-----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, DXXwX0eNsLWevz+0d21v2znOS3/lghjX4x2bzR0uI/tCpo7z8Gnae7uUkHkky5Oj W62OZA5C1/yItqfPAEyxcQ== 0000899243-02-002566.txt : 20020919 0000899243-02-002566.hdr.sgml : 20020919 20020919165719 ACCESSION NUMBER: 0000899243-02-002566 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20020919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BJ SERVICES CO CENTRAL INDEX KEY: 0000864328 STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389] IRS NUMBER: 630084140 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-96981 FILM NUMBER: 02767964 BUSINESS ADDRESS: STREET 1: 5500 NW CENTRAL DR CITY: HOUSTON STATE: TX ZIP: 77210 BUSINESS PHONE: 7134624239 MAIL ADDRESS: STREET 1: 5500 NORTHWEST CENTRAL DR STREET 2: 5500 NORTHWEST CENTRAL DR CITY: HOUSTON STATE: TX ZIP: 77092 S-3/A 1 ds3a.txt AMENDMENT #1 TO FORM S-3 As filed with the Securities and Exchange Commission on September 19, 2002 Registration No. 333-96981 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- Amendment No. 1 to FORM S-3/A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- BJ SERVICES COMPANY (Exact name of Registrant as specified in its charter) Delaware 5500 Northwest Central 63-0084140 Drive (State or other Houston, Texas 77092 (I.R.S. jurisdiction of (713) 462-4239 Employer Identification incorporation or Number) organization)
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ----------------- Margaret Barrett Shannon, Esq. Vice President--General Counsel 5500 Northwest Central Drive Houston, Texas 77092 (713) 462-4239 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------- Copies to: G. Michael O'Leary, Esq. Andrews & Kurth L.L.P. 600 Travis, Suite 4200 Houston, Texas 77002 (713) 220-4200 ----------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this Form are being 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, 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. [_] ----------------- 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. Subject to Completion, dated September 19, 2002 PROSPECTUS $516,350,000 BJ SERVICES COMPANY CONVERTIBLE SENIOR NOTES COMMON STOCK ----------------- The Offering: We issued the notes in a private placement at an issue price of $790.76 per note (79.076% of the principal amount at maturity). Selling securityholders will use this prospectus to resell their notes and the shares of common stock issuable upon conversion of the notes. Interest on the notes from April 24, 2002 at the rate of 0.50% per year on the issue price is payable semiannually in arrears on April 24 and October 24 of each year, beginning October 24, 2002. Additionally, on April 24, 2022, the maturity date of the notes, a holder will receive $1,000 per note. The issue price of each note represents a yield to maturity of 1.625% per year calculated from April 24, 2002, including accrued original issue discount and cash interest payments. The notes will rank equally with all of our existing and future unsecured and unsubordinated indebtedness. Convertibility of the Notes: Holders may convert their notes into 14.9616 shares of our common stock, subject to adjustment, (1) if the sale price of our common stock issuable upon conversion of a note reaches specified thresholds, (2) during any period in which the credit rating of the notes is below a specified level, (3) if the notes are called for redemption or (4) if specified corporate transactions have occurred. Our common stock currently trades on the New York Stock Exchange under the symbol "BJS". On September 16, 2002, the last reported sale price of our common stock on the New York Stock Exchange was $27.96 per share. Purchase of the Notes by BJ Services at the Option of the Holder: Holders may require us to purchase all or a portion of their notes on April 24, 2005, 2007, 2012 and 2017 at the prices calculated as described in "Description of Notes--Purchase of Notes at the Option of the Holder." We may choose to pay the purchase price in cash or in common stock or a combination of cash and common stock. In addition, upon a change in control of BJ Services occurring on or before April 24, 2005, holders may require us to repurchase for cash all or a portion of their notes. Redemption of the Notes at the Option of BJ Services: We may redeem for cash all or a portion of the notes at any time on or after April 24, 2005 at prices calculated as described in "Description of Notes--Redemption of Notes at Our Option". ----------------- You should carefully review and consider the information under the headings "Forward-Looking Statements" on page 4 and "Risk Factors" beginning on page 11 of this prospectus. ----------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES, NOR MAY OFFERS TO BUY BE ACCEPTED, UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. The date of this prospectus is September , 2002. TABLE OF CONTENTS Where You Can Find More Information.................... 3 Forward-Looking Statements............................. 4 Summary................................................ 5 Ratio of Earnings to Fixed Charges.................. 10 Risk Factors........................................... 11 Use of Proceeds........................................ 13 Price Range of Common Stock; Dividend Policy........... 13 Selected Historical Financial Information (unaudited).. 14 Capitalization......................................... 15 Description of Notes................................... 15 Description of Capital Stock........................... 32 Certain United States Federal Income Tax Considerations 33 Selling Securityholders................................ 40 Plan of Distribution................................... 43 Legal Matters.......................................... 45 Experts................................................ 45
2 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed with the SEC a registration statement on Form S-3 to register the notes and the underlying common stock. This prospectus, which forms part of the registration statement, does not contain all of the information included in the registration statement. For further information about BJ Services and the securities offered in this prospectus, you should refer to the registration statement and its exhibits. You may read and copy any document we file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public from commercial document retrieval services and at the SEC's web site at http://www.sec.gov. This prospectus "incorporates by reference" certain information that we have filed with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"). This means that we are disclosing important information to you by referring you to those documents. Information filed with the SEC after the date of this prospectus, and prior to the termination of the offering of the notes, will update and supersede this information. We incorporate by reference the documents listed below and any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering is completed, including filings after the date of the initial registration statement and prior to the effectiveness of the registration statement: (a) Annual Report on Form 10-K for the fiscal year ended September 30, 2001; (b) Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2001, March 31, 2002 and June 30, 2002; (c) Current Reports on Form 8-K, dated February 20, 2002, May 1, 2002, June 14, 2002 (as amended by current report on Form 8-K/A dated July 17, 2002), August 14, 2002 and September 17, 2002; (d) The description of our common stock set forth in the registration statement on Form 8-A/A dated November 14, 2001; and (e) The description of our Series A Junior Participating Preferred Stock, set forth in the registration statement on Form 8-A/A dated November 14, 2001. You should rely only on the information incorporated by reference or provided in this prospectus. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this document. All documents that we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus or after the date of the registration statement of which this prospectus forms a part and prior to the termination of the offering will be deemed to be incorporated in this prospectus by reference and will be a part of this prospectus from the date of the filing of the document. Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document which also is or is deemed to be incorporated by reference in this prospectus modifies or supersedes that statement. Any statement that is modified or superseded will not constitute a part of this prospectus, except as modified or superseded. We will provide without charge to you, upon your written or oral request, a copy of any or all of the documents incorporated by reference in this prospectus, other than the exhibits to those documents, unless the exhibits are specifically incorporated by reference into the information that this prospectus incorporates. You should direct a request for copies to us at 5500 Northwest Drive Houston, Texas 77092, Attention: Corporate Secretary BJ Services Company (telephone number: (713) 462-4239). Our principal executive office is located at 5500 Northwest Drive, Houston, Texas 77092 and our telephone number there is (713) 462-4239. Our world wide web site is located at http://www.bjservices.com. The information contained on our web site is not part of this prospectus. 3 FORWARD-LOOKING STATEMENTS This prospectus and our filings with the Securities and Exchange Commission that are incorporated in it contain "forward-looking statements", within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Exchange Act concerning, among other things, our prospects, expected revenues, expenses and profits, developments and business strategies for our operations, all of which are subject to certain risks, uncertainties and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "expect," "estimate," "project," "believe," "achievable" and similar terms and phrases. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Those statements are subject to the following in the United States and the other countries in which we operate: . general economic and business conditions, . conditions in the oil and natural gas industry, . fluctuating prices of crude oil and natural gas, . weather conditions that affect conditions in the oil and natural gas industry, . the business opportunities that may be presented to and pursued by us, . changes in law or regulations, and . other factors, many of which are beyond our control. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. We do not assume any responsibility to publicly update any of our forward-looking statements. 4 SUMMARY This summary highlights selected information from this prospectus to help you understand the Convertible Senior Notes due 2022 (which we refer to as the notes) and our common stock issuable upon conversion of the notes, and is qualified in its entirety by the more detailed information included elsewhere or incorporated by reference in this prospectus. You should carefully read this prospectus as well as the information incorporated by reference, before making a decision about whether to invest in the notes. You should also carefully review the section entitled "Risks Related to the Notes", which highlights certain risks associated with an investment in the notes, to determine whether an investment in the notes is appropriate for you. You should also carefully review the section entitled "Certain United States Federal Income Tax Considerations", which summarizes the material U.S. federal income tax considerations relating to the ownership and disposition of the notes or shares of our common stock. References in this prospectus to "BJ Services", the "Company", "we", "us" and "our" are to BJ Services Company. BJ Services Company BJ Services Company, whose operations trace back to the Byron Jackson Company (which was founded in 1872), was organized in 1990 under the corporate laws of the state of Delaware. We are a leading provider of pressure pumping and other oilfield services serving the petroleum industry worldwide. Our pressure pumping services consist of cementing and stimulation services used in the completion of new oil and natural gas wells and in remedial work on existing wells, both onshore and offshore. Other oilfield services include product and equipment sales for pressure pumping services, tubular services provided to the oil and natural gas exploration and production industry, commissioning and inspection services provided to refineries, pipelines and offshore platforms and specialty chemical services. Our principal executive office is located at 5500 Northwest Drive, Houston, Texas 77092 and our telephone number there is (713) 462-4239. Our world wide web site is located at http://www.bjservices.com. The information contained on our web site is not part of this prospectus. Recent Developments Acquisition of OSCA On May 31, 2002 the Company acquired OSCA, Inc. The acquisition was structured as a merger of a wholly-owned subsidiary of the Company with and into OSCA, with OSCA surviving the merger as our wholly-owned subsidiary. OSCA provides specialized oil and natural gas well completion fluids, stimulation services and downhole completion tools to exploration and production companies, primarily in the Gulf of Mexico and in select international markets. OSCA's products and services are used in preparing the well for production and enhancing recovery of oil and natural gas. Under the terms of the merger agreement, OSCA shareholders received $28.00 in cash per share in the merger. The total purchase price of OSCA was approximately $470 million, including approximately $35 million of OSCA debt we assumed in the merger. We used a portion of the net proceeds from the placement of the notes to pay the cash purchase price of OSCA. 5 The Offering Notes....................... $516,350,000 aggregate principal amount at maturity of notes due 2022. Each note was issued at a price of $790.76 per note and has a principal amount at final maturity of $1,000. Maturity of notes........... April 24, 2022 Cash interest............... 0.50% per year on the issue price from April 24, 2002, payable semiannually in arrears in cash on April 24 and October 24 of each year, beginning October 24, 2002. Yield to maturity of notes.. 1.625% per year (computed on a semiannual bond equivalent basis) calculated from April 24, 2002, taking into account accrued original issue discount and cash interest payments. Ranking..................... The notes are unsecured and unsubordinated indebtedness of BJ Services and rank equally with BJ Services' other existing and future unsecured and unsubordinated indebtedness. As of June 30, 2002, we had $115.6 million of other indebtedness outstanding. Original issue discount..... We offered each note at an original issue discount for U.S. federal income tax purposes equal to the principal amount at maturity of the note less the issue price to investors. Prospective purchasers of notes should be aware that as original issue discount accrues it must be included in their gross income for U.S. federal income tax purposes. See "Certain United States Federal Income Tax Considerations". Conversion rights........... For each note surrendered for conversion, if the conditions for conversion are satisfied, we will deliver 14.9616 shares of our common stock or, at our option, cash or a combination of cash and common stock. If we elect to pay holders cash for their notes, we will promptly notify holders of the payment amount no later than two business days following our receipt of a holder's notice of conversion (referred to as the cash settlement notice period). The settlement amount will be based on the average sale price (as defined elsewhere in this prospectus) of our common stock for the five consecutive trading days immediately following either: the date of our election notice to deliver cash, which we must give during the cash settlement notice period, unless we have earlier given notice of redemption as described in the prospectus; or the conversion date, if we have previously given notice of redemption specifying that we intend to deliver cash upon conversion thereafter. If we specify a cash settlement amount, referred to as the cash amount, we will calculate settlement amounts upon conversion as follows: Cash Settlement Portion: the cash amount specified by us, plus Common Stock Settlement Portion: Conversion ratio minus the quotient of the cash amount divided by the average stock price, where 6 the average stock price is the average closing price of our common stock during the five trading days referred to above. Commencing after June 30, 2002, holders may surrender their notes for conversion into shares of common stock in any quarter (and only during such quarter), if the closing sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter was more than a specified percentage (beginning at 120% and declining 0.12658% per quarter thereafter to approximately 110% on the last day of the quarter ending March 31, 2022) of the accreted conversion price per share of common stock on the last day of such quarter. The accreted conversion price per share as of any day will equal the sum of the original issue price of a note plus the accrued original issue discount to that day, with that sum divided by the number of shares of common stock issuable upon conversion of a note. Holders may also surrender a note for conversion during any period in which the credit rating assigned to the notes is Ba2 or lower by Moody's Investors Service or BB+ or lower by Standard & Poor's Credit Market Services. Notes or portions of notes in integral multiples of $1,000 principal amount at maturity called for redemption may be surrendered for conversion until the close of business on the second business day prior to the redemption date. In addition, if we make a significant distribution to our stockholders or if we are a party to certain consolidations, mergers or binding share exchanges, notes may be surrendered for conversion as provided in "Description of Notes--Conversion Rights." See "Certain United States Federal Income Tax Considerations" and "Description of Notes--Conversion Rights--Conversion Rights Upon Notice of Redemption." We may increase the conversion rate from time to time at our election by any amount and for any period. No adjustments need be made for any transaction referred to above if we elect to permit holders of the notes to participate in a transaction on a basis and with notice that our 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. See "Description of Notes--Conversion Rights." Purchase by BJ Services at Holders may require us to purchase their notes on the option of the holder.. any of the following dates at the following prices, plus accrued but unpaid cash interest to, but excluding, the purchase date: . on April 24, 2005 at a price of $817.99 per note; . on April 24, 2007 at a price of $836.90 per note; . on April 24, 2012 at a price of $886.93 per note; and . on April 24, 2017 at a price of $941.18 per note. 7 We may choose to pay the purchase price in cash or shares of common stock or a combination of cash and shares of common stock. Not later than 20 business days prior to each purchase date, we must give notice to holders stating, among other things, whether we will pay the purchase price in cash or in shares of common stock or any combination thereof (specifying the percentages of each). Holders of notes may withdraw any purchase notice at any time prior to the applicable purchase date. At our election, we may also add additional purchase dates on which holders may require us to purchase all or a portion of their notes for cash, common stock or a combination of cash and shares of common stock. Change in control........... Upon a change in control of BJ Services occurring on or before April 24, 2005, each holder may require us to repurchase all or a portion of such holder's notes for cash at a price equal to the original issue price of such notes plus accrued original issue discount and accrued but unpaid interest to the date of repurchase. See "Description of Notes--Change in Control Permits Purchase of Notes at the Option of the Holder." Redemption of notes at the option of BJ Services..... At our election, we may redeem all or a portion of the notes for cash at any time, on or after April 24, 2005, at redemption prices equal to the original issue price of the notes plus accrued original issue discount and accrued but unpaid cash interest to the date of redemption. At any time prior to the close of business on the second business day prior to the redemption date, holders may convert their notes after we have called them for redemption. See "Description of Notes--Redemption of Notes at Our Option." If the tax laws change or are interpreted in a way that adversely affects the tax treatment of the notes, then we, as issuer of the notes, may elect to redeem the notes at prices equal to the original issue price of the notes plus accrued original issue discount and accrued but unpaid cash interest to the date of redemption. See "Description of Notes--Tax Event Redemption." Sinking fund................ None. Use of proceeds............. We will not receive any proceeds from the sale by any selling securityholder of the notes or the underlying common stock. DTC eligibility............. The notes are issued in book-entry form and are represented by permanent global certificates without coupons deposited with a custodian for and registered in the name of a nominee of the Depository Trust Company (which we call DTC) in New York, New York. Beneficial interests in any notes are shown on, and transfers are effected only through, records maintained by DTC and its direct and indirect participants, and any such interest may not be exchanged for certificated notes, except in limited circumstances. See "Description of Notes--Depositary--DTC Procedures." PORTAL eligibility.......... The notes issued in the initial private placement are eligible for trading in PORTAL. Notes resold using this prospectus, however, will 8 no longer be eligible for trading in the PORTAL system. BJ Services does not intend to list the notes on any securities exchange. Our common stock............ BJ Services is authorized to issue 380,000,000 shares of common stock, of which 156,756,671 shares were issued and outstanding as of August 31, 2002. Each outstanding share of common stock includes an associated preferred share purchase right. We have a Stockholder Rights Plan, referred to as the rights plan, which is designed to deter coercive takeover tactics and to prevent an acquirer from gaining control of us without offering a fair price to all of our stockholders. In addition, our charter and bylaws may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider to be in such stockholder's best interest. Trading symbol for our common stock.............. Our common stock is traded on the NYSE under the symbol "BJS" 9 RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended June 30, Year Ended September 30, ------------ --------------------------------- 2002 2001 2001 2000 1999 1998 1997 ----- ------ ------ ----- ----- ----- ----- Ratio of Earnings to Fixed Charges(1)(2) 9.15x 12.84x 14.13x 5.18x 0.09x(3) 4.89x 4.82x
- -------- (1) For the periods indicated, we had no outstanding preferred stock or preference stock and, therefore, no dividend requirements on preferred or preference stock. (2) For purposes of computing these ratios, earnings means income (loss) from continuing operations before: . income taxes; . minority interest in majority-owned subsidiaries; . interest expense (including amortization of debt costs); and . that portion of rental expenses that we believe represents an interest factor. Fixed charges means the sum of the following: . interest cost (including amortization of debt costs); . that portion of rental expenses that we believe represents an interest factor; and . minority interest in majority-owned subsidiaries. (3) Earnings were not sufficient for the year ended September 30, 1999 to cover fixed charges. The deficiency was $44.9 million. The foregoing ratios do not give effect to our issuance of the notes until April 24, 2002 or to the acquisition of OSCA until June 1, 2002. If the issuance of the notes and the acquisition of OSCA had occurred as of October 1, 2000, our ratio of earnings to fixed charges for the year ended September 30, 2001 and for the nine months ended June 30, 2002 would have been 10.40 and 6.08, respectively. 10 RISK FACTORS Your investment in the notes (and the shares of our common stock issuable upon conversion of the notes, if any) involves risks. You should carefully consider the following discussion of risks as well as the other information contained or incorporated in this prospectus before deciding whether to invest in the notes. Risks Related to Our Business Risks of Economic Downturn Because of the recent economic downturn in the United States and many foreign economies as well as hostilities following the events of September 11, 2001, there may be decreased demand and lower prices for oil and natural gas and therefore for our products and services. Our customers are generally involved in the energy industry, and if these customers experience a business decline, we may be subject to increased exposure to credit risk. If an economic downturn occurs, our results of operations may be adversely affected. Risks from Operating Hazards The Company's operations are subject to hazards present in the oil and natural gas industry, such as fire, explosion, blowouts and oil spills. These incidents as well as accidents or problems in normal operations can cause personal injury or death and damage to property or the environment. Our customers' operations can also be interrupted. From time to time, customers seek to recover from the Company for damage to their equipment or property that occurred while the Company was performing work. Damage to the customers' property could be extensive if a major problem occurred. For example, operating hazards could arise: . in the pressure pumping and completion services businesses, during work performed on oil and gas wells, . in the specialty chemical business, as a result of use of the Company's products in refineries, and . in the process and pipeline business, as a result of work performed by the Company at petrochemical plants as well as on pipelines. Risks from Unexpected Litigation The Company has insurance coverage against operating hazards that it believes is customary in the industry. However, the insurance has large deductibles and exclusions from coverage. The Company's insurance premiums can be increased or decreased based on the claims made by the Company under its insurance policies. The insurance does not cover damages from breach of contract by the Company or based on alleged fraud or deceptive trade practices. Whenever possible, the Company obtains agreements from customers that limit the Company's liability and intends to seek such agreements from customers of OSCA. Insurance and customer agreements do not provide complete protection against losses and risks, and the Company's results of operations could be adversely affected by unexpected claims not covered by insurance. Risks from International Operations The Company's international operations are subject to special risks that can materially affect the Company's sales and profits. These risks include: . limits on access to international markets, . unsettled political conditions, war, civil unrest, and hostilities in some petroleum-producing and consuming countries and regions where we operate or seek to operate, . fluctuations and changes in currency exchange rates, . the impact of inflation, and 11 . governmental action such as expropriation of assets, general legislative and regulatory environment, exchange controls, changes in global trade policies such as trade restrictions and embargoes imposed by the United States and other countries, and changes in international business, political and economic conditions. Risks Relating to Acquisitions We have acquired OSCA and have acquired other smaller businesses from time to time. The success of these acquisitions depends upon our ability to integrate the business, operations and business practices of the businesses we acquire and to realize expected cost synergies and other benefits from these acquisitions. Other Risks Other risk factors that could cause our actual results to be different from the results we expect include: . weather conditions that affect operating conditions in the oil and natural gas industry, and . changes in environmental laws and other governmental regulations. Many of these risks are beyond our control. In addition, future trends for pricing, margins, revenues and profitability remain difficult to predict in the industries we serve and under current economic and political conditions. Risks Related to the Notes We expect that the trading value of the notes will be significantly affected by the price of our common stock and other factors. The market price of the notes is expected to be significantly affected by the market price of our common stock. This may result in greater volatility in the trading value of the notes than would be expected for nonconvertible debt securities we issue. In addition, the notes have a number of features, including conditions to conversion, which, if not met, could result in a holder receiving less than the value of the common stock into which a note is otherwise convertible. These features could adversely affect the value and the trading prices for the notes. The yield on the notes may be lower than the yield on a standard debt security of comparable maturity. The amount we pay you may be less than the return you could earn on other investments. Your yield may be less than the yield you would earn if you bought a standard senior debt security of BJ Services with the same stated maturity date. Your investment may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. An active trading market for notes may not develop. The notes are a new issue of securities for which there is currently no public market. The notes will not be listed on any securities exchange, and we do not know whether an active trading market will develop or be maintained for the notes. To the extent that an active trading market for the notes does not develop, their liquidity and trading price may be affected adversely. If the notes are traded, they may do so at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the market prices for our common stock, our financial performance and other factors. You should consider the United States Federal income tax consequences of owning notes. We offered each note at an original issue discount for U.S. federal income tax purposes equal to the principal amount at maturity of the note less the issue price to investors. Prospective purchasers of notes should be aware that as original issue discount accrues it must be included in their gross income for U.S. federal income tax purposes. 12 USE OF PROCEEDS We will not receive any of the proceeds from the sale by the selling securityholders of the notes or the underlying shares of common stock. PRICE RANGE OF COMMON STOCK; DIVIDEND POLICY The following table presents, for the periods indicated, the high and low closing prices per share of our common stock as reported on the New York Stock Exchange. All amounts prior to the 2-for-1 stock split effective May 31, 2001 have been restated to reflect the increased number of common shares outstanding resulting from the stock split.
High Low ------ ------ Fiscal Year Ending September 30, 2002: First Quarter............................... $34.00 $17.12 Second Quarter.............................. 35.32 25.70 Third Quarter............................... 38.65 32.67 Fourth Quarter (through September 16, 2002). 34.58 27.53 Fiscal Year Ending September 30, 2001: First Quarter............................... $36.19 $24.84 Second Quarter.............................. 42.33 31.81 Third Quarter............................... 41.13 28.75 Fourth Quarter.............................. 27.30 14.87 Fiscal Year Ending September 30, 2000: First Quarter............................... $21.09 $13.78 Second Quarter.............................. 37.22 19.50 Third Quarter............................... 37.77 28.38 Fourth Quarter.............................. 35.00 27.81
On September 16, 2002, the last reported sale price for our common stock on the New York Stock Exchange was $27.96 per share. Since our initial public offering in 1990, we have not paid any cash dividends to our stockholders. We expect that, for the foreseeable future, any earnings will be retained for the development of our business, used for the development of our business or used to repurchase shares of our common stock pursuant to our repurchase program described under the caption "Description of Capital Stock--Repurchase Program." 13 SELECTED HISTORICAL FINANCIAL INFORMATION (UNAUDITED) (Dollars in thousands, except per share data) The following table sets forth certain unaudited historical information for the Company.
Twelve Months Ended September 30, Nine Months Ended ---------------------------------- June 30, 2002 2001 2000 1999 ----------------- ---------- ---------- ---------- Operating Data: Revenue...................................... $1,392,095 $2,233,520 $1,555,389 $1,131,334 Operating expenses........................... 1,182,154 1,697,300 1,360,164 1,146,099 Operating income (loss)...................... 209,941 536,220 195,225 (14,765) Interest expense............................. (5,005) (13,282) (19,968) (31,365) Other income (expense), net.................. (2,715) 3,676 (1,550) 613 Income tax expense (benefit)................. 70,361 179,922 57,307 (15,221) Net income (loss)............................ 133,584 349,259 117,976 (29,688) Earnings (loss) per share (1) Basic.................................... .85 2.13 .74 (.21) Diluted.................................. .83 2.09 .70 (.21) Average shares outstanding Basic.................................... 157,056 163,885 158,508 141,578 Diluted.................................. 160,590 167,080 168,700 141,578 Financial Position (at end period): Property - net............................... $ 794,580 Total assets................................. 2,431,487 Long-term debt, including current maturities. 488,549 Stockholders' equity......................... 1,412,315 Other Data: Depreciation and amortization................ $ 76,588 $ 104,969 $ 102,018 $ 99,800 Capital expenditures (2)..................... 132,903 183,414 80,518 110,566 Goodwill amortization........................ 13,739 13,497 13,525 Unusual charges.............................. 39,695
- -------- (1) Earnings per share amounts have been restated for all periods presented to reflect the increased number of common shares outstanding resulting from the 2 for 1 stock split effective May 31, 2001. (2) Excluding acquisition of businesses. (3) The following table provides pro forma results for the years ended September 30, 2001, 2000 and 1999, as if the non-amortization provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," which the Company adopted on October 1, 2001, had been applied. This table should be read in conjunction with the financial statements and related notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, which is incorporated herein by reference.
For the Year Ended September 30, -------------------------- 2001 2000 1999 -------- -------- -------- Reported net income (loss).... $349,259 $117,976 $(29,688) Goodwill amortization......... 13,739 13,497 13,525 -------- -------- -------- Adjusted net income (loss).... $362,998 $131,473 $(16,163) ======== ======== ======== Basic earnings per share: Reported net income (loss). $ 2.13 $ .74 $ (.21) Goodwill amortization...... .08 .09 .10 -------- -------- -------- Adjusted net income........... $ 2.21 $ .83 $ (.11) ======== ======== ======== Diluted earnings per share: Reported net income (loss). $ 2.09 $ .70 $ (.21) Goodwill amortization...... .08 .08 .10 -------- -------- -------- Adjusted net income........ $ 2.17 $ .78 $ (.11) ======== ======== ========
14 CAPITALIZATION The following table sets forth the actual capitalization of BJ Services at June 30, 2002. This table should be read in conjunction with the financial statements and related notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, which is incorporated herein by reference.
June 30, 2002 -------------- (in thousands) Cash and cash equivalents............................................................... $ 66,486 ========== Short-term borrowings................................................................... $ 36,094 Long-term debt: Convertible Senior Notes due 2022.................................................... 409,074 7% Notes due 2006, net of discount................................................... 78,826 Notes payable to banks............................................................... 649 ---------- Total long-term debt, including current maturities............................... 488,549 Stockholders' equity: Preferred stock, $1.00 par value; 5,000,000 shares authorized, none issued Common stock, $.10 par value; 380,000,000 shares authorized, 156,735,601 outstanding. 17,376 Capital in excess of par............................................................. 965,655 Retained earnings.................................................................... 816,777 Accumulated other comprehensive loss................................................. (1,891) Unearned compensation................................................................ (1,988) Treasury stock, at cost; 17,019,723 shares........................................... (383,614) ---------- Total stockholders' equity....................................................... 1,412,315 ---------- Total capitalization.................................................................... $1,936,958 ==========
DESCRIPTION OF NOTES We issued the notes pursuant to the indenture dated as of April 24, 2002 (referred to as the indenture), between us and The Bank of New York, as trustee. The following summary does not purport to be complete, and is subject to, and is qualified in its entirety by reference to, all of the provisions of the notes and the indenture. We urge you to read the indenture and the form of the notes, which you may obtain from us upon request. As used in this description, all references to "BJ Services," "our company" or to "we," "us" or "our" mean BJ Services Company, excluding, unless otherwise expressly stated or the context otherwise requires, its subsidiaries. General The notes are our general unsecured unsubordinated obligations limited to an aggregate principal amount at maturity of $516,350,000. The notes were initially offered at an issue price to investors of $790.76 per note and with principal amount at maturity of $1,000 per note. The notes will accrete in value such that, together with interest payable thereon, the yield to maturity will be 1.625% per annum. The notes will mature April 24, 2022 unless earlier redeemed at our option, converted into our common stock at the option of the holder or repurchased by us at the option of the holder. We will pay a portion of the yield to maturity as cash interest at a rate of 0.50% per annum from April 24, 2002 on the issue price semi-annually in arrears on April 24 and October 24, commencing October 24, 2002, to the registered holders of record on the preceding April 9 and October 9, respectively. This cash interest will be calculated on the basis of a 360-day year of twelve 30-day months. 15 If any interest payment date, maturity date, redemption date, purchase date or change in control purchase date of a note falls on a day that is not a business day, the required payment of principal and interest will be made on the next succeeding business day as if made on the date that the payment was due and no interest will accrue on that payment for the period from and after that interest payment date, maturity date, redemption date, purchase date or change in control purchase date, as the case may be, to the date of that payment on the next succeeding business day. The term "business day" means, with respect to any note, any day other than a Saturday, a Sunday or a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to close. We may redeem the notes prior to maturity at any time on or after April 24, 2005, as described below under "--Redemption of Notes at Our Option" and "--Purchase of Notes at the Option of the Holder." The notes do not have the benefit of a sinking fund. Principal of, and accrued and unpaid interest on, the notes will be payable at the office of the paying agent, which initially will be an office or agency of the trustee, or an office or agency maintained for such purpose, in the Borough of Manhattan, The City of New York. If certain conditions have been satisfied, the notes may be presented for conversion at the office of the conversion agent, and for registration of transfer or exchange at the office of the registrar, each such agent initially being the trustee. No service charge will be made for any registration of transfer or exchange of notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Maturity, conversion, purchase by us at the option of a holder or redemption of a note will cause interest to cease to accrue on such note. We may not reissue a note that has matured or been converted, purchased by us at the option of a holder, redeemed or otherwise canceled, except for registration of transfer, exchange or replacement of such note. The indenture does not contain any restrictions on the payment of dividends or the repurchase of our securities or any financial covenants. The indenture contains no covenants or other provisions to afford protection to holders of notes in the event of a highly leveraged transaction or a change in control of the Company except to the extent described under "--Change in Control Permits Purchase of Notes at the Option of the Holder." Ranking of Notes The notes are unsecured and unsubordinated obligations. The notes rank equal in right of payment to all of our existing and future unsecured and unsubordinated indebtedness. As of June 30, 2002, we had $115.6 million of other debt outstanding. Conversion Rights Holders may surrender notes for conversion into shares of our common stock only if at least one of the conditions described below is satisfied. The initial conversion rate is 14.9616 shares of common stock per note, subject to adjustment upon the occurrence of the specified events described below. Notes may be submitted for conversion in multiples of $1,000 principal amount at maturity. A holder of a note otherwise entitled to a fractional share will receive cash in an amount equal to the value of such fractional share based on the sale price, as defined below, on the trading day immediately preceding the conversion date. Upon determination that noteholders are or will be entitled to convert their notes into shares of common stock in accordance with the following provisions, we will issue a press release and publish such information on our website as soon as practicable. Conversion Rights Based on Common Stock Price. Commencing after June 30, 2002, holders may surrender their notes for conversion into shares of common stock in any calendar quarter (and only during such quarter), if, as of the last day of the immediately preceding quarter, the sale price (as defined below) of our 16 common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such quarter is more than a specified percentage (beginning at 120% and declining 0.12658% per quarter thereafter to approximately 110% on the last day of the quarter ending March 31, 2022) of the accreted conversion price per share of common stock on the last day of such quarter. The accreted conversion price per share as of any day will equal the sum of the original issue price of a note plus the accrued original issue discount to that day, with that amount divided by the number of shares of common stock issuable upon the conversion of a note on that day, referred to as the conversion trigger price. "Trading day" means a day during which trading in securities generally occurs on the NYSE or, if the common stock is not listed for trading on the NYSE, on the principal other national or regional securities exchange on which the common stock is then listed or, if the common stock is not listed for trading on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation system or, if the common stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the common stock is then traded. The following table shows what the conversion trigger price per share of common stock is for each of the first 12 quarters. These prices reflect the accreted conversion price per share of common stock multiplied by the applicable percentage for the respective quarter. Thereafter, the accreted conversion price per share of common stock increases each quarter by the accrued original issue discount for the quarter and the applicable percentage declines by 0.12658% per quarter. The conversion trigger price for the second calendar quarter of 2022 beginning April 1 is $73.46.
Accreted Conversion Applicable Conversion Quarter* Price Percentage Trigger -------- ---------- ---------- ---------- 2002: Third Quarter.. $52.96 120.00000% $63.55 Fourth Quarter. 53.11 119.87342 63.66 2003: First Quarter.. $53.26 119.74684% $63.78 Second Quarter. 53.41 119.62026 63.89 Third Quarter.. 53.56 119.49368 64.00 Fourth Quarter. 53.71 119.36710 64.11 2004: First Quarter.. $53.87 119.24052% $64.23 Second Quarter. 54.02 119.11394 64.35 Third Quarter.. 54.17 118.98736 64.46 Fourth Quarter. 54.32 118.86078 64.57 2005: First Quarter.. $54.48 118.73420% $64.69 Second Quarter. 54.63 118.60762 64.80
- -------- * This table assumes no events have occurred that would require an adjustment to the conversion rate. Conversion Rights Based on Credit Ratings Downgrade. Holders may also surrender a note for conversion during any period in which the credit rating assigned to the notes is Ba2 or lower by Moody's or BB+ or lower by Standard & Poor's. The notes will cease to be convertible pursuant to this paragraph during any period or periods in which all of the credit ratings are above such levels. Conversion Rights Upon Notice of Redemption. A holder may surrender for conversion, in accordance with the conversion rights provided herein, a note called for redemption at any time prior to the close of business on the second business day immediately preceding the redemption date, even if it is not otherwise convertible at 17 such time. A note for which a holder has delivered a purchase notice or a change in control purchase notice as described below requiring us to purchase the note may be surrendered for conversion only if such notice is withdrawn in accordance with the indenture. Conversion Rights Upon Occurrence of Certain Corporate Transactions. If we are party to a consolidation, merger or binding share exchange pursuant to which our shares of common stock will be converted into cash, securities or other property, the notes may be surrendered for conversion at any time during the period that commences on the date which is 15 days prior to the anticipated effective date of the transaction and ends on, and does not include, the date which is 15 days after the actual effective date of such transaction and, at the effective time, the right to convert a note into shares of common stock will be changed into a right to convert it into the kind and amount of cash, securities or other property of BJ Services or another person which the holder would have received if the holder had converted the holder's note immediately prior to the transaction. If such transaction also constitutes a change in control, the holder will be able to require us to purchase all or a portion of such holder's notes as described under "--Change in Control Permits Purchase of Notes at the Option of the Holder." If we elect to make a distribution described in the third or fourth bullet of the first paragraph under "--Conversion Rate Adjustments" below which, in the case of the fourth bullet, has a per share value equal to more than 15% of the sale price of our shares of common stock on the day immediately preceding the declaration date for such distribution, we will be required to give notice to the holders of notes at least 20 days prior to the ex-dividend date for such distribution and, upon the giving of such notice, the notes may be surrendered for conversion at any time until the close of business on the business day immediately preceding the ex-dividend date for such distribution or until we announce that such distribution will not take place. No adjustment to the conversion rate or the ability of a holder of a note to convert will be made if we provide that holders of notes will participate in the transaction without conversion or in certain other cases. Delivery of Common Stock. On conversion of a note, a holder will not receive any payment of interest representing accrued and unpaid interest and accrued original issue discount. Our delivery to the holder of the full number of shares of common stock into which the note is convertible, together with any cash payment for such holder's fractional shares, will be deemed: . to satisfy our obligation to pay the principal amount at maturity of the note; and . to satisfy our obligation to pay accrued and unpaid interest and accrued original issue discount. As a result, accrued and unpaid interest and accrued original issue discount are deemed to be paid in full rather than canceled, extinguished or forfeited. If notes are converted after the applicable accrual or record date for interest and prior to the next succeeding interest payment date, holders of such notes at the close of business on the accrual or 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 principal amount of notes so converted, unless such notes have been called for redemption, in which case no such payment shall be required. The conversion rate will not be adjusted for any interest. A certificate for the number of whole shares of common stock into which any note is converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the conversion date. For a discussion of the tax treatment of a holder receiving shares of common stock upon conversion, see "Certain United States Federal Income Tax Considerations--U.S. Holders--Conversion of Notes." In lieu of delivery of shares of our common stock upon notice of 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 18 note) as specified by us, plus a number of shares calculated by reference to the average sale price of our common stock for the five consecutive trading days (referred to as the cash settlement averaging period) immediately following (a) the date of our notice of our election to deliver cash as described below if we have not previously given notice of redemption and the expiration of the conversion retraction period referred to below, or (b) the conversion date, in the case of conversion following our notice of redemption specifying that we intend to deliver cash upon conversion, in either case multiplied by the conversion rate in effect on that date. We will inform the holders through the trustee no later than two business days following the conversion date (referred to as the cash settlement notice period) of our election to pay cash in lieu of delivery of the shares otherwise issuable upon conversion, unless we have already informed holders of our election in connection with our optional redemption of the notes as described under "--Redemption of Notes at Our Option." If we choose to satisfy a portion of our obligation in cash, our notice of such election will specify the dollar amount to be satisfied in cash. If we timely elect to pay cash for any portion of the shares otherwise issuable to you, you may retract your conversion notice at any time during the two business day period beginning on the day after the final day of the cash settlement notice period (referred to as the conversion retraction period); no such retraction can be made (and a conversion notice shall be irrevocable) if we do not elect to deliver cash in lieu of shares (other than cash in lieu of fractional shares). If the conversion notice has not been retracted, then settlement (in cash and/or common stock) will occur on the day following the final day of the cash settlement averaging period. If an event of default, as described under "--Events of Default" 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 note or portion of the note (other than cash for fractional shares). If we specify a cash settlement amount (referred to as the cash amount), the settlement amounts payable with respect to each note will be computed as follows: Cash Settlement Portion: The cash amount specified by us, plus Common Stock Settlement Portion: conversion ratio minus the quotient of the cash amount divided by the average stock price, where the average stock price is the average closing price of our common stock during the cash settlement averaging period. To convert a note into shares of common stock, a holder must: . complete and manually sign the conversion notice on the back of the note or complete and manually sign a facsimile of the conversion notice and deliver the conversion notice to the conversion agent; . surrender the note to the conversion agent; . if required by the conversion agent, furnish appropriate endorsements and transfer documents; and . if required, pay all transfer or similar taxes. Under the indenture, the date on which all of the foregoing requirements have been satisfied is the conversion date. Conversion Rate Adjustments. The conversion rate will be adjusted for: . dividends or other distributions on our common stock payable in our common stock or other capital stock; . subdivisions, combinations or specified reclassifications of our common stock; . distributions to all holders of our common stock of specified rights to purchase our common stock for a period expiring within 45 days at less than the sale price at the "time of determination"; "time of determination" means the time and date of the earlier of (i) the determination of stockholders entitled to receive rights, warrants or options or a distribution and (ii) the time immediately prior to the 19 commencement of "ex-dividend" trading for such rights, warrants or options or distribution on the New York Stock Exchange or such other national or regional exchange or market on which the common stock is then listed or quoted; and . distributions to the holders of our common stock of our assets or debt securities or certain rights to purchase our securities (excluding cash dividends or other cash distributions from current or retained earnings other than extraordinary cash dividends). "Extraordinary cash dividends" means any cash dividend or distribution that, together with all other cash dividends paid to the holders of our common stock during the preceding 12-month period, are on a per share basis in excess of the sum of 5% of the sale price of the shares of common stock on the day preceding the date of declaration of such dividend or distribution. If we pay a dividend or make a distribution on shares of our common stock consisting of capital stock of, or similar equity interests in, a subsidiary or other business unit of ours, the conversion rate may be adjusted based on the market value of the securities so distributed relative to the market value of our common stock, in each case based on the average sale prices of those securities for the 10 trading days commencing on and including the fifth trading day after the date on which "ex-dividend trading" commences for such dividend or distribution on the NYSE or such other national or regional exchange or market on which the securities are then listed or quoted. If a shareholder rights plan, such as our rights agreement described under "Description of Capital Stock--Stockholder Rights Plan," under which any rights are issued provides that each share of common stock issued upon conversion of notes will be entitled to receive such rights, there shall not be any adjustment to the conversion privilege or conversion rate as a result of: . the issuance of the rights; . the distribution of separate certificates representing the rights; . the exercise or redemption of such rights in accordance with any rights agreement; or . the termination or invalidation of the rights. The indenture permits us to increase the conversion rate from time to time. If we are party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of our assets, the right to convert a note into common stock will be changed into a right to convert it into the kind and amount of securities, cash or other assets of BJ Services or another person which the holder would have received if the holder had converted the holder's notes immediately prior to the transaction. No adjustment need be made for any transaction referred to above if holders of the notes are to participate in a transaction on a basis and with notice that our 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. Holders of the notes may, in certain circumstances, be deemed to have received a distribution subject to United States Federal income tax as a dividend if: . a taxable distribution to holders of common stock results in an adjustment of the conversion rate; or . the conversion rate is increased at our discretion. See "Certain United States Federal Income Tax Considerations--U.S. Holders--Adjustment of Conversion Rate." 20 Redemption of Notes at Our Option Prior to April 24, 2005, the notes will not be redeemable at our option. Beginning on April 24, 2005, we may redeem the notes for cash at any time as a whole, or from time to time in part, at a price equal to the original issue price of the notes to be redeemed plus accrued original issue discount and accrued and unpaid interest to, but excluding, the date of redemption. We will give not less than 30 days nor more than 60 days notice of redemption by mail to holders of the notes. The following table shows the redemption price of a note on April 24, 2005, at each April 24 thereafter prior to maturity and at stated maturity on April 24, 2022. These prices reflect the issue price plus accrued original issue discount to the redemption date. The redemption price of a note redeemed between the dates below would include an additional amount reflecting the additional original issue discount accrued since the next preceding date in the table.
Note Accrued Original Redemption Redemption Date Issue Price(1) Issue Discount(2) Price(1) + (2) --------------- -------------- ----------------- -------------- April 24, 2005.... $790.76 $ 27.23 $ 817.99 April 24, 2006.... 790.76 36.61 827.37 April 24, 2007.... 790.76 46.14 836.90 April 24, 2008.... 790.76 55.82 846.58 April 24, 2009.... 790.76 65.67 856.43 April 24, 2010.... 790.76 75.67 866.43 April 24, 2011.... 790.76 85.84 876.60 April 24, 2012.... 790.76 96.17 886.93 April 24, 2013.... 790.76 106.67 897.43 April 24, 2014.... 790.76 117.34 908.10 April 24, 2015.... 790.76 128.19 918.95 April 24, 2016.... 790.76 139.21 929.97 April 24, 2017.... 790.76 150.42 941.18 April 24, 2018.... 790.76 161.80 952.56 April 24, 2019.... 790.76 173.38 964.14 April 24, 2020.... 790.76 185.14 975.90 April 24, 2021.... 790.76 197.09 987.85 At Stated Maturity 790.76 209.24 1,000.00
If we decide to redeem fewer than all of the outstanding notes, the trustee will select the notes to be redeemed in $1,000 principal amounts at maturity or integral multiples of $1,000 principal amount at maturity. In this case, the trustee may select the notes by lot, pro rata, or by another method the trustee considers fair and appropriate. If the trustee selects a portion of your notes for partial redemption and you convert a portion of your notes, the converted portion will be deemed to be the portion selected for redemption. Tax Event Redemption If a tax event occurs and is continuing, we may, at our option, redeem the notes in whole (but not in part) at any time at redemption prices equal to the issue price of the notes plus accrued original issue discount and accrued and unpaid interest to, but excluding, the date of redemption. Interest on notes which is due and payable on or prior to the redemption date will be payable to the holders of the notes registered as such at the close of business on the relevant record dates. We will give not less than 30 days nor more than 60 days notice of redemption by mail to the holders of the notes. Unless we default in payment of the redemption price, on and after the redemption date original issue discount and interest shall cease to accrue on the notes. 21 "Tax event" means the receipt by us of an opinion of nationally recognized tax counsel experienced in such matters to the effect that there is more than an insubstantial risk that original issue discount and interest payable by us on the notes on the next interest payment date would not be deductible, in whole or in part, by us for United States federal income tax purposes as a result of any amendment to, change in, or announced proposed change in, the laws, or any regulations thereunder, of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, any amendment to or change in any official interpretation or application of any such law or regulations by any legislative body, court, governmental agency or regulatory authority or any official interpretation or pronouncement that provides for a position with respect to any such laws or regulations that differs from the generally accepted position on the date of this prospectus, which amendment, change, or proposed change is effective or which interpretation or pronouncement is announced on or after the date of this prospectus. Purchase of Notes at the Option of the Holder On April 24, 2005, 2007, 2012 and 2017, holders may require us to purchase any outstanding note for which the holder has properly delivered and not withdrawn a written purchase notice, subject to certain additional conditions. Holders may submit their notes for purchase to the paying agent at any time from the opening of business on the date that is 20 business days prior to the purchase date until the close of business on the business day immediately preceding the purchase date. The purchase price of a note will be the following prices, plus accrued and unpaid interest to, but excluding, the purchase date: . $817.99 per note on April 24, 2005; . $836.90 per note on April 24, 2007; . $886.93 per note on April 24, 2012; and . $941.18 per note on April 24, 2017. The purchase prices shown above are equal to the issue price plus accrued original issue discount to the purchase date. We may, at our option, elect to pay the purchase price in cash, shares of our common stock, or any combination thereof. For a discussion of the tax treatment of a holder receiving cash, shares of our common stock or any combination thereof, see "Certain United States Federal Income Tax Considerations--U.S. Holders--Exercise of Repurchase Right." We will be required to give notice on a date not less than 20 business days prior to each purchase date to all holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law, stating among other things: . whether we will pay the purchase price of notes in cash or in shares of our common stock or any combination thereof, specifying the percentages of each; . if we elect to pay, in whole or in part, in shares of our common stock, the method of calculating the market price of the common stock; and . the procedures that holders must follow to require us to purchase their notes. The purchase notice given by each holder electing to require us to purchase notes shall be given to the paying agent no later than the close of business on the business day immediately preceding the purchase date and must state: . the certificate numbers of the holder's notes to be delivered for purchase; . the portion of the principal amount at maturity of notes to be purchased, which must be $1,000 aggregate principal amount at maturity or an integral multiple of $1,000 aggregate principal amount at maturity; 22 . that the notes are to be purchased by us pursuant to the applicable provisions of the notes; and . if we elect, pursuant to the notice that we are required to give, to pay the purchase price in shares of our common stock, in whole or in part, but the purchase price is ultimately to be paid to the holder entirely in cash because any of the conditions to payment of the purchase price or portion of the purchase price in shares of our common stock is not satisfied prior to the close of business on the purchase date, as described below, whether the holder elects: (1) to withdraw the purchase notice as to some or all of the notes to which it relates, or (2) to receive cash in such event in respect of the entire purchase price for all notes or portions of notes subject to such purchase notice. If the holder fails to indicate the holder's choice with respect to the election described in the final bullet point above, the holder shall be deemed to have elected to receive cash in respect of the entire purchase price for all notes subject to the purchase notice. A holder may withdraw any purchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the purchase date. The notice of withdrawal shall state: . the principal amount at maturity of the notes being withdrawn, which must be $1,000 principal amount at maturity or an integral multiple of $1,000 principal amount at maturity; . the certificate numbers of the note(s) being withdrawn; and . the principal amount at maturity, if any, of the note(s) that remain subject to the purchase notice. If we elect to pay the purchase price, in whole or in part, in shares of our common stock, the number of shares we deliver shall be equal to the portion of the purchase price to be paid in common stock divided by the market price of a share of our common stock. We will pay cash based on the market price for all fractional shares of common stock if we elect to deliver common stock in payment, in whole or in part, of the purchase price. The "market price" means the average of the sale prices of our common stock for the 20 trading day period ending on (if the third business day prior to the applicable purchase date is a trading day, or if not, then on the last trading day prior to) the third business day prior to the applicable purchase date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such 20 trading day period and ending on such purchase date, of certain events that would result in an adjustment of the conversion rate with respect to our common stock. The "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 the average bid and the average ask prices) on such date on the NYSE on such other principal United States securities exchange on which the common stock is listed for trading or, if the common stock is not listed for trading on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. In the absence of a quotation, we will determine the sale price on the basis of such quotations as we consider appropriate. Because the market price of our common stock is determined prior to the applicable purchase date, holders of notes 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 such purchase date. We may pay the purchase price or any portion of the purchase price in common stock only if the information necessary to calculate the market price is published in a daily newspaper of national circulation or by other appropriate means. 23 Upon determination of the actual number of shares of common stock to be issued for each $1,000 principal amount at maturity of notes in accordance with the foregoing provisions relating to the purchase of notes at the option of the holder, we promptly will issue a press release and publish such information on our website. In addition to the above conditions, our right to purchase notes, in whole or in part, with common stock is subject to our satisfying various conditions, including: . listing such common stock on the principal United States securities exchange on which our common stock is then listed for trading or, if not so listed, on Nasdaq; . the registration of our common stock under the Securities Act and the Exchange Act, if required; and . any necessary qualification or registration under applicable state securities law or the availability of an exemption from such qualification and registration. If such conditions are not satisfied with respect to a holder prior to the close of business on the purchase date, we will pay the purchase price of the notes to the holder 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 notice that we are required to give to holders of the notes, except as described in the paragraph above. In connection with any purchase offer, we will to the extent applicable: . comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable; and . file Schedule TO or any other required schedule under the Exchange Act. Our obligation to pay the purchase price of a note for which a purchase notice has been delivered and not validly withdrawn is conditioned upon the holder delivering the note, together with necessary endorsements, to the paying agent at any time after delivery of the purchase notice. We will cause the purchase price of the note to be paid promptly following the later of the purchase date and the time of delivery of the note. If the paying agent holds money or securities sufficient to pay the purchase price of the note on the business day following the purchase date in accordance with the terms of the indenture, then, immediately after the purchase date, the note will cease to be outstanding, original issue discount and interest on such note will cease to accrue, whether or not the note is delivered to the paying agent. Thereafter, all other rights of the holder shall terminate, other than the right to receive the purchase price upon delivery of the note. We may not purchase any notes for cash at the option of holders if an event of default with respect to the notes has occurred and is continuing, other than a default in the payment of the purchase price with respect to such notes. Change in Control Permits Purchase of Notes at the Option of the Holder If a change in control (as defined below) with respect to BJ Services occurs on or prior to April 24, 2005, each holder will have the right, at its option, subject to the terms and conditions of the indenture, to require us to purchase for cash all or any portion of the holder's notes in integral multiples of $1,000 principal amount at maturity, at a price equal to the issue price of such notes plus accrued original issue discount and accrued and unpaid interest to the purchase date. We will be required to purchase the notes with respect to which a change of control purchase notice is given to the paying agent no later than 35 business days after the occurrence of such change in control. We refer to this date in this prospectus as the "change in control purchase date." Within 15 business days after the occurrence of a change in control, we must mail to the trustee and to all holders of notes at their addresses shown in the register of the registrar and to beneficial owners as required by applicable law a notice regarding the change in control, which notice shall state, among other things: . the events causing a change in control; 24 . the date of such change in control; . the last date on which a holder may exercise the purchase right; . the change in control purchase price; . the change in control purchase date; . the name and address of the paying agent and the conversion agent; . the conversion rate and any adjustments to the conversion rate; . that notes with respect to which a change in control purchase notice is given by the holder may be converted, if otherwise convertible, only if the change in control purchase notice has been withdrawn in accordance with the terms of the indenture; and . the procedures that holders must follow to exercise these rights. To exercise this right to require us to purchase a holder's note(s), the holder must deliver a written notice so as to be received by the paying agent no later than the close of business on the change in control purchase date. The required purchase notice upon a change in control must state: . the certificate numbers of the note(s) to be delivered by the holder; . the portion of the principal amount at maturity of note(s) to be purchased, which portion must be $1,000 principal amount at maturity or an integral multiple of $1,000 principal amount at maturity; and . that we are to purchase the note(s) pursuant to the applicable provisions of the notes. A holder may withdraw any change in control purchase notice by delivering to the paying agent a written notice of withdrawal prior to the close of business on the change in control purchase date. The notice of withdrawal must state: . the principal amount at maturity of the note(s) being withdrawn, which must be $1,000 principal amount at maturity or an integral multiple of $1,000 principal amount at maturity; . the certificate numbers of the note(s) being withdrawn; and . the principal amount at maturity, if any, of the note(s) that remain subject to a change in control purchase notice. Our obligation to pay 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 the note, together with necessary endorsements, to the paying agent at any time after the delivery of such change in control purchase notice. We will cause the change in control purchase price for such note to be paid promptly following the later of the change in control purchase date and the time of delivery of such note. If the paying agent holds money sufficient to pay the change in control purchase price of a note on the change in control purchase date in accordance with the terms of the indenture, then, immediately after the change in control purchase date, original issue discount and interest will cease to accrue, on such note, whether or not the note is delivered to the paying agent. Thereafter, all other rights of the holder shall terminate, other than the right to receive the change in control purchase price upon delivery of the note. Under the indenture, a "change in control" of BJ Services is deemed to have occurred at such time as: . any person, including its respective affiliates and associates, other than BJ Services, its subsidiaries or their employee benefit plans, files a Schedule 13D or Schedule TO (or any successor schedule, form or report under the Exchange Act) disclosing that such person has become the beneficial owner of more than 50% of the aggregate voting power of our common stock and other capital stock with equivalent voting rights, or other capital stock into which the common stock is reclassified or changed, with certain exceptions; or 25 . there shall be consummated any share exchange, consolidation or merger of BJ Services pursuant to which our common stock is converted into cash, securities or other property in which the holders of our common stock and other capital stock with equivalent voting rights immediately prior to the share exchange, consolidation or merger, have, directly or indirectly, less than a majority of the total voting power in the aggregate of all classes of capital stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger. The indenture does not permit our board of directors to waive our obligation to purchase notes at the option of holders in the event of a change in control. In connection with any purchase offer in the event of a change in control, we will to the extent applicable: . comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable; and . file Schedule TO or any other required schedule under the Exchange Act. The change in control purchase feature of the notes may in certain circumstances make more difficult or discourage a takeover of BJ Services. The change in control purchase feature, however, is not the result of our knowledge of any specific effort: . to accumulate shares of our common stock; . to obtain control of BJ Services by means of a merger, tender offer, solicitation or otherwise; or . part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change in control purchase feature resulted from negotiations between the initial purchasers and us. We could, in the future, enter into certain transactions, including certain recapitalizations, that would not constitute a change in control with respect to the change in control purchase feature of the notes but that would increase the amount of our (or our subsidiaries') outstanding indebtedness. We may not purchase notes at the option of holders upon a change in control if there has occurred and is continuing an event of default with respect to the notes, other than a default in the payment of the change in control purchase price with respect to the notes. Events of Default The following are events of default for the notes: (1) default in payment of the principal amount, redemption price, purchase price or change in control purchase price with respect to any notes when such become due and payable; (2) default in payment of any interest, which default continues for 30 days; (3) our failure to comply with any of our other agreements in the notes or the indenture upon our receipt of notice of such default from the trustee or from holders of not less than 25% in aggregate principal amount at maturity of the notes then outstanding, and our failure to cure (or obtain a waiver of) such default within 60 days after we receive such notice; (4) a failure to pay when due at final maturity, or a default that results in the acceleration of maturity of, any indebtedness for borrowed money of BJ Services or our subsidiaries in an aggregate amount of $50.0 million or more, unless the acceleration is rescinded, stayed or annulled within 30 days after written notice of default is given to us by the trustee or holders of not less than 25% in aggregate principal amount at maturity of the notes then outstanding; and 26 (5) certain events of bankruptcy, insolvency or reorganization with respect to us or any of our subsidiaries that is a designated subsidiary or any group of two or more subsidiaries that, taken as a whole, would constitute a designated subsidiary. A "designated subsidiary" means any existing or future, direct or indirect, subsidiary of BJ Services and its subsidiaries whose assets constitute 15% or more of the total assets of BJ Services on a consolidated basis. Under the indenture, the trustee must give to the holders of notes notice of all uncured defaults known to it with respect to the notes within 90 days after such a default occurs (the term default to include the events specified above without notice or grace periods); provided that, except in the case of default in the payment of principal of or interest on, any of the notes, the trustee will be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of the holders of the notes. In case an event of default with respect to any note has occurred and is continuing, the amount payable to a beneficial owner of a note upon any acceleration permitted by the notes, with respect to each note, will be the original issue price of the note plus accrued original issue discount through the date of such acceleration, and any accrued and unpaid interest through the date of acceleration. If a bankruptcy proceeding is commenced in respect of us, the claim of the beneficial owner of a note may be limited, under Section 502(b)(2) of Title 11 of the United States Code, to the original issue price of the note plus accrued original issue discount, and any interest which has accrued, as of the commencement of the proceeding. In case of default in payment of the notes, whether at the stated maturity or upon acceleration, the notes will bear interest from and after the maturity date or date of acceleration, payable upon demand of their beneficial owners, at 1.625% per year on the unpaid principal amount plus accrued original issue discount and accrued and unpaid interest, to the extent that payment of any interest is legally enforceable, in accordance with the terms of the notes to the date payment of that amount has been made or duly provided for. Except when an event of default has occurred and is continuing, the trustee is not obligated to exercise any of its rights or powers under the indenture at the request or direction of any holders of notes, unless the holders offer the trustee reasonable indemnity. If they provide this reasonable indemnification, the holders of a majority in principal amount of notes may, subject to certain limitations, direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or of exercising any trust or power conferred on the trustee. If an event of default has occurred and is continuing, the trustee is generally required to act as a prudent person would under the circumstances in the conduct of his or her own affairs. Modification of the Indenture We and the trustee may, without the consent of the holders of the debt securities issued under the indenture, enter into supplemental indentures for, among others, one or more of the following purposes: . to evidence the succession of another corporation to our company, and the assumption by such successor of our obligations under the indenture and the notes; . to add covenants of our company, or surrender any rights of our company, or add any rights for the benefit of the holders of notes; . to cure any ambiguity, omission, defect or inconsistency in such indenture; . to evidence and provide for the acceptance of any successor trustee with respect to the notes or to facilitate the administration of the trusts thereunder by one or more trustees in accordance with such indenture; and . to provide any additional events of default. 27 With certain exceptions, the indenture or the rights of the holders of the notes may be modified by us and the trustee with the consent of the holders of a majority in aggregate principal amount of the notes then outstanding, but no such modification may be made without the consent of the holder of each outstanding note affected thereby that would: . alter the manner or rate of accrual or payment of original issue discount or interest on any note; . make any note payable in money or securities other than that stated in the note; . reduce the principal amount at maturity, redemption price, purchase price or change in control purchase price with respect to any note; . make any change that affects the right of a holder to convert any note in any adverse manner; . make any change that adversely affects the right to require us to purchase a note; and . impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, the notes. Discharge of the Indenture We may satisfy and discharge our obligations under the indenture by delivering to the trustee for cancellation all outstanding notes or by depositing with the trustee, the paying agent or the conversion agent, if applicable, after the notes have become due and payable, whether at stated maturity, or any redemption date, or any purchase date, or a change in control purchase date, or upon conversion or otherwise, cash or common stock (as applicable under the terms of the indenture) sufficient to pay all of the outstanding notes and paying all other sums payable under the indenture by our company. Governing Law The indenture and the notes will be governed by and construed in accordance with the laws of the State of New York. Depositary Description of the Global Securities All notes are represented by one or more fully registered global securities. Each global security is deposited with, or on behalf of, DTC (DTC, along with any successor, is referred to as a "depositary"), as depositary, registered in the name of Cede & Co., DTC's partnership nominee. Unless and until it is exchanged in whole or in part for notes in definitive form, no global security may be transferred except as a whole by the depositary to its nominee or by such nominee of the depositary or another nominee of the depositary or by the depositary or any nominee to a successor of the depositary or a nominee of that successor. So long as DTC, or its nominee, is a registered owner of a global security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the notes represented by the global security for all purposes under the indenture. Except as provided below, the beneficial owners of the notes represented by a global security will not be entitled to have the notes registered in their names, will not receive or be entitled to receive physical delivery of the notes in definitive form and will not be considered the owners or holders of the notes including for purposes of receiving any reports delivered by BJ Services or the trustee under the indenture. Accordingly, each person owning a beneficial interest in a global security must rely on the procedures of DTC and, if that person is not a participant of DTC, on the procedures of the participant through which that person owns its interest, to exercise any rights of a holder under the indenture. We understand that under existing industry practices, if we request any action of holders or that an owner of a beneficial interest in a global security desires to give or take any action which a holder is entitled to give or take under the indenture, DTC would 28 authorize the participants holding the relevant beneficial interests to give or take that action, and those participants would authorize beneficial owners owning through those participants to give or take that action or would otherwise act upon the instructions of beneficial owners. Conveyance of notices and other communications by DTC to participants, by participants to indirect participants and by participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. To ensure that notices of conversion and purchase at the option of a holder or upon a change in control of BJ Services (or any other notices or actions permitted or required to be taken by holders of notes under the indenture) are received by the paying agent by the times required, holders may need to give substantially earlier instructions to their broker or other intermediary. Different brokerage firms and intermediaries may have different cut-off times for accepting and implementing instructions from their clients. Therefore, you should consult with your broker and other intermediary, if applicable, as to applicable cut-off times and other notice mechanics. DTC Procedures The following is based on information provided by DTC. DTC acts as securities depositary for the notes. The notes are fully registered securities registered in the name of Cede & Co., DTC's partnership nominee. Two fully registered global securities are issued for the notes in the aggregate principal amount of such issue, and are deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants deposit with DTC. DTC also facilitates the settlement among participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants of DTC include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its direct participants and by the NYSE, the American Stock Exchange, and the National Association of Securities Dealers, Inc. Access to DTC's system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC. Purchases of the notes under DTC's system must be made by or through direct participants, which will receive a credit for the notes on DTC's records. The ownership interest of each beneficial owner is in turn to be recorded on the records of direct and indirect participants. Beneficial owners will not receive written confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participants through which the beneficial owner entered into the transaction. Transfers of ownership interests in the notes are to be made by entries on the books of participants acting on behalf of beneficial owners. To facilitate subsequent transfers, all notes deposited with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the notes; DTC's records reflect only the identity of the direct participants to whose accounts the notes are credited, which may or may not be the beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers. 29 Conveyance of notices and other communications by DTC to direct participants, by direct participants to indirect participants, and by direct participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to the notes. Under its usual procedures, DTC mails an omnibus proxy to BJ Services as soon as possible after the applicable record date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to those direct participants identified in a listing attached to the omnibus proxy to whose accounts the notes are credited on the record date. Payments of principal and interest made in cash on the notes will be made in immediately available funds to DTC. DTC's practice is to credit direct participants' accounts on the applicable payment date in accordance with their respective holdings shown on the depositary's records unless DTC has reason to believe that it will not receive payment on that date. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of that participant and not of DTC, the trustee or BJ Services, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and/or interest to DTC is the responsibility of BJ Services or the trustee, disbursement of those payments to direct participants will be the responsibility of DTC, and disbursement of those payments to the beneficial owners will be the responsibility of direct participants and indirect participants. Exchange for Certificated Securities If: . the depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 60 days, . we execute and deliver to the trustee a company order to the effect that the global securities shall be exchangeable, or . an event of default under the indenture has occurred and is continuing with respect to the notes, the global notes will be exchangeable for notes in definitive form of like tenor and of an equal aggregate principal amount at maturity, in denominations of $1,000 principal amount at maturity and integral multiples of $1,000 principal amount at maturity. The definitive notes will be registered in the name or names as the depositary shall instruct the trustee. It is expected that instructions may be based upon directions received by the depositary from participants with respect to ownership of beneficial interests in the global notes. DTC may discontinue providing its services as securities depositary with respect to the notes at any given time by giving reasonable notice to us or the trustee. Under these circumstances, in the event that a successor securities depositary is not obtained, notes certificates are required to be printed and delivered. We may decide to discontinue use of the system of book-entry transfers through DTC or a successor securities depositary. In that event, notes certificates will be printed and delivered. The information in this section concerning DTC and DTC's system has been obtained from sources that we believe to be reliable, but we take no responsibility for its accuracy. Registration Rights We have entered into a registration rights agreement with Banc of America Securities LLC ("BAS") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") pursuant to which we, at our expense, agreed to file with the SEC a shelf registration statement covering resale of the notes and the shares of common 30 stock issuable upon conversion of the notes, within 90 days after the date of original issuance of the notes. We will use our reasonable commercial efforts to cause the shelf registration statement to become effective within 180 days of such date of original issuance, and to keep the shelf registration statement effective until the earlier of (i) the transfer pursuant to Rule 144 under the Securities Act or the sale pursuant to the shelf registration statement of all the securities registered thereunder, (ii) the expiration of the holding period applicable to such securities held by persons that are not affiliates of ours under Rule 144(k) under the Securities Act or any successor provision and (iii) the second anniversary of the effective date of the registration statement, subject to certain permitted exceptions. We are permitted to suspend the use of a prospectus that is part of the shelf registration statement under certain circumstances relating to pending corporate developments, public filings with the SEC and similar events for a period not to exceed 60 days in any three-month period and not to exceed an aggregate of 90 days in any 12-month period. We agreed to pay predetermined liquidated damages to holders of transfer restricted notes and holders of transfer restricted common stock issued upon conversion of the notes, if the prospectus is unavailable for the periods in excess of those permitted above. Such liquidated damages shall accrue until unavailability is cured, (i) in respect of any notes at a rate per year equal to 0.25% for the first 90 day period after the occurrence of such event, and 0.50% thereafter, of the sum of the original issue price thereof plus the accrued original issue discount thereof at such time and, (ii) in respect of any shares of common stock issued upon conversion, at a rate per year equal to 0.25% for the first 90 day period, and 0.50% thereafter, of the then applicable conversion price (as defined below). So long as unavailability continues, we will pay liquidated damages in cash on April 24 and October 24 of each year to the holder of record of the transfer restricted notes or shares of common stock on the immediately preceding April 1 or October 1. When such registration default is cured, accrued and unpaid liquidated damages will be paid in cash to the record holder as of the date of such cure. A holder who sells notes or shares of common stock issued upon conversion of the notes pursuant to the shelf registration statement must complete and deliver to us a notice and questionnaire at least 10 business days prior to any distribution of the securities so offered. A holder generally is required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers and be bound by certain provisions of the registration rights agreement that are applicable to such holder, including certain indemnification provisions, and will be subject to certain civil liability provisions under the Securities Act. If the holder of offered securities is not a named selling securityholder in this prospectus at the time of effectiveness of the shelf registration statement, upon receipt of a completed questionnaire together with such other information as we may reasonably request from the holder, we will, as promptly as practicable but in any event within 20 business days of such receipt, file such amendments to the shelf registration statement or supplements to a related prospectus as are necessary to permit such holder to deliver such prospectus to purchasers of notes or shares of our common stock issuable upon conversion of the notes, subject to our right to suspend the use of the prospectus as described above. 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 the prospectus and therefore will not be permitted to sell the notes or shares of our common stock issuable upon conversion of the notes pursuant to the shelf registration statement. We will pay all of our expenses of the shelf registration statement, will provide copies of such prospectus to each holder that has notified us of its acquisition of notes or shares of common stock issued upon conversion of the notes, will notify each such holder when the shelf registration statement has become effective and will take certain other actions as are required to permit, subject to the foregoing, unrestricted resales of the notes and the shares of common stock issued upon conversion of the notes. The term "applicable conversion price" means, as of any date of determination, the sum of the original issue price plus the accrued original issue discount of each note as of such date of determination divided by the conversion rate in effect as of such date of determination or, if no notes are then outstanding, the conversion rate that would be in effect were notes then outstanding. The summary herein of certain provisions of the registration rights agreement is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which is available from us upon request. 31 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of BJ Services consists of 380,000,000 shares of common stock and 5,000,000 shares of preferred stock, par value $1.00 per share, including shares of Series A Junior Participating Preferred Stock, par value $1.00 per share, issuable upon exercise of the Company's preferred share purchase rights. The following description of the capital stock of BJ Services does not purport to be complete or to give full effect to the provisions of statutory or common law and is subject in all respects to the applicable provisions of the Certificate of Incorporation (referred to as the charter) and Bylaws (referred to as the bylaws) of the Company, the Certificate of Designation for the preferred stock, the Amended and Restated Stockholder Rights Agreement between BJ Services and The Bank of New York, as rights agent (referred to as the rights agreement), each as amended, which are incorporated by reference into this prospectus. Common Stock BJ Services is authorized by its charter to issue 380,000,000 shares of common stock, of which 156,756,671 shares were issued and outstanding as of August 31, 2002. Each outstanding share of common stock includes an associated preferred share purchase right (referred to as the right). The holders of shares of common stock are entitled to one vote for each share held on all matters submitted to a vote of common stockholders. The bylaws provide that, in general, when a quorum is present at any meeting of stockholders, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy and entitled to vote shall decide questions brought before such meeting (except as otherwise required by statute or the charter or bylaws). Each share of common stock is entitled to participate equally in dividends, if, as and when declared by BJ Services' Board of Directors, and in the distribution of any assets in the event of liquidation, subject in all cases to any prior claims and prior rights of outstanding shares of preferred stock. The shares of common stock have no preemptive or conversion rights, redemption provisions or sinking fund provisions. The outstanding shares of common stock are duly and validly issued, fully paid and nonassessable. Stockholder Rights Plan BJ Services has a Stockholder Rights Plan (referred to as the rights plan) pursuant to the rights agreement, which is designed to deter coercive takeover tactics and to prevent an acquirer from gaining control of BJ Services without offering a fair price to all of BJ Services' stockholders. Under this plan, each outstanding share of BJ Services' common stock includes one-quarter of a right which becomes exercisable under certain circumstances, including when beneficial ownership of BJ Services' common stock by any person, or group, equals or exceeds 15% of BJ Services' outstanding common stock. Each right entitles the registered holder to purchase from BJ Services one one-thousandth of a share of preferred stock at a price of $150, subject to adjustment under certain circumstances. Upon the occurrence of certain events specified in the rights plan, each holder of a right (other than a holder who would be deemed to be an acquiring person under the rights plan) will have the right, upon exercise of such right, to receive that number of shares of common stock of BJ Services (or the surviving corporation) that, at the time of such transaction, would have a market price of two times the purchase price of the right. No shares of Series A Junior Participating Preferred Stock have been issued by BJ Services. Shares of our common stock issuable upon the conversion or redemption of the notes will include a right. Preferred Stock Pursuant to the charter, BJ Services is authorized to issue 5,000,000 shares of preferred stock, and BJ Services' Board of Directors by resolution may establish one or more series of preferred stock having such number of shares, designation, relative voting rights, dividend rates, liquidation and other rights, preferences and 32 limitations as may be fixed by the Board of Directors without any further stockholder approval. A certificate of designation has been filed with the Secretary of State of the State of Delaware authorizing 200,000 shares of Series A Junior Participating Preferred Stock in respect of our rights plan. The preferred stock could include dividend, liquidation and voting rights that would limit or qualify the rights of the holders of the common stock. Certain Anti-Takeover Provisions Certain provisions of the charter and bylaws, as well as the rights agreement, may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider to be in such stockholder's best interest, including those attempts that might result in a payment of a premium over the market price for the shares held by stockholders. Such provisions include a classified board of directors and the preferred stock authorized pursuant to the charter. The charter further provides that (i) stockholders may act only at an annual or special meeting of stockholders and may not act by written consent; (ii) special meetings of stockholders can be called only by BJ Services' Board of Directors; (iii) a 75% vote of the outstanding voting stock is required for the stockholders to amend the bylaws; (iv) a 75% vote of the outstanding voting stock is required to amend the charter with respect to certain matters, including, without limitation, the matters set forth in clauses (i) and (iii) above and (v) a 75% vote is required for certain business combinations. Commission Position on Indemnification Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers or persons controlling BJ Services pursuant to the foregoing provisions, BJ Services has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. Repurchase Program BJ Services' Board of Directors has authorized a stock repurchase program of up to $750 million. Repurchases are made at the discretion of BJ Services' management and the program will remain in effect until terminated by BJ Services' Board of Directors. Under this program, BJ Services has repurchased 12,792,800 shares at a cost of $219.4 million through fiscal 2000, and 7,014,200 shares at a cost of $177.5 million during fiscal 2001. During the period that commenced on October 1, 2001 and ended June 30, 2002, BJ Services has purchased an additional 4,376,000 shares at a cost of $102.1 million. Listing Shares of our common stock and rights are listed for trading on the New York Stock Exchange, trading under the symbol "BJS". CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material U.S. federal income tax considerations relating to the ownership and disposition of the notes or shares of common stock issuable upon conversion of the notes. This discussion is limited to holders who hold the notes and any shares of common stock into which the notes are converted as capital assets. This discussion does not contain a complete analysis of all the potential tax considerations relating to the ownership and disposition of the notes or shares of common stock. In particular, this discussion does not address all tax considerations that may be important to you in light of your particular circumstances such as the alternative minimum tax provisions or special rules applicable to certain categories of investors. Special rules 33 may apply, for instance, to certain financial institutions, insurance companies, tax-exempt organizations, dealers in securities, persons who hold notes or shares of common stock as part of a hedge, conversion or constructive sale transaction, or straddle or other integrated or risk reduction transaction, or persons who have ceased to be United States citizens or to be taxed as resident aliens. In addition, special rules may apply to holders of notes or shares of common stock which are partnerships. If a partnership is a holder, the tax treatment of a partner will generally depend on the status of the partner and on the activities of the partnership. A holder that is a partnership, and partners of such partnership, should consult their own tax advisors. This discussion also does not address the tax consequences arising under the laws of any foreign, state or local jurisdiction. This discussion is based upon the Internal Revenue Code of 1986, as amended, existing and proposed Treasury Regulations, and judicial decisions and administrative interpretations thereunder, as of the date hereof, all of which are subject to change or different interpretations, possibly with retroactive effect. We cannot assure you that the Internal Revenue Service will not challenge one or more of the tax results described in this discussion, and we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal tax consequences of acquiring, holding or disposing of the notes or shares of common stock. Please consult your own tax advisors as to the particular tax consequences to you of acquiring, holding, converting or otherwise disposing of the notes and shares of common stock, including the effect and applicability of state, local or foreign tax laws. U.S. Holders You are a "U.S. holder" for purposes of this discussion if you are a holder of a note or common stock that is, for U.S. federal income tax purposes: . a citizen or resident of the United States; . a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof, . an estate the income of which is subject to U.S. federal income taxation regardless of its source; or . a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. Payment of Stated Interest Interest paid on the notes generally will be taxable as ordinary interest income at the time payments are accrued or received in accordance with your regular method of accounting for U.S. federal income tax purposes provided that the interest is "qualified stated interest." Qualified stated interest is stated interest, other than any stated interest payable in kind, that is unconditionally payable at least annually at a single fixed rate. Original Issue Discount on the Notes The notes were issued at a substantial discount from their principal amount. For U.S. federal income tax purposes, the excess of the principal amount of each note over its issue price constitutes original issue discount, or OID. The issue price of the notes was $790.76 per $1000 principal amount at maturity. Thus, the OID of the notes equals $209.24 per $1000 principal amount at maturity. As the holder of a note, subject to the rules for acquisition premium discussed below, you will be required to include OID in income as it accrues, in accordance with a constant yield method, before receipt of the cash or stock attributable to that income, regardless of your regular method of accounting for U.S. federal income tax purposes. Under these rules, you will have to include in gross income increasingly greater amounts of OID in each successive accrual period. Your original tax basis for determining gain or loss on the sale or other disposition of a note will be increased by any accrued OID included in your gross income. 34 As discussed in this prospectus, we will be required to pay additional interest in the event of a registration default. The payment of additional interest would change the yield on the notes and would therefore change the rate at which OID accrues. We do not expect a registration default to occur and therefore intend to report the accrual of OID on the notes on the basis that no additional interest will become payable. Market Discount. The resale of notes may be affected by the impact on a purchaser of the market discount provisions of the Internal Revenue Code. Under the market discount rules, a U.S. holder who purchases a note at a market discount generally will be required to treat any gain recognized on the disposition of the note as ordinary income to the extent of the lesser of the gain or the portion of the market discount that accrued during the period that the U.S. holder held the note. Market discount is generally defined as the amount by which your purchase price for a note is less than the revised issue price of the note on the date of purchase, subject to a statutory de minimis exception. A note's revised issue price equals the sum of the issue price of the note and the aggregate amount of the OID includible in the gross income of all holders of the note for periods before the acquisition of the note by the holder, likely reduced, although the Internal Revenue Code does not expressly so provide, by any cash payment in respect of the note other than qualified stated interest. Generally, a note's issue price is the first price at which a substantial amount of the notes was sold to investors, not including sales to underwriters or placement agents, including the initial purchasers. If you acquire a note at a market discount you may be required to defer a portion of any interest expense that otherwise may be deductible on any indebtedness incurred or continued to purchase or carry the note until you dispose of the note in a taxable transaction. A U.S. holder who has elected under applicable Internal Revenue Code provisions to include market discount in income annually as the discount accrues will not, however, be required to treat any gain recognized as ordinary income or to defer any deductions for interest expense under these rules. In that case your tax basis in a note is increased by each accrual of amounts treated as market discount. This election to include market discount in income currently, once made, applies to all market discount obligations acquired on or after the first day of the taxable year to which the election applies and may not be revoked without the consent of the IRS. U.S. holders should consult their tax advisors as to the portion of any gain that would be taxable as ordinary income under these provisions and any other consequences of the market discount rules that may apply to them in particular. Acquisition Premium. A U.S. holder of a note is generally subject to the rules for accruing OID described above. However, if your purchase price for the note exceeds the adjusted issue price but is less than or equal to the sum of all amounts payable on the note after the purchase date other than payments of qualified stated interest, the excess is acquisition premium and is subject to special rules. The adjusted issue price of your note for this purpose generally is the sum of the issue price of the note plus the OID that has accrued on your note, less any prior payments of the note other than a payment of qualified stated interest. Acquisition premium ratably offsets the amount of accrued OID otherwise includible in your taxable income, that is, you may reduce the daily portions of OID by a fraction, the numerator of which is the excess of your purchase price for the note over the adjusted issue price, and the denominator of which is the excess of the sum of all amounts payable, other than qualified stated interest, on the note after the purchase date over the note's adjusted issue price. As an alternative to reducing the amount of OID otherwise includible in income by this fraction, you may elect to compute OID accruals with respect to the notes by treating the purchase as a purchase at original issue and applying the OID rules described above. Election to Treat All Interest as Original Issue Discount. U.S. holders may elect to include in gross income all amounts in the nature of interest that accrue on a note, including any stated interest, acquisition discount, OID, market discount, de minimis market discount and unstated interest, as adjusted by acquisition premium, by using the OID rules described above. An election for a 35 note with market discount results in a deemed election to accrue market discount in income currently for the note and for all other evidences of indebtedness you acquire with market discount on or after the first day of the taxable year to which the election first applies, and may be revoked only with permission of the IRS. Your tax basis in a note is increased by each accrual of the amounts treated as OID under the election described in this paragraph. Sale, Exchange or Retirement of the Notes Except as described below, upon the sale, exchange or retirement of a note, you will recognize gain or loss equal to the difference between the sale or redemption proceeds (except to the extent attributable to the payment of accrued interest) and your adjusted tax basis in the note. Your adjusted tax basis in a note will generally equal your cost of the note increased by any OID or market discount previously included in income with respect to the note and reduced by any payments other than payments of interest made on the note. Subject to the market discount rules discussed above, gain or loss realized on the sale, exchange or retirement of a note will generally be capital gain or loss and will be long term capital gain or loss if the note is held for more than one year. Payments attributable to accrued interest which you have not included in income will be taxed as ordinary interest income. You should consult your tax advisors regarding the treatment of capital gains, which may be taxed at lower rates than ordinary income for taxpayers who are individuals, and capital losses, the deductibility of which is subject to limitations. Conversion of Notes The conversion of a note into common stock will generally not be a taxable event, except with respect to cash received in lieu of a fractional share. To the extent the notes converted into common stock have accrued market discount, the amount of the unrecognized accrued market discount will carry over to the common stock and will be treated as ordinary income upon disposition of that common stock. Your basis in the common stock received on conversion of a note will be the same as your basis in the note at the time of conversion, exclusive of any tax basis allocable to a fractional share. The holding period for the common stock received on conversion will include the holding period of the converted note, except that the holder's holding period for common stock attributable to accrued OID may commence on the day following the date of conversion. Subject to the market discount rules discussed above, the receipt of cash in lieu of a fractional share upon conversion of a note should generally result in capital gain or loss measured by the difference between the cash received for the fractional share interest and your tax basis in the note allocable to the fractional share interest. Exercise of Repurchase Right If you require us to repurchase a note on a repurchase date and if we issue shares of common stock in full satisfaction of the repurchase price, the exchange of a note for shares of common stock will be treated the same as a conversion. If you require us to repurchase a note on a repurchase date and if we deliver a combination of cash and common stock in payment of the repurchase price, then, in general, you will realize gain, but not loss, to the extent that the cash and the value of the common stock exceeds your adjusted tax basis in the note, but in no event will the amount of recognized gain exceed the amount of cash received. This gain will be subject to the market discount rules discussed above. Your basis in the common stock received will be the same as your basis in the note tendered, except for any basis allocable to a fractional share, decreased by the amount of cash received, other than cash received in lieu of a fractional share, and increased by the amount of any gain recognized, other than with respect to a fractional share. The holding period of the common stock received in the exchange will include the holding period for the note tendered to us, except that the holding period of shares attributable to OID may commence on the day following the date of delivery. Subject to the market discount rules discussed above, the receipt of cash in lieu of a fractional share of common stock should generally result in capital gain or loss measured by the difference between the cash received for the fractional share interest and your tax basis in the note allocable to the fractional share interest. To the extent the notes tendered in exchange for common stock have accrued market discount, the amount of the unrecognized accrued market discount will carry over to the common stock and will be treated as ordinary income upon disposition of that common stock. 36 Adjustment of Conversion Rate If at any time we make a distribution of property to stockholders that would be taxable to the stockholders as a dividend for U.S. federal income tax purposes (for example, distributions of evidences of indebtedness or assets of ours, but generally not stock dividends or rights to subscribe for common stock) and, pursuant to the anti-dilution provisions of the indenture, the conversion rate of the notes is increased, that increase may be deemed to be the payment of a taxable dividend to you to the extent of our current or accumulated earnings and profits. If the conversion rate is increased at our discretion or in certain other circumstances, that increase also may be deemed to be the payment of a taxable dividend to you. Ownership and Disposition of Common Stock Distributions, if any, paid on shares of common stock generally will be includable in your income as ordinary income to the extent made from our current or accumulated earnings and profits. Subject to the market discount rules discussed above, upon the sale, exchange or other disposition of shares of common stock, you generally will recognize capital gain or capital loss equal to the difference between the amount realized on the sale or exchange and your adjusted tax basis in the shares. You should consult your tax advisors regarding the treatment of capital gains, which may be taxed at lower rates than ordinary income for taxpayers who are individuals, and capital losses, the deductibility of which is subject to limitations. Information Reporting and Backup Withholdings Original issue discount and payments of interest on the notes, payments of dividends on the common stock, and the proceeds of the sale or other disposition of the notes or shares of common stock may be subject to information reporting and U.S. federal backup withholding tax if the recipient of such payment fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable United States information reporting or certification requirements. The backup withholding rate is currently 30% and will be reduced periodically until 2006, when the backup withholding rate will be 28%. After December 31, 2010, the backup withholding rate will be increased to 31%. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the IRS. Non-U.S. Holders You are a "non-U.S. holder" for purposes of this discussion if you are a holder of a note or common stock that is not a U.S. holder as described above. Withholding Taxes The payments of principal, interest and any OID on a note will not be subject to U.S. federal withholding tax, provided that in the case of a payment in respect of interest or OID: . you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock; . you are not a controlled foreign corporation that is related to us within the meaning of the Internal Revenue Code; and . you satisfy the certification requirements of Sections 871(h) or 881(c) of the Internal Revenue Code, as described below under "--Owner Statement Requirement." Under section 871(h)(4) of the Internal Revenue Code, otherwise exempt interest, including OID, is subject to U.S. federal withholding tax if that interest or OID is based on certain enumerated equity-like features. 37 Although the IRS has not provided any guidance regarding the application of this provision to an instrument such as a note, we have been advised that this section should not apply and, accordingly, do not plan to withhold amounts, provided the conditions above are met. Except to the extent otherwise provided under an applicable tax treaty, you generally will be taxed in the same manner as a U.S. holder with respect to interest and OID on a note if that interest or OID is effectively connected with a trade or business you conduct in the United States. Effectively connected interest and OID received by a non-U.S. holder which is a foreign corporation may also be subject to an additional "branch profits tax" at a 30% rate or, if applicable, a lower treaty rate, subject to certain adjustments. That effectively connected interest and OID will not be subject to withholding tax if the holder delivers a properly completed and executed IRS Form W-8ECI to the payor. Dividends Distributions on our common stock will constitute a dividend for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. Dividends, if any, paid to you on shares of our common stock generally will be subject to a 30% U.S. federal withholding tax, subject to reduction if you are eligible for the benefits of an applicable income tax treaty. You will be required to satisfy specific certification requirements in order to claim treaty benefits. Except to the extent otherwise provided under an applicable tax treaty, you generally will be taxed in the same manner as a U.S. holder on dividends that are effectively connected with your conduct of a trade or business in the United States. If you are a foreign corporation, you may also be subject to a U.S. branch profits tax on such effectively connected income at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, subject to certain adjustments. Gain on Disposition of the Notes and Common Stock You generally will not be subject to U.S. federal income tax on gain realized on the sale, exchange or redemption of a note, including the exchange of a note for shares of common stock, or the sale or exchange of shares of common stock unless: . you are an individual present in the United States for 183 days or more in the year of such sale, exchange or redemption and either (A) you have a "tax home" in the United States and certain other requirements are met, or (B) the gain from the disposition is attributable to an office or other fixed place of business in the United States; . in the case of an amount which is attributable to accrued interest or OID, you do not meet the conditions for exemption from U.S. federal withholding tax, as described in "- Withholding Taxes", above; . the gain is effectively connected with a trade or business you conduct in the United States; or . we are, or have been during specified periods, a U.S. real property holding corporation for U.S. federal income tax purposes. If we are or have been a U.S. real property holding corporation, a non-U.S. holder will generally not be subject to U.S. federal income tax on gain recognized on a sale or other disposition of our common stock provided that the non-U.S. holder does not hold, and has not held during certain periods, directly or indirectly, more than 5% of the outstanding notes or more than 5% of our outstanding common stock, and our common stock continues to be regularly traded on an established securities market for U.S. federal income tax purposes. If we are or have been a U.S. real property holding corporation and the above exception does not apply, a non-U.S. holder will be subject to U.S. federal income tax with respect to gain realized on any sale or other disposition of our common stock as well as to withholding tax, generally at a rate of 10% on the proceeds. Any amount withheld pursuant to a withholding tax will be creditable against a non-U.S. holder's U.S. federal income tax liability. 38 Owner Statement Requirement Sections 871(h) and 881(c) of the Internal Revenue Code require that either the beneficial owner of a note or a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and that holds a note on behalf of a non-U.S. holder files a statement with us or our agent to the effect that the non-U.S. holder is not a U.S. person in order to avoid withholding of the U.S. federal income tax. Under current regulations, this requirement will be satisfied if we or our agent receives: . a statement (an "owner statement") from the beneficial owner of a note in which that owner certifies, under penalties of perjury, that the owner is not a U.S. person and provides such owner's name and address; or . a statement from the financial institution holding the note on behalf of the beneficial owner in which the financial institution certifies, under penalties of perjury, that it has received the owner statement, together with a copy of it. Generally, this statement is made on IRS Form W-8BEN. The beneficial owner must inform us or our agent (or, in the case of a statement described in the second bullet point of the immediately preceding sentence, the financial institution) within 30 days of any change in information on the owner statement. A non-U.S. holder who is not an individual or corporation (or an entity treated as a corporation for federal income tax purposes) holding the notes on its own behalf may have additional reporting requirements. In particular, in the case of notes held by a foreign partnership (or foreign trust), the partnership (or trust) will be required to provide the statement from each of its partners (or beneficiaries), and the partnership (or trust) will be required to provide certain additional information. Information Reporting and Backup Withholding You may have to comply with specific certification procedures (as described above) to establish that you are not a United States person in order to avoid backup withholding tax requirements with respect to our payments of interest and principal, including payments in respect of OID, on the notes. In addition, we must report annually to the IRS and to each non-U.S. holder the amount of any dividends paid to, and the tax withheld with respect to, that holder, regardless of whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which you reside. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the IRS. 39 SELLING SECURITYHOLDERS The notes were originally issued to and resold by BAS and Merrill Lynch in transactions exempt from the registration requirements of the Securities Act to persons reasonably believed by BAS or Merrill Lynch to be "qualified institutional buyers," as defined by Rule 144A under the Securities Act. The selling securityholders may from time to time offer and sell pursuant to this prospectus any or all of the notes listed below and the shares of common stock issuable upon conversion of the notes. When we refer to the "selling securityholders" in this prospectus, we mean those persons listed in the table below, as well as their transferees, pledgees, donees or successors. We are filing this registration statement pursuant to a registration rights agreement that we entered into with BAS and Merrill Lynch. We agreed, at our expense, for the benefit of the holders, to file a shelf registration statement covering the resale of the notes and the shares of common stock issuable upon conversion of the notes. The selling securityholders listed below and the beneficial owners of the notes and their transferees, pledgees, donees or other successors, if not identified in this prospectus then identified in supplements to this prospectus as required, are the selling securityholders under this prospectus. The following table sets forth, as of a recent practicable date prior to the effectiveness of the registration statement of which this prospectus is a part, information with respect to the selling securityholders named below and the principal amount at maturity of notes that each selling securityholder may offer pursuant to this prospectus and the number of shares of common stock into which the notes are convertible. The table set forth below is based solely on information that has been provided by or on behalf of the selling securityholders as of a recent practicable date prior to the effectiveness of this registration statement of which this prospectus is a part. Except as indicated below, none of the selling securityholders has, or within the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates. However, any or all of the notes or shares of common stock listed below may be offered for sale pursuant to this prospectus by the selling securityholders from time to time. Accordingly, no estimate can be given as to the amounts of notes or common stock that will be held by the selling securityholders upon consummation of any sales. In addition, the selling securityholders listed in the table may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their notes since the date as of which the information in the table is presented. Information about the selling securityholders may change over time. Any changed information will be set forth in prospectus supplements. 40
Number of Principal Amount Shares of At Maturity of Percentage Common Stock Percentage of Notes That of Notes That May Be Common Stock Name May Be Sold Outstanding Sold(4) Outstanding(5)(6) - ---- ---------------- ----------- ------------ ----------------- Advisory Convertible Arbitrage Fund (I) L. P.......... 1,000,000 0.19% 14,962 0.01% Aftra Health Fund..................................... 410,000 0.08% 6,134 0.00% Aid Association for Lutherans as Successor to Lutheran Brotherhood......................................... 1,000,000 0.19% 14,962 0.01% Allstate Insurance Company............................ 500,000 0.10% 7,481 0.00% Allstate Life Insurance Company....................... 2,250,000 0.44% 33,664 0.02% Alpha U.S. Sub Fund VIII, LLC......................... 560,000 0.11% 8,378 0.01% Amerisure Mutual Insurance Company.................... 260,000 0.05% 3,890 0.00% Arbitex Master Fund L. P.............................. 12,250,000 2.37% 183,280 0.12% Argent Classic Convertible Arbitrage Fund (Bermuda), Ltd................................................. 3,100,000 0.60% 46,381 0.03% Argent Classic Convertible Arbitrage Fund L. P........ 1,900,000 0.37% 28,427 0.02% Argent LowLev Convertible Arbitrage Fund, LLC......... 1,400,000 0.27% 20,946 0.01% Argent LowLev Convertible Arbitrage Fund, Ltd......... 5,000,000 0.97% 74,808 0.05% Aristeia International Limited........................ 10,780,000 2.09% 161,286 0.10% Aristeia Trading LLC.................................. 3,220,000 0.62% 48,176 0.03% B.G.I. Global Investors c/o Forest Investment Mortgage L.L.C...................................... 433,000 0.08% 6,478 0.00% Banc of America Securities L.L.C.(1)(4)............... 5,500,000 1.07% 82,289 0.05% Bank Austria Cayman Islands, Ltd...................... 3,250,000 0.63% 48,625 0.03% Castle Convertible Fund, Inc.......................... 650,000 0.13% 9,725 0.01% CIBC World Markets (International) Arbitrage Corp..... 5,000,000 0.97% 74,808 0.05% City of Shreveport Post Employees Retirement System.............................................. 450,000 0.09% 6,733 0.00% Clinton Convertible Managed Trading Account 1 Limited............................................. 3,070,000 0.59% 45,932 0.03% Clinton Multistrategy Master Fund, Ltd................ 16,965,000 3.29% 253,824 0.16% Clinton Riverside Convertible Portfolio Limited....... 16,965,000 3.29% 253,824 0.16% Cobra Fund U.S.A. L.P................................. 275,000 0.05% 4,114 0.16% Cobra Master Fund Ltd................................. 1,725,000 0.33% 25,809 0.02% Continental Assurance Company on behalf of its separate A/C (E).................................... 1,400,000 0.27% 20,946 0.01% Continental Casualty Company.......................... 8,600,000 1.67% 128,670 0.08% Deep Rock & Co........................................ 2,000,000 0.39% 29,923 0.02% Deephaven Domestic Convertible Trading, Ltd........... 13,440,000 2.60% 201,084 0.13% Deutsche Bank Securities, Inc......................... 5,000,000 0.97% 74,808 0.05% Erste Bank Der Oesterreichischen Sparkassen AG........ 200,000 0.04% 2,992 0.00% Forest Fulcrum Fund L. L. P........................... 1,529,000 0.30% 22,876 0.01% Forest Global Convertible Fund Series A-5............. 6,423,000 1.24% 96,098 0.06% GDO Equity Arbitrage Master Fund...................... 6,500,000 1.26% 97,250 0.06% Grace Brothers Management, L. L. C.................... 1,000,000 0.19% 14,962 0.01% Granville Capital Corporation......................... 23,000,000 4.45% 344,117 0.22% Great-West Life & Annuity Insurance Company........... 12,500,000 2.42% 187,020 0.12% Highbridge International, LLC......................... 11,500,000 2.23% 172,058 0.11% Innovest Finanzdienstlistungs AG...................... 850,000 0.16% 12,717 0.01% KBC Financial Products (Cayman Islands)............... 7,500,000 1.45% 112,212 0.07% KBC Financial Products USA, Inc....................... 9,680,000 1.87% 144,828 0.09% L L T Limited......................................... 433,000 0.08% 6,478 0.00%
41
Principal Number of Amount At Shares of Maturity of Percentage Common Stock Percentage of Notes That of Notes That May Be Common Stock Name May Be Sold Outstanding Sold (4) Outstanding (5)(6) - ---- ----------- ----------- ------------ ------------------ Lehman Brothers, Inc................................... 15,000,000 2.91% 224,424 0.14% Lyxor Master Fund c/o Forest Investment Mortgage L.L.C................................................ 1,810,000 0.35% 27,080 0.02% Lyxor Master Fund Ref: Argent/LowLev CB................ 4,200,000 0.81% 62,839 0.04% Mainstay Convertible Fund.............................. 5,270,000 1.02% 78,848 0.05% Mainstay VP Convertible Portfolio...................... 1,780,000 0.34% 26,632 0.02% Man Convertible Bond Master Fund, Ltd.................. 11,040,000 2.14% 165,176 0.11% Marathon Global Convertible Master Fund, Ltd........... 21,000,000 4.07% 314,194 0.20% McMahan Securities Co. L. P............................ 120,000 0.02% 1,795 0.00% Merrill Lynch Pierce Fenner & Smith, Inc. (2).......... 12,000,000 2.32% 179,539 0.11% MFS Total Return Fund.................................. 960,000 0.19% 14,363 0.01% MLQA Convertible Securities Arbitrage, Ltd............. 10,000,000 1.94% 149,616 0.10% New York Life Insurance Company........................ 5,850,000 1.13% 87,525 0.06% New York Life Insurance Company........................ 2,480,000 0.48% 37,105 0.02% New York Life Separate Account #7...................... 710,000 0.14% 10,623 0.01% Nicholas Applegate Investment Grade Convertible........ 10,000 0.00% 150 0.00% Northwestern Mutual Life Insurance Company, The........ 3,000,000 0.58% 44,885 0.03% Quattro Fund Ltd....................................... 6,000,000 1.16% 89,770 0.06% Ramius Capital Group................................... 1,000,000 0.19% 14,962 0.01% Ramius, L. P........................................... 250,000 0.05% 3,740 0.00% RBC Alternative Assets L. P. c/o Forest Investment Mortgage L.L.C. (4).................................. 280,000 0.05% 4,189 0.00% RCG Baldwin L.P........................................ 500,000 0.10% 7,481 0.00% RCG Halifax Master Fund, L.T.D......................... 3,000,000 0.58% 44,885 0.03% RCG Latitude Master Fund, Ltd.......................... 4,000,000 0.77% 59,846 0.04% RCG Multi Strategy, L. P............................... 7,000,000 1.36% 104,731 0.07% Relay 11 Holdings c/o Forest Investment Mortgage L.L.C................................................ 216,000 0.04% 3,232 0.00% S.A.C. Capital Associates, LLC......................... 12,500,000 2.42% 187,020 0.12% St. Thomas Trading, Ltd................................ 18,960,000 3.67% 283,672 0.18% Sylvan (IMA) Ltd. c/o Forest Investment Mortgage L.L.C................................................ 599,000 0.12% 8,962 0.01% UBS O'Connor LLC f/b/o UBS Global Equity Arbitrage Master Ltd........................................... 10,000,000 1.94% 149,616 0.10% UBS Warburg L.L.C...................................... 60,488,000 11.71% 904,997 0.58% UFJ Investments Asia Limited........................... 1,250,000 0.24% 18,702 0.01% Wachovia Securities International Ltd.................. 10,000,000 1.94% 149,616 0.10% Zurich Institutional Benchmark Management c/o Quattro Fund................................................. 1,800,000 0.35% 26,931 0.02% Zurich Institutional Benchmark Master Fund, Ltd........ 2,700,000 0.52% 40,396 0.03% Zurich Master Hedge Fund c/o Forest Investment Mortgage L.L.C....................................... 777,000 0.15% 11,625 0.01% Any other holder of the notes or shares of common stock received upon conversion of the notes, or future transferee, pledgee, donee or other successor of such holder (3)........................................... 70,332,000 13.62% 1,052,279 0.67% Total.................................................. 516,350,000 100.00% 7,725,421 4.93%
- -------- (1) Banc of America Securities was an initial purchaser of the notes in the private placement and served as joint Book-Running Managers. (2) Merrill Lynch was an initial purchaser of the notes in the private placement and served as joint Book-Running Managers. (3) Information about other selling securityholders will be set forth in prospectus supplements, if required. (4) This selling securityholder is an affiliate of a lender under BJ Services' credit facilities. 42 (4) Assumes conversion of all of the holder's notes at the initial conversion rate of 14.9616 shares of common stock per $1,000 principal amount at maturity of the notes. This conversion rate is subject to adjustment as described under "Description of Notes--Conversion Rights." As a result, the number of shares of common stock issuable upon conversion of the notes may increase or decrease in the future. (5) Calculated based on 156,756,671 shares of common stock outstanding as of August 31, 2002. In calculating this amount for each holder, we treated as outstanding the number of shares of common stock issuable upon conversion of all of that holder's notes, but we did not assume conversion of any other holder's notes. (6) Assumes that any other holders of notes, or any future transferees, pledgees, donees or successors of or from any such other holders of notes, do not beneficially own any common stock other than the common stock issuable upon conversion of the notes at the initial conversion rate. PLAN OF DISTRIBUTION The notes and underlying common stock, which we will refer to as offered securities, are being registered to permit the resale of such securities by the holders of them, or such holder's transferees, donees or pledgees, from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling securityholders of the notes and common stock. We will bear the fees and expenses incurred in connection with our obligation to register the notes and underlying common stock. These fees and expenses include registration and filing fees, printing and duplication expenses, and fees and disbursements of our counsel. However, the selling securityholders will pay all underwriting discounts and selling commissions, if any, and their own legal expenses. The selling securityholders may sell the notes and common stock from time to time, at market prices prevailing at the time of sale, at prices related to market prices, at fixed prices, prices subject to change or at negotiated prices, by a variety of methods including the following: . in transactions on the NYSE; . in market transactions; . in the over-the-counter market; . in privately negotiated transactions; . through broker-dealers, which may act as agents or principals; . in a block trade in which a broker-dealer will attempt to sell a block of securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; . if we agree to it prior to the distribution, through one or more underwriters on a firm commitment or best-efforts basis; . directly to one or more purchasers; . through agents; . through short sales of the offered securities; . through put or call options transactions relating to the offered securities; . in any combination of the above; or . by any other legally available means. In effecting sales, brokers or dealers engaged by the selling securityholders may arrange for other brokers or dealers to participate. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling securityholders and/or the purchasers of the securities for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). Broker-dealer transactions may include: . purchases of the notes and common stock by a broker-dealer as principal and resales of them by the broker-dealer for its account pursuant to this prospectus; 43 . ordinary brokerage transactions; or . transactions in which the broker-dealer solicits purchasers. If a material arrangement with any underwriter, broker, dealer or other agent is entered into for the sale of any notes and common stock through a secondary distribution, a block trade, special offering, exchange distribution, or a purchase by a broker or dealer, or if other material changes are made in the plan of distribution of the notes and common stock, a prospectus supplement will be filed, if necessary, under the Securities Act disclosing the material terms and conditions of such arrangement. The underwriter or underwriters with respect to an underwritten offering of notes and common stock and the other material terms and conditions of the underwriting will be set forth in a prospectus supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover of the prospectus supplement. In connection with the sale of notes and common stock, underwriters will receive compensation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of notes and underlying common stock for whom they may act as agent. Underwriters may sell to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. In addition, any securities covered by this prospectus which can be sold under Rule 144 under the Securities Act may be sold under Rule 144 rather than in a registered offering contemplated by this prospectus. The selling securityholders and any underwriters, broker-dealers or agents participating in the distribution of the securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the notes and/or common stock by the selling securityholders and any commissions received by any such underwriters, broker-dealers or agents may be deemed to be underwriting discounts or commissions under the Securities Act. In addition, the selling securityholders will be subject to the prospectus delivery requirements of the Securities Act, which may include delivery through the facilities of the NYSE pursuant to the Securities Act. We have informed the selling securityholders that the anti-manipulative provisions promulgated under the Exchange Act may apply to their sales in the market. The selling securityholders and any other person participating in the distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations under the Exchange Act, including without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and common stock by the selling securityholders and any other relevant person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the notes and common stock to engage in market-making activities with respect to the particular notes and common stock being distributed. All of the above may affect the marketability of the notes and common stock and the ability of any person or entity to engage in market-making activities with respect to the notes and common stock. Under the securities laws of certain states, the notes and underlying common stock may be sold in those states only through registered or licensed brokers or dealers. In addition, in certain states the notes and common stock may not be sold unless the notes and common stock have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with. We have agreed to indemnify the selling securityholders against certain civil liabilities, including certain liabilities arising under the Securities Act, and the selling securityholders will be entitled to contribution from us in connection with those liabilities. The selling securityholders will indemnify us against certain civil liabilities, including liabilities arising under the Securities Act, and will be entitled to contribution from the selling securityholders in connection with those liabilities. We are permitted to suspend the use of this prospectus under certain circumstances relating to pending corporate developments, public filings with the SEC and similar events for a period not to exceed 60 days in any 44 three-month period; provided that if the circumstances relate to previously undisclosed proposed or pending material business transactions, we may extend the suspension period to 120 days. However, if the duration of such suspension exceeds any of the periods above-mentioned, we have agreed to pay liquidated damages. Please refer to the section entitled "Description of Notes--Registration Rights." Our outstanding common stock is listed for trading on the New York Stock Exchange under the symbol "BJS." We do not intend to apply for listing of the notes on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. Accordingly, we cannot assure you about the development of liquidity or any trading market for the notes. Please refer to the section entitled "Risk Factors." LEGAL MATTERS The validity of the notes and common stock offered hereby has been passed upon for us by Andrews & Kurth L.L.P., Houston, Texas. EXPERTS The consolidated financial statements of BJ Services Company and its subsidiaries as of September 30, 2001 and 2000 and for each of the years in the three-year period ended September 30, 2001 incorporated by reference in this prospectus from the Company's annual report on Form 10-K for the year ended September 30, 2001 have been audited by Deloitte & Touche, LLP, independent auditors, as stated in their report which is incorporated herein by reference, and have been so incorporated by reference in reliance upon the report of that firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of OSCA, Inc. as of December 31, 2001 and for the year ended December 31, 2001 included in BJ Services Company Form 8-K/A dated July 17, 2002 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 45 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The registrant estimates that expenses in connection with the offering described in this Registration Statement, other than any underwriting discounts and commissions, will be as follows: SEC registration fee.......... $ 36,994 Legal fees and expenses....... 200,000 Printing...................... 35,000 Accountants' fees and expenses 100,000 Blue Sky fees and expenses.... 0 Trustee's fees and expenses... 14,000 Miscellaneous expenses........ 185,000 -------- Total...................... $570,994 ========
- -------- * All of the above amounts are estimates except for the SEC registration fee. Item 15. Indemnification of Directors and Officers The Company is governed by Section 145 of the General Corporation Law of the State of Delaware (the "DGCL") which permits a corporation to indemnify certain persons, including officers and directors, who are (or are threatened to be made) parties to any threatened, pending or completed action or suit (other than an action by or in the right of the corporation) by reason of their being directors, officers or other agents of the corporation. The Company's Certificate of Incorporation provides that no director of the Company shall be held personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. The Company's Certificate of Incorporation also provides that if the DGCL is amended to authorize further limitation or elimination of the personal liability of directors, then the liability of the Company's directors shall be limited or eliminated to the full extent permitted by the DGCL. Section 16 of Article III of the Company's Bylaws provides as follows: (a) The Company shall indemnify every person who is or was a party or is or was threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Company or any of its direct or indirect wholly owned subsidiaries or, while a director, officer, employee or agent of the Company or any of its direct or indirect wholly owned subsidiaries, is or was serving at the request of the Company or any of its direct or indirect wholly owned subsidiaries, as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable laws provided that the Company shall not be obligated to indemnify any such person against any such action, suit or proceeding which is brought by such person against the Company or any of its direct or indirect wholly owned subsidiaries or the directors of the Company or any of its direct or indirect wholly owned subsidiaries, other than an action brought by such person to enforce his rights to indemnification hereunder, unless a majority of the Board of Directors of the Company shall have previously approved the bringing of such action, suit or proceeding. The Company shall indemnify II-1 every person who is or was a party or is or was threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was licensed to practice law and an employee (including an employee who is or was an officer) of the Company or any of its direct or indirect wholly owned subsidiaries and, while acting in the course of such employment committed or is alleged to have committed any negligent acts, errors or omissions in rendering professional legal services at the request of the Company or pursuant to his employment (including, without limitation, rendering written or oral legal opinions to third parties) against expenses (including counsel fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable law; provided that the Company shall not be obligated to indemnify any such person against any action, suit or proceeding arising out of any adjudicated criminal, dishonest or fraudulent acts, errors or omissions of such person or any adjudicated willful, intentional or malicious acts, errors or omissions of such person. (b) Expenses incurred by an officer or director of the Company or any of its direct or indirect wholly owned subsidiaries in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized in this Section 16. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (c) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 16 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any provision of law, the Company's Certificate of Incorporation, the Certificate of Incorporation or Bylaws or other governing documents of any direct or indirect wholly owned subsidiary of the Company, or any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding any of the positions or having any of the relationships referred to in this Section 16. Item 16. Exhibits
Exhibit No. Description of Exhibit - ----------- ---------------------- 4.1 Indenture dated as of April 24, 2002 between BJ Services Company and The Bank of New York, as trustee (filed as Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the second quarter ended March 31, 2002, and incorporated herein by reference). 4.2** Resale Registration Rights Agreement dated as of April 24, 2002 among BJ Services Company and Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 4.3** Convertible Senior Notes Purchase Agreement dated as of April 19, 2002 among BJ Services and Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 5.1** Opinion of Andrews & Kurth L.L.P. 8.1** Tax Opinion of Andrews & Kurth L.L.P. 12.1** Computation of Ratio of Earnings to Fixed Charges. 23.1** Consent of Andrews & Kurth L.L.P. (included in Exhibits 5.1 and 8.1). 23.2** Consent of Deloitte & Touche LLP relating to the financial statements of BJ Services Company. 23.3** Consent of Ernst & Young LLP relating to the financial statements of OSCA, Inc. 25.1** Statement of Eligibility of Trustee on Form T-1 of The Bank of New York.
- -------- * Previously filed. ** Filed herewith. II-2 Item 17. Undertakings A. We hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (a) To include any prospectus required by section 10(a)(3) of the Securities Act; (b) 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 the prospectus filed with the SEC pursuant to Rule 424(b) 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. (c) 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(l)(a) and A(l)(b) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the SEC by the registrant pursuant to section 13 or 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, 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. We hereby undertake that, for purposes of determining any liability under the Securities Act, each filing of our 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 may be permitted to our directors, officers, and controlling persons pursuant to the provisions described in Item 15 above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act 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 registrant certifies that it has reasonable grounds to believe that it meets the requirements for filing on Form S-3 and has duly caused this Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on September 19, 2002. BJ SERVICES COMPANY By: /s/ J. W. STEWART ----------------------------- Name: J. W. Stewart Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Pre-Effective Amendment No. 1 to the Registration Statement has been signed below by the following persons in the capacities indicated on September 19, 2002: Signature Title --------- ----- /s/ J. W. STEWART Chairman of the Board, - ----------------------------- President, and Chief J. W. Stewart Executive Officer (Principal Executive Officer and Director) /s/ T. M. WHICHARD III Vice President and Chief - ----------------------------- Financial T. M. Whichard III Officer (Principal Financial Officer) /s/ JAMES HORSCH* Corporate Controller - ----------------------------- (Principal Accounting James Horsch Officer) /s/ L. WILLIAM HEILIGBRODT* Director - ----------------------------- L. William Heiligbrodt /s/ JOHN R. HUFF* Director - ----------------------------- John R. Huff /s/ DON D. JORDAN* Director - ----------------------------- Don D. Jordan /s/ R. A. LEBLANC* Director - ----------------------------- R. A. LeBlanc /s/ MICHAEL E. PATRICK* Director - ----------------------------- Michael E. Patrick /s/ JAMES L. PAYNE* Director - ----------------------------- James L. Payne *By: /s/ T. M. WHICHARD III ------------------------- T. M. Whichard III Attorney-in-Fact II-4 EXHIBIT INDEX
Exhibit No. Description of Exhibit - ----------- ---------------------- 4.1 Indenture dated as of April 24, 2002 between BJ Services Company and The Bank of New York, as trustee (filed as Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the second quarter ended March 31, 2002, and incorporated herein by reference). 4.2** Resale Registration Rights Agreement dated as of April 24, 2002 among BJ Services Company and Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 4.3** Convertible Senior Notes Purchase Agreement dated as of April 19, 2002 among BJ Services Company and Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 5.1** Opinion of Andrews & Kurth L.L.P. 8.1** Tax Opinion of Andrews & Kurth L.L.P. 12.1** Computation of Ratio of Earnings to Fixed Charges. 23.1** Consent of Andrews & Kurth L.L.P. (included in Exhibits 5.1 and 8.1). 23.2** Consent of Deloitte & Touche LLP relating to the financial statements of BJ Services Company. 23.3** Consent of Ernst & Young LLP relating to the financial statements of OSCA, Inc. 25.1** Statement of Eligibility of Trustee on Form T-1 of The Bank of New York.
- -------- * Previously filed. ** Filed herewith. EX-4.2 3 dex42.txt RESALE REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 BANC OF AMERICA SECURITIES LLC MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED $449,000,000 AGGREGATE PRINCIPAL AMOUNT BJ SERVICES COMPANY CONVERTIBLE SENIOR NOTES DUE 2022 RESALE REGISTRATION RIGHTS AGREEMENT dated April 24, 2002 THIS RESALE REGISTRATION RIGHTS AGREEMENT, dated as of April 24, 2002, among BJ SERVICES COMPANY, a Delaware corporation (the "Company"), BANC OF AMERICA SECURITIES LLC and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (together, the "Initial Purchasers") under the Purchase Agreement (as defined below). R E C I T A L S: This Agreement is made pursuant to the Purchase Agreement, dated as of April 19, 2002, among the Company and the Initial Purchasers (the "Purchase Agreement"), whereby the Initial Purchasers have agreed to purchase from the Company $449,000,000 ($516,350,000 if the Initial Purchasers exercise their option in full) in aggregate principal amount at maturity of Convertible Senior Notes due 2022 (the "Notes"). The Notes will be convertible into fully paid, nonassessable shares of common stock, $.10 par value per share, of the Company together with the associated rights evidenced by such Common Stock to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock, $1.00 par value to the extent provided in the Amended and Restated Rights Agreement dated September 26, 1996, as amended, between the Company and The Bank of New York, as rights agent (collectively, the "Common Stock"). The Notes will be convertible on the terms, and subject to the conditions, set forth in the Indenture (as defined below). To induce the Initial Purchasers to purchase the Notes, the Company has agreed to provide the registration rights set forth in this Agreement pursuant to Section 5(h) of the Purchase Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The Company agrees with each Initial Purchaser, (i) for its benefit as Initial Purchaser and (ii) for the benefit of the beneficial owners (including the Initial Purchaser) from time to time of the Notes, and the beneficial owners from time to time of the Common Stock issued upon conversion of the Notes, if any, (each of the foregoing a "Holder" and together the "Holders"), as follows: 1. Definition. Capitalized terms used in this Agreement without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized terms shall have the following meanings: "Affiliate" means, with respect to any specified person, any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, "control" of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" means this Resale Registration Rights Agreement. "Blue Sky Application" has the meaning as defined in Section 6(a)(i) hereof. "Business Day" has the meaning as defined in the Indenture. "Commission" means the Securities and Exchange Commission. "Common Stock" has the meaning as defined in the preamble hereto. "Company" has the meaning as defined in the preamble hereto. "Effectiveness Period" has the meaning as defined in Section 2(a)(iii) hereof. "Effectiveness Target Date" has the meaning as defined in Section 2(a)(ii) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means a Person who owns, beneficially or otherwise, Transfer Restricted Securities. "Holder Questionnaire" has the meaning as defined in Section 2(b) hereof. "Indemnified Holder" has the meaning as defined in Section 6(a) hereof. "Indenture" means the Indenture, dated as of April 24, 2002 between the Company and The Bank of New York, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended, modified or supplemented from time to time in accordance with the terms thereof. "Initial Purchasers" has the meaning as defined in the preamble hereto. "Junior Preferred Stock" has the meaning as defined in the preamble hereto. "Liquidated Damages" has the meaning as defined in Section 3(a) hereof. "Liquidated Damages Payment Date" means each April 24 and October 24. "Majority of Holders" means Holders holding more than 50% of the aggregate outstanding principal amount of Notes, provided that, for the purpose of this definition, a holder of shares of Common Stock which constitute Transfer Restricted Securities and issued upon conversion of the Notes shall be deemed to hold an aggregate principal amount at maturity of Notes (in addition to the principal amount at maturity of Notes held by such holder) equal to the quotient of (x) the number of such shares of Common Stock held by such holder and (y) the conversion rate in effect at the time of such conversion as determined in accordance with the Indenture. "NASD" means National Association of Securities Dealers, Inc. "Notes" has the meaning as defined in the preamble hereto. "Person" means an individual, partnership, corporation, company, unincorporated organization, trust, joint venture or a government or agency or political subdivision thereof. "Purchase Agreement" has the meaning as defined in the preamble hereto. -2- "Prospectus" means the prospectus included in a Shelf Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such prospectus. "Questionnaire Deadline" has the meaning as defined in Section 2(b) hereof. "Record Holder" means, with respect to any Liquidated Damages Payment Date, each Person who is a Holder on the April 1 or October 1 immediately preceding the relevant Liquidated Damages Payment Date. In the case of a Holder of shares of Common Stock issued upon conversion of the Notes, "Record Holder" shall mean each Person who is a Holder of shares of Common Stock which constitute Transfer Restricted Securities on the 15th day preceding the relevant Liquidated Damages Payment Date. "Registration Default" has the meaning as defined in Section 3(a) hereof. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Filing Deadline" has the meaning as defined in Section 2(a)(i) hereof. "Shelf Registration Statement" has the meaning as defined in Section 2(a)(i) hereof. "Suspension Notice" has the meaning as defined in Section 4(c) hereof. "Suspension Period" has the meaning as defined in Section 4(b)(i) hereof. "TIA" means the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder, in each case, as in effect on the date the Indenture is qualified under the TIA. "Transfer Restricted Securities" means each Note and each share of Common Stock issued upon conversion of Notes until the earliest of: (i) the date on which such Note or such share of Common Stock issued upon conversion has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement; (ii) the date on which such Note or such share of Common Stock issued upon conversion is transferred in compliance with Rule 144 under the Securities Act or may be sold or transferred by a person who is not an affiliate of the Company pursuant to Rule 144 under the Securities Act (or any other similar provision then in force) without any volume or manner of sale restrictions thereunder; and (iii) the date on which such Note or such share of Common Stock issued upon conversion ceases to be outstanding (whether as a result of redemption, repurchase and cancellation, conversion or otherwise). -3- "Underwritten Registration" means a registration in which Notes of the Company are sold to an underwriter for reoffering to the public. Unless the context otherwise requires, the singular includes the plural, and words in the plural include the singular. 2. Shelf Registration. (a) The Company shall: (i) not later than 90 days after the date hereof (the "Shelf Filing Deadline"), cause to be filed a registration statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities held by Holders that have timely provided the information required pursuant to the terms of Section 2(b) hereof. The Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Transfer Restricted Securities for resale by such Holders in accordance with the methods of distribution reasonably elected by the Holders and set forth in the Shelf Registration Statement, provided, that in no event will such method(s) of distribution take the form of an underwritten offering of the Transfer Restricted Securities without the prior agreement of the Company; (ii) use its reasonable commercial efforts to cause the Shelf Registration Statement to be declared effective by the Commission not later than 180 days after the date hereof (the "Effectiveness Target Date"); and (iii) use its reasonable commercial efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 4(b) hereof to the extent necessary to ensure that it (A) is available for resales by the Holders of Transfer Restricted Securities entitled, subject to Section 2(b), to the benefit of this Agreement and (B) conforms with the requirements of this Agreement and the Securities Act and the rules and regulations of the Commission promulgated thereunder as announced from time to time, for a period (the "Effectiveness Period") until the earliest of: (1) the first date on which the Holders of Transfer Restricted Securities are able to sell all such Transfer Restricted Securities immediately without restriction pursuant to the volume limitation provisions of Rule 144 under the Securities Act or any successor rule thereto; (2) the first date on which all of the Transfer Restricted Securities of those Holders that complete and deliver in a timely manner the Holder Questionnaire described below are registered under the Shelf Registration Statement and have been disposed of in accordance with the Shelf Registration Statement; -4- (3) two years following the effective date of the Shelf Registration Statement; and (4) all Transfer Restricted Securities have ceased to be outstanding (whether as a result of redemption, repurchase and cancellation, conversion or otherwise). (b) No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in the Shelf Registration Statement pursuant to this Agreement unless such Holder furnishes to the Company in writing, at least 10 Business Days prior to the intended distribution of Transfer Restricted Securities (the "Questionnaire Deadline"), such information as the Company may reasonably request for use in connection with the Shelf Registration Statement or Prospectus or preliminary Prospectus included therein and in any application to be filed with or under any federal or state securities laws (the form of which request is attached as an Appendix to the offering memorandum dated April 19, 2002 regarding the sale of the Notes to the Initial Purchasers and which is referred to herein as the "Holder Questionnaire"). In connection with all such requests for information from Holders of Transfer Restricted Securities, the Company shall notify such Holders of the time deadlines set forth in the preceding sentence. The Company agrees and undertakes that it shall distribute a Holder Questionnaire no later than 20 Business Days prior to the effectiveness of the Shelf Registration Statement to each Holder then of record at the address set forth on the register of Notes maintained by the Registrar of the Notes or the records of the transfer agent of the Common Stock at such time. The Company shall not be obligated to name as a selling Holder in the Prospectus included in the Shelf Registration Statement any Holder that does not complete the Holder Questionnaire and deliver it to the Company on or prior to the date 10 Business Days prior to such time of effectiveness; and the Company shall not be required to permit any such Holder to sell any Transfer Restricted Securities pursuant to the Shelf Registration Statement. From and after the date the Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable but in any event 20 Business Days after the date a Holder Questionnaire is delivered, (i) if required by applicable law, file with the Commission 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 Commission so that the Holder delivering such Holder Questionnaire is named as a selling Holder 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 the Transfer Restricted Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as reasonably practicable; (ii) provide such Holder copies of any documents filed pursuant to clause (i); and (iii) notify such Holder as promptly as reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to clause (i); provided, that if such Holder Questionnaire is delivered during a Suspension Period, the Company shall so inform the Holder delivering such Holder Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Suspension Period in accordance with Section 4(b)(i). No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 3 hereof unless such Holder shall have provided all such reasonably requested information prior to or on the Questionnaire Deadline. Each Holder -5- as to which the Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make information previously furnished to the Company by such Holder not materially misleading. 3. Liquidated Damages. (a) If: (i) the Shelf Registration Statement is not filed with the Commission prior to or on the Shelf Filing Deadline; (ii) the Shelf Registration Statement has not been declared effective by the Commission prior to or on the Effectiveness Target Date; (iii) except as provided in Section 4(b)(i) hereof, the Shelf Registration Statement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within five Business Days by a post-effective amendment to the Shelf Registration Statement, a supplement to the Prospectus or a report filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failure and, in the case of a post-effective amendment, is itself declared effective within two Business Days after such filing; or (iv) (A) prior to or on the 60th or 120th day, as the case may be, of any Suspension Period, such suspension has not been terminated or (B) Suspension Periods exceed an aggregate of 60 days in any three-month period or 120 days in any twelve-month period, (each such event referred to in foregoing clauses (i) through (iv), a "Registration Default"), the Company hereby agrees to pay liquidated damages ("Liquidated Damages") with respect to the Transfer Restricted Securities from and including the day following the Registration Default to but excluding the earlier of (1) the day on which the Registration Default has been cured and (2) the date the Shelf Registration Statement is no longer required to be kept effective, such Liquidated Damages accruing at a rate: (A) in respect of the Notes, to each holder of Notes, (x) with respect to the first 90-day period during which a Registration Default shall have occurred and be continuing, equal to 0.25% per annum of the aggregate issue price plus accrued original issue discount of the Notes, and (y) with respect to the period commencing on the 91st day following the day the Registration Default shall have occurred and be continuing, equal to 0.50% per annum of the aggregate issue price plus accrued original issue discount of the Notes; provided that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the aggregate issue price plus accrued original issue discount of the Notes; and -6- (B) in respect of any shares of Common Stock, to each holder of shares of Common Stock issued upon conversion of Notes, (x) with respect to the first 90-day period in which a Registration Default shall have occurred and be continuing, equal to 0.25% per annum of the aggregate issue price plus accrued original issue discount to the date of calculation, of each Note converted for such Common Stock, and (y) with respect to the period commencing the 91st day following the day the Registration Default shall have occurred and be continuing, equal to 0.50% per annum of the aggregate issue price plus accrued original issue discount to the date of calculation, of each Note converted for such Common Stock; provided that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the aggregate issue price plus accrued original issue discount to the date of calculation, of the converted Notes. (b) All accrued Liquidated Damages shall be paid in arrears to Record Holders by the Company on each Liquidated Damages Payment Date. Upon the cure of all Registration Defaults relating to any particular Note or share of Common Stock, the accrual of Liquidated Damages with respect to such Note or share of Common Stock will cease. Notwithstanding any other provision of this Agreement, no Liquidated Damages shall accrue as to any Transfer Restricted Security from and after the earlier of the date such security is no longer a Transfer Restricted Security and the expiration of the Effectiveness Period. All obligations of the Company set forth in this Section 3 that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Transfer Restricted Security shall have been satisfied in full. The Trustee shall be entitled, on behalf of Holders of Notes or Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Liquidated Damages. The Liquidated Damages set forth above shall be the exclusive monetary remedy available to the Holders of Transfer Restricted Securities for each Registration Default. 4. Registration Procedure. (a) In connection with the Shelf Registration Statement, the Company shall comply with all the provisions of Section 4(b) hereof and shall use its reasonable commercial efforts to effect such registration to permit the sale of the Transfer Restricted Securities, and pursuant thereto, shall as expeditiously as practicable prepare and file with the Commission a Shelf Registration Statement relating to the registration on any appropriate form under the Securities Act. (b) In connection with the Shelf Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities, the Company shall: (i) Subject to any notice by the Company in accordance with this Section 4(b) of the existence of any fact or event of the kind described in Section 4(b)(iii)(D), use its reasonable commercial efforts to keep the Shelf Registration Statement continuously -7- effective during the Effectiveness Period; upon the occurrence of any event that would cause the Shelf Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the Effectiveness Period, the Company shall file promptly an appropriate amendment to the Shelf Registration Statement, a supplement to the Prospectus or a report filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its reasonable commercial efforts to cause such amendment to be declared effective and the Shelf Registration Statement and the related Prospectus to become usable for their intended purposes as soon as practicable thereafter. Notwithstanding the foregoing, the Company may suspend the effectiveness of the Shelf Registration Statement by written notice to the Holders for a period not to exceed an aggregate of 60 days in any three-month period (each such period, a "Suspension Period") if: (x) an event occurs and is continuing as a result of which the Shelf Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein would, in the Company's judgment, 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 not misleading; and (y) the Company determines in good faith that the disclosure of such event at such time would be significantly detrimental to the Company and its subsidiaries; provided that, in the event the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which the Company determines in good faith would be reasonably likely to impede the Company's ability to consummate such transaction, the Company may extend a Suspension Period from 60 days to 120 days; provided, however, that Suspension Periods shall not exceed an aggregate of 120 days in any twelve-month period. The Company shall not be required to specify in the written notice to the Holders the nature of the event giving rise to the Suspension Period. (ii) Prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement effective during the Effectiveness Period; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by the Shelf Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in the Shelf Registration Statement or supplement to the Prospectus; provided, that in no event will such method(s) of distribution take the form of an offering pursuant to an Underwritten Registration without the prior agreement of the Company. -8- (iii) Advise the selling Holders promptly and, if requested by such selling Holders, to confirm such advice in writing, except as provided in clause (D) below: (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request following the effectiveness of the Shelf Registration Statement under the Securities Act by the Commission or any other federal or state governmental authority for amendments to the Shelf Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Shelf Registration Statement under the Securities Act or of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of the Transfer Restricted Securities by any state securities commission of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, or (D) of the existence of any fact or the happening of any event, during the Effectiveness Period (but not as to the substance of any such fact or event), that makes any statement of a material fact made in the Shelf Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Shelf Registration Statement or the Prospectus in order to make the statements therein not misleading, provided, that such notice need only be provided to selling Holders who have delivered a Holder Questionnaire as set forth in Section 4(e) hereof who are then entitled to sell Transfer Restricted Securities under the Shelf Registration Statement. If at any time the Commission shall issue any stop order suspending the effectiveness of the Shelf Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its reasonable commercial efforts to obtain the withdrawal or lifting of such order at the earliest possible time and will provide to each Holder who is named in the Shelf Registration Statement prompt notice of the withdrawal of any such order. (iv) Make available at reasonable times for inspection by one or more representatives of the selling Holders, designated in writing by a selling Holder whose Transfer Restricted Securities are included in the Shelf Registration Statement, and any broker-dealer, attorney or accountant retained by such selling Holders, all relevant -9- financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries as shall be reasonably necessary to enable them to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act, and cause the officers, directors, managers and employees of the Company and its subsidiaries to supply all information reasonably requested by any such representative or representatives of the selling Holders, broker-dealer, attorney or accountant in connection therewith; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of all selling Holders by one firm of counsel, which firm shall be Sidley Austin Brown & Wood LLP until another firm shall be designated in writing to the Company by Majority of Holders whose Transfer Restricted Securities are included in the Shelf Registration Statement; and provided further, that such persons shall first agree in writing with the Company that any information that is reasonably designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement and such person shall comply with applicable securities laws, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any Prospectus referred to in this Agreement), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person from a source other than the Company and such source is not bound by a confidentiality agreement or fiduciary obligations. (v) Comply with all applicable rules and regulations of the Commission and make generally available to the Holders earning statements (which need not be audited) 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 90 days after the end of the first twelve-month period constituting a fiscal year commencing on the first day of the first fiscal quarter of the first fiscal year of the Company commencing after the effective date of the Shelf Registration Statement, which statements shall cover said twelve-month periods. (vi) If requested by any selling Holder, promptly incorporate in the Shelf Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holder may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities. (vii) Furnish to each Initial Purchaser or selling Holder upon such Initial Purchaser's or selling Holder's request, without charge, at least one conformed copy of the Shelf Registration Statement, as first filed with the Commission, and of each amendment thereto (and any documents incorporated by reference therein or exhibits thereto (or exhibits incorporated in such exhibits by reference) as such Person may request). -10- (viii) Deliver to each selling Holder, without charge, as many copies of the Prospectus and any amendment or supplement thereto as such Persons reasonably may request; subject to any notice by the Company in accordance with this Section 4(b) of the existence of any fact or event of the kind described in Section 4(b)(iii)(D), the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto. (ix) Before any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions in the United States as the selling Holders may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that the Company shall not be required (A) to register or qualify as a foreign corporation or a dealer of securities where it is not now so qualified or to take any action that would subject it to service of process in any jurisdiction where it is not now so subject or (B) to subject itself to in personam jurisdiction or general or unlimited service of process or to taxation in any such jurisdiction if it is not now so subject. (x) Cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends (unless required by applicable securities laws); and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders may request at least two Business Days before any sale of Transfer Restricted Securities. (xi) Use its reasonable commercial efforts to cause the Transfer Restricted Securities covered by the Shelf Registration Statement to be registered with or approved by such other U.S. governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities. (xii) Subject to Section 4(b)(i) hereof, if any fact or event contemplated by Section 4(b)(iii)(D) hereof shall exist or have occurred, use its reasonable commercial efforts to prepare a supplement or post-effective amendment to the Shelf Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an 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 light of the circumstances in which they are made, not misleading, provided, that the Company shall not be required to comply with the foregoing obligations during any Suspension Period or any period during which Liquidated Damages shall be accruing. -11- (xiii) Provide CUSIP numbers for all Transfer Restricted Securities not later than the effective date of the Shelf Registration Statement and provide the Trustee under the Indenture and the transfer agent for the Common Stock with certificates for the Transfer Restricted Securities that are in a form eligible for deposit with The Depository Trust Company. (xiv) Cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter that is required to be retained in accordance with the rules and regulations of the NASD. (xv) Enter into such customary agreements and take all such other reasonable necessary actions in connection therewith (including those reasonably requested by the holders of a majority of the Transfer Restricted Securities being sold) in order to expedite or facilitate the registration or the disposition of such Transfer Restricted Securities; provided that the Company shall not be required to take any action in connection with an underwritten offering without its consent (in its sole discretion). (xvi) Otherwise use its reasonable commercial efforts to comply with all applicable rules and regulations of the Commission and all reporting requirements under the rules and regulations of the Exchange Act. (xvii) Cause the Indenture to be qualified under the TIA not later than the effective date of the Shelf Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its reasonable commercial efforts to cause the Trustee thereunder to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. (xviii) Cause all Common Stock covered by the Shelf Registration Statement to be listed or quoted, as the case may be, on each securities exchange or automated quotation system on which Common Stock is then listed or quoted. (xix) Provide to each Holder upon written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act after the effective date of the Shelf Registration Statement, unless such document is available through the Commission's EDGAR system. (c) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice (a "Suspension Notice") from the Company of the existence of any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement and will not deliver any Prospectus forming part thereof, until: (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 4(b)(xii) hereof; or -12- (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company in the Suspension Notice, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such Suspension Notice. Each Holder agrees to keep the receipt of a Suspension Notice and its contents confidential. (d) Each Holder agrees, by acquisition of the Transfer Restricted Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Transfer Restricted Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Holder Questionnaire as required pursuant to Section 2(b) hereof (including the information required to be included in such Holder Questionnaire) and the information set forth in the next sentence. Each selling Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such selling Holder not misleading and any other information regarding such selling Holder and the distribution of such Transfer Restricted Securities as may be required to be disclosed in the Shelf Registration Statement under applicable law or pursuant to Commission comments. Upon receipt of a Holder Questionnaire, the Company shall inform each selling Holder in writing of the existence of a Suspension Period or otherwise of the kind of event described in Section 4(b)(iii)(D). (e) Each Holder further agrees to notify the Company within 10 business days of a request of the amount of Transfer Restricted Securities sold pursuant to the Registration Statement and, in the absence of a response, the Company may assume that all of the Holder's Transfer Restricted Securities were so sold. 5. Registration Expense. (a) All fees and expenses incident to the Company's performance of or compliance with this Agreement shall be borne by the Company regardless of whether a Shelf Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees and expenses (including filings made with the NASD); (ii) all fees and expenses of compliance with federal and state securities and Blue Sky laws to the extent such filings or compliance are required pursuant to this Agreement (including fees and expenses of the Company's counsel); (iii) all expenses of printing (including printing of Prospectuses and certificates for the Transfer Restricted Securities in a form eligible for deposit with The Depository Trust Company) and the Company's expenses for messenger and delivery services and telephone; -13- (iv) all fees and disbursements of counsel to the Company in connection with the Shelf Registration Statement; (v) duplication expenses relating to copies of the Shelf Registration Statement or Prospectus delivered to any Holders hereunder; (vi) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock; (vii) all application and filing fees in connection with listing (or authorizing for quotation) the Common Stock on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (viii) all fees and disbursements of independent certified public accountants of the Company. The Company shall bear its internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal, accounting or other duties), the expenses of any annual audit, the fees and expenses incurred in connection with the listing of the Transfer Restricted Securities on any securities exchange on which the same securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company. (b) The Holders of the Transfer Restricted Securities being registered shall pay all agency fees and commissions, transfer taxes and underwriting discounts and commissions attributable to the sale of such Transfer Restricted Securities and the fees and disbursements of any counsel or other advisors or experts retained by such Holders, other than the counsel and experts that represent the Company specifically referred to above. 6. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Initial Purchaser or each Holder, such Initial Purchaser or such Holder's directors, officers, and employees and each person, if any, who controls any such Initial Purchaser or such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an "Indemnified Holder"), against any loss, claim, damage expense, or liability, joint or several, or any action, commenced or threatened, in respect thereof (including, but not limited to, any loss, claim, damage, expense, liability or action, commenced or threatened, relating to resales of the Transfer Restricted Securities), to which such Indemnified Holder may become subject, insofar as any such loss, claim, damage, expense, liability or action, commenced or threatened, arises out of, or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Shelf Registration Statement as originally filed or in any amendment thereof, in any Prospectus, or in any amendment or supplement thereto or (B) any Blue Sky application or other document or any amendment or supplement thereto prepared by the Company (or based upon written information furnished by or on behalf of the Company expressly for use in such Blue Sky application or other document or -14- amendment on supplement) filed in any jurisdiction specifically for the purpose of qualifying any or all of the Transfer Restricted Securities under the securities law of any state or other jurisdiction (such application or document being hereinafter called a "Blue Sky Application"); or (ii) the omission or alleged omission to state therein 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 agrees to reimburse each Indemnified Holder promptly upon demand for any and all expenses whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Initial Purchasers), reasonably incurred by such Indemnified Holder in connection with investigating or defending against any such loss, cost, claim, damage, expense, liability or action, commenced or threatened; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, expense, liability or action, commenced or threatened, arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder (or its related Indemnified Holder) specifically for use therein; provided further, that the Company shall not be liable to any Indemnified Holder under the indemnity agreement in this subsection (a) with respect to (1) any Prospectus to the extent that any such loss, cost, claim, damage, expense, liability or action, commenced or threatened, of such Indemnified Holder (or action in respect thereof) results from the fact that such Indemnified Holder sold Transfer Restricted Securities to a Person as 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 supplement in any case where such delivery is required by the Securities Act if the Company had previously furnished copies thereof in sufficient quantities to such Indemnified Holder and the loss, cost, claim, damage, expense, liability or action, commenced or threatened, of such Indemnified Holder (or action in respect thereof) results from an untrue statement or omission of a material fact contained in the Prospectus which was corrected in the Prospectus supplement or (2) any such loss, cost, claim, damage, expense, liability or action, commenced or threatened, of such Indemnified Holder (or action in respect thereof) results from the fact that such Indemnified Holder offered or sold Transfer Restricted Securities during a Suspension Period, if a Suspension Notice was given to such selling Holder in accordance with Section 4(b)(i). The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have. (b) Each Holder, severally and not jointly, shall indemnify and hold harmless the Company, its directors, officers, and employees and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, cost, claim, damage, expense or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer, employee or controlling person may become subject, insofar as any such loss, cost, claim, damage, expense or liability or action arises out of, or is based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in the Shelf Registration Statement or Prospectus or any amendment or supplement thereto or any Blue Sky Application; or -15- (ii) the omission or the alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder (or its related Indemnified Holder) specifically for use therein, and shall reimburse the Company and any such director, officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by the Company or any such director, officer, employee or controlling person in connection with investigating or defending against any such loss, cost, claim, damage, expense, liability or action, commenced or threatened, as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Holder may otherwise have to the Company and any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent it has been materially prejudiced by such failure and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party other than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Holders shall have the right to employ a single counsel to represent jointly the Holders and their officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Holders against the Company under this Section 6 if the Holders seeking indemnification shall have been advised by legal counsel that there may be one or more legal defenses available to such Holders and their respective officers, employees and controlling persons that are different from or additional to those available to the Company, and in that event, the reasonable fees and expenses of such separate counsel shall be paid by the Company. No indemnifying party shall: (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld) settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action), unless such settlement, compromise or consent includes an unconditional release of each -16- indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss of liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 6 shall for any reason be unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability (or action in respect thereof) referred to therein, each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability (or action in respect thereof): (i) in such proportion as is appropriate to reflect the relative benefits received by the Company from the offering and sale of the Transfer Restricted Securities on the one hand and a Holder with respect to the sale by such Holder of the Transfer Restricted Securities on the other, or (ii) if the allocation provided by Section (6)(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in Section 6(d)(i) but also the relative fault of the Company on the one hand and the Holders on the other in connection with the statements or omissions or alleged statements or alleged omissions that resulted in such loss, claim, damage or liability (or action in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Transfer Restricted Securities purchased under the Purchase Agreement (before deducting expenses) received by the Company, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Transfer Restricted Securities on the other. The relative fault of the parties shall be determined by reference to 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 on the one hand or the Holders on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Holder agree that it would not be just and equitable if the amount of contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense or liability, or action, commenced or threatened, in respect thereof, referred to above in this Section 6 shall be deemed to include, for purposes of this Section 6(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no Holder shall be required to contribute any amount in excess of the amount by which the -17- total price at which the Transfer Restricted Securities purchased by it were resold exceeds the amount of any damages which such Holder has otherwise been required to pay and has paid by reason of any 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. The Holders' obligations to contribute as provided in this Section 6(d) are several and not joint. 7. Rule 144A. If the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. 8. No Participation In Underwritten Registrations. No Holder may participate in any Underwritten Registration hereunder. 9. Miscellaneous. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely, and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2 hereof. The Company further agrees to waive, to the extent permitted by applicable law, the defense in any action for specific performance that a remedy at law would be adequate. (b) Actions Affecting Transfer Restricted Securities. The Company shall not, directly or indirectly, take any action with respect to the Transfer Restricted Securities as a class that would adversely affect the ability of the Holders of Transfer Restricted Securities to include such Transfer Restricted Securities in a registration undertaken pursuant to this Agreement. (c) No Inconsistent Agreements. The Company will not, on or after the date hereof, enter into any agreement with respect to its securities that conflicts with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. In addition, the Company shall not grant to any of its securityholders (other than the Holders of Transfer Restricted Securities in such capacity) the right to include any of its securities in the Shelf Registration Statement provided for in this Agreement other than the Transfer Restricted Securities. The Company has not previously entered into any agreement (which has not expired or been terminated) granting any registration rights with respect to its securities to any Person which rights conflict with the rights granted to the Holders in this Agreement or otherwise conflict with the provisions hereof. -18- (d) Amendments and Waivers. This Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, unless the Company has obtained the written consent of a Majority of Holders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof, with respect to a matter which relates exclusively to the rights of Holders of Transfer Restricted Securities whose securities are being sold pursuant to a Shelf Registration Statement and does not directly or indirectly adversely affect the rights of other Holders, may be given by the Majority of Holders, determined on the basis of Notes being sold rather than registered under such Shelf Registration Statement, provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each holder of Transfer Restricted 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 9(d), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Transfer Restricted Securities or is delivered to such Holder. (e) Notices. All notices, requests and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first class mail (registered or certified, return receipt requested), telex, facsimile transmission, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the registrar under the Indenture or the transfer agent of the Common Stock, as the case may be; (ii) if to selling Holder, at the most current address given by such Holder to the Company in a Holder Questionnaire or any amendment thereto; and (iii) if to the Company, to: BJ Services Company 5500 Northwest Central Drive Houston, Texas 77092 Attention: General Counsel Tel.: (713) 462-4239 Fax: (713) 895-5625 With a copy to: Andrews & Kurth L.L.P. 4200 Chase Tower Houston, Texas 77002 Attention: Doris Rodriguez, Esq. Tel.: (713) 220-4258 Fax: (713) 238-7185; and -19- (iv) if to the Initial Purchasers, to: Banc of America Securities LLC 9 West 57/th/ Street New York, New York 10019 Fax: (212) 583-8457 Attention: Eric Hambleton Merrill Lynch, Pierce, Fenner & Smith Incorporated 1221 McKinney, Suite 2700 Houston, Texas 77002 Fax: (713) 759-2543 Attention: Aaron R. Hoover. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if transmitted by facsimile; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Any party hereto may change the address for receipt of communications by giving written notice to the other parties hereto. (f) Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of, each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that (i) this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder and (ii) nothing contained herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. (g) 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. (h) Notes Held by the Company or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Company or its Affiliates (other than Initial Purchasers or subsequent Holders if such Initial Purchasers or subsequent Holders are deemed to -20- be Affiliates solely by reason of their holding of such Transfer Restricted Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (i) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. (k) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal, void or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected, impaired or invalidated thereby 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 provision, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (l) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and the registration rights granted by the Company with respect to the Transfer Restricted Securities. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. (m) Termination. This Agreement and the obligations of the parties hereunder shall terminate upon the end of the Effectiveness Period, except for any liabilities or obligations under Sections 4, 5 or 6 hereof and the obligations to make payments of and provide for Liquidated Damages under Section 3 hereof to the extent such damages accrue prior to the end of the Effectiveness Period, each of which shall remain in effect in accordance with its terms. [Remainder of Page Intentionally Left Blank] -21- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BJ SERVICES COMPANY By: /s/ T. M. Whichard ---------------------------------- Name: T. M. Whichard Title: Vice President and Treasurer BANC OF AMERICA SECURITIES LLC By /s/ [Illegible] ----------------------------------- Authorized Representative MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By /s/ [Illegible] ----------------------------------- Authorized Representative -22- EX-4.3 4 dex43.txt CONVERTIBLE SENIOR NOTES PURCHASE AGREEMENT EXHIBIT 4.3 BANC OF AMERICA SECURITIES LLC MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED $449,000,000 AGGREGATE PRINCIPAL AMOUNT BJ SERVICES COMPANY CONVERTIBLE SENIOR NOTES DUE 2022 PURCHASE AGREEMENT dated April 19, 2002 Table of Contents Section 1. Representations and Warranties of the Company................................. 2 (a) No Registration.................................................................. 2 (b) No Integration................................................................... 2 (c) Rule 144A........................................................................ 2 (d) Offering Memorandum.............................................................. 3 (e) Authorization of the Purchase Agreement.......................................... 3 (f) Authorization of the Indenture, etc.............................................. 3 (g) Authorization of the Notes, etc.................................................. 3 (h) Authorization of the Conversion Shares........................................... 3 (i) Authorization of the Registration Rights Agreement............................... 4 (j) No Material Adverse Change....................................................... 4 (k) Independent Accountants.......................................................... 4 (l) Preparation of the Financial Statements.......................................... 4 (m) Incorporation and Good Standing of the Company and its Subsidiaries.............. 5 (n) Capitalization and Other Capital Stock Matters................................... 5 (o) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required............................................................... 6 (p) No Material Actions or Proceedings............................................... 6 (q) Company Not an "Investment Company".............................................. 6 (r) No Price Stabilization or Manipulation........................................... 7 (s) No General Solicitation.......................................................... 7 (t) Company's Accounting System...................................................... 7 Section 2. Purchase, Sale and Delivery of the Notes...................................... 7 (a) The Firm Notes................................................................... 7 (b) The First Closing Date........................................................... 7 (c) The Optional Notes; the Second Closing Date...................................... 8 (d) Payment for the Notes............................................................ 8 (e) Delivery of the Notes............................................................ 8 Section 3. Additional Covenants of the Company........................................... 9 (a) Initial Purchasers' Review of Proposed Amendments and Supplements................ 9 (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters...................................................................... 9 (c) Documents to be Incorporated by Reference........................................ 9 (d) Copies of Offering Memorandum.................................................... 9 (e) Qualification of the Indenture................................................... 10 (f) Blue Sky Compliance.............................................................. 10 (g) Rule 144A Information............................................................ 10 (h) Legends.......................................................................... 10 (i) No General Solicitation.......................................................... 10 (j) No Integration................................................................... 10 (k) Rule 144 Tolling................................................................. 10 (l) Use of Proceeds.................................................................. 11 (m) DTC Approval..................................................................... 11
-i- (n) Company to Provide Interim Financial Statements................................ 11 (o) Agreement Not to Offer or Sell Additional Securities........................... 11 (p) Listing of Conversion Shares................................................... 11 Section 4. Payment of Expenses......................................................... 11 Section 5. Conditions of the Obligations of the Initial Purchasers..................... 12 (a) Accountants' Comfort Letter.................................................... 12 (b) No Material Adverse Change or Rating Agency Change............................. 12 (c) Opinion of Counsel for the Company............................................. 13 (d) Opinion of General Counsel of the Company...................................... 13 (e) Opinion of Counsel for the Initial Purchasers.................................. 13 (f) Officers' Certificate.......................................................... 13 (g) Bring-Down Comfort Letter...................................................... 13 (h) Registration Rights Agreement.................................................. 13 (i) PORTAL Designation............................................................. 13 (j) Additional Documents........................................................... 14 Section 6. Representations, Warranties and Agreements of Initial Purchasers............ 14 Section 7. Reimbursement of Initial Purchasers' Expenses............................... 14 Section 8. Indemnification............................................................. 15 (a) Indemnification of the Initial Purchasers...................................... 15 (b) Indemnification of the Company, its Directors and Officers..................... 15 (c) Notifications and Other Indemnification Procedures............................. 16 (d) Settlements.................................................................... 17 Section 9. Contribution................................................................ 17 Section 10. Termination of this Agreement............................................... 18 Section 11. Representations and Indemnities to Survive Delivery......................... 19 Section 12. Notices..................................................................... 19 Section 13. Successors.................................................................. 20 Section 14. Definition of the Terms "Business Day" and "Subsidiary"..................... 20 Section 15. Partial Unenforceability.................................................... 21 Section 16. Governing Law Provisions.................................................... 21 (a) Governing Law.................................................................. 21 (b) Consent to Jurisdiction........................................................ 21 Section 17. General Provisions.......................................................... 21
-ii- Schedule A Schedule B -iii- Purchase Agreement April 19, 2002 BANC OF AMERICA SECURITIES LLC MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED c/o BANC OF AMERICA SECURITIES LLC 9 West 57/th/ Street New York, New York 10019 Ladies and Gentlemen: BJ Services Company, a Delaware corporation (the "Company"), proposes to issue and sell to Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchasers") $449,000,000 in aggregate principal amount of its Convertible Senior Notes due April 24, 2022 (the "Firm Notes"). In addition, the Company has granted to the Initial Purchasers an option to purchase up to an additional $67,350,000 in aggregate principal amount of its Convertible Senior Notes due April 24, 2022 (the "Optional Notes" and, together with the Firm Notes, the "Notes"). The Notes will be redeemable at the Company's option at any time after April 24, 2005. The Notes will be convertible into fully paid, non-assessable shares of common stock, par value $.10 per share, of the Company (the "Common Stock"), such Common Stock also evidencing the rights (the "Rights") provided in the Amended and Restated Rights Agreement (the "Rights Agreement") dated as of September 26, 1996, as amended, between the Company and Bank of New York, as Rights Agent. The Notes will be convertible initially at a conversion rate of 14.9616 shares per $1,000 principal amount of the Notes, on the terms, and subject to the conditions, set forth in the Indenture (as defined below). As used herein, "Conversion Shares" means the shares of Common Stock into which the Notes are convertible. The Notes will be issued pursuant to an indenture (the "Indenture") to be dated as of the First Closing Date (as defined in Section 2), between the Company and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). The Notes will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended, and the rules and regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder (the "Securities Act"), in reliance upon an exemption therefrom. Holders of the Notes (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of a Resale Registration Rights Agreement, dated the First Closing Date, among the Company and the Initial Purchasers (the "Registration Rights Agreement"), for so long as such Notes constitute Transfer Restricted Securities (as defined in the Registration Rights Agreement), pursuant to which the Company will agree to file with the Commission a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Registration Statement") covering the resale of the Notes and the Conversion Shares, and to use its reasonable commercial efforts to cause the Registration Statement to be declared effective. This Agreement, the Indenture, the Notes and the Registration Rights Agreement are referred to herein collectively as the "Operative Documents." The Initial Purchasers may make offers and sales (the "Exempt Resales") of the Notes on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) solely to purchasers (the "Eligible Purchasers") whom the selling Initial Purchaser reasonably believes to be "qualified institutional buyers" as defined by Rule 144A under the Securities Act ("QIBs"). The Notes are to be offered and sold to or through the Initial Purchasers to Eligible Purchasers without being registered with the Commission under the Securities Act in reliance upon exemptions therefrom. The terms of the Notes and the Indenture will require that investors that acquire Notes expressly agree that Notes (and any Conversion Shares) may only be resold or otherwise transferred, after the date hereof, if such Notes (or Conversion Shares) are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemption afforded by Rule 144A ("Rule 144A") thereunder). The Company has prepared an offering memorandum dated as of April 19, 2002 setting forth information concerning the Company, the Notes, the Registration Rights Agreement and the Common Stock. As used in this Agreement, "Offering Memorandum" means the offering memorandum, as amended or supplemented by the Company and including all documents incorporated or deemed to be incorporated by reference therein. The Company and the Initial Purchasers hereby confirm their agreements as follows: Section 1. Representations and Warranties of the Company The Company hereby represents, warrants and covenants to each Initial Purchaser as follows: (a) No Registration. Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 6 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Notes to the Initial Purchasers, the Exempt Resales and delivery of the Notes by the Initial Purchasers and the conversion of the Notes into Conversion Shares, in each case in the manner contemplated by this Agreement, the Indenture and the Offering Memorandum, to register the Notes or the Conversion Shares under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (b) No Integration. None of the Company or any of its subsidiaries has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the Notes or the Conversion Shares in a manner that would require registration under the Securities Act of the Notes or the Conversion Shares. (c) Rule 144A. No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Notes are listed on any national securities exchange -2- registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted on an automated inter-dealer quotation system. (d) Offering Memorandum. The Company hereby confirms that it has authorized the use of the Offering Memorandum in connection with the Exempt Resales of the Notes by the Initial Purchasers. Each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Offering Memorandum, when filed with the Commission conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Offering Memorandum does not or will not contain, any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by or on the behalf of the Initial Purchasers specifically for inclusion therein. (e) Authorization of the Purchase Agreement. This Agreement has been duly authorized, executed and delivered by the Company. (f) Authorization of the Indenture, etc. The Indenture has been, or not later than the First Closing Date will be, duly authorized by the Company and when duly executed and delivered by the Company (assuming due authorization, execution and delivery of the Indenture by the Trustee), will constitute a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding in equity or at law); and the Indenture, when executed and delivered by the Company, will conform in all material respects to the description thereof contained in the Offering Memorandum. (g) Authorization of the Notes, etc. The Notes have been, or not later than the First Closing Date will be, duly authorized by the Company; when the Notes are executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchasers pursuant to this Agreement on the respective Closing Date (assuming due authentication of the Notes by the Trustee), such Notes will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding in equity or at law); and the Notes will conform at the time of their execution and issuance in all material respects to the description thereof contained in the Offering Memorandum. (h) Authorization of the Conversion Shares. The shares of Common Stock initially issuable upon conversion of the Notes have been duly authorized and reserved for issuance upon conversion of the Notes, and, when issued upon conversion of the Notes in accordance with the -3- terms of the Indenture, will be validly issued, fully paid and non-assessable, and the issuance of such shares will not be subject to any preemptive or similar rights. (i) Authorization of the Registration Rights Agreement. The Registration Rights Agreement has been, or not later than the First Closing Date will be, duly authorized by the Company, and when the Registration Rights Agreement is duly executed and delivered by the Company (assuming due authorization, execution and delivery thereof by the Initial Purchasers), it will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as rights to indemnification or contribution thereunder may be limited by applicable law, including United States federal or state securities laws, or the policies underlying such laws, and except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and by limitations on the availability of equitable relief, including specific performance (whether considered in a proceeding in equity or at law). (j) No Material Adverse Change. Except as otherwise disclosed or incorporated by reference in the Offering Memorandum subsequent to the date of the latest unaudited financial statements included in the Offering Memorandum: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries (as defined in Section 14), considered as one entity (any such change is called a "Material Adverse Change"); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business, nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no (A) dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or other subsidiaries, by any of its subsidiaries, on any class of capital stock or (B) repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock of the Company. (k) Independent Accountants. Deloitte & Touche LLP, who have expressed their opinion with respect to the audited financial statements (which term as used in this Agreement includes the related notes thereto) included in the Offering Memorandum, are independent public or certified public accountants as required by the Securities Act and the Exchange Act. (l) Preparation of the Financial Statements. The consolidated financial statements included or incorporated by reference in the Offering Memorandum present fairly the consolidated financial position of the Company and its consolidated subsidiaries as of and at the dates specified therein and the results of their operations and cash flows for the periods specified therein. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except to the extent disclosed therein and except, in the case of unaudited interim financial information, for the absence of footnotes. The financial information set forth in the Offering Memorandum under the caption "Capitalization" fairly present in all material respects the information set forth therein on a basis consistent with that of the audited financial statements contained or incorporated by -4- reference in the Offering Memorandum. The Company's ratios of earnings to fixed charges set forth in the Offering Memorandum have been calculated in compliance with Item 503(d) of Regulation S-K under the Securities Act. (m) Incorporation and Good Standing of the Company and its Subsidiaries. Each of the Company and its subsidiaries has been duly incorporated or organized and is validly existing as a corporation, limited liability company or limited partnership in good standing under the laws of the jurisdiction of its formation; the Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum as currently being conducted and to enter into and perform its obligations under this Agreement. Each of the Company's subsidiaries has all requisite power and authority to own or lease its properties and conduct its business as currently conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation, limited liability company or limited partnership and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure so to qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. Exhibit 21.1 (the "Subsidiary List") to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2001 sets forth all of the Company's subsidiaries as of the date thereof and their jurisdictions of formation, and no "significant subsidiary" (as defined in Rule 405 under the Securities Act) has been formed or acquired by the Company since the date of such Subsidiary List. All of the issued and outstanding shares of capital stock or similar ownership interest of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and nonassessable, except, in the case of limited partner interests of any subsidiary that is a limited partnership, as such nonassessability may be affected by the matters specified in Sections 17-303 and 17-607 of the Delaware Revised Uniform Limited Partnership Act, and, except for directors' qualifying shares and as indicated on the Subsidiary List, are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim. (n) Capitalization and Other Capital Stock Matters. The number of authorized, issued and outstanding shares of capital stock of the Company is as set forth in the Offering Memorandum under the caption "Capitalization" (other than for subsequent issuances, if any, pursuant to employee benefit plans described in the Offering Memorandum or upon exercise of outstanding options or warrants described in the Offering Memorandum). The Common Stock conforms in all material respects to the description thereof contained in the Offering Memorandum. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable, and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those the description(s) of which are included or incorporated by reference in the Offering Memorandum. The description of the Company's stock option, stock bonus and other stock plans or arrangements and the options or other rights granted thereunder or included or incorporated by reference in the -5- Offering Memorandum accurately and fairly describes and summarizes such plans, arrangements, options and rights in all material respects. (o) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or is in default (or, with the giving of notice or lapse of time, would be in default) ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company or any of its subsidiaries are parties or by which the Company or any of its subsidiaries may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an "Existing Instrument"), except for such Defaults as would not result in a Material Adverse Change. The Company's execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby and by the Offering Memorandum (i) will not result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries, (ii) will not constitute a breach or violation of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument except as would not have a Material Adverse Change, and (iii) will not result in any violation of any law or regulation applicable to the Company or any subsidiary or of any decree of any court or governmental body by which the Company or any subsidiary is bound. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency is required for the Company's execution, delivery and performance of the Operative Documents and consummation of the transactions contemplated thereby and by the Offering Memorandum, except (1) with respect to the transactions contemplated by the Registration Rights Agreement, as may be required under the Securities Act, the Trust Indenture Act and the Rules and Regulations promulgated thereunder and (2) such as have been or, prior to the First Closing, will be obtained or made by the Company and will be in full force and effect under the Securities Act, applicable state securities or blue sky laws and from the NASD. (p) No Material Actions or Proceedings. Except as may otherwise be disclosed or incorporated by reference in the Offering Memorandum, there are no legal or governmental proceedings pending or, to the Company's knowledge, threatened against the Company or any of its subsidiaries, where in any such case (i) there is a reasonable likelihood that such action, suit or proceeding will be determined adversely to the Company or such subsidiary and (ii) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or materially and adversely affect the consummation of the transactions contemplated by this Agreement. (q) Company Not an "Investment Company". The Company has been advised of the rules and regulations under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not and, after receipt of payment for the Notes and application of the proceeds as described in the Offering Memorandum, will not be required to register as an "investment company" within the meaning of Investment Company Act. -6- (r) No Price Stabilization or Manipulation. The Company has not taken, directly or indirectly, any action designed to stabilize or manipulate, or that might be reasonably expected to cause or result in stabilization or manipulation of, the price of the Notes or the Conversion Shares to facilitate the sale or Exempt Resales of the Notes. (s) No General Solicitation. None of the Company or any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")) has, directly or through an agent (provided that no representation or warranty is made as to the Initial Purchasers or any person acting on their behalf), engaged in any form of general solicitation or general advertising in connection with the offering of the Notes or the Conversion Shares (as those terms are used in Regulation D) under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the Company has not entered into any contractual arrangement with respect to the distribution of the Notes or the Conversion Shares except for this Agreement, and the Company will not enter into any such arrangement except for the Registration Rights Agreement and as may be contemplated thereby. (t) Company's Accounting System. The Company maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Any certificate signed by an officer of the Company and delivered to the Initial Purchasers or to counsel for the Initial Purchasers which contains representations or warranties shall be deemed to be a representation and warranty by the Company to each Initial Purchaser as to the matters set forth therein. The Company acknowledges that the Initial Purchasers and, for purposes of the opinions to be delivered pursuant to Section 5 hereof, counsel to the Company and counsel to the Initial Purchasers, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance. Section 2. Purchase, Sale and Delivery of the Notes (a) The Firm Notes. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company agrees to issue and sell the Firm Notes to the Initial Purchasers, and the Initial Purchasers agree, severally and not jointly, to purchase from the Company the respective principal amount of Firm Notes set forth opposite their names on Schedule A, at a purchase price of 77.494383% of the aggregate principal amount thereof. (b) The First Closing Date. Delivery of the Firm Notes to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Andrews & Kurth L.L.P., 600 Travis Street, Suite 4200, Houston, Texas (or such other place as may be agreed to by the -7- Company and the Initial Purchasers) at 9:00 a.m. Houston time, on April 24, 2002, which date and time may be postponed by agreement between the Company and the Initial Purchasers (the time and date of such closing are called the "First Closing Date"). (c) The Optional Notes; the Second Closing Date. In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the Initial Purchasers to purchase, severally and not jointly, up to $67,350,000 aggregate principal amount of Optional Notes from the Company at the same purchase price as the purchase price to be paid by the Initial Purchasers for the Firm Notes. The option granted hereunder may be exercised only once and (i) only to cover overallotments in the sale of Notes by the Initial Purchasers and (ii) only upon written notice by the Initial Purchasers to the Company, which notice may be given at any time within 30 days from the date of this Agreement. Such notice shall set forth (1) the amount (which shall be an integral multiple of $1,000 in aggregate principal amount) of Optional Notes as to which the Initial Purchasers are exercising the option, (2) the names and denominations in which the Optional Notes are to be registered and (3) the time, date and place at which such Notes will be delivered (which time and date may be simultaneous with, but not earlier than, the First Closing Date; and in such case the term "First Closing Date" shall refer to the time and date of delivery of the Firm Notes and the Optional Notes). Such time and date of delivery, if subsequent to the First Closing Date, is called the "Second Closing Date" and shall be determined by the Initial Purchasers, subject to the requirements set forth herein. Such date may be the same as the First Closing Date but not earlier than the First Closing Date nor earlier than three, nor later than 10, business days after the date of such notice. If any Optional Notes are to be purchased, each Initial Purchaser agrees, severally and not jointly, to purchase the principal amount of Optional Notes (subject to such adjustments to eliminate fractional amounts as the Initial Purchasers may determine) that bears the same proportion to the total principal amount of Optional Notes to be purchased as the principal amount of Firm Notes set forth on Schedule A opposite the name of such Initial Purchaser bears to the total principal amount of Firm Notes. The Initial Purchasers may cancel the option at any time prior to its expiration by giving irrevocable written notice of such cancellation to the Company. (d) Payment for the Notes. Payment for the Notes shall be made at the First Closing Date (and, if applicable, at the Second Closing Date) by wire transfer of immediately available funds to the order of the Company. It is understood that the Initial Purchasers have been authorized, for their own account, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Notes and any Optional Notes the Initial Purchasers have agreed to purchase. (e) Delivery of the Notes. The Company shall deliver, or cause to be delivered, as hereafter provided, to the Initial Purchasers for the accounts of the Initial Purchasers the Firm Notes at the First Closing Date, against payment of the purchase price therefor by wire transfer of immediately available funds. The Company shall also deliver, or cause to be delivered, to the Initial Purchasers for the accounts of the Initial Purchasers, the Optional Notes the Initial Purchasers have agreed to purchase at the First Closing Date or the Second Closing Date, as the case may be, against payment of the purchase price therefor by a wire transfer of immediately available funds. The Notes shall be delivered in one or more global Notes, registered in the name -8- of Cede & Co., as nominee for The Depositary Trust Company ("DTC"), having an aggregate principal amount corresponding to the aggregate principal amount of the Notes (collectively, the "Global Notes") or otherwise registered in such names and denominations as the Initial Purchasers shall have requested at least two full business days prior to the First Closing Date (or the Second Closing Date, as the case may be) and shall be made available for inspection on the business day preceding the First Closing Date (or the Second Closing Date, as the case may be) at a location in New York City as the Initial Purchasers may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers. Section 3. Additional Covenants of the Company The Company further covenants and agrees with each Initial Purchaser as follows: (a) Initial Purchasers' Review of Proposed Amendments and Supplements. During the period beginning on the date hereof and ending on the date which is the earlier of nine months after the date hereof and the completion of the Exempt Resales of the Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company), the Company shall, prior to amending or supplementing the Offering Memorandum, furnish to the Initial Purchasers for review a copy of each such proposed amendment or supplement, and the Company shall not print or distribute such proposed amendment or supplement to which the Initial Purchasers reasonably object within a reasonable time, but in any event not longer than three business days after being furnished a copy of such amendment or supplement. (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, at any time prior to the earlier of nine months after the date hereof and the completion of the Exempt Resales of the Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company), any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if in the opinion of the Initial Purchasers or counsel for the Initial Purchasers (which opinion is promptly communicated to the Company) it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company shall promptly notify the Initial Purchasers and prepare, subject to Section 3(a) hereof, an appropriate amendment or supplement so that, at the time the Offering Memorandum is delivered to prospective Eligible Purchasers, (i) the statements in the Offering Memorandum, as so amended or supplemented, in the light of the circumstances under which they were made will not be misleading, and (ii) the Offering Memorandum will comply with applicable law. (c) Documents to be Incorporated by Reference. Each document, if any, filed pursuant to the Exchange Act on or after the date of this Agreement and incorporated by reference in the Offering Memorandum will comply when it is filed in all material respects to the requirements of the Exchange Act and the Rules and Regulations of the Commission thereunder. (d) Copies of Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, until the earlier of nine months after the date hereof or the -9- completion of the Exempt Resales of the Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company) as many copies of the Offering Memorandum and any amendments and supplements thereto as the Initial Purchasers may reasonably request for internal use and for distribution to prospective Eligible Purchasers. (e) Qualification of the Indenture. The Indenture, upon the effectiveness of the Registration Statement, will be qualified under the Trust Indenture Act. (f) Blue Sky Compliance. The Company shall use its reasonable commercial efforts to cooperate with the Initial Purchasers and counsel for the Initial Purchasers, as the Initial Purchasers may reasonably request from time to time, to qualify or register the Notes for sale under (or obtain exemptions from the application of) the state securities or blue sky laws or Canadian provincial securities laws or other foreign laws of those jurisdictions designated by the Initial Purchasers, to comply with such laws and continue such qualifications, registrations and exemptions in effect so long as required for the resale of the Notes. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where such qualification would be subject to taxation. (g) Rule 144A Information. For so long as any of the Notes are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company shall make available to any holder of the Notes or to any prospective purchaser of the Notes designated by any holder, upon request of such holder or prospective purchaser, information required to be provided by Rule 144A(d)(4) of the Securities Act if, at the time of such request, the Company is not subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act. (h) Legends. Each of the Notes will bear, to the extent applicable, the legend contained in "Transfer Restrictions" in the Offering Memorandum for the time period and upon the other terms stated therein. (i) No General Solicitation. Except following the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Company will not, and will not permit its subsidiaries to, solicit any offer to buy or offer to sell the Notes by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (j) No Integration. The Company will not, and will not permit its subsidiaries to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of, any "security" (as defined in the Securities Act) in a transaction that would be integrated with the sale of the Notes in a manner that would require the registration under the Securities Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Notes. (k) Rule 144 Tolling. During the period of two years after the last Closing Date, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144 under the Securities Act) to, resell any of the Notes which constitute "restricted securities" under Rule 144 that have been reacquired by any of them. -10- (l) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Notes sold by it in the manner described under the caption "Use of Proceeds" in the Offering Memorandum. (m) DTC Approval. The Company shall obtain the approval of DTC for "book-entry" transfer of the Notes and shall comply with its agreements set forth in the letter of representations of the Company to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. (n) Company to Provide Interim Financial Statements. Prior to the Closing Date, the Company will furnish the Initial Purchasers, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Offering Memorandum. (o) Agreement Not to Offer or Sell Additional Securities. During the period commencing on the date hereof and ending on the 90th day following the date of the Offering Memorandum, the Company will not, without the prior written consent of the Initial Purchasers (which consent shall not unreasonably be withheld or delayed), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants to acquire shares of Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock (other than as contemplated by this Agreement or the Registration Rights Agreement with respect to the Notes); provided, however, that the Company may issue shares of its Common Stock or options to purchase its Common Stock, or Common Stock upon exercise of options, pursuant to any stock option, stock bonus or other stock plan or arrangement existing on the date hereof; and provided further that nothing in this Section 3(o) shall be deemed to limit in any manner the Company's right to issue Common Stock or securities convertible into Common Stock as consideration for the acquisition of the assets or equity interests of any other entity, including by way of merger, consolidation, amalgamation or similar event. (p) Listing of Conversion Shares. The Company will use its reasonable commercial efforts to have the Conversion Shares approved for listing (subject to notice of issuance) by the New York Stock Exchange ("NYSE") prior to the effectiveness of the Registration Statement. Section 4. Payment of Expenses The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including, without limitation (i) all expenses incident to the issuance and delivery of the Notes (including all printing and engraving costs), (ii) all fees and expenses of the Trustee under the Indenture, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Notes to the Initial Purchasers, (iv) all fees and expenses of the Company's counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, shipping and -11- distribution of the Offering Memorandum and all amendments and supplements thereto, (vi) all filing fees, reasonable attorneys' fees and expenses incurred by the Company or the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Notes for offer and sale under the state securities or blue sky laws or the provincial securities laws of Canada, and, if requested by the Initial Purchasers, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vii) the expenses of the Company in connection with the marketing and offering of the Notes, (viii) the fees and expenses associated with including the Conversion Shares for listing on the NYSE, (ix) all fees and expenses of the Company in connection with approval of the Notes by DTC for "book-entry" transfer and (x) all expenses and fees in connection with any application for inclusion of the Notes for trading in the PORTAL Market, provided, however, that, except as provided in this Section 4, Section 7 and Section 10 hereof, the Initial Purchasers shall pay their own costs and expenses, including the fees and disbursements of their counsel and any transfer taxes on the Notes which they may sell. Section 5. Conditions of the Obligations of the Initial Purchasers The obligations of the Initial Purchasers to purchase and pay for the Notes as provided herein on the First Closing Date and, with respect to the Optional Notes, the Second Closing Date, shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the First Closing Date as though then made and, with respect to the Optional Notes, as of the Second Closing Date as though then made, to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions: (a) Accountants' Comfort Letter. On the First Closing Date, the Initial Purchasers shall have received from Deloitte & Touche, LLP, independent public or certified public accountants for the Company, a letter dated the First Closing Date addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers, setting forth the conclusions and findings of such firm with respect to the financial information, operating data and other information of the type ordinarily included in accountants' "comfort letters" to underwriters in connection with registered public offerings, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin). (b) No Material Adverse Change or Rating Agency Change. For the period from and after the date of this Agreement and prior to the First Closing Date and, with respect to the Optional Notes, the Second Closing Date: (i) in the reasonable judgment of the Initial Purchasers there shall not have occurred any Material Adverse Change; (ii) (A) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act, and (B) no such organization shall have publicly -12- announced that it has under surveillance or review, with negative implications, its rating of any of the Company's debt securities. (c) Opinion of Counsel for the Company. On the First Closing Date, the Initial Purchasers shall have received an opinion of Andrews & Kurth L.L.P., counsel for the Company, dated as of such Closing Date, in form and substance satisfactory in the reasonable judgment of the Initial Purchasers. (d) Opinion of General Counsel of the Company. On the First Closing Date, the Initial Purchasers shall have received the favorable opinion of the General Counsel of the Company, dated as of such Closing Date, in form and substance satisfactory in the reasonable judgment of the Initial Purchasers. (e) Opinion of Counsel for the Initial Purchasers. On the First Closing Date, the Initial Purchasers shall have received the favorable opinion of Sidley Austin Brown & Wood LLP, counsel for the Initial Purchasers, dated as of such Closing Date, in form and substance satisfactory in the reasonable judgment of the Initial Purchasers. (f) Officers' Certificate. On each of the First Closing Date and the Second Closing Date, the Initial Purchasers shall have received a written certificate executed by (i) any of the Chairman of the Board, Chief Executive Officer or President of the Company and (ii) either of the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of such Closing Date, to the effect that: (i) for the period from and after the date of this Agreement and prior to such Closing Date, there has not occurred any Material Adverse Change; (ii) the representations, warranties and covenants of the Company set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of such Closing Date; and (iii) the Company has performed or complied with all the agreements hereunder and satisfied all the conditions to be performed or satisfied by it hereunder at or prior to such Closing Date. (g) Bring-Down Comfort Letter. On the Second Closing Date, the Initial Purchasers shall have received from Deloitte & Touche, LLP, independent public or certified public accountants for the Company, a letter dated the Second Closing Date, substantially in the same form and substance as the letter furnished to the Initial Purchasers pursuant to Section 5(a) hereof, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Second Closing Date. (h) Registration Rights Agreement. The Company and the Initial Purchasers shall have executed and delivered the Registration Rights Agreement, and the Registration Rights Agreement shall be in full force and effect. -13- (i) PORTAL Designation. The Notes shall have been designated PORTAL-eligible securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. (j) Additional Documents. On or before each of the First Closing Date and the Second Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Notes as contemplated herein or the satisfaction of any of the conditions or agreements herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Initial Purchasers by notice to the Company at any time on or prior to the First Closing Date and, with respect to the Optional Notes, at any time prior to the Second Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 7, Section 8 and Section 9 shall at all times be effective and shall survive such termination. Section 6. Representations, Warranties and Agreements of Initial Purchasers Each of the Initial Purchasers represents and warrants that it is a "qualified institutional buyer," as defined in Rule 144A of the Securities Act. Each Initial Purchaser agrees with the Company that: (a) The Notes and the Conversion Shares have not been, and will not be, registered under the Securities Act in connection with the initial offering of the Notes. (b) The Initial Purchasers are purchasing the Notes pursuant to a private sale exemption from registration under the Securities Act. (c) The Notes have not been and will not be offered or sold by such Initial Purchaser or its affiliates except in accordance with Rule 144A; and the Initial Purchasers will effect such offers and sales only in compliance with all applicable securities laws in any jurisdiction in which the Initial Purchasers effect such offers or sales. (d) The Initial Purchasers will not offer or sell the Notes in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising in the United States. (e) The Initial Purchasers have not offered or sold, and will not offer or sell, any Notes except to persons whom they reasonably believe to be QIBs. Section 7. Reimbursement of Initial Purchasers' Expenses If this Agreement is terminated by the Initial Purchasers pursuant to Section 5 or Section 10, or if the sale to the Initial Purchasers of the Notes on the First Closing Date is not -14- consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Initial Purchasers severally upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Notes, including but not limited to, fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. Section 8. Indemnification (a) Indemnification of the Initial Purchasers. The Company agrees (i) to indemnify and hold harmless each Initial Purchaser, its officers and employees, and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (A) upon any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact, in each case, necessary to make the statements therein not misleading; or (B) on any act or failure to act or any alleged act or failure to act by any Initial Purchaser in connection with, or relating in any manner to, the Notes or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability, expense or action arising out of or based upon any matter covered by clause (A) above, provided that the Company shall not be liable under this clause (B) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability, expense or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Initial Purchaser through its gross negligence or willful misconduct, and (ii) to reimburse each Initial Purchaser and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by the Initial Purchasers) as such expenses are reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use in the Offering Memorandum (or any amendment or supplement thereto). The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise have. (b) Indemnification of the Company, its Directors and Officers. Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become subject, under the Securities Act, the Exchange Act, or -15- other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Initial Purchaser), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Offering Memorandum (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use therein; and to reimburse the Company, or any such director, officer or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company hereby acknowledges that the only information that the Initial Purchasers have furnished to the Company expressly for use in the Offering Memorandum (or any amendment or supplement thereto) are the statements set forth in Schedule B; and the Initial Purchasers confirm that such statements are correct. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Initial Purchaser may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof may be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume, jointly with all other indemnifying parties similarly notified, the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more -16- than one separate counsel (together with local counsel), approved by the indemnifying party (the Initial Purchasers in the case of Section 8(b) and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnifying party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel reasonably incurred shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss or liability by reason of such settlement or judgment in accordance with the foregoing provisions of this Section 8. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Section 9. Contribution If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under Section 8 in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Notes pursuant to this Agreement 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 Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Notes pursuant to this Agreement (before deducting expenses) received by the Company, and the total discount received by the Initial Purchasers bear to the aggregate -17- initial offering price of the Notes. The relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses,claims, damages, liabilities or expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) for purposes of indemnification. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Notes purchased by it and distributed to investors were offered to investors exceeds the amount of any damages which such Initial Purchaser has 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. The Initial Purchasers' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company, each officer of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company. Section 10. Termination of this Agreement On or prior to the First Closing Date, this Agreement may be terminated by the Initial Purchasers by notice given to the Company if at any time after the date hereof (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission or by the NYSE, or trading in securities generally on either the Nasdaq Stock Market or the NYSE shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the -18- NASD; (ii) a general banking moratorium shall have been declared by any federal, New York or California authority; (iii) there shall have occurred any outbreak or substantial escalation beyond conditions existing at the date of this Agreement of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions, as in the reasonable judgment of the Initial Purchasers is in each case material and adverse and makes it impracticable or inadvisable to market the Notes in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of securities; or (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change. Any termination pursuant to this Section 10 shall be without liability on the part of (a) the Company to any Initial Purchaser, except that the Company shall be obligated to reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 7 hereof, (b) any Initial Purchaser to the Company, or (c) of any party hereto to any other party, except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination. Section 11. Representations and Indemnities to Survive Delivery The respective indemnities, contribution, agreements, representations, warranties and other statements of the Company, of its officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement shall remain operative and in full force and effect (in the case of representations and warranties, they shall speak only as of the date on which such representations or warranties were made, pursuant to the terms of this Agreement), regardless of (i) any investigation, or statement as to the result hereof, made by or on behalf of any Initial Purchaser or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be and (ii) acceptance of the Notes and payment for them hereunder. The respective indemnities, contribution, agreements, representations, warranties and other statements of the Company, of its officers and of the Initial Purchasers set forth in or made pursuant to Sections (1), (4), (7), (8), (9), (12), (13), (14), (15), (16) and (17) of this Agreement shall survive the termination of this Agreement and remain operative and in full force and effect (in the case of representations and warranties, they shall speak only as of the date on which such representations or warranties were made, pursuant to the terms of this Agreement). Nothing in this Section 11 is intended to effect any applicable statute of limitations. Section 12. Notices All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: If to the Initial Purchasers: Banc of America Securities LLC 9 West 57/th/ Street New York, New York 10019 Facsimile: (212) 583-8457 Attention: Eric Hambleton -19- with a copy to: Merrill Lynch & Co., Inc. 1221 McKinney, Suite 2700 Houston, Texas 77010 Facsimile: (713) 759-2543 Attention: Aaron R. Hoover If to the Company: BJ Services Company 5500 Northwest Central Drive Houston, Texas 77092 Attention: T. M. Whichard, Vice President and Treasurer Tel.: (713) 895-5847 Fax: (713) 895-5420 With a copy to: Andrews & Kurth L.L.P. 4200 Chase Tower Houston, Texas 77002 Attention: Doris Rodriguez, Esq. Tel.: (713) 220-4258 Fax: (713) 238-7185 Any party hereto may change the address for receipt of communications by giving written notice to the others. Section 13. Successors This Agreement will inure to the benefit of and be binding upon the parties hereto and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any legal or equitable right, benefit, remedy or claim, or any obligation, hereunder. The term "successors" shall not include any purchaser of the Notes as such from any of the Initial Purchasers merely by reason of such purchase. Section 14. Definition of the Terms "Business Day" and "Subsidiary" For purposes of this Agreement, (a) "business day" means each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close and (b) "subsidiary" has the meaning set forth in Rule 405 of the rules and regulations of the Commission under the Securities Act. -20- Section 15. Partial Unenforceability The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Section 16. Governing Law Provisions (a) Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is nonexclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. Each party not located in the United States irrevocably appoints CT Corporation System, which currently maintains a New York office at 111 Eighth Avenue, 13th Floor, New York, New York 10011, United States of America, as its agent to receive service of process or other legal summons for purposes of any such suit, action or proceeding that may be instituted in any state or federal court in the City and County of New York. Section 17. General Provisions This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in one or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified except in a writing signed by all of the parties hereto. The Table of Contents and the Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8 and the contribution -21- provisions of Section 9, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Offering Memorandum (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act. [Remainder of Page Intentionally Left Blank] -22- If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, BJ SERVICES COMPANY By: /s/ T. M. Whichard ------------------------------------------- T. M. Whichard, Vice President and Treasurer The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written. BANC OF AMERICA SECURITIES LLC By: /s/ [Illegible] ---------------------------------- MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Aaron R. Hoover ----------------------------------- -23- SCHEDULE A Aggregate Principal Amount of Firm Notes Initial Purchasers to be Purchased Banc of America Securities LLC........................... $224,500,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated............................... $224,500,000 ---------------- Total........................................... $449,000,000 Schedule A-1 SCHEDULE B List of information Initial Purchasers have furnished to the Company for use in the Offering Memorandum: 1. The information set forth in the first, second and third sentences of the first paragraph under the caption "Plan of Distribution--Notes Are Not Being Registered" on page 39 of the Offering Memorandum. 2. The information set forth in the second paragraph under the caption "Plan of Distribution--Notes Are Not Being Registered" on page 39 of the Offering Memorandum. 3. The information set forth in the first, second and third paragraphs under the caption "Plan of Distribution--Price Stabilization and Short Positions" on page 40 of the Offering Memorandum. Schedule B-1 EX-5.1 5 dex51.txt OPINION OF ANDREWS & KURTH LLP Exhibit 5.1 Andrews & Kurth L.L.P. 600 Travis, Suite 4200 Houston, Texas 77002 September 19, 2002 BJ Services Company 5500 Northwest Central Drive Houston, Texas 77092 RE: Registration Statement on Form S-3, as amended Convertible Senior Notes Due 2022 Ladies and Gentlemen: We have acted as counsel to BJ Services Company, a Delaware corporation (the "Company"), in connection with the issuance by it of $516,350,000 principal amount at maturity of its Convertible Senior Notes due 2022 (the "Notes"), pursuant to an Indenture, dated as of April 24, 2002 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"), and in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") of the Registration Statement (as defined below). The Notes and the up to 7,725,422 shares (the "Shares") of common stock, par value $0.10 per share, issuable upon conversion of the Notes, subject to adjustment as provided in the Indenture, are being registered for resale by the holders thereof under the Securities Act of 1933, as amended (the "Act") pursuant to a Registration Statement on Form S-3 (the "Registration Statement"). In arriving at the opinions expressed below, we have examined (i) the Certificate of Incorporation and Bylaws of the Company, as amended to date, (ii) the Registration Statement, as amended to date, including the form of prospectus included therein and the documents incorporated by reference therein, (iii) the Indenture and (iv) the originals or copies certified or otherwise identified to our satisfaction of such other instruments and certificates of public officials, officers and representatives of the Company and other persons, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinions expressed below. In rendering the opinions expressed below, we have assumed and have not verified (i) the genuineness of the signatures on all documents that we have examined, (ii) the legal capacity of all natural persons, (iii) the conformity to the authentic originals of all documents supplied to us as certified or photostatic or faxed copies, (iv) the authenticity and completeness of all documents supplied to us as originals, and (v) as to the forms of all documents in respect of which forms were filed with the Commission or incorporated by reference as exhibits to the Registration Statement, the conformity in all material respects of such documents to the forms thereof that we have examined. In conducting our examination of documents executed by parties other than the Company, we have assumed that such parties had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the due execution (or, in the case of the Trustee in respect of the Notes, authentication) and delivery by such parties of such documents and that such documents constitute valid and binding obligations of such parties. In conducting our examination of documents, we have further assumed that (A) except as to the Company with respect to the Federal Laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, all parties to such documents have obtained all requisite third party and governmental consents, authorizations and approvals, and made all registrations and filings, necessary to execute and deliver, and perform their respective obligations under, such documents, and (B) the execution, delivery and performance of such documents do not and will not, violate, or require any consent under, the organic documents of any party thereto (other than the Certificate of Incorporation and Bylaws of the Company) or any law, rule, regulation, consent, order, writ, injunction or decree, or any agreement, indenture or other contractual restriction, applicable to any such person. As to any facts material to the opinions expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers, trustees, and other representatives of the Company and others. Based upon and subject to the foregoing and subject also to the other qualifications and limitations set forth herein, we are of the opinion that: (1) The Notes have been duly authorized, executed, issued and delivered and constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, except as may be limited by the effect of (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity, including, without limitation, reasonableness, materiality, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). (2) The Shares initially issuable upon conversion of the Notes have been duly and validly authorized and reserved for issuance and, when issued and delivered in accordance with the provisions of the Notes and the Indenture, will be duly and validly issued, fully paid and non-assessable. This opinion speaks as of its date and we undertake no, and hereby disclaim any, duty to advise as to changes of fact or law coming to our attention after the delivery hereof on such date. We express no opinion other than as to the laws of the State of New York, the General Corporation Law of the State of Delaware (including the applicable provisions of the Delaware Constitution and the reported judicial decisions interpreting those laws) and, to the extent applicable, the Federal laws of the United States of America. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading "Legal Matters" in the prospectus contained in the Registration Statement. In giving this consent we do not admit that we are "experts" under the Act, or the rules and regulations of the Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit. Very truly yours, /s/ Andrews & Kurth L.L.P. EX-8.1 6 dex81.txt TAX OPINION OF ANDREWS & KURTH LLP Exhibit 8.1 Andrews & Kurth L.L.P. 600 Travis, Suite 4200 Houston, Texas 77002 September 19, 2002 BJ Services Company 5500 Northwest Central Drive Houston, Texas 77092 Re: Registration Statement on Form S-3, as amended Convertible Senior Notes Due 2022 Ladies and Gentlemen: We have acted as counsel to BJ Services Company, a Delaware corporation (the "Company"), in connection with the issuance by it of $516,350,000 principal amount at maturity of its Convertible Senior Notes due 2022 (the "Notes"), pursuant to an Indenture, dated as of April 24, 2002 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"), and in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") of the Registration Statement (as defined below). The Notes and up to 7,725,422 shares (the "Shares") of common stock, par value $0.10 per share, issuable upon conversion of the Notes are being registered for resale by the holders thereof under the Securities Act of 1933, as amended (the "Act") pursuant to a Registration Statement on Form S-3 (the "Registration Statement"). In arriving at the opinion expressed below, we have examined (i) the Registration Statement including the form of prospectus included therein and the documents incorporated by reference therein, and (ii) the Indenture, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinion expressed below. In rendering the opinion expressed below, we have assumed and have not verified (i) the genuineness of the signatures on all documents that we have examined, (ii) the conformity to the originals of all documents supplied to us as certified or photostatic or faxed copies, (iii) the authenticity of the originals of such documents and (iv) as to the forms of all documents in respect of which forms were filed with the Commission or incorporated by reference as exhibits to the Registration Statement, the conformity in all material respects of such documents to the forms thereof that we have examined. In conducting our examination of documents executed by parties other than the Company, we have assumed that such parties had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the due execution (or, in the case of the Trustee in respect of the Notes, authentication) and delivery by such parties of such documents and that such documents constitute valid and binding obligations of such parties. As to any facts material to the opinion expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers, trustees, and other representatives of the Company and others. Subject to the limitations and qualifications set forth herein, we are of the opinion that the description of the United States federal income tax consequences appearing under the heading "Certain United States Federal Income Tax Considerations" in the prospectus contained in the Registration Statement accurately describes the material United States federal income tax consequences to holders of the Notes and the Shares issuable upon conversion or repurchase of the Notes under existing law and subject to the qualifications and assumptions stated therein. The opinion set forth above is based upon our interpretations of current United States federal income tax law, including court authority and existing Final and Temporary Regulations, which are subject to change both prospectively and retroactively, and upon the facts and assumptions discussed herein. This opinion letter is limited to the matters set forth herein, and no opinions are intended to be implied or may be inferred beyond those expressly stated herein. Our opinion is rendered as of the date hereof and we assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of fact, circumstances, or law after the date hereof. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court. Furthermore, our opinion is not binding on the Internal Revenue Service or a court. In addition, we must note that our opinion represents merely our best legal judgment on the matters presented and that others may disagree with our conclusion. There can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent we do not admit that we are "experts" under the Act, or the rules and regulations of the Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit. Very truly yours, /s/ ANDREWS & KURTH L.L.P. EX-12.1 7 dex121.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12.1 BJ Services Company Ratio of Earnings to Fixed Charges (dollars in thousands) (As per S-K Item 503(d))
Nine Months Ended Pro Forma Pro Forma Year Ended September 30, June 30, June 30, September 30, ---------------------------------------- ----------------- --------- ------------- 1997 1998 1999 2000 2001 2001 2002 2002 2001 ------- ------- ------- ------- ------- ------- ------- --------- ------------- Pre-tax income............... 154,368 172,054 (44,909) 175,283 529,181 377,308 203,945 179,798 538,361 Minority interest expense.... 805 3,206 2,585 3,263 6,803 4,587 3,560 3,560 6,803 Interest factor on rent...... 8,859 15,384 15,624 18,745 20,233 15,175 16,471 19,521 24,300 Interest expense(1).......... 30,715 25,685 31,365 19,968 13,282 12,109 5,005 12,306 26,193 ------- ------- ------- ------- ------- ------- ------- ------- ------- Earnings, as defined......... 194,747 216,329 4,665 217,259 569,499 409,179 228,981 215,185 595,657 ======= ======= ======= ======= ======= ======= ======= ======= ======= Rent expense................. 26,576 46,153 46,871 56,235 60,700 45,525 49,412 58,562 72,900 Interest factor on rent (1/3) 8,859 15,384 15,624 18,745 20,233 15,175 16,471 19,521 24,300 Minority interest expense.... 805 3,206 2,585 3,263 6,803 4,587 3,560 3,560 6,803 Interest expense............. 30,715 25,685 31,365 19,968 13,282 12,109 5,005 12,306 26,193 ------- ------- ------- ------- ------- ------- ------- ------- ------- Fixed charges, as defined.... 40,379 44,275 49,574 41,976 40,318 31,871 25,036 35,387 57,296 ======= ======= ======= ======= ======= ======= ======= ======= ======= Fixed charge ratio........... 4.82 4.89 .09 5.18 14.13 12.84 9.15 6.08 10.40 ======= ======= ======= ======= ======= ======= ======= ======= =======
- -------- (1) Includes amortization of debt issue costs. EX-23.2 8 dex232.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 333-96981 of BJ Services Company on Form S-3/A of our report dated November 14, 2001, appearing in the Annual Report on Form 10-K of BJ Services Company for the year ended September 30, 2001, and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP Houston, Texas September 18, 2002 EX-23.3 9 dex233.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated January 21, 2002, except for Note 17, as to which the date is April 4, 2002 and Note 18, as to which the date is May 31, 2002, in Amendment 1 to the Registration Statement (Form S-3 No. 33-00000) and related Prospectus of BJ Services Company for the registration of $516,350,000 of convertible senior notes. We also consent to the incorporation by reference therein of our report dated January 21, 2002, except for Note 17, as to which the date is April 4, 2002 and Note 18, as to which the date is May 31, 2002, with respect to the consolidated financial statements of OSCA, Inc. for the year ended December 31, 2001 included in BJ Services Company Form 8-K/A dated July 17, 2002 filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP -------------------------------------- Indianapolis, Indiana September 13, 2002 EX-25.1 10 dex251.txt FORM T-1 EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 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) |__| ___________________________ THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ___________________________ BJ SERVICES COMPANY (Exact name of obligor as specified in its charter) Delaware 63-0084140 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 550 Northwest Central Drive Houston, Texas 77092 (Address of principal executive offices) (Zip code) ___________________________ Convertible Stock Senior Notes due 2022 (Title of the indenture securities) ================================================================================ 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. Name Address Superintendent of Banks of the State of 2 Rector Street, New York, N.Y. New York 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229. 10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) -2- 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, 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 24th day of July 2002. THE BANK OF NEW YORK By: /s/ ROBERT MASSIMILLO ------------------------- Name: ROBERT MASSIMILLO Title: VICE PRESIDENT -4- EXHIBIT 7 Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2002, published 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 ASSETS In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ....... $ 3,765,462 Interest-bearing balances ................................ 3,835,061 Securities: Held-to-maturity securities .............................. 1,232,736 Available-for-sale securities ............................ 10,522,833 Federal funds sold and Securities purchased under agreements to resell ..................................... 1,456,635 Loans and lease financing receivables: Loans and leases held for sale ........................... 801,505 Loans and leases, net of unearned income ................................ 46,206,726 LESS: Allowance for loan and lease losses .......................... 607,115 Loans and leases, net of unearned income and allowance ................................... 35,249,695 Trading Assets .............................................. 8,132,696 Premises and fixed assets (including capitalized leases) .................................................. 898,980 Other real estate owned ..................................... 911 Investments in unconsolidated subsidiaries and associated companies ..................................... 220,609 Customers' liability to this bank on acceptances outstanding .............................................. 574,020 Intangible assets Goodwill ................................................. 1,714,761 Other intangible assets .................................. 49,213 Other assets ................................................ 5,001,308 ----------- Total assets ................................................ $73,954,859 =========== LIABILITIES Deposits: In domestic offices ...................................... $29,175,631 Noninterest-bearing ........................ 11,070,277 Interest-bearing ........................... 18,105,354 In foreign offices, Edge and Agreement subsidiaries, and IBFs ................................. 24,596,600 Noninterest-bearing ........................ 321,299 Interest-bearing ........................... 24,275,301 Federal funds purchased and securities sold under agreements to repurchase ................................. 1,922,197 Trading liabilities ......................................... 1,970,040 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases) ................................ 1,577,518 Bank's liability on acceptances executed and outstanding .............................................. 575,362 Subordinated notes and debentures ........................... 1,940,000 Other liabilities ........................................... 5,317,831 ----------- Total liabilities ........................................... $67,075,179 =========== EQUITY CAPITAL Common stock ................................................ 1,135,284 Surplus ..................................................... 1,055,508 Retained earnings ........................................... 4,227,287 Accumulated other comprehensive income ...................... (38,602) Other equity capital components ............................. 0 - --------------------------------------------------------------------------- Total equity capital ........................................ 6,379,477 ----------- Total liabilities and equity capital ........................ $73,954,859 =========== I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro, Senior Vice President and Comptroller 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 instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi | Gerald L. Hassell | Directors Alan R. Griffith | -----END PRIVACY-ENHANCED MESSAGE-----