AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 2004
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM F-10
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PRECISION DRILLING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ALBERTA 1381 NOT APPLICABLE
(PROVINCE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.,
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IF APPLICABLE)
4200, 150 - 6TH AVENUE S.W., CALGARY, ALBERTA, CANADA T2P 3Y7
(403) 716-4500
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CT CORPORATION SYSTEM
111 - 8TH AVENUE, NEW YORK, NEW YORK 10011
(212) 894-8940
(NAME, ADDRESS AND TELEPHONE NUMBER (INCLUDING AREA CODE)
OF AGENT FOR SERVICE IN THE UNITED STATES)
---------------------------------
COPIES TO:
DALE E. TREMBLAY DANIEL G. KOLIBAR ANDREW J. FOLEY
PRECISION DRILLING CORPORATION BRIAN E. ROBERTS EDWIN S. MAYNARD
4200, 150 - 6TH AVENUE S.W. BORDEN LADNER GERVAIS LLP PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
CALGARY, ALBERTA, CANADA T2P 3Y7 1000 CANTERRA TOWER, 400 THIRD AVENUE 1285 AVENUE OF THE AMERICAS
403) 716-4500 CALGARY, ALBERTA, CANADA T2P 4H2 NEW YORK, NEW YORK 10019-6064
(403) 232-9500 (212) 373-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
PROVINCE OF ALBERTA, CANADA
(PRINCIPAL JURISDICTION REGULATING THIS OFFERING)
It is proposed that this filing shall become effective (check appropriate box
below):
A. |_| upon filing with the Commission, pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in the
United States and Canada).
B. |X| at some future date (check appropriate box below)
1. |_| pursuant to Rule 467(b) on ( ) at ( ) (designate a time
not sooner than 7 calendar days after filing).
2. |_| pursuant to Rule 467(b) on ( ) at ( ) (designate a time 7 calendar
days or sooner after filing) because the securities regulatory
authority in the review jurisdiction has issued a receipt or
notification of clearance on ( ).
3. |_| pursuant to Rule 467(b) as soon as practicable after notification
of the Commission by the Registrant or the Canadian securities
regulatory authority of the review jurisdiction that a receipt or
notification of clearance has been issued with respect hereto.
4. |X| after the filing of the next amendment to this Form (if
preliminary material is being filed).
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis to the home jurisdiction's shelf prospectus
offering procedures, check the following box. |X|
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY REGISTRATION FEE
-----------------------------------------------------------------------------------------------------
Common Shares, no par value
Debt Securities (1)
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Total...................... US$1,000,000,000 US$1,000,000,000 US$126,700
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(1) Such indeterminate number of common shares of the Registrant and such
indeterminate principal amount of debt securities of the Registrant as may
from time to time be issued at indeterminate prices, with an aggregate
initial offering price not to exceed US$1,000,000,000. If any debt
securities are issued at an original issue discount, then the securities
registered shall include such additional debt securities as may be
necessary such that the aggregate initial public offering price of all
securities issued pursuant to this Registration Statement will equal
US$1,000,000,000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES
ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A)
OF THE ACT, MAY DETERMINE.
PART I
INFORMATION REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
THIS INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE U.S. 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 JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject to Completion
Preliminary Short Form Base Shelf Prospectus dated May 10, 2004
BASE SHELF PROSPECTUS
[LOGO]
PRECISION DRILLING CORPORATION
US$1,000,000,000
DEBT SECURITIES
COMMON SHARES
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We may offer for sale from time to time debt securities or common shares
(collectively, the "Securities") up to an aggregate initial offering price of
US$1,000,000,000 (or the equivalent in other currencies or currency units)
during the 25 month period that this prospectus, including any amendments
hereto, remains effective. Securities may be offered separately or together, in
amounts, at prices and on terms to be determined based on market conditions at
the time of sale and set forth in an accompanying prospectus supplement.
We will provide the specific terms of these Securities and all information
omitted from this prospectus in supplements to this prospectus. You should read
this prospectus and any applicable prospectus supplement carefully before you
invest.
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WE ARE PERMITTED, UNDER A MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY THE
UNITED STATES, TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE
REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE PREPARE
OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, AND THEY ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR
INDEPENDENCE STANDARDS. THEY MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF
UNITED STATES COMPANIES.
OWNING THE SECURITIES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED
STATES AND CANADA. THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT MAY
NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ THE TAX DISCUSSION IN
ANY APPLICABLE PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE AMALGAMATED IN CANADA,
MOST OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THIS
PROSPECTUS ARE CANADIAN RESIDENTS, AND MOST OF OUR ASSETS, THE ASSETS OF OUR
DIRECTORS AND OFFICERS AND THE EXPERTS ARE LOCATED OUTSIDE THE UNITED STATES.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
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May , 2004
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS..................................2
WHERE YOU CAN FIND MORE INFORMATION....................2
FORWARD LOOKING STATEMENTS.............................5
RISK FACTORS...........................................6
PRECISION DRILLING CORPORATION.........................9
USE OF PROCEEDS........................................9
INTEREST COVERAGE......................................9
DESCRIPTION OF DEBT SECURITIES........................10
DESCRIPTION OF SHARE CAPITAL..........................23
PLAN OF DISTRIBUTION..................................24
CERTAIN INCOME TAX CONSIDERATIONS.....................25
LEGAL MATTERS.........................................25
EXPERTS...............................................25
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT.25
ABOUT THIS PROSPECTUS
Except as set forth under "Description of Debt Securities", and unless the
context requires otherwise all references in this prospectus and any prospectus
supplement to "Precision", "we", "us" and "our" mean Precision Drilling
Corporation and its consolidated subsidiaries and partnerships.
In this prospectus and in any prospectus supplement, unless otherwise specified
or the context otherwise requires, all dollar amounts are expressed in Canadian
dollars, references to "dollars" or "$" are to Canadian dollars and references
to "US$" are to United States dollars. Unless otherwise indicated, all financial
information included and incorporated by reference in this prospectus or
included in any prospectus supplement is determined using Canadian generally
accepted accounting principles, referred to as "Canadian GAAP". "U.S. GAAP"
means generally accepted accounting principles which are in effect from time to
time in the United States. For a discussion of the principal differences between
our financial results as calculated under Canadian GAAP and under U.S. GAAP, you
should refer to Note 15 of our audited consolidated financial statements for the
year ended December 31, 2003, incorporated by reference into this prospectus.
This prospectus is part of a registration statement on Form F-10 relating to the
Securities, that we filed with the U.S. Securities and Exchange Commission (the
"SEC"). We may, from time to time, sell any combination of the Securities
described in this prospectus in one or more offerings up to an aggregate amount
of US$1,000,000,000. This prospectus provides you with a general description of
the Securities that we may offer. Each time we sell Securities under this
prospectus, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. Before you
invest, you should read both this prospectus and any applicable prospectus
supplement, together with additional information described under the heading
"Where You Can Find More Information". THIS PROSPECTUS DOES NOT CONTAIN ALL OF
THE INFORMATION SET FORTH IN THE REGISTRATION STATEMENT, CERTAIN PARTS OF WHICH
ARE OMITTED IN ACCORDANCE WITH THE RULES AND REGULATIONS OF THE SEC. YOU MAY
REFER TO THE REGISTRATION STATEMENT AND THE EXHIBITS TO THE REGISTRATION
STATEMENT FOR FURTHER INFORMATION WITH RESPECT TO US AND THE SECURITIES.
WHERE YOU CAN FIND MORE INFORMATION
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS FROM DOCUMENTS
FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN CANADA. Copies of
the documents incorporated herein by reference may be obtained on request
without charge from the Corporate Secretary of Precision, 4200, 150 - 6th Avenue
S.W., Calgary, Alberta T2P 3Y7, Canada, telephone: (403) 716-4500. For the
purpose of the Province of Quebec, this simplified prospectus contains
information to be completed by consulting the permanent information record. A
copy of the permanent information record may be obtained from the Corporate
Secretary of Precision at the above-mentioned address and telephone number.
These documents are also available through the internet via the System for
Electronic Document Analysis and Retrieval ("SEDAR"), which can be accessed at
www.sedar.com.
We file with the securities commission or authority in each of the provinces of
Canada annual and quarterly reports, material change reports and other
information. In addition, we are subject to the informational requirements of
the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act") and, in accordance with the Exchange Act, we also file reports with and
furnish other information to the SEC. Under a multijurisdictional disclosure
system adopted by the United States, these reports and other information
(including financial information)
2
may be prepared in accordance with the disclosure requirements of Canada, which
differ from those in the United States. As a foreign private issuer, we are
exempt from the rules under the Exchange Act prescribing the furnishing and
content of proxy statements, and our officers, directors and principal
shareholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act. In addition, we are not
required to publish financial statements as promptly as U.S. companies. You may
read any document we furnish to the SEC at the SEC's public reference room at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain
copies of the same documents from the public reference room of the SEC at 450
Fifth Street, N.W., Washington D.C. 20549 by paying a fee. Please call the SEC
at l-800-SEC-0330 for further information on the public reference rooms. Our
filings are also electronically available from the SEC's Electronic Document
Gathering and Retrieval System, which is commonly known by the acronym EDGAR,
and which may be accessed at www.sec.gov, as well as from commercial document
retrieval services.
You are invited to read and copy any reports, statements or other information
that we file with the Canadian provincial securities commissions or other
similar regulatory authorities at their respective public reference rooms. These
filings are also electronically available from SEDAR (www.sedar.com). Reports
and other information about us are also available for inspection at the offices
of the Toronto Stock Exchange.
Under applicable securities laws in Canada and the United States, the Canadian
securities commissions and the SEC allow us to incorporate by reference certain
information that we file with them, which means that we can disclose important
information to you by referring you to those documents. Information that is
incorporated by reference is an important part of this prospectus. We
incorporate by reference the documents listed below, which were filed with the
Canadian securities commissions under the Canadian securities legislation and
with the SEC, and which form an integral part of this prospectus:
(a) our Annual Information Form dated April 26, 2004 (including
Management's Discussion and Analysis for the year ended December 31,
2003, incorporated therein by reference);
(b) our audited comparative consolidated financial statements for the year
ended December 31, 2003, including the auditors' report thereon;
(c) our Management Information Circular dated April 6, 2004 relating to the
annual and special meeting of our shareholders to be held on May 11,
2004, excluding those portions under the headings "Composition and Role
of Compensation Committee, "Compensation Committee Report", "Common
Share Performance - Toronto Stock Exchange", "Common Share Performance
- New York Stock Exchange" and "Corporate Governance" (which portions
shall be deemed not to be incorporated by reference in this
prospectus); and
(d) our unaudited comparative consolidated financial statements for the
three months ended March 31, 2004 (including Management's Discussion
and Analysis for the three months ended March 31, 2004).
Any documents of the type referred to above (including material change reports
but excluding confidential material change reports) subsequently filed by us
with securities commissions or similar authorities in the relevant provinces of
Canada after the date of this prospectus and prior to the termination of the
offering of Securities under any prospectus supplement shall be deemed to be
incorporated by reference into this prospectus. These documents are available
through the internet on SEDAR. In addition, any report filed or furnished by us
with the SEC pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act after
the date of this prospectus shall be deemed to be incorporated by reference into
this prospectus and the registration statement of which this prospectus forms a
part if and to the extent expressly provided in such report until all of the
Securities are sold.
ANY STATEMENT CONTAINED IN THIS PROSPECTUS OR IN A DOCUMENT (OR PART THEREOF)
INCORPORATED BY REFERENCE, OR DEEMED TO BE INCORPORATED BY REFERENCE, IN THIS
PROSPECTUS SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED, FOR PURPOSES OF THIS
PROSPECTUS, TO THE EXTENT THAT A STATEMENT CONTAINED IN THE PROSPECTUS OR IN ANY
SUBSEQUENTLY FILED DOCUMENT (OR PART THEREOF) THAT ALSO IS, OR IS DEEMED TO BE,
INCORPORATED BY REFERENCE IN THIS PROSPECTUS MODIFIES OR REPLACES SUCH
STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT
AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE PART OF THIS PROSPECTUS. THE
MODIFYING OR SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR
SUPERSEDED A PRIOR STATEMENT OR INCLUDE ANY OTHER INFORMATION SET FORTH IN THE
DOCUMENT WHICH IT MODIFIES OR SUPERSEDES.
3
Updated interest coverage ratios will be filed quarterly with the applicable
securities regulatory authorities, including the SEC, either as prospectus
supplements or exhibits to our unaudited interim consolidated financial
statements and audited annual consolidated financial statements and will be
deemed to be incorporated by reference in this prospectus for the purpose of the
offering of the Securities.
Upon a new annual information form and related annual consolidated financial
statements being filed by us with, and where required, accepted by, the
applicable securities regulatory authorities during the duration of this
prospectus, the previous annual information form, the previous annual
consolidated financial statements and all interim consolidated financial
statements and the accompanying management's discussion and analysis,
information circulars and material change reports filed prior to the
commencement of our financial year in which the new annual information form is
filed shall be deemed no longer to be incorporated into this prospectus for
purposes of future offers and sales of Securities under this prospectus. Upon
interim consolidated financial statements and the accompanying management's
discussion and analysis being filed by us with the applicable securities
regulatory authorities during the duration of this prospectus, all interim
consolidated financial statements and the accompanying management's discussion
and analysis filed prior to the new interim consolidated financial statements
shall be deemed no longer to be incorporated into this prospectus for purposes
of future offers and sales of Securities under this prospectus.
A prospectus supplement or prospectus supplements containing the specific terms
for an issue of Securities will be delivered to purchasers of such Securities
together with this prospectus and will be deemed to be incorporated by reference
into this prospectus as of the date of such prospectus supplement but only for
the purposes of the Securities issued thereunder.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT AND ON THE
OTHER INFORMATION INCLUDED IN THE REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS FORMS A PART. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT OR ADDITIONAL INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED BY LAW. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY APPLICABLE
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THOSE DOCUMENTS.
4
FORWARD LOOKING STATEMENTS
Certain statements included in this prospectus and the documents incorporated by
reference herein constitute forward looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995 relating to, but
not limited to, our operations, anticipated financial performance, business
prospects and strategies. Forward looking statements typically contain
statements with words such as "could", "should", "expect", "estimate", "likely",
"believe", "will" and similar expressions, including, but not limited to,
statements as to: future capital expenditures, including the amount and nature
thereof; oil and gas prices and demand; expansion and other development trends
of the oil and gas industry; business strategy; expansion and growth of our
business and operations, including our marketshare and position in the domestic
and international drilling markets; and beliefs, plans, objectives, assumptions
or statements about future events or performance.
You are cautioned not to place undue reliance on forward looking statements. By
their nature, forward looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, that contribute to the
possibility that the predicted outcomes will not occur. These factors include,
but are not limited to:
o general economic, business and market conditions including
stock market volatility;
o volatility of crude oil, natural gas and natural gas liquids
prices;
o fluctuations in currency and interest rates;
o competition;
o risks inherent in foreign operations, including political and
economic risk;
o risks of war, hostilities, civil insurrection and terrorist
threats;
o fluctuations in the level of oil and gas exploration and
development activities;
o fluctuations in the demand for well servicing, contract
drilling, directional drilling, well logging and ancillary
oilfield services;
o technological changes and developments in the oil and gas
industry;
o the ability of oil and gas companies to raise capital;
o the effects of severe and seasonal weather conditions on
operations and facilities;
o the existence of operating risks inherent in well servicing,
contract drilling, directional drilling, well logging and
ancillary oilfield services;
o political circumstances impeding the progress of work in any
of the countries in which we do business;
o identifying and acquiring suitable acquisition targets on
reasonable terms;
o changes in laws or regulations, including taxation,
environmental and currency regulations;
o the lack of availability of qualified personnel or management;
o our ability to either generate sufficient cash flow to meet
current and future obligations or to obtain external debt or
equity financing;
o our ability to make capital investments and the amounts
thereof; and
o risks associated with existing and potential future lawsuits
and regulatory actions against us.
5
We caution that the foregoing list of important factors is not exhaustive.
Events or circumstances could cause our actual results to differ materially from
those estimated or projected and expressed in, or implied by, these forward
looking statements. You should also carefully consider the matters discussed
under "Risk Factors" in the prospectus. We do not undertake any obligation to
update publicly or otherwise revise any forward looking statements, whether as a
result of new information, future events or otherwise, or the foregoing list of
factors affecting this information.
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS SET FORTH BELOW AS WELL AS THE
OTHER INFORMATION CONTAINED IN AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS
AND IN THE APPLICABLE PROSPECTUS SUPPLEMENT BEFORE PURCHASING THE SECURITIES. IF
ANY EVENT ARISING FROM THESE RISKS OCCURS, OUR BUSINESS, PROSPECTS, FINANCIAL
CONDITION, RESULTS OF OPERATION OR CASH FLOWS COULD BE MATERIALLY ADVERSELY
AFFECTED. ADDITIONAL RISKS AND UNCERTAINTIES NOT CURRENTLY KNOWN TO US OR THAT
WE CURRENTLY DEEM TO BE IMMATERIAL MAY ALSO MATERIALLY ADVERSELY AFFECT OUR
BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS. CERTAIN
STATEMENTS UNDER THIS CAPTION CONSTITUTE FORWARD LOOKING STATEMENTS. SEE
"FORWARD LOOKING STATEMENTS."
OUR OPERATIONS ARE DEPENDENT ON THE PRICES OF OIL AND GAS A DECLINE OF EITHER OF
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
Our revenue, cash flow and earnings are substantially dependent upon, and
affected by, the level of activity associated with oil and gas exploration and
production. Both short-term and long-term trends in oil and gas prices affect
the level of such activity. Oil and gas prices and, therefore, the level of
drilling, exploration and production activity have been volatile over the past
few years and likely will continue to be volatile. Worldwide military, political
and economic events, including initiatives by the Organization of Petroleum
Exporting Countries, may affect both the demand for, and the supply of, oil and
gas. Weather conditions, governmental regulation (both in Canada and elsewhere),
levels of consumer demand, the availability of pipeline capacity, and other
factors beyond our control may also affect the supply of and demand for oil and
gas and thus lead to future price volatility. We believe that any prolonged
reduction in oil and gas prices would depress the level of exploration and
production activity. This would likely result in a corresponding decline in the
demand for our services and could have a material adverse effect on our
revenues, cash flows and profitability. Lower oil and gas prices could also
cause our customers to seek to terminate, renegotiate or fail to honour our
drilling contracts; affect the fair market value of our rig fleet which in turn
could trigger a writedown for accounting purposes; affect our ability to retain
skilled rig personnel; and affect our ability to obtain access to capital to
finance and grow our businesses. We cannot assure you that the future level of
demand for our services or future conditions in the oil and gas and oilfield
services industries will not decline.
WE OPERATE IN A COMPETITIVE INDUSTRY.
The oilfield services industry in which we operate is, and will continue to be,
very competitive. Contract drilling companies compete primarily on a regional
basis, and competition may vary significantly from region to region at any
particular time. Most drilling and workover contracts are awarded on the basis
of competitive bids, which results in price competition. Many drilling, workover
and well-servicing rigs can be moved from one region to another in response to
changes in levels of activity, which can result in an oversupply of rigs in an
area. In many markets in which we operate, the supply of rigs exceeds the demand
for rigs, resulting in further price competition.
Certain competitors are present in more than one of the regions in which we
operate, although no one competitor operates in all of these areas. In the
United States there are several hundred competitors with national, regional or
local rig operations. In Canada we compete with several firms of varying size.
Internationally, we compete directly with various competitors at each location
where we operate and some of our international competitors may be better
positioned in certain markets, allowing them to compete more effectively. We
cannot assure you that we will be able to continue to compete successfully or
that the level of competition and pressure on pricing will not affect our
margins.
6
OUR OPERATIONS ARE SUBJECT TO BUSINESS INTERRUPTION AND CASUALTY LOSSES FOR
WHICH WE MAY NOT HAVE ADEQUATE INSURANCE.
Our operations are subject to many hazards inherent in the drilling, workover
and well-servicing industries, including blowouts, cratering, explosions, fires,
loss of well control, loss of hole, damaged or lost drilling equipment and
damage or loss from inclement weather or natural disasters. Any of these hazards
could result in personal injury or death, damage to or destruction of equipment
and facilities, suspension of operations, environmental damage and damage to the
property of others. Generally, drilling contracts provide for the division of
responsibilities between a drilling company and its customer, and we seek to
obtain indemnification from our customers by contract for certain of these
risks. To the extent that we are unable to transfer such risks to customers by
contract or indemnification agreements, we seek protection through insurance.
However, we cannot assure you that such insurance or indemnification agreements
will adequately protect us against liability from all of the consequences of the
hazards described above. The occurrence of an event not fully insured or
indemnified against, or the failure of a customer or insurer to meet its
indemnification or insurance obligations, could result in substantial losses. In
addition, we cannot assure you that insurance will be available to cover any or
all of these risks, or, even if available, that it will be adequate or that
insurance premiums or other costs will not rise significantly in the future, so
as to make such insurance prohibitive. This is particularly of concern in the
wake of the September 11 terrorist attacks, which have resulted in significantly
increased insurance costs, deductibles and coverage restrictions. In future
insurance renewals we may choose to increase our self insurance retentions (and
thus assume a greater degree of risk) in order to reduce insurance premiums.
WE ARE EXPOSED TO RISKS INHERENT IN FOREIGN OPERATIONS WHICH COULD NEGATIVELY
AFFECT OUR RESULTS OF OPERATIONS.
We conduct a portion of our business outside North America, including the Middle
East, Africa and South America. We are subject to risks inherent in foreign
operations, such as: loss of revenue, property and equipment as a result of
expropriation, nationalization, war, terrorist threats, civil insurrection and
other political risks; fluctuations in foreign currency and exchange controls;
increases in duties, taxes and governmental royalties and renegotiation of
contracts with governmental entities; as well as changes in laws and policies
governing operations of foreign-based companies. In addition, in the
international markets in which we operate, we are subject to various laws and
regulations that govern the operation and taxation of our businesses and the
import and export of our equipment from country to country, the imposition,
application and interpretation of which can prove to be uncertain. Since we
derive a portion of our revenues from subsidiaries outside of Canada, the
payment of dividends or the making of other cash payments or advances by these
subsidiaries to us may be subject to restrictions or exchange controls on the
transfer of funds in or out of the respective countries or result in the
imposition of taxes on such payments or advances. We have organized our foreign
operations in part based on certain assumptions about various tax laws
(including capital gains and withholding taxes), foreign currency exchange and
capital repatriation laws and other relevant laws of a variety of foreign
jurisdictions. While we believe that such assumptions are reasonable, we cannot
assure you that foreign taxing or other authorities will reach the same
conclusion. Further, if such foreign jurisdictions were to change or modify such
laws, we could suffer adverse tax and financial consequences.
OUR BUSINESS IS SUBJECT TO ENVIRONMENTAL LEGISLATION IN ALL JURISDICTIONS IN
WHICH WE OPERATE AND ANY CHANGES IN SUCH LEGISLATION COULD NEGATIVELY AFFECT OUR
RESULTS OF OPERATIONS.
Our operations are subject to numerous laws, regulations and guidelines
governing the management, transportation and disposal of hazardous substances
and other waste materials and otherwise relating to the protection of the
environment and health and safety. These laws, regulations and guidelines
include those relating to spills, releases, emissions and discharges of
hazardous substances or other waste materials into the environment, requiring
removal or remediation of pollutants or contaminants and imposing civil and
criminal penalties for violations. Some of the laws, regulations and guidelines
that apply to our operations also authorize the recovery of natural resource
damages by the government, injunctive relief and the imposition of stop,
control, remediation and abandonment orders. The costs arising from compliance
with such laws, regulations and guidelines may be material to us.
The trend in environmental regulation has been to impose more restrictions and
limitations on activities that may impact the environment, including the
generation and disposal of wastes and the use and handling of chemical
substances. These restrictions and limitations have increased operating costs
for both us and our customers. Any regulatory changes that impose additional
environmental restrictions or requirements on us or our customers could
adversely affect us through increased operating costs and potential decreased
demand for our services.
7
While we maintain liability insurance, including insurance for environmental
claims, the insurance is subject to coverage limits and certain of our policies
exclude coverage for damages resulting from environmental contamination. There
can be no assurance that insurance will continue to be available to us on
commercially reasonable terms, that the possible types of liabilities that may
be incurred by us will be covered by our insurance, or that the dollar amount of
such liabilities will not exceed our policy limits. Even a partially uninsured
claim, if successful and of sufficient magnitude, could have a material adverse
effect on our business, results of operations and prospects.
OUR BUSINESS IS SEASONAL AND IS INFLUENCED BY WEATHER PATTERNS.
In Canada, the level of activity in the oilfield service industry is influenced
by seasonal weather patterns. During the spring months, wet weather and the
spring thaw make the ground unstable. Consequently, municipalities and
provincial transportation departments enforce road bans that restrict the
movement of rigs and other heavy equipment, thereby reducing activity levels and
placing an increased level of importance on the location of our equipment prior
to imposition of the road bans. Additionally, certain oil and gas producing
areas are located in sections of the Western Canadian Sedimentary Basin that are
inaccessible, other than during the winter months, because the ground
surrounding or containing the drilling sites in these areas consists of terrain
known as muskeg. Until the muskeg freezes, the rigs and other necessary
equipment cannot cross the terrain to reach the drilling site. Moreover, once
the rigs and other equipment have been moved to a drilling site, they may become
stranded or otherwise unable to relocate to another site should the muskeg thaw
unexpectedly. Our financial results depend, at least in part, upon the severity
and duration of the Canadian winter.
WE INCUR SIGNIFICANT EXPENDITURES ON RESEARCH AND DEVELOPMENT EFFORTS TO OFFER
ADVANCED TECHNOLOGY TO OUR CUSTOMERS.
The continued development and growth of our Technology Services segment is
dependent on the success of our research and development efforts. A number of
new products have been commercialized and others are progressing to that stage.
Of particular note is the Rotary Steerable tool currently under development. The
research and engineering team is focusing on issues related to the reliability
of tool performance and increasing the mean time between physical failures.
The Rotary Steerable tool is a key component of the new suite of down hole tools
being introduced to the market by the Technology Services segment and as such is
important to the continued growth of the segment's business worldwide. However,
as with any research efforts, we cannot assure you that this new product will be
successfully developed and marketed.
The carrying value of Technology Services long-lived assets is reviewed annually
for impairment with the assistance of independent valuation experts. The most
recent review was completed in the fourth quarter of 2003 at which time it was
concluded that there was no impairment of the carrying value. Should the
segment's research and development efforts not be successful, assumptions with
respect to the growth of the business may change such that a write-down of
long-lived assets would be necessary.
WE ARE EXPOSED TO CURRENCY EXCHANGE RISK WHICH COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR OPERATING RESULTS.
Although our financial results are reported in Canadian dollars, a portion of
our sales and operating costs are denominated in U.S. dollars. In addition, we
are exposed to currency exchange risk on those of our assets denominated in U.S.
dollars. Since we present our financial statements in Canadian dollars, any
change in the value of the Canadian dollar relative to the U.S. dollar during a
given financial reporting period would result in a foreign currency loss or gain
on the translation of our U.S. dollar assets into Canadian dollars.
Consequently, our reported earnings could fluctuate materially as a result of
foreign exchange translation gains or losses. While it is not our normal
practice to enter into significant hedging arrangements, we may use futures and
forward contracts to partially hedge against short-term fluctuations in
currency; however, such activities provide only
8
short-term protection against a limited portion of our currency exposure. We
may, from time to time, hedge a portion of our net exchange rate exposure by way
of one or more swap transactions to Canadian dollars, to the extent our
management considers it reasonable to do so having regard to the then prevailing
levels of our net assets denominated in U.S. dollars and our U.S. dollar
revenues, and to the extent available on reasonable terms; however, such
activities provide only short-term protection and we cannot assure you that such
transactions will be effective in insulating us against exchange rate
fluctuations.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES IN CANADA UNDER U.S. SECURITIES LAWS
MAY BE LIMITED.
We are incorporated under the laws of Canada and a substantial portion of our
assets are located in Canada. Most of our directors and officers reside in
Canada and most of their assets are located in Canada. It may not be possible,
therefore, for you to effect service of process within the United States upon us
or our directors and officers. There is uncertainty as to the enforceability (1)
in an original action in Canadian courts of liabilities predicated solely upon
United States federal securities laws and (2) of judgments of United States
courts obtained in actions predicated upon the civil liability provisions of
United States federal securities laws in Canadian courts. Therefore, you may not
be able to secure judgment against us or our directors and officers in a
Canadian court or, if successful in securing a judgment against us or them in a
U.S. court, you may not be able to enforce such judgment in Canada.
PRECISION DRILLING CORPORATION
We provide oilfield and industrial services to customers in Canada, the United
States and other international regions. Our principal business is the provision
of land drilling services to oil and gas exploration and production companies.
We are the leading provider in Canada of land drilling services based on the
number of wells and metres drilled. Additionally, we provide the following: well
service rigs and hydraulic well assist snubbing units; procurement and
distribution of oilfield supplies; camp and catering services; manufacture, sale
and repair of drilling equipment; open hole logging, cased hole logging and
completion services, slickline services, directional drilling services;
measurement-while-drilling and logging-while-drilling services; the manufacture,
rental and sale of polycrystalline diamond compact drill bits; controlled
pressure drilling services and well testing services; rental of mobile
combination office and industrial housing; rental of surface oilfield equipment
for drilling, completion and production activities; and we also provide
industrial maintenance and turnaround services, including specialized equipment
and labour services, to downstream oil and gas, petrochemical and other process
industry customers.
We have grown primarily through a series of acquisitions of related businesses
as well as reinvestment in our core business to become the largest Canadian
integrated oilfield service contractor. We have reinvested cash flow from
operations to grow our service and product offerings.
Our principal executive and registered offices are located at 4200, 150 - 6th
Avenue S.W., Calgary, Alberta, Canada T2P 3Y7.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement relating to
an offering of Securities, we will use the net proceeds we receive from the sale
of Securities for general corporate purposes relating to our operations in North
America, South America and Europe that may include capital expenditures, the
repayment of indebtedness and the financing of acquisitions. The amount of net
proceeds to be used for any such purpose will be described in an applicable
prospectus supplement.
INTEREST COVERAGE
The following consolidated financial ratios are calculated for the twelve month
periods ended December 31, 2003 and March 31, 2004, based on audited, in the
case of December 31, 2003, and unaudited, in the case of March 31, 2004,
financial information. The interest coverage ratios set out below have been
prepared and included in this prospectus in accordance with Canadian disclosure
requirements and have been calculated based on information prepared in
accordance with Canadian GAAP.
DECEMBER 31, MARCH 31,
2003 2004
------------ -----------
Interest coverage on long-term debt:
Earnings........................................... 8.07 times 9.47 times
Cash flow.......................................... 9.79 times 13.31 times
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Interest coverage on long-term debt on an earnings basis is equal to earnings
before interest and income tax expense divided by interest expense. Interest
coverage on long-term debt on a cash flow basis is equal to cash flow from
operations before interest expense and current income tax expense divided by
interest expense. For purposes of calculating the interest coverage ratios set
forth in this prospectus, long-term debt includes the current portion of
long-term debt.
DESCRIPTION OF DEBT SECURITIES
In this section, "we", "us", "our" or "Precision" refers only to Precision
Drilling Corporation and not any of its subsidiaries or interests in
partnerships and other entities. The following description sets forth certain
general terms and provisions of the debt securities. We will provide the
particular terms and provisions of a series of debt securities and a description
of how the general terms and provisions described below apply to that series in
a prospectus supplement. Accordingly, for a description of the terms of a
particular series of debt securities, you must refer to both the applicable
prospectus supplement relating to the series and the description of the debt
securities set forth in this prospectus.
The debt securities will be issued under an indenture (the "Indenture") to be
entered into between us and The Bank of Nova Scotia Trust Company of New York,
as trustee (the "Trustee"). The Indenture will be subject to and governed by the
U.S. Trust Indenture Act of 1939, as amended. A copy of the form of Indenture
has been filed with the SEC as an exhibit to the registration statement of which
this prospectus is a part.
The following is a summary of the Indenture which sets forth certain general
terms and provisions of the debt securities and is not intended to be complete.
For a more complete description, including the definition of capitalized terms
used but not defined in this summary, you should refer to the Indenture.
Whenever we refer in this summary to particular provisions of the Indenture,
those provisions are qualified in their entirety by reference to the Indenture.
It is the Indenture, and not this summary, that governs the rights of holders of
debt securities.
We may from time to time issue debt securities and incur additional indebtedness
other than through an offering of debt securities under this prospectus.
GENERAL
The Indenture does not limit the aggregate principal amount of debt securities
(which may include debentures, notes and other evidences of indebtedness) that
we may issue under the Indenture and does not limit the amount of other
indebtedness we may incur. The Indenture provides that debt securities may be
issued from time to time in one or more series and may be denominated and
payable in U.S. dollars or any other currency. Special Canadian and United
States Federal income tax considerations applicable to any debt securities so
denominated will be described in the prospectus supplement relating thereto.
Unless otherwise indicated in an applicable prospectus supplement, the debt
securities will be unsecured obligations. The debt securities offered pursuant
to this prospectus will be issued in an aggregate principal amount of up to
US$1,000,000,000 or the equivalent in a foreign currency. The Indenture also
permits us to increase the principal amount of any series of the debt securities
previously issued and to issue that increased principal amount.
The applicable prospectus supplement will describe the specific terms of the
debt securities being offered and may include, but is not limited to, any of the
following:
o the title and the aggregate principal amount of the debt
securities;
o any limit on the aggregate principal amount of the debt
securities of such series;
o the date or dates, or the method by which such date or dates
will be determined or extended, on which the principal of, and
premium, if any, on the debt securities will be payable and
the portion (if less than the principal amount) to be payable
upon a declaration of acceleration of maturity;
o the rate or rates (whether fixed or variable) at which the
debt securities will bear interest, if any, or the method by
which such rate or rates will be determined and the date or
dates from which such interest will accrue and on which such
interest will be payable and the regular record date or dates
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for the payment of interest on the debt securities in
registered form, or the method by which such date or dates
will be determined;
o the place or places where the principal of, and premium, if
any, and interest, if any, on the debt securities will be
payable and each office or agency where the debt securities
may be presented for registration of transfer or exchange;
o the period or periods within which, the price or prices at
which, the currency in which, and other terms and conditions
upon which the debt securities may be redeemed or purchased,
in whole or in part, by us;
o the terms and conditions upon which you may redeem the debt
securities prior to maturity and the price or prices at which
and the currency in which the debt securities are payable;
o the terms, if any, on which the debt securities may be
converted or exchanged for other of our debt securities or
debt securities of other entities;
o if payment of the debt securities will be guaranteed by any
other person;
o the extent and manner, if any, in which payment on or in
respect of the debt securities will be secured, or will rank
senior, or will be subordinated to the prior payment of our
other liabilities and obligations;
o if the series of debt securities will be issuable in the form
of one or more global securities and, if so, the identity of
the depository for the global securities;
o any applicable Canadian and U.S. federal income tax
consequences;
o the terms and conditions of any sinking fund or analogous
provisions;
o if the debt securities may be issued bearing no interest or at
a discount below their stated principal amount, and special
considerations applicable to any such discounted debt
securities or other debt securities offered and sold at par
which are treated as having been issued at a discount for
Canadian and/or U.S. federal income tax purposes;
o if the debt securities are to be registered securities, bearer
securities (with or without coupons) or both;
o if other than denominations of US$1,000 and any integral
multiple thereof, the denomination or denominations in which
any definitive securities of the series shall be issuable and,
if other than the denomination of US$1,000, the denomination
or denominations in which any bearer debt securities of the
series shall be issuable;
o if other than U.S. dollars, the currency or currency unit in
which the debt securities are denominated or in which currency
payment of the principal of, and premium, if any, or interest,
if any, on such debt securities will be payable;
o any index formula or other method used to determine the amount
of payments of principal of, and premium, if any, or interest,
if any, on the debt securities;
o whether and under what circumstances we will be required to
pay any Additional Amounts (defined below under "Additional
Amounts") for withholding or deduction for Canadian taxes with
respect to the debt securities, and whether we will have the
option to redeem the debt securities rather than pay the
Additional Amounts; and
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o any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) of the debt
securities including covenants and events of default which
apply solely to a particular series of the debt securities
being offered which do not apply generally to other debt
securities, or any covenants or events of default generally
applicable to the debt securities which do not apply to a
particular series of the debt securities.
Unless otherwise indicated in the applicable prospectus supplement, the
Indenture does not afford holders of the debt securities the right to tender
such debt securities to us for repurchase in the event we experience a change in
control.
RANKING AND OTHER INDEBTEDNESS
Unless otherwise indicated in any applicable prospectus supplement, the debt
securities will be our unsecured senior obligations and will rank equally and
ratably with all of our other unsecured senior indebtedness from time to time
outstanding. Unless otherwise indicated in any applicable prospectus supplement,
the debt securities will be structurally subordinated to all existing and future
liabilities, including trade payables and other indebtedness, of our
subsidiaries, partnerships and other entities. We will specify in a prospectus
supplement at the time we issue a series of debt securities the amount of our
subsidiaries' and partnerships' then existing liabilities, including trade
payables and other indebtedness.
DEBT SECURITIES IN GLOBAL FORM
Unless otherwise indicated in a prospectus supplement, a series of the debt
securities will be issued in global form as one or more "global securities" and
will be registered in the name of and be deposited with a depositary, or its
nominee, each of which will be identified in the prospectus supplement relating
to that series. Unless and until exchanged, in whole or in part, for debt
securities in definitive form, a global security may not be transferred except
as a whole by the depositary for such global security to a nominee of the
depositary, by a nominee of the depositary to the depositary or another nominee
of the depositary or by the depositary or any such nominee to a successor of the
depositary or a nominee of the successor.
The specific terms of the depositary arrangement with respect to any series or
portion of a series of the debt securities to be represented by a global
security will be described in the prospectus supplement relating to such series.
We anticipate that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a global security, the depositary therefor or its nominee
will credit, on its book entry and registration system, the respective principal
amounts of the debt securities represented by the global security to the
accounts of such persons, designated as "participants", having accounts with
such depositary or its nominee. Such accounts shall be designated by the
underwriters, dealers or agents participating in the distribution of the debt
securities or by us if such debt securities are offered or sold directly by us.
Ownership of beneficial interests in a global security will be limited to
participants or persons that may hold beneficial interests through participants.
Ownership of beneficial interests in a global security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the depositary therefor or its nominee (with respect to beneficial interests of
participants) or by participants or persons that hold through participants (with
respect to beneficial interests of persons other than participants).
So long as the depositary for a global security or its nominee is the registered
owner of the global security, such depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a global security will not
be entitled to have a series of the debt securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of such series of the debt securities in definitive form and
will not be considered the owners or holders thereof under the Indenture.
The laws of some states in the United States require that certain purchasers of
debt securities take physical delivery of such debt securities in definitive
form. These depositary arrangements and these laws may impair the ability to
transfer beneficial interests in a global security.
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Any payments of principal, and premium, if any, and interest, if any, on a
global security registered in the name of a depositary or its nominee will be
made to the depositary or its nominee, as the case may be, as the registered
owner of the global security representing such debt securities. None of us, the
Trustee or any paying agent for the debt securities represented by the global
security will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
global security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
We expect that the depositary for a global security or its nominee, upon receipt
of any payment of principal, and premium, if any, or interest, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global security
as shown on the records of such depositary or its nominee. We also expect that
payments by participants to owners of beneficial interests in a global security
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name", and will be the responsibility of such
participants.
If a depositary for a global security representing a particular series of the
debt securities is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by us within 90 days, we will issue such
series of debt securities in definitive form in exchange for the global security
representing such series of debt securities. In addition, we may at any time and
in our sole discretion determine not to have a series of debt securities
represented by a global security and, in such event, will issue a series of debt
securities in definitive form in exchange for the global security representing
such series of debt securities.
DEBT SECURITIES IN DEFINITIVE FORM
If indicated in a prospectus supplement, the debt securities may be issued in
definitive form without coupons or in bearer form with or without coupons, or in
both forms. Debt securities in definitive form may be presented for exchange and
for registration of transfer in the manner, at the places and, subject to the
restrictions set forth in the Indenture and in the applicable prospectus
supplement, without service charge, but upon payment of any taxes or other
governmental charges due in connection therewith. We have initially appointed
the Trustee as security registrar. Debt securities in bearer form and the
coupons appertaining thereto, if any, will be transferable by delivery.
Unless otherwise indicated in a prospectus supplement, payment of principal, and
premium, if any, and interest on any debt securities in definitive form will be
made at the office or agency of the Trustee, at One Liberty Plaza, 23rd Floor,
New York, New York 10006, or at our option we can pay principal and any premium
and interest on the debt securities by (1) check mailed or delivered to the
address of the person entitled to receive payments appearing in the security
register of the Trustee or (2) wire transfer to an account in the United States
of the person entitled to receive payments if such person is a holder of US$1.0
million or more in aggregate principal amount of the debt securities of a
particular series.
COVENANTS
LIMITATION ON LIENS
The Indenture includes a covenant of Precision to the effect that, so long as
any debt securities are outstanding and subject to the provisions of the
Indenture, Precision will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or otherwise have outstanding any Security Interest in, on
or over any of its or their interest in any property, present or future,
securing any Indebtedness of any person, other than Permitted Encumbrances,
unless at the time thereof or prior thereto the debt securities then outstanding
under the Indenture are equally and ratably secured with such Indebtedness for
so long as such Indebtedness is so secured.
CONSOLIDATION, AMALGAMATION, MERGER AND SALE OF ASSETS
The Indenture includes a covenant of Precision to the effect that it may not in
a single transaction or a series of transactions consolidate or amalgamate with
or merge with or into or enter into any statutory arrangement with any other
corporation, or, directly or indirectly, convey, transfer, sell, lease or
otherwise dispose of all or substantially all of its property to any person,
unless:
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o the entity formed by or continuing from such consolidation or
amalgamation or into which Precision is merged or with which
Precision enters into such arrangement, or the person which
acquires or leases all or substantially all of Precision's
property, is organized and existing under the laws of the
United States, any state thereof or the District of Columbia,
the laws of Canada or any province or territory thereof, or,
if such consolidation, amalgamation, merger, arrangement or
other transaction would not impair the rights of holders of
the debt securities, in any other jurisdiction, PROVIDED THAT,
if such successor entity is organized under the laws of a
jurisdiction other than Canada or the United States, the
successor entity assumes our obligations under the debt
securities and the Indenture to pay Additional Amounts,
substituting the name of such successor jurisdiction for
Canada in each place that Canada appears in "Description of
Debt Securities--Additional Amounts", below and submits to the
jurisdiction of U.S. federal and state courts in the manner
and to the extent provided in the Indenture;
o the successor entity expressly assumes or assumes by operation
of law all of Precision's obligations under the debt
securities and under the Indenture;
o immediately after giving effect to such transaction, no event
of default, and no event which, after notice or lapse of time
or both, would become an event of default, shall have happened
and be continuing; and
o an officer's certificate and legal opinion covering such
conditions will be delivered to the Trustee.
If, as a result of any such transaction, any property of Precision or any
Restricted Subsidiary becomes subject to a Security Interest, then, unless such
Security Interest could be created pursuant to the Indenture provisions
described under the "LIMITATION ON LIENS" covenant above without equally and
ratably securing the debt securities, Precision or such Restricted Subsidiary,
simultaneously with or prior to such transaction, will cause the debt securities
to be secured equally and ratably with or prior to the Indebtedness secured by
such Security Interest.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
"CAPITAL LEASE OBLIGATION" means the obligation of a person, as lessee, to pay
rent or other amounts to the lessor under a lease of property which is required
to be classified and accounted for as a capital lease on the consolidated
balance sheet of such person in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets of any
person on a consolidated basis (less applicable reserves and other properly
deductible items) after deducting therefrom:
o all current liabilities (excluding any current liabilities
which are by their terms extendible or renewable at the option
of the obligor thereon to a time more than 12 months after the
time as of which the amount thereof is being computed);
o all goodwill, trade names, trademarks, patents, unamortized
debt discounts and expenses and other like intangibles; and
o appropriate adjustments on account of minority interests of
other persons holding shares of the subsidiaries of such
person,
in each case, as shown on the most recent annual audited or quarterly unaudited
consolidated balance sheet of such person computed in accordance with GAAP.
"CURRENT ASSETS" means current assets as determined in accordance with GAAP.
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"FINANCIAL INSTRUMENT OBLIGATIONS" means obligations (entered into for risk
management and not for speculative purposes) arising under:
o interest rate swap agreements, forward rate agreements, floor,
cap or collar agreements, futures or options, insurance or
other similar agreements or arrangements, or any combination
thereof, entered into by a person relating to interest rates
or pursuant to which the price, value or amount payable
thereunder is dependent or based upon interest rates in effect
from time to time or fluctuations in interest rates occurring
from time to time;
o currency swap agreements, cross-currency agreements, forward
agreements, floor, cap or collar agreements, futures or
options, insurance or other similar agreements or
arrangements, or any combination thereof, entered into by a
person relating to currency exchange rates or pursuant to
which the price, value or amount payable thereunder is
dependent or based upon currency exchange rates in effect from
time to time or fluctuations in currency exchange rates
occurring from time to time; and
o commodity swap or hedging agreements, floor, cap or collar
agreements, commodity futures or options or other similar
agreements or arrangements, or any combination thereof,
entered into by a person relating to one or more commodities
or pursuant to which the price, value or amount payable
thereunder is dependent or based upon the price of one or more
commodities in effect from time to time or fluctuations in the
price of one or more commodities occurring from time to time.
"GAAP" means generally accepted accounting principles in Canada in effect from
time to time, unless Precision's most recent audited or quarterly unaudited
financial statements are not prepared in accordance with generally accepted
accounting principles in Canada, in which case GAAP shall mean generally
accepted accounting principles in the United States in effect from time to time.
"INDEBTEDNESS" means liability for money borrowed or accrued and unpaid interest
thereon, obligations for payment of money under any Capital Lease Obligation and
any guarantees (without duplication);
"ISSUE DATE" means the date that any series of debt securities is first issued
under the Indenture.
"NON-RECOURSE DEBT" means Indebtedness to finance the creation, development,
construction or acquisition of assets and any increases in or extension,
renewals or refundings of such Indebtedness, provided that the recourse of the
lender thereof (including any agent, trustee, receiver or other person acting on
behalf of such entity) in respect of such Indebtedness is limited in all
circumstances to the assets created, developed, constructed or acquired in
respect of which such Indebtedness has been incurred and to the receivables,
inventory, equipment, chattels payable, contracts, intangibles and other assets,
rights or collateral connected with the assets created, developed, constructed
or acquired and to which such lender has recourse;
"PERMITTED ENCUMBRANCES" means:
o any Security Interest existing as of the Issue Date;
o any Security Interest to secure a Purchase Money Obligation,
provided that the Security Interest does not extend to any
property other than the property acquired, constructed or
improved;
o any Security Interest existing on the property of any person
immediately prior to the time that (i) such person becomes a
Restricted Subsidiary, or (ii) such person is merged with or
into, liquidated into, or amalgamated or consolidated with
Precision or a Restricted Subsidiary, PROVIDED that such
Security Interest was not incurred in anticipation of such
person becoming a Restricted Subsidiary or of such merger,
liquidation, amalgamation or consolidation, and PROVIDED
FURTHER that such Security Interest does not extend to any
property other than the property of such person secured by
such Security Interest immediately prior to the time that such
person becomes a Restricted Subsidiary or the time of such
merger, liquidation, amalgamation or consolidation;
15
o any Security Interest existing on property at the time of
acquisition (including by way of lease) by Precision or a
Restricted Subsidiary, provided that such Security Interest
was not incurred in anticipation of the financing of such
acquisition;
o any Security Interest on property acquired by Precision or a
Restricted Subsidiary after the Issue Date given in connection
with a Capital Lease Obligation;
o any Security Interest in favour of Precision or any Restricted
Subsidiary;
o any Security Interest in Current Assets given to secure any
Indebtedness repayable on demand or maturing, including any
right of extension or renewal, within 12 months after the date
such Indebtedness is incurred;
o any Security Interest granted in connection with Financial
Instrument Obligations;
o any Security Interest on cash or securities deposited with a
trustee or collateral agent to defease Indebtedness secured by
such Security Interest;
o any Security Interest referred to in the foregoing clauses or
this clause securing any extension, renewal, alteration or
replacement of all or part of any Indebtedness secured by such
Security Interest, PROVIDED THAT:
o the principal amount of such Indebtedness is not
increased by an amount exceeding the cost of such
extension, renewal, alteration or replacement,
including but not limited to all fees and expenses
incurred in connection therewith; and
o the Security Interest is limited to all or part of
the property which secured the Indebtedness prior to
it being extended, renewed, altered or replaced, plus
improvements on such property and the proceeds
thereof and all rights associated therewith; and
o any Security Interest that would otherwise be prohibited,
provided that the aggregate of all Indebtedness outstanding
and secured under this clause does not (calculated at the time
of the granting of the Security Interest) exceed an amount
equal to 10% of Consolidated Net Tangible Assets.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof;
"PURCHASE MONEY OBLIGATION" means any Indebtedness incurred in respect of, and
not exceeding, the cost of acquisition of any property or of the cost of
construction or improvements (but not costs of refurbishment) of any property
acquired, constructed or improved after the Issue Date, which Indebtedness
existed at the time of acquisition or was created, issued, incurred, assumed or
guaranteed contemporaneously with the acquisition, construction or improvement
or within 180 days after the completion thereof;
"RESTRICTED SUBSIDIARY" means, on any date, any Subsidiary of Precision;
provided, however, such term shall not include a Subsidiary of Precision if the
amount of Precision's share of shareholders' equity of such Subsidiary
constitutes, at the time of determination, less than 2% of Precision's
Consolidated Net Tangible Assets;
"SECURITY INTEREST" means with respect to any property, any security by way of
an assignment, mortgage, charge, pledge, lien, encumbrance, easement,
preference, priority, title retention agreement or other security interest of
any kind or nature whatsoever, howsoever created or arising, whether absolute or
contingent, fixed or floating, perfected or not, but not including any security
interest that may be deemed to arise solely as a result of entering into an
agreement not in violation of the Indenture to sell or otherwise transfer
property.
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"SHAREHOLDERS' EQUITY" means shareholders' equity of Precision as shown on the
most recent annual audited or quarterly unaudited consolidated balance sheet of
Precision and computed in accordance with GAAP.
"SIGNIFICANT SUBSIDIARY" means a Restricted Subsidiary that constitutes a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X of the
Exchange Act.
"SUBSIDIARY" means any corporation or other person of which Voting Shares or
other interests carrying more than 50% of the voting rights attached to all
outstanding Voting Shares or other interests are owned, directly or indirectly,
by Precision or by one or more Subsidiaries of Precision, or by Precision and
one or more Subsidiaries of Precision. "VOTING SHARES" means shares of any class
of a corporation which ordinarily have the right to vote for the election of the
directors of such corporation, PROVIDED THAT, for the purpose of this
definition, shares which only carry the right to vote conditionally on the
happening of an event shall not be considered Voting Shares whether or not such
event shall have happened.
ADDITIONAL AMOUNTS
Unless otherwise specified in a prospectus supplement, all payments made by us
under or with respect to the debt securities will be made free and clear of and
without withholding or deduction for or on account of any present or future tax,
duty, levy, impost, assessment or other governmental charge (including
penalties, interest and other liabilities related thereto) imposed or levied by
or on behalf of the Government of Canada or any province or territory thereof or
by any authority or agency therein or thereof having power to tax ("Canadian
Taxes"), unless we are required to withhold or deduct Canadian Taxes by law or
by the interpretation or administration thereof. If we are so required to
withhold or deduct any amount for or on account of Canadian Taxes from any
payment made under or with respect to the debt securities, we will pay to each
holder of such debt securities as additional interest such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each such holder after such withholding or deduction (and after deducting any
Canadian Taxes on such Additional Amounts) will not be less than the amount such
holder would have received if such Canadian Taxes had not been withheld or
deducted. However, no Additional Amounts will be payable with respect to a
payment made to a debt securities holder (such holder, an "Excluded Holder") in
respect of the beneficial owner thereof:
o with which we do not deal at arm's length (within the meaning
of the INCOME TAX ACT (Canada)) at the time of making such
payment;
o which is subject to such Canadian Taxes by reason of the
holder of the debt securities being a resident, domicile or
national of, or engaged in business or maintaining a permanent
establishment or other physical presence in or otherwise
having some connection with Canada or any province or
territory thereof otherwise than by the mere holding of debt
securities or the receipt of payments thereunder;
o which is subject to such Canadian Taxes by reason of the
holder's failure to comply with any certification,
identification, documentation or other reporting requirements
if compliance is required by law, regulation, administrative
practice or an applicable treaty as a precondition to
exemption from, or a reduction in the rate of deduction or
withholding of, such Canadian Taxes; or
o which by reason of the legal nature of the holder of the debt
securities is disentitled to the benefit of an applicable
treaty.
We will also make such withholding or deduction and remit the full amount
deducted or withheld to the relevant authority in accordance with applicable
law.
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We will furnish to the holders of the debt securities, within 60 days after the
date the payment of any Canadian Taxes is due pursuant to applicable law,
certified copies of tax receipts or other documents evidencing such payment by
us.
We will indemnify and hold harmless each holder of debt securities (other than
an Excluded Holder) and upon written request reimburse each such holder for the
amount, excluding any payment of Additional Amounts that have previously been
made by us, of:
o any Canadian Taxes levied or imposed and paid by such holder
as a result of payments made under or with respect to the debt
securities;
o any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto; and
o any Canadian Taxes imposed with respect to any reimbursement
under the preceding two bullet points, but excluding any such
Canadian Taxes on such holder's net income.
At least 15 days prior to each date on which any payment under or with respect
to any of the debt securities is due and payable, if we are aware that we will
be 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 be payable, the amounts so payable and will set forth
such other information necessary to enable the Trustee to pay such Additional
Amounts to holders on the payment date. Wherever in the Indenture there is
mentioned, in any context, the payment of principal, and premium, if any,
interest or any other amount payable under or with respect to a debt security,
such mention shall be deemed to include mention of the payment of Additional
Amounts to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof.
TAX REDEMPTION
Unless otherwise specified in a prospectus supplement, a series of debt
securities will be subject to redemption at any time, in whole but not in part,
at a redemption price equal to the principal amount thereof together with
accrued and unpaid interest to the date fixed for redemption, upon the giving of
a notice as described below, if we (or our successor) determine that (i) as a
result of (A) any amendment to or change (including any announced prospective
change) in the laws (or any regulations thereunder) of Canada (or our
successor's jurisdiction of organization) or of any political subdivision or
taxing authority thereof or therein affecting taxation, as applicable, or (B)
any amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), which amendment or change is
announced or becomes effective on or after the date specified in the applicable
prospectus supplement (or the date a party organized in a jurisdiction other
than Canada or the United States becomes our successor), we have or will become
obligated to pay, on the next succeeding date on which interest is due,
additional amounts with respect to any debt security of such series as described
under "Additional Amounts", or (ii) on or after the date specified in the
applicable prospectus supplement (or the date a party organized in a
jurisdiction other than Canada or the United States becomes our successor), any
action has been taken by any taxing authority of, or any decision has been
rendered by a court of competent jurisdiction in, Canada (or our successor's
jurisdiction of organization) or any political subdivision or taxing authority
thereof or therein, including any of those actions specified in (i) above,
whether or not such action was taken or decision was rendered with respect to
us, or any change, amendment, application or interpretation shall be officially
proposed, which, in any such case, in the written opinion to us of legal counsel
of recognized standing, will result in our becoming obligated to pay, on the
next succeeding date on which interest is due, Additional Amounts with respect
to any debt security of such series.
In the event that we elect to redeem a series of the debt securities pursuant to
the provisions set forth in the preceding paragraph, we shall deliver to the
Trustee a certificate, signed by an authorized officer, stating that we are
entitled to redeem such series of the debt securities pursuant to their terms.
Notice of intention to redeem such series of our debt securities will be given
not more than 60 nor less than 30 days prior to the date fixed for redemption
and will specify the date fixed for redemption.
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PROVISION OF FINANCIAL INFORMATION
We will furnish to the Trustee, within 30 days after we file them with or
furnish them to the SEC, copies (which may be electronic copies) of our annual
and quarterly reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which we are required to file with or furnish to the SEC
pursuant to Section 13 or 15(d) of the Exchange Act.
In the event that we may not remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly reporting
pursuant to rules and regulations promulgated by the SEC, we will continue to
furnish to the Trustee:
o within the time periods required for the filing of annual
information forms and annual financial statements (or similar
annual filings) by the Canadian securities regulatory
authorities, the information required to be contained in
annual reports on Form 40-F (or any successor form); and
o within the time periods for filing interim reports by the
Canadian securities regulatory authorities, the information
required to be contained in reports on Form 6-K (or any
successor form) which, regardless of applicable requirements
shall, at a minimum, contain such information required to be
provided in quarterly reports under the laws of Canada or any
province thereof to security holders of a corporation with
securities listed on the Toronto Stock Exchange, whether or
not we have any of our securities listed on such exchange.
Such information will be prepared in accordance with Canadian
disclosure requirements and GAAP; PROVIDED, HOWEVER, that we
shall not be obligated to file such report with the SEC if the
SEC does not permit such filings.
EVENTS OF DEFAULT
The following are summaries of events with respect to any series of our debt
securities which will constitute an event of default with respect to the debt
securities of that series:
o default in the payment of the principal of, or premium, if
any, on, any debt security when it becomes due and payable;
o default in the payment of any interest on any debt security,
when it becomes due and payable, and continuance of such
default for a period of 30 days;
o default in the performance, or breach, of any covenant or
warranty in the Indenture, and continuance of such default or
breach for a period of 60 days after written notice has been
given to us by the Trustee or by the holders of at least 25%
in principal amount of all outstanding debt securities of any
series affected thereby;
o default in the performance of any covenant of Precision or any
Restricted Subsidiary contained in any instrument (other than
the Indenture) under which Indebtedness (other than
Non-Recourse Debt) is created or issued if such Indebtedness
has an outstanding principal amount in excess of the greater
of US$40 million and 2.5% of Shareholders' Equity at the time
of default and the holders of such Indebtedness, or a trustee,
if any, for those holders, declare such Indebtedness to be due
and payable prior to the stated maturity of such Indebtedness,
and such acceleration shall not be rescinded or annulled, or
such default shall not be remedied or cured, whether by
payment or otherwise, or waived by the holders of such
accelerated Indebtedness within a period of seven days after
such Indebtedness has been accelerated (or, if such
acceleration is the result of an event of default which is not
related to the failure to pay principal or interest, within 30
days after such Indebtedness has been accelerated);
o certain events in bankruptcy, insolvency, assignment for the
benefit of creditors or analogous process relating to
Precision or any Significant Subsidiary of Precision, as
described in the Indenture; or
o any other events of default provided with respect to debt
securities of that series.
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If an event of default occurs and is continuing with respect to debt securities
of any series, unless the principal of all of the debt securities of that series
shall have already become due and payable, the Trustee may, in its discretion,
and shall upon request in writing made by the holders of not less than 25% in
principal amount of all outstanding debt securities affected by such event of
default, declare the principal of, and premium, if any, on, all the outstanding
debt securities of that series and the interest accrued thereon and all other
money, if any, owing under the provisions of the Indenture in respect of those
debt securities, to be immediately due and payable.
The indenture governing our 6.85% Debentures due June 2007 and our 7.65%
Debentures due October 2010 provides that an event of default shall have
occurred with respect to such debentures if there is a default by us or by a
material subsidiary of ours in respect of any indebtedness for borrowed money in
excess of $20 million if such default consists of a failure to pay the
indebtedness when due or results in the acceleration of such indebtedness. Since
the similar event of default described in the fourth bullet point in the above
paragraph provides for an event of default with respect to the debt securities
only if there is a default with respect to other Indebtedness having a principal
amount in excess of the greater of US$40 million or 2.5% of Shareholders'
Equity, it is possible that holders of such debentures could accelerate payment
of those debentures as a result of a default in other indebtedness while the
holders of the debt securities would not be entitled to accelerate payment of
the debt securities.
Subject to certain conditions contained in the Indenture, the holders of a
majority of the aggregate principal amount of the debt securities of the
affected series can rescind this accelerated payment requirement. Subject to
certain limitations contained in the Indenture, the holders of a majority in
principal amount of the outstanding debt securities of all series affected by an
event of default shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the debt securities
of all series affected by such event of default.
No holder of a debt security of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless:
o such holder has previously given to the Trustee written notice
of a continuing event of default with respect to the debt
securities of such series affected by such event of default;
o the holders of at least 25% in aggregate principal amount of
the outstanding debt securities of such series (voting as one
class) affected by such event of default have made written
request, and such holder or holders have offered reasonable
indemnity, to the Trustee to institute such proceeding as
Trustee; and
o the Trustee has failed to institute such proceeding, and has
not received from the holders of a majority in aggregate
principal amount of the outstanding debt securities of such
series affected by such event of default a direction
inconsistent with such request, within 60 days after such
notice, request and offer.
However, such above-mentioned limitations do not apply to a suit instituted by
the holder of a debt security for the enforcement of payment of the principal of
or any premium or interest on such debt security on or after the applicable due
date specified in such debt security.
The Indenture requires that we annually furnish to the Trustee a statement by
certain of our officers as to whether or not Precision, to the best of their
knowledge, is in compliance with all conditions and covenants of the Indenture
and, if not, specifying all such known defaults. We will also be required under
the Indenture to notify the Trustee as soon as practicable upon becoming aware
of any event of default.
DEFEASANCE
Unless otherwise specified in the applicable prospectus supplement, the
Indenture provides that, at our option, we will be discharged from any and all
obligations in respect of the outstanding debt securities of any series upon
irrevocable deposit with the Trustee, in trust, of money and/or government
securities which will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent chartered accountants to pay the
principal of and premium, if any, and each installment of interest on the
outstanding debt securities of such series ("Defeasance") (except with respect
to the authentication, transfer, exchange or replacement of our debt securities
or
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the maintenance of a place of payment and certain other obligations set forth in
the Indenture). Such trust may only be established if, among other things:
o we have delivered to the Trustee an opinion of counsel in the
United States stating that Precision has received from, or
there has been published by, the Internal Revenue Service a
ruling or, since the Issue Date, there has been a change in
the applicable U.S. federal income tax law, in either case to
the effect that the holders of the outstanding debt securities
of such series will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such
Defeasance and will be subject to U.S. federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such Defeasance had not occurred;
o we have delivered to the Trustee an opinion of counsel in
Canada or a ruling from Canada Revenue Agency to the effect
that the holders of the outstanding debt securities of such
series will not recognize income, gain or loss for Canadian
federal or provincial income or other tax purposes as a result
of such Defeasance and will be subject to Canadian federal or
provincial income and other tax on the same amounts, in the
same manner and at the same times as would have been the case
had such Defeasance not occurred (and for the purposes of such
opinion, such Canadian counsel shall assume that holders of
the outstanding debt securities of such series include holders
who are not resident in Canada);
o we are not an "insolvent person" within the meaning of the
BANKRUPTCY AND INSOLVENCY ACT (Canada) on the date of such
deposit or at any time during the period ending on the 91st
day following such deposit; and
o no event of default or event that, with the passing of time or
the giving of notice, or both, shall constitute an event of
default, shall have occurred and be continuing on the date of
such deposit.
We may exercise our Defeasance option notwithstanding our prior exercise of our
Covenant Defeasance option described in the following paragraph if we meet the
conditions described in the preceding sentence at the time we exercise the
Defeasance option.
The Indenture provides that, at our option, unless and until we have exercised
our Defeasance option described in the preceding paragraph, we may omit to
comply with the "Limitation on Liens" and "Consolidation, Amalgamation, Merger
and Sale of Assets" covenants and certain other covenants and such omission
shall not be deemed to be an event of default under the Indenture upon
irrevocable deposit with the Trustee, in trust, of money and/or government
securities which will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent chartered accountants to pay the
principal of and premium, if any, and each installment of interest, if any, on
the outstanding debt securities ("Covenant Defeasance"). If we exercise our
Covenant Defeasance option, the obligations under the Indenture other than with
respect to such covenants and the events of default with respect to such
covenants shall remain in full force and effect. Such trust may only be
established if, among other things:
o we have delivered to the Trustee an opinion of counsel in the
United States to the effect that the holders of the
outstanding debt securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such
Covenant Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance
had not occurred;
o we have delivered to the Trustee an opinion of counsel in
Canada or a ruling from Canada Revenue Agency to the effect
that the holders of the outstanding debt securities will not
recognize income, gain or loss for Canadian federal or
provincial income or other tax purposes as a result of such
Covenant Defeasance and will be subject to Canadian federal or
provincial income and other tax on the same amounts, in the
same manner and at the same times as would have been the case
had such Covenant Defeasance not occurred (and for the
purposes of such opinion, such Canadian counsel shall assume
that holders of our outstanding debt securities include
holders who are not resident in Canada);
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o we are not an "insolvent person" within the meaning of the
Bankruptcy and Insolvency Act (Canada) on the date of such
deposit or at any time during the period ending on the 91st
day following such deposit; and
o no event of default or event that, with the passing of time or
the giving of notice, or both, shall constitute an event of
default, shall have occurred and be continuing on the date of
such deposit.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by us and the Trustee
with the consent of the holders of a majority in principal amount of the
outstanding debt securities of each series issued under the Indenture affected
by such modification or amendment (voting as one class); provided that no such
modification or amendment may, without the consent of the holder of each
outstanding debt security of such affected series:
o change the stated maturity of the principal of, or extend the
scheduled time of payment of any instalment of interest, if
any, on any debt security;
o reduce the principal amount of, or premium, if any, or
interest rate, if any, on any debt security;
o change the place of payment;
o change the currency of payment of principal of, or premium, if
any, or interest, if any, on any debt security;
o impair the right to institute suit for the enforcement of any
payment on or with respect to any debt security;
o reduce the percentage of principal amount of outstanding debt
securities of such series, the consent of the holders of which
is required for modification or amendment of Indenture
provisions or for waiver of compliance with provisions of the
Indenture or for waiver of defaults; or
o modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of
past defaults or covenants, except as otherwise specified in
the Indenture.
The holders of a majority in principal amount of the outstanding debt securities
of any series may on behalf of the holders of all debt securities of that series
waive, insofar as that series is concerned, compliance by us with certain
restrictive provisions of the Indenture. The holders of a majority in principal
amount of outstanding debt securities of any series may waive any past default
under the Indenture with respect to that series, except a default in the payment
of the principal of, or premium, if any, and interest, if any, on any debt
security of that series or in respect of a provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding debt security of that series.
The Indenture or the debt securities may be amended or supplemented, without the
consent of any holder of such debt securities, in order to, among other things,
cure any ambiguity or inconsistency that, in each case, does not materially
adversely affect the rights of any holder of such debt securities.
RESIGNATION OF TRUSTEE
The Trustee may resign or be removed with respect to one or more series of debt
securities and a successor Trustee may be appointed to act with respect to such
series. In the event that two or more persons are acting as Trustee with respect
to different series of debt securities, each such Trustee shall be a Trustee of
a trust under the Indenture separate and apart from the trust administered by
any other such Trustee, and any action described herein to be taken by the
"Trustee" may then be taken by each such Trustee with respect to, and only with
respect to, the one or more series of debt securities for which it is Trustee.
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GOVERNING LAW
Our debt securities and the Indenture will be governed by and construed in
accordance with the laws of the State of New York.
CONSENT TO JURISDICTION AND SERVICE
Under the Indenture, we have irrevocably appointed CT Corporation System, 111
8th Avenue, 13th Floor, New York, New York 10011, as our authorized agent for
service of process in any suit or proceeding arising out of or relating to the
debt securities or the Indenture and for actions brought under U.S. federal or
state securities laws in any U.S. federal or state court located in the Borough
of Manhattan in The City of New York, New York, and we have irrevocably
submitted to the non-exclusive jurisdiction of such courts.
ENFORCEABILITY OF JUDGMENTS
Since most of our assets, as well as the assets of a number of our directors and
officers, are outside the United States, any judgment obtained in the United
States against us or certain of our directors or officers, including judgments
with respect to the payment of principal on any debt securities, may not be
collectible within the United States.
We have been informed by Borden Ladner Gervais LLP, our Canadian counsel, that
the laws of the Province of Alberta and the federal laws of Canada applicable
therein permit an action to be brought in a court of competent jurisdiction in
the Province of Alberta on any final and conclusive judgment IN PERSONAM of any
federal or state court located in the State of New York (a "New York Court")
against us, which judgment is subsisting and unsatisfied for a sum certain with
respect to the enforcement of the Indenture and the debt securities that is not
impeachable as void or voidable under the internal laws of the State of New York
if: (i) the New York Court rendering such judgment had jurisdiction over the
judgment debtor, as recognized by the courts of the Province of Alberta (and
submission by us in the Indenture to the jurisdiction of the New York Court will
be sufficient for that purpose); (ii) such judgment was not obtained by fraud or
in a manner contrary to natural justice and the enforcement thereof would not be
inconsistent with public policy, as such terms are understood under the laws of
the Province of Alberta or contrary to any order made by the Attorney General of
Canada under the FOREIGN EXTRATERRITORIAL MEASURES ACT (Canada) or by the
Competition Tribunal under the COMPETITION ACT (Canada); (iii) the enforcement
of such judgment would not be contrary to the laws of general application
limiting the enforcement of creditors' rights including bankruptcy,
reorganization, winding up, moratorium and similar laws and does not constitute,
directly or indirectly, the enforcement of foreign revenue, expropriatory or
penal laws in the Province of Alberta; (iv) no new admissible evidence relevant
to the action is discovered prior to the rendering of judgment by the court in
the Province of Alberta; (v) interest payable on the debt securities is not
characterized by a court in the Province of Alberta as interest payable at a
criminal rate within the meaning of Section 347 of the CRIMINAL CODE (Canada);
and (vi) the action to enforce such judgment is commenced within the appropriate
limitation period, except that any court in the Province of Alberta may only
give judgment in Canadian dollars.
In the opinion of such counsel, there are no reasons under present laws of the
Province of Alberta for avoiding recognition of such judgments of New York
Courts under the Indenture or on the debt securities based upon public policy.
We have been advised by such counsel that there is doubt as to the
enforceability in Canada by a court in original actions, or in actions to
enforce judgments of United States courts, of civil liabilities predicated
solely upon the United States federal securities laws.
DESCRIPTION OF SHARE CAPITAL
AUTHORIZED CAPITAL
Our authorized capital consists of an unlimited number of common shares without
nominal or par value and an unlimited number of non-voting, cumulative,
convertible, redeemable preferred shares ("Preferred Shares") without nominal or
par value, issuable in series. As at April 30, 2004, 55,897,119 common shares
are issued and outstanding and no Preferred Shares have been issued.
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COMMON SHARES
Each common share entitles the holder to receive notice of and to attend all
meetings of our shareholders, other than meetings at which only the holders of
another class or series are entitled to vote. Each common share entitles the
holder to one vote. The holders of common shares, in the discretion of the board
of directors, are entitled to receive out of any monies properly applicable to
the payment of dividends, and after the payment of any dividends payable on the
Preferred Shares of any series or any other series ranking prior to the common
shares as to the payment of dividends, any dividends declared and payable on the
common shares. Upon any liquidation, dissolution or winding-up of Precision, or
other distribution of our assets among our shareholders for the purposes of
winding-up our affairs, the holders of the common shares are entitled to share
on a share-for-share basis in the distribution, except for the prior rights of
the holders of the Preferred Share of any series, or any other class ranking
prior to the common shares. There are no pre-emptive or conversion rights, and
the common shares are not subject to redemption. All common shares currently
outstanding and to be outstanding upon exercise of outstanding options are, or
will be, fully paid and non-assessable.
Our by-laws provide for certain rights of holders of our common shares in
accordance with the provisions of the BUSINESS CORPORATIONS ACT (Alberta). Such
by-laws may be amended either by a majority vote of the holders of common shares
or by a majority vote of the board of directors. Any amendment of the by-laws by
action of the board of directors must be submitted to the next meeting of our
shareholders whereupon the by-law amendment must be confirmed, confirmed as
amended or replaced by a majority of the vote of the shareholders voting on such
matter.
Our shareholders do not have cumulative voting rights on the election of our
directors. Therefore, the holder of more than 50% of the common shares voting
for the election of our directors could, if they chose to do so, elect all of
the directors and, in such event, the holders of the remaining common shares
would not be able to elect any director.
PLAN OF DISTRIBUTION
We may sell Securities to or through underwriters or dealers and also may sell
Securities directly to purchasers or through agents. These Securities may be
sold in Canada, the United States and elsewhere where permitted by law.
The distribution of Securities of any series may be effected from time to time
in one or more transactions:
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale; or
o at prices related to such prevailing market prices to be
negotiated with purchasers.
In connection with the sale of Securities, underwriters may receive compensation
from us or from purchasers of Securities for whom they may act as agents in the
form of concessions or commissions. Underwriters, dealers and agents that
participate in the distribution of Securities may be deemed to be underwriters
and any commissions received by them from us and any profit on the resale of
Securities by them may be deemed to be underwriting commissions under the United
States Securities Act of 1933, as amended (the "Securities Act").
The prospectus supplement will also set forth the terms of the offering of the
Securities, including to the extent applicable, the initial offering price, our
proceeds from the offering, the underwriting concessions or commissions, and any
other discounts or concessions to be allowed or reallowed to dealers.
Underwriters with respect to each series sold to or through underwriters will be
named in the prospectus supplement relating to such series.
Under agreements which may be entered into by us, underwriters, dealers and
agents who participate in the distribution of debt securities may be entitled to
indemnification by us against certain liabilities, including liabilities under
the Securities Act. The underwriters, dealers and agents with whom we enter into
agreements may be customers of, engage in transactions with or perform services
for us in the ordinary course of business.
24
Each series of debt securities will be a new issue of securities with no
established trading market. Unless otherwise specified in a prospectus
supplement relating to a series of debt securities, the debt securities will not
be listed on any securities exchange or on any automated dealer quotation
system. Certain broker-dealers may make a market in the debt securities, but
will not be obligated to do so and may discontinue any market making at any time
without notice. We cannot assure you that any broker-dealer will make a market
in the debt securities of any series or as to the liquidity of the trading
market, if any, for the debt securities of any series.
CERTAIN INCOME TAX CONSIDERATIONS
The applicable prospectus supplement will describe certain Canadian federal
income tax consequences to an investor who is a resident of Canada or who is a
non-resident of Canada of acquiring any Securities offered thereunder, including
whether the payments of principal of, premium, if any, and interest on the debt
securities will be subject to Canadian non-resident withholding tax.
The applicable prospectus supplement will also describe certain United States
federal income tax consequences of the acquisition, ownership and disposition of
any Securities offered under this prospectus by an initial investor who is a
United States person (within the meaning of the United States Internal Revenue
Code), including, to the extent applicable, any such consequences relating to
debt securities payable in a currency other than the United States dollar,
issued at an original issue discount for United States federal income tax
purposes or containing early redemption provisions or other special terms.
LEGAL MATTERS
Unless otherwise specified in the prospectus supplement certain legal matters
relating to Canadian law will be passed upon for us by Borden Ladner Gervais
LLP, Calgary, Alberta, Canada. Certain legal matters in connection with the
offering relating to United States law will be passed upon for us by Paul,
Weiss, Rifkind, Wharton & Garrison LLP, New York, New York. Certain legal
matters relating to Canadian law will be passed upon for any underwriters,
dealers or agents by Burnet Duckworth & Palmer LLP, Calgary, Alberta, Canada. In
addition, certain legal matters relating to United States law will be passed
upon for any underwriters, dealers or agents by Skadden, Arps, Slate, Meagher &
Flom LLP, Toronto, Ontario, Canada.
The partners and associates of Borden Ladner Gervais LLP and Paul, Weiss,
Rifkind, Wharton & Garrison LLP as a group beneficially own, directly or
indirectly, less than 1% of any class of Precision's securities.
EXPERTS
The audited consolidated financial statements incorporated by reference in this
prospectus have been so incorporated in reliance on the reports of KPMG LLP,
Chartered Accountants, given on the authority of said firm, as experts in
auditing and accounting.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the registration
statement of which this prospectus is a part insofar as required by the SEC's
Form F-10:
o the documents listed in the third paragraph under "Where You
Can Find More Information" in this prospectus;
o U.S. GAAP Reconciliation for our unaudited comparative
consolidated financial statements for the three months ended
March 31, 2004;
o the consent of our accountants, KPMG LLP;
o the consent of our counsel, Borden Ladner Gervais LLP;
o powers of attorney from our directors and officers;
o the form of trust indenture relating to the debt securities;
o the statement of eligibility of the trustee on Form T- 1; and
o interest coverage ratios.
25
CONSENT OF KPMG LLP
We have read the short form base shelf prospectus of Precision Drilling
Corporation (the "Corporation") dated May , 2004 relating to the offer for
sale from time to time of up to US$1,000,000,000 of debt securities or common
shares of the Corporation. We have complied with Canadian generally accepted
standards for an auditor's involvement with offering documents.
We consent to the incorporation by reference in the above-mentioned short form
base shelf prospectus of our report to the shareholders of the Corporation on
the consolidated balance sheets of the Corporation as at December 31, 2003 and
2002 and the consolidated statements of earnings and retained earnings and cash
flow for each of the years in the three-year period ended December 31, 2003.
Chartered Accountants
May , 2004
PART II
INFORMATION NOT REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the BUSINESS CORPORATIONS ACT (Alberta) (the "ABCA"),
the registrant may indemnify a present or former director or officer or a person
who acts or acted at the registrant's request as a director or officer of a body
corporate of which the registrant is or was a shareholder or creditor, and his
heirs and legal representatives, against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been a
director or officer of the registrant or that body corporate, if the director or
officer acted honestly and in good faith with a view to the best interests of
the registrant, and, in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, had reasonable grounds for
believing that his conduct was lawful. Such indemnification may be in connection
with a derivative action only with court approval. A director or officer is
entitled to indemnification from the registrant as a matter of right if he was
substantially successful on the merits, fulfilled the conditions set forth
above, and is fairly and reasonably entitled to indemnify.
The By-laws of the registrant provide that, subject to the
limitations contained in the ABCA, the registrant shall indemnify a director or
officer, a former director or officer, or a person who acts or acted at the
registrant's request as a director or officer of a body corporate of which the
registrant is or was a shareholder or creditor (or a person who undertakes or
has undertaken any liability on behalf of the registrant or any such body
corporate), and his heirs and legal representatives, against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the registrant or such body
corporate, if he acted honestly and in good faith with a view to the best
interests of the registrant; and, in the case of a criminal or administrative
action or proceeding that is enforced by a monetary penalty, he had reasonable
grounds for believing that his conduct was lawful.
The By-laws of the registrant provide that the registrant may,
subject to the limitations contained in the ABCA, purchase and maintain such
insurance for the benefit of its directors and officers as such, as the board of
directors of the registrant may from time to time determine.
Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that, in the opinion of the SEC, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
II-1
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1* The Annual Information Form of the Registrant, dated April 26, 2004
(incorporated by reference to the Registrant's Annual Report on Form
40-F filed with the Commission on April 27, 2004, Commission File No.
001-14534).
4.2* The Registrant's audited comparative consolidated financial
statements for the year ended December 31, 2003, including the
auditors' report thereon, and Management's Discussion and Analysis
for the year ended December 31, 2003 (incorporated by reference to
the Registrant's Current Report on Form 6-K filed with the Commission
on April 13, 2004, Commission File No. 001-14534).
4.3* The Registrant's Management Information Circular, dated April 6,
2004, relating to the annual and special meeting of the Registrant's
shareholders to be held on May 11, 2004, excluding those portions
under the headings "Composition and Role of Compensation Committee,"
"Compensation Committee Report," "Common Share Performance - Toronto
Stock Exchange," "Common Share Performance - New York Stock Exchange"
and "Corporate Governance" (which portions shall be deemed not to
have been filed as part of, or incorporated by reference in, this
Registration Statement on Form F-10) (incorporated by reference to
the Registrant's Current Report on Form 6-K filed with the Commission
on April 13, 2004, Commission File No. 001-14534).
4.4* The Registrant's unaudited comparative consolidated financial
statements for the three months ended March 31, 2004 (including
Management's Discussion and Analysis for the three months ended March
31, 2004) (incorporated by reference to the Registrant's Current
Report on Form 6-K filed with the Commission on May 4, 2004,
Commission File No. 001-14534).
4.5*** U.S. GAAP Reconciliation for the Registrant's unaudited comparative
consolidated financial statements for the three months ended
March 31, 2004.
5.1** Consent of KPMG LLP.
5.2*** Consent of Borden Ladner Gervais LLP.
6.1** Powers of Attorney (included on the signature page of this
Registration Statement).
7.1*** Form of Trust Indenture.
7.3*** Statement of Eligibility of the Trustee on Form T-1.
9.1** Interest coverage ratios.
--------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
II-2
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
ITEM 1. UNDERTAKING
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to Form F-10 or to transactions
in said securities.
ITEM 2. CONSENT TO SERVICE OF PROCESS
Concurrent with the filing of this Registration Statement on Form F-10,
the Registrant filed with the Commission a written irrevocable consent and power
of attorney on Form F-X.
Any change to the name or address of the agent for service of process
of the Registrant shall be communicated promptly to the Securities and Exchange
Commission by an amendment to the Form F-X referencing the file number of the
relevant registration statement.
III-1
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 F-10 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Calgary, Province of Alberta, Canada, on the
10th day of May, 2004.
PRECISION DRILLING CORPORATION
By: /s/ Dale E. Tremblay
-------------------------------
Dale E. Tremblay
Senior Vice President-Finance
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dale Tremblay, Senior Vice
President-Finance and Chief Financial Officer, his or her true and lawful
attorney-in-fact and agent, who may act alone, with full powers of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, including post-effective amendments, and any and all additional
registration statements (including amendments and post-effective amendments
thereto) in connection with any increase in the amount of debt securities
registered with the Securities and Exchange Commission, and to file the same,
with all exhibits thereto, and other documents and in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent 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 or she might or could do in person, and hereby
ratifies and confirms all his or her said attorney-in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on May 10, 2004.
SIGNATURE TITLE
/s/ Hank B. Swartout Chairman of the Board, President and
-------------------------------- Chief Executive Officer
Hank B. Swartout (Principal Executive Officer)
/s/ Dale E. Tremblay
-------------------------------- Senior Vice President-Finance and Chief
Dale E. Tremblay Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
III-2
/s/ W.C. (Mickey) Dunn
-------------------------------- Director
W.C. (Mickey) Dunn
/s/ Robert J.S. Gibson Director
--------------------------------
Robert J.S. Gibson
/s/ Murray K. Mullen Director
--------------------------------
Murray K. Mullen
/s/ Patrick M. Murray Director
--------------------------------
Patrick M. Murray
/s/ Frederick W. Pheasey Director
--------------------------------
Frederick W. Pheasey
/s/ H. Garth Wiggins Director
--------------------------------
H. Garth Wiggins
III-3
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act of
1933, the undersigned has signed this Registration Statement, in the capacity of
the duly authorized representative of the Registrant in the United States, on
May 10, 2004.
CEDA INTERNATIONAL, INC.
By: /s/ Dale E. Tremblay
----------------------------------
Dale E. Tremblay
Vice President
III-4
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1* The Annual Information Form of the Registrant, dated April 26, 2004
(incorporated by reference to the Registrant's Annual Report on
Form 40-F filed with the Commission on April 27, 2004, Commission
File No. 001-14534).
4.2* The Registrant's audited comparative consolidated financial
statements for the year ended December 31, 2003, including the
auditors' report thereon, and Management's Discussion and Analysis
for the year ended December 31, 2003 (incorporated by reference to
the Registrant's Current Report on Form 6-K filed with the
Commission on April 13, 2004, Commission File No. 001-14534).
4.3* The Registrant's Management Information Circular, dated April 6,
2004, relating to the annual and special meeting of the
Registrant's shareholders to be held on May 11, 2004, excluding
those portions under the headings "Composition and Role of
Compensation Committee," "Compensation Committee Report," "Common
Share Performance - Toronto Stock Exchange," "Common Share
Performance - New York Stock Exchange" and "Corporate Governance"
(which portions shall be deemed not to have been filed as part of,
or incorporated by reference in, this Registration Statement on
Form F-10) (incorporated by reference to the Registrant's Current
Report on Form 6-K filed with the Commission on April 13, 2004,
Commission File No. 001-14534).
4.4* The Registrant's unaudited comparative consolidated financial
statements for the three months ended March 31, 2004 (including
Management's Discussion and Analysis for the three months ended
March 31, 2004) (incorporated by reference to the Registrant's
Current Report on Form 6-K filed with the Commission on May 4,
2004, Commission File No. 001-14534).
4.5*** U.S. GAAP Reconciliation for the Registrant's unaudited comparative
consolidated financial statements for the three months ended
March 31, 2004.
5.1** Consent of KPMG LLP.
5.2*** Consent of Borden Ladner Gervais LLP.
6.1** Powers of Attorney (included on the signature page of this
Registration Statement).
7.1*** Form of Trust Indenture.
7.3*** Statement of Eligibility of the Trustee on Form T-1.
9.1** Interest coverage ratios.
----------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
III-5