<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ___________.
COMMISSION FILE NUMBER 1-7746
___________________
TRANSOCEAN OFFSHORE INC.
(Exact name of registrant as specified in its charter)
___________________
DELAWARE 72-0464968
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 871-7500
___________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of May 1, 1997, 50,661,781 shares of common stock, par value $.01 per
share, of Transocean Offshore Inc. were outstanding.
================================================================================
<PAGE>
TRANSOCEAN OFFSHORE INC.
INDEX TO FORM 10-Q
QUARTER ENDED MARCH 31, 1997
Page
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996............. 2
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996................... 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996............. 4
Notes to Condensed Consolidated Financial Statements..... 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 8
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K......................... 16
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements of Transocean Offshore Inc. and
consolidated subsidiaries (the "Company") included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and notes normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------------------------
1997 1996
---------- ----------
(In thousands, except per share data)
Operating Revenues $ 219,616 $ 81,220
- --------------------------------------------------------------------------------
Costs and Expenses
Operating and maintenance 144,846 57,752
Depreciation and amortization 24,408 6,058
General and administrative 5,779 3,459
- --------------------------------------------------------------------------------
175,033 67,269
- --------------------------------------------------------------------------------
Operating Income 44,583 13,951
- --------------------------------------------------------------------------------
Other Income (Expense), Net
Equity in earnings of joint ventures 2,465 1,180
Interest income 703 1,522
Interest expense, net of amounts capitalized (4,802) (442)
Interest income related to settlement
of tax case - 983
Other, net (2,200) 969
- --------------------------------------------------------------------------------
(3,834) 4,212
- --------------------------------------------------------------------------------
Income Before Income Taxes 40,749 18,163
Income Taxes 13,040 6,338
- --------------------------------------------------------------------------------
Net Income $ 27,709 $ 11,825
================================================================================
Earnings Per Share of Common Stock $ 0.54 $ 0.42
Weighted Average Shares Outstanding 51,205 28,435
- --------------------------------------------------------------------------------
Dividends Paid Per Share $ 0.06 $ 0.06
================================================================================
See accompanying notes.
2
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
------------ -----------
(In thousands, except per share data)
ASSETS
Cash and Cash Equivalents $ 21,806 $ 24,154
Accounts Receivable 175,542 168,573
Deferred Income Taxes 16,963 17,207
Materials and Supplies 27,009 26,556
Prepayments 8,887 8,913
Other Current Assets 7,178 6,843
- --------------------------------------------------------------------------------
Total Current Assets 257,385 252,246
- --------------------------------------------------------------------------------
Investments in and Advances to Joint Ventures 38,769 35,608
Property and Equipment 1,832,246 1,751,863
Less Accumulated Depreciation 399,047 381,514
- --------------------------------------------------------------------------------
Property and Equipment, net 1,433,199 1,370,349
- --------------------------------------------------------------------------------
Goodwill, net 759,021 763,173
Other Assets 29,769 21,838
- --------------------------------------------------------------------------------
Total Assets $ 2,518,143 $ 2,443,214
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 65,389 $ 67,032
Accrued Income Taxes 68,000 57,666
Current Portion of Long-Term Debt 30,272 28,013
Other Current Liabilities 68,363 78,767
- --------------------------------------------------------------------------------
Total Current Liabilities 232,024 231,478
- --------------------------------------------------------------------------------
Long-Term Debt 468,809 392,322
Deferred Income Taxes 153,034 151,980
Other Long-Term Liabilities 61,361 39,725
- --------------------------------------------------------------------------------
Total Long-Term Liabilities 683,204 584,027
- --------------------------------------------------------------------------------
Preferred Stock, $0.10 par value; 50,000,000
shares authorized, none issued and outstanding - -
Common Stock, $0.01 par value; 150,000,000 shares
authorized, 51,550,448 shares issued, including
shares in treasury, and 50,657,448 shares
outstanding at March 31, 1997, and 51,522,985
shares issued and outstanding at
December 31, 1996 515 515
Additional Paid-in Capital 1,501,605 1,501,159
Retained Earnings 150,705 126,035
Less Common Stock in Treasury, at cost;
893,000 shares at March 31, 1997 (49,910) -
- --------------------------------------------------------------------------------
Total Stockholders' Equity 1,602,915 1,627,709
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 2,518,143 $ 2,443,214
================================================================================
See accompanying notes.
3
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
---------------------------
1997 1996
---------- ----------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 27,709 $ 11,825
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 24,408 6,058
Deferred income taxes 1,298 78
Equity in earnings of joint ventures (2,465) (1,180)
(Gain) loss on disposal of assets 138 (1,061)
Deferred income 20,000 6,079
Other, net (1,908) 363
Changes in operating assets and liabilities
Accounts receivable (17,969) (5,531)
Accounts payable (1,643) 5,663
Income taxes receivable/payable, net 10,334 6,053
Other current assets (762) (6,787)
Other current liabilities (12,251) (5,495)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 46,889 16,065
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (82,618) (26,230)
Proceeds from disposal of assets 81 1,247
Joint ventures and other investments (1,484) 3,563
- --------------------------------------------------------------------------------
Net cash used in investing activities (84,021) (21,420)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments on revolving lines of credit (22,161) -
Proceeds from project financing facility 107,896 -
Repayments on term loan facility (6,750) -
Financing costs (2,543) -
Treasury shares purchased (49,910) -
Sale of note receivable 11,000 -
Exercise of stock options 286 458
Dividends paid (3,038) (1,706)
Other, net 4 16
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 34,784 (1,232)
- --------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (2,348) (6,587)
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Period 24,154 112,972
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 21,806 $ 106,385
================================================================================
See accompanying notes.
4
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
BASIS OF CONSOLIDATION - The accompanying condensed consolidated financial
statements of Transocean Offshore Inc. and its consolidated subsidiaries (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, pursuant to such rules and regulations, these financial statements
do not include all disclosures required by generally accepted accounting
principles for complete financial statements. Operating results for the three
month period ended March 31, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. In connection with
the preparation of these financial statements, management was required to make
estimates and assumptions that affect the reported amount of assets,
liabilities, revenues, expenses and disclosure of contingent liabilities.
Actual results could differ from such estimates. The accompanying condensed
consolidated financial statements and notes thereto should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
SUPPLEMENTARY CASH FLOW INFORMATION - Cash payments for interest and income
taxes, net were $7.9 million and $1.4 million, respectively, for the three
months ended March 31, 1997 and $1.1 million and $0.2 million, respectively, for
the three months ended March 31, 1996.
GOODWILL - Goodwill is amortized on a straight-line basis over 40 years (the
period when benefits are expected to be derived). Accumulated amortization as
of March 31, 1997 totaled $11.2 million.
CHANGE IN ESTIMATE - Effective July 1, 1996, the Company extended the useful
lives of nine of its rigs by an average of five years. The effect of this
change in accounting estimate for the three months ended March 31, 1997 on
depreciation expense and net income was approximately $2.0 million and $1.4
million ($0.03 per share), respectively.
CAPITALIZED INTEREST - Interest costs for the construction and upgrade of
qualifying assets are capitalized. The Company capitalized interest costs on
construction work in progress of $2.8 million and $0.1 million for the three
months ended March 31, 1997 and 1996, respectively.
RECLASSIFICATIONS - Certain reclassifications have been made to prior period
amounts to conform with the current period's presentation. Combining
adjustments were made to classify various statement of operations and balance
sheet items consistently upon combination with Transocean ASA (see Note 2).
INTERIM FINANCIAL INFORMATION - The financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results for the interim periods. Such adjustments are considered to be of a
normal recurring nature unless otherwise identified.
NOTE 2 - BUSINESS COMBINATION
The Company acquired over 99 percent of the outstanding capital shares of
Transocean ASA, a Norwegian company, pursuant to an exchange offer for Company
common stock and cash completed in September 1996 and subsequent purchases of
Transocean ASA shares in November and December 1996 (the "Combination"). The
total purchase price was approximately $1.5 billion. The Combination was deemed
effective for accounting purposes as of September 1, 1996. The purchase price
allocation is based on preliminary estimates and may be revised at a later date.
The accompanying Condensed Consolidated Statement of Operations for the three
months ended March 31, 1997 includes the operating results of Transocean ASA. If
the Combination had been effective as of January 1, 1996, consolidated revenues
for the three month period ended March 31, 1996 would have increased on an
unaudited pro forma basis to $170.2 million, and net income and net income per
share would have decreased on an unaudited pro forma basis to a net loss and net
loss per share of $10.1 million and $0.20, respectively. The pro forma
information is
5
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
not necessarily indicative of the results of operations had the transaction been
effected on the assumed date or the results of operations for any future
periods.
NOTE 3 - CONSTRUCTION IN PROGRESS
The Company made significant capital additions during the first quarter of 1997
in connection with its previously announced fleet additions and upgrades.
During the first quarter of 1997 the Company spent $17.9 million on the
conversion of a multi-service vessel to a semisubmersible drilling rig, to be
named "Transocean Marianas", $23.2 million on the construction of a new
deepwater drillship, to be named "Discoverer Enterprise" and $12.8 million on
the upgrade of the semisubmersible drilling rig, Transocean Amirante. In
addition the Company spent $11.1 million on a major upgrade to the drillship
Discoverer Seven Seas.
NOTE 4 - DEBT
Debt is comprised of the following:
March 31, December 31,
1997 1996
----------- -----------
(In thousands)
Term Loan Facility $ 186,500 $ 193,250
Revolving Credit Facility 171,600 193,761
Project Financing Agreement 107,896 -
Notes Payable 30,000 30,000
Other 3,085 3,324
----------------------------------------------------------------
Total Debt 499,081 420,335
Less Current Maturities 30,272 28,013
----------------------------------------------------------------
Total Long-Term Debt $ 468,809 $ 392,322
================================================================
TERM LOAN AND REVOLVING CREDIT FACILITIES - In connection with the Combination,
the Company entered into a secured credit agreement, dated as of July 30, 1996
with a group of banks led by ABN AMRO Bank N.V. (the "Credit Agreement"). The
Credit Agreement provides for borrowing by the Company under (i) a six-year term
loan facility in the amount of $200 million (the "Term Loan Facility") and (ii)
a six-year revolving credit facility in the amount of $400 million (the
"Revolving Credit Facility"). Loans under the Credit Agreement bear interest, at
the option of the Company, at a base rate or LIBOR plus a specified margin that
varies depending on the Company's funded debt to total capital ratio or its
public senior unsecured debt rating (see Note 6).
PROJECT FINANCING AGREEMENT - In connection with the construction of the
Discoverer Enterprise and upgrade of the Transocean Amirante, Transocean
Enterprise Inc., a wholly owned subsidiary of the Company, entered into a bank
financing agreement, dated as of December 27, 1996 with a group of banks led by
ABN AMRO Bank N.V. (the "Project Financing Agreement"). Approximately $340.5
million is available for drawdowns during the construction period. Amounts
outstanding bear interest at LIBOR plus a specified margin.
NOTE 5 - CAPITAL STOCK
In February 1997, pursuant to previously granted authority, the Company
repurchased 893,000 shares of its common stock for a total of $49.9 million at
an average price of $55.89 per share. Borrowings from the Revolving Credit
Facility were used to fund the repurchases. The Board of Directors regularly
reviews the possibility of repurchasing common stock in light of prevailing
stock prices and the financial position of the Company.
6
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SUBSEQUENT EVENTS
PUBLIC DEBT OFFERING - In April 1997, the Company completed the public offering
and sale of $300 million aggregate principal amount of senior, unsecured debt
securities. The securities sold consisted of $100 million aggregate principal
amount of 7.45% Notes due April 15, 2027 (the "Notes") and $200 million
aggregate principal amount of 8.00% Debentures due April 15, 2027 (the
"Debentures"). Holders of Notes may elect to have all or any portion of the
Notes repaid on April 15, 2007 at 100% of the principal amount. The Notes, at
any time after April 15, 2007, and the Debentures, at any time, may be redeemed
at the option of the Company at 100% of the principal amount plus a make-whole
premium, if any, equal to the excess of the present value of future payments due
under the Notes and Debentures, using a discount rate equal to the then-
prevailing yield of U.S. treasury notes plus 20 basis points over the principal
amount of the security being redeemed. Interest is payable on April 15 and
October 15 of each year, commencing October 15, 1997. The indenture and
supplemental indenture relating to the Notes and the Debentures place
limitations on the Company's ability to (i) incur indebtedness secured by
certain liens, (ii) engage in certain sale/leaseback transactions and (iii)
engage in certain merger, consolidation or reorganization transactions. The net
proceeds were used to repay amounts outstanding under the Credit Agreement.
In connection with the public offering of the Notes and Debentures, the Credit
Agreement was amended to, among other things, release all security, convert $140
million of the term loans into revolving loans, and renegotiate the applicable
margins over LIBOR and the applicable commitment fees. Following the amendment,
the Credit Agreement provides for a $540 million Revolving Credit Facility, with
no Term Loan Facility.
STOCK REPURCHASE - On May 8, 1997, the Company's Board of Directors authorized
the repurchase of up to $200 million of the Company's common stock from time to
time on the open market or in privately negotiated transactions.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in connection with the information
contained in the Company's consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
OVERVIEW
Transocean Offshore Inc. is a leading international provider of deepwater and
harsh environment contract drilling services for oil and gas wells. The Company
currently owns, has ownership interests in or operates 30 mobile offshore
drilling rigs. Transocean's fleet consists of seven fourth-generation
semisubmersibles, fourteen second- and third-generation semisubmersibles, three
deepwater drillships and six jackup rigs. In addition, the Company has under
construction a new technologically advanced, ultra-deepwater drillship, to be
called the "Discoverer Enterprise". The Company contracts these drilling rigs,
related equipment and work crews at a contractually determined price per day
(dayrate), to drill offshore wells. The Company also provides other drilling
services on a dayrate, cost plus, footage or lump sum basis, including the
drilling of wells to a specified depth for a fixed price.
During 1996, the Company acquired over 99 percent of the outstanding capital
shares of Transocean ASA, a Norwegian company, pursuant to an exchange offer for
Company common stock and cash completed in September 1996 and subsequent
purchases of Transocean ASA shares in November and December 1996 (the
"Combination"). The total purchase price was approximately $1.5 billion. The
Combination was deemed effective for accounting purposes as of September 1,
1996.
8
<PAGE>
OPERATING RESULTS
Comparative data relating to the Company's operating revenues and operating
income by segment and geographic area follows. In the table and related
discussion below, the "Mobile Units" segment consists of the results of
operations for drilling rigs contracted to customers on a dayrate basis. The
"Drilling Services" segment includes results of all other drilling services
provided by the Company, including turnkey operations. The operating results of
Transocean ASA are included from September 1, 1996.
Three Months Ended
March 31,
1997 1996
----------- -----------
(In thousands)
OPERATING REVENUES
Mobile Units
U.S. Gulf of Mexico $ 39,106 $ 25,695
North Sea and Europe 84,592 23,463
Other Western Hemisphere 6,935 6,141
Other Eastern Hemisphere 17,787 5,801
- --------------------------------------------------------------------------------
148,420 61,100
- --------------------------------------------------------------------------------
Drilling Services
U.S. Gulf of Mexico 21,427 6,762
North Sea and Europe 48,869 3,871
Other Western Hemisphere 1,102 1,867
Other Eastern Hemisphere 242 7,620
- --------------------------------------------------------------------------------
71,640 20,120
- --------------------------------------------------------------------------------
Intersegment Eliminations (a) (444) -
- --------------------------------------------------------------------------------
Total Revenues $ 219,616 $ 81,220
================================================================================
OPERATING INCOME (LOSS) (b)
Mobile Units
U.S. Gulf of Mexico $ 23,609 $ 7,413
North Sea and Europe 12,865 5,538
Other Western Hemisphere 2,728 1,194
Other Eastern Hemisphere 9,683 2,037
Other (3,413) (1,528)
- --------------------------------------------------------------------------------
45,472 14,654
- --------------------------------------------------------------------------------
Drilling Services
U.S. Gulf of Mexico 338 901
North Sea and Europe 5,528 971
Other Western Hemisphere (653) 294
Other Eastern Hemisphere 123 1,084
Other (274) (341)
- --------------------------------------------------------------------------------
5,062 2,909
- --------------------------------------------------------------------------------
Corporate Expenses (5,951) (3,612)
- --------------------------------------------------------------------------------
Operating Income $ 44,583 $ 13,951
================================================================================
(a) Intersegment eliminations reflect the elimination of revenues earned when
one of the Company's business segments provides services to another of the
Company's business segments.
(b) Amounts shown are after applicable depreciation and amortization.
9
<PAGE>
Quarter ended March 31, 1997, compared to Quarter ended March 31,1996
Revenues increased to $219.6 million for the quarter ended March 31, 1997 up
from $81.2 million for the prior year quarter, an increase of $138.4 million or
170 percent. Operating income increased by $30.6 million or 219 percent, up
from $14.0 million in the first quarter of 1996 to $44.6 million in the current
year quarter. Net income for the first quarter of 1997 was $27.7 million, up
from $11.8 million for the first quarter of 1996, an increase of $15.9 million
or 135 percent. The increase in 1997 resulted primarily from increased
dayrates, higher utilization rates and the inclusion of the Transocean ASA
results following the Combination. The weighted-average number of shares was
51.2 million and 28.4 million for the quarters ended March 31, 1997 and 1996,
respectively. The increase was primarily due to the shares issued in the
Combination.
Revenues and operating income from Mobile Units increased significantly in the
first quarter of 1997 compared to the prior year quarter. In the U.S. Gulf of
Mexico, the increases resulted primarily from higher dayrates earned during the
current quarter. In addition one of the drillships was drydocked during part of
the 1996 quarter and incurred significant repairs and maintenance costs during
the shipyard stay. In the North Sea and Europe, the increases in revenues and
operating income resulted primarily from the inclusion of the Transocean ASA
results following the Combination. The increases in Other Eastern Hemisphere
resulted primarily from higher dayrates earned during the current year quarter
as well as full utilization of one jackup rig which was stacked during the 1996
quarter.
Revenues and operating income from Drilling Services increased during the first
quarter of 1997 compared to the same period in 1996. In the U.S. Gulf of
Mexico, the increase in revenues resulted primarily from more turnkey wells
completed during the current quarter over the prior year quarter. Operating
income in the U.S. Gulf of Mexico decreased slightly in the first quarter of
1997 over the prior year quarter primarily due to losses from turnkey
operations. In the North Sea and Europe, the increases in revenues and operating
income resulted primarily from the inclusion of the Transocean ASA results
following the Combination, as well as a higher level of services provided during
the first quarter of 1997 over the prior year quarter. Partially offsetting
these increases in the North Sea and Europe were decreases in Other Eastern
Hemisphere. The decreases resulted primarily from services provided in Qatar
during the first quarter of 1996 that were not performed in the current year
quarter.
Corporate expenses increased $2.4 million, from $3.6 million in the first
quarter of 1996 to $6.0 million in the current year quarter primarily due to
increased costs to integrate and manage a larger organization. The corporate
organization expanded to accommodate the overall growth of the Company as a
result of the Combination and the increased activity in the industry, such as
the major construction programs, increasing recruiting and training activity and
upgrading and expanding communication and data processing systems.
Depreciation and amortization expense increased in the 1997 period over 1996 due
to $14.2 million of additional depreciation for the Transocean ASA property and
equipment and $4.8 million of amortization of goodwill related to the
Combination. Partially offsetting these increases was a $2.0 million reduction
of depreciation expense due to the extension of the useful lives of nine of the
Company's rigs effective July 1, 1996.
Other income (expense) decreased from income of $4.2 million in the first
quarter of 1996 to expense of $3.8 million in the current year quarter. The
decrease resulted primarily from lower interest income due to lower average cash
balances during the current quarter, higher interest expense due primarily to
debt incurred related to the Combination and higher other expense due to $1.9
million in losses on the mark-to-market adjustment on open foreign exchange
derivative instruments. Partially offsetting these decreases was higher equity
in earnings of joint ventures, resulting primarily from higher dayrates earned
on two rigs owned by a corporation in which the Company has a 25 percent
interest.
Income tax expense increased by $6.7 million due primarily to higher pre-tax
earnings in the first quarter of 1997 over the same period in 1996.
10
<PAGE>
MARKET OUTLOOK
The increased demand and higher dayrates for rigs in the deepwater and harsh-
environment markets that began in 1995 has continued into the second quarter of
1997. The improvements in these markets are due in part to technological
advances that improved the economics of offshore exploration and development, as
well as the greater availability of attractive concessions in markets throughout
the world. Operators are showing more interest in deepwater areas worldwide,
including the U.S. Gulf of Mexico, and in some of the North Sea's more demanding
locations, particularly the harsh-environment areas west of Shetlands and
northern areas offshore Norway. As a result of the improved market conditions,
rigs are being contracted under longer-term agreements at higher dayrates, with
customers often paying for upgrades to the rigs to operate in more challenging
conditions. In response to the demands of its customers, the Company is also
providing a variety of drilling services, including well planning, engineering
and management through integrated service teams.
Historically, the contract drilling market has been highly competitive and
cyclical; thus, the Company cannot predict the extent to which the current
market conditions will continue. In addition, as a result of improved market
conditions, a number of drilling contractors are upgrading existing rigs or
constructing new rigs that will be capable of competing with the Company's
deepwater and harsh environment rigs. Although most of these rigs are being
built pursuant to long-term contract commitments, there can be no assurance
that, upon the expiration of such contracts and the contracts for the Company's
rigs, then-current market conditions will be favorable and that current high
utilization rates will continue.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Cash flows provided by operations for the three months ended March 31, 1997
increased to $46.9 million, up from $16.1 million for the three months ended
March 31, 1996, an increase of $30.8 million. The increase in cash provided by
operations was due primarily to an increase in operating income earned in the
1997 quarter over the 1996 quarter and deferred income received from a customer
in 1997.
Cash flows used in investing activities increased by $62.6 million from $21.4
million in the first quarter of 1996 to $84.0 million in the current year
quarter. The increase in cash used in investing activities resulted primarily
from the increase in capital expenditures related to the Transocean Amirante,
Transocean Marianas, the Discoverer Enterprise and the Discoverer Seven Seas.
Cash flows provided by financing activities increased $36.0 million from $1.2
million used in the first quarter of 1996 to $34.8 million provided by in the
current year quarter. The increase resulted primarily from borrowings under the
project financing agreement, partially offset by repayments on the revolving
line of credit and from cash used to reacquire 893,000 shares of common stock.
CAPITAL EXPENDITURES
The Company's investments in its existing fleet and fleet additions announced
during 1996 will require significant capital expenditures in future years. The
Company spent approximately $83 million in the first quarter of 1997 on capital
expenditures. The Company expects total capital expenditures to be
approximately $490 million for the year 1997. The purchase and conversion of
the Transocean Marianas is expected to require expenditures of approximately
$130 million during 1997, which includes $14 million of client requested
upgrades. The Discoverer Enterprise project is expected to require capital
expenditures of approximately $170 million during 1997 and $80 million during
1998. The Company expects to spend approximately $40 million during 1997 for
upgrades to the Transocean Amirante. As with any major construction project
that takes place over an extended period of time, actual costs and the timing of
such
11
<PAGE>
expenditures may vary from initial estimates based on finalization of the
design and actual terms of awarded contracts. Expenditures for upgrades and
improvements to other rigs in the Company's operating fleet during 1997 are
expected to be approximately $150 million.
The Company intends to fund the cash requirements relating to these capital
commitments through available cash balances, borrowings under the Credit
Agreement referred to below and, in the case of the Discoverer Enterprise and
Transocean Amirante, financing under the Project Financing Agreement referred to
below.
DEBT
CREDIT AGREEMENT AND PROJECT FINANCING AGREEMENT - In connection with the
Combination, the Company entered into a secured credit agreement dated as of
July 30, 1996 with a group of banks led by ABN AMRO Bank N.V. (the "Credit
Agreement"). Prior to the amendment discussed below, the Credit Agreement
provided for borrowing by the Company under a six-year term loan facility in the
amount of $200 million (the "Term Loan Facility") and a six-year revolving
credit facility in the amount of $400 million (the "Revolving Credit Facility").
Loans under the Credit Agreement bear interest, at the option of the Company, at
a base rate or LIBOR plus a margin (0.35 percent at March 31, 1997) that varies
depending on the Company's funded debt to total capital ratio or its public
senior unsecured debt rating. The Credit Agreement requires compliance with
various restrictive covenants and effectively limits the Company's ability to
pay dividends based on a specified net worth requirement and an interest
coverage ratio. Quarterly principal payments began on the Term Loan Facility on
December 31, 1996. The Credit Agreement has a maturity date of July 2002.
In connection with the public offering of the Notes and Debentures as discussed
below, the Credit Agreement was amended to, among other things, release all
security, convert $140 million of the term loans into revolving loans, and
renegotiate the applicable margins over LIBOR and the applicable commitment
fees. Following the amendment, the Credit Agreement provides for a $540 million
Revolving Credit Facility, with no Term Loan Facility.
In connection with the construction of the Discoverer Enterprise and upgrade of
the Transocean Amirante, the Company entered into a bank financing agreement
with a group of banks led by ABN AMRO N.V. ("Project Financing Agreement").
Approximately $340 million is available for drawdowns during the construction
period and is available in two tranches. The first tranche of $66 million is to
be repaid by December 31, 1998 or when construction on both vessels is
completed. It bears an interest rate of LIBOR plus the same margin applicable to
borrowings under the Company's Revolving Credit Facility (0.35 percent at March
31, 1997). The second tranche of $274.5 million bears an interest rate of LIBOR
plus 0.85 percent during the construction period and is convertible to term
financing upon completion of construction and acceptance of the two vessels (no
later than December 31, 1998) by Amoco Exploration and Production Company
("Amoco"), which is contracting the rigs for a period of three to five years
following completion. The term financing matures over a period of three to five
years based upon Amoco's contract selections. The term financing would also be
divided into two tranches, the relative amounts of which will depend on various
factors, including Amoco's contract selections for the Discoverer Enterprise and
the Transocean Amirante. One tranche of the term financing will be sized based
upon, and is expected to be repaid from, the net cash flows generated from the
Amoco contracts (the "Amoco Cash Flows"). The Company has the option to accept
bank financing for the Amoco Cash Flows at LIBOR plus 0.65 percent or to enter
into an uncommitted lease securitization program at commercial paper rates plus
approximately 0.28 percent. The second tranche of the term facility is expected
to be repaid from Company cash flows to the extent the Amoco Cash Flows do not
cover scheduled repayments. The Company has the option to accept bank financing
for the Company cash flows at LIBOR plus 1.125 percent for a period of three
years and LIBOR plus 1.25 percent thereafter or to enter into a lease
securitization at commercial paper rates plus approximately 0.58 percent (as
long as the Company's credit rating is BBB- or Baa3 or better).
PUBLIC DEBT OFFERING - In April 1997, the Company completed the public offering
and sale of $300 million aggregate principal amount of senior, unsecured debt
securities. The securities sold consisted of $100 million aggregate principal
amount of 7.45% Notes due April 15, 2027 (the "Notes") and $200 million
aggregate principal amount of 8.00%
12
<PAGE>
Debentures due April 15, 2027 (the "Debentures"). Holders of Notes may elect to
have all or any portion of the Notes repaid on April 15, 2007 at 100% of the
principal amount. The Notes, at any time after April 15, 2007, and the
Debentures, at any time, may be redeemed at the option of the Company at 100% of
the principal amount plus a make-whole premium, if any, equal to the excess of
the present value of future payments due under the Notes and Debentures using a
discount rate equal to the then-prevailing yield of U.S. treasury notes plus 20
basis points over the principal amount of the security being redeemed. Interest
is payable on April 15 and October 15 of each year, commencing October 15, 1997.
The indenture and supplemental indenture relating to the Notes and the
Debentures place limitations on the Company's ability to (i) incur indebtedness
secured by certain liens, (ii) engage in certain sale/leaseback transactions and
(iii) engage in certain merger, consolidation or reorganization transactions.
The net proceeds were used to repay amounts outstanding under the Credit
Agreement.
The Company has letters of credit outstanding at March 31, 1997 totaling $11.4
million, which guarantee various insurance and contract bidding activities.
SHELF REGISTRATION
In April 1997, the Company filed with the Securities and Exchange Commission
(the "SEC") a $750 million shelf registration statement on Form S-3 for the
proposed offering from time to time of debt securities, preferred stock, common
stock and warrants to purchase preferred stock or debt securities. The
registration statement was declared effective by the SEC on April 11, 1997. The
Company sold the Notes and Debentures discussed elsewhere in this quarterly
report under this registration statement.
AUTHORIZED STOCK REPURCHASE
In February 1997, the Company repurchased 893,000 shares of its common stock at
an average price of $55.89 per share for a total of $49.9 million pursuant to
authority previously granted by the Board of Directors. Borrowings from the
Revolving Credit Facility were used to fund the repurchase. In May 1997, the
Company's Board of Directors authorized the repurchase of up to $200 million
shares of its common stock from time to time on the open market or in privately
negotiated transactions. The Board of Directors regularly reviews the
possibility of repurchasing common stock in light of prevailing stock prices and
the financial position of the Company.
DERIVATIVE INSTRUMENTS
The Company enters into a variety of derivative financial instruments in
connection with the management of its exposure to fluctuations in foreign
exchange rates and interest rates. The Company does not enter into derivative
transactions for speculative purposes; however, for accounting purposes certain
transactions may not meet the criteria for hedge accounting.
Gains and losses on foreign exchange derivative instruments, which qualify as
accounting hedges, are deferred and recognized when the underlying foreign
exchange exposure is realized. Gains and losses on foreign exchange derivative
instruments, which do not qualify as hedges for accounting purposes, are
recognized currently based on the change in market value of the derivative
instruments. At March 31, 1997, the net market value of open foreign exchange
derivative instruments, not qualifying as accounting hedges, all of which expire
during 1997, was approximately $(0.3) million. The Company recognized a net
pre-tax loss of $1.9 million on such instruments for the three months ended
March 31, 1997. The notional amount of such open contracts was not significant
at March 31, 1997.
The Company uses interest rate swap agreements and option contracts to
effectively convert a portion of its floating rate debt to a fixed rate basis,
reducing the impact of interest rate changes on future income. Interest rate
swaps and options are designated as a hedge of underlying future payments. The
interest rate differential to be received or paid on the swaps is recognized
over the lives of the swaps as an adjustment to interest expense. The fair
value of the interest rate
13
<PAGE>
swap agreements and option contracts obtained in connection with the Transocean
ASA Combination was recorded as of the effective date of the Combination. At
March 31, 1997, the net unrealized gain on open interest rate swaps and options
was $2.6 million, which has been deferred because the Company intends to
maintain these contracts through their maturity.
ACQUISITIONS
The Company regularly reviews possible acquisitions of businesses and drilling
units, and may from time to time in the future make significant capital
commitments for such purposes. Any such acquisition could involve the payment
by the Company of a substantial amount of cash and the issuance of a substantial
number of shares of common stock. The Company would expect to fund the cash
portion of any such acquisition through cash balances on hand, the incurrence of
additional debt, sales of assets or common stock, or a combination thereof.
SOURCES OF LIQUIDITY
The Company believes that its cash and cash equivalents, cash generated from
operations, borrowings available under its Credit Agreement, Project Financing
Agreement and access to other financing sources will be adequate to meet its
anticipated short-term and long-term liquidity requirements, including scheduled
debt repayments.
ASSET DIVESTITURE
In March 1997, the Company announced its intention to divest certain activities
and associated non-core assets within its Drilling Services line of business.
The specific activities to be divested include platform drilling, workover and
maintenance, as well as engineering and construction services. Revenues
generated from the business activities to be divested totaled approximately $110
million during the full year 1996 (including the period prior to the
Combination). The Company has retained Oslo-based Pareto Fonds to structure the
divested activities into a new corporate entity, which will be sold to investors
in Norway and subsequently listed on the Oslo Stock Exchange. In April 1997,
the Company established a Norwegian underwriting syndicate to effect the sale.
The sale is expected to occur during May 1997, with a listing on the Oslo Stock
Exchange to follow in June 1997. The members of the underwriting syndicate have
agreed to purchase any shares not sold. The Company estimates that net proceeds
from the offering will be approximately $105 million, which will be used to
repay debt.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued the Statement
of Financial Accounting Standard No. 128, Earnings per Share. This statement
establishes standards for computing and presenting earnings per share ("EPS")
and simplifies the standards for computing EPS previously outlined in the
Accounting Principles Board Opinion No. 15. The Company plans to adopt this
standard in the fourth quarter of 1997. Its adoption is not expected to have a
material effect on the financial statements.
FORWARD-LOOKING INFORMATION
The statements included in this quarterly report regarding future financial
performance and results of operations and other statements that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Statements to the effect that the Company or management
"anticipates," "believes," "estimates," "expects," "predicts," or "projects" a
particular result or course of events, or that such result or course of events
"should" occur, and similar expressions, are also intended to identify forward-
looking statements.
14
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Such statements are subject to numerous risks, uncertainties and assumptions,
including but not limited to, uncertainties relating to industry and market
conditions, prices of crude oil and natural gas, foreign exchange and currency
fluctuations, political instability in foreign jurisdictions, ability of the
Company to integrate newly acquired operations and other factors discussed in
this quarterly report and in the Company's other filings with the SEC. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
indicated.
15
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed in connection with this Report:
NUMBER DESCRIPTION
4.1 First Amendment to Secured Credit Agreement dated as of
April 24, 1997 among the Company, the Lenders party thereto,
ABN AMRO Bank, as Agent, and the Co-Agents and Documentation
Agents listed therein.
4.2+ Indenture dated as of April 15, 1997 between the Company and
Texas Commerce Bank National Association, as trustee (filed as
Exhibit 4.1 to the Company's Form 8-K dated April 29, 1997).
4.3+ First Supplemental Indenture dated as of April 15, 1997 between
the Company and Texas Commerce Bank National Association, as
trustee, supplementing the Indenture dated as of April 15, 1997
(filed as Exhibit 4.2 to the Company's Form 8-K dated
April 29, 1997).
4.4+ Form of Note (filed as Exhibit 4.3 to the Company's Form 8-K
dated April 29, 1997).
4.5+ Form of Debenture (filed as Exhibit 4.4 to the Company's
Form 8-K dated April 29, 1997).
10.1* Long-Term Incentive Plan of Transocean Offshore Inc., as
amended and restated effective March 13, 1997.
27.1 Financial Data Schedule.
___________________
* Compensatory plan or arrangement.
+ Incorporated by reference as indicated.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ending
March 31, 1997.
16
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on May 13, 1997.
TRANSOCEAN OFFSHORE INC.
/s/ ROBERT L. LONG
By: _______________________________
Robert L. Long
Senior Vice President
(Principal Financial Officer)
/s/ BARBARA S. KOUCOUTHAKIS
By: _______________________________
Barbara S. Koucouthakis
Vice President and Controller
(Principal Accounting Officer)
17
<PAGE>
EXHIBIT 4.1
FIRST AMENDMENT TO SECURED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO SECURED CREDIT AGREEMENT (this "AMENDMENT") dated
as of April 24, 1997, is by and among Transocean Offshore Inc., a Delaware
corporation (the "BORROWER"), the lenders from time to time parties hereto (each
a "LENDER" and collectively, the "LENDERS"), ABN AMRO Bank N.V. ("ABN AMRO"), a
Netherlands chartered bank acting through its Houston agency, as agent for the
Lenders (in such capacity, the "AGENT"), SunTrust Bank, Atlanta, and Credit
Lyonnais New York Branch, as documentation agents for the Lenders (in such
capacity, each a "DOCUMENTATION AGENT" and together, the "DOCUMENTATION
AGENTS"), and Bank of Montreal, The Fuji Bank, Limited, Royal Bank of Canada,
Wells Fargo Bank (Texas), National Association, and Bank of Tokyo-Mitsubishi,
Ltd., Houston Agency, as co-agents for the Lenders (in such capacity, each a
"CO-AGENT" and collectively, the "CO-AGENTS").
WITNESSETH
----------
WHEREAS, the Borrower, the Lenders, the Agent, the Documentation Agents and
the Co-Agents have entered into that certain Secured Credit Agreement dated as
of July 30, 1996 (the "CREDIT AGREEMENT"), pursuant to which the Lenders have
made and agreed to make Loans to the Borrower and issued and agreed to issue
Letters of Credit for the account of the Borrower; and
WHEREAS, the Borrower, the Lenders, the Agent, the Documentation Agents and
the Co-Agents desire to amend the Credit Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders, the Agent, the Documentation Agents
and the Co-Agents hereby agree as follows:
1. DEFINITIONS. Section 1.1 of the Credit Agreement is hereby amended as
follows:
(a) DELETION OF DEFINITIONS. The definitions of "Amortization Date",
"Mandatory Bid Payment Date", "Term Credit", "Term Credit Commitment", "Term
Credit Commitment Amount", "Term Loan", "Term Notes" and "Total Commitment
Amount" are hereby deleted from the Credit Agreement. The definitions of
"Credit Party" and "Security Documents" are deleted from the Credit Agreement as
of the Settlement Time.
(b) ADDITION OF DEFINITIONS. The definitions of "Public Debt Issue" and
"Settlement Time" are hereby inserted in the Credit Agreement in the appropriate
alphabetical order as follows:
(i) "Public Debt Issue" means the underwritten public offering of
debt securities of the Borrower in an aggregate principal amount of
not more than $300,000,000, the terms of which debt securities are
substantially as described in that certain Prospectus Supplement to
Prospectus dated April 11, 1997, which
<PAGE>
Prospectus comprises part of the Borrower's SEC registration statement
no. 333-24457 on Form S-3.
(ii) "Settlement Time" means the moment of initial issuance of
debt securities in the Public Debt Issue, provided that such moment
occurs on a date no later than May 9, 1997.
(c) AMENDMENT OF DEFINITIONS. The definitions of "Applicable Margin",
"Borrower", "Collateral", "Commitment", "Credit", "Credit Documents", "Loan",
"Majority Lenders", "Material Adverse Effect", "Obligations", "Required
Lenders", "Revolving Credit Commitment Amount" and "SPV", respectively, in the
Credit Agreement are amended as follows:
(i) The definition of "Applicable Margin" is hereby amended by
deleting the pricing grid in the nineteenth through twenty-second
lines thereof and inserting the following pricing grid in its place:
Debt Rating Percentage
----------- ----------
A/A2 or above 0.200%
A-/A3 0.250%
BBB+/Baa1 or above 0.300%
BBB/Baa2 0.340%
BBB-/Baa3 0.400%
(ii) The definition of "Borrower" is hereby amended by inserting
the name "Transocean Offshore Inc., formerly known as" before the word
Sonat in such definition.
(iii) The definition of "Co-Agent" is hereby amended by deleting
the "and" in the second line thereof and by inserting the clause "and
Bank of Tokyo-Mitsubishi, Ltd., Houston Agency" after the word
"Association" in the second line thereof.
(iv) The definition of "Collateral" is amended as of the
Settlement Time by deleting the clause "a Security Document" in the
third line thereof and inserting in its place the clause "Section
7.4".
(v) The definitions of "Commitment" and "Credit" are hereby
amended by deleting the "," after the section reference to 2.1 in the
second line of each of thereof and inserting the word "and" in its
place and by deleting the clause "and 2.3" in the second line of each
of thereof.
(vi) The definition of "Credit Documents" is hereby amended by
adding the clause "any amendments, modifications or restatements to or
of this Agreement," after the word "Agreement," in the first line
thereof and is amended as of the Settlement Time by deleting the
clause ", the Subsidiary Guaranties," in the first line thereof and
inserting the word "and" in its place and by deleting the clause ",
and the Security Documents" in the second line thereof.
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<PAGE>
(vii) The definition of "Loan" is hereby amended to delete the
clause "or Term Loan" in the second line thereof.
(viii) The definitions of "Majority Lenders" and "Required
Lenders" are hereby amended by deleting the clause "(a) the aggregate
outstanding principal amount of the Term Loans, plus (b) so long as
the Revolving Credit Commitments have not terminated pursuant to the
terms hereof," in the second line of each of thereof, by deleting the
word "such" in the fourth line of each of thereof and inserting in its
place the clause "the Revolving Credit" and by deleting the word "so"
in the fourth line of each of thereof.
(ix) The definition of "Material Adverse Effect" is amended as of
the Settlement Time by deleting the clause "or the Borrower and the
other Credit Parties taken as a whole to perform their" in the seventh
line thereof and inserting in its place the clause "to perform its"
and by deleting the clause "they are" in the eighth line thereof and
inserting the clause "it is" in its place.
(x) The definition of "Obligations" is amended as of the
Settlement Time by deleting the clause "and any other Credit Party" in
the first line thereof.
(xi) The definition of "Revolving Credit Commitment Amount" is
hereby amended by deleting the number "400,000,000" in the first line
thereof and inserting in its place the number "540,000,000".
(xii) The definition of "SPV" is amended as of the Settlement
Time by deleting the clause "that is not a Guarantor" in the first
line thereof and the clause "or Guarantor" in the third line thereof.
2. OTHER AMENDMENTS TO CREDIT AGREEMENT.
(a) The cover page of the Credit Agreement and the first paragraph of
the Credit Agreement are amended as of the Settlement Time by deleting the word
"Secured" in the title of the Credit Agreement, by inserting as of the date
hereof the clause "Transocean Offshore Inc., formerly known as" before the word
"Sonat" in each of thereof and by deleting as of the date hereof the word "and"
after the name "Royal Bank of Canada" and by inserting the clause "and Bank of
Tokyo-Mitsubishi, Ltd., Houston Agency" after the name Wells Fargo Bank (Texas),
National Association in each of thereof.
(b) Section 2.3 of the Credit Agreement is hereby deleted in its
entirety and replaced with the clause "Intentionally deleted".
(c) Section 2.4 of the Credit Agreement is hereby amended to delete
the word "both" in the first line thereof and the clause "and Term Loans" in the
second line thereof.
(d) Section 2.5 of the Credit Agreement is hereby amended by deleting
the clause "for the Term Loans and" in the twenty-second line of subsection (a)
thereof, by deleting the clause "(except they shall count as two different
Interest Periods if both Revolving Loans and Term Loans are involved)" in the
twenty-eighth line of subsection (a) thereof and by deleting the last sentence
of subsection (f) thereof.
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<PAGE>
(e) Clause (ii) of Section 2.6 of the Credit Agreement is hereby (i)
amended by changing all references therein to "Term Loans" to "Revolving Loans",
by changing the clause "an Amortization Date" to "the last Business Day of any
calendar quarter" and by changing all references therein to "such Amortization
Date" to "such last Business Day" and (ii) deleted in its entirety and replaced
with the clause "Intentionally deleted" as of the Settlement Time.
(f) Section 2.7 of the Credit Agreement is hereby amended and restated
in its entirety as follows:
"Section 2.7. Maturity of Loans. Each Revolving Loan shall mature
and become due and payable by the Borrower on the Maturity Date. In
addition, if the Settlement Time does not occur prior to or on May 9,
1997, the Revolving Credit Commitment Amount shall, without any
further action, automatically and permanently be reduced on the last
Business Day of each calendar quarter, commencing June 30, 1997. The
amount of each such automatic and permanent reduction shall be the
applicable quarterly amounts set forth on Schedule 2.7. Voluntary
reductions of the Revolving Credit Commitment Amount made pursuant to
Section 2.14 shall be applied, if applicable, to diminish the amount
of scheduled reductions to the Revolving Credit Commitment Amount
thereafter becoming effective pursuant to this Section 2.7, to the
next scheduled reduction(s) thereof from the date of such reduction."
(g) Section 2.10 of the Credit Agreement is hereby amended by deleting
the fourth, fifth and sixth sentences thereof.
(h) Section 2.11 of the Credit Agreement is hereby amended by deleting
the reference to "(a)" in subsection (a) thereof and by deleting subsection (b)
thereof in its entirety.
(i) Section 2.12 of the Credit Agreement is hereby amended by deleting
the second sentence of subsection (a) thereof.
(j) Section 2.14 of the Credit Agreement is hereby amended by deleting
the reference to "(a)" in subsection (a) thereof and by deleting subsection (b)
thereof in its entirety.
(k) Section 3.1 of the Credit Agreement is hereby amended by deleting
the clause "and from the Effective Date to and including the Mandatory Bid
Payment Date with respect to the Term Credit," in the second line of subsection
(a) thereof, by deleting the letter "(x)" in the sixth line of subsection (a)
thereof, by deleting the clause "and (y) the Term Credit Commitment Amount and
the aggregate outstanding principal amount of the Term Loans with respect to the
Term Credit," in the seventh line of subsection (a) thereof, by deleting the
clause "or the Mandatory Bid Payment Date with respect to the Term Credit, as
applicable," in the seventh to last line of subsection (a) thereof, by deleting
the clause "or the Term Credit Commitment, as applicable," in the sixth to last
line of subsection (a) thereof and by deleting the pricing grid in the twenty-
eighth through thirty-first lines thereof and inserting the following pricing
grid in its place:
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Debt Rating Commitment Fee
----------- --------------
A/A2 or above 0.065%
A-/A3 0.085%
BBB+/Baa1 or above 0.100%
BBB/Baa2 0.115%
BBB-/Baa3 0.140%
(l) Section 3.3 of the Credit Agreement is amended as of the
Settlement Time by deleting the clauses "or any Guarantor", "or such Guarantor,
as applicable," and "or such Guarantor" wherever in such Section 3.3 they may
appear.
(m) Section 5.2 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "Each Credit Party" in the first and
fifth lines thereof and inserting the clause "The Borrower" in place of each of
thereof, by deleting the clause "(or comparable action, in the case of a Credit
Party that is not a corporation)" in the third line thereof and by deleting the
clause "such Credit Party" in the seventh line thereof and inserting the clause
"the Borrower" in its place.
(n) Section 5.3 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "any Credit Party" in the first line
thereof and by inserting the clause "the Borrower" in its place.
(o) Section 5.14 of the Credit Agreement is deleted as of the
Settlement Time in its entirety and replaced with the clause "Intentionally
deleted".
(p) Section 6.10 of the Credit Agreement is hereby deleted in its
entirety and replaced with the clause "Intentionally deleted".
(q) Section 6.11 of the Credit Agreement is deleted as of the
Settlement Time in its entirety and replaced with the clause "Intentionally
deleted".
(r) Section 6.12(c) of the Credit Agreement is hereby amended by
inserting the word "or" in front of the number "(2)" in the seventh line thereof
and by deleting the clause "or (3) a transaction or proposed transaction
pursuant to which the Term Loans would be prepaid in like amount" in the ninth
line thereof.
(s) Section 6.13 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "Sections 6.11 and" in the thirteenth
line thereof and inserting in its place the word "Section" and by deleting the
clause "Sections 6.11 and 6.12 are" in the twenty-fourth line thereof and
inserting in its place the clause "Section 6.12 is".
(t) Section 6.14 of the Credit Agreement is hereby amended by deleting
the clause "or (e)" in the first line of subsection (f) thereof and inserting in
its place the clause "on the assets the subject of any such Capitalized Lease
Obligations" and is further amended as of the Settlement Time by deleting the
clause "created by the Security Documents" in subsection (q) thereof and
inserting in its place the clause "contemplated by Section 7.4 of this
Agreement".
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<PAGE>
(u) Section 6.15 of the Credit Agreement is hereby amended by deleting
subsection (e) thereof in its entirety and replacing it with the clause
"intentionally deleted", by inserting the clause "of the Borrower" after the
word "Indebtedness" in the first line of subsection (j) thereof, by deleting the
clause "containing a standstill period of at least one hundred twenty (120) days
after notice to the Agent before the lenders can accelerate the Indebtedness
thereunder" in the fourth line of subsection (j) thereof and inserting the
clause "and standstill" after the word subordination in the sixth line of
subsection (j) thereof, by deleting the word "and" at the end of subsection (q)
thereof, by deleting (as of the Settlement Time) the clause "or any Guarantor"
in the first line of subsection (r) thereof, by deleting the "." at the end of
subsection (r) thereof and inserting the clause "; and" in its place and by
adding new subsection (s) thereafter as follows:
"(s) Indebtedness of the Borrower issued in the Public Debt Issue."
(v) Section 7.1 of the Credit Agreement is amended as of the
Settlement Time by deleting subsection (c) in its entirety and inserting the
clause "intentionally deleted" in its place, by deleting the clause "any Credit
Party" in the first line of subsection (d) thereof and inserting in its place
the clause "the Borrower", by deleting the "," after the letter "(a)" in the
second line of subsection (d) thereof and inserting in its place the word "or",
by deleting the clause "or (c)" in the second line of subsection (d) thereof, by
deleting the clauses "any Credit Party" and "a Credit Party" in the first line
of subsection (k) thereof and inserting in place of each of thereof the clause
"the Borrower," by deleting the clause "such Credit Party's" in the second line
of subsection (k) and inserting in its place the clause "the Borrower's" and by
deleting the word "Liens," and the comma after the word "rights" in the fifth
line of subsection (k) thereof.
(w) Section 7.2 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "Section 7.1(c) or" in the third to last
line thereof.
(x) Section 7.5 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "Sections 7.1(c) and" and by inserting in
its place the word "Section".
(y) Section 7.7 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "or under any Guaranty" in the third line
thereof, by deleting the clause "any Collateral," in the fourth line thereof, by
deleting the clause "and the Collateral Agent" in the second line of subsection
(a) thereof and by deleting the clause ", the Collateral Agent" in the fifth
line of subsection (a) thereof.
(z) Section 10.7 of the Credit Agreement is hereby amended by deleting
the name "Sonat Offshore Drilling Inc." in the tenth line thereof and by
inserting the name "Transocean Offshore Inc." in its place.
(aa) Section 10.10 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "any Credit Party" in the twenty-fourth
line of subsection (a) thereof and inserting in its place the clause "the
Borrower" and by deleting the clause "or any other Credit Party" in the third
line of subsection (e) thereof.
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(ab) Section 10.11 of the Credit Agreement is hereby amended by
deleting the clauses "the Total Commitment Amount," and "or the Term Credit
Commitment Amount" in the seventh and eighth lines thereof.
(ac) Section 10.18 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause ", the Guarantor" in the sixth line
thereof and is amended as of the date hereof by adding the following sentence at
the end of such section:
"For the avoidance of doubt, the parties affirm and agree that neither
the fixation of the conversion rate of Pounds against the Euro as a
single currency, in accordance with the Treaty Establishing the
European Economic Community, as amended by the Treaty on the European
Union (The Maastricht Treaty), nor the conversion of the Obligations
under this Agreement from Pounds into Euro will be a reason for early
termination or revision of this Agreement or prepayment of any amount
due under this Agreement or create any liability of any party towards
any other party for any direct or consequential loss arising from any
of these events. As of the date that Pounds are no longer the lawful
currency of the United Kingdom, all funding and payment Obligations to
be made in such currency under this Agreement will have to be
satisfied in Euro."
(ad) Section 10.22 of the Credit Agreement is amended as of the
Settlement Time by deleting the clause "any Credit Party" in the second line
thereof and inserting in its place the clause "the Borrower".
(ae) Exhibits 2.12(A), 2.12(B) and 2.12(C) to the Credit Agreement are
hereby deleted in their entirety and new Exhibits 2.12(A), 2.12(B) and 2.12(C)
attached hereto are inserted in their place.
(af) Schedule 2.7 of the Credit Agreement is hereby (i) amended by
deleting the title thereof and inserting in its place "Revolving Credit
Commitment Amount Mandatory Reductions", by deleting the word "Principal" in the
title to the column on the right thereof and inserting the clause "Commitment
Reduction" and by deleting the first, second and last dates and amounts and
inserting as the last date and amount the following: "Maturity Date" and
"Remaining Balance of Revolving Loans" and (ii) deleted in its entirety and
replaced with the clause "Intentionally deleted" as of the Settlement Time.
3. CONVERSION OF TERM LOANS INTO REVOLVING LOANS. On the date hereof,
(i) the outstanding aggregate principal amount of the Term Loan and the
Revolving Loans of $11,976,666.67 made by Dai-Ichi Kangyo Bank, Ltd. ("DKB"),
together with all accrued and unpaid interest thereon and breakage fees, if any,
shall be repaid in full by the Borrower, such that DKB shall no longer be a
Lender under the Credit Agreement, as amended hereby; (ii) the outstanding
principal amount of the Term Loans of the Lenders (other than DKB) shall
automatically, without any further action on the part of any of the parties
hereto, be deemed to have been converted into Revolving Loans; (iii) the
Borrower shall make a non-pro rata repayment of the Revolving Loans (after
repayment of DKB and conversion of the Term Loans described in (i) and (ii)
above) in the principal amount of $12,800,062.49, together with all accrued and
unpaid interest thereon and breakage fees, if any, with a new non-pro rata
Borrowing of Revolving Loans in such amounts from the Lenders, such that after
giving effect to the matters described in (i) and (ii) above, the Borrower shall
pay to or borrow from, as the
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<PAGE>
case may be, each Lender the principal amount listed in the sixth column
entitled "((Payment)/Borrowing)" in Schedule I hereto (together, with, in the
case of a repayment, accrued interest thereon and breakage fees, if any) and the
principal amount of the outstanding Revolving Loans from each Lender as of the
date hereof shall be as listed in the fifth column entitled "Total Outstandings"
in Schedule I hereto; and (iv) the Percentages and Revolving Credit Commitments
of the Lenders as of the date hereof are modified to be as set forth on Schedule
II hereto. All Term Loans of the Lenders (other than DKB) hereto which are
Eurodollar Loans shall be deemed continued as Revolving Loans at such interest
rate(s) and for such Interest Period(s) as applied thereto immediately prior to
the conversion of such Term Loans into Revolving Loans.
4. RELEASES. The Lenders, the Agent, the Collateral Agent, the
Documentation Agents and the Co-Agents each hereby terminates and releases all
of the Security Documents (other than Section 7.4 of the Credit Agreement),
including the Stock Pledge Agreement, the Note Pledge Agreement and all of the
Subsidiary Guaranties, effective as of the Settlement Time, provided, however,
if the Settlement Time does not occur prior to or on May 9, 1997, this sentence
shall cease to be of any force or effect and the Security Documents shall not be
so terminated and released. The Borrower agrees to promptly provide to the
Collateral Agent a written certification when the Settlement Time has occurred.
The Lenders, the Agent, the Documentation Agents and the Co-Agents hereby
irrevocably authorize the Collateral Agent to execute (as Collateral Agent and
on behalf of each of the foregoing (and any and all successors to any of the
foregoing)) any other and further documents evidencing the termination and
release of the Security Documents as the Borrower may reasonably request so long
as the Settlement Time has occurred as certified in writing by the Borrower.
This Section 4 shall be binding on any and all successors and assigns of any of
the Lenders, the Agent, the Documentation Agents and the Co-Agents as fully as
if it had been set forth in the Credit Agreement and each Security Document.
5. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce the
Lenders, the Agent, the Collateral Agent, the Documentation Agents and the Co-
Agents to enter into this Amendment, the Borrower hereby reaffirms, as of the
date hereof (but as if the amendments set forth in Sections 1 and 2 hereof had
all become effective), that its representations and warranties contained in the
Credit Agreement (other than the representations and warranties set forth in
Section 5.14 of the Credit Agreement) are true and correct in all material
respects (except to the extent such representations and warranties (x) are not
so true and correct in all material respects as a result of the transactions
expressly permitted hereunder or under the other Credit Documents or (y) relate
solely to an earlier date) and additionally represents and warrants as follows:
(i) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under this
Amendment and the Credit Agreement, as amended hereby, are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action of the Borrower and do not and will not
contravene in any material respect any provision of applicable law or
contravene or conflict with any provision of the certificate of
incorporation, bylaws or any material agreements binding upon the
Borrower, and the execution and delivery by the Borrower of this
Amendment have received all necessary governmental approvals or other
consents (if any shall be required);
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<PAGE>
(ii) This Amendment and the Credit Agreement, as amended hereby,
are legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, subject as to
enforcement only to bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and equitable principles;
(iii) There are no actions, suits, proceedings or counterclaims
(including, without limitation, derivative or injunctive actions)
pending or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries which purports to affect the
legality, validity or enforceability of this Amendment, the Credit
Agreement, as amended hereby, the replacement Revolving Notes or any
other Credit Document; and
(iv) No Default or Event of Default has occurred and is
continuing.
6. REAFFIRMATION OF CREDIT AGREEMENT. This Amendment shall be deemed to
be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit Agreement in the Credit Agreement and the other
Credit Documents (excluding this Amendment) shall hereafter be deemed to refer
to the Credit Agreement, as amended hereby.
7. DEFINED TERMS. Without limitation of Sections 1 and 2 hereof, terms
used but not defined herein when defined in the Credit Agreement shall have the
same meanings herein unless the context otherwise requires.
8. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The effectiveness
of this Amendment is subject to the following conditions precedent, all in form
and substance satisfactory to the Agent:
The Agent shall have received:
(i) Replacement Revolving Notes. The duly executed Revolving
Notes of the Borrower in substantially the form of Exhibits 2.12A,
2.12B and 2.12C hereto dated the date hereof and with other
appropriate insertions as to payee and principal amount payable to the
order of each Lender in replacement of the Revolving Notes and the
Term Notes of the Borrower dated September 6, 1996;
(ii) Certificate. A certificate of the Secretary or Assistant
Secretary and the President or Vice President of the Borrower
containing specimen signatures of the persons authorized to execute
this Amendment on the Borrower's behalf, together with (i) a copy of
resolutions of the Board of Directors of the Borrower authorizing the
execution and delivery of this Amendment and the replacement Revolving
Notes and of all other legal documents or proceedings taken by the
Borrower in connection herewith, and (ii) copies of any amendments to
the certificate of incorporation or bylaws of the Borrower after July
30, 1996;
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<PAGE>
(iii) Opinions of Counsel. The opinions of Hughes Hubbard &
Reed LLP, legal counsel to the Borrower, and Eric B. Brown, Esq.,
General Counsel to the Borrower;
(iv) Consent of Guarantors. A consent to this Amendment from
each of the Guarantors; and
(v) Other Documents. Such other documents as the Agent may
reasonably request.
If and when the Agent shall be satisfied that the documents meeting the
requirements set forth in this Section 8 have been received by it (and in form
and substance satisfactory to it), the Agent shall so acknowledge in writing,
and such acknowledgment shall constitute conclusive evidence that this Amendment
has become effective.
9. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(A) THIS AMENDMENT AND THE OTHER CREDIT DOCUMENTS, AND THE RIGHTS AND
DUTIES OF THE PARTIES HERETO AND THERETO, SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(B) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AMENDMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE AGENT, THE DOCUMENTATION AGENTS, THE CO-AGENTS, THE COLLATERAL AGENT, THE
LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE
OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY
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<PAGE>
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AMENDMENT AND THE OTHER CREDIT DOCUMENTS.
(C) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AMENDMENT, THE CREDIT AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AMENDMENT OR THE CREDIT
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same agreement.
11. SEVERABILITY. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12. HEADINGS. Section headings used in this Amendment are for reference
only and shall not affect the construction of this Amendment.
13. NOTICE OF ENTIRE AGREEMENT. This Amendment, together with the other
Credit Documents, constitute the entire understanding among the Borrower, the
Lenders, the Agent, the Documentation Agents and the Co-Agents and supersede all
earlier or contemporaneous agreements, whether written or oral, concerning the
subject matter of the Credit Documents. THIS WRITTEN AMENDMENT, TOGETHER WITH
THE OTHER CREDIT DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this First
Amendment to Secured Credit Agreement as of the date first written above.
BORROWER:
TRANSOCEAN OFFSHORE INC.,
a Delaware corporation
By: /s/ Eric B. Brown
--------------------------------
Name: Eric B. Brown
------------------------------
Title: Vice President and Secretary
-----------------------------
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<PAGE>
LENDERS:
ABN AMRO BANK N.V., Houston Agency, as
Agent and Collateral Agent and as a Lender
By: /s/ Cheryl I. Lipshutz
---------------------------------
Cheryl I. Lipshutz
Group Vice President and Director
By: /s/ Michael N. Oakes
----------------------------------
Michael N. Oakes
Vice President and Director
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<PAGE>
SUNTRUST BANK, ATLANTA, as
Documentation Agent and as a Lender
By: /s/ F. McClellan Deaver, III
-----------------------------------
Name: F. McClellan Deaver, III
---------------------------------
Title: Group Vice President
--------------------------------
By: /s/ Trisha E. Hardy
-----------------------------------
Name: Trisha E. Hardy
---------------------------------
Title: Corporate Banking Officer
--------------------------------
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<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as
Documentation Agent and as a Lender
By: /s/ Alain Papiasse
-----------------------------------
Name: Alain Papiasse
---------------------------------
Title: Executive Vice President
--------------------------------
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<PAGE>
BANK OF MONTREAL, as Co-Agent and as a
Lender
By: /s/ Donald G. Skipper
-------------------------------------
Name: Donald G. Skipper
-----------------------------------
Title: Director, U.S. Corporate Banking
----------------------------------
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<PAGE>
THE FUJI BANK, LIMITED, HOUSTON
AGENCY, as Co-Agent and as a Lender
By: /s/ David Kelley
----------------------------------
Name: David Kelley
--------------------------------
Title: Senior Vice President
-------------------------------
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<PAGE>
ROYAL BANK OF CANADA, as Co-Agent and
as a Lender
By: /s/ Gil J. Benard
------------------------------------
Name: Gil J. Benard
----------------------------------
Title: Senior Manager
---------------------------------
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<PAGE>
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, as Co-Agent and as a Lender
By: /s/ Frank W. Schageman
-------------------------------------
Name: Frank W. Schageman
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
BANK OF TOKYO - MITSUBISHI, LTD.,
HOUSTON AGENCY
By: /s/ Michael Meiss
-------------------------------------
Name: Michael Meiss
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
SKANDINAVISKA ENSKILDA BANKEN AB
(publ.)
By: /s/ Magne Haga /s/ Per Frolich
-------------------------------------
Name: Magne Haga/Per Frolich
-----------------------------------
Title: Director / Director
----------------------------------
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<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
------------------------------------
By: /s/ Richard R. Newman
-------------------------------------
Name: Richard R. Newman
-----------------------------------
Title: Vice President
----------------------------------
By: /s/ Salvatore Battinelli
-------------------------------------
Name: Salvatore Battinelli
-----------------------------------
Title: Vice President Credit Department
----------------------------------
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<PAGE>
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED
By: /s/ Kyle Loughlin
-------------------------------------
Name: Kyle Loughlin
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
THE BANK OF NEW YORK
By: /s/ Renee Bijlani
-------------------------------------
Name: Renee Bijlani
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
By: /s/ F.C.H. Ashby
-------------------------------------
Name: F.C.H. Ashby
-----------------------------------
Title: Senior Manager
Loan Operations
----------------------------------
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<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By: /s/ Mark K. Connelly
-------------------------------------
Name: Mark K. Connelly
-----------------------------------
Title: Vice President
----------------------------------
By: /s/ Elizabeth L. Ryan
-------------------------------------
Name: Elizabeth L. Ryan
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
FIRST NATIONAL BANK OF COMMERCE
By: /s/ J. Charles Freel, Jr.
-------------------------------------
Name: J. Charles Freel, Jr.
-----------------------------------
Title: Senior Vice President
----------------------------------
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<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Elizabeth W. Hunter
-------------------------------------
Name: Elizabeth W. Hunter
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: /s/ Matthew G. Patrick
-------------------------------------
Name: Matthew G. Patrick
-----------------------------------
Title: Vice President
----------------------------------
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<PAGE>
THE SUMITOMO BANK, LIMITED
By: /s/ Harumitsu Seki
-------------------------------------
Name: Harumitsu Seki
-----------------------------------
Title: General Manager
----------------------------------
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<PAGE>
EXHIBIT 10.1
LONG-TERM INCENTIVE PLAN
OF
TRANSOCEAN OFFSHORE INC.
(AS AMENDED AND RESTATED AS OF MARCH 13, 1997)
I. GENERAL
1.1 PURPOSE OF THE PLAN
The Long-Term Incentive Plan (the "Plan") of Transocean Offshore Inc. (the
"Company") is intended to advance the best interests of the Company and its
subsidiaries by providing Directors and employees with additional incentives
through the grant of options ("Options") to purchase shares of Common Stock of
the Company ("Common Stock"), stock appreciation rights ("SARs") and shares of
restricted Common Stock ("Restricted Stock"), thereby increasing the personal
stake of such Directors and employees in the continued success and growth of the
Company.
1.2 ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Executive Compensation Committee
or other designated committee (the "Committee") of the Board of Directors of the
Company (the "Board of Directors") which shall consist of at least two Directors
all of whom (i) are not eligible for awards under Articles II and III of the
Plan, (ii) are "non-employee directors" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, and (iii) are outside directors satisfying
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended, or any successor thereto ("the Code"). The Committee shall have
authority to interpret conclusively the provisions of the Plan, to adopt such
rules and regulations for carrying out the Plan as it may deem advisable, to
decide conclusively all questions of fact arising in the application of the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. Notwithstanding the foregoing, the Committee shall
have no power or discretion to vary the amount or terms of awards under Article
IV of the Plan, except as provided in Section 5.2. All decisions and acts of
the Committee shall be final and binding upon all affected Plan participants.
(b) The Committee shall designate the eligible employees, if any, to be
granted awards under Articles II and III and the type and amount of such awards
and the time when awards will be granted. All awards granted under the Plan
shall be on the terms and subject to the conditions hereinafter provided.
<PAGE>
1.3 ELIGIBLE PARTICIPANTS
Employees, including officers, of the Company and its subsidiaries, and of
partnerships or joint ventures in which the Company and its subsidiaries have a
significant ownership interest as determined by the Committee (all of such
subsidiaries, partnerships and joint ventures being referred to as
"Subsidiaries") shall be eligible for awards under Articles II and III of the
Plan. Directors who are not employees of the Company or its Subsidiaries shall
not be eligible for awards under Articles II and III.
Each Director of the Company who is not an officer or employee of the
Company or any of its subsidiaries (an "Eligible Director") shall automatically
be granted awards under Article IV of the Plan. Each Eligible Director to whom
Options or SARs are granted under Article IV is hereinafter referred to as a
"Participant."
1.4 AWARDS UNDER THE PLAN
Awards to employees under Articles II and III may be in the form of (i)
Options to purchase shares of Common Stock, (ii) Stock Appreciation Rights which
may be either freestanding or issued in tandem with Options, (iii) shares of
Restricted Stock, (iv) Supplemental Payments which may be awarded with respect
to Options, Stock Appreciation Rights and Restricted Stock, or (v) any
combination of the foregoing.
Awards to Eligible Directors under Article IV shall be in the form of (i)
Options to purchase shares of Common Stock and Supplemental Payments with
respect thereto, or (ii) solely in the case of Eligible Directors residing in
Norway, freestanding SARs .
1.5 SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Common Stock which may be issued with
respect to awards made under Articles II and III shall not exceed (i) 1,000,000
shares plus (ii) the number of shares previously authorized for use under such
Articles which have not been issued or have again become available for grants
pursuant to the following paragraph. In addition, the aggregate number of
shares of Common Stock which may be issued with respect to awards made under
Article IV shall not exceed 50,000 (which is the number of shares previously
authorized for use under such Article) reduced by the number of shares which
have been issued pursuant to such Article prior to the date of this Amendment
and Restatement. At no time shall the number of shares issued plus the number
of shares estimated by the Committee to be ultimately issued with respect to
outstanding awards under the Plan exceed the number of shares that may be issued
under the Plan. No employee shall be granted Stock Options, freestanding Stock
Appreciation Rights, or Restricted Stock, or any combination of the foregoing,
with respect to more than 300,000 shares of Common Stock in any fiscal year
(subject to adjustment as provided in Section 5.2). No employee shall be
granted a Supplemental Payment in any fiscal year
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<PAGE>
with respect to more than the number of shares of Common Stock covered by Stock
Options, freestanding Stock Appreciation Rights or Restricted Stock awards
granted to such employee in such fiscal year. Shares distributed pursuant to the
Plan may consist of authorized but unissued shares or treasury shares of the
Company, as shall be determined from time to time by the Board of Directors.
If any Option under the Plan shall expire, terminate or be canceled
(including cancellation upon the holder's exercise of a related Stock
Appreciation Right) for any reason without having been exercised in full, or if
any shares of Restricted Stock shall be forfeited to the Company, the
unexercised Options and forfeited shares of Restricted Stock shall not count
against the above limit and shall again become available for grants under the
Plan (regardless of whether the holder of such Options or shares received
dividends or other economic benefits with respect to such Options or shares).
Shares of Common Stock equal in number to the shares surrendered in payment of
the option price, and shares of Common Stock which are withheld in order to
satisfy federal, state or local tax liability, shall not count against the above
limit and shall again become available for grants under the Plan. Only the
number of shares of Common Stock actually issued upon exercise of a Stock
Appreciation Right or payment of a Supplemental Payment shall count against the
above limit, and any shares which were estimated to be used for such purposes
and were not in fact so used shall again become available for grants under the
Plan.
Freestanding Stock Appreciation Rights which may be settled solely in cash
shall be issued with respect to no more than an aggregate of 50,000 underlying
shares. Such SARs shall not count against the limits set forth above on the
number of shares of Common Stock which may be issued under the Plan. If any
freestanding SAR shall expire, terminate, or be canceled for any reason without
having been exercised in full, the unexercised SARs shall not count against this
limit and shall again become available for grants under the Plan.
1.6 OTHER COMPENSATION PROGRAMS
The existence and terms of the Plan shall not limit the authority of the
Board of Directors in compensating Directors and employees of the Company and
its subsidiaries in such other forms and amounts, including compensation
pursuant to any other plans as may be currently in effect or adopted in the
future, as it may determine from time to time.
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<PAGE>
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 TERMS AND CONDITIONS OF OPTIONS
Subject to the following provisions, all Options granted under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine.
(a) Option Price. The option price per share shall not be less than the
fair market value of the Common Stock (as determined by the Committee) on the
date the Option is granted. Notwithstanding the foregoing, the option price per
share with respect to any Option granted by the Committee within 90 days of the
closing of the initial public offering of the Company's Common Stock shall be at
the initial public offering price for such Stock.
(b) Term of Option. The term of an Option shall not exceed ten years from
the date of grant, except as provided pursuant to Section 2.1(g) with respect to
the death of an optionee. No Option shall be exercised after the expiration of
its term.
(c) Exercise of Options. Options shall be exercisable at such time or
times and subject to such terms and conditions as the Committee shall specify in
the Option grant. The Committee shall have discretion to at any time declare all
or any portion of the Options held by any optionee to be immediately
exercisable. An Option may be exercised in accordance with its terms as to any
or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for shares as
to which an Option is exercised to be made in cash, shares of Common Stock, by
"cashless exercise" or in such other manner as the Committee in its discretion
may provide.
(e) Nontransferability of Options. No Option or any interest therein shall
be transferable by the optionee other than by will or by the laws of descent and
distribution. During an optionee's lifetime, all Options shall be exercisable
only by such optionee or by the guardian or legal representative of the
optionee.
(f) Shareholder Rights. The holder of an Option shall, as such, have none
of the rights of a shareholder.
(g) Termination of Employment. The Committee shall have discretion to
specify in the Option grant or an amendment thereof, provisions with respect to
the period during which the Option may be exercised following the optionee's
termination of employment. Notwithstanding the foregoing, the Committee shall
not permit any Option to be exercised beyond the term of the Option established
pursuant to Section 2.1(b), except that the Committee may provide that,
notwithstanding such Option term, an Option which is
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<PAGE>
outstanding on the date of an optionee's death shall remain outstanding and
exercisable for up to one year after the optionee's death.
(h) Change of Control. Notwithstanding the exercisability schedule
governing any Option, upon the occurrence of a Change of Control (as defined in
Section 5.10) all Options outstanding at the time of such Change of Control and
held by optionees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the optionee agrees otherwise in writing, shall remain exercisable for the
remainder of the Option term.
2.2 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS
(a) The Committee may, either at the time of grant of an Option or at any
time during the term of the Option, grant Stock Appreciation Rights with respect
to all or any portion of the shares of Common Stock covered by such Option. A
tandem Stock Appreciation Right may be exercised at any time the Option to which
it relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a tandem Stock Appreciation Right is exercised, the Option to
which it relates shall cease to be exercisable to the extent of the number of
shares with respect to which the tandem Stock Appreciation Right is exercised.
Similarly, when an Option is exercised, the tandem Stock Appreciation Rights
relating to the shares covered by such Option exercise shall terminate. Any
tandem Stock Appreciation Right which is outstanding on the last day of the term
of the related Option (as determined pursuant to Section 2.1(b)) shall be
automatically exercised on such date for cash without any action by the
optionee.
(b) Upon exercise of a tandem Stock Appreciation Right, the holder shall
receive, for each share with respect to which the tandem Stock Appreciation
Right is exercised, an amount (the "Appreciation") equal to the amount by which
the fair market value (as defined below) of a share of Common Stock on the date
of exercise of the Stock Appreciation Right exceeds the option price per share
of the Option to which the tandem Stock Appreciation Right relates. For
purposes of the preceding sentence, the fair market value of a share of Common
Stock shall be the average of the high and low prices of such stock as reported
on the consolidated reporting system. The Appreciation shall be payable in cash,
Common Stock, or a combination of both, at the option of the Committee, and
shall be paid within 30 days of the exercise of the tandem Stock Appreciation
Right.
(c) Notwithstanding the foregoing, if a tandem Stock Appreciation Right is
exercised within 60 days of the occurrence of a Change of Control, (i) the
Appreciation and any Supplemental Payment (as defined in Section 2.4) to which
the holder is entitled shall be payable solely in cash, and (ii) in addition to
the Appreciation and the Supplemental Payment (if any), the holder shall
receive, in cash, (1) the amount by which the greater of (a) the highest market
price per share of Common Stock during the 60-day period
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preceding exercise of the tandem Stock Appreciation Right or (b) the highest
price per share of Common Stock (or the cash-equivalent thereof as determined by
the Board of Directors) paid by an acquiring person during the 60-day period
preceding a Change of Control, exceeds the fair market value of a share of
Common Stock on the date of exercise of the tandem Stock Appreciation Right,
plus (2) if the holder is entitled to a Supplemental Payment, an additional
payment, calculated under the same formula as used for calculating such holder's
Supplemental Payment, with respect to the amount referred to in clause (1) of
this sentence.
2.3 FREESTANDING STOCK APPRECIATION RIGHTS
The Committee may grant Freestanding Stock Appreciation Rights to employees
of the Company and its Subsidiaries, in such form and having such terms and
conditions as the Committee, in its discretion, may from time to time determine,
subject to the following provisions.
(a) Base Price and Appreciation. Each freestanding SAR shall be granted
with a base price, which shall not be less than the fair market value of the
Common Stock (as determined by the Committee) on the date the SAR is granted.
Upon exercise of a freestanding SAR, the holder shall receive, for each share
with respect to which the SAR is exercised, an amount (the "Appreciation") equal
to the amount by which the fair market value (as defined below) of a share of
Common Stock on the date of exercise of the SAR exceeds the base price of the
SAR. For purposes of the preceding sentence, the fair market value of a share
of Common Stock shall be the average of the high and low prices of such stock as
reported on the New York Stock Exchange composite tape. The Appreciation shall
be payable in cash and shall be paid within 30 days of the exercise of the SAR.
(b) Term of SAR. The term of a freestanding SAR shall not exceed ten years
from the date of grant, except as provided pursuant to Section 2.3(f) with
respect to the death of the grantee. No SAR shall be exercised after the
expiration of its term. Any freestanding SAR which is outstanding on the last
day of its term (as such term may be extended pursuant to Section 2.3(f)) and as
to which the Appreciation is a positive number on such date shall be
automatically exercised on such date for cash without any action by the grantee.
(c) Exercise of SARs. Freestanding SARs shall be exercisable at such time
or times and subject to such terms and conditions as the Committee may specify
in the SAR grant. The Committee shall have discretion to at any time declare
all or any portion of the freestanding SARs then outstanding to be immediately
exercisable. A freestanding SAR may be exercised in accordance with its terms
in whole or in part.
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(d) Nontransferability of SARs. No SAR or any interest therein shall be
transferable by the grantee other than by will or by the laws of descent and
distribution. During a grantee's lifetime, all SARs shall be exercisable only by
such grantee or by the guardian or legal representative of the grantee.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none of
the rights of a shareholder.
(f) Termination of Employment. The Committee shall have discretion to
specify in the SAR grant or an amendment thereof, provisions with respect to the
period during which the SAR may be exercised following the grantee's termination
of employment. Notwithstanding the foregoing, the Committee shall not permit any
SAR to be exercised beyond the term of the SAR established pursuant to Section
2.3(b), except that the Committee may provide that, notwithstanding such SAR
term, an SAR which is outstanding on the date of a grantee's death shall remain
outstanding and exercisable for up to one year after the grantee's death.
(g) Change of Control. Notwithstanding the exercisability schedule
governing any SAR, upon the occurrence of a Change of Control (as defined in
Section 5.10) all SARs outstanding at the time of such Change of Control and
held by grantees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the grantee agrees otherwise in writing, shall remain exercisable for the
remainder of the SAR term. In addition, the Committee may provide that if a
freestanding SAR is exercised within 60 days of the occurrence of a Change of
Control, in addition to the Appreciation the holder shall receive, in cash, the
amount by which the greater of (a) the highest market price per share of Common
Stock during the 60-day period preceding exercise of the SAR or (b) the highest
price per share of Common Stock (or the cash equivalent thereof as determined by
the Board of Directors) paid by an acquiring person during the 60-day period
preceding a Change of Control, exceeds the fair market value of a share of
Common Stock on the date of exercise of the SAR.
2.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS
The Committee, either at the time of grant or at the time of exercise of
any Option or tandem Stock Appreciation Right, may provide for a supplemental
payment (the "Supplemental Payment") by the Company to the optionee with respect
to the exercise of any Option or tandem Stock Appreciation Right. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed the amount necessary to pay the income tax payable to the
national government with respect to both exercise of the Option or tandem Stock
Appreciation Right and receipt of the Supplemental Payment, assuming the
optionee is taxed at the maximum effective income tax rate applicable thereto.
The Committee shall have the discretion to grant Supplemental Payments that are
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payable solely in cash or Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of
payment. The Supplemental Payment shall be paid within 30 days of the date of
exercise of an Option or Stock Appreciation Right (or, if later, within 30 days
of the date on which income is recognized for federal income tax purposes with
respect to such exercise).
2.5 STATUTORY OPTIONS
Subject to the limitations on Option terms set forth in Section 2.1, the
Committee shall have the authority to grant (i) incentive stock options within
the meaning of Section 422 of the Code and (ii) Options containing such terms
and conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant. Options
granted pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Stock
Appreciation Rights and Supplemental Payments), to the extent that such terms
and conditions do not cause the Options to lose their preferential tax
treatment. To the extent the Code and Regulations promulgated thereunder
require a plan to contain specified provisions in order to qualify options for
preferential tax treatment, such provisions shall be deemed to be stated in this
Plan.
III. RESTRICTED STOCK
3.1 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
Subject to the following provisions, all awards of Restricted Stock under
the Plan to employees of the Company and its Subsidiaries shall be in such form
and shall have such terms and conditions as the Committee, in its discretion,
may from time to time determine.
(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by the
recipient of the Restricted Stock, and the date or dates on which the
Restricted Stock will vest. The vesting of Restricted Stock may be
conditioned upon the completion of a specified period of service with the
Company or its Subsidiaries, upon the attainment of specified performance
goals, or upon such other criteria as the Committee may determine in its
sole discretion.
(b) Stock certificates representing the Restricted Stock granted to an
employee shall be registered in the employee's name. Such certificates
shall either be held by the Company on behalf of the employee, or delivered
to the employee bearing a legend to restrict transfer of the certificate
until the Restricted Stock has vested, as determined by the Committee. The
Committee shall determine whether
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the employee shall have the right to vote and/or receive dividends on the
Restricted Stock before it has vested. No share of Restricted Stock may be
sold, transferred, assigned, or pledged by the employee until such share
has vested in accordance with the terms of the Restricted Stock award. In
the event of an employee's termination of employment before all of his
Restricted Stock has vested, or in the event other conditions to the
vesting of Restricted Stock have not been satisfied prior to any deadline
for the satisfaction of such conditions set forth in the award, the shares
of Restricted Stock which have not vested shall be forfeited and any
purchase price paid by the employee shall be returned to the employee. At
the time Restricted Stock vests (and, if the employee has been issued
legended certificates of Restricted Stock, upon the return of such
certificates to the Company), a certificate for such vested shares shall be
delivered to the employee (or the Beneficiary designated by the employee in
the event of death), free of all restrictions.
(c) Notwithstanding the vesting conditions set forth in the Restricted
Stock award, (i) the Committee may in its discretion accelerate the vesting
of Restricted Stock at any time, and (ii) all shares of Restricted Stock
shall vest upon a Change of Control of the Company.
3.2 PERFORMANCE AWARDS UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate awards of Restricted Stock
as "Performance Awards." Notwithstanding any other provisions of this Article
III, awards so designated shall be granted and administered in a manner designed
to preserve the deductibility of the compensation resulting from such awards in
accordance with Section 162(m) of the Code. The grant or vesting of a
Performance Award shall be subject to the achievement of performance objectives
(the "Performance Objectives") established by the Committee based on one or more
of the following criteria, in each case applied to the Company on a consolidated
basis and/or to a business unit, and either as an absolute measure or as a
measure of comparative performance relative to a peer group of companies: sales,
operating profits, operating profits before interest expense and taxes, net
earnings, earnings per share, return on equity, return on assets, return on
invested capital, total shareholder return, cash flow, debt to equity ratio,
market share, stock price, economic value added, and market value added.
The Performance Objectives for a particular Performance Award relative to a
particular fiscal year shall be established by the Committee in writing no later
than 90 days after the beginning of such year. The Committee shall have the
authority to determine whether the Performance Objectives and other terms and
conditions of the award are satisfied, and the Committee's determination as to
the achievement of Performance Objectives relating to a Performance Award shall
be made in writing. The Committee shall have discretion to modify or waive the
Performance Objectives or conditions to the grant
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or vesting of a Performance Award only to the extent that the exercise of such
discretion would not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code.
3.3 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or at the time of vesting of
Restricted Stock, may provide for a Supplemental Payment by the Company to the
employee in an amount specified by the Committee which shall not exceed the
amount necessary to pay the federal income tax payable with respect to both the
vesting of the Restricted Stock and receipt of the Supplemental Payment,
assuming the employee is taxed at the maximum effective federal income tax rate
applicable thereto and has not elected to recognize income with respect to the
Restricted Stock before the date such Restricted Stock vests. The Supplemental
Payment shall be paid within 30 days of each date that Restricted Stock vests.
The Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of
payment.
IV. STOCK OPTIONS OR FREESTANDING STOCK APPRECIATION RIGHTS
FOR DIRECTORS
4.1 GRANT OF OPTIONS OR FREESTANDING SARS
Each person who is an Eligible Director on, or becomes an Eligible Director
within 10 days after, the closing of the initial public offering of the
Company's Common Stock, shall be granted an Option to purchase 1,000 shares of
Common Stock, effective as of the date of such closing. Each person who becomes
an Eligible Director thereafter (other than a person who first becomes an
Eligible Director on the date of an annual meeting of the Company's
stockholders) shall be granted, effective as of the date such person becomes an
Eligible Director, (i) an Option to purchase 1,000 shares of Common Stock, if
such person is not then residing in Norway, or (ii) a freestanding SAR with
respect to 1,000 shares of Common Stock, if such person is then residing in
Norway. Each person who is or becomes an Eligible Director on the date of an
annual meeting of the Company's stockholders and whose service on the Board of
Directors will continue after such meeting shall be granted, effective as of the
date of such meeting, (i) an Option to purchase 1,000 shares of Common Stock, if
such person is not then residing in Norway, or (ii) a freestanding SAR with
respect to 1,000 shares of Common Stock, if such person is then residing in
Norway.
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4.2 TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Article shall have the following terms and
conditions:
(a) Option Price. The option price per share shall be the closing sales
price of a share of Common Stock on the date the Option is granted (or, if the
Common Stock is not traded on such date, on the immediately preceding date on
which the Common Stock is traded). Notwithstanding the foregoing, the option
price per share for Options granted pursuant to the first sentence of Section
4.1 shall be the initial public offering price of a share of Common Stock.
(b) Term of Option. Each Option shall expire ten years from the date of
grant, except as provided in Section 4.2(c) with respect to the death of an
optionee. No Option shall be exercised after the expiration of its term.
(c) Exercise of Options. Subject to Section 4.2(g) and the remainder of
this paragraph, each Option shall become exercisable in installments as follows:
(1) a total of 333 shares of Common Stock may be purchased through exercise of
the Option on or after the first anniversary of the date of grant; (2) a total
of 666 shares of Common Stock may be purchased through exercise of the Option on
or after the second anniversary of the date of grant; and (3) a total of 1,000
shares of Common Stock may be purchased through exercise of the Option on or
after the third anniversary of the date of grant. If a Participant ceases to be
a Director of the Company as a result of death, disability, or retirement from
the Board of Directors on his Retirement Date (as defined in Section 4.2(i)),
each Option shall immediately become fully exercisable and shall remain
exercisable for the remainder of its term, except that an Option which is
outstanding on the date of an optionee's death shall remain outstanding and
exercisable for a term of the greater of ten years from the date of grant or one
year after the optionee's death. If a Participant ceases to be a Director of
the Company for any reason not set forth in the preceding sentence, no
additional portions of the Option will become exercisable, and the portion of
the Option that is then exercisable shall expire if not exercised within 60 days
after cessation of service as a Director. An Option may be exercised in
accordance with its terms as to any or all shares purchasable thereunder.
(d) Payment for Shares. Payment for shares as to which an Option is
exercised shall be made in cash, Common Stock, by "cashless exercise," or a
combination thereof, in the discretion of the Participant. Shares of Common
Stock delivered in payment of the Option price shall be valued at the average of
the high and low prices of such Stock on the date of exercise (or, if the Common
Stock is not traded on such date, at the weighted average of the high and low
prices on the nearest trading dates before and after such date).
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(e) Nontransferability of Options. No Option or any interest therein shall
be transferable by the Participant other than by will or by the laws of descent
and distribution. During a Participant's lifetime, all Options shall be
exercisable only by such Participant or by the guardian or legal representative
of the Participant.
(f) Shareholder Rights. The holder of an Option shall, as such, have none
of the rights of a shareholder.
(g) Change of Control. Notwithstanding any other provisions of the Plan,
upon the occurrence of a Change of Control (as defined in Section 5.10) all
Options outstanding at the time of such Change of Control shall become
immediately exercisable and shall remain exercisable for the remainder of their
term.
(h) Tax Status. The Options granted under this Article shall be "non-
qualified" options, and shall not be incentive stock options as defined in
Section 422 of the Code.
(i) Retirement Date. For purposes of this Article, a Participant's
Retirement Date shall mean the date on which the Participant shall be required
to retire from the Board of Directors under the retirement policies of the Board
of Directors as in effect on the date of the Participant's retirement.
4.3 TERMS AND CONDITIONS OF FREESTANDING STOCK APPRECIATION RIGHTS
Each Freestanding Stock Appreciation Right granted under this Article shall
have the following terms and conditions:
(a) Base Price and Appreciation. The base price of the SAR shall be the
closing sales price of a share of Common Stock on the date the SAR is granted
(or, if the Common Stock is not traded on such date, on the immediately
preceding date on which the Common Stock is traded). Upon exercise of an SAR,
the holder shall receive, for each share with respect to which the SAR is
exercised, an amount (the "Appreciation") equal to the amount by which the fair
market value of a share of Common Stock on the date of exercise of the SAR
exceeds the base price of the SAR. For purposes of the preceding sentence, the
fair market value of a share of Common Stock shall be the average of the high
and low prices of such stock as reported on the New York Stock Exchange
composite tape. The Appreciation shall be payable in cash and shall be paid
within 30 days of the exercise of the SAR.
(b) Term of SAR. Each SAR shall expire ten years from the date of grant,
except as provided in Section 4.3(c) with respect to the death of a Participant.
No SAR shall be exercised after the expiration of its term.
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(c) Exercise of SARs. Subject to Section 4.3(f) and the remainder of this
paragraph, each SAR shall become exercisable in installments as follows: (1) the
SAR shall be exercisable with respect to a total of 333 shares of Common Stock
on or after the first anniversary of the date of grant; (2) the SAR shall be
exercisable with respect to a total of 666 shares of Common Stock on or after
the second anniversary of the date of grant; and (3) the SAR shall be
exercisable with respect to a total of 1,000 shares of Common Stock on or after
the third anniversary of the date of grant. If a Participant ceases to be a
Director of the Company as a result of death, disability, or retirement from the
Board of Directors on his Retirement Date (as defined in Section 4.2(i)), each
SAR shall immediately become fully exercisable and shall remain exercisable for
the remainder of its term, except that notwithstanding the term of the SAR, an
SAR which is outstanding on the date of a Participant's death shall remain
outstanding and exercisable for a term of the greater of ten years from the date
of grant or one year after the Participant's death. If a Participant ceases to
be a Director of the Company for any reason not set forth in the preceding
sentence, no additional portions of the SAR will become exercisable, and the
portion of the SAR that is then exercisable shall expire if not exercised within
60 days after cessation of service as a Director. An SAR may be exercised in
accordance with its terms in whole or in part.
(d) Nontransferability of SARs. No SAR or any interest therein shall be
transferable by the Participant other than by will or by the laws of descent and
distribution. During a Participant's lifetime, all SARs shall be exercisable
only by such Participant or by the guardian or legal representative of the
Participant.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none of
the rights of a shareholder.
(f) Change of Control. Notwithstanding any other provisions of the Plan,
upon the occurrence of a Change of Control (as defined in Section 5.10) all SARs
outstanding at the time of such Change of Control shall become immediately
exercisable and shall remain exercisable for the remainder of their term.
(g) Special Provisions. Notwithstanding the foregoing provisions of
Section 4.3, the freestanding SARs granted to Eligible Directors residing in
Norway who were first elected to the Board of Directors in 1996 (and who waived
the grant of an Option to which they were then entitled under the terms of the
Plan as then in effect) with respect to their initial election to the Board of
Directors (i) shall have a base price equal to the closing sales price of the
Common Stock on the date of their initial election, and (ii) shall have exercise
and expiration dates determined as if such SARs had been granted on the date of
their initial election.
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4.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR SARS
Within 30 days of each date that an Option or SAR is exercised, a
Supplemental Payment shall be paid to the Participant (or to the Participant's
Beneficiary in the event of death), in cash, in an amount equal to the amount
necessary to pay the income tax payable to the national government where the
Director resides with respect to both the exercise of the Option or SAR and
receipt of the Supplemental Payment, assuming the Participant is taxed at the
maximum effective income tax rate applicable thereto.
V. ADDITIONAL PROVISIONS
5.1 GENERAL RESTRICTIONS
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of shares of Common Stock
is necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of shares of Common Stock thereunder, such award may not be consummated
in whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
5.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a reorganization, recapitalization, Stock split, Stock
dividend, combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin-off, sale of assets, payment of an extraordinary cash
dividend, or any other change in or affecting the corporate structure or
capitalization of the Company, the Committee shall make appropriate adjustment
in the number and kind of shares authorized by the Plan (including any
limitations on individual awards), in the number, price or kind of shares
covered by the awards and in any outstanding awards under the Plan; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding award.
5.3 AMENDMENTS
(a) The Board of Directors may amend the Plan from time to time. No such
amendment shall require approval by the stockholders unless stockholder approval
is required to satisfy Rule 16b-3 under the Securities Exchange Act of 1934 or
Section 162(m) of the Code, or by applicable law or Stock exchange requirements.
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(b) The Committee shall have the authority to amend any grant to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, no outstanding award may be revoked or altered in a
manner unfavorable to the holder without the written consent of the holder.
(c) If a Participant has ceased or will cease to be a Director of the
Company for the convenience of the Company (as determined by the Board of
Directors), the Board of Directors may amend all or any portion of such
Participant's Options or SARs so as to make such Options or SARs fully
exercisable and/or specify a schedule upon which they become exercisable, and/or
permit all or any portion of such Options or SARs to remain exercisable for such
period designated by it, but not beyond the expiration of the term established
pursuant to Section 4.2(b) or 4.3(b). A Participant shall not participate in
the deliberations or vote by the Board of Directors under this paragraph with
respect to his Options or SARs. The exercise periods of Options or SARs
established by the Board of Directors pursuant to this paragraph shall override
the provisions of Section 4.2(c) or 4.3(c) to the extent inconsistent therewith.
5.4 CANCELLATION OF AWARDS
Any award granted under Articles II and III of the Plan may be canceled at
any time with the consent of the holder and a new award may be granted to such
holder in lieu thereof, which award may, in the discretion of the Committee, be
on more favorable terms and conditions than the canceled award; provided,
however, that the Committee may not reduce the exercise or base price of
outstanding Options or SARs where the existing exercise or base price is higher
than the then current market price of the Common Stock.
5.5 BENEFICIARY
An employee or Participant may file with the Company a written designation
of Beneficiary, on such form as may be prescribed by the Committee, to receive
any Options, SARs, Restricted Shares, Common Stock and Supplemental Payments
that become deliverable to the employee or Participant pursuant to the Plan
after the employee's or Participant's death. An employee or Participant may,
from time to time, amend or revoke a designation of Beneficiary. If no
designated Beneficiary survives the employee or Participant, the executor or
administrator of the employee's or Participant's estate shall be deemed to be
the employee's or Participant's Beneficiary.
5.6 WITHHOLDING
(a) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the award holder to remit to the Company an amount sufficient to satisfy
any applicable withholding tax liability prior to the delivery of any
certificate for such shares. Whenever under the Plan
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payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any withholding tax liability.
(b) An employee entitled to receive Common Stock under the Plan who has not
received a cash Supplemental Payment may elect to have the withholding tax
liability (or a specified portion thereof) with respect to such Common Stock
satisfied by having the Company withhold from the shares otherwise deliverable
to the employee shares of Common Stock having a value equal to the amount of the
tax liability to be satisfied with respect to the Common Stock. An election to
have all or a portion of the tax liability satisfied using Common Stock shall
comply with such requirements as may be imposed by the Committee.
5.7 NON-ASSIGNABILITY
Except as expressly provided in the Plan, no award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.
5.8 NON-UNIFORM DETERMINATIONS
Determinations by the Committee under the Plan (including, without
limitation, determinations of the persons to receive awards under Articles II
and III; the form, amount and timing of such awards; the terms and provisions of
such awards and the agreements evidencing same; and provisions with respect to
termination of employment) need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, awards under the Plan,
whether or not such persons are similarly situated.
5.9 NO GUARANTEE OF EMPLOYMENT OR DIRECTORSHIP
The grant of an award under the Plan shall not constitute an assurance of
continued employment for any period or any obligation of the Board of Directors
to nominate any Director for re-election by the Company's shareholders.
5.10 CHANGE OF CONTROL
A "Change of Control" mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common Stock of the Company (the
"Outstanding Company Common Stock")
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or (ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 5.10; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common Stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
Stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of
-17-
<PAGE>
the Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
5.11 DURATION AND TERMINATION
(a) The Plan shall be of unlimited duration. Notwithstanding the
foregoing, no incentive Stock option (within the meaning of Section 422 of the
Code) shall be granted under the Plan, and no Options or SARs shall be granted
under the Plan to Eligible Directors under Article IV, after May 1, 2003, but
awards granted prior to such dates may extend beyond such dates, and the terms
of this Plan shall continue to apply to all awards granted hereunder.
(b) The Board of Directors may discontinue or terminate the Plan at any
time. Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan's discontinuance or termination without the
holder's written consent.
5.12 EFFECTIVE DATE
The original effective date of the Plan was May 1, 1993. This amendment
and restatement of the Plan shall be effective March 13, 1997.
IN WITNESS WHEREOF, this document has been executed as of March 13, 1997.
TRANSOCEAN OFFSHORE INC.
by: /s/ Eric B. Brown
--------------------------------------
-18-
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