indenture (as otherwise supplemented with applicability with respect to the Notes), unless the context shall otherwise require. 76 Section 5.03. Counterparts of Supplemental Indenture. This Sixth Supplemental Indenture may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one instruments. Section 5.04. Governing Law. This Sixth Supplemental Indenture and the Notes shall be governed by and construed in accordance with the laws of the State of New York. 77 IN WITNESS WHEREOF, Pride International, Inc. has caused this Sixth Supplemental Indenture to be executed in its corporate name by a duly authorized officer and JPMorgan Chase Bank has caused this Sixth Supplemental Indenture to be executed by a duly authorized officer, all as of the date first above written. PRIDE INTERNATIONAL, INC. By: /s/ Earl W. McNiel -------------------------------------------- Earl W. McNiel Vice President and Chief Financial Officer JPMORGAN CHASE BANK, as Trustee BY: /s/ L. O'Brien -------------------------------------------- Name: L. O'Brien Title: Vice President ANNEX 1 PROJECTED PAYMENT SCHEDULE
- ----------------------------------------------------------------------------------------- Number of Trigger Met? Non- Semi-Annual (Yes=1, Contingent Contingent Date Periods Stock Price Bond Price No=0) Payment Payment - ----------------------------------------------------------------------------------------- 3/28/2003 14.28 1,000.00 11/15/2003 1.26 15.04 1,000.00 (20.49) 5/15/2004 1.00 15.68 1,000.00 (16.25) 11/15/2004 1.00 16.34 1,000.00 (16.25) 5/15/2005 1.00 17.02 1,000.00 (16.25) 11/15/2005 1.00 17.74 1,000.00 (16.25) 5/15/2006 1.00 18.49 1,000.00 (16.25) 11/15/2006 1.00 19.27 1,000.00 (16.25) 5/15/2007 1.00 20.08 1,000.00 (16.25) 11/15/2007 1.00 20.92 1,000.00 (16.25) 5/15/2008 1.00 21.81 1,000.00 0 (16.25) 11/15/2008 1.00 22.72 1,000.00 0 - (16.25) 5/15/2009 1.00 23.68 1,000.00 0 - (16.25) 11/15/2009 1.00 24.68 1,000.00 0 - (16.25) 5/15/2010 1.00 25.72 1,000.55 0 - (16.25) 11/15/2010 1.00 26.80 1,042.69 0 - (16.25) 5/15/2011 1.00 27.93 1,086.60 0 - (16.25) 11/15/2011 1.00 29.11 1,132.37 0 - (16.25) 5/15/2012 1.00 30.33 1,180.06 0 - (16.25) 11/15/2012 1.00 31.61 1,229.76 1 - (16.25) 5/15/2013 1.00 32.94 1,281.55 1 (3.07) (16.25) 11/15/2013 1.00 34.33 1,335.53 1 (3.20) (16.25) 5/15/2014 1.00 35.77 1,391.78 1 (3.34) (16.25) 11/15/2014 1.00 37.28 1,450.39 1 (3.48) (16.25) 5/15/2015 1.00 38.85 1,511.48 1 (3.63) (16.25) 11/15/2015 1.00 40.49 1,575.14 1 (3.78) (16.25) 5/15/2016 1.00 42.19 1,641.48 1 (3.94) (16.25) 11/15/2016 1.00 43.97 1,710.62 1 (4.10) (16.25) 5/15/2017 1.00 45.82 1,782.66 1 (4.28) (16.25) 11/15/2017 1.00 47.75 1,857.74 1 (4.46) (16.25) 5/15/2018 1.00 49.76 1,935.98 1 (4.64) (16.25) 11/15/2018 1.00 51.86 2,017.52 1 (4.84) (16.25) 5/15/2019 1.00 54.04 2,102.49 1 (5.04) (16.25) 11/15/2019 1.00 56.32 2,191.05 1 (5.26) (16.25) 5/15/2020 1.00 58.69 2,283.33 1 (5.48) (16.25) 11/15/2020 1.00 61.16 2,379.49 1 (5.71) (16.25) 5/15/2021 1.00 63.74 2,479.71 1 (5.95) (16.25) 11/15/2021 1.00 66.42 2,584.15 1 (6.20) (16.25) 5/15/2022 1.00 69.22 2,692.99 1 (6.46) (16.25) 11/15/2022 1.00 72.14 2,806.41 1 (6.73) (16.25) 5/15/2023 1.00 75.17 2,924.60 1 (7.02) (16.25) 11/15/2023 1.00 78.34 3,047.78 1 (7.31) (16.25) 5/15/2024 1.00 81.64 3,176.14 1 (7.62) (16.25) 11/15/2024 1.00 85.08 3,309.91 1 (7.94) (16.25) 5/15/2025 1.00 88.66 3,449.32 1 (8.27) (16.25) 11/15/2025 1.00 92.40 3,594.59 1 (8.62) (16.25) 5/15/2026 1.00 96.29 3,745.99 1 (8.99) (16.25) 11/15/2026 1.00 100.34 3,903.76 1 (9.36) (16.25) 5/15/2027 1.00 104.57 4,068.17 1 (9.76) (16.25) 11/15/2027 1.00 108.97 4,239.51 1 (10.17) (16.25) 5/15/2028 1.00 113.56 4,418.07 1 (10.60) (16.25) 11/15/2028 1.00 118.34 4,604.14 1 (11.05) (16.25) 5/15/2029 1.00 123.33 4,798.06 1 (11.51) (16.25) 11/15/2029 1.00 128.52 5,000.14 1 (12.00) (16.25) 5/15/2030 1.00 133.94 5,210.73 1 (12.50) (16.25) 11/15/2030 1.00 139.58 5,430.19 1 (13.03) (16.25) 5/15/2031 1.00 145.46 5,658.89 1 (13.58) (16.25) 11/15/2031 1.00 151.58 5,897.23 1 (14.15) (16.25) 5/15/2032 1.00 157.97 6,145.60 1 (14.74) (16.25) 11/15/2032 1.00 164.62 6,404.44 1 (15.36) (16.25) 5/15/2033 1.00 171.55 6,674.17 1 (16.01) (16.25) - ----------------------------------------------------------------------------------------- - --------------------------------------------------------------- Payment Upon Conversion Discount Present Immediately Factor using Value to Prior to Total Comparable Total Date Maturity Payments Yield Payments - --------------------------------------------------------------- 3/28/2003 1,000.00 1.00 1,000.00 11/15/2003 (20.49) 0.95 (19.47) 5/15/2004 (16.25) 0.91 (14.83) 11/15/2004 (16.25) 0.88 (14.24) 5/15/2005 (16.25) 0.84 (13.68) 11/15/2005 (16.25) 0.81 (13.14) 5/15/2006 (16.25) 0.78 (12.62) 11/15/2006 (16.25) 0.75 (12.12) 5/15/2007 (16.25) 0.72 (11.64) 11/15/2007 (16.25) 0.69 (11.18) 5/15/2008 (16.25) 0.66 (10.73) 11/15/2008 (16.25) 0.63 (10.31) 5/15/2009 (16.25) 0.61 (9.90) 11/15/2009 (16.25) 0.59 (9.51) 5/15/2010 (16.25) 0.56 (9.13) 11/15/2010 (16.25) 0.54 (8.77) 5/15/2011 (16.25) 0.52 (8.42) 11/15/2011 (16.25) 0.50 (8.09) 5/15/2012 (16.25) 0.48 (7.77) 11/15/2012 (16.25) 0.46 (7.46) 5/15/2013 (19.32) 0.44 (8.52) 11/15/2013 (19.45) 0.42 (8.24) 5/15/2014 (19.59) 0.41 (7.97) 11/15/2014 (19.73) 0.39 (7.70) 5/15/2015 (19.88) 0.38 (7.45) 11/15/2015 (20.03) 0.36 (7.21) 5/15/2016 (20.19) 0.35 (6.98) 11/15/2016 (20.35) 0.33 (6.76) 5/15/2017 (20.53) 0.32 (6.55) 11/15/2017 (20.71) 0.31 (6.34) 5/15/2018 (20.89) 0.29 (6.15) 11/15/2018 (21.09) 0.28 (5.96) 5/15/2019 (21.29) 0.27 (5.78) 11/15/2019 (21.51) 0.26 (5.61) 5/15/2020 (21.73) 0.25 (5.44) 11/15/2020 (21.96) 0.24 (5.28) 5/15/2021 (22.20) 0.23 (5.13) 11/15/2021 (22.45) 0.22 (4.98) 5/15/2022 (22.71) 0.21 (4.84) 11/15/2022 (22.98) 0.20 (4.70) 5/15/2023 (23.27) 0.20 (4.57) 11/15/2023 (23.56) 0.19 (4.44) 5/15/2024 (23.87) 0.18 (4.32) 11/15/2024 (24.19) 0.17 (4.21) 5/15/2025 (24.52) 0.17 (4.10) 11/15/2025 (24.87) 0.16 (3.99) 5/15/2026 (25.24) 0.15 (3.89) 11/15/2026 (25.61) 0.15 (3.79) 5/15/2027 (26.01) 0.14 (3.70) 11/15/2027 (26.42) 0.14 (3.61) 5/15/2028 (26.85) 0.13 (3.52) 11/15/2028 (27.30) 0.13 (3.44) 5/15/2029 (27.76) 0.12 (3.36) 11/15/2029 (28.25) 0.12 (3.28) 5/15/2030 (28.75) 0.11 (3.21) 11/15/2030 (29.28) 0.11 (3.14) 5/15/2031 (29.83) 0.10 (3.07) 11/15/2031 (30.40) 0.10 (3.00) 5/15/2032 (30.99) 0.09 (2.94) 11/15/2032 (31.61) 0.09 (2.88) 5/15/2033 (6,674.17) (6,706.43) 0.09 (586.96) - --------------------------------------------------------------- TOTAL PV 0.00 - ---------------------------------------------------------------
1-1 EXHIBIT A [FORM OF FACE OF NOTE] PRIDE INTERNATIONAL, INC. 3 1/4% CONVERTIBLE SENIOR NOTE DUE 2033 THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE ISSUE PRICE OF EACH NOTE IS $1,000 PER $1,000 OF PRINCIPAL AMOUNT, THE ISSUE DATE IS APRIL 28, 2003 AND THE COMPARABLE YIELD IS 8.25%, COMPOUNDED SEMI-ANNUALLY. HOLDERS OF THIS NOTE MAY OBTAIN INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, YIELD TO MATURITY AND THE PROJECTED PAYMENT SCHEDULE FOR THIS NOTE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: PRIDE INTERNATIONAL, INC., CHIEF FINANCIAL OFFICER, 5847 SAN FELIPE, SUITE 3300, HOUSTON, TEXAS 77057. [ADD LEGENDS REQUIRED BY SECTION 305 OF THE INDENTURE REFERRED TO ON THE OTHER SIDE OF THIS NOTE] [UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), SHALL ACT AS THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST THEREIN.]* - ----------------------- * On Global Notes only. A-1 CUSIP No. [ ] No. $ _____________________ Pride International, Inc., a Delaware corporation, promises to pay to _____________, or registered assigns, the Principal Amount of _________________________________ Dollars[, or such greater or lesser amount as indicated on the Schedule of Exchanges hereto,]* on May 1, 2033. This Note shall bear interest as specified on the other side of this Note. This Note is convertible as specified on the other side of this Note. All capitalized terms used herein without definition shall have the respective meanings assigned thereto in the Indenture referred to on the other side of this Note. Additional provisions of this Note are set forth on the other side of this Note. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] A-2 Dated: ________________ PRIDE INTERNATIONAL, INC. [SEAL] By:___________________________ Name: Title: ATTEST: __________________________ Name: Title: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. JPMORGAN CHASE BANK, as Trustee By:________________________ Authorized Officer A-3 [FORM OF REVERSE SIDE OF NOTE] 3 1/4% CONVERTIBLE SENIOR NOTE DUE 2033 1. Interest Pride International, Inc., a Delaware corporation (the "Company"), promises to pay interest on the Principal Amount of this Note at the rate per annum shown above. The Company shall pay such interest semi-annually in arrears on May 1 and November 1 of each year, commencing November 1, 2003. Interest will be paid on each Interest Payment Date to the Holder as of the immediately preceding Regular Record Date, even if such Interest Payment Date is a Redemption Date, Repurchase Date or Change in Control Purchase Date, but subject to the other provisions of this Note and the Indenture. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 28, 2003. Contingent interest on the Notes will accrue as provided in Section 1001 of the Indenture for any six-month interest period from May 1 to October 31 or November 1 to April 30 commencing on or after May 1, 2008 for which the Trading Price for each of the five Trading Days immediately preceding the first day of such six-month interest period equals 120% or more of $1,000 per $1,000 Principal Amount of Notes and will be treated like any other interest accruing on the Notes. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company promises to pay interest at the rate of 4 1/4% per annum on overdue principal, premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) interest on the Notes. 2. Method of Payment Subject to the surrender contemplated by this sentence and the other terms and conditions of the Indenture, the Company will make payments of the Redemption Price, Purchase Price, Change in Control Purchase Price and Principal Amount at Stated Maturity to the Holders that surrender Notes to a Paying Agent to collect such payments in respect of the Notes, together with accrued and unpaid interest to but excluding the Repurchase Date or through and including the Repurchase Date or Change in Control Purchase Date, as the case may be; provided that, if any Redemption Date, Repurchase Date or Change in Control Purchase Date is an Interest Payment Date, accrued and unpaid interest to but excluding the Repurchase Date or through and including the Repurchase Date or Change in Control Purchase Date, as the case may be, shall be paid to the Holder as of the immediately preceding Regular Record Date notwithstanding such Redemption Date, Repurchase Date or Change in Control Purchase Date. The Company will pay cash amounts in money of The United States of America that at the time of payment is legal tender for payment of public and private debts. The Company will make such cash payments (i) by wire transfer of immediately available funds with respect A-4 to Notes held in book-entry form or Notes held in certificated form with an aggregate Principal Amount in excess of $2,000,000 whose Holder has requested such method of payment and provided wire transfer instructions to the Paying Agent or (ii) by check payable in such money mailed to a Holder's registered address with respect to any other certificated Notes. 3. Paying Agent, Conversion Agent and Security Registrar Initially, JPMorgan Chase Bank, the Trustee under the Indenture, will act as Paying Agent, Conversion Agent and Security Registrar. The Company may appoint and change any Paying Agent, Conversion Agent or Security Registrar without notice, other than notice to the Trustee, provided that the Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency of the Security Registrar, Paying Agent or Conversion Agent. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent and/or Security Registrar. 4. Indenture This Note is one of a duly authorized series of Securities of the Company, designated as its 3 1/4% Convertible Senior Notes Due 2033, issued under an Indenture dated as of May 1, 1997, as amended and supplemented by a Sixth Supplemental Indenture dated as of the Issue Date and as otherwise supplemented with applicability with respect to the Notes (as so amended and supplemented, the "Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), except as provided in the Indenture. Capitalized terms used herein or on the face hereof and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of those terms. Those terms are incorporated herein by reference. The Notes are unsecured, general obligations of the Company limited to an aggregate Principal Amount specified in the Indenture. 5. Redemption at the Option of the Company No sinking fund is provided for the Notes. On or after May 5, 2008, the Notes are redeemable for cash as a whole at any time, or from time to time in part, at the option of the Company, at a Redemption Price equal to 100% of the Principal Amount of Notes to be redeemed. Such Redemption Price shall be paid in cash. A-5 6. Purchase by the Company at the Option of the Holder upon a Change in Control; Purchase by the Company at the Option of the Holder Subject to the terms and conditions of the Indenture, if any Change in Control occurs, the Company shall, at the option of the Holder, become obligated to repurchase all Notes for which a Change in Control Purchase Notice shall have been delivered as provided in the Indenture and not withdrawn on the date that is 35 Business Days after the occurrence of such Change in Control for a Change in Control Purchase Price equal to 100% of the Principal Amount. Such Change in Control Purchase Price shall be paid in cash. Subject to the terms and conditions of the Indenture, the Company shall, at the option of the Holder, become obligated to repurchase all Notes for which a Repurchase Notice shall have been delivered as provided in the Indenture and not withdrawn on any Repurchase Date for a Purchase Price equal to 100% of the Principal Amount. Such Purchase Price may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock or in any combination thereof. Holders have the right to withdraw any Change in Control Purchase Notice or Repurchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or securities if permitted by the Indenture) sufficient to pay the Change in Control Purchase Price or Purchase Price, as the case may be, of all Notes or portions thereof to be purchased as of the Change in Control Purchase Date or the Repurchase Date, as the case may be, plus (unless such date is an Interest Payment Date) accrued and unpaid interest through and including such date, is deposited with the Paying Agent on the Business Day following such date, then interest ceases to accrue on such Notes (or portions thereof) on and after such date and the Holders thereof shall have no other rights as such (other than the right to receive the Change in Control Purchase Price or Purchase Price, as the case may be, according to the Indenture upon surrender of such Note, plus accrued and unpaid interest through and including the Change in Control Purchase Date or the Repurchase Date, as the case may be, subject always to the right of Holders as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Change in Control Purchase Date or the Repurchase Date, as the case may be, is an Interest Payment Date). No interest on the Notes to be purchased will be payable by the Company on any Interest Payment Date subsequent to the Business Day following the Change in Control Purchase Date or Repurchase Date, as the case may be, if the requirements of the immediately preceding sentence are satisfied. A-6 7. Notice of Redemption Notice of redemption will be given in the manner provided in the Indenture not less than 30 days nor more than 60 days prior to the Redemption Date. If money sufficient to pay the Redemption Price of all Notes (or portions thereof) to be redeemed on the Redemption Date, plus (unless the Redemption Date is an Interest Payment Date) accrued and unpaid interest to but excluding the Redemption Date, is deposited with the Paying Agent prior to or on the Redemption Date, then interest ceases to accrue on such Notes or portions thereof on and after such Redemption Date, and the Holders thereof shall have no other rights as such (other than the right to receive the Redemption Price according to the Indenture upon surrender of such Note, plus accrued and unpaid interest to but excluding the Redemption Date, subject always to the right of Holders as of the immediate preceding Regular Record Date to receive such accrued and unpaid interest if the Redemption Date is an Interest Payment Date). No interest on redeemed Notes will be payable by the Company on any Interest Payment Date subsequent to the Redemption Date. Notes in denominations larger than $1,000 of Principal Amount may be redeemed in part but only in integral multiples of $1,000 of Principal Amount. 8. Conversion Subject to the provisions of the Indenture and this paragraph 8 and to the prior redemption or repurchase of any Note, a Holder of such Note may convert it into Common Stock, but only before the close of business on May 1, 2033 and only upon the occurrence of one of the events set forth in Section 1501 of the Indenture. A Note in respect of which a Holder has delivered a Change in Control Purchase Notice or Repurchase Notice exercising the option of such Holder to require the Company to purchase such Note may be converted only if the notice of exercise is withdrawn in accordance with the terms of the Indenture. The number of shares of Common Stock to be delivered upon conversion of a Note into Common Stock per $1,000 of Principal Amount shall be equal to the Conversion Rate. The initial Conversion Rate is 38.9045 shares of Common Stock per $1,000 Principal Amount, subject to adjustment in certain events described in the Indenture. The Company will pay cash in lieu of any fractional share of Common Stock. Each Holder's rights to convert Notes into Common Stock are subject to the Company's right to elect instead to pay each such Holder the amount of cash determined pursuant to Article Fifteen of the Indenture (or a combination of cash and Common Stock) in lieu of delivering such Common Stock. To convert a Note, a Holder must (i) complete and manually sign the conversion notice on the back of the Note (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent (or the office or agency referred to in Section 1002 of the Indenture) or, in the case of a Global Note, deliver a conversion notice according to the procedures of The Depository Trust Company ("DTC" or the "Depositary," which term includes any A-7 successor thereto), (ii) surrender the Note to a Conversion Agent by physical delivery or, in the case of a Global Note, according to the procedures of the Depositary, (iii) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee, (iv) make any payment required pursuant to the second succeeding paragraph and (v) pay any transfer or similar tax, if required. Conversion through the Depositary's book-entry conversion program is available for any Note that is held in an account maintained at the Depositary by any financial institution that is a participant in the Depositary. A Holder may convert a portion of a Note if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Except as provided in the next paragraph, no Holder of Notes will be entitled, upon conversion of any Note, to any actual cash payment or adjustment to the shares of Common Stock into which such Note is convertible on account of accrued and unpaid interest or on account of dividends on shares of Common Stock issued in connection with the conversion the record date for which occurred prior to the Conversion Date. On conversion of a Note, that portion of accrued and unpaid interest attributable to the period from (x) the later of the Issue Date and the date on which interest was last paid to (y) the Conversion Date with respect to the converted Note shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock and any cash payment for fractional shares (or cash or a combination of cash and Common Stock in lieu thereof as permitted by the Indenture) in exchange for the Note being converted pursuant to the terms hereof, and the Fair Market Value of such Common Stock and any cash payment for fractional shares (or cash or a combination of cash and Common Stock in lieu thereof as permitted by the Indenture) shall be treated as issued or paid, to the extent thereof, first in exchange for the interest accrued through the Conversion Date, and the balance, if any, of such Fair Market Value shall be treated as issued in exchange for the Principal Amount of the Note being converted pursuant to the provisions hereof. Notwithstanding the preceding paragraph, if the Conversion Date occurs after the close of business on a Regular Record Date but prior to the opening of business on the next succeeding Interest Payment Date, Holders of Notes at the close of business on such Regular Record Date will receive the interest payment on their Notes on the corresponding Interest Payment Date notwithstanding the conversion. Such Notes, upon surrender for conversion, must be accompanied by funds equal to the amount of interest payable on the Notes so converted; provided that no such payment need be made if (1) the Company has specified a Redemption Date that is after such Regular Record Date and prior to the next Interest Payment Date, (2) the Company has specified a Change in Control Purchase Date that is during such period or (3) only to the extent of overdue interest, any overdue interest exists at the time of conversion with respect to such Note. In addition, if the Conversion Date occurs on an Interest Payment Date, the Notes to be converted, upon surrender for conversion, must be accompanied by funds equal to the A-8 dividends on the shares of Common Stock issued in connection with the conversion the record date for which is the Conversion Date. The Conversion Rate will be adjusted for (i) dividends or distributions on Common Stock payable in Common Stock or other Capital Stock of the Company, (ii) subdivisions, combinations or certain reclassifications of Common Stock, (iii) distributions to all holders of Common Stock of certain rights, warrants or options to purchase Common Stock or securities convertible into Common Stock for a period expiring within 60 days after the applicable record date for such distribution at a price per share less than the Sale Price at the Time of Determination, (iv) distributions to all holders of Common Stock of assets or debt securities of the Company or certain rights, warrants or options to purchase securities of the Company (excluding distributions to which any of the preceding three clauses apply and certain cash dividends or other cash distributions), (v) cash distributions to substantially all holders of Common Stock that, together with all other all-cash distributions and consideration payable in respect of any tender or exchange offer by the Company or one of its Subsidiaries for Common Stock made within the preceding twelve months, exceeds 5.0% of the Company' s aggregate Market Capitalization on the date of the distribution, and (vi) repurchases (including by way of a tender offer) of Common Stock which involve an aggregate consideration that, together with (a) any cash and other consideration payable in respect of any tender or exchange offer by the Company or one of its Subsidiaries for Common Stock concluded within the preceding twelve months and (b) the amount of any all-cash distributions to all holders of Common Stock made within the preceding twelve months, exceeds 5.0% of the Company's aggregate Market Capitalization on the date of such repurchase. However, no adjustment need be made if Holders may participate in the transaction or in certain other cases. The Company from time to time may voluntarily increase the Conversion Rate. If the Company is a party to a consolidation, merger or binding share exchange of the type specified in the Indenture, or certain transfers of all or substantially all of its assets to another Person, or in certain other circumstances described in the Indenture, the right to convert a Note into Common Stock may be changed into a right to convert it into the kind and amount of securities, cash or other assets that the Holder would have received if the Holder had converted such Holder's Notes immediately prior to such transaction. 9. Conversion Arrangement on Call for Redemption Any Notes called for redemption, unless surrendered for conversion before the Redemption Date, may be deemed to be purchased from the Holders of such Notes at an amount not less than the Redemption Price, plus (unless the Redemption Date is an Interest Payment Date) accrued and unpaid interest to but excluding the Redemption Date, by one or more investment banks or other purchasers who may agree with the Company to purchase such Notes from the A-9 Holders and to make payment for such Notes to the Trustee in trust for such Holders. 10. Denominations; Transfer; Exchange The Notes initially issued are in permanent global form. Under certain circumstances described in the Indenture, Notes may also be issued in the form of certificated Notes in fully registered form, without coupons, in minimum denominations of $1,000 Principal Amount or in integral multiples thereof. A Holder may register a transfer or exchange of Notes in accordance with the Indenture. The Security Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental changes required by law or permitted by the Indenture. The Security Registrar need not register the transfer or exchange of any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes in respect of which a Repurchase Notice or a Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Note to be purchased in part, the portion of the Note not to be purchased) or any Notes for a period of 15 days before a selection of Notes to be redeemed. 11. Persons Deemed Owners The registered Holder of this Note may be treated as the owner of this Note for all purposes, except as otherwise provided in Section 203 of the Indenture. 12. Unclaimed Money for Notes Any money or other consideration deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of any amount with respect to the Notes and remaining unclaimed for three years after such amounts have become due and payable shall be paid to the Company on Company Request (unless otherwise required by mandatory provisions of the applicable escheat or abandoned or unclaimed property law), or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that, if any Notes then Outstanding are in certificated form, the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper in The Borough of Manhattan, The City of New York, and in such other Authorized Newspapers as the Trustee shall deem appropriate, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then A-10 remaining will (unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law) be repaid to the Company. 13. Amendment; Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes at the time Outstanding and (ii) certain defaults or noncompliance with certain provisions may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes in certain respects set forth in the Indenture. 14. Defaults and Remedies Under the Indenture, Events of Default include (i) default in the payment of interest that continues for a period of 30 days; (ii) default in (a) the payment (other than payment in shares of Common Stock or cash in lieu of fractional interests in shares of Common Stock, which is covered by clause (b) of this sentence) of the Principal Amount, Redemption Price, Purchase Price or Change in Control Purchase Price with respect to any Note when the same becomes due and payable or (b) the delivery of shares of Common Stock (or cash in lieu of fractional interests in shares of Common Stock) in accordance with the terms of the Indenture when such Common Stock or cash is required to be delivered following conversion or repurchase of a Note and such default is not remedied for a period of 10 days; (iii) failure by the Company to comply with the provisions of Sections 801 and 1110 of the Indenture; (iv) failure by the Company or any Subsidiary Guarantor for 30 days after notice from the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding to comply with any of its other agreements in the Indenture or the Notes; (v) any Subsidiary Guarantee shall for any reason cease to be, or be asserted by the Company or any Subsidiary Guarantor, as applicable, not to be, in full force and effect (except pursuant to the release of any such Subsidiary Guarantee in accordance with the Indenture); (vi) failure by the Company or any of its Subsidiaries to pay Indebtedness (other than Non-Recourse Indebtedness or Limited Recourse Indebtedness) of the Company or any Subsidiary when due within the applicable grace period, or the acceleration of such Indebtedness, which Indebtedness exceeds $10 million in the aggregate; and (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries that constitute a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary. If an Event of Default occurs and is continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes at the time Outstanding may declare the Principal Amount of the Notes to be due and payable immediately, except that, in A-11 the case of an Event of Default specified in clause (iv) above, if the Event of Default affects more than one series of Securities, the Trustee, or the Holders of not less than 25% in principal amount of the Outstanding Securities, of all series of Securities shall be required to make such declaration Certain events of bankruptcy or insolvency are Events of Default that will result in the Principal Amount of the Notes becoming due and payable immediately upon the occurrence of such Events of Default. As set forth in, and subject to the provisions of, the Indenture, no Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or trustee, or for any other remedy thereunder, unless certain conditions set forth in the Indenture have been satisfied. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations (including that, in some cases, a majority in principal amount of all Outstanding Securities is required), Holders of a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting certain proceedings, or exercising any trust or power conferred on the Trustee. 15. Trustee Dealings with the Company Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not Trustee. 16. Authentication This Note shall not be valid until an authorized officer of the Trustee manually signs the Certificate of Authentication on the other side of this Note. 17. Additional Amounts The Company is not obligated to pay Additional Amounts with respect to the Notes. 18. Abbreviations Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and UNIF TRANS MIN ACT (=Uniform Transfers to Minors Act). A-12 19. Governing Law THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. [20. Registration Rights Agreement The Holder of this Note is entitled to the benefits of the Registration Rights Agreement, dated April 28, 2003, between the Company and Morgan Stanley & Co. Incorporated.]+ The Company will furnish to any Holder upon written request and without charge a copy of the Indenture which has in it the text of this Note. Requests may be made to: Pride International, Inc. 5847 San Felipe, Suite 3300 Houston, Texas 77057 Attention: General Counsel - ------------------------------------ + On Transfer Restricted Notes only. A-13 CONVERSION NOTICE To convert this Note into Common Stock of the Company, check the box: [ ] To convert only part of this Note, state the Principal Amount to be converted (which must be $1,000 or an integral multiple of $1,000): $_______________________________ If you want the share certificate made out in another Person's name, fill in the form below: --------------------------- --------------------------- (Insert other Person's soc. sec. or tax ID no.) ___________________________ ___________________________ ___________________________ ___________________________ (Print or type other Person's name, address and zip code) ________________________________________________________________________________ Date:_____________________ Your Signature:_______________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee:____________________________________________________________ (Participant in a Recognized Signature Guarantee Medallion Program) A-14 TRANSFER NOTICE This Transfer Notice relates to $______________________ Principal Amount of the 3 1/4% Senior Convertible Notes Due 2033 of Pride International, Inc., a Delaware corporation, held by ______________________________ (the "Transferor"). (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Print or type assignee's name, address and zip code) ________________________________________________________________________________ (Insert assignee's social security or tax I.D. no.) and irrevocably appoint _______________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: ________________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Date: ___________ Signature Guarantee:____________________________________________________________ (Participant in a Recognized Signature Guarantee Medallion Program) In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred: CHECK ONE BOX BELOW (1)[ ] to Pride International, Inc.; or (2)[ ] to a "qualified institutional buyer" pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended, that is purchasing for its own account or for the account of a "qualified institutional buyer" to whom notice is given that the resale, pledge or other transfer is being made in reliance on Rule 144A; or (3)[ ] pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 144 under the Securities Act; or (4)[ ] pursuant to an effective registration statement under the Securities Act of 1933. A-15 Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that the Trustee may require, prior to registering any such transfer of the Notes such legal opinions (if box (3) is checked), certifications and other information as the Company or the Trustee has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. Unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): (5)[ ] The transferee is an Affiliate of the Company. Signature: ___________________________________ Date: ___________ Signature Guarantee:____________________________________________________________ (Participant in a Recognized Signature Guarantee Medallion Program) A-16 TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned (i) represents and warrants that it is purchasing this Note for its own account or for an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, (ii) is aware that the sale to it is being made in reliance on Rule 144, (iii) acknowledges that this Note and the Common Stock issuable upon conversion thereof have not been registered under the Securities Act and may not be sold except in compliance with the legend on the face of this Note and that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and (iv) is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:_______________ [Signature of executive officer of purchaser] Name:_______________________________ Title:______________________________ A-17 OPTION OF HOLDER TO ELECT PURCHASE UPON CHANGE IN CONTROL If you want to elect to have this Note purchased by the Company pursuant to Section 1110 of the Indenture, check this box: [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 1110 of the Indenture, state the Principal Amount you elect to have purchased: $_____________________ (in multiples of $1,000) Date:_____________ Your Signature: ______________________ (Sign exactly as your name appears on the Note) Tax Identification No.:_____________________ Signature Guarantee:____________________________________________________________ (Participant in a Recognized Signature Guarantee Medallion Program) A-18 [SCHEDULE OF EXCHANGES OF SECURITIES The following exchanges of a part of this Global Note for other Notes have been made:
Principal Amount Signature of of this authorized Amount of Amount of Global Note officer decrease in increase in following of Trustee or Date of Principal Amount of Principal Amount of such decrease Security Exchange this Global Note this Global Note (or increase) Custodian - -------- ---------------- ---------------- ------------- ---------
]* A-19 EXHIBIT B FORM OF NOTATION OF SUBSIDIARY GUARANTEE Each of the Subsidiary Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company thereunder, that: (a) the principal of and any premium and interest on the Notes shall be promptly paid in full when due, whether at Stated Maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on premium and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee thereunder shall be promptly paid in full or performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly and severally obligated to pay the same immediately. The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee pursuant to this Subsidiary Guarantee are expressly set forth in Article Fourteen of the Indenture, and reference is hereby made to such Article for the precise terms of this Subsidiary Guarantee. The terms of Article Fourteen of the Indenture are incorporated herein by reference. This is a continuing Subsidiary Guarantee and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's obligations under the Notes and the Indenture and shall inure to the benefit of the Trustee and the Holders of Notes and their successors and assigns and, in the event of any transfer or assignment of rights by any Holder of Notes or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. Notwithstanding the foregoing, the Subsidiary Guarantees may be discharged in accordance with Article Four of the Indenture and any Subsidiary Guarantor that satisfies the provisions of Section 1404 of the Indenture shall be released of its obligations hereunder. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. B-1 For purposes hereof, each Subsidiary Guarantor's liability will be that amount from time to time equal to the aggregate liability of such Subsidiary Guarantor hereunder, but shall be limited to the lesser of (i) the aggregate amount of the obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term is defined in the Bankruptcy Act and in the Debtor and Creditor Law of the State of New York) or (B) left it with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into, after giving effect to the incurrence of existing Indebtedness immediately prior to such time; provided that, it shall be a presumption in any lawsuit or other proceeding in which such Subsidiary Guarantor is a party that the amount guaranteed pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of such Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate liability of such Subsidiary Guarantor is limited to the amount set forth in clause (ii). The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Subsidiary Guarantor in accordance with the previous sentence, the right of such Subsidiary Guarantor to contribution from other Subsidiary Guarantors and any other rights such Subsidiary Guarantor may have, contractual or otherwise, shall be taken into account. Capitalized terms used herein have the same meanings given in that certain Indenture dated as of May 1, 1997 between Pride International, Inc. (formerly Pride Petroleum Services, Inc.) and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, as supplemented by the Sixth Supplemental Indenture dated as of April 28, 2003 between Pride International, Inc. and JPMorgan Chase Bank, as Trustee, and as otherwise supplemented with applicability with respect to the Notes, unless otherwise indicated. [Name of Subsidiary Guarantor] By:___________________________ Name:_________________________ Title:________________________ B-2 EX-4.4 4 h07587exv4w4.txt FORM OF SEVENTH SUPPLEMENTAL INDENTURE EXHIBIT 4.4 PRIDE INTERNATIONAL, INC. and JPMORGAN CHASE BANK Trustee. --------------------- FORM OF SEVENTH SUPPLEMENTAL INDENTURE Dated [ ], 2003 --------------------- THIS SEVENTH SUPPLEMENTAL INDENTURE, dated [ ], 2003, between Pride International, Inc., a Delaware corporation (successor by merger to Pride International, Inc., a Louisiana corporation formerly known as Pride Petroleum Services, Inc.) (the "Company"), and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), a New York banking corporation, as Trustee (the "Trustee") under the Indenture (as defined below). W I T N E S S E T H: WHEREAS, the Company has duly authorized the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), which are to be issued in one or more series, and the Company has heretofore made, executed and delivered to the Trustee its Indenture dated as of May 1, 1997 (the "Original Indenture") pursuant to which the Securities are issuable; WHEREAS, pursuant to the Sixth Supplemental Indenture dated as of April 28, 2003 (the "Sixth Supplemental Indenture"), the Company has issued its fifth series of Securities designated as its 3 1/4% Convertible Senior Notes Due 2033 (the "Notes"; the Original Indenture, as supplemented by this Seventh Supplemental Indenture and as otherwise supplemented with applicability with respect to the Notes, the "Indenture"); WHEREAS, Section 901 of the Original Indenture provides that, under certain conditions, the Company and Trustee, may, without the consent of any Holders, from time to time and at any time, enter into an indenture or indentures supplemental thereto, for the purposes, inter alia, of curing any ambiguity or correcting or supplementing any provision in the Indenture that may be defective or inconsistent with any other provision in the Indenture, and the Company desires, by means of this Seventh Supplemental Indenture, to correct Annex 1 to the Sixth Supplemental Indenture; and WHEREAS, all things necessary to make this Seventh Supplemental Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH that, for and in consideration of the premises and the purchase of the Notes by the Holders, the Company and the Trustee mutually covenant and agree, solely for the equal and proportionate benefit of the respective Holders from time to time of Notes, as follows: ARTICLE 1 SUPPLEMENT The Sixth Supplemental Indenture is supplemented by, effective as of the effective date of the Sixth Supplemental Indenture, revising Annex 1 to the Sixth Supplemental Indenture to read as follows: 1 ANNEX 1 PROJECTED PAYMENT SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------ Payment Upon Discount Conversion Factor Trigger Immediately using Present Number of Met? Non- Prior Total Value of Semi-Annual Stock Bond (Yes=1, Contingent Contingent to Total Comparable Total Date Periods Price Price No=0) Payment Payment Maturity Payments Yield Payments - ------------------------------------------------------------------------------------------------------------------------------------ 4/28/2003 14.28 1,000.00 1,000.00 1.00 1,000.00 11/1/2003 1.02 14.89 1,000.00 (16.52) (16.52) 0.96 (15.86) 5/1/2004 1.00 15.52 1,000.00 (16.25) (16.25) 0.92 (14.98) 11/1/2004 1.00 16.17 1,000.00 (16.25) (16.25) 0.89 (14.38) 5/1/2005 1.00 16.85 1,000.00 (16.25) (16.25) 0.85 (13.81) 11/1/2005 1.00 17.56 1,000.00 (16.25) (16.25) 0.82 (13.27) 5/1/2006 1.00 18.30 1,000.00 (16.25) (16.25) 0.78 (12.74) 11/1/2006 1.00 19.08 1,000.00 (16.25) (16.25) 0.75 (12.24) 5/1/2007 1.00 19.88 1,000.00 (16.25) (16.25) 0.72 (11.75) 11/1/2007 1.00 20.72 1,000.00 (16.25) (16.25) 0.69 (11.29) 5/1/2008 1.00 21.59 1,000.00 0 (16.25) (16.25) 0.67 (10.84) 11/1/2008 1.00 22.50 1,000.00 0 - (16.25) (16.25) 0.64 (10.41) 5/1/2009 1.00 23.45 1,000.00 0 - (16.25) (16.25) 0.62 (10.00) 11/1/2009 1.00 24.43 1,000.00 0 - (16.25) (16.25) 0.59 (9.60) 5/1/2010 1.00 25.46 1,000.00 0 - (16.25) (16.25) 0.57 (9.22) 11/1/2010 1.00 26.54 1,032.38 0 - (16.25) (16.25) 0.54 (8.86) 5/1/2011 1.00 27.65 1,075.87 0 - (16.25) (16.25) 0.52 (8.51) 11/1/2011 1.00 28.82 1,121.20 0 - (16.25) (16.25) 0.50 (8.17) 5/1/2012 1.00 30.03 1,168.43 0 - (16.25) (16.25) 0.48 (7.84) 11/1/2012 1.00 31.30 1,217.65 1 - (16.25) (16.25) 0.46 (7.53) 5/1/2013 1.00 32.62 1,268.95 1 (3.04) (16.25) (19.29) 0.45 (8.59) 11/1/2013 1.00 33.99 1,322.41 1 (3.17) (16.25) (19.42) 0.43 (8.31) 5/1/2014 1.00 35.42 1,378.12 1 (3.31) (16.25) (19.56) 0.41 (8.03) 11/1/2014 1.00 36.92 1,436.17 1 (3.45) (16.25) (19.70) 0.39 (7.77) 5/1/2015 1.00 38.47 1,496.68 1 (3.59) (16.25) (19.84) 0.38 (7.52) 11/1/2015 1.00 40.09 1,559.73 1 (3.74) (16.25) (19.99) 0.36 (7.27) 5/1/2016 1.00 41.78 1,625.44 1 (3.90) (16.25) (20.15) 0.35 (7.04) 11/1/2016 1.00 43.54 1,693.91 1 (4.06) (16.25) (20.31) 0.34 (6.82) 5/1/2017 1.00 45.37 1,765.27 1 (4.23) (16.25) (20.48) 0.32 (6.60) 11/1/2017 1.00 47.29 1,839.64 1 (4.41) (16.25) (20.66) 0.31 (6.39) 5/1/2018 1.00 49.28 1,917.14 1 (4.60) (16.25) (20.85) 0.30 (6.20) 11/1/2018 1.00 51.35 1,997.90 1 (4.79) (16.25) (21.04) 0.29 (6.01) 5/1/2019 1.00 53.52 2,082.07 1 (4.99) (16.25) (21.24) 0.27 (5.82) 11/1/2019 1.00 55.77 2,169.78 1 (5.21) (16.25) (21.46) 0.26 (5.65) 5/1/2020 1.00 58.12 2,261.19 1 (5.42) (16.25) (21.67) 0.25 (5.48) 11/1/2020 1.00 60.57 2,356.45 1 (5.65) (16.25) (21.90) 0.24 (5.32) 5/1/2021 1.00 63.12 2,455.72 1 (5.89) (16.25) (22.14) 0.23 (5.16) 11/1/2021 1.00 65.78 2,559.17 1 (6.14) (16.25) (22.39) 0.22 (5.01) 5/1/2022 1.00 68.55 2,666.98 1 (6.40) (16.25) (22.65) 0.22 (4.87) 11/1/2022 1.00 71.44 2,779.34 1 (6.67) (16.25) (22.92) 0.21 (4.73) 5/1/2023 1.00 74.45 2,896.42 1 (6.95) (16.25) (23.20) 0.20 (4.60) 11/1/2023 1.00 77.59 3,018.44 1 (7.24) (16.25) (23.49) 0.19 (4.48) 5/1/2024 1.00 80.85 3,145.60 1 (7.55) (16.25) (23.80) 0.18 (4.35) 11/1/2024 1.00 84.26 3,278.12 1 (7.86) (16.25) (24.11) 0.18 (4.24) 5/1/2025 1.00 87.81 3,416.22 1 (8.20) (16.25) (24.45) 0.17 (4.13) 11/1/2025 1.00 91.51 3,560.13 1 (8.54) (16.25) (24.79) 0.16 (4.02) 5/1/2026 1.00 95.36 3,710.11 1 (8.90) (16.25) (25.15) 0.16 (3.91) 11/1/2026 1.00 99.38 3,866.41 1 (9.28) (16.25) (25.53) 0.15 (3.82) 5/1/2027 1.00 103.57 4,029.30 1 (9.67) (16.25) (25.92) 0.14 (3.72) 11/1/2027 1.00 107.93 4,199.04 1 (10.07) (16.25) (26.32) 0.14 (3.63) 5/1/2028 1.00 112.48 4,375.93 1 (10.50) (16.25) (26.75) 0.13 (3.54) 11/1/2028 1.00 117.22 4,560.28 1 (10.94) (16.25) (27.19) 0.13 (3.46) 5/1/2029 1.00 122.16 4,752.40 1 (11.40) (16.25) (27.65) 0.12 (3.38) 11/1/2029 1.00 127.30 4,952.60 1 (11.88) (16.25) (28.13) 0.12 (3.30) 5/1/2030 1.00 132.66 5,161.24 1 (12.38) (16.25) (28.63) 0.11 (3.23) 11/1/2030 1.00 138.25 5,378.67 1 (12.90) (16.25) (29.15) 0.11 (3.15) 5/1/2031 1.00 144.08 5,605.26 1 (13.45) (16.25) (29.70) 0.10 (3.09) 11/1/2031 1.00 150.15 5,841.40 1 (14.01) (16.25) (30.26) 0.10 (3.02) 5/1/2032 1.00 156.47 6,087.48 1 (14.60) (16.25) (30.85) 0.10 (2.96) 11/1/2032 1.00 163.06 6,343.94 1 (15.22) (16.25) (31.47) 0.09 (2.90) 5/1/2033 1.00 169.93 6,611.19 1 (15.86) (16.25) (6,611.19) (6,643.30) 0.09 (587.21) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL PV 0.00 - ------------------------------------------------------------------------------------------------------------------------------------
2 ARTICLE 2 CONCERNING THE TRUSTEE Section 2.01. Acceptance of Trusts. The Trustee accepts the trusts hereunder and agrees to perform the same, but only upon the terms and conditions set forth in the Original Indenture (as otherwise supplemented with applicability with respect to the Notes) and in this Seventh Supplemental Indenture, to all of which the Company and the respective Holders of the Notes at any time hereafter Outstanding agree by their acceptance thereof. Section 2.02. No Responsibility of Trustee for Recitals, Etc. The recitals and statements contained in this Seventh Supplemental Indenture shall be taken as the recitals and statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Seventh Supplemental Indenture, except that the Trustee is duly authorized by all necessary corporate actions to execute and deliver this Seventh Supplemental Indenture. The execution by the Trustee of this Seventh Supplemental Indenture shall not be construed to be an approval or disapproval by the Trustee of the advisability of the action being taken herein by the Company. All the provisions of the Indenture with respect to the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect hereof as fully and with like effect as if set forth herein in full with such omissions, variations or insertions, if any, as may be appropriate to make the same conform to this Seventh Supplemental Indenture. ARTICLE 3 MISCELLANEOUS PROVISIONS Section 3.01. Relation to the Original Indenture. This Seventh Supplemental Indenture and all the terms and provisions herein contained shall form a part of the Original Indenture as fully and with the same effect as if all such terms and provisions had been set forth in the Original Indenture; provided, however, such terms and provisions shall be so included in this Seventh Supplemental Indenture solely for the benefit of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes. The Original Indenture is hereby ratified and confirmed and shall remain and continue in full force and effect in accordance with the terms and provisions thereof, as supplemented by this Seventh Supplemental Indenture and as otherwise supplemented with applicability with respect to the Notes, and the Original Indenture (as otherwise supplemented with applicability with respect to the Notes) and this Seventh Supplemental Indenture shall be read, taken and construed together as one instrument. Section 3.02. Meaning of Terms. Any term used in this Seventh Supplemental Indenture which is defined in the Original Indenture shall have the meaning specified in the Original Indenture (as otherwise supplemented with applicability with respect to the Notes), unless the context shall otherwise require. 3 Section 3.03. Counterparts of Supplemental Indenture. This Seventh Supplemental Indenture may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one instruments. Section 3.04. Governing Law. This Seventh Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 4 IN WITNESS WHEREOF, Pride International, Inc. has caused this Seventh Supplemental Indenture to be executed in its corporate name by a duly authorized officer and JPMorgan Chase Bank has caused this Seventh Supplemental Indenture to be executed by a duly authorized officer, all on the date first above written. PRIDE INTERNATIONAL, INC. By: ------------------------------------- Name: Title: JPMORGAN CHASE BANK, as Trustee By: ------------------------------------- Name: Title: EX-4.8 5 h07587exv4w8.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.8 REGISTRATION RIGHTS AGREEMENT Dated April 28, 2003 By and Between PRIDE INTERNATIONAL, INC., as Issuer, and MORGAN STANLEY & CO. INCORPORATED as Initial Purchaser 3 1/4% Convertible Senior Notes Due 2033 TABLE OF CONTENTS 1. Definitions.................................................................................................1 2. Shelf Registration..........................................................................................4 3. Liquidated Damages..........................................................................................5 4. Registration Procedures.....................................................................................6 5. Registration Expenses......................................................................................11 6. Indemnification............................................................................................12 7. Rules 144 and 144A.........................................................................................15 8. Miscellaneous..............................................................................................15
REGISTRATION RIGHTS AGREEMENT This registration rights agreement (the "Agreement") is dated as of April 28, 2003, by and between PRIDE INTERNATIONAL, INC., a Delaware corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED (the "Initial Purchaser"). This Agreement is entered into in connection with the Purchase Agreement, dated April 22, 2003 (the "Purchase Agreement"), by and between the Company and the Initial Purchaser, which provides for the sale by the Company to the Initial Purchaser of $250,000,000 aggregate principal amount of the Company's 3 1/4% Convertible Senior Notes Due 2033 (the "Firm Notes"), which are convertible into common stock of the Company, par value $.01 per share (the "Underlying Shares"), plus up to an additional $50,000,000 aggregate principal amount of the same which the Initial Purchaser may subsequently elect to purchase pursuant to the terms of the Purchase Agreement (the "Additional Notes" and, together with the Firm Notes, the "Convertible Notes"). The Convertible Notes are being issued pursuant to an Indenture dated as of May 1, 1997 (the "Original Indenture"), between the Company and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee, as amended and supplemented to date and as further amended and supplemented by the Sixth Supplemental Indenture thereto to be dated as of the date hereof (the Original Indenture, as so amended and supplemented, the "Indenture"). In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchaser and any subsequent Holder or Holders of the Convertible Notes or Underlying Shares as provided herein. The execution and delivery of this Agreement is a condition to the Initial Purchaser's obligation to purchase the Firm Notes under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: Additional Notes: See the second introductory paragraph hereof. Agreement: See the first introductory paragraph hereof. Amendment Effectiveness Deadline Date: See Section 4(p) hereof. Amount of Registrable Securities: (a) With respect to Convertible Notes constituting Registrable Securities, the aggregate principal amount of all such Convertible Notes outstanding, (b) with respect to Underlying Shares constituting Registrable Securities, the aggregate number of such Underlying Shares outstanding multiplied by a fraction (i) the numerator of which shall be 1,000 and (ii) the denominator of which shall be the Conversion Rate in effect at the time of computing the Amount of Registrable Securities or, if no such Convertible Notes are then outstanding, the last Conversion Rate that was in effect under such Indenture when any such Convertible Notes were last outstanding, and (c) with respect to combinations thereof, the sum of (a) and (b) for the relevant Registrable Securities. Business Day(s): Any day that is not a Saturday, Sunday or a day on which banking institutions in New York are authorized or required by law to be closed. Closing Date: April 28, 2003. Company: See the first introductory paragraph hereof. Controlling Person: See Section 6 hereof. Conversion Rate: As defined in the Indenture relating to the Convertible Notes upon the conversion of which such Underlying Shares were issued. Convertible Notes: See the second introductory paragraph hereof. Damages Payment Date: See Section 3(c) hereof. Deferral Period: See Section 3(b) hereof. Effectiveness Date: The 180th day after the Closing Date. Effectiveness Period: See Section 2(a) hereof. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. Filing Date: The 90th day after the Closing Date. Firm Notes: See the second introductory paragraph hereof. Holder(s): Any holder of Registrable Securities. Indemnified Holder: See Section 6 hereof. Indemnified Person: See Section 6 hereof. Indemnifying Person: See Section 6 hereof. Indenture: See the second introductory paragraph hereof. Initial Purchaser: See the first introductory paragraph hereto. Initial Shelf Registration: See Section 2(a) hereof. Inspector(s): See Section 4(l) hereof. Liquidated Damages: See Section 3(a) hereof. 2 Original Indenture: See second introductory paragraph hereof. Person: An individual, partnership, corporation, limited liability company, unincorporated association, trust, joint venture or similar entity, or a governmental agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. Purchase Agreement: See the second introductory paragraph hereof. Records: See Section 4(l) hereof. Registrable Security(ies): All Convertible Notes and all Underlying Shares upon original issuance thereof and at all times subsequent thereto until the earliest to occur of (i) a Registration Statement covering such Convertible Notes and Underlying Shares having been declared effective by the SEC and such Convertible Notes and Underlying Shares having been disposed of in accordance with such effective Registration Statement, (ii) such Convertible Notes and Underlying Shares having been sold in compliance with Rule 144 or could (except with respect to affiliates of the Company within the meaning of the Securities Act) be sold in compliance with Rule 144(k), or (iii) such Convertible Notes and any Underlying Shares ceasing to be outstanding. Registration Default: See Section 3(a) hereof. Registration Statement: Any registration statement of the Company filed with the SEC pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. 3 SEC: The Securities and Exchange Commission. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. Shelf Registration: See Section 2(b) hereof. Shelf Registration Statement: See Section 2(b) hereof. Subsequent Shelf Registration: See Section 2(b) hereof. TIA: The Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder. Trustee: The Trustee under the Indenture. Underlying Shares: See the second introductory paragraph hereof. 2. Shelf Registration. (a) Shelf Registration. The Company shall use its reasonable best efforts to file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Securities (the "Initial Shelf Registration") on or prior to the Filing Date. The Initial Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by Holders in the manner or manners set forth in such Registration Statement and in Rule 415. The Company shall not permit any securities other than the Registrable Securities to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below). The Company shall use its reasonable best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep such Initial Shelf Registration continuously effective under the Securities Act until the earliest of (i) the date on which all the Registrable Securities covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) the date on which all the Registrable Securities (x) held by Persons who are not affiliates of the Company may be resold pursuant to Rule 144(k) under the Securities Act or (y) cease to be outstanding, or (iii) the date on which a Subsequent Shelf Registration covering all of the Registrable Securities has been declared effective under the Securities Act (the "Effectiveness Period"). (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the 4 order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company shall use its reasonable best efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such Registration Statement continuously effective until the termination of the Effectiveness Period. As used herein the term "Shelf Registration" means the Initial Shelf Registration and any Subsequent Shelf Registration and the term "Shelf Registration Statement" means any Registration Statement filed in connection with a Shelf Registration. (c) Supplements and Amendments. The Company shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of the majority in Amount of Registrable Securities covered by such Registration Statement. 3. Liquidated Damages. (a) The Company and the Initial Purchaser agree that the Holders of Registrable Securities will suffer damages if the Company fails to fulfill its obligations under Section 2 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay liquidated damages on the Registrable Securities ("Liquidated Damages") under the circumstances and to the extent set forth below (each of which shall be given independent effect; each a "Registration Default"): (i) if the Initial Shelf Registration is not filed on or prior to the Filing Date, then commencing on the day after the Filing Date, Liquidated Damages shall accrue on the Registrable Securities at a rate of 0.50% per annum on the Amount of Registrable Securities for the first 90 days immediately following the Filing Date, such Liquidated Damages increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; (ii) if the Company fails to use reasonable best efforts and the Initial Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date, then commencing one day after the Effectiveness Date, Liquidated Damages shall accrue on the Registrable Securities at a rate of 0.50% per annum on the Amount of Registrable Securities for the first 90 days immediately following the day after such Effectiveness Date, such Liquidated Damages increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; and (iii) if a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective or available at any time during the Effectiveness Period (other than as permitted under Section 3(b)), then Liquidated Damages shall accrue on the Registrable Securities at a rate of 0.50% per annum on the Amount of Registrable Securities for the first 90 days commencing on the day such Shelf Registration ceases to be so effective or available, such Liquidated Damages increasing by an additional 0.50% per annum at the beginning of each such subsequent 90-day period; 5 provided, however, that Liquidated Damages on the Registrable Securities may not accrue under more than one of the foregoing clauses (i), (ii) or (iii) at any one time and at no time shall the aggregate amount of Liquidated Damages accruing exceed in the aggregate 1.0% per annum of the Amount of Registrable Securities; provided, further, however, that (1) upon the filing of the Shelf Registration as required hereunder (in the case of clause (a)(i) of this Section 3), (2) upon the effectiveness of the Shelf Registration as required hereunder (in the case of clause (a)(ii) of this Section 3), or (3) upon the effectiveness or availability of a Shelf Registration which had ceased to remain effective or available (in the case of (a)(iii) of this Section 3), Liquidated Damages on the Registrable Securities as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. It is understood and agreed that, notwithstanding any provision to the contrary, so long as any Registrable Security is then covered by an effective Shelf Registration Statement, no Liquidated Damages shall accrue on such Registrable Security. (b) Notwithstanding paragraph (a) of this Section 3, the Company shall be permitted to suspend the effectiveness or availability of a Shelf Registration for any reason whatsoever for up to 30 consecutive days in any 90 day period, for a total of not more than 60 days in any calendar year, without paying Liquidated Damages. Any period during which the availability of the Shelf Registration is suspended in accordance with this Section 3(b) shall be referred to as a "Deferral Period." (c) So long as Convertible Notes remain outstanding, the Company shall notify the Trustee within two Business Days after each and every date on which an event occurs in respect of which Liquidated Damages is required to be paid. Any amounts of Liquidated Damages due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 3 will be payable in cash semi-annually on each May 1 and November 1 (each a "Damages Payment Date"), commencing with the first such date occurring after any such Liquidated Damages commences to accrue, to Holders to whom regular interest is payable on such Damages Payment Date with respect to Convertible Notes that are Registrable Securities and to Persons that are registered Holders 15 days prior to such Damages Payment Date with respect to Underlying Shares that are Registrable Securities. The amount of Liquidated Damages for Registrable Securities will be determined by multiplying the applicable rate of Liquidated Damages by the Amount of Registrable Securities outstanding on the Damages Payment Date following such Registration Default in the case of the first such payment of Liquidated Damages with respect to a Registration Default (and thereafter at the next succeeding Damages Payment Date until the cure of such Registration Default), multiplied by a fraction, the numerator of which is the number of days such Liquidated Damages rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 4. Registration Procedures. In connection with the filing of any Registration Statement pursuant to Section 2 hereof, the Company shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof and pursuant thereto, and in connection with any Registration Statement filed by the Company hereunder, the Company shall: 6 (a) Use its reasonable best efforts to prepare and file with the SEC on or prior to the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 hereof, and use its reasonable best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that before filing any Registration Statement or Prospectus or any amendments or supplements thereto (other than any post-effective amendment to any Registration Statement or supplement to any Prospectus filed solely pursuant to the third sentence of the second paragraph of Section 4(p) hereof), the Company shall furnish to and afford the Holders of the Registrable Securities covered by such Registration Statement a reasonable opportunity to review copies of all such documents proposed to be filed, other than documents filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act that are deemed incorporated by reference in such Registration Statement or Prospectus (in each case, where possible, at least five Business Days prior to such filing, or such later date as is reasonable under the circumstances). The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in Amount of Registrable Securities covered by such Registration Statement shall reasonably object. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented. Subject to Section 3(b), the Company shall be deemed not to have used its reasonable best efforts to keep a Registration Statement effective during the Effectiveness Period if it voluntarily takes any action that would result in selling Holders of the Registrable Securities covered thereby not being able to sell such Registrable Securities during that period unless such action is required by applicable law or unless the Company complies with this Agreement, including without limitation the provisions of Section 4(j) hereof. (c) Notify the selling Holders of Registrable Securities promptly (but in any event within two Business Days), (i) when a Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the 7 Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (iv) of the Company's determination that a post-effective amendment to a Registration Statement would be appropriate. (d) Use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus and, if any such order is issued, to use its reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If requested, furnish to each selling Holder of Registrable Securities and a single counsel to such Holders (chosen in accordance with Section 5(b)) at the sole expense of the Company, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (f) Deliver to each selling Holder of Registrable Securities and a single counsel to such Holders (chosen in accordance with Section 5(b)) at the sole expense of the Company, as many copies of the Prospectus (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the second paragraph of Section 4(p) hereof, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities and the agents and dealers (if any), in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (g) Prior to any public offering of Registrable Securities, to use its reasonable best efforts to register or qualify, to the extent required by applicable law, and to cooperate with the selling Holders of Registrable Securities in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder reasonably requests; provided, however, that the Company agrees (i) to cause the Company's counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 4(g); and (ii) to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. 8 (h) Cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such shares of Registrable Securities to be in such denominations and registered in such names as the Holders may reasonably request. (i) Use its reasonable best efforts to cause the Registrable Securities covered by any Shelf Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (j) Upon the occurrence of any event contemplated by paragraph 4(c)(ii), 4(c)(iii) or 4(c)(iv) hereof, as promptly as practicable give notice to suspend the availability of the Registration Statement as contemplated by Section 3(b) and, subject to Section 3(b), prepare and (subject to Section 4(a) hereof) file with the SEC, at the sole expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee with certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Securities. (l) Make available for inspection by any selling Holder of such Registrable Securities being sold and any attorney, accountant or other agent retained by any such selling Holder (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours at such time or times as shall be mutually convenient for the Company and the Inspectors as a group, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable Inspectors to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of such Holders by one firm of counsel, which firm shall be Vinson & Elkins L.L.P. until another firm shall be designated pursuant to Section 5(b). Records that the Company determines, in good faith, to be confidential and any Records that it notifies the Inspectors are confidential shall not be disclosed by any Inspector unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or material omission in such Registration Statement if such Registration Statement is then 9 available, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or any transactions contemplated hereby or arising hereunder or (iv) the information in such Records has been made generally available to the public other than through the acts of such Inspector; provided, however, that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clauses (ii) or (iii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this paragraph (l)). Each Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information to the extent such actions are otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector, unless and until such information in such Records has been made generally available to the public other than as a result of a breach of this Agreement. (m) Provide (i) the Holders of the Registrable Securities to be included in such Registration Statement and not more than one counsel for all the Holders of such Registrable Securities chosen in accordance with Section 5(b), (ii) the sales or placement agent, if any, and (iii) one counsel for such agents, reasonable opportunity to participate in the preparation of such Registration Statement, each Prospectus included therein or filed with the SEC, and each amendment or supplement thereto. (n) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (o) Cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the Trustee and the Holders of the Registrable Securities to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. (p) Use its reasonable best efforts to take all other steps necessary or advisable to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company the Notice and Questionnaire attached to the Offering Memorandum dated April 22, 2003 used in connection with the offer of the 10 Convertible Notes and such other information regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request to the extent necessary or advisable to comply with the Securities Act. The Company may exclude from such registration the Registrable Securities of any seller if such seller fails to furnish such Notice and Questionnaire and such information within 20 Business Days after receiving such request. From and after the date a Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a Notice and Questionnaire is delivered, and in any event within ten (10) Business Days after such date, if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other document required by the SEC so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Registration Statement, the Company will use its reasonable best efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as practicable, but in any event by the date (the "Amendment Effectiveness Deadline Date") that is thirty (30) days after the date such post-effective amendment is required by this clause to be filed; provided, that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions required pursuant to this sentence as if such Holder had delivered such Notice and Questionnaire on the date of the expiration of the Deferral Period. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed so that the information previously furnished to the Company by such seller is not materially misleading and does not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon actual receipt of any notice from the Company of the happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii) or 4(c)(iv) hereof, or upon the suspension of the availability of the Registration Statement as contemplated by Section 3(b), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(j) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed. 5. Registration Expenses. (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company, including, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as provided in Section 4(g) hereof)), (ii) printing expenses, including, without 11 limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and reasonable fees and disbursements of one special counsel for the sellers of Registrable Securities (subject to the provisions of Section 5(b) hereof), (v) Securities Act liability insurance, if the Company desires such insurance, (vi) fees and expenses of all other Persons retained by the Company, (vii) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (viii) the expense of any annual audit, (ix) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, and (x) the expenses relating to printing, word processing and distributing all Registration Statements, securities sales agreements and any other documents necessary in order to comply with this Agreement. Notwithstanding anything in this Agreement to the contrary, each Holder shall pay all underwriting discounts and brokerage commissions with respect to any Registrable Securities sold by it. (b) The Company shall reimburse the Holders of the Registrable Securities being registered in a Shelf Registration for the reasonable fees and disbursements of not more than one counsel chosen by the Holders of a majority in Amount of Registrable Securities to be included in such Registration Statement, which counsel shall be Vinson & Elkins L.L.P. until another firm shall be designated pursuant to this Section 5(b). 6. Indemnification. The Company agrees to indemnify and hold harmless (i) the Initial Purchaser, (ii) each Holder, (iii) each Person, if any, who controls (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) any of the foregoing (any of the Persons referred to in this clause (iii) being hereinafter referred to as a "Controlling Person"), (iv) the respective officers, directors, partners, employees, representatives and agents of the Initial Purchaser, the Holders (including predecessor Holders) or any Controlling Person (any person referred to in clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an "Indemnified Holder"), from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, reasonable legal fees and other expenses reasonably incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Holder furnished to the Company in writing by such Holder expressly for use in therein; provided, however, that the Company shall not be liable to any Indemnified Holder under the indemnity agreement of this paragraph with respect to any preliminary prospectus to the extent that any such loss, claim, damage, liability, judgment or expense of such Indemnified Holder results from the fact that such Indemnified Holder sold Registrable Securities under a Registration Statement to a Person to whom it shall be established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (or of the preliminary prospectus as then amended or supplemented if the Company shall have furnished such Indemnified Holder with such amendment or supplement thereto on a timely basis), in any case where such delivery is required by applicable law and the loss, claim, damage, liability or 12 expense of such Indemnified Holder results from an untrue statement or omission of a material fact contained in the preliminary prospectus, which was corrected in the Prospectus (or in the preliminary prospectus as then amended or supplemented if the Company shall have furnished such Indemnified Holder with such amendment or supplement thereto, as the case may be, on a timely basis). The Company shall notify Indemnified Holder promptly of the institution, threat or assertion of any claim, proceeding (including any governmental investigation) or litigation in connection with the matters addressed by this Agreement, which involves the Company or such Indemnified Holder. Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, officers and each Person who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Holder, but only with reference to such losses, claims, damages or liabilities that are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to a Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement or Prospectus, or any amendment or supplement thereto or any related preliminary prospectus. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly notify the Person or Persons against whom such indemnity may be sought (each an "Indemnifying Person") in writing, and such Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) such Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) such Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to such Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include an Indemnifying Person and an Indemnified Person and representation of both parties by the same counsel would be inappropriate due to a conflict of interests between them. It is understood that an Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the indemnified Holders shall be designated in writing by the Holders of the majority in Amount of Registrable Securities, and any such separate firm for the Company, its directors, respective officers and such control Persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, such Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the 13 prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. If the indemnification provided for in the first and second paragraphs of this Section 6 is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Person on the one hand and the Indemnified Person on the other hand pursuant to the Purchase Agreement or from the offering of the Registrable Securities pursuant to any Shelf Registration or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Person on the one hand and the Indemnified Person on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and any Indemnified Holder on the other shall be deemed to be in the same proportion as the total net proceeds from the initial offering and sale of Convertible Notes (before deducting expenses) received by the Company bear to the total net proceeds received by such Indemnified Holder from sales of Registrable Securities giving rise to such obligations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Each of the Company and the Initial Purchaser agrees that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, in no event shall any Holder be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of the Registrable Securities pursuant to a Shelf Registration Statement exceed the amount of damages which such Holder would have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 14 The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution agreements contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any Person controlling any Holder or by or on behalf of the Company, its officers or directors or any other Person controlling the Company and (iii) acceptance of and payment for any of the Registrable Securities. 7. Rules 144 and 144A. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, for so long as any Registrable Securities remain outstanding, if at any time the Company is not required to file such reports, it will, upon the request of any Holder or beneficial owner of Registrable Securities, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. The Company further covenants that, for so long as any Registrable Securities remain outstanding, it will use its reasonable best efforts to take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. Miscellaneous. (a) No Inconsistent Agreements. The Company has not, as of the date hereof, and the Company shall not, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The Company has not entered and will not enter into any agreement with respect to any of its securities that will grant to any Person piggyback registration rights with respect to a Registration Statement, except to the extent any existing right has heretofore been waived. (b) Adjustments Affecting Registrable Securities. The Company shall not, directly or indirectly, take any action with respect to the Registrable Securities as a class that would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, other than with the prior written consent of the Company and the Holders of not less than a majority in Amount of Registrable Securities; provided, however, that Section 6 and this Section 8(c) may not be amended, modified or supplemented without the prior written consent of the Company and each Holder (including, in the case of an amendment, 15 modification or supplement of Section 6, any Person who was a Holder of Registrable Securities disposed of pursuant to any Registration Statement). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in Amount of the Registrable Securities being sold by such Holders pursuant to such Registration Statement. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(c), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder. Each Holder may waive compliance with respect to any obligation of the Company under this Agreement as it may apply or be enforced by such particular Holder. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: (1) if to a Holder of the Registrable Securities, at the most current address of such Holder set forth on the records of the security registrar under the Indenture, in the case of Holders of Convertible Notes, and in the stock ledger of the Company, in the case of Holders of Common Stock of the Company. (2) if to the Initial Purchaser: Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Facsimile No.: (212) 761-0538 Attention: Equity Capital Markets with copies to: Vinson & Elkins L.L.P. 2300 First City Tower 1001 Fannin Houston, Texas 77002 Facsimile No.: (713) 615-5531 Attention: T. Mark Kelly, Esq. (3) if to the Company: Pride International, Inc. 5847 San Felipe, Suite 3300 Houston, Texas 77057 Facsimile No.: (713) 789-1430 16 Attention: Robert W. Randall, General Counsel with copies to: Baker Botts, L.L.P. One Shell Plaza 910 Louisiana Street Houston, Texas 77002 Facsimile No.: (713) 229-7785 Attention: L. Proctor Thomas, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier; and when the addressor receives facsimile confirmation, if sent by facsimile. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including the Holders; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and except to the extent such successor or assign holds Registrable Securities. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS SITTING IN MANHATTAN, NEW YORK CITY, THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would 17 have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage in Amount of Registrable Securities is required hereunder, Registrable Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third-Party Beneficiaries. Holders of Registrable Securities are intended third-party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. (l) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Initial Purchaser on the one hand and the Company on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PRIDE INTERNATIONAL, INC. By: /S/ EARL W. MCNIEL ---------------------------------------- Earl W. McNiel Vice President and Chief Financial Officer MORGAN STANLEY & CO. INCORPORATED By: /S/ DAVID SCHWARZBACH ---------------------------------------- David Schwarzbach Vice President EX-12.1 6 h07587exv12w1.txt STATEMENT OF COMPUTATION OF RATIO OF EARNINGS . . . Exhibit 12.1 RATIO OF EARNINGS TO FIXED CHARGES COMPUTATION (IN THOUSANDS EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED ------------------------- JUNE 30, 2003 2002 2001 -------------- ---------- ---------- NET INCOME (LOSS): Net income (loss) before income taxes and minority interest $ (4,260) $ 11,355 $ 154,613 Portion of rents representative of interest expense 3,514 4,531 7,629 Interest on indebtedness, including amortization of deferred loan costs 64,803 132,551 116,785 Amortization of capitalized interest 1,838 3,613 3,090 Minority interest in pre-tax income of subsidiaries that have not incurred fixed charges (892) (2,132) (2,014) ---------- ---------- ---------- Net income (loss) as adjusted $ 65,003 $ 149,918 $ 280,103 ========== ========== ========== FIXED CHARGES: Portion of rents representative of the interest factor $ 3,514 $ 4,531 $ 7,629 Interest on indebtedness, including amortization of deferred loan costs 64,803 132,551 116,785 Capitalized interest 598 1,900 19,032 ---------- ---------- ---------- Total fixed charges $ 68,915 $ 138,982 $ 143,446 ========== ========== ========== RATIO OF EARNINGS TO FIXED CHARGES (a) 1.1x 2.0x ========== ========== ==========
YEARS ENDED DECEMBER 31, ---------------------------------------- 2000 1999 1998 ---------- ---------- ---------- NET INCOME (LOSS): Net income (loss) before income taxes and minority interest $ 94,741 $ (83,511) $ 197,724 Portion of rents representative of interest expense 6,617 5,767 2,005 Interest on indebtedness, including amortization of deferred loan costs 104,528 68,973 47,943 Amortization of capitalized interest 2,962 1,778 504 Minority interest in pre-tax income of subsidiaries that have not incurred fixed charges (955) (3,976) 60 ---------- ---------- ---------- Net income (loss) as adjusted $ 207,893 $ (10,969) $ 248,236 ========== ========== ========== FIXED CHARGES: Portion of rents representative of the interest factor $ 6,617 $ 5,767 $ 2,005 Interest on indebtedness, including amortization of deferred loan costs 104,528 68,973 47,943 Capitalized interest 11,200 33,210 16,293 ---------- ---------- ---------- Total fixed charges $ 122,345 $ 107,950 $ 66,241 ========== ========== ========== RATIO OF EARNINGS TO FIXED CHARGES 1.7x (a) 3.7x ========== ========== ==========
(a) For the six months ended June 30, 2003 and the year ended December 31, 1999, earnings were inadequate to cover fixed charges by $3.9 million and $118.9 million, respectively. EX-15.1 7 h07587exv15w1.txt LETTER ON UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15.1 LETTER ON UNAUDITED INTERIM FINANCIAL INFORMATION Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Pride International, Inc. Registration Statement on Form S-3 We are aware that our report dated August 14, 2003 on our review of interim financial information of Pride International, Inc. (the "Company") as of June 30, 2003 and for the three-month and six-month periods ended June 30, 2003 and 2002 and included in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2003 is incorporated by reference in its Registration Statement. Very truly yours, /s/ PricewaterhouseCoopers LLP Houston, Texas August 14, 2003 EX-23.1 8 h07587exv23w1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 25, 2003 relating to the financial statements, which appear in Pride International, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2002. We also consent to the reference to us under the headings "Experts" and "Independent Accountants" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Houston, Texas August 14, 2003 EX-23.2 9 h07587exv23w2.txt CONSENT OF KPMG LLP EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT The Board of Directors and Shareholders Pride International, Inc. We consent to the incorporation by reference in the Registration Statement on Form S-3 (the "Registration Statement") of our report dated January 23, 2001, with respect to the consolidated statements of operations, shareholders' equity and cash flows of Marine Drilling Companies, Inc. for the year ended December 31, 2000, which report is included in the Annual Report of Pride International, Inc. on Form 10-K for the year ended December 31, 2002. /s/ KPMG LLP Houston, Texas August 14, 2003 EX-25.1 10 h07587exv25w1.txt STATEMENT OF ELIGIBILITY ON FORM T-1 EXHIBIT 25.1 ------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------------------------------------- JPMORGAN CHASE BANK (Exact name of trustee as specified in its charter) NEW YORK 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 PARK AVENUE NEW YORK, NEW YORK 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) -------------------------------------------- PRIDE INTERNATIONAL, INC. (Exact name of obligor as specified in its charter) DELAWARE 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 offices) (Zip Code) ---------------------------------------------------------- 3 1/4% CONVERTIBLE SENIOR NOTES DUE 2033 (Title of the indenture securities) ---------------------------------------------------------- GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor and Guarantors. If the obligor or any Guarantor is an affiliate of the trustee, describe each such affiliation. None. - 2 - Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Restated Organization Certificate of the Trustee dated March 25, 1997 and the Certificate of Amendment dated October 22, 2001 (see Exhibit 1 to Form T-1 filed in connection with Registration statement No. 333-76894, which is incorporated by reference.) 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). On November 11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York, the surviving corporation was renamed JPMorgan Chase Bank. 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement 333-76894, which is incorporated by reference.) 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). On November 11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York, the surviving corporation was renamed JPMorgan Chase Bank. 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, JPMorgan Chase Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 12th day of August, 2003. JPMORGAN CHASE BANK By /s/ L. O'Brien ----------------- /s/ L. O'Brien Vice President 3 Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF JPMorgan Chase Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2003, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS IN MILLIONS ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin.......................................................... $ 21,415 Interest-bearing balances.................................................. 6,882 Securities: Held to maturity securities..................................................... 334 Available for sale securities................................................... 80,076 Federal funds sold and securities purchased under agreements to resell....................................................... Federal funds sold in domestic offices 14,044 Securities purchased under agreements to resell 73,060 Loans and lease financing receivables: Loans and leases held for sale............................................. 25,832 Loans and leases, net of unearned income $ 161,345 Less: Allowance for loan and lease losses 3,823 Loans and leases, net of unearned income and allowance.................................................................. 157,522 Trading Assets.................................................................. 189,427 Premises and fixed assets (including capitalized leases)........................ 6,186 Other real estate owned......................................................... 131 Investments in unconsolidated subsidiaries and associated companies ...................................................... 691 Customers' liability to this bank on acceptances outstanding................................................................ 225 Intangible assets Goodwill................................................................ 2,180 Other Intangible assets................................................. 3,314 Other assets.................................................................... 40,377 TOTAL ASSETS.................................................................... $ 621,696 ==========
LIABILITIES Deposits In domestic offices.......................................................... $ 174,351 Noninterest-bearing................. $ 70,991 Interest-bearing.................... 103,360 In foreign offices, Edge and Agreement subsidiaries and IBF's....................................................... 125,789 Noninterest-bearing..................... $ 7,531 Interest-bearing..................... 118,258 Federal funds purchased and securities sold under agree- ments to repurchase: Federal funds purchased in domestic offices 5,929 Securities sold under agreements to repurchase 113,903 Trading liabilities ............................................................ 116,329 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases).................................... 10,758 Bank's liability on acceptances executed and outstanding ....................... 225 Subordinated notes and debentures .............................................. 8,306 Other liabilities .............................................................. 29,735 TOTAL LIABILITIES .............................................................. 585,325 Minority Interest in consolidated subsidiaries ................................. 97 EQUITY CAPITAL Perpetual preferred stock and related surplus .................................. 0 Common stock ................................................................... 1,785 Surplus (exclude all surplus related to preferred stock) ....................... 16,304 Retained earnings .............................................................. 17,228 Accumulated other comprehensive income ......................................... 957 Other equity capital components ................................................ 0 TOTAL EQUITY CAPITAL ........................................................... 36,274 ---------- TOTAL LIABILITIES, MINORITY INTEREST, AND EQUITY CAPITAL $ 621,696 ==========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in structions issued by the appropriate Federal regulatory authority and is true and correct. WILLIAM B. HARRISON, JR. ) HELENE L. KAPLAN ) DIRECTORS WILLIAM H. GRAY, III ) -----END PRIVACY-ENHANCED MESSAGE-----