AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 2004.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WILLBROS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
REPUBLIC OF PANAMA 98-0160660
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
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PLAZA 2000 BUILDING
50TH STREET, 8TH FLOOR
P.O. BOX 0816-01098
PANAMA, REPUBLIC OF PANAMA
(50-7) 213-0947
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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MICHAEL F. CURRAN
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PLAZA 2000 BUILDING
50TH STREET, 8TH FLOOR
P.O. BOX 0816-01098
PANAMA, REPUBLIC OF PANAMA
(50-7) 213-0947
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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With Copies to:
ROBERT J. MELGAARD, ESQ.
MARK D. BERMAN, ESQ.
CONNER & WINTERS, P.C.
3700 FIRST PLACE TOWER
15 EAST FIFTH STREET
TULSA, OKLAHOMA 74103-4344
(918) 586-5711
(918) 586-8548 (FACSIMILE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time 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,
other than securities offered only in connection with dividend or interest
reinvestment plans, please 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, 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. [ ]
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CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
--------------------------------------- -------------- -------------- ----------------- ------------
2.75% Convertible Senior Notes due 2024 $70,000,000(2) 100%(3) $70,000,000(3) $8,869
Common Stock ($0.05 par value) (4)(5) 3,595,277(6) N/A N/A (4)
Preferred Share Purchase Rights (5) 3,595,277 (5) (5) (5)
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) Represents the aggregate principal amount of 2.75% Convertible
Senior Notes due 2024 that we sold in March and April 2004.
(3) Exclusive of accrued interest, if any.
(4) The Registrant will receive no consideration upon conversion of the
notes. Therefore, pursuant to Rule 457(i), no filing fee is required
with respect to the shares of common stock registered hereby.
(5) Each share of common stock is accompanied by a preferred share
purchase right pursuant to the Rights Agreement, dated April 1,
1999, with Mellon Investor Services, LLC, as Rights Agent.
(6) Represents the maximum number of shares of common stock initially
issuable upon conversion of the notes registered hereby. For
purposes of estimating the number of shares of common stock to be
included in this Registration Statement upon conversion of the
notes, we calculated the number of shares of common stock issuable
upon conversion of the notes at the initial conversion price of
$19.47, which equals a conversion rate of 51.3611 shares per $1,000
principal amount of the notes. In addition to the shares of common
stock set forth in the table above, pursuant to Rule 416 under the
Securities Act, we are registering an indeterminate number of shares
of common stock issuable upon conversion of the notes by means of
adjustment of the conversion price pursuant to the terms of the
notes.
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED MAY 28, 2004
PROSPECTUS
$70,000,000
WILLBROS GROUP, INC.
2.75% CONVERTIBLE SENIOR NOTES DUE 2024 AND
THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
The securities offered and sold using this prospectus will be offered and
sold by the selling securityholders named in this prospectus or in any
supplement to this prospectus. See "Selling Securityholders" beginning on page
19.
We will pay cash interest on the notes at an annual rate of 2.75% of the
principal amount, from the date of issue to March 15, 2024, payable on March 15
and September 15 of each year, beginning on September 15, 2004. The notes will
mature on March 15, 2024.
During certain periods, the notes are convertible by holders into shares of
our common stock initially at a conversion rate of 51.3611 shares of common
stock per $1,000 principal amount of notes, which is equivalent to an initial
conversion price of $19.47 per share of common stock (subject to adjustment in
certain events), under the following circumstances:
- if the price of our common stock issuable upon conversion reaches
specified thresholds;
- if we call the notes for redemption; or
- upon the occurrence of specified corporate transactions,
in each case as described in this prospectus.
Upon conversion of the notes, in lieu of delivering common stock we may,
in our discretion, deliver cash or a combination of cash and common stock.
The notes are general senior unsecured obligations, ranking on a parity in
right of payment with all our existing and future senior indebtedness, and
senior in right of payment to all our future subordinated indebtedness. The
notes will be effectively subordinated to all of our secured indebtedness to the
extent of the assets securing such secured indebtedness, and all indebtedness
and other liabilities of our subsidiaries.
We may redeem all or a portion of the notes on or after March 15, 2011, at
100% of the principal amount of the notes plus accrued and unpaid interest
(including additional interest and additional amounts), if any. We may also
redeem all, but not fewer than all, of the notes at a redemption price equal to
100% of the principal amount of the notes plus any accrued and unpaid interest
(including additional interest and additional amounts), if any, in the event of
certain changes affecting tax laws.
Holders may require us to purchase all or part of the notes at a purchase
price of 100% of the principal amount per note plus accrued and unpaid interest,
if any, on March 15, 2011, March 15, 2014 and March 15, 2019 and upon the
occurrence of a fundamental change as described in this prospectus. On March 15,
2011 and upon the occurrence of a fundamental change, we must pay the purchase
price in cash. On March 15, 2014 and March 15, 2019, we may pay the purchase
price in cash, in shares of our common stock, or in any combination of cash and
common stock.
Our common stock is listed on the New York Stock Exchange under the symbol
"WG." On May 26, 2004, the last reported sale price of our common stock on the
New York Stock Exchange was $14.05 per share.
There is no established trading market for the notes. The selling
securityholders may sell the securities offered by this prospectus from time to
time on any exchange on which the securities are listed on terms to be
negotiated with buyers. They may also sell the securities in private sales or
through dealers or agents. The selling securityholders may sell the securities
at prevailing market prices or at prices negotiated with buyers. The selling
securityholders will be responsible for any commissions due to brokers, dealers
or agents. We will be responsible for all other offering expenses. We will not
receive any of the proceeds from the sale by the selling securityholders of the
securities offered by this prospectus.
THIS INVESTMENT INVOLVES SIGNIFICANT RISKS. SEE THE "RISK FACTORS" SECTION
BEGINNING AT PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2004.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
THOSE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED BY THIS PROSPECTUS IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR
FROM WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION OF AN OFFER IN
SUCH JURISDICTION. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS OR ANY DOCUMENT INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT COVER OF THE APPLICABLE DOCUMENT.
TABLE OF CONTENTS
Page
----
Prospectus Summary................................................................ 3
Risk Factors...................................................................... 8
Ratio of Earnings to Fixed Charges................................................ 17
No Proceeds....................................................................... 17
Price Range of Common Stock and Dividend Policy................................... 18
Selling Securityholders........................................................... 19
Description of Notes.............................................................. 21
Description of Capital Stock...................................................... 47
Description of Credit Facility.................................................... 51
Material U.S. Federal and Panamanian Income Tax Consequences...................... 52
Material ERISA Considerations..................................................... 58
Plan of Distribution.............................................................. 60
Special Note Regarding Forward-Looking Statements and Other Factors............... 62
Where You Can Find More Information............................................... 63
Incorporation of Certain Documents by Reference................................... 63
Legal Matters..................................................................... 65
Experts........................................................................... 65
Enforceability of Civil Liabilities Under the Federal Securities Laws............. 65
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, utilizing a "shelf" registration or
continuous offering process. Under this shelf registration process, the selling
securityholders may, from time to time, sell the securities described in this
prospectus in one or more offerings. This prospectus provides you with a general
description of the securities which may be offered by the selling
securityholders. Each time a selling securityholder sells securities, the
selling securityholder is required to provide you with this prospectus and, in
certain cases, a prospectus supplement containing specific information about the
selling securityholder and the terms of the securities being offered. Any
prospectus supplement may also add, update or change information in this
prospectus. If there is any inconsistency between the information in this
prospectus and any prospectus supplement, you should rely on the information in
that prospectus supplement. You should read both this prospectus and any
prospectus supplement together with additional information described under
"Where You Can Find More Information" and "Incorporation of Certain Documents by
Reference."
In this prospectus, unless otherwise specified, "Willbros," the "Company,"
"we," "us" and "our" refer to Willbros Group, Inc., its consolidated
subsidiaries and their predecessors; and "you" or "your" refers to prospective
investors or holders of the notes, as the case may be.
2
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in, or
incorporated by reference into, this prospectus about our company. Because it is
a summary, it does not contain all of the information that you should consider
before buying the notes offered hereby. You should read the entire prospectus,
including the Risk Factors section beginning on page 8, and the financial data
and related notes included in this prospectus and incorporated by reference
herein, before deciding to invest in the notes.
WILLBROS
We are a leading independent international contractor serving the oil, gas
and power industries. We provide construction and engineering services to
industry and governmental entities worldwide, specializing in pipelines and
associated facilities for onshore, coastal and offshore locations. We also are
actively involved in asset development, ownership and operations as an extension
of our construction and engineering services. We place particular emphasis on
projects in countries where we believe our experience gives us a competitive
advantage, including several developing countries. Our construction services
include the building and replacement of major pipelines and gathering systems,
flow, pump and gas compressor stations, gas processing facilities, oil and gas
production facilities and related infrastructure and specialty services. Our
engineering services include feasibility studies, conceptual and detailed design
services, field services, material procurement and overall project management.
Our asset development and operations (also referred to as facility operations)
include assets developed under "Build, Own and Operate" contracts, such as the
fueling facilities operated for the Defense Energy Supply Corporation, an agency
of the U.S. government, a gas processing plant, owned by us, in the Opal,
Wyoming area, and a water injection facility in Venezuela.
We are incorporated in the Republic of Panama and maintain our
headquarters at the Plaza 2000 Building, 50th Street, 8th Floor, P.O. Box
0816-01098, Panama, Republic of Panama, and our telephone number is (50-7)
213-0947. Administrative services are provided to us by our subsidiary, Willbros
USA, Inc., whose administrative headquarters are located at 4400 Post Oak
Parkway, Suite 1000, Houston, Texas 77027, and whose telephone number is (713)
403-8000. Information contained on our website http://www.willbros.com, is not,
and you must not consider such information to be, a part of this prospectus.
THE OFFERING
This prospectus covers the resale of up to $70,000,000 aggregate
principal amount of the notes and the 3,595,277 shares of our common stock
issuable upon conversion of the notes plus an indeterminate number of shares of
our common stock issuable upon conversion of the notes by means of adjustment of
the conversion price pursuant to the terms of the notes. We issued and sold a
total of $70,000,000 aggregate principal amount of the notes in March and April
2004 in private placements to Bear, Stearns & Co. Inc., CIBC World Markets Corp.
and Credit Lyonnais Securities (USA) Inc. (the "initial purchasers"). The
following summary contains basic information about the notes and is not intended
to be complete. It does not contain all the information that is important to
holders of the notes. For a more complete understanding of the notes, please
refer to the section of this document entitled "Description of Notes." For
purposes of the description of the notes included in this prospectus, references
to "the Company," "us," "we" and "our" refer only to Willbros Group, Inc.
Issuer..................... Willbros Group, Inc., a Republic of Panama
corporation.
Selling Securityholders.... The securities to be offered and sold using this
prospectus will be offered and sold by the selling
securityholders named in this prospectus or in any
supplement to this prospectus. See "Selling
Securityholders."
Securities Offered......... $70.0 million aggregate principal amount of 2.75%
Convertible Senior Notes due 2024 and the shares
of common stock issuable upon conversion of such
notes.
Issue Price................ The notes were issued at an issue price of 100% of
their principal amount, which is $1,000 per note,
plus accrued interest, if any, from March 12,
2004.
3
Maturity Date.............. March 15, 2024, unless earlier converted, redeemed
by us at our option or purchased by us at the
option of the holders.
Ranking.................... The notes are our general senior unsecured
obligations, ranking on a parity in right of
payment with all our other existing and future
senior indebtedness, and senior in right of
payment to all our future subordinated
indebtedness. The notes are effectively
subordinated to any of our existing and future
secured senior indebtedness to the extent of the
assets securing such indebtedness, and to the
claims of all creditors of our subsidiaries. We
have a $150.0 million senior secured credit
facility. As of March 31, 2004, we had no loans
and $46.3 million in letters of credit outstanding
under our credit facility. In addition, as of
March 31, 2004, our subsidiaries had approximately
$83.1 million of indebtedness outstanding
(excluding intercompany indebtedness and
guarantees of our indebtedness), approximately
$78.5 million of which constitutes trade debt
arising in the ordinary course of business.
Interest................... 2.75% per annum interest rate on the principal
amount, from March 12, 2004, payable
semi-annually, in arrears, in cash on March 15 and
September 15 of each year, beginning September 15,
2004 to the holders of record at the close of
business on the preceding March 1 and September 1,
respectively. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day
months.
Conversion Rights.......... The notes may be converted by the holders into
shares of our common stock at an initial
conversion rate of 51.3611 shares of common stock
per $1,000 principal amount of notes (representing
a conversion price of $19.47 per share), subject
to adjustment, prior to the close of business on
the final maturity date only under the following
circumstances:
- during the period from and including the
mid-point date in a fiscal quarter to, but not
including, the mid-point date (or, if that day
is not a trading day, then the next trading
day) in the immediately following fiscal
quarter (a "conversion period"), if on each of
at least 20 trading days in the period of 30
consecutive trading days ending on the first
trading day of the conversion period, the
closing sale price of our common stock exceeded
120% of the conversion price in effect on that
30th trading day of such period. The "mid-point
dates" for our fiscal quarters are February 15,
May 15, August 15 and November 15;
- if we have called the notes for redemption; or
- during prescribed periods, upon the occurrence
of specified corporate transactions described
in this prospectus.
4
Upon conversion, we will have the right to
deliver, in lieu of shares of our common stock,
cash or a combination of cash and shares of our
common stock. If we elect to pay cash in lieu of
shares, the payment amount will be based on the
average closing sale price of our common stock
over a 20 consecutive trading day measurement
period beginning on the third trading day
following receipt of a conversion notice. See
"Description of Notes -- Conversion Procedures."
On the first date the notes become convertible
under the above circumstances, we will notify
holders in writing of our method for settling the
principal amount of the notes upon conversion
("principal conversion settlement election"). This
notification, once provided to holders on the date
the notes first become convertible, regardless of
any holder's decision to convert, is irrevocable
and legally binding with regard to any conversion
of the notes. As such, the principal conversion
settlement election made on that date remains in
force if the notes cease to be convertible but
subsequently become convertible again.
Until the notes are surrendered for conversion, we
will not be required to notify holders of our
method for settling the excess amount of our
conversion obligation relating to the amount of
the conversion value above the principal amount,
if any.
Except as described in "Description of Notes --
Conversion Procedures," upon conversion, holders
will not receive any cash payment representing
accrued and unpaid interest.
Sinking Fund............... None.
Optional Redemption........ On or after March 15, 2011, upon at least 20
calendar days' notice, we may redeem for cash all
or a portion of the notes at any time at a
redemption price equal to 100% of the principal
amount of notes to be redeemed plus accrued and
unpaid interest (including additional interest and
additional amounts), if any, to but excluding the
redemption date. See "Description of Notes --
Optional Redemption."
Redemption for
Changes in Panamanian
Tax Law.................... We will be required to pay additional amounts to
the holders of the notes to compensate them for
any amounts deducted from payments to them in
respect of the notes on account of certain
Panamanian taxes and other governmental charges.
If we become obligated to pay such additional
amounts as a result of a change in Panamanian law,
the notes will be subject to redemption, in whole
but not in part, at our option for cash at a price
equal to 100% of the principal amount of the
notes, plus accrued and unpaid interest (including
additional interest and additional amounts), if
any, to but excluding the redemption date.
However, each holder may avoid such redemption
with respect to its notes, but if it so elects, we
will not be required to pay additional amounts
respecting payments made on that holder's notes
following the redemption date.
5
Purchase of Notes at
Holder's Option............ Holders have the right to require us to purchase
all or a portion of their notes on March 15, 2011,
March 15, 2014 and March 15, 2019, each of which
we refer to as a "purchase date," in each case,
upon prior notice as described in this prospectus.
We will pay a purchase price equal to 100% of the
principal amount of the notes to be purchased plus
accrued and unpaid interest (including additional
interest and additional amounts), if any, to but
excluding the purchase date. On March 15, 2011, we
must pay the purchase price in cash. On March 15,
2014 and March 15, 2019, we may pay the purchase
price in cash, in shares of our common stock, or
in any combination of cash and common stock. See
"Description of Notes -- Purchase of Notes at a
Holder's Option" and "Risk Factors -- Risks
Related to the Notes and the Offering -- We may be
unable to repay the principal amount of the notes
due at stated maturity or, at the option of the
holder, on March 15, 2011 or upon the occurrence
of a fundamental change, because of insufficient
funds or restrictions in our other debt
agreements."
Fundamental Change......... Upon the occurrence of a fundamental change, as
described in this prospectus, and before the
stated maturity or redemption of the notes, a
holder will have the right to require us to
purchase for cash all or any part of its notes at
a price equal to 100% of the principal amount plus
accrued and unpaid interest (including additional
interest and additional amounts), if any, to but
excluding the fundamental change purchase date.
See "Description of Notes -- Purchase of Notes at
a Holder's Option Upon a Fundamental Change" and
"Risk Factors -- Risks Related to the Notes and
the Offering -- We may be unable to repay the
principal amount of the notes due at stated
maturity or, at the option of the holder, on March
15, 2011 or upon the occurrence of a fundamental
change, because of insufficient funds or
restrictions in our other debt agreements."
No Proceeds................ We will not receive any proceeds from the sale by
any selling securityholder of the notes or our
common stock issuable upon conversion of the
notes.
Absence of a Public
Market..................... The notes are new securities and there is
currently no established market for the notes. We
cannot assure holders of the notes that any active
or liquid market will develop for the notes. See
"Plan of Distribution."
Trading.................... The notes will not be listed on any securities
exchange or included in any automated quotation
system. However, the notes issued in the private
placements are eligible for trading on the Private
Offerings, Resale and Trading through Automated
Linkages Market, commonly referred to as the
PORTAL Market. The notes sold using this
prospectus, however, will no longer be eligible
for trading in the PORTAL Market.
Guarantees................. None
6
Material U.S. Federal
Income Tax
Considerations............. A United States holder will recognize gain or loss
on the sale, exchange (other than a conversion),
redemption or other disposition of a note or
common stock in an amount equal to the difference
between the amount realized on such transaction
and the United States holder's adjusted tax basis
in the note or common stock. Any gain or loss
recognized on the sale, exchange, redemption or
other disposition of a note generally will
constitute capital gain or loss (other than any
amount attributable to accrued but unpaid interest
on a note, which will constitute ordinary income).
A conversion of a note, or a purchase of a note by
us, will generally be non-taxable to the extent
the U.S. holder receives our common stock upon
such conversion or purchase. See "Material U.S.
Federal and Panamanian Income Tax Considerations."
Book-Entry Form............ The notes were issued in book-entry form and are
represented by permanent global certificates
deposited with, or on behalf of, The Depository
Trust Company, or DTC, and registered in the name
of a nominee of DTC. Beneficial interests in any
of the notes will be shown on, and transfers will
be effected only through, records maintained by
DTC or its nominee and any such interest may not
be exchanged for certificated securities, except
in limited circumstances. See "Description of
Notes -- Form, Denomination and Registration."
New York Stock Exchange
Symbol for our Common
Stock...................... Our common stock is listed on the New York Stock
Exchange under the symbol "WG."
RISK FACTORS
Investing in the notes involves a number of material risks. For a
discussion of various risks that should be considered in connection with an
investment in the notes, see "Risk Factors" beginning on page 8 of this
prospectus.
7
RISK FACTORS
In deciding whether to purchase the notes, you should carefully consider
the risks described below, which could cause our operating results and financial
condition to be materially adversely affected, as well as other information and
data included or incorporated by reference in this prospectus.
RISKS RELATED TO OUR COMPANY
OUR BUSINESS IS HIGHLY DEPENDENT UPON THE LEVEL OF CAPITAL EXPENDITURES BY OIL,
GAS AND POWER COMPANIES ON INFRASTRUCTURE.
Our revenue and cash flow are primarily dependent upon major engineering
and construction projects. The availability of these types of projects is
dependent upon the condition of the oil, gas and power industries, and
specifically, the level of capital expenditures of oil, gas and power companies
on infrastructure. Our failure to obtain major projects, the delay in awards of
major projects, the cancellation of major projects or delays in completion of
contracts are factors that could result in the under-utilization of our
resources, which would have an adverse impact on our revenue and cash flow.
There are numerous factors beyond our control that influence the level of
capital expenditures of oil, gas and power companies, including:
- current and projected oil, gas and power prices;
- the demand for electricity;
- the abilities of oil, gas and power companies to generate, access
and deploy capital;
- exploration, production and transportation costs;
- the discovery rate of new oil and gas reserves;
- the sale and expiration dates of oil and gas leases and concessions;
- regulatory restraints on the rates that power companies may charge
their customers;
- local and international political and economic conditions;
- the ability or willingness of host country government entities to
fund their budgetary commitments; and
- technological advances.
OUR SIGNIFICANT INTERNATIONAL OPERATIONS ARE SUBJECT TO POLITICAL AND ECONOMIC
RISKS OF DEVELOPING COUNTRIES.
We have substantial operations and assets in developing countries in
Africa, the Middle East and South America. Approximately 63% of our contract
revenues for 2003 were derived from activities outside of North America, and
approximately 55% of our long-lived assets as of December 31, 2003 were located
outside of North America. Accordingly, we are subject to risks which ordinarily
would not be expected to exist to the same extent in the United States, Canada,
Japan or Western Europe. Some of these risks include:
- foreign currency restrictions, which may prevent us from
repatriating foreign currency received in excess of local currency
requirements and converting it into dollars or other fungible
currency;
- exchange rate fluctuations, which can reduce the purchasing power of
local currencies and cause our costs to exceed our budget, reducing
our operating margin in the affected country;
- expropriation of assets, by either a recognized or unrecognized
foreign government, which can disrupt our business activities and
create delays and corresponding losses;
- civil uprisings, riots and war, which can make it impractical to
continue operations, adversely affect both budgets and schedules and
expose us to losses;
8
- availability of suitable personnel and equipment, which can be
affected by government policy, or changes in policy, which limit the
importation of skilled craftsmen or specialized equipment in areas
where local resources are insufficient;
- government instability, which can cause investment in capital
projects by our potential customers to be withdrawn or delayed,
reducing or eliminating the viability of some markets for our
services;
- decrees, laws, regulations, interpretations and court decisions
under legal systems, which are not always fully developed and which
may be retroactively applied and cause us to incur unanticipated
and/or unrecoverable costs as well as delays which may result in
real or opportunity costs; and
- terrorist attacks such as those which occurred on September 11,
2001, which could impact insurance rates, insurance coverages, the
level of economic activity and produce instability in financial
markets. The terrorist attacks on September 11, 2001, and the
changes in the insurance markets attributable to the terrorist
attacks, have resulted in increased insurance premiums.
Our operations in developing countries may be adversely affected in the
event any governmental agencies in these countries interpret laws, regulations
or court decisions in a manner which might be considered inconsistent or
inequitable in the United States, Canada, Japan or Western Europe. We may be
subject to unanticipated taxes, including income taxes, excise duties, import
taxes, export taxes, sales taxes or other governmental assessments which could
have a material adverse effect on our results of operations for any quarter or
year.
These risks may result in a loss of business which could have a material
adverse effect on our results of operations.
WE MAY BE ADVERSELY AFFECTED BY A CONCENTRATION OF BUSINESS IN A PARTICULAR
COUNTRY.
Due to a limited number of major projects worldwide, we currently have,
and expect that we will continue to have, a substantial portion of our resources
dedicated to projects located in a few countries. Therefore, our results of
operations are susceptible to adverse events beyond our control which may occur
in a particular country in which our business may be concentrated at that time.
Economic downturns in such countries could also adversely affect our operations.
At December 31, 2003, our property, plant, equipment and spare parts were
located in Nigeria, the United States, Canada, Offshore West Africa, South
America and the Middle East. Our operations and assets are subject to various
risks inherent in conducting business in these countries.
OUR BUSINESS IS DEPENDENT ON A LIMITED NUMBER OF KEY CLIENTS.
We operate primarily in a single operating segment in the oil, gas and
power industries, providing construction, engineering and specialty services to
a limited number of clients. Much of our success depends on developing and
maintaining relationships with our major clients and obtaining a share of
contracts from these clients. The loss of any of our major clients could have a
material adverse effect on our operations. Our 10 largest clients were
responsible for 75% of our revenue in 2003, 75% of our revenue in 2002 and 81%
of our revenue in 2001. Operating units of ExxonMobil and Royal Dutch Shell
accounted for 16% and 15%, respectively, of our total revenue in 2003.
OUR DEPENDENCE UPON FIXED PRICE CONTRACTS COULD ADVERSELY AFFECT OUR OPERATING
RESULTS.
A substantial portion of our projects are currently performed on a
fixed-price basis. Under a fixed-price contract, we agree on the price that we
will receive for the entire project, based upon a defined scope, which includes
specific assumptions and project criteria. If our estimates of our own costs to
complete the project are below the actual costs that we may incur, our margins
will decrease, and we may incur a loss. The revenue, cost and gross profit
realized on a fixed-price contract will often vary from the estimated amounts
because of unforeseen conditions or changes in job conditions and variations in
labor and equipment productivity over the term of the contract. If we are
unsuccessful in mitigating these risks, we may realize gross profits that are
different from those originally estimated and reduced profitability or losses on
projects. Depending on the size of a project, these variations from estimated
contract performance could have a significant effect on our operating results
for any quarter or year. In general, turnkey contracts to be performed on a
fixed-price basis involve an increased risk of significant variations. This is a
result of the long-term nature of these contracts and the inherent difficulties
in estimating costs and of the interrelationship of the integrated services to
be provided under these contracts whereby unanticipated costs or delays in
performing part of the contract can have compounding effects by increasing costs
of performing other parts of the contract.
9
PERCENTAGE-OF-COMPLETION METHOD OF ACCOUNTING FOR CONTRACT REVENUE MAY RESULT IN
MATERIAL ADJUSTMENTS THAT WOULD ADVERSELY AFFECT OUR OPERATING RESULTS.
We recognize contract revenue using the percentage-of-completion method.
Under this method, estimated contract revenue is accrued based generally on the
percentage that costs to date bear to total estimated costs, taking into
consideration physical completion. Estimated contract losses are recognized in
full when determined. Accordingly, contract revenue and total cost estimates are
reviewed and revised periodically as the work progresses and as change orders
are approved, and adjustments based upon the percentage of completion are
reflected in contract revenue in the period when these estimates are revised.
These estimates are based on management's reasonable assumptions and our
historical experience, and are only estimates. Variation of actual results from
these assumptions or our historical experience could be material. To the extent
that these adjustments result in an increase, a reduction or an elimination of
previously reported contract revenue, we would recognize a credit or a charge
against current earnings, which could be material.
TERRORIST ATTACKS AND WAR OR RISK OF WAR MAY ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS, OUR ABILITY TO RAISE CAPITAL OR SECURE INSURANCE OR OUR FUTURE
GROWTH.
The continued threat of terrorism and the impact of military and other
action, including U.S. military operations in Iraq, will likely lead to
continued volatility in prices for crude oil and natural gas and could affect
the markets for our operations. In addition, future acts of terrorism could be
directed against companies operating both outside and inside the United States.
Further, the U.S. government has issued public warnings that indicate that
pipelines and other energy assets might be specific targets of terrorist
organizations. These developments have subjected our operations to increased
risks and, depending on their ultimate magnitude, could have a material adverse
effect on our business.
OUR OPERATIONS ARE SUBJECT TO A NUMBER OF OPERATIONAL RISKS.
Our business operations include pipeline construction, dredging, pipeline
rehabilitation services, marine support services and the operation of vessels
and heavy equipment. These operations involve a high degree of operational risk.
Natural disasters, adverse weather conditions, collisions and operator or
navigational error could cause personal injury or loss of life, severe damage to
and destruction of property, equipment and the environment and suspension of
operations. In locations where we perform work with equipment that is owned by
others, our continued use of the equipment can be subject to unexpected or
arbitrary interruption or termination. The occurrence of any of these events
could result in work stoppage, loss of revenue, casualty loss, increased costs
and significant liability to third parties.
The insurance protection we maintain may not be sufficient or effective
under all circumstances or against all hazards to which we may be subject. An
enforceable claim for which we are not fully insured could have a material
adverse effect on our financial condition and results of operations. Moreover,
we may not be able to maintain adequate insurance in the future at rates that we
consider reasonable.
WE MAY BECOME LIABLE FOR THE OBLIGATIONS OF OUR JOINT VENTURERS AND OUR
SUBCONTRACTORS.
Some of our projects are performed through joint ventures with other
parties. In addition to the usual liability of contractors for the completion of
contracts and the warranty of our work, where work is performed through a joint
venture, we also have potential liability for the work performed by our joint
venturers. In these projects, even if we satisfactorily complete our project
responsibilities within budget, we may incur additional unforeseen costs due to
the failure of our joint venturers to perform or complete work in accordance
with contract specifications.
We act as prime contractor on a majority of the construction projects we
undertake. In our capacity as prime contractor and when acting as a
subcontractor, we perform most of the work on our projects with our own
resources and typically subcontract only such specialized activities as
hazardous waste removal, nondestructive inspection, tank erection, catering and
security. In the construction industry, the prime contractor is normally
responsible for the performance of the entire contract, including subcontract
work. Thus, when acting as a prime contractor, we are subject to the risk
associated with the failure of one or more subcontractors to perform as
anticipated.
10
GOVERNMENTAL REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
Many aspects of our operations are subject to governmental regulations in
the countries in which we operate, including those relating to currency
conversion and repatriation, taxation of our earnings and earnings of our
personnel, and our use of local employees and suppliers. In addition, we depend
on the demand for our services from the oil, gas and power industries, and,
therefore, our business is affected by changing taxes, price controls and laws
and regulations relating to the oil, gas and power industries generally. The
adoption of laws and regulations by the countries or the states in which we
operate for the purpose of curtailing exploration and development drilling for
oil and gas or the development of power generation facilities for economic and
other policy reasons, could adversely affect our operations by limiting demand
for our services.
Our operations are also subject to the risk of changes in foreign and
domestic laws and policies which may impose restrictions on our business,
including trade restrictions, which could have a material adverse effect on our
operations. Other types of governmental regulation which could, if enacted or
implemented, adversely affect our operations include:
- expropriation or nationalization decrees;
- confiscatory tax systems;
- primary or secondary boycotts directed at specific countries or
companies;
- embargoes;
- extensive import restrictions or other trade barriers;
- mandatory sourcing rules;
- oil, gas or power price regulation; and
- unrealistically high labor rate and fuel price regulation.
Our future operations and earnings may be adversely affected by new
legislation, new regulations or changes in, or new interpretations of, existing
regulations, and the impact of these changes could be material.
OUR OPERATIONS EXPOSE US TO POTENTIAL ENVIRONMENTAL LIABILITIES.
Our United States operations are subject to numerous environmental
protection laws and regulations which are complex and stringent. We regularly
perform work in and around sensitive environmental areas such as rivers, lakes
and wetlands. Significant fines and penalties may be imposed for non-compliance
with environmental laws and regulations, and some environmental laws provide for
joint and several strict liability for remediation of releases of hazardous
substances, rendering a person liable for environmental damage, without regard
to negligence or fault on the part of such person. In addition to potential
liabilities that may be incurred in satisfying these requirements, we may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. These laws and regulations may expose
us to liability arising out of the conduct of operations or conditions caused by
others, or for our acts which were in compliance with all applicable laws at the
time these acts were performed.
We own and operate several properties in the United States that have been
used for a number of years for the storage and maintenance of equipment and upon
which hydrocarbons or other wastes may have been disposed or released. Any
release of substances by us or by third parties who previously operated on these
properties may be subject to the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA), the Resource Compensation and Recovery
Act (RCRA), and analogous state laws. CERCLA imposes joint and several
liability, without regard to fault or the legality of the original conduct, on
certain classes of persons who are considered to be responsible for the release
of "hazardous substances" into the environment, while RCRA governs the
generation, storage, transfer, and disposal of hazardous wastes. Under such
laws, we could be required to remove or remediate previously disposed wastes and
clean up contaminated property.
Our operations outside of the United States are potentially subject to
similar governmental controls and restrictions relating to the environment.
11
OUR INDUSTRY IS HIGHLY COMPETITIVE, WHICH COULD IMPEDE OUR GROWTH.
We operate in a highly competitive environment. A substantial number of
the major projects that we pursue are awarded based on bid proposals. We compete
for these projects against government-owned or supported companies and other
companies that have substantially greater financial and other resources than we
do. In some markets, there is competition from national and regional firms
against which we may not be able to compete on price. Our growth may be impacted
to the extent that we are unable to successfully bid against these companies.
OUR OPERATING RESULTS COULD BE ADVERSELY AFFECTED IF OUR NON-U.S. OPERATIONS
BECAME TAXABLE IN THE UNITED STATES.
If any income earned, currently or historically, by Willbros Group, Inc.
or its non-U.S. subsidiaries from operations outside the United States
constituted income effectively connected to a United States trade or business,
and as a result became taxable in the United States, our consolidated operating
results could be materially and adversely affected.
WE ARE DEPENDENT UPON THE SERVICES OF OUR EXECUTIVE MANAGEMENT.
Our success depends heavily on the continued services of our executive
management. We do not have an employment agreement with any of these
individuals. Accordingly, we may not be able to retain any of these individuals
in their capacity for any particular period of time. In addition, we do not
maintain key man life insurance for these individuals. The loss or interruption
of services provided by one or more of our senior officers could adversely
affect our results of operations.
OUR STOCKHOLDER RIGHTS PLAN, ARTICLES OF INCORPORATION AND BY-LAWS MAY INHIBIT A
TAKEOVER, WHICH MAY ADVERSELY AFFECT THE PERFORMANCE OF OUR STOCK.
Our stockholder rights plan and provisions of our articles of
incorporation and by-laws may discourage unsolicited takeover proposals or make
it more difficult for a third party to acquire us, which may adversely affect
the price that investors might be willing to pay for our common stock. For
example, our articles of incorporation and by-laws:
- provide for restrictions on the transfer of any shares of common
stock to prevent us from becoming a "controlled foreign corporation"
under United States tax law;
- provide for a classified board of directors, which allows only
one-third of our directors to be elected each year;
- restrict the ability of stockholders to take action by written
consent;
- establish advance notice requirements for nominations for election
to our board of directors; and
- authorize our board of directors to designate the terms of and issue
new series of preferred stock.
We also have a stockholder rights plan which gives holders of our common
stock the right to purchase additional shares of our capital stock if a
potential acquirer purchases or announces a tender or exchange offer to purchase
15% or more of our outstanding common stock. The rights issued under the
stockholder rights plan would cause substantial dilution to a person or group
that attempts to acquire us on terms not approved in advance by our board of
directors.
IT MAY BE DIFFICULT TO ENFORCE JUDGMENTS WHICH ARE PREDICATED ON THE FEDERAL
SECURITIES LAWS OF THE UNITED STATES AGAINST US.
We are a corporation organized under the laws of the Republic of Panama.
Accordingly:
- because a substantial amount of our assets are located outside the
United States, any judgment obtained against us in the United States
may not be fully collectible in the United States; and
- we have been advised that courts in the Republic of Panama will not
enforce liabilities in original actions predicated solely on the
United States federal securities laws.
12
These factors mean that it may be more costly and difficult for you to
recover fully any alleged damages that you may suffer for any violation of
federal securities laws by us or our management than it would otherwise be in
the case of a United States corporation. See "Enforceability of Civil
Liabilities Under the Federal Securities Laws."
RISKS RELATED TO THE NOTES AND THE OFFERING
WE INCREASED OUR LEVERAGE AS A RESULT OF THE SALE OF THE NOTES.
In connection with the sale of the notes, we incurred $70.0 million of
indebtedness. As a result of this indebtedness, our interest payment obligations
will increase. Our interest payment for the notes is expected to be
approximately $1.9 million annually. The degree to which we will be leveraged
could adversely affect our ability to obtain further financing for working
capital, acquisitions or other purposes and could make us more vulnerable to
industry downturns and competitive pressures. Our ability to meet our debt
service obligations will be dependent upon our future performance, which will be
subject to the financial, business and other factors affecting our operations,
many of which are beyond our control.
THERE ARE NO RESTRICTIVE COVENANTS IN THE NOTES INDENTURE RELATING TO OUR
ABILITY TO INCUR FUTURE INDEBTEDNESS OR COMPLETE OTHER FINANCIAL TRANSACTIONS.
The indenture governing the notes does not contain any financial or
operating covenants or restrictions on the payment of dividends, the incurrence
of indebtedness, transactions with affiliates, incurrence of liens or the
issuance or repurchase of securities by us or any of our subsidiaries. Willbros
and its subsidiaries may therefore incur additional indebtedness, including
secured indebtedness, to which the notes are effectively subordinated. As part
of our strategy, we may use proceeds from the initial sale of the notes to
finance potential acquisitions, which may cause us to incur significant
indebtedness to which the notes may be subordinate.
A higher level of indebtedness increases the risk that we may default on
our debt obligations. We cannot assure you that we will be able to generate
sufficient cash flow to pay the interest on our indebtedness or that future
working capital, borrowings or equity financing will be available to pay or
refinance such indebtedness. You are not afforded protection under the indenture
in the event of a highly leveraged transaction or a change in control of
Willbros except to the extent described under "Description of Notes -- Purchase
of Notes at a Holder's Option Upon a Fundamental Change."
OUR OBLIGATIONS UNDER THE NOTES ARE UNSECURED AND ARE EFFECTIVELY SUBORDINATED
TO ALL OF OUR EXISTING AND FUTURE SECURED DEBT.
Our obligations under the notes are unsecured. Our secured indebtedness
and any secured indebtedness we incur in the future will rank effectively senior
in right of payment to the notes to the extent of the assets securing such
secured indebtedness. We have pledged substantially all of our assets, including
the stock of our significant subsidiaries, to secure our senior secured credit
facility, and the indenture for the notes does not limit our ability to incur
additional secured debt. Our credit facility is described under "Description of
Credit Facility." Accordingly, the notes are effectively subordinated to the
senior secured credit facility to the extent of the assets securing the credit
facility.
THE NOTES ARE EFFECTIVELY JUNIOR TO THE INDEBTEDNESS OF OUR SUBSIDIARIES.
The notes are issued by Willbros Group, Inc. and are structurally
subordinated to the existing and future claims of creditors of our subsidiaries.
Holders of the notes are not creditors of our subsidiaries. Any claims of
holders of the notes to the assets of our subsidiaries derive from our own
equity interests in those subsidiaries. Claims of such subsidiaries' creditors
will generally have priority as to the assets of such subsidiaries over our own
equity interest claims and will therefore have priority over the holders of the
notes. Our subsidiaries' creditors may include:
- general creditors;
- trade creditors;
- secured creditors; and
- taxing authorities.
13
As of March 31, 2004, our subsidiaries had approximately $83.1 million of
indebtedness outstanding (excluding intercompany indebtedness and guarantees of
our indebtedness), approximately $78.5 million of which constitutes trade debt
arising in the ordinary course of business.
UPON THE CONVERSION OF THE NOTES, WE HAVE THE RIGHT TO PAY CASH IN LIEU OF
ISSUING SHARES OF OUR COMMON STOCK OR A COMBINATION OF CASH AND SHARES OF OUR
COMMON STOCK. THEREFORE, HOLDERS OF THE NOTES MAY RECEIVE NO SHARES OF OUR
COMMON STOCK OR FEWER SHARES THAN THE NUMBER INTO WHICH THEIR NOTES ARE
CONVERTIBLE.
We have the right to make an irrevocable election on the first date the
notes become convertible to settle the principal amount of the notes upon
conversion by issuing shares of common stock into which the notes are
convertible, the cash value of the common stock into which the notes are
convertible, or a combination thereof. Until the notes are surrendered for
conversion, we will not be required to notify holders of our method of settling
the excess amount of our conversion obligation relating to the amount of the
conversion value (the product of the closing sale price of our common stock on a
given day multiplied by the then current conversion price) in excess of the
principal amount. Accordingly, upon conversion of a note, holders may not
receive any shares of our common stock, or they might receive fewer shares of
common stock relative to the conversion value of the note. Further, our
liquidity may be reduced to the extent that we choose to deliver cash rather
than shares of common stock upon conversion of notes.
SOME SIGNIFICANT RESTRUCTURING TRANSACTIONS MAY NOT CONSTITUTE A FUNDAMENTAL
CHANGE, IN WHICH CASE WE WOULD NOT BE OBLIGATED TO OFFER TO REPURCHASE THE
NOTES.
Upon the occurrence of a fundamental change, which includes certain
specified change of control events, the holders of the notes will have the right
to require us to repurchase the notes. However, the fundamental change
provisions will not afford protection to holders of notes in the event of
certain transactions. For example, certain transactions, such as leveraged
recapitalizations, refinancings, restructurings or acquisitions initiated by us,
would not constitute a change of control and, therefore, not constitute a
fundamental change requiring us to repurchase the notes. Certain other
transactions may not constitute a fundamental change because they do not involve
a change in voting power or beneficial ownership of the magnitude required under
the definition of fundamental change. In the event of any such transaction, the
holders would not have the right to require us to repurchase the notes, even
though each of these transactions could increase the amount of our indebtedness,
or otherwise adversely affect our capital structure or any credit ratings,
thereby adversely affecting the holders of notes.
In addition, the definition of fundamental change includes a phrase
relating to the sale of all or substantially all of our properties and assets.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under New York law, which governs the indenture and the notes, or under the law
of the Republic of Panama, our jurisdiction of incorporation. Accordingly, the
ability of a holder of notes to require us to repurchase the notes as a result
of a sale of less than all of our properties and assets may be uncertain.
WE MAY BE UNABLE TO GENERATE SUFFICIENT CASH FLOW TO SATISFY OUR DEBT SERVICE
OBLIGATIONS.
Our ability to generate cash flow from operations to make interest
payments on the notes will depend on our future performance, which will be
affected by a range of economic, competitive and business factors. We cannot
control many of these factors, including general economic conditions and the
condition of the oil, gas and power industries. If our operations do not
generate sufficient cash flow from operations to satisfy our debt service
obligations, we may need to borrow additional funds to make these payments or
undertake alternative financing plans, such as refinancing or restructuring our
debt, or reducing or delaying capital investments and acquisitions. Additional
funds or alternative financing may not be available to us on favorable terms, or
at all. Our inability to generate sufficient cash flow from operations or obtain
additional funds or alternative financing on acceptable terms could have a
material adverse effect on our business, financial condition and results of
operations.
WE MAY BE UNABLE TO REPAY THE PRINCIPAL AMOUNT OF THE NOTES DUE AT STATED
MATURITY OR, AT THE OPTION OF THE HOLDER, ON MARCH 15, 2011 OR UPON THE
OCCURRENCE OF A FUNDAMENTAL CHANGE, BECAUSE OF INSUFFICIENT FUNDS OR
RESTRICTIONS IN OUR OTHER DEBT AGREEMENTS.
At maturity, the entire outstanding principal amount of the notes will
become due and payable by us. In addition, on March 15, 2011, or if a
fundamental change occurs (as defined in this prospectus under "Description of
Notes -- Purchase of Notes at a Holder's Option Upon a Fundamental Change"),
each holder of the notes may require that we purchase for cash all or a portion
of that holder's notes. We cannot assure you that we will have sufficient funds
or will be able to arrange for additional financing to pay in cash the principal
amount or purchase price due.
14
In addition, our credit agreement contains a covenant that prohibits us
from making cash payments in respect of the notes (other than scheduled payments
of interest, additional interest and additional amounts, if any) prior to their
stated maturity. Violation of this covenant would constitute a default under
that agreement. Any future credit agreements or other agreements to which we
become a party may contain similar restrictions and provisions. If we are
required to make a cash payment on the notes prior to their stated maturity,
such as upon the occurrence of a fundamental change, or if we are required to
redeem the notes at the option of the holders on March 15, 2011, such payments
would cause a default under our senior secured credit facility unless we are
able to obtain a consent or to repay in full all indebtedness under such
agreement. Our failure to purchase any tendered notes would constitute a default
under the indenture governing the notes which would, in turn, constitute a
default under our other borrowings and could lead to the acceleration of the
indebtedness thereunder.
THE CONVERSION RATE OF THE NOTES MAY NOT BE ADJUSTED FOR ALL DILUTIVE EVENTS,
INCLUDING THIRD-PARTY TENDER OR EXCHANGE OFFERS THAT MAY ADVERSELY AFFECT THE
TRADING PRICE OF THE NOTES OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE
NOTES.
The conversion rate of the notes is subject to adjustment upon certain
events, including the issuance of stock dividends on our common stock, the
issuance of rights or warrants, subdivisions, combinations, distributions of
capital stock, indebtedness or assets, cash dividends and issuer tender or
exchange offers as described under "Description of Notes -- Conversion
Procedures -- Conversion Rate Adjustments." The conversion rate will not be
adjusted for certain other events, such as third-party tender or exchange
offers, that may adversely affect the trading price of the notes or the common
stock issuable upon conversion of the notes.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES,
AND IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP FOR THE NOTES, HOLDERS MAY NOT
BE ABLE TO RESELL THE NOTES.
There is no established trading market for the notes. We have no plans to
list the notes on a securities exchange. The liquidity of any market for the
notes will depend upon the number of holders of the notes, our results of
operations and financial condition, the market for similar securities, the
interest of securities dealers in making a market in the notes and other
factors. An active or liquid trading market for the notes may not develop.
WE EXPECT THAT THE TRADING VALUE OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED BY
THE PRICE OF OUR COMMON STOCK.
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 any non-convertible
debt securities we may issue. Our common stock has experienced significant price
volatility, and such volatility may continue in the future. The price of our
common stock could fluctuate widely in response to a range of factors, including
variations in our quarterly results and changing conditions in the economy in
general or in our industry in particular.
THE CONDITIONAL CONVERSION FEATURE OF THE NOTES COULD RESULT IN YOUR RECEIVING
LESS THAN THE VALUE OF THE COMMON STOCK INTO WHICH A NOTE IS CONVERTIBLE.
The notes are convertible into shares of our common stock only if
specified conditions are met. If the specific conditions for conversion are not
met, you will not be able to convert your notes, and you may not be able to
receive the value of the common stock into which the notes would otherwise be
convertible.
OUR REPORTED EARNINGS PER SHARE MAY BE MORE VOLATILE BECAUSE OF THE CONTINGENT
CONVERSION PROVISION OF THE NOTES.
Holders of the notes are entitled to convert the notes into shares of our
common stock (or, at our election, cash or a combination of cash and common
stock), among other circumstances, if the closing sale price of our common stock
on each of at least 20 trading days in the 30 consecutive trading day period
ending on the first trading day of the conversion period exceeds 120% of the
then prevailing conversion price in effect on that 30th trading day. Until this
contingency or another conversion contingency is met, the shares underlying the
notes are not included in the calculation of our basic or diluted earnings per
share. Should any of these contingencies be met, diluted earnings per share
would be expected to decrease as a result of the inclusion of the underlying
shares in our diluted earnings per share calculation. Volatility in our stock
price could cause this common stock price condition to be met in one quarter and
not in a subsequent quarter, increasing the volatility of our diluted earnings
per share.
15
THE NOTES MAY NOT BE RATED OR MAY RECEIVE A LOWER RATING THAN ANTICIPATED.
We did not seek a rating on the notes. However, if one or more rating
agencies rates the notes and assigns the notes a rating lower than the rating
expected by investors, or reduces their rating in the future, the market price
of the notes and our common stock could be adversely affected.
16
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges. For
this purpose, earnings consist of income before income tax plus fixed charges
less capitalized interest. Fixed charges consist of interest expense (whether
expensed or capitalized), amortization of debt expense, discount and premium and
one-third of rental expense estimated to be attributable to interest.
THREE
MONTHS
ENDED
MARCH YEAR ENDED DECEMBER 31,
31, -----------------------------------------
2004 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges............... (1) (1) 14.8 8.7 (1) (1)
----------
(1) Earnings for the years ended December 31, 1999, December 31, 2000 and
December 31, 2003, and for the quarter ended March 31, 2004 were
insufficient to cover fixed charges by $16.7 million, $10.3 million, $7.0
million and $0.4 million, respectively.
NO PROCEEDS
The securities to be offered and sold using this prospectus will be
offered and sold by the selling securityholders named in this prospectus or in
any supplement to this prospectus. We will not receive any proceeds from the
sale of the securities or conversion of the notes. The shares of our common
stock offered by this prospectus are issuable upon conversion of the notes.
17
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is listed on the New York Stock Exchange under the symbol
"WG." The following table sets forth the high and low sale prices per share for
our common stock as reported by the New York Stock Exchange for the periods
indicated:
HIGH LOW
--------- --------
2002:
First Quarter............................ $ 16.85 $ 14.10
Second Quarter........................... 19.24 15.55
Third Quarter............................ 17.35 10.30
Fourth Quarter........................... 11.24 5.84
2003:
First Quarter............................ $ 8.89 $ 7.02
Second Quarter........................... 10.72 6.95
Third Quarter............................ 10.85 8.86
Fourth Quarter........................... 13.99 10.20
2004:
First Quarter............................ $ 16.08 $ 11.80
Second Quarter (through May 26, 2004).... 15.70 13.05
Substantially all of our stockholders maintain their shares in "street
name" accounts and are not, individually, stockholders of record. As of April
30, 2004, our common stock was held by 99 holders of record and an estimated
3,000 beneficial owners.
Since 1991, we have not paid any cash dividends on our capital stock,
except dividends in 1996 on our outstanding shares of preferred stock, which
were converted into shares of common stock on July 15, 1996. We anticipate that
we will retain earnings to support operations and to finance the growth and
development of our business. Therefore, we do not expect to pay cash dividends
in the foreseeable future. Our senior secured credit facility prohibits us from
paying cash dividends on our common stock.
18
SELLING SECURITYHOLDERS
In March and April 2004, we issued and sold a total of $70,000,000
aggregate principal amount of the notes in private placements to Bear, Stearns &
Co. Inc., CIBC World Markets Corp. and Credit Lyonnais Securities (USA) Inc.,
which we refer to as the initial purchasers in this prospectus. The initial
purchasers have advised us that they resold the notes in transactions exempt
from the registration requirements of the Securities Act to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) in
compliance with Rule 144A. The selling securityholders, which term includes
their transferees, pledgees, donees and successors, may from time to time offer
and sell pursuant to this prospectus any and all of the notes and the shares of
our common stock issuable upon conversion of the notes.
The notes and our shares of common stock to be issued upon conversion of
the notes are being registered pursuant to a registration rights agreement
between us and the initial purchasers. In that agreement, we undertook to file a
registration statement with regard to the notes and our shares of common stock
issuable upon conversion of the notes and, subject to certain exceptions, to
keep that registration statement effective for up to two years. The registration
statement to which this prospectus relates is intended to satisfy our
obligations under that agreement.
The selling securityholders named below have advised us that they
currently intend to sell the notes and our shares of common stock set forth
below pursuant to this prospectus. Additional selling securityholders may choose
to sell notes and our shares of common stock pursuant to this prospectus from
time to time upon notice to us. None of the selling securityholders named below,
has, within the past three years, held any position, office or other material
relationship with us or any of our predecessors or affiliates, except for Bear,
Stearns & Co. Inc., which was one of the initial purchasers of the notes, and
except as noted below in "Plan of Distribution."
Before a securityholder not named below may use this prospectus in
connection with an offering of securities, this prospectus will be supplemented
to include the name and amount of notes and common stock beneficially owned by
the selling securityholder and the amount of notes and common stock to be
offered. Any prospectus supplement will also disclose whether any selling
securityholder selling in connection with that prospectus supplement has held
any position, office or other material relationship with us or any of our
predecessors or affiliates during the three years prior to the date of the
prospectus supplement.
The following table is based solely on information provided by the selling
securityholders. This information represents the most current information
provided to us by selling securityholders.
NUMBER OF NUMBER OF
SHARES OF SHARES OF
PRINCIPAL AMOUNT COMMON STOCK COMMON STOCK
OF NOTES THAT PERCENTAGE OF OWNED PRIOR THAT MAY
NAME MAY BE SOLD NOTES OUTSTANDING TO CONVERSION BE SOLD (1)
------------------------------------------ ---------------- ----------------- ------------- ------------
Univest Multistrategy Fund $ 150,000 * 0 7,704
RBC-Alternative Assets $ 250,000 * 0 12,840
WPG-MSA Convertible Arbitrage Fund $ 50,000 * 0 2,568
WPG Convertible Arbitrage Overseas Master
Fund $ 550,000 * 0 28,248
Calamos Market Neutral Fund (Calamos
Investment Trust) $2,500,000 3.57% 0 128,402
CNH CA Master Account, L.P. $ 750,000 1.07% 0 38,520
DKR SoundShare Strategic Holding Fund Ltd. $ 750,000 1.07% 0 38,520
Gaia Offshore Master Fund Ltd. $1,400,000 2.00% 0 71,905
Lyxor/Gaia II Fund Ltd. $ 350,000 * 0 17,976
Institutional Benchmarks Master Fund c/o
Alexandra Investment Management, LLC $3,000,000 4.29% 0 154,083
Arkansas PER $ 475,000 * 0 24,396
ICI American Holdings Trust $ 105,000 * 0 5,392
AstraZeneca Holdings Pension $ 145,000 * 0 7,447
19
NUMBER OF NUMBER OF
SHARES OF SHARES OF
PRINCIPAL AMOUNT COMMON STOCK COMMON STOCK
OF NOTES THAT PERCENTAGE OF OWNED PRIOR THAT MAY
NAME MAY BE SOLD NOTES OUTSTANDING TO CONVERSION BE SOLD (1)
------------------------------------------ ---------------- ----------------- ------------- ------------
Delaware PERS $ 465,000 * 0 23,882
Southern Farm Bureau Life Insurance $ 235,000 * 0 12,069
Syngenta AG $ 80,000 * 0 4,108
Prudential Insurance Company of America $ 25,000 * 0 1,284
Boilermakers Blacksmith Pension Trust $ 1,550,000 2.21% 0 79,609
State of Oregon/Equity $ 1,450,000 2.07% 0 74,473
Duke Endowment $ 300,000 * 0 15,408
Louisiana CCRF $ 55,000 * 0 2,824
Delta Airlines Master Trust $ 155,000 * 0 7,960
Nuveen Preferred & Convertible Income
Fund JPC $ 1,800,000 2.57% 0 92,449
Nuveen Preferred & Convertible Fund JPC $ 2,350,000 3.36% 0 120,698
Froley Revy Investment Convertible
Security Fund $ 40,000 * 0 2,054
Attorney's Title Insurance Fund $ 40,000 * 0 2,054
OCLC Online Computer Library Center $ 15,000 * 0 770
Bear, Stearns & Co., Inc. $ 3,214,000 4.59% 0 165,074
DBAG London $ 1,000,000 1.43% 0 51,361
Clinton Riverside Convertible
Portfolio Limited $ 3,885,000 5.55% 0 199,537
Clinton Multistrategy
Master Fund, Ltd. $ 2,115,000 3.02% 0 108,628
Any other holder of notes or future
transferee, pledge, donee or successor
of any such holder (2) $40,751,000 58.21% -- 2,093,016
----------- ------ --- ---------
Total $70,000,000 100.00% -- 3,595,277
=========== ====== === =========
---------------
* less than 1.00%
(1) Assumes conversion of all of the holder's notes at a conversion price of
$19.47 per share of common stock, which equals the initial conversion rate
of 51.3611 shares of common stock per $1,000 principal amount of the
notes. This conversion rate, however, is subject to adjustment as
described under "Description of Notes - Conversion Procedures - Conversion
Rate Adjustments." As a result, the number of shares of our common stock
issuable upon conversion of the notes may increase or decrease in the
future.
(2) Assumes that any other holders of notes, or any future transferees,
pledgees, donees or successors of or from any such 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. Holders of
these notes or the common stock into which they are convertible may not
sell these notes or shares under this prospectus. In order to offer these
notes or shares under the registration statement of which this prospectus
forms a part, those holders must first be named in a new prospectus that
is part of a post-effective amendment to the registration statement.
Selling securityholders who are registered broker-dealers are deemed to be
"underwriters" within the meaning of the Securities Act. In addition, selling
securityholders who are affiliates of registered broker-dealers may be deemed to
be "underwriters" within the meaning of the Securities Act if such selling
securityholder (i) did not acquire its notes or underlying common stock in the
ordinary course of business or (ii) had any agreement or understanding, directly
or indirectly, with any person to distribute the notes or underlying common
stock. To our knowledge, no selling securityholder who is a registered
broker-dealer or an affiliate of a registered broker-dealer received any
securities as underwriting compensation.
20
DESCRIPTION OF NOTES
We issued the notes under an indenture dated March 12, 2004, between
Willbros Group, Inc., as issuer, and JPMorgan Chase Bank, a New York state
banking organization, as trustee. JPMorgan Chase Bank is also the paying agent,
registrar and conversion agent. The notes and the shares of common stock
issuable upon conversion of the notes are covered by a resale registration
rights agreement.
The following description is a summary of the material provisions of the
notes, the indenture and the registration rights agreement. It does not purport
to be complete. This summary is subject to and is qualified by reference to all
the provisions of the indenture, including the definitions of certain terms used
in the indenture, and to all provisions of the registration rights agreement.
The terms of the notes include those provided in the indenture, those made a
part of the indenture by reference to the Trust Indenture Act of 1939, as
amended, and those provided in the registration rights agreement. You should
read the notes, the indenture, and the registration rights agreement, because
they, and not this description, define your rights as a holder of the notes. A
copy of the indenture, including the form of note, and the registration rights
agreement, has been filed as an exhibit to the registration statement relating
to this prospectus.
As used in this "Description of Notes" section, "Willbros," "we," "our" or
"us" refer solely to Willbros Group, Inc. and not to any of our current or
future subsidiaries, unless the context otherwise requires.
BRIEF DESCRIPTION OF THE NOTES
The notes offered hereby:
- are limited to $70.0 million in aggregate principal amount;
- bear interest at an annual rate of 2.75% of the principal amount,
from the issue date, payable semi-annually in cash, in arrears, on
March 15 and September 15 of each year, commencing on September 15,
2004 to the holders of record at the close of business on the
preceding March 1 and September 1, respectively;
- will accrue additional interest if we fail to comply with certain
obligations as set forth below under "-- Registration Rights," and
will require the payment of additional amounts in the circumstances
described under "-- Payment of Additional Amounts;"
- are our general senior unsecured obligations, ranking on a parity in
right of payment with all our other existing and future senior
indebtedness, and senior in right of payment to all our future
subordinated indebtedness, and are effectively subordinated to any
of our existing and future secured senior indebtedness to the extent
of the assets securing such indebtedness, and to the claims of all
creditors of our subsidiaries;
- may be converted by the holder into shares of our common stock,
subject to our right to deliver, in lieu of our common stock, cash
or a combination of cash and common stock, initially at a conversion
rate of 51.3611 shares of common stock per $1,000 principal amount
of notes, which represents an initial conversion price of $19.47 per
share, only:
- during the period from and including the mid-point date in a
fiscal quarter to, but not including, the mid-point date (or,
if that day is not a trading day, then the next trading day)
in the immediately following fiscal quarter (a "conversion
period"), if on each of at least 20 trading days in the period
of 30 consecutive trading days ending on the first trading day
of the conversion period, the closing sale price of our common
stock exceeded 120% of the conversion price in effect on that
30th trading day of such period. The "mid-point dates" for
each of our fiscal quarters are February 15, May 15, August 15
and November 15;
- if we have called the notes for redemption; or
- during prescribed periods, upon the occurrence of specified
corporate transactions described under "-- Conversion Rights
-- Conversion Upon Specified Corporate Transactions."
21
- will be redeemable at our option in whole or in part on or after
March 15, 2011 at a redemption price equal to 100% of the principal
amount of the notes plus accrued and unpaid interest (including
additional interest and additional amounts), if any, to, but not
including, the redemption date;
- will also be redeemable at our option in whole at a redemption price
equal to 100% of the principal amount of the notes plus accrued and
unpaid interest (including additional interest and additional
amounts), if any, to, but not including, the redemption date in the
event of certain changes affecting tax laws as described in "--
Redemption for Taxation Reasons";
- will be subject at a holder's option to purchase by us for cash upon
a fundamental change of Willbros, as described under "-- Purchase
of Notes at a Holder's Option Upon a Fundamental Change," and on
March 15, 2011, March 15, 2014 and March 15, 2019, in each case at a
purchase price equal to 100% of the principal amount of the notes
plus accrued and unpaid interest (including additional interest and
additional amounts), if any, to but not including, the purchase
date; and
- will be due on March 15, 2024, payable in cash in an amount equal to
$1,000 per note, plus accrued and unpaid interest (including
additional interest and additional amounts), if any, unless earlier
converted, redeemed by us at our option or purchased by us at your
option.
The indenture does not contain any financial covenants and does not
restrict us from paying dividends, incurring additional indebtedness or issuing
or repurchasing other securities. In addition, our subsidiaries are not
restricted under the indenture from incurring additional indebtedness, including
secured indebtedness. The indenture also does not protect a holder of notes in
the event of a highly leveraged transaction or a fundamental change, as defined
below, of Willbros, except to the extent described under "-- Purchase of Notes
at a Holder's Option Upon a Fundamental Change" below.
No sinking fund is provided for the notes.
We issued the notes in book-entry form only in denominations of $1,000
principal amount and whole multiples thereof. Beneficial interests in the notes
will be shown on, and transfers will be effected only through, records
maintained by DTC, or its nominee, and any such interests may not be exchanged
for certificated securities except in limited circumstances.
PAYMENTS ON THE NOTES
An office or agency will be maintained in the City of New York, where the
principal on the notes will be paid and you may present the notes for
conversion, registration of transfer or exchange for other denominations, which
shall initially be the principal corporate trust office of the trustee presently
located at 4 New York Plaza, Floor 15, New York, New York 10004.
Except as provided below, we will pay interest on:
- global notes to DTC in immediately available funds;
- any certificated notes having an aggregate principal amount of $5.0
million or less by check mailed to the holders of those notes; and
- any certificated notes having an aggregate principal amount of more
than $5.0 million by wire transfer in immediately available funds if
requested in writing by the holders of those notes, otherwise by
check mailed to the holders of those notes.
At maturity of the notes, interest (including additional interest and
additional amounts) on the certificated notes will be payable at the principal
corporate trust office of the trustee.
We will not be required to make any payment on the notes due on any day
which is not a business day until the next succeeding business day. The payment
made on the next business day will be treated as though it were paid on the
original due date and no interest will be payable on the payment date for the
additional period of time.
INTEREST
The notes will bear interest at an annual rate of 2.75% from March 12,
2004, or from the most recent date to which interest has been paid or provided
for. Interest will be payable semi-annually in cash in arrears on March 15 and
September 15 of each year to
22
holders of record at the close of business on the March 1 and September 1
immediately preceding such interest payment date. There are two exceptions to
the preceding sentence:
- Except as described below, we will not make any payment in cash or
other adjustment for accrued and unpaid interest (including
additional interest and additional amounts) on any notes that are
converted. If a holder of notes converts after the record date for
an interest payment but prior to the corresponding interest payment
date, the holder on the record date will receive on that interest
payment date accrued interest (including additional interest and
additional amounts) on those notes, notwithstanding the conversion
of those notes prior to that interest payment date. However, at the
time that such holder surrenders notes for conversion, the holder
must pay to us an amount equal to the interest (including additional
interest and additional amounts), if any, that has accrued and that
will be paid on the related interest payment date. The preceding
sentence does not apply to any notes that are converted after being
called by us for redemption. Accordingly, if we elect to redeem
notes and a holder of notes chooses to convert those notes on a date
that is after a record date but prior to the corresponding interest
payment date, the holder will not be required to pay us, at the time
that holder surrenders those notes for conversion, the amount of
interest (including additional interest and additional amounts) it
will receive on the interest payment date; and
- We will pay interest (including additional interest and additional
amounts) to a person other than the holder of record on the record
date, on the stated maturity date or, in connection with a purchase
by us or redemption, on the purchase date or redemption date, as the
case may be, if such date is after a record date but on or before
the corresponding interest payment date. In either case, we will pay
accrued and unpaid interest (including additional interest and
additional amounts) only to the person to whom we pay the principal
amount.
Each payment of cash interest due on the notes will include interest
accrued through the day before the applicable interest payment date. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Cash interest otherwise payable will cease to accrue on a note upon its
maturity, conversion, redemption or purchase by us (including upon a fundamental
change).
RANKING
The notes are our general senior unsecured obligations, ranking on a
parity in right of payment with all our other existing and future senior
indebtedness, and senior in right of payment to all our future subordinated
indebtedness. The notes are effectively subordinated to any of our existing and
future secured senior indebtedness to the extent of the assets securing such
indebtedness, and to the claims of all creditors of our subsidiaries.
On March 12, 2004, we completed a $150.0 million senior secured credit
facility with a syndicated bank group, replacing the existing facility that was
due to expire in June 2005. The facility may be used for letters of credit, cash
borrowings or a combination thereof. Cash borrowings under the facility may not
exceed $30.0 million. A commitment fee on the unused portion of the credit
facility is payable quarterly ranging from 0.375% to 0.625%.
The credit agreement restricts the payment of cash dividends and requires
us to maintain various financial ratios. In addition, the credit agreement
prohibits us from making any cash payments in respect of the notes (other than
scheduled payments of interest, additional interest and additional amounts, if
any) prior to their stated maturity. The credit agreement is collateralized by
substantially all of our assets, including the stock of our principal
subsidiaries. Therefore, as noted above, the notes are effectively subordinated
to our indebtedness under the senior secured credit facility to the extent of
the assets securing such indebtedness.
As of March 31, 2004, there were no loans outstanding under the credit
agreement, but there were $46.3 million of letters of credit outstanding. In
addition, as of March 31, 2004, our subsidiaries had $83.1 million of
indebtedness outstanding (excluding intercompany indebtedness and guarantees of
our indebtedness), approximately $78.5 million of which constitutes trade debt
arising in the ordinary course of business.
23
CONVERSION RIGHTS
GENERAL
A holder may convert all or any portion of such holder's outstanding
notes, only on the conditions described below, initially at a conversion rate of
51.3611 shares of common stock per $1,000 principal amount of the notes. This is
equivalent to an initial conversion price of $19.47 per share of common stock.
In lieu of delivery of shares of our common stock, we may elect to deliver to
holders surrendering notes either cash, or a combination of cash and shares of
our common stock, as described below under "-- Conversion Procedures -- Payment
Upon Conversion." The conversion rate, and thus the conversion price, is subject
to adjustment as described below. A holder may convert notes only in
denominations of $1,000 principal amount and integral multiples thereof.
A holder may surrender notes for conversion prior to the stated maturity
only:
- during the period from and including the mid-point date in a fiscal
quarter to, but not including, the mid-point date (or, if that day
is not a trading day, then the next trading day) in the immediately
following fiscal quarter (a "conversion period"), if on each of at
least 20 trading days in the period of 30 consecutive trading days
ending on the first trading day of the conversion period, the
closing sale price of our common stock exceeded 120% of the
conversion price in effect on that 30th trading day of such period.
The "mid-point dates" for each of our fiscal quarters are February
15, May 15, August 15 and November 15;
- if we have called those notes for redemption; or
- during the prescribed periods, upon the occurrence of the specified
corporate transactions described under "-- Conversion Rights --
Conversion Upon Specified Corporate Transactions."
Each of these circumstances is more fully described below.
The conversion agent will, on our behalf, determine if the notes are
convertible as a result of the common stock price condition and notify the
trustee and us accordingly.
Upon conversion, we will have the right to deliver, in lieu of shares of
our common stock, cash or a combination of cash and shares of our common stock,
as described below under "-- Conversion Procedures -- Payment Upon Conversion."
For a discussion of the U.S. federal income tax consequences of conversion to a
holder, see "Material U.S. Federal and Panamanian Income Tax Consequences."
We will not issue fractional shares of our common stock upon the
conversion of the notes. Instead, we will pay the cash value of such fractional
shares based upon the closing sale price of our common stock on the trading day
immediately prior to the conversion date.
CONVERSION UPON SATISFACTION OF COMMON STOCK PRICE CONDITION
A holder will have the right to convert any of its notes during the period
from and including the mid-point date in a fiscal quarter to, but not including,
the mid-point date (or, if that day is not a trading day, then the next trading
day) in the immediately following fiscal quarter (a "conversion period"), if on
each of at least 20 trading days in the period of 30 consecutive trading days
ending on the first trading day of the conversion period, the closing sale price
of our common stock exceeded 120% of the conversion price in effect on that 30th
trading day of such period. The "mid-point dates" for each of our fiscal
quarters are February 15, May 15, August 15 and November 15.
The initial conversion trigger price per share of our common stock is
$23.36. This conversion trigger price reflects the initial conversion price per
share of our common stock multiplied by 120%.
The "closing sale price" of any share of common stock on any date means
the closing sale price of a share of common stock (or if no closing sale price
is reported, the average of the bid and ask prices or, if there is more than one
bid or ask price, the average of the average bid and the average ask prices) on
that date as reported on a national securities exchange or, if the common stock
is not listed on a national securities exchange, as reported by the Nasdaq
National Market system. If our common stock is not listed for trading on a
national securities exchange and not quoted by the Nasdaq National Market on the
relevant date, the "closing sale price" will be the last quoted bid for our
common stock in the over the counter market on the relevant date as reported by
the National Quotation Bureau
24
or similar organization. If our common stock is not so quoted, the "closing sale
price" will be the average of the midpoint of the last bid and ask prices for
our common stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by us for this purpose.
If at any time the common stock price condition described herein is
satisfied in respect of a conversion period, we will publish a notice advising
that the common stock price condition has been satisfied in respect of such
conversion period in a newspaper of general circulation in the City of New York
or through such other public medium as we may use at that time and publish such
information on our corporate website.
CONVERSION UPON NOTICE OF REDEMPTION
A holder will have the right to convert any of its notes that we have
called for redemption at any time prior to 5:00 p.m., New York City time, on the
day that is two business days prior to the redemption date, even if the notes
are not otherwise convertible at such time. If a holder already has delivered a
purchase notice or a fundamental change purchase notice with respect to a note,
however, the holder may not surrender that note for conversion unless the holder
has withdrawn the notice in accordance with the indenture.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
A holder will have the right to convert any of its notes in the event:
- we distribute to all holders of our common stock certain rights or
warrants entitling them to subscribe for or purchase, for a period
expiring within 60 days, common stock at less than the closing sale
price of the common stock on the business day immediately preceding
the announcement of such distribution;
- we elect to distribute to all holders of our common stock, cash or
other assets, debt securities or certain rights or warrants to
purchase our securities, including the declaration of any cash
dividends, payable quarterly or otherwise, which distribution has a
per share value exceeding 10% of the closing sale price of the
common stock on the business day immediately preceding the
declaration date for the distribution; or
- a fundamental change (as defined under "-- Purchase of Notes at a
Holder's Option Upon a Fundamental Change") occurs.
In any such event, a holder may convert any of its notes at any time after
we notify holders of such event:
- in the case of a distribution, until the earlier of 5:00 p.m., New
York City time, on the business day immediately preceding the
ex-dividend date or the date of our announcement that the
distribution will not take place; or
- in the case of a fundamental change, within 20 business days of the
fundamental change notice.
We will notify holders at least 20 business days prior to the ex-dividend
date for the distribution or within 20 business days following the occurrence of
the fundamental change, as the case may be. In the case of a distribution, a
holder of notes may not convert any of its notes if, as a holder of notes, the
holder will otherwise participate in the distribution without conversion.
In addition, if we are party to a consolidation, merger or share exchange
pursuant to which our common stock would be converted into cash, securities or
other property, a holder may surrender notes for conversion at any time from and
after the date which is 15 calendar days prior to the date announced by us as
the anticipated effective date of the transaction until 15 calendar days after
the actual date of the transaction. If (a) we reclassify our common stock or (b)
we are a party to a consolidation, merger or share exchange or dispose of all or
substantially all our assets, in either case pursuant to which our common stock
is converted into cash, securities or other property, then, at the effective
time of the transaction, the right to convert the notes into common stock will
be changed into a right to convert the notes into the kind and amount of cash,
securities or other property which the holder would have received if the holder
had converted such notes immediately prior to the transaction. If the
transaction also constitutes a fundamental change, the holder can require us to
purchase all or a portion of its notes as described under "-- Purchase of Notes
at a Holder's Option Upon a Fundamental Change."
25
CONVERSION PROCEDURES
GENERAL
Except as described below, we will not make any payment in cash or our
common stock or other adjustment for accrued and unpaid interest (including
additional interest and additional amounts) on any notes when they are
converted. If a holder of notes converts after the record date for an interest
payment but prior to the corresponding interest payment date, the holder on the
record date will receive on that interest payment date accrued interest
(including additional interest and additional amounts) on those notes,
notwithstanding the conversion of those notes prior to that interest payment
date, because that holder will have been the holder of record on the
corresponding record date. However, at the time that such holder surrenders
notes for conversion, the holder must pay us an amount equal to the interest
(including additional interest and additional amounts), if any, that has accrued
and that will be paid on the related interest payment date. The preceding
sentence does not apply to any notes that are converted after being called by us
for redemption. Accordingly, if we elect to redeem notes and a holder of notes
chooses to convert those notes on a date that is after a record date but prior
to the corresponding interest payment date, the holder will not be required to
pay us, at the time that holder surrenders those notes for conversion, the
amount of interest (including additional interest and additional amounts) it
will receive on the interest payment date.
Our delivery to the holder of the full number of shares of common stock
into which the note is convertible (or, at our option, cash, or a combination of
cash and common stock, in lieu thereof), together with any cash payment for such
holder's fractional shares, will be deemed to satisfy our obligation to pay the
principal amount of the note and to satisfy our obligation to pay accrued and
unpaid interest (including any additional interest and additional amounts)
through the conversion date. As a result, accrued interest (including additional
interest and additional amounts) is deemed paid in full rather than cancelled,
extinguished or forfeited. Notwithstanding the preceding, accrued interest
(including additional interest and additional amounts), if any, will be payable
in cash upon any conversion of notes at the option of the holder made
concurrently with or after acceleration of the notes following an event of
default under the notes.
Except as described under "-- Conversion Rate Adjustments," we will not
make any payment or other adjustment for dividends on any common stock issued
upon conversion of the notes.
If you convert notes, we will pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of our common stock upon the
conversion, unless the tax is due because you request the shares to be issued or
delivered to another person, in which case you will pay that tax.
PROCEDURES
To convert interests in a global note, a holder must deliver to DTC the
appropriate instruction form for conversion pursuant to DTC's conversion
program.
To convert a certificated note, a holder must:
- complete and manually sign the conversion notice on the back of the
note (or a facsimile thereof);
- deliver the completed conversion notice and the note to be converted
to the specified office of the conversion agent;
- if required by the conversion agent, furnish appropriate
endorsements and transfer documents;
- pay all funds required, if any, relating to interest on the note
(including additional interest and additional amounts) to be
converted to which it is not entitled; and
- pay all taxes or duties, if any, as described in the last paragraph
in "-- General."
To convert a certificated note or interests in a global note, a holder
must:
- pay all funds required, if any, relating to interest on the note
(including additional interest and additional amounts) to be
converted to which it is not entitled; and
26
- pay all taxes or duties, if any, as described in the last paragraph
in "-- General."
The conversion date will be the date on which all of the foregoing
requirements have been satisfied. The notes will be deemed to have been
converted immediately prior to 5:00 p.m., New York City time, on the conversion
date.
We will settle our obligation upon conversion as described below under
"-- Payment Upon Conversion."
If a holder has exercised its right to require us to purchase its notes as
described under "-- Purchase of Notes at a Holder's Option" or "-- Purchase of
Notes at a Holder's Option Upon Fundamental Change" such holder's conversion
rights respecting the notes so subject to purchase will expire at 5:00 p.m., New
York City time, on the business day immediately preceding the purchase date,
unless we default in the payment of the purchase price. If a holder has
submitted any note for purchase, such note may be converted only if such holder
submits a notice of withdrawal and, if the note is a global note, complies with
appropriate DTC procedures.
PAYMENT UPON CONVERSION
In lieu of delivery of shares of our common stock, and pursuant to the
procedures described below, we may elect to deliver to holders surrendering
notes either cash, or a combination of cash and shares of our common stock.
On the first date the notes become convertible under the circumstances
described above in "-- Conversion Rights," we will notify holders in writing of
our method for settling the principal amount of the notes upon conversion
("principal conversion settlement election"). This notification, once provided
to holders on the date the notes first become convertible, regardless of any
holder's decision to convert, is irrevocable and legally binding with regard to
any conversion of the notes. As such, the principal conversion settlement
election made on the first date the notes become convertible remains in force if
the notes cease to be convertible but subsequently become convertible again.
However, we have the right to amend the indenture without the consent of the
holder of any note to require us to settle our conversion obligation in cash
with respect to the principal amount of notes surrendered for conversion.
Until the notes are surrendered for conversion, we will not be required to
notify holders of our method for settling the excess amount ("excess amount") of
our conversion obligation relating to the amount of the conversion value (the
product of the closing sale price for our common stock on a given day multiplied
by the then current conversion rate) above the principal amount, if any ("excess
conversion obligation").
Conversion On or Prior to 31 Trading Days Prior to Stated Maturity. If we
receive a holder's conversion notice on or prior to the day that is 31 trading
days prior to the stated maturity of the notes (the "final notice date"), the
following procedures will apply:
- Settlement of our conversion obligation relating to the principal
amount of the notes will be according to the principal conversion
settlement election we will have already made.
- We will notify the holder through the trustee, at any time on or
before the date that is three trading days following receipt of the
holder's conversion notice (the "settlement notice period"), of the
method we choose to settle the excess conversion obligation.
Specifically we will indicate whether settlement of the excess
conversion obligation will be 100% in common stock, 100% in cash or
in a combination of cash and common stock. If we elect to settle the
excess conversion obligation in a combination of cash and common
stock, we will specify the percentage of the excess conversion
obligation relating to the notes surrendered for conversion that we
will pay in cash. The remainder of the excess conversion obligation
will be settled in shares of our common stock (except that we will
pay cash in lieu of issuing any fractional shares). We will treat
all holders converting on the same trading day in the same manner.
We will not, however, have any obligation to settle the excess
conversion obligation arising on different trading days in the same
manner. That is, we may choose on one trading day to settle in
common stock only and choose on another trading day to settle in
cash or a combination of common stock and cash.
- Settlement of our conversion obligation with respect to the
principal amount of the notes and the excess conversion obligation
in common stock only will occur as soon as practicable after we
notify the holder that we have chosen this method of settlement.
- Settlement of any portion of our conversion obligation, including
the principal amount and/or excess amount, in cash or in a
combination of common stock and cash will occur on the third trading
day following the final trading day of the 20 trading day period
beginning on the final trading day of the settlement notice period
(the "cash settlement averaging period").
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- Settlement amounts will be computed as follows:
1. If we elect to satisfy our entire conversion obligation,
including principal amount and excess amount, in common stock
(other than with respect to fractional shares), we will
deliver to a holder a number of shares of common stock equal
to the product of (i) the aggregate principal amount of the
notes to be converted divided by 1,000, multiplied by (ii) the
conversion rate.
2. If we elect to satisfy our entire conversion obligation in
cash, including principal amount and excess amount, we will
deliver to the holder cash in an amount equal to the product
of:
- The product of (i) the aggregate principal amount of the
notes to be converted divided by 1,000, multiplied by
(ii) the conversion rate, multiplied by
- the arithmetic average of the closing sale prices of our
common stock during the cash settlement averaging
period.
3. If we elect to satisfy our conversion obligation, including
principal amount and excess amount, in a combination of cash
and common stock, we will deliver to the holder:
(a) a cash amount ("cash amount") (excluding any cash in
lieu of fractional shares) equal to the product of (i)
the percentage of the conversion obligation to be
satisfied in cash, multiplied by (ii) the amount of cash
that would be paid pursuant to paragraph number 2 above;
and
(b) a number of shares equal to the remainder of (i) the
number of shares that would be issued pursuant to
paragraph number 1 above, minus (ii) the number of
shares equal to the quotient of (x) the cash amount
divided by (y) the arithmetic average of the closing
sale prices of our common stock during the cash
settlement averaging period.
Conversion During 30 Trading Days Prior to Stated Maturity. If we receive
a holder's conversion notice after the "final notice date," the following
procedure will apply:
- Settlement of our conversion obligation relating to the principal
amount of the notes will be according to the principal conversion
settlement election we will have already made.
- We will notify the holder through the trustee of the method we
choose to settle the excess conversion obligation in the same manner
as set forth above under "-- Conversion On or Prior to 31 Trading
Days Prior to Stated Maturity," except that we will settle all of
our conversion obligations arising during the 30 trading day period
prior to stated maturity in the same manner.
- Settlement of our conversion obligation of the principal amount and
the excess amount in common stock only will occur as soon as
practicable after we notify the holder that we have chosen this
method of settlement.
- Settlement of any portion of the conversion obligation, including
any portion of the principal amount or the excess amount, in cash or
in a combination of common stock and cash will occur on the third
trading day following the final trading day of the cash settlement
averaging period. The "cash settlement averaging period" will be the
20 trading day period beginning on the date that is the 23rd trading
day prior to the stated maturity date.
- The settlement amount will be computed in the same manner as set
forth above under "-- Conversion On or Prior to 31 Trading Days
Prior to Stated Maturity."
Additional Provisions. If any trading day during a cash settlement
averaging period is not an undisrupted trading day, then determination of the
price for that day will be delayed until the next undisrupted trading day on
which a pricing is not otherwise observed; that is, such day will not count as
one of the 20 trading days that constitute the cash settlement averaging period.
If this would result in a price being observed later than the eighth trading day
after the last of the original 20 trading days in the cash settlement averaging
period, then we will determine all prices for all delayed and undetermined
prices on that eighth trading day based on our good faith estimate of our common
stock's value on that date.
An "undisrupted trading day" means a trading day on which our common stock
does not experience any of the following during the one-hour period ending at
the conclusion of the regular trading day:
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- any suspension of or limitation imposed on the trading of our common
stock on any national or regional securities exchange or association
or over-the-counter market;
- any event (other than an event listed in the third bullet below)
that disrupts or impairs the ability of market participants in
general to (i) effect transactions in or obtain market values for
our common stock on any relevant national or regional securities
exchange or association or over-the-counter market or (ii) effect
transactions in or obtain market values for, futures or options
contracts relating to the common stock on any relevant national or
regional securities exchange or association or over-the-counter
market; or
- any relevant national or regional securities exchange or association
or over-the-counter market on which our common stock trades closes
on any exchange trading day prior to its scheduled closing time
unless such earlier closing time is announced by the exchange at
least one hour prior to the earlier of (i) the actual closing time
for the regular trading session on such exchange and (ii) the
submission deadline for orders to be entered into the exchange for
execution on such trading day, if, in the case of the first and
second bullet points above, we determine that the effect of such
suspension, limitation, disruption or impairment is material.
CONVERSION RATE ADJUSTMENTS
We will adjust the conversion rate if any of the following events occur:
1. we issue shares of our common stock as a dividend or distribution
to all or substantially all holders of our common stock;
2. we subdivide or combine our outstanding common stock;
3. we issue to all or substantially all holders of our common stock
certain rights or warrants to subscribe for or purchase our common stock,
or securities convertible into or exchangeable or exercisable for our
common stock, for a period expiring within 60 days, at less than the
closing sale price of our common stock on the business day immediately
preceding the date of the announcement of such issuance, provided that the
conversion rate will be readjusted to the extent that such rights or
warrants are not exercised prior to their expiration;
4. we distribute to all or substantially all holders of our common
stock shares of our capital stock or evidences of our indebtedness or
other assets, including securities, but excluding:
- dividends or distributions referred to in (1) above;
- rights or warrants referred to in (3) above;
- dividends and distributions in connection with a
reclassification, change, consolidation, merger, share
exchange, sale or conveyance resulting in a change in the
conversion consideration pursuant to the next succeeding
paragraph; and
- cash dividends or distributions referred to in (6) below;
5. we distribute to all or substantially all holders of our common
stock shares of capital stock of one of our subsidiaries, with such
adjustment, if any, based on the market value of the subsidiary capital
stock so distributed relative to the market value of our common stock, in
each case over a measurement period following the distribution;
6. we distribute cash to all or substantially all holders of our
common stock, including any quarterly cash dividends; or
7. we or one of our subsidiaries makes purchases of our common stock
pursuant to a tender offer or exchange offer for our common stock.
In the event of any:
- reclassification or change of our common stock;
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- consolidation, merger or share exchange involving us; or
- sale or conveyance to another person or entity of all or
substantially all of our property or assets;
in which holders of our common stock would be entitled to receive securities,
cash or other property for their common stock, upon conversion of a noteholder's
notes, such noteholder will be entitled to receive the same type of
consideration which such noteholder would have been entitled to receive if such
noteholder had converted the notes into our common stock immediately prior to
any of these events.
If the rights provided for in our stockholder rights agreement, dated as
of April 1, 1999, have separated from our common stock in accordance with the
provisions of our rights agreement so that the holders of the notes would not be
entitled to receive any rights in respect of shares of our common stock issuable
upon conversion of the notes, the conversion rate will be adjusted as provided
in clause (4) above, subject to readjustment in the event of expiration,
termination or redemption of the rights. In lieu of any such adjustment, we may
amend our rights agreement to provide that upon conversion of the notes, the
holders will receive, in addition to the cash and shares of our common stock
issuable upon such conversion, the rights that would have attached to such
shares of our common stock issuable upon conversion of the notes solely into
shares of our common stock at the then applicable conversion rate, if the rights
had not become separated from our common stock under our rights agreement. See
"Description of Capital Stock -- Stockholder Rights Plan." Our existing
stockholder rights plan expires on April 15, 2009. To the extent that we adopt
any future rights plan, upon conversion of the notes, you will receive, in
addition to the cash and the shares of our common stock issuable upon such
conversion, the rights under the future rights plan in respect of the shares of
our common stock issuable upon conversion of the notes solely into shares of our
common stock at the then applicable conversion rate, whether or not the rights
have separated from our common stock at the time of conversion, and no
adjustment to the conversion rate will be made in connection with any
distribution of rights thereunder.
A holder of notes may, in certain circumstances, including the
distribution of cash dividends to stockholders, be deemed to have received a
distribution or dividend subject to U.S. federal income tax as a result of an
adjustment or the nonoccurrence of an adjustment to the conversion price. See
"Material U.S. Federal and Panamanian Income Tax Consequences -- U.S. Federal
Income Tax Considerations Applicable to U.S. Holders -- Adjustment of Conversion
Price."
To the extent permitted by law, we may, from time to time, increase the
conversion rate for a period of at least 20 days if our board of directors
determines that this increase would be in our best interests. Any such
determination by our board will be conclusive. In addition, we may increase the
conversion rate if our board of directors deems it advisable to avoid or
diminish any income tax to holders of common stock resulting from any
distribution of common stock or similar event. We will give holders at least 15
days' notice of any increase in the conversion rate.
We will not be required to make an adjustment in the conversion rate
unless the adjustment would require a change of at least one percent in the
conversion rate. However, we will carry forward any adjustments that are less
than one percent of the conversion rate.
Except as described above in this section, we will not adjust the
conversion rate for any issuance of our common stock or any securities
convertible into or exchangeable or exercisable for our common stock or rights
to purchase our common stock or such convertible, exchangeable or exercisable
securities.
If a holder converts some or all of its notes into common stock during the
occurrence of a registration default under the registration rights agreement,
the holder will not be entitled to receive additional interest on such common
stock, but will receive, with respect to the portion of the conversion
obligation that we settle in common stock, 103% of the number of shares of our
common stock that the holder would otherwise receive upon conversion in the
absence of such registration default. See "-- Registration Rights" below.
PAYMENT AT MATURITY
At the stated maturity date, each holder of $1,000 principal amount of the
notes shall be entitled to receive $1,000, and accrued and unpaid interest
(including additional interest and additional amounts), if any, in cash to, but
not including, the maturity date.
SINKING FUND
No sinking fund is provided for the notes.
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OPTIONAL REDEMPTION
On or after March 15, 2011, we may redeem for cash all or a portion of the
notes at any time for a price equal to 100% of the principal amount of the notes
to be redeemed plus accrued and unpaid interest (including additional interest
and additional amounts), if any, to but excluding the redemption date. We will
provide not less than 20 calendar days, nor more than 60 calendar days, notice
mailed to each holder of the notes to be redeemed. When the redemption notice is
given and funds deposited as required, interest will cease to accrue on and
after the redemption date on the notes or portions of such notes called for
redemption.
PARTIAL REDEMPTION
If we decide to redeem fewer than all of the outstanding notes, the
trustee will select the notes to be redeemed by lot, or on a pro rata basis or
by another method the trustee considers fair and appropriate. If the trustee
selects a portion of a holder's notes for partial redemption and such holder
converts a portion of its notes, the converted portion will be deemed to be from
the portion selected for redemption.
REDEMPTION FOR TAXATION REASONS
We may at any time redeem for cash, in whole but not in part, the notes at
a redemption price of 100% of the principal amount of the notes plus accrued and
unpaid interest (including additional interest and additional amounts), if any,
to but excluding the redemption date if we have become or would become obligated
to pay any additional amounts in respect of the notes as a result of:
(a)(1) any change in or amendment to the laws or treaties (or
regulations promulgated thereunder) of the Republic of Panama or (in the
circumstances described in the next-to-last paragraph of "-- Payment of
Additional Amounts" below) any relevant Territory or any political
subdivision or authority or agency thereof or therein having the power to
tax or (2) any change in or amendment to any official position regarding
the application or interpretation of such laws, treaties, regulations or
rulings, which change or amendment is announced or is effective on or
after the date of first original issuance of the notes, and
(b) we cannot avoid such obligation by taking reasonable measures
available to us.
Notwithstanding the preceding, no notice of redemption will be given
earlier than 60 days prior to the earliest date on which we could be obligated
to pay such additional amounts if a payment in respect of the notes was then
due. Prior to giving notice of any such redemption, we will deliver to the
trustee (1) an officers' certificate stating that the obligation to pay
additional amounts cannot be avoided by taking reasonable measures available to
us and (2) a written opinion of our independent legal counsel to the effect that
the circumstances referred to above exist. Following the delivery of the
officers' certificate and written opinion described above, we will provide
notice of redemption not less than 20 calendar days, but not more than 60
calendar days, prior to the date of redemption.
If we have given a notice of redemption as described in the preceding
paragraph, each holder of the notes will have the right to elect that such
holder's notes will not be subject to such tax redemption. If a holder elects
not to be subject to a tax redemption, we will not be required to pay additional
amounts with respect to payments made on that holder's notes following the
redemption date fixed by us, and all subsequent payments on such holder's notes
will be subject to any tax required to be withheld or deducted by the Republic
of Panama or any relevant Territory. Holders must elect their option to avoid
tax redemption by written notice to the trustee no later than the 15th day prior
to the redemption date fixed by us.
PURCHASE OF NOTES AT A HOLDER'S OPTION
Holders have the right to require us to purchase all or a portion of their
notes on March 15, 2011, March 15, 2014 and March 15, 2019 (each, a "purchase
date"). We will be required to purchase any outstanding notes for which a holder
delivers a written purchase notice to the paying agent. This notice must be
delivered during the period beginning at any time from the opening of business
on the date that is 22 business days prior to the relevant purchase date until
the close of business on the date that is two business days prior to the
purchase date. If the purchase notice is given and withdrawn prior to the
relevant purchase date, we will not be obligated to purchase the related notes.
Also, as described in the "Risk Factors" section of this prospectus under the
caption "-- We may be unable to repay or purchase the principal amount of the
notes," we may not have funds sufficient to purchase notes when we are required
to do so.
The purchase price payable will be equal to 100% of the principal amount
of the notes to be purchased plus accrued and unpaid interest (including
additional interest and additional amounts), if any, to, but not including, the
purchase date. If a holder elects to
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require us to purchase such holders notes on March 15, 2011, we must pay the
purchase price in cash. If a holder elects to require us to purchase such
holders notes on March 15, 2014 or March 15, 2019, we may pay the purchase price
in cash, in shares of our common stock, or in any combination of cash and common
stock; provided, however, that we must pay any accrued and unpaid interest
(including additional interest and additional amounts), if any, on such notes in
cash. However, we have the right to amend the indenture without the consent of
the holder of any note to require us to settle our purchase obligation in cash.
If we elect to pay the purchase price, in whole or in part, in shares of common
stock, the number of shares to be delivered in exchange for the portion of the
purchase price to be paid in our common stock will be equal to that portion of
the purchase price divided by 95% of the average closing sale prices of our
common stock for the five trading days ending on the third business day prior to
the applicable purchase date (appropriately adjusted to take into account the
occurrence of certain events that would result in an adjustment of the
conversion rate with respect to our common stock). We will not, however, deliver
fractional shares in purchases using shares of our common stock as
consideration. Holders who would otherwise be entitled to receive fractional
shares will instead receive cash in an amount equal to the market price of a
share of common stock multiplied by such fraction.
Because the market price of our common stock will be determined prior to
the applicable purchase date, holders bear the market risk that our common stock
will decline in value between the date the market price is calculated and the
purchase date.
On or before the 22nd business day prior to each purchase date, we will
provide to the trustee, the paying agent and to all holders of the notes at
their addresses shown in the register of the registrar, and to beneficial owners
as required by applicable law, a notice stating, among other things:
- the purchase price;
- whether we will pay the purchase price of the notes in cash, shares
of our common stock, or both (in which case the relative percentage
will be specified);
- if we elect to pay all or a portion of the purchase price in shares
of our common stock, the method by which we are required to
calculate the market price of the common stock;
- the name and address of the paying agent and the conversion agent;
and
- the procedures that holders must follow to require Willbros to
purchase their notes.
Simultaneously with providing such notice, we will publish a notice
containing this information in a newspaper of general circulation in the City of
New York or through such other public medium as we may use at that time, and
publish such information on our corporate website.
Our right to elect to purchase notes, in whole or in part, with shares of
our common stock is subject to various conditions, including:
- registration of the shares of our common stock to be issued upon
purchase under the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act'), if required;
- qualification or registration of the shares of our common stock to
be issued upon purchase under applicable state securities laws, if
necessary, or the availability of an exemption therefrom; and
- listing of our common stock on a national securities exchange or
quoted on an inter-dealer quotation system of any registered
national securities association.
If these conditions are not satisfied by a purchase date, we will pay the
purchase price of the notes to be purchased 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 holders the required notice, except as
described in the preceding sentence.
A notice electing to require us to purchase a holder's notes must state:
- the relevant purchase date;
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- if certificated notes have been issued, the certificate numbers of
the notes;
- the portion of the principal amount of notes to be purchased, in
integral multiples of $1,000; and
- that the notes are to be purchased by us pursuant to the applicable
provisions of the notes and the indenture.
If the notes are not in certificated form, a holder's notice must comply with
appropriate DTC procedures.
No notes may be purchased at the option of holders if there has occurred
and is continuing an event of default other than an event of default that is
cured by the payment of the purchase price of the notes.
A holder may withdraw any purchase notice in whole or in part by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the purchase date. The notice of
withdrawal must state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the certificate numbers of
the withdrawn notes; and
- the principal amount, if any, which remains subject to the purchase
notice.
If the notes are not in certificated form, a holder's notice must comply
with appropriate DTC procedures.
A holder must either effect book-entry transfer or deliver the notes,
together with necessary endorsements, to the office of the paying agent after
delivery of the purchase notice to receive payment of the purchase price. A
holder will receive payment promptly following the later of the purchase date or
the time of book-entry transfer or the delivery of the notes. If the paying
agent holds money or shares of our common stock (as applicable) sufficient to
pay the purchase price of the notes on the business day following the purchase
date, then:
- the notes will cease to be outstanding and interest (including
additional interest and additional amounts), if any, will cease to
accrue (whether or not book-entry transfer of the notes is made or
whether or not the note is delivered to the paying agent); and
- all other rights of the holder will terminate (other than the right
to receive the purchase price upon delivery or transfer of the
notes).
PURCHASE OF NOTES AT A HOLDER'S OPTION UPON A FUNDAMENTAL CHANGE
In the event of a fundamental change, a holder will have the right to
require us to purchase for cash all or any part of the notes after the
occurrence of a fundamental change at a purchase price equal to 100% of the
principal amount and any accrued and unpaid interest (including additional
interest and additional amounts), if any, up to, but not including, the
fundamental change purchase date. Notes submitted for purchase must be $1,000
principal amount or an integral multiple thereof.
On or before the 20th calendar day after the occurrence of a fundamental
change, we will provide to all holders of the notes and the trustee and paying
agent a notice of the occurrence of the fundamental change and of the resulting
purchase right. Such notice shall state, among other things, the procedures that
holders must follow to require us to purchase the notes and the date of the
fundamental change.
Simultaneously with providing such notice, we will publish a notice
containing this information in a newspaper of general circulation in the City of
New York or through such other public medium as we may use at that time, publish
such information on our corporate website and notify the trustee.
To exercise the purchase right, a holder must deliver, on or before the
20th business day after the date of our notice of a fundamental change, subject
to extension to comply with applicable law, the notes to be purchased, duly
endorsed for transfer, together with a written purchase notice and the form
entitled "Form of Fundamental Change Purchase Notice" on the reverse side of the
notes duly completed, to the paying agent. The purchase notice must state:
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- the relevant purchase date;
- if certificated notes have been issued, the certificate numbers of
the notes;
- the portion of the principal amount of notes to be purchased, in
integral multiples of $1,000; and
- that the notes are to be purchased by us pursuant to the applicable
provisions of the notes and the indenture.
If the notes are not in certificated form, a holder's notice must comply with
appropriate DTC procedures.
A holder may withdraw any purchase notice (in whole or in part) by a
written notice of withdrawal delivered to the paying agent prior to the close of
business on the business day prior to the fundamental change purchase date. The
notice of withdrawal shall state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the certificate numbers of
the withdrawn notes; and
- the principal amount, if any, which remains subject to the purchase
notice.
If the notes are not in certificated form, a holder's notice of withdrawal
must comply with appropriate DTC procedures.
We will be required to purchase the notes no later than 35 business days
after the date of our notice of the occurrence of the relevant fundamental
change, subject to extension to comply with applicable law. A holder will
receive payment of the fundamental change purchase price promptly following the
later of the fundamental change purchase date or the time of book-entry transfer
or the delivery of the notes. If the paying agent holds cash sufficient to pay
the fundamental change purchase price of the notes on the business day following
the fundamental change purchase date, then:
- the notes will cease to be outstanding and interest (including
additional interest and additional amounts), if any, will cease to
accrue (whether or not book-entry transfer of the notes is made or
whether or not the note is delivered to the paying agent); and
- all other rights of the holder will terminate (other than the right
to receive the fundamental change purchase price and any previously
accrued and unpaid interest (including additional interest and
additional amounts), if any, upon delivery or transfer of the
notes).
A fundamental change will be deemed to have occurred if any of the
following occurs:
- any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 of the Exchange Act, except
that a person shall be deemed to have beneficial ownership of all
shares that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of our total outstanding
voting stock;
- during any period of two consecutive years, individuals who at the
beginning of such period constituted our board of directors
(together with any new directors whose election to such board or
whose nomination for election by our stockholders, was approved by a
vote of at least 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose
election or nomination for election was previously so approved)
cease for any reason to constitute a majority of such board of
directors then in office;
- we consolidate with or merge with or into any person or convey,
transfer, sell, or otherwise dispose of or lease all or
substantially all of our properties and assets to any person, or any
corporation consolidates with or merges into or with us, in any such
event pursuant to a transaction in which our outstanding voting
stock is changed into or exchanged for cash, securities or other
property, other than any such transaction where our outstanding
voting stock is not changed or exchanged at all (except to the
extent necessary to reflect a change in our jurisdiction of
incorporation), or where (A) our outstanding voting stock is changed
into or exchanged for cash, securities and other property (other
than equity interests of the surviving corporation) and (B) our
stockholders immediately before such transaction own, directly or
indirectly, immediately following such transaction, more than 50% of
the total outstanding voting stock of the surviving corporations;
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- we are liquidated or dissolved or adopt a plan of liquidation or
dissolution other than in a transaction which complies with the
provisions described under "Consolidation, Merger and Sale of
Assets:, or
- the notes are no longer convertible into common stock that is listed
on the New York Stock Exchange or another established national
securities exchange or traded on an established automated
over-the-counter trading market in the United States.
However, notwithstanding the foregoing, a fundamental change will not be
deemed to have occurred if either:
(1) the closing sale price of our common stock for each of at least
five trading days within:
- the period of ten consecutive trading days immediately
after the later of the fundamental change or the public
announcement of the fundamental change, in the case of a
fundamental change resulting solely from a fundamental
change under the first bullet point above; or
- the period of ten consecutive trading days immediately
preceding the fundamental change, in the case of a
fundamental change under the second, third and fourth
bullet points above;
is at least equal to 105% of the quotient where the numerator is the
principal amount of a note and the denominator is the conversion rate in
effect on each of those five trading days; or
(2) in the case of a merger or consolidation described in the third
bullet point above, at least 95% of the consideration, excluding cash
payments for fractional shares and cash payments pursuant to dissenters'
approval rights, in the merger or consolidation constituting the
fundamental change, consists of common stock traded on a U.S. national
securities exchange or quoted on the Nasdaq National Market (or which will
be so traded or quoted when issued or exchanged in connection with such
fundamental change) and as a result of such transaction or transactions
the notes become convertible solely into such common stock, excluding any
cash payments for fractional shares.
For purposes of this fundamental change definition, "voting stock" means
stock of the class or classes pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the board of directors, managers or trustees of a corporation (irrespective
of whether or not at the time stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
The definition of fundamental change includes a phrase relating to the
conveyance, transfer, sale, lease or other disposition of "all or substantially
all" of our properties and assets. There is no precise, established definition
of the phrase "substantially all" under the laws of the State of New York, which
governs the indenture and the notes, or under the laws of Panama, our
jurisdiction of incorporation. Accordingly, a holder's ability to require us to
repurchase its notes as a result of a conveyance, transfer, sale, lease or other
disposition of less than all of our properties and assets may be uncertain.
Pursuant to the indenture, we will:
- comply with the provisions of Rule 13e-4 and Rule 14e-1, if
applicable, under the Exchange Act;
- file a Schedule TO or any successor or similar schedule if required
under the Exchange Act; and
- otherwise comply with all U.S. federal and state securities laws in
connection with any offer by us to purchase the notes upon a
fundamental change.
This fundamental change purchase feature may make more difficult or
discourage a takeover of us and the removal of incumbent management. However, we
are not aware of any specific effort to accumulate shares of our capital stock
with the intent to obtain control of us by means of a merger, tender offer,
solicitation or otherwise. In addition, the fundamental change purchase feature
is not part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the fundamental change purchase feature is a result of
negotiations between us and the initial purchasers.
We could, in the future, enter into certain transactions, including
recapitalizations, which would not constitute a fundamental change but would
increase the amount of debt outstanding or otherwise adversely affect a holder.
Neither we nor our subsidiaries are
35
prohibited under the indenture from incurring additional debt. The incurrence of
significant amounts of additional debt could adversely affect our ability to
service our debt, including the notes, and satisfy our obligation to purchase
the notes upon a fundamental change. See "Risk Factors -- There are no
restrictive covenants in the notes indenture relating to our ability to incur
future indebtedness or complete other financial transactions."
Our ability to purchase notes may be limited by the terms of our then
existing indebtedness or financing agreements. In the event that a fundamental
change occurs at a time when we are directly or indirectly prohibited from
purchasing the notes, we will within 30 days following any fundamental change:
- obtain consents under all indebtedness required to permit the
purchase of the notes tendered under a fundamental change purchase
notice; or
- repay in full all indebtedness and terminate all commitments under
all indebtedness, the terms of which would prohibit the purchase of
the notes tendered in connection with a fundamental change purchase
notice.
Our ability to purchase notes upon the occurrence of a fundamental change
is subject to important limitations. If a fundamental change were to occur, we
may not have sufficient funds, or be able to arrange financing, to pay the
fundamental change purchase price for the notes tendered by holders. In
addition, we currently have outstanding indebtedness and we may in the future
incur debt that has similar fundamental change provisions that permit holders of
such debt to accelerate or require us to purchase such debt upon the occurrence
of events similar to a fundamental change. Any failure by Willbros to purchase
the notes when required following a fundamental change would result in an event
of default under the indenture. Any such default may, in turn, cause a default
under our other debt. In addition, our ability to purchase the notes for cash
may be limited by restrictions on our ability to obtain funds for such purchase
through dividends from our subsidiaries and/or other provisions in agreements
governing our other debt and that of our subsidiaries.
CONSOLIDATION, MERGER AND SALES OF ASSETS
The indenture provides that we may not consolidate with or merge into any
other person or convey, transfer, sell, lease or otherwise dispose of all or
substantially all of our properties and assets to another person unless, among
other things:
- the resulting, surviving or transferee person is a corporation
organized and existing under the laws of the United States, any
state thereof or the District of Columbia, Panama or the Netherlands
(even if a subsidiary of a foreign entity);
- such person assumes all of our obligations under the notes, the
indenture and the registration rights agreement under a supplemental
indenture in a form reasonably satisfactory to the trustee;
- no event of default exists under the indenture and is continuing
immediately before and after giving effect to such transaction; and
- we have delivered to the trustee an officers' certificate and an
opinion of counsel with respect to such consolidation, merger or
disposition and any supplemental indenture executed in connection
with such transaction, as provided for in the indenture.
Upon any such consolidation, merger or disposition in accordance with the
preceding paragraph, the successor corporation formed by such consolidation or
into which we are merged or to which such conveyance, sale, lease, transfer or
other disposition is made will succeed to, and be substituted for, and may
exercise our right and power, under the indenture with the same effect as if
such successor had been named as us in the indenture, and thereafter (except in
the case of a lease) the predecessor corporation will be relieved of all further
obligations and covenants under the indenture, the notes and the registration
rights agreement.
This covenant includes a phrase relating to the conveyance, transfer,
sale, lease or other disposition of "all or substantially all" of our properties
and assets. There is no precise, established definition of the phrase
"substantially all" under the laws of the State of New York, which governs the
indenture and the notes, or under the laws of the Panama, our jurisdiction of
incorporation. Accordingly, the effectiveness of this covenant in the event of a
conveyance, transfer, sale, lease or other disposition of less than all of our
properties and assets may be uncertain.
An assumption by any person of our obligations under the notes and the
indenture might be deemed for U.S. federal income tax purposes to be an exchange
of the notes for new notes by the holders thereof, resulting in recognition of
gain or loss for such purposes
36
and possibly other adverse tax consequences to the holders. Holders should
consult their own tax advisors regarding the tax consequences of such an
assumption.
EVENTS OF DEFAULT
Each of the following constitutes an event of default under the indenture:
- our failure to pay principal of any note when due and payable,
whether at maturity or upon acceleration;
- our failure to pay any accrued unpaid interest (including additional
interest and additional amounts) on the notes, if any, when due and
payable, and continuance of such default for a period of 30 days;
- our failure to convert notes into shares of common stock (or cash or
a combination of cash and common stock if we elect) upon exercise of
a holder's conversion right in accordance with the terms of the
indenture;
- our failure to redeem notes after we have exercised our redemption
option;
- our failure to provide notice in the event of a fundamental change;
- our failure to purchase all or any part of the notes in accordance
with the provisions of "-- Purchase of Notes at a Holder's Option"
or "-- Purchase of Notes at a Holder's Option Upon a Fundamental
Change";
- our failure to perform or observe any other term, covenant or
agreement contained in the notes or the indenture for a period of 60
calendar days after written notice of such failure has been given to
us by the trustee or to us and the trustee by the holders of at
least 25% in aggregate principal amount of the notes then
outstanding;
- default by Willbros or any of our subsidiaries under any credit
agreement, mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
indebtedness of Willbros or any of our subsidiaries for money
borrowed whether such indebtedness now exists, or is created after
the date of the indenture, which default:
- involves the failure to pay the principal of or any premium or
interest on such indebtedness when such indebtedness becomes
due and payable at the stated maturity thereof, and such
default continues after any applicable grace period, or
- results in the acceleration of such indebtedness prior to its
stated maturity, and
- in each case, the principal amount of any such indebtedness,
together with the principal amount of any other such
indebtedness so unpaid at its stated maturity or the stated
maturity of which has been so accelerated, aggregates $10.0
million or more;
- there is a failure by us or any of our subsidiaries to pay final
judgments not covered by insurance aggregating in excess of $7.5
million, which judgments are not paid, discharged or stayed for a
period of 60 calendar days; and
- certain events of bankruptcy, insolvency, liquidation or similar
reorganization with respect to Willbros or any of our significant
subsidiaries.
Pursuant to the indenture, the trustee shall, within 90 calendar days of
the occurrence of a default known to the trustee (or within 15 calendar days
after it is known to the trustee, if later), give to the registered holders of
the notes notice of all uncured defaults known to it, but the trustee shall be
protected in withholding such notice if it, in good faith, determines that the
withholding of such notice is in the interests of such registered holders,
except in the case of a default under the first, second, fourth or sixth bullets
above.
If certain events of default specified in the last bullet point above
shall occur with respect to us and be continuing, then automatically the
principal amount of the notes plus accrued and unpaid interest (including
additional interest and additional amounts), if any, through such date shall
become immediately due and payable. If any other event of default shall occur
and be continuing (the default not having been cured or waived as provided under
"-- Modification and Waiver" below), the trustee or the holders of at least 25%
in aggregate principal amount of the notes then outstanding may declare the
principal amount of the notes due and payable plus accrued and unpaid interest
(including additional interest and additional amounts), if any; and thereupon
the trustee may, at its
37
discretion, proceed to protect and enforce the rights of the holders of notes by
appropriate judicial proceedings. Such declaration accelerating the notes and
the amounts due thereunder may be rescinded with the consent of the holders of a
majority in aggregate principal amount of the notes then outstanding if (1)
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction and (2) all existing events of default, other than the
nonpayment of the principal of, interest, additional amounts and additional
interest, if any, on the notes that have become due solely by such declaration
of acceleration, have been cured or waived.
The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care, to
be indemnified by the holders of notes before proceeding to exercise any right
or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
notes then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred upon the trustee.
Except with respect to a default in the payment of the principal or any
accrued and unpaid interest and additional interest and additional amounts, if
any, on any note, redemption price or fundamental change purchase price of any
note, or in respect of a failure to convert any note into common stock (or cash
or a combination of cash and common stock) as required, or in respect of a
covenant or provision which under the indenture cannot be modified or amended
without the consent of the holder of each note outstanding, the holders of not
less than a majority in aggregate principal amount of the notes outstanding may
on behalf of the holders of all the notes waive any past default under the
indenture.
We will be required to furnish annually to the trustee a statement as to
the fulfillment of our obligations under the indenture and as to any default in
the performance of such obligations.
MODIFICATION AND WAIVER
CHANGES REQUIRING APPROVAL OF EACH AFFECTED HOLDER
The indenture (including the terms and conditions of the notes) cannot be
modified or amended without the consent or the affirmative vote of the holder of
each note affected by such change (in addition to the consent or the affirmative
vote of the holders of at least a majority in aggregate principal amount of the
notes at the time outstanding) to:
- change the maturity of any note or the payment date of any
installment of interest or additional interest or additional
amounts, if any, payable on any notes;
- reduce the principal amount, redemption price or purchase price of,
or interest (including additional interest and additional amounts),
if any, on, any note;
- change the currency of payment of principal, redemption price or
purchase price of, or interest (including additional interest and
additional amounts), if any, on, any note from U.S. dollars;
- impair or adversely affect the manner of calculation or rate of
accrual of interest (including additional interest and additional
amounts), if any, on any note,
- impair the right to institute suit for the enforcement of any
payment on or with respect to, or conversion of, any note;
- modify our obligation to maintain a paying agent, registrar and
conversion agent in the City of New York;
- impair or adversely affect the conversion rights or purchase rights
of any holders of notes;
- modify the redemption provisions of the indenture in a manner
adverse to the holders of notes;
- reduce the percentage in aggregate principal amount of notes
outstanding necessary to modify or amend the indenture; or
- reduce the percentage in aggregate principal amount of notes
outstanding necessary to waive past defaults.
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CHANGES REQUIRING MAJORITY APPROVAL
The indenture (including the terms and conditions of the notes) may be
modified or amended, subject to the provisions described above, with the consent
of the holders of at least a majority in aggregate principal amount of the notes
at the time outstanding.
CHANGES REQUIRING NO APPROVAL
The indenture (including the terms and conditions of the notes) may be
modified or amended by us and the trustee, without the consent of the holder of
any note, to, among other things:
- add to our covenants for the benefit of the holders of notes;
- surrender any right or power conferred upon us;
- provide for conversion rights of holders of notes if any
reclassification or change of our common stock or any consolidation,
merger or sale of all or substantially all of our properties and
assets occurs;
- provide for the assumption of our obligations to the holders of
notes in the case of a merger, consolidation, conveyance, transfer,
sale, lease or other disposition described under "-- Consolidation,
Merger and Sale of Assets;"
- increase the conversion rate, provided that the increase will not
adversely affect the interests of the holders of notes;
- require us to settle our conversion obligation or our purchase
obligation in cash with respect to the principal amount of notes
surrendered for conversion or purchase;
- comply with the requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust
Indenture Act of 1939, as amended;
- make any changes or modifications necessary in connection with the
registration of the notes under the Securities Act as contemplated
in the registration rights agreement; provided that such change or
modification does not, in the good faith opinion of our board of
directors, adversely affect the interests of the holders of notes in
any material respect;
- cure any ambiguity or correct or supplement any inconsistent or
otherwise defective provision contained in the indenture or make any
other provision with respect to matters or questions arising under
the indenture which we may deem necessary or desirable and which
shall not be inconsistent with provisions of the indenture; provided
that such modification or amendment does not, in the good faith
opinion of our board of directors, adversely affect the interests of
the holders of notes in any material respect;
- to evidence the succession of another person to us or any other
obligor upon the notes, and the assumption by any such successor of
the covenants of us or such other obligor under the indenture and in
the notes, in each case in compliance with the provisions of the
indenture; or
- to evidence and provide the acceptance of the appointment of a
successor trustee under the indenture.
WAIVER
The holders of a majority in aggregate principal amount of the notes
outstanding may waive compliance with certain provisions of the indenture
relating to the notes, unless (1) we fail to pay principal or interest
(including additional interest and additional amounts), if any, on any note when
due, (2) we fail to convert any note into common stock as required by the
indenture, or (3) we fail to comply with any of the provisions of the indenture
that would require the consent of the holders of each outstanding note.
Any notes held by us or by any person directly or indirectly controlling
or controlled by or under direct or indirect common control with us shall be
disregarded (from both the numerator and denominator) for purposes of
determining whether the holders of a majority in principal amount of the
outstanding notes have consented to a modification, amendment or waiver of the
terms of the indenture.
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PAYMENT OF ADDITIONAL AMOUNTS
Unless otherwise required by Panamanian law, we will not deduct or
withhold from payments made with respect to the notes on account of any present
or future taxes, duties, levies, imposts, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of any political subdivisions
or taxing authorities in Panama having the power to tax. In the event that we
are required to withhold or deduct on account of any Panamanian taxes due from
any payment made under or with respect to the notes, we will pay additional
amounts so that the net amount received by each holder of notes will equal the
amount that the holder would have received if the Panamanian taxes had not been
required to be withheld or deducted. The amounts that we are required to pay to
preserve the net amount receivable by the holders of the notes are referred to
as "additional amounts."
Also, additional amounts will not be payable with respect to a payment
made to a holder of the notes to the extent:
- that any Panamanian taxes would not have been so imposed but for the
existence of any present or former connection between the holder and
Panama other than the mere receipt of the payment, the acquisition,
ownership or disposition of such notes or the exercise or
enforcement of rights under the notes or the indenture;
- of any estate, inheritance, gift, sales, transfer or personal
property taxes imposed with respect to the notes, except as
described below or as otherwise provided in the indenture;
- that any such Panamanian taxes would not have been imposed but for
the presentation of the notes, where presentation is required, for
payment on a date more than 30 days after the date on which the
payment became due and payable or the date on which payment thereof
is duly provided for, whichever is later, except to the extent that
the beneficiary or holder thereof would have been entitled to
additional amounts had the notes been presented for payment on any
date during such 30-day period; or
- that the holder would not be liable or subject to such withholding
or deduction of Panamanian taxes but for the failure to make a valid
declaration of non-residence or other similar claim for exemption,
if:
- the making of the declaration or claim is required or imposed
by statute, treaty, regulation, ruling or administrative
practice of the relevant taxing authority as a precondition to
an exemption from, or reduction in, the relevant taxes; and
- at least 60 days prior to the first payment date with respect
to which we shall apply this fourth bullet point, we shall
have notified all holders of the notes in writing that they
shall be required to provide this declaration or claim.
If we elect to redeem all of the notes as a result of our becoming
obligated to pay additional amounts, as described above, holders that have
elected that their notes will not be subject to such tax redemption will not be
entitled to receive additional amounts with respect to payments by us following
the applicable redemption date.
We will also:
- withhold or deduct such Panamanian taxes as required;
- remit the full amount of taxes deducted or withheld to the relevant
taxing authority in accordance with all applicable laws;
- use reasonable efforts to obtain from each relevant taxing authority
imposing the taxes certified copies of tax receipts evidencing the
payment of any taxes deducted or withheld; and
- upon request, make available to the holders of the notes, within 60
days after the date the payment of any taxes deducted or withheld is
due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by us and, notwithstanding our efforts to
obtain the receipts, if the same are not obtainable, other evidence
of such payments.
In addition, we will pay any stamp, issue, registration, documentary or
other similar taxes and duties, including interest, penalties and additional
amounts with respect thereto, payable in Panama or the United States or any
political subdivision or taxing authority of or in the foregoing with respect to
the creation, issue, offering, enforcement, redemption or retirement of the
notes.
40
At least 30 calendar days prior to each date on which any payment under or
with respect to the notes is due and payable, if we are obligated to pay
additional amounts with respect to such payment, we will deliver to the trustee
an officers' certificate stating the fact that such additional amounts will also
be payable, the amounts so payable and such other information as is necessary to
enable the trustee to pay such additional amounts to holders of the notes on the
payment date.
If payments with respect to the notes become subject generally to the
taxing jurisdiction of any Territory or any political subdivision or taxing
authority having power to tax, other than or in addition to Panama or any
political subdivision or taxing authority in Panama having the power to tax,
immediately upon becoming aware thereof we will notify the trustee of such
event, and we will pay any additional amounts in respect thereof on terms
corresponding to the terms of the foregoing provisions of this "-- Payment of
Additional Amounts" section with the substitution for (or, as the case may be,
in addition to) the references herein to Panama or any political subdivision or
taxing authority in Panama having the power to tax of references to that other
or additional Territory or any political subdivision or taxing authority in such
Territory having the power to tax to whose taxing jurisdiction such payments
shall have become subject as aforesaid. The term "Territory" means for this
purpose any jurisdiction in which we are incorporated or in which we have our
place of central management or central control.
In the event that we are required to pay additional amounts with respect
to a payment made to a holder of the notes, we may elect to redeem all of the
notes for cash as described in "-- Redemption for Taxation Reasons."
REGISTRATION RIGHTS
We and the initial purchasers entered into a registration rights agreement
for the benefit of the holders of the notes. Pursuant to the registration rights
agreement, we will, at our expense use our reasonable best efforts to keep the
shelf registration statement of which this prospectus is a part effective until
the earliest of:
- two years after the last date of original issuance of any of the
notes;
- the date on which the holders of the notes and common stock issuable
upon conversion of the notes that are not affiliates of Willbros are
able to sell all such securities immediately without restriction in
accordance with the provisions of Rule 144(k) under the Securities
Act;
- the date when all of the notes and common stock issuable upon
conversion of the notes of those holders that complete and deliver
the selling securityholder election and questionnaire described
below are registered under the shelf registration statement of which
this prospectus is a part and disposed of in accordance with such
shelf registration statement; and
- the date when all of the notes and common stock issuable upon
conversion of the notes have ceased to be outstanding (whether as a
result of repurchase and cancellation, conversion or otherwise) or
have been disposed of in accordance with the shelf registration
statement.
We have filed the registration statement of which this prospectus is a
part to meet our obligations under the registration rights agreement. We
delivered a notice and questionnaire to each holder which was to be completed
and delivered by each holder interested in selling their notes and common stock
pursuant to the initial registration statement of which this prospectus is a
part. In order to sell the notes or common stock issuable upon conversion of the
notes upon effectiveness of the initial registration statement of which this
prospectus is a part, a holder must have completed and delivered the
questionnaire to us by the 20th day after receipt of the questionnaire. We
agreed in the registration rights agreement to give notice to all holders of the
filing and effectiveness of the registration statement.
After effectiveness of the initial shelf registration statement of which
this prospectus is a part, upon our receipt of a completed and signed election
and questionnaire from a holder, we will prepare and file (a) a prospectus
supplement as soon as practicable or (b) if required, a post-effective amendment
to the shelf registration statement of which this prospectus is a part or an
additional shelf registration statement as soon as reasonably practicable after
the end of each fiscal quarter. Accordingly, each holder that submits a
completed and signed election and questionnaire after the initial deadline may
experience delay in being named as a selling securityholder in the registration
statement of which this prospectus is a part and may not deliver a prospectus in
connection with the resale of such holder's notes or common stock issued upon
conversion of the notes until such holder is named as a selling securityholder
in the registration statement.
41
We cannot assure you that we will be able to maintain an effective and
current registration statement as required. The absence of such a registration
statement may limit a holder's ability to sell such notes and/or shares of
common stock issuable upon conversion of such notes or adversely affect the
price at which such securities can be sold.
We will:
- provide to each holder for whom a shelf registration statement was
filed copies of the prospectus that is a part of such shelf
registration statement;
- notify each such holder when a shelf registration statement has
become effective; and
- take certain other actions as are required to permit unrestricted
resales of the notes and common stock issuable upon conversion of
the notes.
Each holder who sells securities pursuant to the shelf registration
statement generally will be:
- required to be named as a selling securityholder in the related
prospectus;
- required to deliver a prospectus to the purchaser;
- subject to certain of the civil liability provisions under the
Securities Act in connection with the holder's sales; and
- bound by the provisions of the registration rights agreement that
are applicable to the holder (including certain indemnification
rights and obligations).
We may suspend the holders' use of the prospectus for a period not to
exceed 30 calendar days (subject, in certain circumstances to an extension to 45
days) in any 90 calendar day period, and not to exceed an aggregate of 120
calendar days in any 360 calendar day period, if:
- the prospectus would, in our judgment, contain a material
misstatement or omission as a result of an event that has occurred
and is continuing; and
- we determine in good faith that the disclosure of this material
non-public information would have a material adverse effect on us
and our subsidiaries taken as a whole.
However, if the disclosure relates to a previously undisclosed proposed or
pending material business transaction, the disclosure of which would impede our
ability to consummate such transaction, we may extend the suspension period from
30 calendar days to 45 calendar days. We need not specify the nature of the
event giving rise to a suspension in any notice to holders of the notes of the
existence of such a suspension.
Upon the resale of notes or common stock issued upon conversion of the
notes, each selling securityholder will be required to deliver a notice of such
sale to the trustee and us. The notice will, among other things:
- identify the sale as a transfer pursuant to the shelf registration
statement;
- certify that the prospectus delivery requirements, if any, of the
Securities Act have been complied with; and
- certify that the selling securityholder and the aggregate principal
amount of the notes and/or number of shares of our common stock
owned by such holder are identified in the related prospectus in
accordance with the applicable rules and regulations under the
Securities Act.
If:
- the initial shelf registration statement of which this prospectus is
a part has not been declared effective by the SEC on or prior to 180
calendar days after March 12, 2004;
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- the shelf registration statement is filed and declared effective but
thereafter ceases to be effective or usable in connection with
resales of notes and common stock issuable upon conversion of the
notes and we do not cause the shelf registration statement to become
effective or usable within five business days by filing a
post-effective amendment, prospectus supplement or report pursuant
to the Exchange Act;
- if applicable, we do not terminate the suspension period by the 30th
or 45th calendar day, as the case may be, or a suspension period
exceeds an aggregate of 120 calendar days in any 360 calendar day
period; or
- subsequent to the effectiveness of the initial registration
statement of which this prospectus is a part, we shall fail to
comply with our obligation to name in the prospectus, as a selling
securityholder, a holder of notes and/or common stock issuable upon
conversion of the notes who has returned a completed and signed
election and questionnaire;
each such event referred to in the bullet points above being referred to as a
"registration default," then additional interest will accrue on the notes from
and including the calendar day following the registration default to but
excluding the earlier of (1) the calendar day on which all registration defaults
have been cured and (2) the date of the shelf registration statement is no
longer required to be kept effective. Additional interest will be paid in cash
semi-annually in arrears, with the first semi-annual payment due on the first
interest payment date following the date on which such additional interest
begins to accrue, and will accrue on the notes at a rate per year equal to 0.25%
for the first 90 calendar day period and 0.50% thereafter of the principal
amount of such notes. If a holder converts some or all of its notes into common
stock during the occurrence of a registration default, the holder will not be
entitled to receive additional interest on such common stock, but will receive,
with respect to the portion of the conversion obligation that we settle in
common stock, 103% of the number of shares of our common stock the holder would
otherwise receive upon conversion in the absence of such registration default.
While holders of notes have the right to specifically enforce our registration
obligations, we will have no other liability for monetary damages with respect
to any of our registration obligations.
FORM, DENOMINATION AND REGISTRATION
DENOMINATION AND REGISTRATION
The notes were issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
GLOBAL NOTES
Notes are evidenced by one or more global notes deposited with the trustee
as custodian for DTC, and registered in the name of Cede & Co. as DTC's nominee.
Record ownership of the global notes may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee,
except as set forth below. A holder may hold its interests in the global notes
directly through DTC if such holder is a participant in DTC, or indirectly
through organizations which are direct DTC participants if such holder is not a
participant in DTC. Transfers between direct DTC participants will be effected
in the ordinary way in accordance with DTC's rules and will be settled in
same-day funds. Holders may also beneficially own interests in the global notes
held by DTC through certain banks, brokers, dealers, trust companies and other
parties that clear through or maintain a custodial relationship with a direct
DTC participant, either directly or indirectly.
So long as Cede & Co., as nominee of DTC, is the registered owner of the
global notes, Cede & Co. for all purposes will be considered the sole holder of
the global notes. Except as provided below, owners of beneficial interests in
the global notes:
- will not be entitled to have certificates registered in their names;
- will not receive or be entitled to receive physical delivery of
certificates in definitive form; and
- will not be considered holders of the global notes.
The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability of an owner
of a beneficial interest in a global security to transfer the beneficial
interest in the global security to such persons may be limited.
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We will wire, through the facilities of the trustee, payments of
principal, accrued interest (including additional interest and additional
amounts), if any, on the global notes to Cede & Co., the nominee of DTC, as the
registered owner of the global notes. None of the Company, the trustee or any
paying agent will have any responsibility or be liable for paying amounts due on
the global notes to owners of beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal,
accrued interest (including additional interest and additional amounts), if any,
on the global notes, to credit participants' accounts on the payment date in
amounts proportionate to their respective beneficial interests in the notes
represented by the global notes, as shown on the records of DTC, unless DTC
believes that it will not receive payment on the payment date. Payments by DTC
participants to owners of beneficial interests in notes represented by the
global notes held through DTC participants will be the responsibility of DTC
participants, as is now the case with securities held for the accounts of
customers registered in "street name."
If a holder would like to convert its notes pursuant to the terms of the
notes, the holder should contact its broker or other direct or indirect DTC
participant to obtain information on procedures, including proper forms and
cut-off times, for submitting those requests.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and other banks, a holder's ability to
pledge its interest in the notes represented by global notes to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interest, may be affected by the lack of a physical certificate.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes, including, without limitation, the presentation of notes for
conversion as described below, only at the direction of one or more direct DTC
participants to whose account with DTC interests in the global notes are
credited and only for the principal amount of the notes for which directions
have been given.
DTC has advised us that DTC is:
- a limited purpose trust company organized under the laws of the
State of New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities for DTC participants and to facilitate
the clearance and settlement of securities transactions between DTC participants
through electronic book-entry changes to the accounts of its participants,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations, such as the initial
purchasers of the notes. Certain DTC participants or their representatives,
together with other entities, own DTC. Indirect access to the DTC system is
available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with, a participant, either
directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among DTC participants, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If (a) DTC is at any time unwilling
or unable to continue as depositary or if at any time ceases to be a "clearing
agency" registered under the Exchange Act and a successor depositary is not
appointed by us within 90 days or (b) an event of default under the indenture
occurs and is continuing and the registrar has received a request from DTC that
the notes be issued in definitive registered form, we will cause notes to be
issued in definitive registered form in exchange for the global notes. None of
Willbros, the trustee or any of their respective agents will have any
responsibility for the performance by DTC or direct or indirect DTC participants
of their obligations under the rules and procedures governing their operations,
including maintaining, supervising or reviewing the records relating to or
payments made on account of beneficial ownership interests in global notes.
According to DTC, the foregoing information with respect to DTC has been
provided to its participants and other members of the financial community for
information purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.
44
TRANSFER AND EXCHANGE
A holder may transfer or exchange the notes only in accordance with the
indenture. 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, assessment or other governmental charge payable in connection therewith. We
are not required to transfer or exchange any note in respect of which a
fundamental change or other purchase notice has been given and not withdrawn by
the holder thereof.
SATISFACTION AND DISCHARGE
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 paying agent or the conversion agent, as the case may be,
after the notes have become due and payable, whether at maturity, any redemption
date, any 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. Such
discharge is subject to terms contained in the indenture.
GOVERNING LAW
The indenture and the notes will be governed by, and construed in
accordance with, the laws of the State of New York.
TRUSTEE, TRANSFER AGENT AND REGISTRAR
JPMorgan Chase Bank, as trustee, has been appointed by us as paying agent,
conversion agent, registrar and custodian with regard to the notes. JPMorgan
Chase Bank or its affiliates may from time to time in the future provide banking
and other services to us in exchange for a fee.
Mellon Investor Services LLC is the transfer agent and registrar for our
common stock.
CALCULATIONS IN RESPECT OF NOTES
Except as otherwise provided in the indenture, we or our agents are
responsible for making all calculations called for under the notes. These
calculations include, but are not limited to, determination of the market price
of our common stock. We or our agents will make all these calculations in good
faith and, absent manifest error, our and their calculations will be final and
binding on holders of notes. We or our agents will provide a schedule of these
calculations to the trustee, and the trustee is entitled to conclusively rely
upon the accuracy of these calculations without independent verification.
PURCHASE AND CANCELLATION OF NOTES
We may, to the extent permitted by law, purchase notes in the open market
or by tender offer at any price or by private agreement. Any notes purchased by
us, to the extent permitted by law, may be reissued or resold or may, at our
option, be surrendered to the trustee for cancellation. Any notes surrendered
for cancellation may not be reissued or resold and will be promptly cancelled.
All notes surrendered for payment, redemption, registration of transfer or
exchange or conversion shall, if surrendered to any person other than the
trustee, be delivered to the trustee. All notes delivered to the trustee shall
be cancelled promptly by the trustee. No notes shall be authenticated in
exchange for any notes cancelled as provided in the indenture.
REPLACEMENT OF NOTES
We will replace mutilated, destroyed, stolen or lost notes at the expense
of the holder upon delivery to the trustee of the mutilated notes, or evidence
of the loss, theft or destruction of the notes satisfactory to us and the
trustee. In the case of a lost, stolen or destroyed note, indemnity satisfactory
to the trustee and us may be required at the expense of the holder of such note
before a replacement note will be issued.
45
CONSENT TO JURISDICTION
The indenture governing the notes will provide that any suit, action or
proceeding with respect to the indenture or the notes may be brought in any New
York state or federal court located in the Borough of Manhattan in the City of
New York, and we will submit to the non-exclusive jurisdiction of such courts.
INDEMNIFICATION FOR FOREIGN CURRENCY JUDGMENTS
Our obligations to any holder of the notes or the trustee shall,
notwithstanding any judgment in a currency (the "judgment currency") other than
United States dollars, be discharged only to the extent that on the first
business day following receipt of any amount in the judgment currency, such
holder of notes or the trustee may, in accordance with normal banking
procedures, purchase United States dollars with the judgment currency in the
City of New York, New York. If the amount of the United States dollars that
could be so purchased is less than the amount originally to be paid to such
holder of notes or the trustee in United States dollars, we agree, as a separate
obligation and notwithstanding such judgment, to pay to such holder of notes or
the trustee the difference, and if the amount of the United States dollars that
could be so purchased exceeds the amount originally to be paid to such holder of
notes or the trustee, such holder of notes or the trustee agrees to pay to or
for our account such excess. The holder of notes or the trustee shall not have
any obligation to pay any such excess as long as a default by us in respect of
our obligations to pay when due any principal of, or interest (including
additional interest and additional amounts), if any, on the notes, or any other
amounts due under the indenture has occurred and is continuing, in which case
such excess may be applied by such holder of notes or the trustee to such
payment obligations.
46
DESCRIPTION OF CAPITAL STOCK
GENERAL
We have 36,000,000 authorized shares of capital stock, consisting of (a)
35,000,000 shares of common stock, par value $0.05 per share; and (b) 1,000,000
shares of Class A preferred stock, par value $0.01 per share.
COMMON STOCK
As of April 30, 2004, 21,016,606 shares of our common stock were
outstanding. All of the outstanding shares of our common stock are fully paid
and non-assessable, and any shares issued upon conversion of the notes offered
hereby will be fully paid and non-assessable. The holders of our common stock
are entitled to one vote for each share of common stock held on all matters
voted upon by stockholders, including the election of directors. Holders of our
common stock have no right to cumulate their votes in the election of directors.
Subject to the rights of any then-outstanding shares of our preferred stock, the
holders of our common stock are entitled to receive dividends as may be declared
in the discretion of the board of directors out of funds legally available for
the payment of dividends. We are subject to restrictions on the payment of
dividends under the provisions of our senior secured credit facility.
The holders of our common stock are entitled to share equally and ratably
in our net assets upon a liquidation or dissolution after we pay or provide for
all liabilities, subject to any preferential liquidation rights of any preferred
stock that at the time may be outstanding. The holders of our common stock have
no preemptive, subscription, conversion or redemption rights. There are no
governmental laws or regulations in the Republic of Panama affecting the
remittance of dividends, interest and other payments to our nonresident
stockholders so long as we continue not to engage in business in the Republic of
Panama.
Our articles of incorporation contain restrictions, subject to the
determination by the board of directors in good faith and in its sole
discretion, on the transfer of any shares of our common stock in order to
prevent us from becoming a "controlled foreign corporation" under United States
tax law. See "-- Anti-Takeover Effects of Provisions of Our Articles of
Incorporation and By-laws."
CLASS A PREFERRED STOCK
As of the date of this prospectus, there were no outstanding shares of our
Class A preferred stock; however, the board of directors has reserved for
issuance pursuant to our Stockholder Rights Plan described below 35,000 shares
of Series A junior participating preferred stock. Class A preferred stock may be
issued from time to time in one or more series, and the board of directors,
without further approval of the stockholders, is authorized to fix the dividend
rates and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund and any other rights, preferences,
privileges and restrictions applicable to each series of Class A preferred
stock.
The specific matters that the board of directors may determine include the
following:
- the designation of each series;
- the number of shares of each series;
- the rate of any dividends;
- whether any dividends will be cumulative or non-cumulative;
- the terms of any redemption;
- the amount payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of our
company;
- rights and terms of any conversion or exchange;
- restrictions on the issuance of shares of the same series or any
other series; and
- any voting rights.
47
The purpose of authorizing the board of directors to determine these
rights, preferences, privileges and restrictions is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of Class
A preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could:
- decrease the amount of earnings and assets available for
distribution to holders of common stock;
- adversely affect the rights and powers, including voting rights, of
holders of common stock; and
- have the effect of delaying, deferring or preventing a change in
control.
For example, the board of directors, with its broad power to establish the
rights and preferences of authorized but unissued Class A preferred stock, could
issue one or more series of Class A preferred stock entitling holders to vote
separately as a class on any proposed merger or consolidation, to convert Class
A preferred stock into a larger number of shares of common stock or other
securities, to demand redemption at a specified price under prescribed
circumstances related to a change in control, or to exercise other rights
designed to impede a takeover.
STOCKHOLDER RIGHTS PLAN
On April 1, 1999, our Board of Directors approved a rights agreement with
Mellon Investor Services LLC, as rights agent, and declared a distribution of
one preferred share purchase right ("Right") for each outstanding share of
common stock. Each Right, when it becomes exercisable, entitles its registered
holder to purchase one one-thousandth of a share of Series A junior
participating preferred stock ("Series A preferred stock") at a price of $30 per
one one-thousandth of a share.
The Rights are attached to and trade with shares of our common stock.
Currently, the Rights are not exercisable and there are no separate certificates
representing the Rights. If the Rights become exercisable, we will distribute
separate Rights certificates. Until that time and as long as the Rights are
outstanding, any transfer of shares of our common stock will also constitute the
transfer of the Rights associated with those common shares. The Rights will
expire on April 15, 2009, unless we redeem or exchange the Rights before that
date.
The Rights will become exercisable upon the earlier to occur of:
- the public announcement that a person or group of persons has
acquired 15% or more of our common stock, except in connection with
an offer approved by our board of directors; or
- 10 days, or a later date determined by our board of directors, after
the commencement of, or announcement of an intention to commence, a
tender or exchange offer that would result in a person or group of
persons acquiring 15% or more of our common stock.
If any person or group of persons acquire 15% or more of our common stock,
except in connection with an offer approved by our board of directors, each
holder of a Right, except the acquiring person or group, will have the right,
upon exercise of the Right, to receive that number of shares of our common stock
or Series A preferred stock having a value equal to two times the exercise price
of the Right.
In the event that any person or group acquires 15% or more of our common
stock and either (a) we are acquired in a merger or other business combination
in which the holders of all of our common stock immediately prior to the
transaction are not the holders of all of the surviving corporation's voting
power or (b) more than 50% of our assets or earning power is sold or
transferred, then each holder of a Right, except the acquiring person or group,
will have the right, upon exercise of the Right, to receive common shares of the
acquiring company having a value equal to two times the exercise price of the
Right.
The Rights are redeemable in whole, but not in part, by action of the
board of directors at a price of $.005 per Right prior to the earlier to occur
of a person or group acquiring 15% of our common stock or the expiration of the
Rights. Following the public announcement that a person or group has acquired
15% of our common stock, the Rights are redeemable in whole, but not in part, by
action of the board of directors at a price of $.005 per Right, provided the
redemption is in connection with a merger or other business combination
involving our company in which all the holders of our common stock are treated
alike and which does not involve the acquiring person or its affiliates.
48
In the event shares of Series A preferred stock are issued upon the
exercise of the Rights, holders of the Series A preferred stock will be entitled
to receive, in preference to holders of common stock, a quarterly dividend
payment in an amount per share equal to the greater of (a) $10 or (b) 1,000
times the dividend declared per share of common stock. The Series A preferred
stock dividends are cumulative but do not bear interest. Shares of Series A
preferred stock are not redeemable. In the event of liquidation, the holders of
the Series A preferred stock will be entitled to a minimum preferential
liquidation payment of $1,000 per share; thereafter, and after the holders of
the common stock receive a liquidation payment of $1.00 per share, the holders
of the Series A preferred stock and the holders of the common stock will share
the remaining assets in the ratio of 1,000 to 1 (as adjusted) for each share of
Series A preferred stock and common stock so held, respectively. In the event of
any merger, consolidation or other transaction in which the shares of common
stock are exchanged, each share of Series A preferred stock will be entitled to
receive 1,000 times the amount received per share of common stock. These rights
are protected by antidilution provisions.
Each share of Series A preferred stock will have 1,000 votes, voting
together with the common stock. In the event that the amount of accrued and
unpaid dividends on the Series A preferred stock is equivalent to six full
quarterly dividends or more, the holders of the Series A preferred stock shall
have the right, voting as a class, to elect two directors in addition to the
directors elected by the holders of the common stock until all cumulative
dividends on the Series A preferred stock have been paid through the last
quarterly dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.
The stockholder rights plan is designed to deter coercive takeover tactics
that attempt to gain control of our company without paying all stockholders a
fair price. The plan discourages hostile takeovers by effectively allowing our
stockholders to acquire shares of our capital stock at a discount following a
hostile acquisition of a large block of our outstanding common stock and by
increasing the value of consideration to be received by stockholders in
specified transactions following an acquisition.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS
Our articles of incorporation, as amended and restated, and our restated
by-laws contain provisions that might be characterized as anti-takeover
provisions. These provisions may deter or render more difficult proposals to
acquire control of our company, including proposals a stockholder might consider
to be in his or her best interest, impede or lengthen a change in membership of
the board of directors and make removal of our management more difficult.
CLASSIFIED BOARD OF DIRECTORS; REMOVAL OF DIRECTORS; ADVANCE NOTICE PROVISIONS
FOR STOCKHOLDER NOMINATIONS
Our articles of incorporation provide for the board of directors to be
divided into three classes of directors serving staggered three-year terms, with
the numbers of directors in the three classes to be as nearly equal as possible.
Any director may be removed from office but only for cause and only by the
affirmative vote of a majority of the then outstanding shares of stock entitled
to vote on the matter. Any stockholder wishing to submit a nomination to the
board of directors must follow the procedures outlined in our articles of
incorporation. Any proposal to amend or repeal the provisions of our articles of
incorporation relating to the matters contained above in this paragraph requires
the affirmative vote of the holders of 75% or more of the outstanding shares of
stock entitled to vote on the matter.
UNANIMOUS CONSENT OF STOCKHOLDERS REQUIRED FOR ACTION BY WRITTEN CONSENT
Under our restated by-laws, stockholder action may be taken without a
meeting only by unanimous written consent of all of our stockholders.
ISSUANCE OF PREFERRED STOCK
As described above, our articles of incorporation authorize a class of
undesignated Class A preferred stock consisting of 1,000,000 shares. Class A
preferred stock may be issued from time to time in one or more series, and the
board of directors, without further approval of the stockholders, is authorized
to fix the rights, preferences, privileges and restrictions applicable to each
series of Class A preferred stock. The purpose of authorizing the board of
directors to determine these rights, preferences, privileges and restrictions is
to eliminate delays associated with a stockholder vote on specific issuances.
The issuance of Class A preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of our common
stock and, under certain circumstances, make it more difficult for a third party
to gain control of us.
49
RESTRICTIONS ON TRANSFER OF COMMON STOCK
Our articles of incorporation provide for restrictions on the transfer of
any shares of our common stock to prevent us from becoming a "controlled foreign
corporation" under United States tax law. Any purported transfer, including a
sale, gift, assignment, devise or other disposition of common stock, which would
result in a person or persons becoming the beneficial owner of 10% or more of
the issued and outstanding shares of our common stock, is subject to a
determination by our board of directors in good faith, in its sole discretion,
that the transfer would not in any way, directly or indirectly, affect our
status as a non-controlled foreign corporation. The transferee or transferor to
be involved in a proposed transfer must give written notice to our Secretary not
less than 30 days prior to the proposed transfer. In the event of an attempted
transfer in violation of the provisions of our articles of incorporation
relating to the matters contained in this paragraph, the purported transferee
will acquire no rights whatsoever in the transferred shares of common stock.
Nothing in this provision, however, precludes the settlement of any transactions
entered into through the facilities of the New York Stock Exchange. If the board
of directors determines that a transfer has taken place in violation of these
restrictions, the board of directors may take any action it deems advisable to
refuse to give effect to or to prevent the transfer, including instituting
judicial proceedings to enjoin the transfer.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock, as well as the
rights agent under our rights agreement, is Mellon Investor Services LLC.
50
DESCRIPTION OF CREDIT FACILITY
On March 12, 2004, we replaced our prior credit facility with a new
three-year $150.0 million credit facility with availability governed by a
borrowing base determination. The borrowing base is determined monthly based on
the submission of a borrowing base report which calculates the borrowing base as
the combination of certain percentages of our current and fixed assets at the
date of the borrowing base report. Availability under the borrowing base will be
used to support the issuance of letters of credit and for cash borrowings. Cash
borrowings under the facility may not exceed $30.0 million. The amount available
under the credit facility is limited to the lesser of $150.0 million or the
borrowing base. At March 31, 2004, the borrowing base was $98.1 million.
Outstanding advances under the new senior secured credit facility bear
interest payable quarterly at a floating rate based on the base rate as defined
in the credit agreement or, at our option, at a fixed rate for up to six months
based on the Eurodollar market rate ("LIBOR"). Our interest rate increments
above the alternate base rate or LIBOR will vary based on the ratio of our total
debt outstanding to our Adjusted EBITDA, as defined in the credit agreement. In
addition, we will pay a commitment fee ranging from 0.375% to 0.625% per annum
on the unused portion of the commitment.
The new credit facility is secured by a first priority lien on
substantially all of our assets and is guaranteed by all of our operating
subsidiaries. It contains customary covenants, including, among other things:
- maintenance of consolidated tangible net worth;
- maintenance of a fixed charge coverage ratio;
- limitations on the creation of liens;
- limitations on total indebtedness and lease transactions;
- limitations on our ability to make cash payments in respect of the
notes (other than scheduled payments of interest, additional
interest and additional amounts, if any) prior to their stated
maturity, including upon the occurrence of a fundamental change;
- limitations on certain acquisitions, mergers and investments;
- limitations on transactions with affiliates; and
- limitations on changes in business, structure or accounting policy.
The new credit facility includes customary events of default, including,
among other things, and subject to applicable grace periods, if any:
- our failure to make any payment of principal of, or interest on, any
loan under the new credit facility when due and payable;
- breaches of any representations or warranties in any material
respect when made;
- breaches of certain agreements and covenants, including reporting
requirements and negative covenants;
- certain acts of bankruptcy, insolvency or dissolution;
- a default in payment under any other debt of ours (including the
notes) or of our operating subsidiaries in excess of $3 million;
- any judgment or order for the payment of money in excess of $3
million (not otherwise covered by insurance less deductible) is
rendered against us or any of our operating subsidiaries;
- any non-monetary judgment is rendered against us or any of our
operating subsidiaries that could be expected to have a material
adverse effect on us and our subsidiaries, taken as a whole;
- incurrence of a loss of more that $15 million on any one project;
and
- certain change of control events.
51
MATERIAL U.S. FEDERAL AND PANAMANIAN INCOME TAX CONSEQUENCES
The following discussion under "-- U.S. Federal Income Taxation of
Willbros Group, Inc. and Its Subsidiaries," "-- U.S. Federal Income Tax
Considerations Applicable to U.S. Holders" and "-- U.S. Federal Income Tax
Considerations Applicable to Non-U.S. Holders" summarizes the opinion of Sidley
Austin Brown & Wood LLP, our special United States tax counsel, as to certain
material United States federal income tax consequences with respect to the
acquisition, ownership and disposition of notes and our common stock. The
following discussion under "-- Panamanian Tax" constitutes the opinion of
Arias, Fabrega & Fabrega, our Panamanian counsel, as to certain material
Panamanian income tax consequences applicable to us and a holder of notes or our
common stock. We have filed these opinions with the Securities and Exchange
Commission as exhibits to the registration statement related to this prospectus.
See "Where You Can Find More Information."
The following discussion is based upon the tax laws of the United States
and Panama as in effect on the date of this prospectus. This discussion does not
take into account U.S. state or local tax laws, or tax laws of jurisdictions
outside the United States and Panama. This discussion is not tax advice nor does
it purport to be a complete analysis or listing of all the potential tax
consequences of holding notes or our common stock, nor does it purport to
furnish information in the level of detail or with attention to your specific
tax circumstances that would be provided by your own tax advisor. Accordingly,
if you are considering purchasing notes or our common stock, we suggest that you
consult with your own tax advisors as to the United States, Panamanian or other
state, local or foreign tax consequences to you of the acquisition, ownership
and disposition of notes or our common stock.
Sidley Austin Brown & Wood LLP, our special United States tax counsel, is
opining on certain United States federal income tax issues in connection with
this offering. Sidley Austin Brown & Wood LLP has advised us that its opinion is
not binding on the Internal Revenue Service ("IRS") or on any court and that no
assurance can be given that the IRS will not challenge any of the conclusions in
such opinion or that such a challenge would not be successful. Such opinion of
Sidley Austin Brown & Wood LLP relies upon and is premised on the accuracy of
factual statements and representations by us concerning our business and
properties, ownership, organization, sources of income and manner of operation.
The statements made herein with respect to U.S. federal income tax are
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, IRS rulings and judicial decisions now in effect, all of which are
subject to change (possibly, with retroactive effect) or different
interpretations. We have not obtained, nor do we intend to obtain, a ruling from
the IRS with respect to the U.S. federal income tax consequences of acquiring,
owning or disposing of the notes or our common stock.
U.S. FEDERAL INCOME TAXATION OF WILLBROS GROUP, INC. AND ITS SUBSIDIARIES
A foreign corporation that is engaged in the conduct of a trade or
business in the United States is taxable at graduated rates on its income that
is "effectively connected" with such trade or business. For this purpose,
"effectively connected income" includes U.S.-source income other than certain
types of passive income and capital gains, and, if the taxpayer has an office or
other fixed place of business in the United States, certain foreign-source
dividends, interest, rents, royalties and income from the sale of property. The
activities of Willbros Group, Inc. and its non-U.S. subsidiaries are carried out
in a manner that is intended to prevent each of such corporations from being
engaged in the conduct of a trade or business in the United States. Based on
representations made by us and on the assumption that the operations of Willbros
Group, Inc. and its foreign subsidiaries continue to be conducted in the manner
they are presently conducted, Sidley Austin Brown & Wood LLP is of the opinion
that, with exceptions not likely to be material, the income currently earned by
Willbros Group, Inc. and its non-U.S. subsidiaries should not be treated as
effectively connected income subject to U.S. federal income tax even if such
corporations were determined to be engaged in the conduct of a trade or business
in the United States. However, if any material amount of income earned,
currently or historically, by Willbros Group, Inc. or its non-U.S. subsidiaries
from operations outside the United States constituted income effectively
connected to a United States trade or business, and as a result became taxable
in the United States, our consolidated operating results could be materially and
adversely affected.
Our U.S. subsidiaries will be subject to U.S. federal income tax on their
worldwide income regardless of its source, subject to reduction by allowable
foreign tax credits. Moreover, it should be noted that in the event that any of
the United States subsidiaries of Willbros Group, Inc. performs services for
Willbros Group, Inc. or its non-U.S. subsidiaries at rates that are not
commensurate with the standard rates that would be charged to an unrelated party
at arm's length for similar services, the IRS would be able, pursuant to Section
482 of the Code, to allocate additional income to such U.S. subsidiaries to
reflect arm's-length charges for such services.
Distributions by our U.S. subsidiaries to us or to our non-U.S.
subsidiaries may be subject to U.S. withholding tax.
There is no income tax treaty between Panama and the United States.
52
U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS
The following is a summary of certain material U.S. federal income tax
considerations generally applicable to a U.S. holder who acquires notes and
common stock issued upon their conversion. As used in this summary of U.S.
federal income tax considerations, the term "U.S. holder" means a beneficial
holder of a note or common stock that for U.S. federal income tax purposes is
(i) a citizen or resident of the United States, (ii) a corporation, or an entity
treated as a corporation, formed under the laws of the United States or any
state thereof (including the District of Columbia), (iii) an estate, the income
of which is subject to U.S. federal income taxation regardless of its source,
and (iv) in general, a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more "United States persons" have the authority to control all substantial
decisions of the trust.
This summary does not purport to deal with all aspects of U.S. federal
income taxation that may be relevant to a particular U.S. holder in light of the
holder's circumstances (for example, persons subject to the alternative minimum
tax provisions of the Code or a holder whose "functional currency" is not the
U.S. dollar). Also, it is not intended to be wholly applicable to all categories
of U.S. holders, some of which (such as dealers in securities or currencies,
traders in securities that elect to use a mark-to-market method of accounting,
banks, thrifts, regulated investment companies, insurance companies, tax-exempt
organizations and persons holding notes or common stock as part of a hedging or
conversion transaction or straddle or persons deemed to sell notes or common
stock under the constructive sale provisions of the Code) may be subject to
special rules. This summary also does not discuss any aspect of state, local or
foreign law or U.S. federal estate and gift tax law as applicable to U.S.
holders of the notes and common stock. In addition, this discussion is limited
to purchasers of notes who acquire the notes at their original issue price and
who will hold the notes and common stock as "capital assets" (generally, for
investment).
All prospective purchasers of the notes are advised to consult their own
tax advisors regarding the U.S. federal, state, local and foreign tax
consequences of the purchase, ownership and disposition of the notes and the
common stock in their particular situations.
This summary does not consider the U.S. federal income tax consequences of
the holding or the disposition of the notes or common stock by a partnership. If
a partnership (including for this purpose any entity treated as a partnership
for U.S. federal income tax purposes) or other pass-through entity is a
beneficial owner of the notes or common stock, the U.S. federal income tax
treatment of a partner or other owner of a pass-through entity generally will
depend upon the status of the partner or other owner and the activities of the
partnership or other pass-through entity. A holder of the notes or common stock
that is a partnership or other pass-through entity, and its partners or owners,
should consult their individual tax advisors about the U.S. federal income tax
consequences of holding and disposing of the notes and common shares into which
the notes may be converted.
INTEREST ON NOTES
A U.S. holder will be required to recognize as ordinary income any
interest paid or accrued on the notes, in accordance with the U.S. holder's
regular method of U.S. federal income tax accounting. Such interest will be
treated as income from outside the United States but generally will be "passive
income" or, in the case of certain types of U.S. holders, "financial services
income" for U.S. foreign tax credit purposes.
ADDITIONAL PAYMENTS
In certain circumstances, we may be obligated to pay holders of the notes
amounts in excess of stated interest or principal. For example, as more fully
described under "Description of Notes -- Registration Rights," in the event of a
"registration default" we will be required to pay additional interest to holders
of the notes. Although the matter is not free from doubt, we intend to take the
position that the contingency that we will make such additional payments is
"remote" within the meaning of the applicable Treasury regulations and do not
intend to treat the possibility of such payments as causing the notes to be
considered issued with original issue discount or as requiring the notes to be
treated as "contingent payment debt instruments" for U.S. federal income tax
purposes. On that basis, we believe that such additional payments, if any, will
be taxable to a U.S. holder as ordinary income at the time such payments accrue
or are received in accordance with the holder's regular method of accounting for
U.S. federal income tax purposes.
CONVERSION OF NOTES INTO COMMON STOCK
A U.S. holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except with respect to (i) cash received
in lieu of a fractional common share and (ii) common shares that are considered
attributable to accrued but unpaid interest not previously included in gross
income. Cash received in lieu of a fractional common share should generally be
53
treated as a payment in exchange for the fractional common share rather than as
a dividend. Gain or loss recognized on the receipt of cash paid in lieu of a
fractional common share generally will equal the difference between the amount
of cash received and the amount of the adjusted tax basis allocable to the
fractional common share, and will be long-term capital gain or loss if the U.S.
holder will have held the note for more than one year at the time of conversion.
See "-- Sale, Exchange, Redemption or Other Disposition of Notes or Common
Stock," below, for a discussion of the consequences of capital-gain treatment.
The fair market value of common shares that are considered attributable to
accrued but unpaid interest generally will be taxable to the U.S. holder as
interest to the extent not previously included in gross income.
The initial tax basis of common shares received on conversion (other than
common shares attributable to accrued but unpaid interest not previously
included in gross income) will equal the adjusted tax basis of the note
converted, reduced by the portion of adjusted tax basis allocated to any
fractional common share exchanged for cash. The initial tax basis of common
shares attributable to accrued but unpaid interest will be the fair market value
of such common shares. The holding period for the common shares received on
conversion will generally include the period during which the converted note was
held prior to conversion. The holding period for common shares attributable to
accrued but unpaid interest will, however, commence on the day following the
date of conversion.
CONVERSION OF NOTES INTO CASH OR COMMON STOCK AND CASH
As discussed above under "Description of Notes -- Conversion -- Payment
Upon Conversion," we will have the option to deliver cash in lieu of some or all
of the common shares to be delivered upon conversion of the notes. If a U.S.
holder converts a note and we deliver solely cash, the transaction will be
treated for U.S. federal income tax purposes as a redemption of the note, having
the consequences for the holder described below under "-- Sale, Exchange,
Redemption or Other Disposition of Notes or Common Stock."
If a U.S. holder converts a note and we deliver a combination of common
stock and cash, and such cash is not merely received in lieu of a fractional
common share, the U.S. federal income tax treatment to the holder will depend on
whether the note is a "security" for U.S. federal income tax purposes. For U.S.
federal income tax purposes, the transaction will be treated as an exchange of
the note for a combination of cash and common shares. Assuming the note is a
security for U.S. federal income tax purposes, which is likely, a U.S. holder
will be required to recognize the gain (but not loss) realized on this exchange
in an amount equal to the lesser of (i) the gain realized (being the excess, if
any, of the fair market value of the common shares received plus the cash
received over the adjusted tax basis in the note exchanged therefor) and (ii)
the cash received. Such gain generally will be long-term capital gain if the
U.S. holder will have held the note for more than one year at the time of the
exchange. See "-- Sale, Exchange, Redemption or Other Disposition of Notes or
Common Stock" below, for a discussion of the consequences of capital-gain
treatment. The U.S. holder's adjusted tax basis in the common shares received
generally will equal the adjusted tax basis in the note exchanged, decreased by
the cash received and increased by the amount of gain recognized. The U.S.
holder's holding period in the common shares received upon exchange of the note
will include the holding period of the note so exchanged.
If the notes are not treated as securities for U.S. federal income tax
purposes, then the delivery of a combination of common shares and cash upon the
conversion of a note would be treated either as a bifurcated transaction or a
fully taxable transaction. Pursuant to the treatment as a bifurcated
transaction, the U.S. holder would not recognize any income, gain or loss upon
the portion of the note converted into common shares (excluding the shares
attributable to accrued interest), and the cash payment would be treated as
proceeds from the redemption of a portion of the note and taxed in the manner
described under "-- Sale, Exchange, Redemption or Other Disposition of Notes or
Common Stock" below. In such case, the U.S. holder's adjusted tax basis in the
note would be allocated pro rata between the common shares received and the
portion of the note that is treated as redeemed for cash. The holding period for
the common shares received in the conversion would include the holding period
for the note.
In either case, a U.S. holder should be entitled to treat any cash
received in the exchange as applied first to the satisfaction of any accrued but
unpaid interest on the note. U.S. holders should consult their tax advisors
regarding the proper treatment to them of the receipt of a combination of cash
and common stock upon a conversion.
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the notes is subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion Procedures -- Conversion
Rate Adjustments". Certain adjustments (or failures to make adjustments) to the
conversion price of the notes may result in a taxable constructive dividend
distribution to a U.S. holder of a note. This will occur if and to the extent
that certain adjustments in the conversion price, which may occur in limited
circumstances (particularly an adjustment to reflect a taxable dividend to
holders of our common stock), increase the proportionate interest of a U.S.
holder of a note in the fully diluted common
54
shares. The amount of any constructive dividend distribution will be limited to
the amount of our current and accumulated earnings and profits, as determined
for U.S. federal income tax purposes. Because a constructive dividend
distribution may occur whether or not a U.S. holder ever exercises the
conversion privilege, the holder may recognize income even though the holder
does not receive any cash or property as a result of the adjustment (or failure
to adjust). Adjustments to the conversion price made pursuant to a bona fide,
reasonable adjustment formula that has the effect of preventing dilution in the
interest of the holders of the notes, however, will generally not be considered
to result in a constructive dividend distribution.
PURCHASE OF NOTES
If a U.S. holder requires us to purchase a note and we pay the purchase
price in cash, the U.S. holder will have the tax consequences described below
under "-- Sale, Exchange, Redemption or Other Disposition of Notes or Common
Stock."
If a U.S. holder requires us to purchase a note and we elect to pay the
purchase price with common stock, the U.S. holder generally should have the same
tax consequences as if the U.S. holder had converted the note into common stock.
See "-- Conversion of Notes Into Common Stock" above.
If a U.S. holder requires us to purchase a note and we deliver a
combination of common stock and cash in satisfaction of our purchase obligation,
the U.S. holder generally should have the same tax consequences as if the U.S.
holder had converted the note into a combination of common stock and cash. See
"-- Conversion of Notes Into Cash or Common Stock and Cash" above.
SALE, EXCHANGE, REDEMPTION OR OTHER DISPOSITION OF NOTES OR COMMON STOCK
Subject to the passive foreign investment company ("PFIC") rules discussed
below, gain or loss, if any, realized by a U.S. holder on the sale, exchange
(other than a conversion or a purchase for common stock or a combination of cash
and common stock, as discussed above), redemption or other disposition of a note
or common share will generally be subject to U.S. federal income taxation as
capital gain or loss in an amount equal to the difference between the U.S.
holder's adjusted tax basis in the note or common share and the amount realized
on the disposition (other than, in the case of a note, any amount attributable
to accrued but unpaid interest, which will be taxable as ordinary income). A
U.S. holder's adjusted tax basis in a note generally will equal the cost of the
note to such holder less any principal payments received by such holder. A U.S.
holder's adjusted tax basis in a common share acquired through conversion of a
note is discussed above.
Gain or loss realized on the sale, exchange, redemption or other
disposition of a note or common share generally will be long-term capital gain
or loss if at the time of the disposition the note or common share has been held
for more than one year. For non-corporate taxpayers, including individuals, net
long-term capital gains generally are taxed at a lower rate than ordinary income
(generally 15% for most long-term gains recognized in taxable years beginning on
or before December 31, 2008). The deductibility of capital losses may be subject
to limitation. Any gain or loss realized by a U.S. holder on the sale of a note
or a common share will generally constitute U.S. source gain or loss for foreign
tax credit purposes.
DISTRIBUTIONS ON COMMON STOCK
Subject to the PFIC rules discussed below, the gross amount of any
distribution by us with respect to common shares generally will be included in
the gross income of a U.S. holder as dividend income to the extent paid out of
our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. Such dividends will not be eligible for the
dividends-received deduction generally allowed to corporations under the Code.
However, provided that we are not a PFIC, such dividends should be "qualified
dividend income," which, if received by a U.S. holder that is a non-corporate
taxpayer, including an individual, in taxable years beginning on or before
December 31, 2008, is subject to tax at the rates applicable to net long-term
capital gain, discussed above. Qualified dividend income does not include
dividends received on common shares with respect to which the U.S. holder has
not met a minimum holding-period requirement or to the extent the U.S. holder is
obligated to make related payments with respect to substantially similar or
related property (e.g., in a short sale of such shares).
To the extent that the amount of any distribution exceeds our accumulated
earnings and profits and our earnings and profits for the current taxable year,
the distribution will first be treated as a tax-free return of capital to the
extent of the U.S. holder's adjusted tax basis in the common shares and, to the
extent that such distribution exceeds the U.S. holder's adjusted tax basis in
the common shares, will be taxed as a capital gain from the sale or exchange of
the common shares.
55
If we are not a "United States-owned foreign corporation" as defined
below, dividends we pay on the common stock will generally be treated for U.S.
foreign tax credit purposes as foreign source "passive income" or, in the case
of certain types of U.S. holders, "financial services income." If, and for so
long as, we are a United States-owned foreign corporation, dividends we pay on
the common stock may, subject to certain exceptions, instead be treated for U.S.
foreign tax credit purposes as either foreign-source "passive income" (or
"financial services income") or as U.S.-source income, in proportion to our
earnings and profits in the year of such distribution allocable to foreign and
U.S. sources, respectively. We will be treated as a United States-owned foreign
corporation so long as stock representing 50% or more of the voting power or
value of our stock is held, directly or indirectly, by U.S. persons. No
assurance can be given as to whether we will be treated as a United States-owned
foreign corporation.
CONTROLLED FOREIGN CORPORATION RULES
Under the Code, a foreign corporation will be a controlled foreign
corporation ("CFC") if "United States shareholders" own, on any day during the
corporation's taxable year, more than 50% of either the total combined voting
power of all classes of stock entitled to vote or the total value of such
corporation's stock. A "United States shareholder" is a U.S. person who owns
(after applying certain attribution rules) 10% or more of the total combined
voting power of all classes of stock entitled to vote. If Willbros Group, Inc.
or any of its non-U.S. subsidiaries were to become a CFC, then each person who
is a United States shareholder of Willbros Group, Inc. would be subject to
federal income taxation on such person's share of certain types of income earned
by such corporation. The articles of incorporation of Willbros Group, Inc.
contain restrictions designed to prevent it from becoming a CFC. See
"Description of Capital Stock -- Anti-Takeover Effects of Provisions of Our
Articles of Incorporation and By-laws" above. Based on representations made by
the management of Willbros Group, Inc. regarding the nature of the ownership of
our common stock (including the representation that, based on the information
available to us, we believe that there is no U.S. person who (after applying the
relevant attribution rules) owns 10% or more of the voting power of our common
stock), Sidley Austin Brown & Wood LLP is of the opinion that Willbros Group,
Inc. and its non-U.S. subsidiaries are not CFCs. (The references in this
paragraph to non-U.S. subsidiaries of Willbros Group, Inc. do not include
foreign subsidiaries of a U.S. subsidiary of ours, which foreign subsidiaries
are CFCs because they have a U.S. parent corporation. Certain types of income
realized by such foreign subsidiaries will be taxable to that U.S. subsidiary).
PASSIVE FOREIGN INVESTMENT COMPANY RULES
If we were to be treated as a PFIC, U.S. holders of the notes or common
stock could be subject to higher U.S. federal income taxes on certain
distributions, and on any gain recognized on the disposition of the notes (other
than by conversion) or the common stock, than otherwise would apply. A non-U.S.
corporation will be classified as a PFIC if 75% or more of its gross income for
the taxable year is passive income or if the value of the assets it holds during
the taxable year that produce passive income (or are held for the production of
passive income) is at least 50% of the total value of its assets, taking into
account a proportionate share of the income and assets of corporations at least
25% owned by such corporation. Based on representations made by the management
of Willbros Group, Inc. regarding the nature of the income and assets of
Willbros Group, Inc. and its subsidiaries, Sidley Austin Brown & Wood LLP is of
the opinion that Willbros Group, Inc. is not a PFIC. However, because the PFIC
determination will be made annually on the basis of our income and assets, and
because the principles and methodology for applying the PFIC tests are not
entirely clear, there can be no assurance that we will not be a PFIC in the
current or subsequent taxable years. U.S. holders should consult their own tax
advisors regarding the U.S. federal income tax consequences to them if we were
treated as a PFIC.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Code and the Treasury regulations require those who make specified
payments to report the payments to the IRS. Among the specified payments are
interest, dividends and proceeds paid by brokers to their customers. The
required information returns enable the IRS to determine whether the recipient
properly included the payments in income. This reporting regime is reinforced by
"backup withholding" rules. These rules require the payors to withhold tax
(currently at the rate of 28%) from payments subject to information reporting if
the recipient fails to provide his or her taxpayer identification number to the
payor, furnishes an incorrect identification number or repeatedly fails to
report interest or dividends on his or her U.S. federal income tax returns. The
information reporting and backup withholding rules do not apply to payments to
corporations, tax-exempt organizations and other exempt recipients.
Payments of interest, dividends or proceeds of the sale or other
disposition of notes or common stock to a U.S. holder that is not an exempt
recipient will be subject to information reporting and backup withholding will
apply unless the holder provides us or our paying agent with a correct taxpayer
identification number, certified under penalties of perjury, as well as certain
other information, or otherwise establishes an exemption from backup
withholding.
56
Any amounts withheld from a payment to a U.S. holder of notes or common
stock under the backup withholding rules can be credited against any U.S.
federal income tax liability of the U.S. holder and may entitle the holder to a
refund, provided that the required information is furnished to the IRS.
U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
As used herein, the term "non-U.S. holder" means a beneficial owner of a
note or our common stock that is not a U.S. holder (which term is defined under
"-- U.S. Federal Income Tax Considerations Applicable to U.S. Holders" above).
All payments on the notes made to a non-U.S. holder, including a payment
in our common stock or cash pursuant to a conversion, exchange, redemption or
retirement, and any gain realized on a sale of the notes generally will be
exempt from U.S. federal income and withholding tax, except as described below.
Assuming that Willbros Group, Inc. is not at any time engaged in a U.S.
trade or business, dividends on our common stock generally should not be subject
to U.S. federal income tax in the hands of a non-U.S. holder. Gain from the
sale, exchange or redemption of our common stock generally should not be subject
to U.S. federal income tax in the hands of a non-U.S. holder.
If a non-U.S. holder holds a note or our common stock in connection with a
U.S. trade or business carried on by such non-U.S. holder (and, if an applicable
tax treaty applies, a U.S. permanent establishment is maintained by such
non-U.S. holder), or if such non-U.S. holder is an individual who was present in
the United States for 183 days or more during a taxable year in which gain from
the sale or other disposition of a note or our common stock is realized, then
such non-U.S. holder may be subject to U.S. federal income tax on its interest
or dividend income or its gain with respect to a note or our common stock,
depending on such non-U.S. holder's particular circumstances.
Payments of interest on the notes, and dividends on our common stock,
which are made to non-U.S. holders and their proceeds from the disposition of a
note or our common stock generally will not be subject to information reporting
or backup withholding if certain certification and identification procedures are
met or an exemption otherwise applies.
PANAMANIAN TAX
The following discussion of Panamanian tax matters is based upon the tax
laws of Panama and regulations thereunder in effect as of the date of this
prospectus, and is subject to any subsequent change in Panamanian laws and
regulations which may come into effect after such date. The material Panamanian
tax consequences of ownership of the notes and shares of our common stock are as
follows.
GENERAL
Panama's income tax is exclusively territorial. Only income actually
derived from sources within Panama is subject to taxation. Income derived by
Panama corporations, foreign corporations or individuals from off-shore
operations is not taxable. The territorial principle of taxation has been in
force throughout the history of the country and is supported by legislation,
administrative regulations and court decisions. We have not been in the past and
do not in the future expect to be subject to income taxes in Panama because all
of our income has arisen from activities conducted entirely outside Panama. This
is the case even though we maintain our registered office in Panama.
TAXATION OF INTEREST, DISTRIBUTIONS AND CAPITAL GAINS
There will be no Panamanian taxes on payments of interest, distribution of
dividends or capital gains realized by an individual or corporation, regardless
of its nationality or residency, from the sale, conversion or other disposition
of the notes or from the sale or other disposition of shares of common stock, so
long as our assets are held, and our activities are conducted, entirely outside
of Panama.
57
MATERIAL ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
purchase and ownership of the notes by employee benefit plans that are subject
to Title I of the U.S. Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), plans, individual retirement accounts and other arrangements
(including Archer MSA accounts and Coverdell education savings accounts) that
are subject to Section 4975 of the Code or other laws or regulations that are
similar to such provisions of ERISA or the Code (collectively, "Similar Laws"),
and entities whose underlying assets are considered to include "plan assets" of
such plans, accounts and arrangements (each, a "plan").
GENERAL FIDUCIARY MATTERS
ERISA and the Code impose certain duties on persons who are fiduciaries of
a plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA plan")
and prohibit certain transactions involving the assets of an ERISA plan and its
fiduciaries or other interested parties. Under ERISA and the Code, any person
who exercises any discretionary authority or control over the administration of
such an ERISA plan or the management or disposition of the assets of such an
ERISA plan, or who renders investment advice for a fee or other compensation to
such an ERISA plan, is generally considered to be a fiduciary of such ERISA
plan.
In considering an investment in the notes of a portion of the assets of
any plan, a fiduciary should determine whether the investment in the notes is in
accordance with the documents and instruments governing the plan and the
applicable provisions of ERISA, the Code or any Similar Law relating to a
fiduciary's duties to the plan, including, without limitation, the prudence,
diversification, delegation of control and prohibited transaction provisions of
ERISA, the Code and any other applicable Similar Law.
PLAN ASSETS ISSUES
Under a "look-through" rule set forth in the Department of Labor's plan
asset regulations (29 C.F.R. 2510.3-101), a pro rata portion of the assets of an
entity will be treated as "plan assets" of any ERISA plan that acquires an
equity interest in such entity unless an exception applies. Among others, there
are exceptions that provide that such look-through rule does not apply to
"operating companies" or "publicly offered securities," in each case as
described in such plan asset regulations, and the issuer believes it presently
qualifies as an "operating company" and its outstanding shares of common stock
currently qualify as "publicly offered securities," although no assurances can
be given in this regard. Further, it is anticipated that the issuer will
continue to qualify as an "operating company" and/or that the common stock
issuable upon conversion of the notes will constitute "publicly offered
securities," although no assurances can be given in this regard.
PROHIBITED TRANSACTION ISSUES
Section 406 of ERISA and Section 4975 of the Code prohibit plans from
engaging in specified transactions involving plan assets with persons who are
"parties in interest," within the meaning of ERISA, or "disqualified persons,"
within the meaning of Section 4975 of the Code, unless an exemption is
available. A party in interest or disqualified person that engages in a
non-exempt prohibited transaction may be subject to excise taxes and other
penalties and liabilities under ERISA and the Code, and the fiduciary of the
ERISA plan that engages in a non-exempt prohibited transaction may be subject to
penalties and liabilities under ERISA and the Code.
The purchase and/or holding of the notes by an ERISA plan with respect to
which we or the initial purchasers are considered a party in interest or a
disqualified person, and the conversion of the notes by an ERISA plan with
respect to which we are considered a party in interest or a disqualified person,
may constitute or result in a direct or indirect prohibited transaction under
Section 406 of ERISA and/or Section 4975 of the Code, unless the notes are
acquired, held and converted in accordance with an applicable statutory, class
or individual prohibited transaction exemption. In this regard, the U.S.
Department of Labor (the "DOL") has issued prohibited transaction class
exemptions, or "PTCEs," that may apply to the purchase, holding and conversion
of the notes. These class exemptions include, without limitation, PTCE 91-38
regarding bank collective investment funds, PTCE 90-1 regarding insurance
company pooled separate accounts, PTCE 84-14 regarding transactions determined
by independent qualified professional asset managers, PTCE 95-60 regarding life
insurance company general accounts and PTCE 96-23 regarding transactions
determined by in-house asset managers. There can be no assurance that all of the
conditions of any such exemptions will be satisfied.
In addition, the issuer is a party in interest and disqualified person
with respect to plans directly covering employees of the issuer or any
subsidiary thereof, but the issuer is not aware that it provides services to or
is otherwise a "party in interest" or "disqualified person" with respect to any
other plans. However, the issuer does not monitor whether the persons to which
it provides services are
58
plans, and accordingly there are no assurances that the issuer might not be a
party in interest or disqualified person subject to the prohibited transaction
provisions of ERISA or Section 4975 of the Code with respect to any plans
besides those plans directly covering its own employees or those of its
subsidiaries. Fiduciaries and other persons considering the purchase of notes
with the assets of any plan should determine whether the issuer is or is likely
to become a party in interest or disqualified person with respect to such plan.
Because of the foregoing, the notes should not be purchased or held by any
person investing "plan assets" or any plan, unless such purchase and holding and
any conversion will not constitute a non-exempt prohibited transaction under
ERISA and the Code or similar violation of any applicable Similar Laws.
REPRESENTATION
Accordingly, because of the potential prohibited transaction exposures
described above, by acceptance of the notes (or any interest therein), each
purchaser and subsequent transferee of the notes will be deemed to have
represented and warranted that either (i) no portion of the assets used by such
purchaser or transferee to acquire and hold its interest in the notes
constitutes assets of any plan or (ii) the acquisition and holding of the notes
(or any interest therein) and any conversion of the notes by such purchaser or
transferee will not constitute a non-exempt prohibited transaction under Section
406 of ERISA or Section 4975 of the Code or a violation of any applicable
Similar Laws.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries, or other persons considering purchasing
notes on behalf of, or with the assets of, any plan, consult with their counsel
to determine whether such plan is subject to Title I of ERISA, Section 4975 of
the Code or any Similar Laws.
GOVERNMENTAL AND CHURCH PLANS
Governmental plans, some church plans and non-U.S. plans, while not
subject to the fiduciary responsibility or prohibited transaction provisions of
ERISA or Section 4975 of the Code, may be subject to federal, state or other
laws that are very similar to such provisions of ERISA and the Code. If you are
a fiduciary of a governmental plan, church plan or non-U.S. plan, you should
consult with counsel before purchasing any notes.
59
PLAN OF DISTRIBUTION
The selling securityholders and their successors, including their
transferees, pledgees or donees or their successors, may sell the notes and the
common stock into which the notes are convertible directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions from the selling
securityholders or the purchasers. These discounts, concessions or commissions
as to any particular underwriter, broker-dealer or agent may be in excess of
those customary in the types of transactions involved.
The notes and the common stock issuable upon conversion of the notes may
be sold in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at prices related to the prevailing market prices, at
varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected in transactions, which may involve crosses or block
transactions:
- on any national securities exchange or quotation service on which
the notes or the common stock may be listed or quoted at the time of
sale;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;
- through the writing of options, whether the options are listed on an
options exchange or otherwise; or
- through the settlement of short sales.
In connection with the sale of the notes and the common stock issuable
upon conversion of the notes or otherwise, the selling securityholders may enter
into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the notes or the common stock
issuable upon conversion of the notes in the course of hedging the positions
they assume. The selling securityholders may also sell the notes or the common
stock issuable upon conversion of the notes short and deliver these securities
to close out their short positions, or loan or pledge the notes or the common
stock issuable upon conversion of the notes to broker-dealers that in turn may
sell these securities.
The aggregate proceeds to the selling securityholders from the sale of the
notes or common stock issuable upon conversion of the notes offered by them will
be the purchase price of the notes or common stock less discounts and
commissions, if any. Each of the selling securityholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole or
in part, any proposed purchase of notes or common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
Our outstanding common stock is listed on the New York Stock Exchange. We
do not intend to list the notes for trading on the New York Stock Exchange, any
other national securities exchange or on the Nasdaq National Market and can give
no assurance about the development of any trading market for the notes.
In order to comply with the securities laws of some states, if applicable,
the notes and common stock issuable upon conversion of the notes may be sold in
these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the notes and common stock issuable upon conversion of
the notes may not be sold unless they have been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
The selling securityholders may be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Selling securityholders that are
broker-dealers and underwriters, broker-dealers or other agents that participate
in the sale of the notes and common stock issuable upon conversion of the notes
are "underwriters" within the meaning of Section 2(11) of the Securities Act.
Any discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling securityholders who are "underwriters" within the meaning of Section
2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act.
Bear, Stearns & Co. Inc. has informed us that it is a registered
broker-dealer, and, as a result, an "underwriter" in connection with its sale of
notes and common stock issuable upon conversion of the notes. The selling
securityholders who are affiliates of broker-dealers have confirmed that they
purchased the notes in the ordinary course of business and, at the time of
purchase, had no agreement
60
or understandings, directly or indirectly with any person to distribute the
notes or the common stock issuable upon conversion of the notes.
The selling securityholders have acknowledged that they understand their
obligations to comply with the provisions of the Securities Exchange Act and the
rules thereunder relating to stock manipulation, particularly Regulation M,
which may limit the timing of purchases and sales of any of the notes by the
selling securityholders and any such other person. In addition, Regulation M may
restrict the ability of any person engaged in the distribution of the notes to
engage in market-making activities with respect to the particular notes being
distributed for a period of up to five business days prior to the commencement
of the distribution. This may affect the marketability of the notes and the
ability of any person or entity to engage in market-making activities with
respect to the notes.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling
securityholder may not sell any notes or common stock described in this
prospectus and may not transfer, devise or gift these securities by other means
not described in this prospectus.
In March and April 2004, we issued and sold the notes to the initial
purchasers in transactions exempt under Section 4(2) of the Securities Act, and
the initial purchasers subsequently resold them to persons reasonably believed
to be qualified institutional buyers in a transaction exempt from registration
in reliance on Rule 144A of the Securities Act. To the extent required, the
specific notes or common stock to be sold, the names of the selling
securityholders, the respective purchase prices and public offering prices, the
names of any agent, dealer or underwriter, and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the notes to register their notes and common stock under applicable federal
and state securities laws under specific circumstances and at specific times.
The registration rights agreement provides for cross-indemnification of the
selling securityholders and Willbros and their respective directors, officers
and controlling persons against specific liabilities in connection with the
offer and sale of the notes and the common stock, including liabilities under
the Securities Act. We will pay substantially all of the expenses incurred by
the selling securityholders incident to the offering and sale of the notes and
the common stock. We estimate that our share of the total expenses of this
offering will be approximately $100,000.
The initial purchasers and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings with us.
The initial purchasers have received customary fees and commissions for these
transactions.
An affiliate of Credit Lyonnais Securities (USA) Inc. acted as lead
arranger for our senior secured credit facility. An affiliate of CIBC World
Markets Corp. and JPMorgan Chase Bank, the trustee for the notes, are also
lenders under our senior secured credit facility. An affiliate of Credit
Lyonnais Securities (USA) Inc. also acted as lead arranger and joint book
runner, and an affiliate of CIBC World Markets Corp. acted as joint lead
arranger and joint book runner, for our prior senior secured credit facility
which was repaid using a portion of the net proceeds from the private placements
of the notes. In addition, JPMorgan Chase Bank is serving as the trustee for the
notes and will receive customary fees and expense reimbursements in connection
therewith.
61
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND OTHER FACTORS
Some of the statements contained or incorporated by reference in this
prospectus and the documents to which we refer you are forward-looking
statements within the meaning of the federal securities laws.
These forward-looking statements address activities, events or
developments that we expect or anticipate will or may occur in the future,
including, among others, the following:
- the amount and nature of future capital expenditures by our
customers;
- oil, gas and power prices;
- demand for our services;
- the amount and nature of future investments by governments;
- expansion and other development trends of the oil, gas and power
industries;
- the business strategy of our customers; and
- expansion and growth of our business and operations.
Forward-looking statements typically are identified by use of terms such
as "may," "will," "expect," "anticipate," "estimate" and similar words, although
some forward-looking statements are expressed differently. You should be aware
that our actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including:
- curtailment of capital expenditures in the oil, gas and power
industries;
- political or social circumstances impeding the progress of our work;
- the timely award of one or more projects;
- cancellation of projects;
- inclement weather;
- project cost overruns and unforeseen schedule delays;
- failing to realize cost recoveries from projects completed or in
progress within a reasonable period after completion of the relevant
project;
- identifying and acquiring suitable acquisition targets on reasonable
terms;
- obtaining adequate financing;
- the demand for energy diminishing;
- downturns in general economic, market or business conditions in our
target markets;
- changes in the effective tax rate in countries where the work will
be performed;
- changes in laws or regulations;
- our ability to manage insurable risk at an affordable cost; and
62
- other factors, most of which are beyond our control.
Consequently, all of the forward-looking statements made in this
prospectus are qualified by these cautionary statements and there can be no
assurance that the actual results or developments we anticipate will be realized
or, even if substantially realized, will have the consequences for, or effects
on, our business and operations that we anticipate today. You should also
consider carefully the statements under "Risk Factors" and other sections of
this prospectus and the documents that we incorporate by reference, which
address additional factors that could cause our actual results to differ from
those set forth in the forward-looking statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy materials that we have filed
with the SEC at the SEC's public reference room located at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference room. Our SEC filings also are
available to the public on the SEC's web site at www.sec.gov, which contains
reports, proxies and information statements and other information regarding
issuers that file electronically.
We have agreed that if, at any time that the notes are "restricted
securities" within the meaning of the Securities Act and we are not subject to
the information reporting requirements of the Exchange Act, we will furnish to
holders of the notes and to prospective purchasers designated by them the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act to permit compliance with Rule 144A in connection with resales of
the notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus "incorporates by reference" information that we have filed
with the SEC under the Exchange Act (File No. 1-11953), which means that we are
disclosing important information to you by referring you to those documents. Any
statement contained in this prospectus or in any document incorporated or deemed
to be incorporated by reference into 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 any subsequently filed document which
also is, or is deemed to be incorporated by reference into this prospectus
modifies or supersedes that statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this prospectus. We incorporate by reference the following documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act (other than Current Reports furnished under Items 9
or 12 of Form 8-K), until the offering of the notes and the common stock
issuable upon conversion of the notes is completed:
- our Annual Report on Form 10-K for the fiscal year ended December
31, 2003;
- our Quarterly Report on Form 10-Q for the quarter ended March 31,
2004;
- our Current Reports on Form 8-K filed on March 4, 2004, March 5,
2004 and April 14, 2004;
- the description of our common stock contained in our registration
statement on Form 8-A, dated July 19, 1996, including any amendment
or report filed before or after the date of this prospectus for the
purpose of updating the description; and
- the description of our preferred stock purchase rights contained in
our registration statement on Form 8-A, dated April 9, 1999,
including any amendment or report filed before or after the date of
this prospectus for the purpose of updating the description.
In addition, any filings we make with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 (other than Current Reports
furnished under Items 9 or 12 of Form 8-K) after the date of the initial filing
of the registration statement and prior to the effectiveness of the registration
statement will be incorporated by reference in this prospectus.
63
You may request a copy of these filings and of the form of the indenture,
notes and registration rights agreement at no cost, by contacting us at:
Willbros USA, Inc.
4400 Post Oak Parkway
Suite 1000
Houston, Texas 77027
Attention: Investor Relations
(713) 403-8000
64
LEGAL MATTERS
The validity of the shares of common stock issuable upon the conversion of
the notes offered hereby and certain Panamanian income tax matters will be
passed upon for us by Arias, Fabrega & Fabrega, Panama City, Panama. Certain
United States federal income tax matters will be passed upon for us by our
special United States tax counsel, Sidley Austin Brown & Wood LLP, Los Angeles,
California. The validity of the notes offered hereby will be passed upon for us
by Conner & Winters, P.C., Tulsa, Oklahoma.
EXPERTS
Our consolidated financial statements as of December 31, 2003 and 2002,
and for each of the years in the three-year period ended December 31, 2003, and
our financial statement schedule as of December 31, 2003 and for each of the
years in the three-year period then ended, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG LLP covering our December 31, 2001 and 2002
consolidated financial statements refers to our adoption of Statement of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and
certain provisions of SFAS No. 142, Goodwill and Other Intangible Assets in 2001
and our adoption of the remaining provisions of SFAS No. 142 in 2002.
ENFORCEABILITY OF CIVIL LIABILITIES
UNDER THE FEDERAL SECURITIES LAWS
We are a corporation organized under the laws of the Republic of Panama.
In addition, our counsel, Arias, Fabrega & Fabrega, who will issue opinions for
us regarding the validity of the shares of common stock issuable upon the
conversion of the notes offered hereby and certain Panamanian income tax
matters, is a law firm located in Panama City, Panama. Accordingly, it may not
be possible to effect service of process on such parties in the United States
and to enforce judgments against them predicated on the civil liability
provisions of the federal securities laws of the United States. Because a
substantial amount of our assets are located outside the United States, any
judgment obtained in the United States against us may not be fully collectible
in the United States. We have been advised by Arias, Fabrega & Fabrega that
courts in the Republic of Panama will enforce foreign judgments for liquidated
amounts in civil matters, subject to certain conditions and exceptions. However,
courts in the Republic of Panama will not enforce in original actions
liabilities predicated solely on the United States federal securities laws. Our
agent for service of process in the United States with respect to matters
arising under the United States federal securities laws is CT Corporation
System, 111 Eighth Avenue, New York, New York 10011.
65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All amounts, except the SEC fee, are estimates. The Registrant will pay all of
these expenses.
SEC registration fee........................................ $ 8,869
Printing and shipping expenses.............................. 5,000
Legal fees and expenses..................................... 75,000
Accounting fees and expenses................................ 7,500
Miscellaneous............................................... 3,631
----------
Total.................................................. $ 100,000
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 64 of the General Corporation Law of Panama (the "PGCL") provides that
directors shall be liable to creditors of the Registrant for authorizing a
dividend or distribution of assets with knowledge that such payments impair the
Registrant's capital or for making a false report or statement in any material
respect. In addition, Article 444 of the Panama Code of Commerce ("Article 444")
provides that directors are not personally liable for the Registrant's
obligations, except for liability to the Registrant and third parties for the
effectiveness of the payments to the Registrant made by stockholders, the
existence of dividends declared, the good management of the accounting, and in
general, for execution or deficient performance of their mandate or the
violation of laws, the Articles of Incorporation, the By-laws or resolutions of
the stockholders. Article 444 provides that the liability of directors may only
be claimed pursuant to a resolution of the stockholders.
The PGCL does not address the issue as to whether or not a corporation may
eliminate or limit a director's, officer's or agent's liability to the
corporation. Nevertheless, Arias, Fabrega & Fabrega, Panamanian counsel to the
Registrant, has advised the Registrant that, as between the Registrant and its
directors, officers and agents, such liability may be released under general
contract principles, to the extent that a director, officer or agent, in the
performance of his duties to the corporation, has not acted with gross
negligence or malfeasance. This release may be included in the Articles of
Incorporation or By-laws of the Registrant or in a contract entered into between
the Registrant and the director, officer or agent. While such a release may not
be binding with respect to a third person or stockholder claiming liability
under Article 444, in order to claim such liability, a resolution of the
stockholders would be necessary, which the Registrant believes would be
difficult to secure in the case of a publicly held company.
The PGCL does not address the extent to which a corporation may indemnify a
director, officer or agent. However, the Registrant's Panamanian counsel has
advised the Registrant that, under general agency principles, an agent, which
would include directors and officers, may be indemnified against liability to
third persons, except for a claim based on Article 64 of the PGCL or for losses
due to gross negligence or malfeasance in the performance of such agent's
duties. The Registrant's Restated Articles of Incorporation release directors
from personal liability to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director and authorize the
Registrant's board of directors to adopt By-laws or resolutions to this effect
or to cause the Registrant to enter into contracts providing for limitation of
liability and for indemnification of directors, officers, and agents. The
Registrant's Restated By-laws provide for indemnification of directors and
officers of the Registrant to the fullest extent permitted by, and in the manner
permissible under, the laws of the Republic of Panama. The Registrant has also
entered into specific agreements with its directors and officers providing for
indemnification of such persons under certain circumstances. The Registrant
carries directors' and officers' liability insurance to insure its officers and
directors against liability for certain errors and omissions and to defray costs
of a suit or proceeding against an officer or director. The Registrant also
carries directors' and officers' liability insurance which insures its officers
and directors against liabilities they may incur in connection with the
registration, offering or sale of the securities covered by this Registration
Statement.
The preceding discussion is subject to the Registrant's Restated Articles of
Incorporation and Restated By-laws and the provisions of Article 64 of the PGCL
and Article 444 as applicable. It is not intended to be exhaustive and is
qualified in its entirety by the Registrant's Restated Articles of
Incorporation, the Registrant's Restated By-laws and Article 64 of the PGCL and
Article 444.
II-1
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this Registration
Statement on Form S-3, including those incorporated by reference herein.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Amended and Restated Articles of Incorporation of the Registrant
(previously filed as Exhibit 3.2 to the Registrant's quarterly
report on Form 10-Q for the quarter ended September 30, 2002, and
incorporated by reference herein).
4.2 Restated By-laws of the Registrant (previously filed as Exhibit 3.2
to the Registrant's Registration Statement on Form S-1, Registration
No. 333-5413 (the "S-1 Registration Statement"), and incorporated by
reference herein).
4.3 Form of Stock Certificate for Common Stock, par value $0.05 per
share (previously filed as Exhibit 4 to the S-1 Registration
Statement and incorporated by reference herein).
4.4 Indenture (including form of note) dated March 12, 2004 between the
Registrant and JPMorgan Chase Bank, as trustee, relating to the
2.75% Convertible Senior Notes due 2024 (previously filed as Exhibit
10.2 to the Registrant's quarterly report on Form 10-Q for the
quarter ended March 31, 2004, and incorporated by reference herein).
4.5 Registration Rights Agreement dated March 12, 2004, among Bear
Stearns & Co. Inc., CIBC World Markets Corp., Credit Lyonnais
Securities (USA) Inc. and the Registrant (previously filed as
Exhibit 10.3 of the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 2004 and incorporated by reference
herein).
4.6 Rights Agreement, dated April 1, 1999, between the Registrant and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent
(previously filed as an exhibit to the Registrant's Registration
Statement on Form 8-A, dated April 9, 1999, and incorporated by
reference herein).
4.7 Certificate of Designation of Series A Junior Participating
Preferred Stock of the Registrant (previously filed as Exhibit 3 to
the Registrant's Report on Form 10-Q for the quarter ended March 31,
1999, and incorporated by reference herein).
5.1* Opinion of Conner & Winters, P.C., regarding the legality of the
notes.
5.2* Opinion of Arias, Fabrega & Fabrega, regarding the legality of the
common stock issuable upon conversion of the notes.
8.1* Opinion of Sidley Austin Brown & Wood regarding U.S. tax matters.
8.2* Opinion of Arias, Fabrega & Fabrega regarding Panamanian tax matters
(included in Exhibit 5.2).
12* Statement re Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of KPMG LLP.
23.2* Consent of Conner & Winters, P.C. (included in Exhibit 5.1).
23.3* Consent of Arias, Fabrega & Fabrega (included in Exhibit 5.2).
23.4* Consent of Sidley Austin Brown & Wood (included in Exhibit 8.1).
24* Power of Attorney (included on the signature page to this
Registration Statement).
25* Statement of Eligibility and Qualification of Trustee under the
Trust Indenture Act of 1939, as amended, on Form T-1.
------------
* Filed herewith.
II-2
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this 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 this Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) 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 this effective
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) 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 by
the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
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.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(i) The undersigned Registrant undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
a part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
II-3
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus 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.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 27th day of May,
2004.
WILLBROS GROUP, INC.
By: /s/ Michael F. Curran
----------------------------------------
Michael F. Curran
Chairman of the Board, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Michael F. Curran, Warren L. Williams and Jay T.
Dalton, and each of them, his true and lawful attorneys-in-fact and agents with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MICHAEL F. CURRAN Chairman of the Board, President and Chief May 27, 2004
-------------------------------- Executive Officer (Principal Executive Officer
Michael F. Curran and Authorized Representative in the United
States)
/s/ WARREN L. WILLIAMS Senior Vice President, Chief Financial Officer and May 27, 2004
-------------------------------- Treasurer (Principal Financial Officer and
Warren L. Williams Principal Accounting Officer)
/s/ LARRY J. BUMP Director May 27, 2004
--------------------------------
Larry J. Bump
/s/ S. FRED ISAACS Director May 27, 2004
--------------------------------
S. Fred Isaacs
/s/ PETER A. LEIDEL Director May 27, 2004
--------------------------------
Peter A. Leidel
/s/ RODNEY B. MITCHELL Director May 27, 2004
--------------------------------
Rodney B. Mitchell
/s/ JAMES B. TAYLOR, JR. Director May 27, 2004
--------------------------------
James B. Taylor, Jr.
/s/ S. MILLER WILLIAMS Director May 27, 2004
--------------------------------
S. Miller Williams
II-5
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Amended and Restated Articles of Incorporation of the Registrant
(previously filed as Exhibit 3.2 to the Registrant's quarterly
report on Form 10-Q for the quarter ended September 30, 2002, and
incorporated by reference herein).
4.2 Restated By-laws of the Registrant (previously filed as Exhibit 3.2
to the Registrant's Registration Statement on Form S-1, Registration
No. 333-5413 (the "S-1 Registration Statement"), and incorporated by
reference herein).
4.3 Form of Stock Certificate for Common Stock, par value $0.05 per
share (previously filed as Exhibit 4 to the S-1 Registration
Statement and incorporated by reference herein).
4.4 Indenture (including form of note) dated March 12, 2004 between the
Registrant and JPMorgan Chase Bank, as trustee, relating to the
2.75% Convertible Senior Notes due 2024 (previously filed as Exhibit
10.2 to the Registrant's quarterly report on Form 10-Q for the
quarter ended March 31, 2004, and incorporated by reference herein).
4.5 Registration Rights Agreement dated March 12, 2004, among Bear
Stearns & Co. Inc., CIBC World Markets Corp., Credit Lyonnais
Securities (USA) Inc. and the Registrant (previously filed as
Exhibit 10.3 of the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 2004 and incorporated by reference
herein).
4.6 Rights Agreement, dated April 1, 1999, between the Registrant and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent
(previously filed as an exhibit to the Registrant's Registration
Statement on Form 8-A, dated April 9, 1999, and incorporated by
reference herein).
4.7 Certificate of Designation of Series A Junior Participating
Preferred Stock of the Registrant (previously filed as Exhibit 3 to
the Registrant's Report on Form 10-Q for the quarter ended March 31,
1999, and incorporated by reference herein).
5.1* Opinion of Conner & Winters, P.C., regarding the legality of the
notes.
5.2* Opinion of Arias, Fabrega & Fabrega, regarding the legality of the
common stock issuable upon conversion of the notes.
8.1* Opinion of Sidley Austin Brown & Wood regarding U.S. tax matters.
8.2* Opinion of Arias, Fabrega & Fabrega regarding Panamanian tax matters
(included in Exhibit 5.2).
12* Statement re Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of KPMG LLP.
23.2* Consent of Conner & Winters, P.C. (included in Exhibit 5.1).
23.3* Consent of Arias, Fabrega & Fabrega (included in Exhibit 5.2).
23.4* Consent of Sidley Austin Brown & Wood (included in Exhibit 8.1).
24* Power of Attorney (included on the signature page to this
Registration Statement).
25* Statement of Eligibility and Qualification of Trustee under the
Trust Indenture Act of 1939, as amended, on Form T-1.
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*Filed herewith.